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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 7, 1999
REGISTRATION NO. 333-85235
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LODGIAN FINANCING CORP.
LODGIAN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
DOTHAN HOSPITALITY 3053, INC.
DOTHAN HOSPITALITY 3071, INC.
GADSDEN HOSPITALITY, INC.
SHEFFIELD MOTEL ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
ALABAMA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
SERVICO FLAGSTAFF, INC.
(Exact name of registrant as specified in its charter)
ARIZONA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
LODGIAN ANAHEIM INC.
LODGIAN ONTARIO INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
SERVICO FT. PIERCE, INC.
SERVICO PENSACOLA 7200, INC.
SERVICO PENSACOLA 7330, INC.
SERVICO PENSACOLA, INC.
AMI OPERATING PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
ALBANY HOTEL, INC.
PALM BEACH MOTEL ENTERPRISES, INC.
SERVICO NORTHWOODS, INC.
SERVICO SILVER SPRING, INC.
SERVICO WEST PALM BEACH, INC.
SERVICO WINDSOR, INC.
SERVICO WINTER HAVEN, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
BRUNSWICK MOTEL ENTERPRISES, INC.
ATLANTA--HILLSBORO LODGING, LLC
LODGIAN RICHMOND, LLC
LITTLE ROCK LODGING ASSOCIATES I, L.P.
(Exact name of registrant as specified in its charter)
GEORGIA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
SERVICO CEDAR RAPIDS, INC.
(Exact name of registrant as specified in its charter)
IOWA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
SERVICO ROLLING MEADOWS, INC.
(Exact name of registrant as specified in its charter)
ILLINOIS 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
<CAPTION>
58-2480614
52-2093696
DELAWARE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
63-1166288
63-1166287
63-1166289
59-2059817
ALABAMA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65-0654227
ARIZONA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65-0849714
65-0842533
CALIFORNIA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65-0592830
65-0592816
65-0592815
65-0592674
22-2754732
DELAWARE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65-0384379
59-1978788
65-0503927
64-0432696
59-3473157
98-0175025
65-0787913
FLORIDA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
59-1693138
58-2392166
58-2460119
58-2230766
GEORGIA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
39-1882535
IOWA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
58-2348777
ILLINOIS
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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<S> <C>
SERVICO METAIRIE, INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
SERVICO COLESVILLE, INC.
SERVICO COLUMBIA, INC.
SERVICO MARYLAND, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
NH MOTEL ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
MINNEAPOLIS MOTEL ENTERPRISES, INC.
SERVICO ROSEVILLE, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
LODGIAN MOUNT LAUREL, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
SERVICO GRAND ISLAND, INC.
SERVICO JAMESTOWN, INC.
SERVICO NEW YORK, INC.
SERVICO NIAGARA FALLS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
FAYETTEVILLE MOTEL ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
APICO HILLS, INC.
APICO INNS OF GREEN TREE, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
SERVICO HILTON HEAD, INC.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
SERVICO AUSTIN, INC.
SERVICO HOUSTON, INC.
SERVICO MARKET CENTER, INC.
(Exact name of registrant as specified in its charter)
TEXAS 7011
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
<CAPTION>
65-0654223
LOUISIANA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
52-2069223
58-2348775
58-2348773
MARYLAND
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
59-2256713
MICHIGAN
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
59-2722347
41-1872737
MINNESOTA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
58-2460123
NEW JERSEY
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16-1540702
58-2348783
16-1540703
16-1540701
NEW YORK
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
59-2195645
NORTH CAROLINA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
62-0962543
62-0788158
PENNSYLVANIA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
57-1046985
SOUTH CAROLINA
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65-0654220
58-2348780
75-2708406
TEXAS
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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<S> <C>
3445 PEACHTREE ROAD, N.E., SUITE 700 KENNETH R. POSNER
ATLANTA, GEORGIA 30326 3445 PEACHTREE ROAD, N.E., SUITE 700
(404) 364-9400 ATLANTA, GEORGIA 30326
(Address, including zip code, and telephone number, including (404) 365-4469
area code, of registrant's principal executive offices) (Name, address, including zip code, and
telephone number,
including area code, of agent for service)
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COPIES TO:
DENNIS J. BLOCK, ESQ.
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE NEW YORK,
NEW YORK 10038
(212) 504-5555
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
----------------------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FIELD WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS WILL BE AMENDED OR COMPLETED;
DATED SEPTEMBER 7, 1999
PROSPECTUS
[LOGO]
LODGIAN FINANCING CORP.
EXCHANGE OFFER FOR
12 1/4% SENIOR SUBORDINATED NOTES DUE 2009
GUARANTEED BY: LODGIAN, INC. AND SUBSIDIARIES OF LODGIAN FINANCING CORP.
INVESTMENT IN THE EXCHANGE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 18.
TERMS OF THE EXCHANGE OFFER
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/ / The Exchange Offer expires at 5:00 p.m.,
New York City time, on , 1999,
unless extended.
/ / The Exchange Offer is not subject to any
condition other than that the exchange
notes be freely tradeable and that the
interests of holders of outstanding notes
not be materially adversely affected by
consummation of the Exchange Offer.
/ / All outstanding notes that are validly
tendered and not validly withdrawn will
be exchanged.
/ / Tenders of outstanding notes may be
withdrawn at any time prior to the
expiration of the Exchange Offer.
/ / The exchange of outstanding notes for
exchange notes will not be a taxable
event for federal income tax purposes.
/ / We will not receive any proceeds from the
Exchange Offer.
/ / The terms of the exchange notes are
substantially identical to the
outstanding notes, except that the
exchange notes will be freely tradeable.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus includes forward-looking statements, including our "belief,"
"anticipation" or "expectation," within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. We have based these statements on our beliefs and assumptions, based on
information currently available to us. These forward-looking statements are
subject to risks and uncertainties. Forward-looking statements include the
information concerning our possible or assumed future results of operations set
forth under the sections entitled "Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
Forward-looking statements are not guarantees of performance. Our future
results and requirements may differ materially from those described in the
forward-looking statements. Many of the factors that will determine these
results and requirements are beyond our control. In addition to the risks and
uncertainties discussed in "Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," you should
consider those discussed under "Risk Factors" and, among others, the following:
- general and local economic conditions;
- risks relating to the acquisition, operation and renovation of hotels;
- government legislation and regulation;
- competition in the lodging industry;
- changes in interest rates;
- the impact of rapid growth;
- the availability of capital to finance growth;
- the historical cyclicality of the lodging industry;
- year 2000 matters; and
- other factors described at various times in our filings with the
Securities and Exchange Commission.
These forward-looking statements speak only as of the date of this
memorandum. We do not intend to update or revise any forward-looking statements
to reflect events or circumstances after the date of this memorandum, including
changes in our business strategy or planned capital expenditures, or to reflect
the occurrence of unanticipated events.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549,
7 World Trade Center, 13(th) Floor, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
website at "http://www.sec.gov." Copies of these reports, proxy statements and
other information can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
We have filed with the SEC a Registration Statement on Form S-4 (together
with all amendments and exhibits thereto, the "Registration Statement") under
the Securities Act with respect to the securities offered by this Prospectus.
This Prospectus does not contain all of the information set forth or
incorporated by reference in the Registration Statement and the exhibits and
schedules related thereto, certain portions of which have been omitted as
permitted by the rules and regulations of the SEC. For
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further information with respect to us and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits
filed or incorporated as a part thereof. Statements contained in this Prospectus
as to the contents of any documents referred to are not necessarily complete
and, in each such instance, are qualified in all respects by reference to the
applicable documents filed with the SEC.
All documents that we have filed pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of all securities to which this Prospectus
relates shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document which is
also incorporated herein by reference, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed to constitute a
part of this Prospectus except as so modified or superseded.
Copies of all documents which are incorporated herein by reference (not
including exhibits, unless such exhibits are specifically incorporated by
reference in such documents) will be provided without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of any such person,. Requests for such copies should be
directed to Kenneth R. Posner, Chief Financial Officer, Lodgian, Inc., 3445
Peachtree Road N.E., Suite 700, Atlanta, Georgia 30326; telephone: (404)
364-9400.
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in this
Prospectus or a Prospectus Supplement, in connection with the offering
contemplated thereby, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or any
underwriter, dealer or agent. This Prospectus and a Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the securities to which they relate and do not constitute an offer to
sell or a solicitation of an offer to buy any securities in any jurisdiction to
any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus or a Prospectus
Supplement, nor any sale made thereunder, shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or thereof or that the information contained or
incorporated by reference herein or therein is correct as of any time subsequent
to such date.
CERTAIN DEFINITIONS
Unless otherwise stated in this Prospectus:
- the "Company" refers to Lodgian, Inc. and its subsidiaries;
- the "Exchange Notes" refer to the 12 1/4% Senior Subordinated Notes due
2009, Series B;
- the "Indenture" refers the Indenture, dated as of July 23, 1999, among
Lodgian Financing, Lodgian, Inc., the guarantors named therein and Bankers
Trust Company, as trustee;
- the "Notes" refer to the 12 1/4% Senior Subordinated Notes due 2009,
Series A and Series B;
- the "Old Notes" refer to the 12 1/4% Senior Subordinated Notes due 2009,
Series A; and
- "we" or "our" refers to Lodgian, Inc. and its subsidiaries.
EACH OF THE OTHER CAPITALIZED TERMS USED IN THIS PROSPECTUS AND NOT
OTHERWISE DEFINED IN THIS PROSPECTUS HAS THE MEANING SET FORTH IN THE INDENTURE.
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SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY, THE EXCHANGE NOTES BEING OFFERED HEREBY AND
OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. LODGIAN, INC. IS A SUCCESSOR TO SERVICO, INC. ("SERVICO") AS
A RESULT OF SERVICO'S MERGER (THE "MERGER") WITH IMPAC HOTEL GROUP, LLC
("IMPAC"), A PRIVATELY OWNED HOTEL OWNERSHIP, MANAGEMENT AND DEVELOPMENT
COMPANY. THE MERGER WAS COMPLETED ON DECEMBER 11, 1998. BECAUSE THE MERGER WAS
ACCOUNTED FOR UNDER THE PURCHASE ACCOUNTING METHOD, LODGIAN'S RESULTS FOR THE
YEAR ENDED 1998 REFLECT IMPAC'S CONTRIBUTIONS ONLY SINCE DECEMBER 11, 1998
UNLESS STATED OTHERWISE. REFERENCES TO THE TERMS "WE," "US," "OUR," AND "OURS"
MEAN LODGIAN, INC. ("LODGIAN") AND OUR SUBSIDIARIES, INCLUDING LODGIAN FINANCING
CORP. ("LODGIAN FINANCING"), COLLECTIVELY, AND, FOR PERIODS PRIOR TO THE MERGER,
SERVICO, INC. AND ITS SUBSIDIARIES AND IMPAC HOTEL GROUP, LLC AND ITS
SUBSIDIARIES COMBINED, EXCEPT WHERE IT IS MADE CLEAR THAT THE MEANING IS
OTHERWISE.
LODGIAN
GENERAL
We are one of the largest owners and operators of full-service hotels in the
United States, with 134 hotels containing approximately 25,375 rooms located in
35 states and Canada. Our hotels include 121 wholly-owned hotels (including
three under construction), 11 hotels in which we have a 50% or greater equity
interest, one hotel in which we have a minority equity interest and one hotel
managed for a third party. Our hotels are primarily full-service properties
which offer food and beverage services, meeting space and banquet facilities and
compete in the mid-price and upscale segments of the lodging industry. We
believe that these segments have more consistent demand generators than other
segments of the lodging industry and that they have recently experienced less
development of new properties than other lodging segments, such as the limited
service, economy and budget segments. Substantially all of our hotels are
affiliated with nationally recognized hospitality franchises. We own and operate
hotels under franchise agreements with Marriott International, Bass Hotels and
Resorts, the franchisor for the Holiday Inn and Crowne Plaza brands, and the
franchisors of the Doubletree, Hilton, Omni, Radisson and Sheraton brands, among
others. We are one of the largest Holiday Inn franchisees and one of the largest
Marriott franchisees nationally.
Our success in managing, developing, renovating and repositioning our hotels
has resulted in strong relationships with our franchisors. We pride ourselves on
the recognition and awards we have received from our franchisors. These awards
include, among others:
- Seven Modernization Awards during the last four consecutive years from
Bass Hotels and Resorts;
- Torchbearer Award for quality for several hotels from Bass Hotels and
Resorts;
- President's Award for quality for three hotels in 1998 from Marriott
International;
- Best New Hotel Opening in 1997 for the Courtyard by Marriott, Tulsa and in
1998 for the Denver Airport Marriott, in each case from Marriott
International;
- Hotel of the Year for the Club Hotel by Doubletree in Philadelphia from
Promus Hotels; and
- "Best New Franchisee" in 1995 from Marriott International.
Lodgian was formed by Servico's merger with Impac in December 1998. We
believe that the Merger enhances our growth potential and provides significant
opportunities for operating synergies, due to the complementary nature of the
two companies' property portfolios, strategies and core competencies. Both
companies had portfolios consisting of full-service properties in the mid-price
and upscale segments with leading franchise brands, such as Holiday Inn,
Sheraton, Hilton and Doubletree. Both companies pursued a strategy of renovating
and repositioning their hotel properties to achieve growth in revenue per
available
5
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room and profitability and strong returns on capital. Impac developed
significant in-house development and construction management capabilities and
expertise, while Servico generally relied on others, including Impac, for
renovation and redevelopment services. We believe that the addition of Impac's
in-house development capabilities and relationships with high quality
franchisors, such as Marriott, will enable us to take advantage of more
opportunities to reposition our existing hotels, as well as to selectively
acquire and develop new hotels. We also believe that we have opportunities to
improve the operating performance of Impac's hotels by applying Servico's
operating expertise and "best practices." In addition, we believe that we will
be able to generate greater value from our portfolio through operating synergies
(including opportunities for cost savings in overhead, purchasing, insurance and
related activities) achieved as a result of, among other things, national
purchasing contracts.
GROWTH STRATEGY
We have developed a strategy designed to increase our revenues, cash flow
and profitability while focusing on return on investment as the primary
criterion for growth. Our growth strategy consists primarily of (1) realizing
the built-in growth of our existing portfolio, (2) acquiring existing
full-service, mid-price and upscale hotels that are in need of substantial
renovation and repositioning and (3) developing new full-service, mid-price and
upscale hotels, primarily franchised under Marriott brands.
REALIZE BUILT-IN GROWTH. We intend to capitalize on the substantial
investments we have made in the development and renovation of the hotels in our
portfolio. From January 1, 1996 through June 30, 1999, we grew from 65 owned
hotels with approximately 12,533 rooms to 135 owned hotels (including three
under construction) with approximately 25,525 rooms, largely through
acquisitions. In that time, we acquired 65 hotels with 12,643 rooms at an
average purchase price of $37,900 per room. In that time, we have spent
approximately $11,800 per room in our acquired hotels in renovations and other
capital assets and expect to spend an additional $26.1 million for planned
renovations, for a total expected cost per room of $51,800. From January 1, 1996
through June 30, 1999, we completed development of 11 hotels, initiated
development of three hotels and completed renovations on 60 hotels. Through the
implementation of our operating strategies, we expect to be well-positioned to
realize the built-in growth of our recently renovated and developed properties.
We expect to realize significant EBITDA contribution from four newly developed
hotels which were completed in 1998, including the Marriott at the Denver
Airport in Denver, Colorado, the Residence Inn Little Rock in Little Rock,
Arkansas, the Hilton Garden Rio Rancho in Rio Rancho, New Mexico and the
Residence Inn Dedham in Boston, Massachusetts. Furthermore, we expect
substantial EBITDA contribution from recently renovated hotels, including the
Doubletree Club Hollywood in Hollywood, California, the Holiday Inn Anchorage in
Anchorage, Alaska, the Mayfair House Coconut Grove in Miami, Florida and the
Sheraton West Palm Beach in West Palm Beach, Florida. We cannot assure you that
we will realize these expected EBITDA contributions.
ACQUIRE AND IMPROVE UNDERPERFORMING HOTELS. We seek to capitalize on our
management, renovation and development expertise by continuing to acquire
underperforming hotels and implementing operational initiatives and
repositioning programs to achieve revenue growth and margin improvements. We
have generally invested significant capital to renovate and reposition newly
acquired hotels. In certain instances, we re-brand hotels to highlight property
improvements to the marketplace and to improve average daily rates and market
share. We believe that our total cost to acquire and renovate hotels has been
significantly less than the cost to construct new hotels with similar
facilities. We expect that our relationships throughout the industry and our
in-house development capabilities will continue to provide us with a competitive
advantage in identifying, evaluating, acquiring, redeveloping and managing
hotels that meet our criteria.
We believe that a number of lodging industry trends will enable us to
continue to successfully execute our acquisition, renovation and repositioning
strategy, including the following: (1) there has generally been less competition
to purchase underperforming hotels than other properties because of the level of
expertise required to purchase and efficiently reposition such hotels, and (2) a
number of major
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franchisors, such as Bass Hotels and Resorts, have launched quality improvement
initiatives under which owners are required to invest substantial amounts of
capital to upgrade older properties or risk having the franchise agreement
terminated. We believe that these initiatives will provide us with new
acquisition opportunities, as individual or small-portfolio owners are unable or
unwilling to invest the capital required to raise quality standards to the level
required by franchisors.
SELECTIVELY DEVELOP NEW HOTELS. We plan to continue to selectively develop
new full-service, mid-price and upscale hotels. We intend to develop these
properties primarily under the Marriott and Courtyard by Marriott brands due to
the high quality image, strong reservations and marketing networks and overall
quality management of these brands. We have focused our development in suburbs
of metropolitan areas that are experiencing significant demand growth where
there have not historically been suitable acquisition targets. We believe that
the expertise required to develop such assets generally limits access to the
marketplace, and that our in-house development capabilities enable us to develop
hotels more efficiently than our competitors.
Our historical objective has been to develop each property as cost
efficiently as possible while meeting quality standards and return on investment
objectives. We have developed 12 hotels with 1,389 rooms since 1995. In
addition, we have three upscale hotels with 552 rooms under construction,
including the Marriott in downtown Portland, Oregon and the Courtyard by
Marriott in Livermore, California, which are both scheduled to open in the third
quarter of 1999, and the Hilton Garden Inn in Lake Oswego, Oregon, which is
scheduled to open in the first quarter of 2000. In addition, at June 30, 1999,
we owned five land parcels and held an option to purchase one additional land
parcel that together would permit the development of six new hotels with a total
capacity of approximately 1,270 rooms.
OPERATING STRATEGY
We have developed a highly focused operating strategy designed to maximize
the financial performance of our hotels while providing our guests with high
quality service and value. Key elements of our operating strategy include:
ENHANCE HOTEL PERFORMANCE THROUGH DISCIPLINED CAPITAL INVESTMENT. We seek
to reposition and renovate our hotels based on strategic plans designed to
address the opportunities presented by each hotel and the hotel's particular
market. Renovations include enhancing lobbies, restaurants and public areas,
upgrading guest rooms and converting unprofitable lounge areas to meeting rooms
to accommodate the needs of business travelers. Renovations often include a
substantial exterior renovation to improve the property's overall appearance and
appeal. We believe that these renovations enable us to increase both occupancy
and room rates and generate attractive returns on our investment.
SELECTIVE USE OF PREMIUM BRANDS. We believe that the selection of an
appropriate franchise brand is essential in positioning a hotel optimally within
its local market. Because we are not bound by a single franchise brand, we can
choose a franchise relationship that will maximize a hotel's performance in a
particular market and complement our management strategies and those of the
individual hotel. Since January 1, 1996, we have rebranded 14 hotels to better
position them in their competitive markets. We select brands based on factors
such as revenue contribution, product quality standards, local presence of the
franchisor, brand recognition, target demographics and purchasing efficiencies
offered by franchisors.
INDIVIDUAL HOTEL MANAGEMENT. We seek to maximize the performance of our
hotels by developing marketing and business plans specifically tailored for each
individual hotel. We develop and implement marketing plans that properly
position each hotel within its local market and facilitate targeted sales and
marketing efforts. These plans focus on maximizing revenues and improving market
share, guest satisfaction and cost controls. We believe that experienced and
hands-on management of hotel operations is the most critical element in
maximizing revenue and cash flow of hotels, especially in full service hotels.
In order to maintain strong performance of the individual hotels, we stress
management accountability and
7
<PAGE>
entrepreneurship and provide performance-based compensation at the individual
hotel and regional levels that we believe is among the most attractive in the
industry.
EFFECTIVE CENTRALIZED CONTROLS AND SUPPORT. We have implemented centralized
controls and support that seek to provide corporate and group support services
while promoting flexibility and encouraging associates to develop innovative
solutions. Our hotels are organized into six regions, each headed by a regional
vice president who reports to the chief operating officer. This structure
enables us to provide close oversight of property managers at the regional and
local levels while ensuring that information, standards and goals are
communicated effectively across our entire portfolio. We have established
certain uniform productivity standards and skill requirements for hotel
associates that we believe increase operating efficiencies by enhancing our
ability to measure performance and to allocate associates efficiently within our
hotel system.
LEADING EDGE TECHNOLOGY. We have invested substantial capital in advanced
information systems that allow for increased timely and accurate reporting of
operational and financial data, among many other capabilities. We are also in
the process of implementing Oracle web-based technology, which will permit (1)
more accurate and efficient revenue and expense reporting and forecasting by
providing real-time access to financial information, (2) improved labor and cash
management and (3) the ability to monitor from any location daily revenue
results, labor costs and expenses of every one of our hotels. Through our
intranet, we also can provide real-time reporting, distribute corporate
communications and disseminate critical information to our associates
company-wide.
CENTRALIZED RESERVATIONS AND SALES SUPPORT. We currently operate a revenue
center in Baton Rouge, Louisiana that maintains the reservation system for 47
Holiday Inn hotels, with 30 hotels expected to be added by the end of November
1999. We believe that the revenue center is the first of its kind in the hotel
industry, and we expect it will be able to cover multiple hotel brands in the
near future. The revenue center improves the efficiency of our hotel reservation
process by freeing up hotel associates to service guests and allowing dedicated
reservation agents to focus on taking reservations. We believe that dedicated
reservation agents convert a higher number of inquiries into actual reservations
than hotel associates with multiple responsibilities. Specialists at the revenue
center have complete access to the property reservation systems and price each
room according to market demand, inventory supply and competitor strategies. The
revenue center also has a group sales center which enables hotel salespeople to
focus on direct sales and marketing efforts and building and maintaining client
relationships.
RECENT DEVELOPMENTS
In December 1998, Robert Cole, the President of Impac, became our Chief
Executive Officer and President, replacing David Buddemeyer, Servico's Chairman
and Chief Executive Officer, who resigned from Servico in November 1998. In
addition, in April 1999, Kenneth R. Posner became our Chief Financial Officer,
replacing Warren Knight, who resigned from Lodgian in February 1999. Mr. Posner
previously had served as Chief Financial Officer of the Hyatt Group of Companies
since 1981. Upon completion of the Merger, we closed Servico's headquarters in
West Palm Beach, Florida and relocated to Impac's headquarters in Atlanta,
Georgia.
On July 23, 1999, we issued and sold the Old Notes. We used the net proceeds
of the offering of the Old Notes, together with borrowings under our new credit
facility, to:
- repay approximately $278 million of indebtedness under mortgage notes owed
to Lehman Brothers Holding, Inc;
- repay on September 13, 1999 approximately $132.5 million of indebtedness
under mortgage notes owed to Nomura Asset Capital Corporation;
- repay approximately $5.7 million of indebtedness under mortgage notes owed
to Bank One, Louisiana, National Association;
- pay exit, prepayment and other fees; and
- use as working capital for general corporate purposes.
8
<PAGE>
Concurrently with the closing of the offering of the Old Notes, Lodgian
Financing entered into a $315.0 million secured credit facility with a $50.0
million revolving facility maturing on April 15, 2004 and up to $265.0 million
maturing no later than July 31, 2006. Approximately $107.5 million of the
facility was funded at closing, with the remainder of the facility to be drawn
under certain conditions. The new credit facility is guaranteed by certain of
Lodgian's subsidiaries and secured by the stock or equity interest in Lodgian
Financing and certain of Lodgian Financing's existing subsidiaries and by
mortgages on each of the hotel properties owned through Lodgian Financing.
Morgan Stanley Senior Funding Inc., an affiliate of Morgan Stanley & Co.
Incorporated, acted as co-lead arranger, joint book manager and syndication
agent and one of the lenders under our new credit facility. An affiliate of
Lehman Brothers Inc. acted as co-lead arranger, joint book manager and
documentation agent and one of the lenders under our new credit facility.
On June 24, 1999, we sold our joint venture interest in our European hotel
portfolio, which consisted of six hotels. We received approximately $6.0 million
at closing and expect to receive an additional $1.5 million in net proceeds from
the sale. As a result of this transaction, we no longer have operations in
Europe.
CORPORATE ORGANIZATION
The following diagram sets forth our corporate structure, after the closing
of the offering of the Notes and the establishment of our new credit facility.
[CHART]
- ------------------------
(1) We plan to use borrowings under our new credit facility to repay our Nomura
Impac I mortgage notes in September 1999. At the time of repayment, the
entity owning the 22 Nomura Impac I properties will become a direct
subsidiary of Lodgian Financing Corp. and will guarantee our new credit
facility and the Notes.
Lodgian Financing is the issuer of the notes and the borrower under the new
credit facility. Lodgian, Inc. and each of Lodgian Financing's wholly-owned
subsidiaries guarantee the notes, on an unsecured senior subordinated basis, and
each of Lodgian Financing's wholly-owned subsidiaries guarantee our new credit
facility. All but one of Lodgian Financing's hotel properties is held through
wholly-owned subsidiaries. Certain of Lodgian's other subsidiaries guarantee our
new credit facility but not the notes. Our new credit facility is secured by the
stock or equity interests of certain of Lodgian's subsidiaries and by mortgages
on each of the hotel properties held through Lodgian Financing.
Our corporate headquarters are located at Lodgian, Inc., 3445 Peachtree
Road, N.E., Suite 700, Atlanta, Georgia 30326, telephone (404) 364-9400.
9
<PAGE>
THE OFFERING
THE FOLLOWING SUMMARY IS PROVIDED SOLELY FOR YOUR CONVENIENCE AND IS NOT
INTENDED TO BE COMPLETE. YOU SHOULD READ AND CONSIDER THE MORE SPECIFIC DETAILS
CONTAINED IN THIS PROSPECTUS. SEE "THE EXCHANGE OFFER" AND "DESCRIPTION OF THE
NOTES."
<TABLE>
<S> <C>
Registration Rights............... You are entitled to exchange your notes for freely
tradeable exchange notes with substantially identical
terms. The Exchange Offer is intended to satisfy your
exchange rights. After the Exchange Offer is complete,
you will no longer be entitled to any exchange or
registration rights with respect to your notes.
Accordingly, if you do not exchange your notes, you will
not be able to reoffer, resell or otherwise dispose of
your notes unless you comply with the registration and
prospectus delivery requirements of the Securities Act
of 1933, as amended (the "Securities Act") or there is
an exemption available.
The Exchange Offer................ We are offering to exchange $1,000 principal amount of
our 12 1/4% Senior Subordinated Notes due 2009, Series
B, which have been registered under the Securities Act,
for $1,000 principal amount of our outstanding 12 1/4%
Senior Subordinated Notes due 2009, Series A, which were
issued in a private offering in July 1999. As of the
date of this Prospectus, there are $200.0 million of
notes outstanding. We will issue exchange notes promptly
after the expiration of the Exchange Offer.
Resales........................... We believe that the exchange notes issued in the
Exchange Offer may be offered for resale, resold or
otherwise transferred by you without compliance with the
registration and prospectus delivery requirements of the
Securities Act provided that:
- you are acquiring the exchange notes in the
ordinary course of your business;
- you are not participating, do not intend to
participate and have no arrangement or understanding
with any person to participate, in a distribution
of the Exchange Notes; and
- you are not an "affiliate" of ours.
If you do not meet the above criteria, you will have to
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with
any reoffer, resale or other disposition of your
Exchange Notes.
Each broker or dealer that receives Exchange Notes for
its own account in exchange for outstanding notes that
were acquired as a result of market-making or other
trading activities must acknowledge that it will deliver
this Prospectus in connection with any sale of Exchange
Notes.
Expiration Date................... 5:00 p.m., New York City time, on , 1998, unless
we extend the expiration date.
</TABLE>
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<TABLE>
<S> <C>
Accrued Interest on the Exchange
Notes and Old Notes............. The Exchange Notes will bear interest from July 23,
1999. If your outstanding notes are accepted for
exchange, then you will waive interest on such
outstanding notes accrued and unpaid to the date the
Exchange Notes are issued.
Conditions to the Exchange
Offer........................... The Exchange Offer is not subject to any condition other
than that the Exchange Notes be freely tradeable and
that the interests of holders of outstanding notes not
be materially adversely affected by consummation of the
Exchange Offer. See "The Exchange Offer--Conditions."
Procedures for Tendering Old
Notes........................... If you wish to tender outstanding notes, you must
complete, sign and date the Letter of Transmittal, or a
facsimile of it, in accordance with its instructions and
transmit the Letter of Transmittal, together with your
notes to be exchanged and any other required
documentation to Bankers Trust Company, who is the
exchange agent, at the address set forth in the Letter
of Transmittal by 5:00 p.m. New York City time, on the
expiration date. See "The Exchange Offer--Procedures for
Tendering." By executing the Letter of Transmittal, you
will represent to us that you are acquiring the Exchange
Notes in the ordinary course of your business, that you
are not participating, do not intend to participate and
have no arrangement or understanding with any person to
participate in the distribution of Exchange Notes, and
that you are not an "affiliate" of ours. See "The
Exchange Offer--Procedures for Tendering."
Special Procedures for Beneficial
Holders......................... If you are the beneficial holder of notes that are
registered in the name of your broker, dealer,
commercial bank, trust company or other nominee, and you
wish to tender in the Exchange Offer, you should contact
the person in whose name your notes are registered
promptly and instruct such person to tender on your
behalf. See "The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery Procedures.... If you wish to tender your notes and you cannot deliver
your notes, the Letter of Transmittal or any other
required documents to the exchange agent before the
expiration date, you may tender your notes according to
the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights................. Tenders may be withdrawn at any time before 5:00 p.m.,
New York City time, on the expiration date.
Acceptance of Old Notes and
Delivery of Exchange Notes...... Subject to certain conditions, we will accept for
exchange any and all outstanding notes which are
properly tendered in the Exchange Offer before 5:00
p.m., New York City time, on the expiration date. The
Exchange Notes will be delivered promptly after the
expiration date. See "The Exchange Offer--Terms of the
Exchange Offer."
</TABLE>
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<TABLE>
<S> <C>
Certain U.S. Federal Tax
Considerations.................. The exchange of Old Notes for Exchange Notes pursuant to
the Exchange Offer will not be a taxable event for U.S.
federal income tax purposes. You will not recognize any
taxable gain or loss as a result of such exchange and
will have the same tax basis and holding period in the
Exchange Notes as you had in the Old Notes immediately
before the exchange.
Exchange Agent.................... Bankers Trust Company is serving as exchange agent in
connection with the Exchange Offer. The mailing address
of the exchange agent is BT Services Tennessee, Inc.,
Reorganization Unit, P.O. Box 292737, Nashville,
Tennessee 37229-2737, fax number (615) 835-3701.
Deliveries by overnight courier should be addressed to
BT Services Tennessee, Inc., Corporate Trust and Agency
Group, Reorganization Unit, 648 Grassmere Park Road,
Nashville, Tennessee 37211, confirm by telephone at
(615) 835-3572. Deliveries by hand should be addressed
to Bankers Trust Company, Corporate Trust and Agency
Group, Receipt & Delivery Window, 123 Washington Street,
1st Floor, New York, New York 10006. For information
about the Exchange Offer, call the exchange agent at
telephone number: (800) 735-7777.
SUMMARY OF TERMS OF EXCHANGE NOTES
Securities Offered................ $200.0 million aggregate principal amount of 12 1/4%
Senior Subordinated Notes due 2009, Series B.
Issuer............................ Lodgian Financing Corp.
Guarantors........................ Lodgian, Inc., Sheffield Motel Enterprises, Inc., Dothan
Hospitality 3053, Inc., Dothan Hospitality 3071, Inc.,
Gadsden Hospitality, Inc., Servico Flagstaff, Inc.,
Lodgian Anaheim Inc, Lodgian Ontario Inc., Servico
Pensacola, Inc., Servico Pensacola 7200, Inc., Servico
Pensacola 7330, Inc., Servico Ft. Pierce, Inc., AMI
Operating Partners, L.P., Servico West Palm Beach, Inc.,
Servico Winter Haven, Inc., Servico Silver Spring, Inc.,
Albany Hotel, Inc., Palm Beach Motel Enterprises, Inc.,
Servico Northwoods, Inc., Servico Windsor, Inc.,
Brunswick Motel Enterprises, Inc., Little Rock Lodging
Associates I, L.P., Atlanta Hillsboro Lodging, LLC,
Lodgian Richmond, L.L.C., Servico Rolling Meadows, Inc.,
Servico Cedar Rapids, Inc., Servico Metairie, Inc.,
Servico Columbia, Inc., Servico Colesville, Inc.,
Servico Maryland, Inc., NH Motel Enterprises, Inc.,
Minneapolis Motel Enterprises, Inc., Servico Roseville,
Inc., Lodgian Mount Laurel, Inc., Servico Jamestown,
Inc., Servico New York, Inc., Servico Niagara Falls,
Inc., Servico Grand Island, Inc., Fayetteville Motel
Enterprises, Inc., Apico Inns of Green Tree, Inc., Apico
Hills, Inc., Servico Hilton Head, Inc., Servico Austin,
Inc., Servico Market Center, Inc., Servico Houston, Inc.
Maturity Date..................... July 15, 2009.
Interest Payment Dates............ January 15 and July 15, beginning January 15, 2000.
</TABLE>
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<TABLE>
<S> <C>
Ranking........................... The Exchange Notes will be unsecured senior obligations
of Lodgian Financing Corp. and will rank:
- junior in right of payment to all existing and
future debt that is senior indebtedness under the
Indenture (including obligations under our new
credit facility);
- equal in right of payment with any of our future
debt that is senior subordinated indebtedness under
the Indenture; and
- senior in right of payment to all our debt that is
subordinated indebtedness under the Indenture,
including our convertible debentures (the
"Convertible Debentures") underlying the
convertible redeemable equity structure trust
securities (the "CRESTS") issued by a subsidiary
trust.
Each guarantee will be subordinated to all of the
guarantors' senior debt to the same extent as the
Exchange Notes are subordinated to Lodgian Financing's
senior debt. However, until we repay the Nomura Impac I
loan referred to above in September 1999, the guarantee
of Lodgian, Inc. will be junior solely to the guarantees
under the Nomura Impac loans and the new credit
facility.
The indebtedness under our new revolving credit facility
is secured by the stock or equity interests of certain
of Lodgian's subsidiaries and by mortgages on each of
the hotel properties held through Lodgian Financing. As
of July 30, 1999, we had unused commitments of $
million outstanding under our new revolving credit
facility.
Optional Redemption............... The Exchange Notes will be redeemable, in whole or in
part, at our option, on or after July 15, 2004 at the
redemption prices set forth under "Description of the
Notes," plus accrued and unpaid interest to the date of
redemption. In addition, at any time on or prior to July
15, 2002, we may redeem up to 35% of the principal
amount of the Exchange Notes with the proceeds of one or
more offerings of our capital stock (other than to any
subsidiary), at a price equal to 112.250% of their
principal amount, plus accrued interest to the date of
redemption; PROVIDED that at least 65% of the aggregate
principal amount of notes remains outstanding. See
"Description of the Notes--Optional Redemption."
Change of Control................. Upon a change of control, holders of the notes will have
the right to require us to repurchase their notes at a
price equal to 101% of their principal amount plus
accrued interest to the date of repurchase. See
"Description of the Notes--Repurchase of Notes upon a
Change of Control."
</TABLE>
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<TABLE>
<S> <C>
Certain Covenants................. The indenture governing the exchange notes contains
certain covenants that restrict our subsidiaries'
ability to:
- incur debt;
- pay dividends on, or redeem, capital stock, make
investments or redeem subordinated debt;
- dispose of assets;
- sell stock of subsidiaries;
- engage in transactions with affiliates;
- create liens securing subordinated debt; and
- engage in mergers or consolidations
However, these limitations will be subject to a number
of important qualifications and exceptions. See
"Description of the Notes--Covenants."
</TABLE>
USE OF PROCEEDS
We will not receive any proceeds from the Exchange Offer. See "Use of
Proceeds." We have agreed to bear the expenses of the Exchange Offer. No
underwriter is being used in connection with the Exchange Offer.
RISK FACTORS
You should consider carefully all of the information contained in this
memorandum and, in particular, you should evaluate the specific factors under
"Risk Factors" before deciding to invest in the Notes.
14
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
The following table presents summary historical consolidated financial data
of Lodgian for the years ended December 31, 1996, 1997 and 1998 and the six
months ended June 30, 1998 and 1999 and summary pro forma consolidated financial
data of Lodgian for the year ended December 31, 1998. We derived the historical
consolidated financial data for each of the three years in the period ended
December 31, 1998 from our audited consolidated financial statements. We derived
the historical financial data as of and for the six months ended June 30, 1998
and 1999 from our unaudited consolidated financial statements. We believe the
financial statements for these periods have been prepared on the same basis as
our audited consolidated financial statements and include all adjustments
(consisting only of normal recurring items) necessary for a fair and consistent
presentation of Lodgian's results of operations and financial position for these
periods and as of these dates. Historical results for the six months ended June
30, 1999 are not necessarily indicative of the results that might be expected
for the entire year ending December 31, 1999.
The pro forma statement of operations data for the year ended December 31,
1998 give effect to:
(1) the Merger;
(2) the 1998 acquisitions of AMI Operating Partners, L.P. (after the sale of
three of the 14 acquired properties) and the Boston Revere Hotel;
(3) the offering of the CRESTS and the repayment of debt with the proceeds;
and
(4) the offering of the Old Notes and borrowings under our new credit
facility and the application of the proceeds thereof, as if each such
transaction occurred on January 1, 1998.
The summary financial data presented below should be read along with
"Unaudited Pro Forma Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements contained elsewhere in this memorandum.
15
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
ACTUAL PRO FORMA ACTUAL
------------------------------- ----------- --------------------
<CAPTION>
1996 1997 1998 1998 1998 1999
--------- --------- --------- ----------- --------- ---------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ 239,526 $ 276,657 $ 395,214 $ 568,024 $ 185,269 $ 295,667
Direct operating expenses......................... 96,428 110,527 156,959 220,889 77,850 115,879
General and administrative........................ 9,297 8,973 10,080 16,859 4,829 11,367
Depreciation and amortization..................... 18,677 23,023 31,114 48,099 14,758 27,500
Other hotel operating expenses.................... 77,183 88,036 129,950 195,776 53,634 85,143
--------- --------- --------- ----------- --------- ---------
Income from operations............................ 37,941 46,098 67,111 86,401 34,198 55,778
Other income (expense):
Interest income and other....................... 1,723 1,720 1,260 2,122 700 817
Interest expense................................ (29,443) (25,909) (30,378) (63,649) (16,132) (37,139)
Non-recurring items(1).......................... 3,612 -- (35,324) (46,428) (432) --
Minority interests:
Preferred redeemable securities................. -- -- (6,475) (12,250) (311) (6,814)
Other........................................... (2,060) (960) (1,436) (1,318) (823) (1,310)
--------- --------- --------- ----------- --------- ---------
Income (loss) before income taxes and
extraordinary item.............................. 11,773 20,949 (5,242) (35,122) 17,200 11,332
Provision (benefit) for income taxes.............. 3,225 8,379 (2,097) (14,049) 6,880 4,533
--------- --------- --------- ----------- --------- ---------
Income (loss) before extraordinary item........... 8,548 12,570 (3,145) (21,073) 10,320 6,799
-----------
-----------
Extraordinary item, net of taxes.................. (348) (3,751) (2,076) (1,095) --
--------- --------- --------- --------- ---------
Net income (loss)................................. $ 8,200 $ 8,819 $ (5,221) $ 9,225 $ 6,799
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
EBITDA(2)......................................... $ 57,915 $ 69,559 $ 98,225 $ 134,500 $ 49,260 $ 84,266
Ratio of earnings to fixed charges(3)............. 1.4x 1.7x -- -- 2.0x 1.2x
Capital expenditures and acquisitions............. $ 96,635 $ 203,406 $ 186,384 $ 118,667 83,286 46,188
Total debt/EBITDA(4).............................. 5.3x 4.7x 8.7x 6.3x N/A N/A
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EBITDA/interest expense........................... 2.0x 2.7x 3.2x 2.1x 3.1x 2.3x
Number of hotels owned at end of period........... 57 69 142 142 87 135
Number of rooms owned at end of period............ 11,059 14,061 26,889 26,889 17,388 25,525
Occupancy(5)...................................... 64.4% 60.9% 60.9% 60.3% 62.1% 62.3%
Average daily rate(6)............................. $ 69.47 $ 71.90 $ 73.52 $ 73.17 $ 73.61 $ 75.42
RevPAR(7)......................................... $ 44.72 $ 43.82 $ 44.77 $ 44.12 $ 45.72 $ 46.95
Available room nights(8).......................... 3,487,689 4,107,066 5,844,637 9,107,862 2,728,523 4,507,909
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30, 1999
------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 ACTUAL AS ADJUSTED
--------- --------- --------- --------- -----------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property and equipment, net............................. $ 364,922 $ 534,080 $1,317,470 $1,332,522 $1,329,968
Total assets............................................ 439,786 627,651 1,497,921 1,519,909 1,525,793
Long-term obligations, less current portion............. 284,880 323,320 816,644 833,142 876,467
Minority interests:
Preferred redeemable securities....................... -- -- 175,000 175,000 175,000
Other................................................. 19,627 13,555 15,021 15,922 15,922
Total stockholders' equity.............................. 74,738 239,535 283,767 290,990 275,071
</TABLE>
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
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(1) Non-recurring items were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
<S> <C> <C> <C> <C>
ACTUAL PRO FORMA
------------------------------- -----------
<CAPTION>
1996 1997 1998 1998
--------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Gain on litigation settlement......................................... $ 3,612 $ -- $ -- $ --
Other non-recurring expense........................................... -- -- (432) (432)
Settlement on treasury rate lock transaction.......................... -- -- (31,492) (31,492)
Severance and other................................................... -- -- (3,400) (14,504)
--------- --------- --------- -----------
Total............................................................... $ 3,612 $ -- $ (35,324) $ (46,428)
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
(2) "EBITDA" represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the lodging industry. EBITDA is not a measurement of financial performance
under generally accepted accounting principles and should not be considered
an alternative to net income as a measure of performance or to cash flow as
a measure of liquidity. EBITDA is not necessarily comparable with similarly
titled measures for other companies.
(3) For purposes of calculating the ratio of earnings to fixed charges, earnings
are determined by adding fixed charges (excluding capitalized interest) and
amortization of capitalized interest to earnings before income taxes. Fixed
charges consist of (i) interest expense (including amortization of debt
issuance costs), (ii) capitalized interest, (iii) dividends paid on the
CRESTS and (iv) the portion of rent expense considered interest. Excluding
the non-recurring items for actual 1998 and pro forma 1998, the ratios would
have been 1.7x and 1.1x respectively. For the year ended December 31, 1998,
actual and pro forma, our earnings were insufficient to cover our fixed
charges by $6.8 million and $41.0 million, respectively.
(4) Based on debt at the end of the period. Excludes $175.0 million of CRESTS.
(5) Occupancy is determined by dividing the total rooms occupied for the period
by the total available room nights for such period. We include rooms being
renovated or otherwise unavailable in determining the total available room
nights.
(6) Average daily rate is determined by dividing room revenue for the period by
the number of rooms occupied for the period.
(7) "RevPAR" means revenue per available room per day, which is calculated as
average daily rate multiplied by the occupancy.
(8) Total rooms multiplied by number of days in the period. Includes rooms being
renovated or otherwise unavailable. Historically, Servico had not included
rooms being renovated or otherwise unavailable.
(9) Our results for the six months ended June 30, 1999 have been materially
affected by the Merger and the acquisitions of AMI and the Boston Revere
Hotel, that were recorded under the purchase method of accounting.
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RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS AND THE OTHER
INFORMATION IN THIS PROSPECTUS. THIS SECTION INCLUDES OR REFERS TO CERTAIN
FORWARD-LOOKING STATEMENTS. YOU SHOULD REFER TO THE EXPLANATION OF THE
QUALIFICATIONS AND LIMITATIONS ON SUCH FORWARD-LOOKING STATEMENTS DISCUSSED
UNDER THE HEADING "FORWARD-LOOKING STATEMENTS" IN THIS PROSPECTUS.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND
PREVENT US FROM FULFILLING OUR OBLIGATION UNDER THESE NOTES
We have a substantial amount of debt. As of June 30, 1999, after giving
effect to the offering of the Notes and borrowings under our new credit facility
and the application of the net proceeds thereof, we would have had outstanding
debt of $890.0 million and the ability to borrow an additional $12.8 million
under our existing agreements and $75.0 million under our new credit facility.
These additional borrowings under our new credit facility would be for
designated construction projects and for general corporate purposes. The
Indenture permits us to incur additional debt, subject to specified limitations.
See "Description of Certain Indebtedness and Preferred Stock" and "Description
of the Notes."
Our substantial indebtedness could interfere with the ability to pay
interest and principal on the Notes and may have important consequences for our
operations, including:
- we may not have sufficient funds to pay interest on, and principal of, our
debt (including the Notes);
- we will have to dedicate a substantial portion of our cash flow from
operations to the payment of interest on, and principal of, our debt,
which will reduce funds available for other purposes;
- we may not be able to fund capital expenditures, working capital and other
corporate requirements;
- we may not be able to obtain additional financing; and
- our ability to adjust to changing market conditions and to withstand
competitive pressures could be limited, and we may be vulnerable to
additional risk if there is a downturn in general economic conditions or
our business.
In addition, as of June 30, 1999, after giving effect to the offering of the
Notes and borrowings under our new credit facility and the application of the
net proceeds thereof, $445.2 million of our debt would have had variable rates
of interest, which could result in higher interest expense if interest rates
increase.
We have a significant amount of debt that will mature prior to the maturity
of the Notes, and this debt and the Notes may need to be refinanced at their
maturity. Our ability to refinance our debt will depend upon several factors,
including our financial condition at the time, the restrictions in the existing
debt agreements and other factors, including market condition, which are beyond
our control. We cannot assure you that we will be able to obtain any necessary
refinancing on terms that are acceptable to us.
The following chart is presented assuming we had completed the offering of
the Notes and have made borrowings under our new credit facility and applied the
proceeds as they were so applied:
<TABLE>
<CAPTION>
AT JUNE 30,
1999
---------------
(IN MILLIONS)
<S> <C>
Total indebtedness............................................................................... $ 890.0
Indebtedness senior to the Notes (includes debt of subsidiaries that are not guarantors)......... $ 690.0
</TABLE>
In addition, at June 30, 1999, we had $175.0 million of Convertible
Debentures underlying the CRESTS outstanding. See "Description of Certain
Indebtedness and Preferred Stock--CRESTS."
18
<PAGE>
TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH, AND
OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL
Our ability to make payments on our debt, including the Notes, depends on
our future operating performance, which is subject to general economic and
competitive conditions and to financial, business, regulatory and other factors,
many of which we cannot control. If our cash flow from operations is
insufficient, we may take specific actions, including delaying or reducing
capital expenditures, attempting to restructure or refinance our debt, deferring
scheduled CRESTS dividends, selling assets or operations, or seeking additional
equity capital. We may be unable to take any of these actions on satisfactory
terms or in a timely manner. Further, any of these actions may not be sufficient
to allow us to meet our debt obligations. Our existing debt agreements limit our
ability to take certain of these actions. The Indenture will contain similar
restrictions. See "--Our Debt Instruments Restrict Our Ability to Enter into
Certain Transactions." Our failure to earn enough to pay our debts or to
successfully undertake any of these actions could, among other things,
materially and adversely affect the market value of the Notes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Description of Certain
Indebtedness and Preferred Stock" and "Description of the Notes."
SUBORDINATION OF THE NOTES AND NOTE GUARANTEES; ASSET ENCUMBRANCES--EXISTENCE OF
SENIOR DEBT COULD LIMIT THE ABILITY OF LODGIAN FINANCING AND THE GUARANTORS TO
FULFILL THEIR OBLIGATIONS UNDER THE NOTES AND THE NOTE GUARANTEES
The right to payment on the Notes and the guarantees is subordinate to all
of the existing and future debt of Lodgian Financing and the guarantors that is
senior indebtedness under the Indenture. In the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding, Lodgian
Financing's assets will be available to pay obligations on the Notes, and the
assets of Lodgian and the subsidiary guarantors will be available to pay their
obligations under their respective guarantees, only after all our outstanding
senior indebtedness has been paid in full. There may not be sufficient assets
remaining to make payments on amounts due on any or all of the Notes then
outstanding or on the guarantees. In addition, under particular circumstances, a
default in the payment of some senior indebtedness prohibits Lodgian Financing
or the guarantors from making payments on the Notes or the guarantees. As of
June 30, 1999, after giving effect to the offering of the Notes and borrowings
under our new credit facility and the application of the net proceeds thereof,
our outstanding senior indebtedness would have been $349.8 million (which
includes $109.8 million of guarantees of debt of subsidiaries that are not
guaranteeing the Notes), and we would have had $465.4 million of debt
outstanding at subsidiaries that have not guaranteed the Notes. Although the
Indenture limits the amount of debt that we may incur, the amount of debt we
incur could be substantial and could be senior indebtedness. See "Description of
the Notes."
The Notes and the guarantees are unsecured and effectively rank junior in
right of payment to any of our secured debt to the extent of the value of the
assets securing that debt. Our secured debt includes debt incurred under our
mortgage notes and credit facilities, which is secured by liens on substantially
all of our assets. If an event of default were to occur under our mortgage notes
or credit facilities, the lenders could foreclose on the assets regardless of
any default with respect to the Notes or the guarantees. The assets would first
be used to repay in full all amounts outstanding under our mortgage notes and
credit facilities. There may not be sufficient value to repay the outstanding
principal amount of the Notes or the guarantees.
COMPANY STRUCTURE; STRUCTURAL SUBORDINATION--FUNDS FROM SUBSIDIARIES MAY NOT BE
SUFFICIENT FOR US TO MAKE PAYMENTS ON THE NOTES
Lodgian is a holding company whose primary assets consist of shares of
Lodgian Financing, Servico and Impac. Lodgian Financing is a holding company
whose operations are conducted through its direct or
19
<PAGE>
indirect subsidiaries. As a result, Lodgian Financing will be dependent on
dividends and other distributions from its subsidiaries for the funds necessary
to make payments on the Notes. The Notes are guaranteed on an unsecured senior
subordinated basis by Lodgian and each of the wholly-owned subsidiaries of
Lodgian Financing. Under our new credit facility, our subsidiaries Impac Hotel
Group, LLC and Servico, Inc. are restricted from making distributions to
Lodgian, other than tax distributions, but can make other distributions to
Lodgian Financing.
Holders of the Notes will effectively be junior to all creditors of our
subsidiaries that are not guarantors. As of June 30, 1999, after giving effect
to the offering of the Notes and borrowings under our new credit facility and
the application of the net proceeds thereof, the total liabilities of these
subsidiaries would have been approximately $613.1 million, including trade
payables, and $465.4 million of debt.
The direct and indirect subsidiaries of Lodgian Financing are legally
distinct entities from us and, except for the subsidiary guarantors, have no
obligation to pay amounts due under the Notes or to make funds available for
payment. The ability of our subsidiaries to make these payments is subject to
the availability of funds and the terms of these subsidiaries' indebtedness,
among other things. For example, our mortgage notes and credit facilities
restrict the ability of our subsidiaries to pay dividends or make other
distributions.
SUBSIDIARY GUARANTEES COULD BE DEEMED TO BE FRAUDULENT CONVEYANCES
All wholly-owned subsidiaries of Lodgian Financing guarantee the Notes. The
issuance of these subsidiary guarantees could be subject to review under
applicable fraudulent transfer or conveyance laws in a bankruptcy or other
similar proceeding. Under these laws, the issuance of a guarantee will be a
fraudulent conveyance if either (1) the subsidiary issued the guarantee with
intent of hindering, delaying or defrauding its creditors, or (2) the subsidiary
received less than reasonably equivalent value or fair consideration in return
for issuing the guarantee, and, in the case of (2) only, one of the following is
also true:
- the subsidiary was insolvent or became insolvent when it issued the
guarantee,
- issuing the guarantee left the subsidiary with an unreasonably small
amount of capital, or
- the subsidiary intended to, or believed that it would, be unable to pay
its debts as they matured.
If the issuance of the subsidiary guarantee were a fraudulent conveyance, a
court could, among other things, void the subsidiary's obligations under the
guarantee and require the repayment of any amounts paid thereunder.
Generally, an entity will be considered insolvent if:
- the sum of its debts is greater that the fair value of its property,
- the present fair value of its assets is less than the amount that it will
be required to pay on its existing debts as they become due, or
- it cannot pay its debts as they become due.
We believe, however, that upon issuance of the Notes, our subsidiaries are
solvent, have sufficient capital to carry on their businesses and are able to
pay their debts as they mature. We cannot be sure, however, as to what standard
a court would apply in making such determinations or that a court would reach
the same conclusions with regard to these issues.
20
<PAGE>
OUR DEBT INSTRUMENTS RESTRICT OUR ABILITY TO ENTER INTO CERTAIN TRANSACTIONS
The Indenture restricts our ability to engage in certain transactions. In
addition, certain of our indebtedness requires us to maintain debt service
coverage ratios. See "Description of Certain Indebtedness and Preferred Stock"
and "Description of the Notes--Covenants."
Our indebtedness and the Indenture restrict our ability, and the ability of
our subsidiaries, to:
- incur additional indebtedness;
- pay dividends and make distributions;
- issue stock of subsidiaries;
- make investments;
- repurchase stock;
- create liens;
- enter into transactions with affiliates;
- enter into sale and leaseback transactions;
- merge or consolidate; and
- transfer and sell assets.
The restrictions imposed by our indebtedness may limit our ability to
finance future operations, respond to changing business and economic conditions,
secure any needed additional financing and engage in opportunistic transactions.
Moreover, we may not satisfy the financial ratios and tests due to events that
are beyond our control. The failure to satisfy any of these restrictions could
result in a default under that indebtedness. Following a default, the lenders
could declare all amounts outstanding to be immediately due and payable. If we
could not repay those amounts, the lenders could foreclose on the collateral
granted to them to secure the indebtedness under those financings. If the
lenders accelerated the outstanding indebtedness, we cannot guarantee that we
could repay such indebtedness nor can we guarantee that we could pay amounts due
in respect of our other indebtedness, including the Notes, with our remaining
assets. See "Description of Certain Indebtedness and Preferred Stock" and
"Description of the Notes--Ranking."
WE MAY BE UNABLE TO REALIZE THE ANTICIPATED BENEFITS OF THE MERGER AND THE
ACQUISITION OF AMI
Primarily as a result of the Merger and the acquisition of AMI Operating
Partners, L.P. ("AMI"), the number of hotels we own almost doubled during 1998.
We must fully integrate the Impac and AMI hotels into our hotel portfolio and we
may need additional people and resources to handle the increased work load. If
we are unable to integrate the Impac and AMI hotels successfully into our
portfolio, our business, financial condition and results of operations could
suffer. Similarly, a large number of the Impac and AMI hotels are in the process
of, or awaiting, substantial renovation, development and rebranding. If the
implementation of these plans is significantly delayed or curtailed, or the
improvements do not yield the anticipated results, then we may have paid too
much for these hotels.
RISKS ASSOCIATED WITH THE LODGING INDUSTRY--ECONOMIC CONDITIONS, OVERSUPPLY,
TRAVEL PATTERNS, WEATHER AND OTHER CONDITIONS BEYOND OUR CONTROL MAY ADVERSELY
AFFECT OUR BUSINESS AND RESULTS OF OPERATION
The lodging industry may be adversely affected by changes in national or
local economic conditions and other local market conditions, such as an
oversupply of hotel rooms or a reduction in demand for hotel space in a
geographic area, changes in travel patterns, extreme weather conditions, changes
in governmental regulations which influence or determine wages, prices or
construction costs, changes in
21
<PAGE>
interest rates, the availability of financing for operating or capital needs, or
changes in real estate tax rates and other operating expenses. In addition, due
in part to the strong correlation between the lodging industry's performance and
economic conditions, the lodging industry is subject to cyclical changes in
revenues and profits. Downturns or prolonged adverse conditions in the real
estate or capital markets or in national or local economies, our inability to
secure financing for the development of hotels or an oversupply of hotel rooms
could have a material adverse effect on our business and results of operations.
RISKS RELATED TO THE DEVELOPMENT OF NEW PROJECTS, ACQUISITIONS AND
RENOVATIONS--WE CANNOT GUARANTEE THE SUCCESS OF ANY FUTURE PROJECTS
Part of our growth strategy is to develop new hotels and to acquire and
redevelop underperforming hotels. Acquiring, developing and renovating involve
substantial risks, including:
- identifying acquisitions that meet our criteria;
- costs exceeding budgeted or contracted amounts;
- delays in completion of construction;
- the failure to obtain necessary zoning and construction permits;
- lack of financing on favorable terms;
- the failure of developed or redeveloped or acquired properties to achieve
desired revenue or profitability levels;
- competition for suitable development sites from competitors who may have
greater financial resources;
- the incurrence of substantial costs for abandoned development projects;
- work stoppages;
- relationships with contractors;
- changes in governmental rules, regulations and interpretations; and
- changes in general economic and business conditions.
As of June 30, 1999, we were constructing three new hotels and renovating 19
hotels. We cannot guarantee that present or future development or renovation
will proceed in accordance with our expectations. We also cannot assure you that
we will acquire and redevelop properties or complete the development and
construction of hotels or that any such development or construction will be
completed on time or within budget.
We compete against numerous entities to acquire hotels. Some of our
competitors have greater financial resources or carry less debt than we do. For
successful growth, we must be able to acquire hotels on attractive terms and
integrate the acquired hotels into our existing operations. For acquired hotels,
including those acquired in the Merger, we must consolidate management,
operations, systems, personnel and procedures. Any delays or unexpected costs in
this integration could materially affect our business, financial condition, or
results of operations. We cannot assure you that our newly acquired hotels will
perform as expected or that we will be able to realize any expected cost
savings.
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH
We expect to grow internally and through acquisitions. We expect to expend
significant time and effort in expanding existing businesses and in identifying,
completing and integrating acquisitions and in developing new properties. We
cannot guarantee that our systems, procedures and controls will be adequate to
support our operations as they expand. Any future growth also will impose
significant added
22
<PAGE>
responsibilities on members of senior management, including the need to
identify, recruit and integrate new managers and executives. We cannot guarantee
that we will identify and retain additional management. If we are unable to
manage our growth efficiently and effectively, or are unable to attract and
retain additional qualified management, our business and results of operations
could be materially adversely affected. In making acquisitions, we may have
difficulty combining the operations or realizing the expected benefits and
operating synergies. Our ability to consolidate our business, operations and
personnel (including reducing duplicate functions and costs) with any
acquisitions will affect our growth and profitability. Delays or unexpected
costs in the integration could reduce the expected gains from the combined
business and results of operations. We cannot assure you that we will be able to
accomplish the consolidation and achieve the cost savings in a timely or
profitable manner or that any savings will be realized. See "Business--Growth
Strategy" and "Management."
WE HAVE SIGNIFICANT CAPITAL NEEDS AND ADDITIONAL FINANCINGS MAY NOT BE AVAILABLE
The development, renovation and maintenance of hotels is capital intensive.
As part of our growth strategy we intend to acquire and redevelop additional
hotels and to develop new hotels. To pursue this strategy, we will be required
to obtain additional capital in the future to meet our expansion plans. In
addition, in order for our hotels to remain competitive they must be maintained
and refurbished on an ongoing basis. Moreover, our cash flow from operations may
be adversely affected because portions of the facilities are removed from
service during renovation. We may obtain needed capital from cash on hand,
including reserves, cash flow from operations or from financing, including the
issuance of additional indebtedness. We may also seek financing from other
sources or enter into joint ventures and other collaborative arrangements in
connection with the acquisition or development of hotel properties. We cannot
guarantee that we will be able to raise any additional financing on acceptable
terms on a timely basis or at all. If we cannot obtain such financing, we may be
unable to construct additional hotels, and we may experience delays in our
planned renovation or maintenance of our hotels.
WE DEPEND ON THIRD PARTIES IN OUR JOINT VENTURES AND COLLABORATIVE ARRANGEMENTS
We currently own 12 hotels in partnership with other entities and may in the
future enter into joint venture or other collaborative arrangements. Our
investment in these joint ventures may, under certain circumstances, involve
risks not otherwise present in our business, including (1) the risk that our
partner may become bankrupt, (2) the impact on our ability to sell or dispose of
our property as a result of buy/sell rights that may be imposed by the venture,
and (3) the risk that our partner may have economic or other interests or goals
that are inconsistent with our interests and goals and that they may be in
position to veto actions which may be in our best interests.
COMPETITION IN THE LODGING INDUSTRY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS AND RESULTS OF OPERATIONS
The lodging industry is highly competitive. Competitive factors within the
industry include:
- room rates;
- quality of accommodations;
- name recognition;
- service levels;
- reputation;
- reservation systems;
- convenience of location; and
- the supply and availability of alternative lodging.
23
<PAGE>
We intend to develop or acquire most of our hotels in geographic locations
where other hotels may be located. We expect to compete for guests and
development sites with national chains, large franchisees and independent
operators. Many of these competitors have greater financial resources and may
have better relationships with prospective franchisors, representatives in the
construction industry and others in the lodging industry. The number of
competitive lodging facilities in a particular area could have a material
adverse effect on our occupancy and rates and, therefore, revenues of our
hotels. See "Business-- Competition and Seasonality."
We believe that competition within the lodging market has increased
substantially and may increase in the foreseeable future. We cannot guarantee
that new or existing competitors will not significantly reduce their rates or
offer greater convenience, services or amenities or significantly expand or
improve hotels in the markets in which we currently or may subsequently compete,
thereby materially adversely affecting our business and results of operations.
WE RELY ON OUR FRANCHISORS, AND OUR FRANCHISE AGREEMENTS MAY RESTRICT OUR HOTEL
OPERATIONS AND MAINTENANCE
We expect to derive substantial benefits from our strategic alliances with
franchisors. Most of the hotels that we own or manage are operated under
franchise licenses, including franchise licenses for the Comfort Inn, Courtyard
by Marriott, Crowne Plaza, Doubletree, Fairfield Inn by Marriott, Hampton Inn,
Hilton, Holiday Inn, Marriott, Radisson, Residence Inn by Marriott and Sheraton
brands, among others. Any significant decline in the reputation of any of our
franchisors could adversely affect our results of operations. Most of our hotels
are affiliated with Holiday Inn and Marriott. If we lose our position as a
franchisee of any of our franchisors, particularly Holiday Inn or Marriott, or
there is a decline in their reputations, our business, financial condition and
results of operations could be adversely affected.
We believe our relationships with our franchisors are good. However, from
time to time, we have terminated relationships with franchisors for quality or
for other reasons and, in addition, one franchisor terminated its franchise with
us on one property that was under notice of termination when we acquired it.
Currently we have received a notice of franchise termination on two hotels. We
expect to convert these hotels to new franchises.
We operate our hotels according to franchise agreements with major hotel
chains. Each franchise agreement usually contains specific standards for, and
restrictions and limitations on, hotel operation and maintenance. These
standards, restrictions, and limitations may conflict with our planned
expenditures and priorities. In addition, franchisors may change their standards
or limit our ability to improve or modify our hotels without franchisor consent.
To comply with franchisors' requirements, or to change a franchise affiliation
for a particular hotel, we may be forced to incur significant costs or make
capital expenditures. Franchisors may usually cancel franchise agreements if the
hotel operator fails (1) to maintain specified operating standards or (2) to
make payments when due under the franchise agreement. If we lose a franchise, we
may suffer in the areas of brand recognition, marketing, and centralized
reservations systems provided by the franchisor, which, in turn, could affect
operations and the underlying value of the affected hotel. Franchise agreements
often define certain transactions as a "change of control" and can require
franchisor approval, or the payment of certain fees, or both. Obtaining approval
for these transactions can take time, and the potential cost of doing so could
have an adverse effect on our business, financial condition and results of
operations.
OUR INVESTMENT IN REAL ESTATE COULD DECLINE IN VALUE, BE ILLIQUID OR EXPERIENCE
UNINSURED OR UNDERINSURED LOSSES
GENERAL RISKS. Our investment in our hotels will be subject to varying
degrees of risk related to the ownership and operation of real property. The
underlying value of our real estate investments depends significantly on our
ability to maintain or increase cash provided by operating the investments. The
value of our hotels and income from the hotels may be materially adversely
affected by:
24
<PAGE>
- changes in national economic conditions;
- changes in general or local economic conditions and neighborhood
characteristics;
- competition from other lodging facilities;
- changes in real property tax rates;
- changes in the availability, cost and terms of financing;
- the effect of present or future environmental laws;
- the ongoing need for capital improvements;
- changes in operating expenses;
- changes in governmental rules and policies;
- natural disasters; and
- other factors which are beyond our control.
ILLIQUIDITY OF REAL ESTATE. Real estate investments are relatively
illiquid. Our ability to vary our portfolio in response to changes in economic
and other conditions will be limited. We cannot guarantee that we will be able
to dispose of an investment when we find disposition advantageous or necessary
or that the sale price of any disposition will recoup or exceed the amount of
our investment.
UNINSURED AND UNDERINSURED LOSSES COULD RESULT IN LOSS OF VALUE OF
HOTELS. We maintain comprehensive insurance on each of our hotels, including
liability, fire and extended coverage, of the type and amount we believe is
customarily obtained for or by an owner of similar real property assets.
However, there are types of losses, generally of a catastrophic nature, such as
earthquakes and floods, that may be uninsurable or not economically insurable.
We use our discretion in determining amounts, coverage limits and deductibility
provisions of insurance, with a view to obtaining appropriate insurance on our
hotels at a reasonable cost and on suitable terms. This may result in insurance
coverage that could be insufficient to pay the full current market value or
current replacement cost of our lost investment. Inflation, changes in building
codes and ordinances, environmental considerations and other factors also might
make it infeasible to use insurance proceeds to replace a hotel after it has
been damaged or destroyed. Under these circumstances, the insurance proceeds we
receive might not be enough to restore our economic position with respect to a
damaged or destroyed hotel. In addition, property and casualty insurance rates
may increase depending on claims experience, insurance market conditions and the
replacement value of our hotels.
THE FAILURE TO COMPLY WITH GOVERNMENT REGULATION MAY ADVERSELY EFFECT OUR
BUSINESS AND RESULTS OF OPERATIONS
The hotel industry is subject to numerous federal, state and local
government regulations, including those relating to building and zoning
requirements. In addition, we are subject to laws governing the relationships
with employees, including minimum wage requirements, overtime, working
conditions, work permit requirements and dramshop laws, 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.
Further, under the Americans with Disabilities Act of 1990, all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While we anticipate that our owned hotels
and the hotels we manage will be substantially in compliance with these
requirements, a determination that we are not in compliance with these
regulations could result in the imposition of fines, an award of damages to
private litigants and significant expense in bringing our hotels in compliance.
See "Business--Regulation."
25
<PAGE>
ENVIRONMENTAL REGULATION MAY ADVERSELY IMPACT OUR COSTS
Our operating costs may be affected by the obligation to pay for the cost of
complying with existing environmental laws, ordinances and regulations. In
addition, if any future legislation is adopted, we may at various times be
required to make significant capital and operating expenditures in response to
such legislation. We attempt to minimize our exposure to potential environmental
liability through our site selection procedures. We typically enter into
contracts to purchase real estate subject to certain contingencies. Prior to
exercising our option to purchase property, we typically conduct a Phase I
environmental assessment (which generally includes a physical inspection and
database search, but not soil or groundwater analyses). Under various federal,
state and local environmental laws, ordinances and regulations, 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 the
property. These laws often impose liability whether or not the owner or operator
knew of, or was responsible for, the presence of hazardous or toxic substances.
In addition, the presence of contamination from hazardous or toxic substances,
or the failure to properly remediate the contaminated property, may adversely
affect the owner's ability to borrow using the real property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances also may be liable for the costs of removal or remediation of these
substances at the disposal or treatment facility, whether or not the facility is
or ever was owned or operated by that person. Certain environmental laws and
common law principles could be used to impose liability for releases of
hazardous materials, including asbestos-containing materials, into the
environment, and third parties may seek recovery from owners or operators of
real properties for personal injury associated with exposure to released
hazardous materials. Environmental laws also may impose restrictions on the
manner in which property may be used or transferred or in which businesses may
be operated, and these restrictions may require expenditures. In connection with
the ownership of our properties and the management of other hotels, we
potentially may be liable for any such costs. The cost of defending against
claims of liability or remediating contaminated property and the cost of
complying with environmental laws could materially adversely affect our business
and results of operations.
DEPENDENCE ON KEY PERSONNEL--LOSS OF MANAGEMENT COULD RESULT IN A MATERIAL
ADVERSE EFFECT
We depend substantially on the efforts and skills of members of management,
in particular Robert S. Cole. Mr. Cole is our Chief Executive Officer, President
and a director. The loss of the services of Mr. Cole or his inability to devote
sufficient attention to our operations could have a material adverse effect on
our operations.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your notes for exchange notes, you will continue to
be subject to the restrictions on transfer of your notes set forth in their
legend because the outstanding Old Notes were issued pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act. In general, outstanding Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. We currently do not anticipate registering the
outstanding Old Notes under the Securities Act.
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<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the Exchange Offer. In consideration
for issuing the Exchange Notes, we will receive in exchange outstanding Old
Notes of like principal amount, the terms of which are identical in all material
respects to the Old Notes. The outstanding Old Notes surrendered in exchange for
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any increase in our
indebtedness. We have agreed to bear the expenses of the Exchange Offer. No
underwriter is being used in connection with the Exchange Offer.
For a description of the use of proceeds of the offering of outstanding Old
Notes, see "Summary-- Lodgian--Recent Developments."
27
<PAGE>
CAPITALIZATION
The following table presents our consolidated capitalization as of June 30,
1999 (1) on an actual basis and (2) as adjusted for the offering of the Notes
and borrowings under our new credit facility and the application of the proceeds
to repay portions of our existing indebtedness as described in "Summary--
Lodgian--Recent Developments" as if these transactions had occurred on June 30,
1999. The information presented below should be read along with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements contained elsewhere in this memorandum.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------ ------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Long-term debt (including current portion):
Mortgage notes payable--to be repaid with issuance of the Notes and the new credit
facility(1)....................................................................... $ 412,973 $ --
Mortgage notes with variable interest rates maturing through 2011(2)................ 205,240 205,240
Mortgage notes payable, with fixed rates ranging from 8.6% to 10.7% payable through
2010.............................................................................. 230,345 230,345
Other(3)............................................................................ 20,994 14,369
New credit facility(4).............................................................. -- 240,000
Senior Subordinated Notes offered hereby............................................ -- 200,000
------------ ------------
Total long-term debt(5)........................................................... 869,552 889,954
Minority Interests:
Preferred redeemable securities(6).................................................. 175,000 175,000
Other............................................................................... 15,922 15,922
Stockholders' equity:
Common stock........................................................................ 278 278
Additional paid-in capital.......................................................... 262,436 262,436
Retained earnings(7)................................................................ 29,905 13,906
Accumulated other comprehensive loss................................................ (1,629) (1,629)
------------ ------------
Total stockholders' equity........................................................ 290,990 275,071
------------ ------------
Total capitalization............................................................ $ 1,351,464 $ 1,355,947
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) $132.5 million relating to the Nomura Impac I mortgage notes are to be
repaid in September 1999 with a deferred funding.
(2) Each note converts to a term loan amortizing over a 20-year period,
commencing in October 2000 and October 2001.
(3) As adjusted to reflect exit fees paid to Lehman Brothers upon repayment of
the Lehman Brothers mortgage notes.
(4) Does not reflect any borrowing expected to be available under our new credit
facility other than the borrowings to fund the repayment of the Nomura Impac
I mortgage notes in September 1999.
(5) The weighted average interest rate on the as adjusted total long-term debt
at June 30, 1999 would have been 9.5% (based on the interest expense
relating to the Notes and the new credit facility set forth in Note 5 under
"Unaudited Pro Forma Consolidated Financial Data").
(6) Represents $175.0 million liquidation preference of CRESTS issued by Lodgian
Capital Trust I, with a $50 par value. The sole asset of the trust consists
of $175.0 million principal amount of our convertible subordinated
debentures due 2010. The CRESTS are convertible into common stock of Lodgian
at the option of the holder at a price of $21.42 per share. Holders receive
distributions at a fixed annual rate of 7%, which are deferrable for 20
quarters under the governing indenture. The CRESTS will be redeemed upon the
repayment of the underlying convertible debentures on June 30, 2010 or their
earlier redemption. See "Description of Certain Indebtedness and Preferred
Stock."
(7) As adjusted to reflect certain exit, prepayment and other fees associated
with the repayment of the debt with the proceeds of the offering of the
Notes and borrowings under our new credit facility.
28
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited 1998 pro forma consolidated statement of operations
of Lodgian gives effect to:
(1) the Merger;
(2) the 1998 acquisitions of AMI (after the sale of three of the 14 acquired
properties) and the Boston Revere Hotel;
(3) the June 1998 offering of the CRESTS and the repayment of debt with the
proceeds; and
(4) the offering of the Old Notes and borrowings under our new credit
facility and the application of the proceeds thereof, as if such
transactions occurred on January 1, 1998.
The unaudited 1998 pro forma consolidated statement of operations of Lodgian
should be read in conjunction with the historical financial statements and other
financial information included elsewhere in this memorandum.
The effect of the offering of the Old Notes and the borrowings under the new
credit facility on the historical consolidated balance sheet as of June 30, 1999
and the consolidated statement of operations for the six months ended June 30,
1999 is immaterial to the respective statements. Therefore, no separate pro
forma balance sheet or statement of operations for these periods is included in
the unaudited pro forma consolidated financial data.
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. Such information is not
necessarily indicative of the operating results or financial position that would
have occurred had the transactions been consummated at the dates indicated, nor
is it necessarily indicative of future operating results or the financial
position of Lodgian. No effect has been given in the unaudited 1998 pro forma
consolidated statement of operations for operating and cost savings that may be
realized from the acquisition of AMI or from the Merger.
29
<PAGE>
LODGIAN, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------------------
OFFERING OF
NOTES,
IMPAC THE CREDIT
(JANUARY 1, AMI AND FACILITY,
1998- BOSTON CRESTS
LODGIAN DECEMBER 11, REVERE HOTEL OFFERING AND
HISTORICAL(1) 1998)(2) ACQUISITIONS(3) MERGER PRO FORMA
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Rooms...................................... $ 267,862 $ 116,495 $ 17,593 $ -- $ 401,950
Food and beverages......................... 107,334 26,425 3,977 -- 137,736
Other...................................... 20,018 7,861 459 -- 28,338
------------ ------------ ------------ ------------ -----------
Total.................................... 395,214 150,781 22,029 -- 568,024
Operating expenses:
Direct
Rooms.................................... 75,316 34,571 4,241 -- 114,128
Food and beverage........................ 81,643 21,714 3,404 -- 106,761
General and administrative................. 10,080 6,437 342 -- 16,859
Other hotel operating expenses............. 129,950 56,067 9,759 -- 195,776
Depreciation and amortization.............. 31,114 14,268 1,010 1,707(4) 48,099
------------ ------------ ------------ ------------ -----------
Total.................................... 328,103 133,057 18,756 1,707 481,623
------------ ------------ ------------ ------------ -----------
Income from operations....................... 67,111 17,724 3,273 (1,707) 86,401
Other income (expenses):
Interest income and other.................. 1,261 56 805 -- 2,122
Loss on asset disposition.................. (432) -- -- -- (432)
Interest expense........................... (30,378) (33,336) -- 65(5) (63,649)
Settlement on swap transactions............ (31,492) -- -- -- (31,492)
Merger related costs....................... (3,400) (11,104) -- -- (14,504)
Minority interests:
Preferred redeemable securities............ (6,476) -- -- (5,774)(5) (12,250)
Other...................................... (1,436) 118 -- -- (1,318)
------------ ------------ ------------ ------------ -----------
(Loss) income before income taxes and
extraordinary item......................... (5,242) (26,542) 4,078 (7,416) (35,122)
(Benefit) provision for income taxes......... (2,097) (10,617) 1,632 (2,967) (14,049)
------------ ------------ ------------ ------------ -----------
Net (loss) income before extraordinary
items...................................... $ (3,145) $ (15,925) $ 2,446 $ (4,449) $ (21,073)
------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ -----------
Loss before extraordinary items per common
share...................................... $ (0.16) $ (0.76)
Loss before extraordinary items per common
share, assuming dilution................... $ (0.16) $ (0.76)
Basic weighted average shares................ 20,245 27,641
Diluted weighted average shares.............. 20,245 27,641
</TABLE>
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
30
<PAGE>
(1) The historical statement of operations of Lodgian, Inc. for the year ended
December 31, 1998 includes the operations of various properties that Servico
acquired during 1998 from the date of acquisition through the earlier of
December 31, 1998 or the date of disposition (including Impac from December
11, 1998 to December 31, 1998), and the effect of the CRESTS offering
completed in July 1998 from the date of offering through December 31, 1998.
(2) The unaudited historical results of operations of Impac were derived from
information provided by Impac as of the date of the Merger. The statement of
operations for Impac represents the historical operations of Impac for the
period from January 1, 1998 through the date of the Merger. The statement
includes the operations of the Boston Revere Hotel, acquired by Impac on
July 1, 1998, from the date of acquisition through the date of the Merger.
(3) Reflects the operations of 11 of the 14 hotels acquired in the acquisition
of AMI (the other three hotels were sold by Servico) from January 1, 1998
until May 28, 1998, the date of the AMI acquisition, and the Boston Revere
Hotel from January 1, 1998, until July 1, 1998, the date of its acquisition
by Impac.
(4) Reflects the additional depreciation and amortization resulting from the
allocation of purchase price to the Impac properties and recording of
goodwill pursuant to APB No. 16 in connection with the Merger. The
allocation of the cost of the acquired assets between land, buildings, and
furnishings and equipment is based on the fair values of the assets.
Depreciation expense for buildings and furnishings and equipment is based
upon their estimated useful lives of 40 years and 9.5 years, respectively.
Goodwill is being amortized over a 20-year period. Depreciation and
amortization is calculated on a straight-line basis.
(5) Reflects (i) $6.1 million of additional interest expense related to the
CRESTS ($5.8 million of which is reflected in minority interests--preferred
redeemable securities), which includes the amortization of $.3 of deferred
financing costs, (ii) interest expense of $24.5 million relating to the
Notes plus $.7 million of amortization of deferred financing costs, (iii)
assumed interest expense of $13.1 million relating to the new credit
facility plus $1.1 million of amortization of deferred financing costs, (iv)
the elimination of $3.8 million of interest expense relating to indebtedness
repaid with the CRESTS proceeds and (v) the elimination of $34.4 million of
interest expense relating to indebtedness to be repaid with the net proceeds
from the sale of the Old Notes and borrowings under the new credit facility
(and indebtedness that was repaid with such indebtedness). For each .25%
change in the assumed rate on the new credit facility, pro forma interest
expense will change by approximately $355,576 for the year ended December
31, 1998.
31
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF LODGIAN
In the table below, we provide you with selected historical financial data
of Lodgian. We have prepared this information using the consolidated financial
statements of Lodgian for the years ended December 31, 1994, 1995, 1996, 1997
and 1998 and the six-months periods ended June 30, 1998 and 1999. The financial
statements for the years ended December 31, 1994, 1995, 1996, 1997 and 1998 have
been audited by Ernst & Young LLP, independent auditors. The financial
statements for the six months ended June 30, 1998 and 1999 have not been
audited. We believe the financial statements for these periods have been
prepared on the same basis as our audited consolidated financial statements and
include all adjustments (consisting only of normal recurring items) necessary
for a fair and consistent presentation of our results of operations and
financial position for these periods and as of these dates. Historical results
for the interim periods are not necessarily indicative of the results that may
be expected for the entire year ending December 31, 1999.
This summary historical financial data should be read along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements included elsewhere in this
memorandum.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Rooms....................... $ 93,720 $ 113,902 $ 156,564 $ 179,956 $ 267,862 $ 124,761 $ 211,663
Food and beverage........... 46,945 53,499 68,803 80,335 107,334 50,540 69,126
Other....................... 9,018 11,079 14,159 16,366 20,018 9,968 14,878
--------- --------- --------- --------- --------- --------- ---------
Total revenues............ 149,683 178,480 239,526 276,657 395,214 185,269 295,667
Operating Expenses:
Direct:
Rooms..................... 26,848 32,140 43,667 49,608 75,316 34,072 57,122
Food and beverage......... 36,585 41,474 52,761 60,919 81,643 38,460 50,541
General and
administrative............ 7,944 8,977 9,297 8,973 10,080 4,829 11,367
Depreciation and
amortization.............. 9,465 12,370 18,677 23,023 31,114 14,758 27,500
Other hotel operating
expenses.................. 52,205 59,727 77,183 88,036 129,950 56,952 93,359
--------- --------- --------- --------- --------- --------- ---------
Total operating
expenses................ 133,047 154,688 201,585 230,559 328,103 151,071 239,889
--------- --------- --------- --------- --------- --------- ---------
Income from operations........ 16,636 23,792 37,941 46,098 67,111 34,198 55,778
Other income (expense):
Interest income and other... 325 1,197 1,723 1,720 1,260 700 817
Interest expense............ (12,693) (17,903) (29,443) (25,909) (30,378) (16,132) (37,139)
Non-recurring items(1)...... 539 -- 3,612 -- (35,324) (432) --
Minority interests:
Preferred redeemable
securities................ -- -- -- -- (6,475) (311) (6,814)
Other....................... (171) (572) (2,060) (960) (1,436) (823) (1,310)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income
taxes and extraordinary
item........................ 4,636 6,514 11,773 20,949 (5,242) 17,200 11,332
Provision (benefit) for income
taxes....................... 1,855 2,605 3,225 8,379 (2,097) 6,880 4,533
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item.......... 2,781 3,909 8,548 12,570 (3,145) 10,320 6,799
Extraordinary item, net of
taxes....................... 1,436 -- (348) (3,751) (2,076) (1,095) --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............. $ 4,217 $ 3,909 $ 8,200 $ 8,819 $ (5,221) $ 9,225 $ 6,799
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT RATIOS AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(2)..................... $ 26,238 $ 36,894 $ 57,915 $ 69,559 $ 98,225 $ 49,260 $ 84,266
Ratio of earnings to fixed
charges(3).................. 1.3x 1.3x 1.4x 1.7x -- 2.0x 1.2x
Capital expenditures.......... $ 20,158 $ 99,560 $ 96,635 $ 203,406 $ 186,384 $ 83,286 $ 46,188
Total debt/EBITDA(4).......... 5.7x 5.8x 5.3x 4.7x 8.7x N/A N/A
EBITDA/interest expense....... 2.1x 2.2x 2.0x 2.7x 3.2x 3.1x 2.3x
Number of hotels owned at end
of period................... 32 46 57 69 142 87 135
Number of rooms owned at end
of period................... 6,544 9,031 11,059 14,061 26,889 17,388 25,525
Occupancy(5).................. 64.7% 66.2% 64.4% 60.9% 60.9% 62.1% 62.3%
Average daily rate(6)......... $ 65.15 $ 67.19 $ 69.47 $ 71.90 $ 73.52 $ 73.61 $ 75.42
RevPAR(7)..................... $ 42.15 $ 44.46 $ 44.72 $ 43.82 $ 44.77 $ 45.72 $ 46.95
Available room nights(8)...... 2,211,700 2,550,932 3,487,689 4,107,066 5,844,637 2,728,523 4,507,909
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------------- MARCH 31,
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property and equipment, net.................... $ 196,788 $ 277,873 $ 364,922 $ 534,080 $1,317,470 $1,332,522
Total assets................................... 228,900 324,202 439,786 627,651 1,497,921 1,519,909
Long-term obligations, less current portion.... 143,830 210,242 284,880 323,320 816,644 833,442
Minority interests
Preferred redeemable securities.............. -- -- -- -- 175,000 175,000
Other........................................ 3,012 11,766 19,627 13,555 15,021 15,922
Total stockholders' equity..................... 46,740 62,820 74,738 239,535 283,767 290,990
</TABLE>
- ------------------------
(1) Non-recurring items are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Gain on litigation settlement................ $ -- $ -- $ 3,612 $ -- $ --
Other non-recurring income (expense)......... 539 -- -- -- (432)
Settlement on swap transaction............... -- -- -- -- (31,492)
Severance and other.......................... -- -- -- -- (3,400)
--------- --------- --------- --------- ----------
Total........................................ $ 539 $ -- $ 3,612 $ -- $ (35,324)
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
</TABLE>
(2) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the lodging industry. EBITDA is not a measurement of financial performance
under generally accepted accounting principles and should not be considered
an alternative to net income as a measure of performance or to cash flow as
a measure of liquidity. EBITDA is not necessarily comparable with similarly
titled measures for other companies.
(3) For purposes of calculating the ratio of earnings to fixed charges, earnings
are determined by adding fixed charges (excluding capitalized interest) and
amortization of capitalized interest to earnings before income taxes. Fixed
charges consist of (i) interest expense (including amortization of debt
issuance costs), (ii) capitalized interest, (iii) dividends paid on the
CRESTS and (iv) the portion of rent expense considered interest. Excluding
the non-recurring items for 1998, the ratio would have been 1.7x. For the
year ended December 31, 1998, our earnings were insufficient to cover our
fixed charges by $6.8 million.
(4) Based on debt at the end of the period. Excludes $175.0 million of CRESTS.
33
<PAGE>
(5) Occupancy is determined by dividing the total rooms occupied for the period
by the total available room nights for such period. We include rooms being
renovated or otherwise unavailable in determining the total available room
nights.
(6) Average daily rate is determined by dividing room revenue for the period by
the number of rooms occupied for the period.
(7) "RevPAR" means revenue per available room, which is calculated as average
daily rate multiplied by the occupancy.
(8) Total rooms multiplied by number of days in the period. Includes rooms being
renovated or otherwise unavailable. Historically, Servico had not included
rooms being renovated or otherwise unavailable.
34
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF IMPAC
The following table presents consolidated and combined financial data
derived from Impac's and Impac Hotel Development, Inc.'s ("IHD") unaudited
historical financial statements for the years ended December 31, 1993 and 1994
and for the six months ended June 30, 1997 and 1998 and from their audited
historical financial statements for the years ended December 31, 1995 through
1997. The financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Historical Results of Operations--Impac" and the consolidated and
combined financial statements, related notes and other financial information of
Impac included in this memorandum.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
-------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997(1) 1997 1998
----------- ----------- ---------- ---------- ------------ ---------- ----------
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $ 23,927 $ 41,615 $ 55,576 $ 67,813 $ 119,859 $ 52,830 $ 75,884
(Loss) income before
extraordinary
items(2)........... (457) (64) 5,619 14,064 (16,089) (4,589) (8,714)
End of period:
Total assets....... 48,143 71,875 116,248 191,666 417,780 343,614 463,119
Long-term
obligations...... 42,615 61,754 92,849 155,851 355,236 294,970 400,071
Total members'/
partners'
equity........... 3,284 5,375 13,408 19,760 36,970 27,038 27,349
</TABLE>
- ------------------------
(1) 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 was to analyze prospective hotel acquisitions
for Impac. IHD was not acquired by Impac in the above described
reorganization.
(2) 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.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Management believes that results of operations in the hotel industry are
best explained by four key performance measures: occupancy levels, average daily
rate, revenue per available room ("RevPAR") and EBITDA margins. These measures
are influenced by a variety of factors including national, regional and local
economic conditions, the degree of competition with other hotels in the area and
changes in travel patterns. The demand for accommodations is also affected by
normally recurring seasonal patterns and most of our hotels experience lower
occupancy levels in the fall and winter months (November through February) which
may result in lower revenues, lower net income and less cash flow during these
months.
Our business strategy includes the acquisition of underperforming hotels and
the implementation of our operational initiatives and repositioning and
renovation programs to achieve revenue and margin improvements. During this
period of repositioning, the revenues and earnings of these hotels may be
adversely affected and may negatively impact our consolidated RevPAR, average
daily rate and occupancy rate performance, as well as our EBITDA margins. In
addition, our strategy also includes developing new full service hotels. Newly
developed properties typically require 24 months following completion to
stabilize. To track the execution of our repositioning and development growth
strategy and its impact on our results of operations, we classify our hotels as
either "Stabilized Hotels," "Stabilizing Hotels" or "Being Repositioned Hotels,"
as described below:
- Stabilized Hotels are properties (1) which have experienced little or no
disruption to their operations over the past 24 to 36 months as the result
of redevelopment or repositioning efforts, or (2) newly-constructed hotels
which have been in service for 24 months or more.
- Stabilizing Hotels are (1) properties which have undergone renovation or
repositioning investment within the last 36 months, which work is now
completed, or (2) newly developed properties placed into service within
the past 24 months. Management believes that these properties should
experience higher rates of growth in RevPAR and improvements in operating
margin than the Stabilized Hotels. On average, our hotels which have
undergone renovation have generally reached stabilization within
approximately 12 to 18 months after their completion date, and our newly
developed hotels have reached stabilization in approximately 24 months
after their completion date.
- Being Repositioned Hotels are hotels experiencing disruption to their
operations due to renovation and repositioning. During this period
(generally 12 to 18 months) hotels will usually experience lower operating
results, such as RevPAR and operating margins. We expect significant
improvements in the operating performance of those hotels which have
undergone a repositioning once the renovation is completed. After the
repositioning work is completed, these properties will be reclassified as
Stabilizing Hotels.
We classify each hotel into one of the three categories at the beginning of
each fiscal year. We have not classified our six European hotels, the one hotel
in which we have a minority equity interest or the two hotels we managed for
third parties. We will determine the category most appropriate for each hotel
based on our evaluation of objective and subjective factors, including the time
of completion of renovation and whether the full benefit of renovations have
been realized.
On June 24, 1999, we sold our joint venture interest in our European hotel
portfolio, which consisted of six hotels. We received approximately $6.0 million
at closing and expect to receive an additional $1.5 million in net proceeds from
the sale. We do not expect the sale of these hotels, which were acquired on
October 1, 1998, to have a material effect on our EBITDA or results of
operations. In addition, during July 1999, we sold two wholly-owned hotels in
the United States, and effective August 1, 1999, we ceased managing one hotel
for a third party.
36
<PAGE>
REVENUES. Revenues are composed of rooms and food and beverage (both of
which are classified as direct revenues) and other revenues. Room revenues are
derived from guest room rentals, while food and beverage revenues primarily
include sales from our hotel restaurants, room service and hotel catering. Other
revenues include charges for guests' long-distance telephone service, laundry
service, use of meeting facilities and fees earned by us for services rendered
in conjunction with properties managed for third parties.
OPERATING EXPENSES. Operating expenses are composed of direct, general and
administrative, other hotel operating expenses and depreciation and
amortization. Direct expenses, including both rooms and food and beverage
operations, reflect expenses directly related to hotel operations. These
expenses generally vary with available rooms and occupancy rates, but also have
a small fixed component. General and administrative expenses represent corporate
salaries and other corporate operating expenses and are generally fixed. Other
hotel operating expenses include primarily property level expenses related to
general operations such as advertising, utilities, repairs and maintenance and
other property administrative costs. These expenses are also primarily fixed.
HISTORICAL RESULTS OF OPERATIONS--LODGIAN
Our operating results have been materially impacted by the significant
number of acquisitions and extensive renovation activity during 1997 and 1998.
In June 1998, Servico acquired AMI, an entity that owned and operated 14 hotels,
three of which were subsequently sold. In December 1998, Servico merged with
Impac, an entity that owned or managed 53 hotels, three of which are under
construction. Because these transactions were accounted for using the purchase
accounting method, the results of AMI and Impac are included in our consolidated
results of operations from the time they were acquired. This makes
comparisons of our historical operating results with prior periods less
meaningful. Servico had historically classified its hotels as Stabilized Hotels
and Reposition Hotels. The Stabilized Hotels were hotels that had achieved
normalized operations after completion of renovation and repositioning. The
Reposition Hotels were those hotels that were undergoing or had completed
significant renovation and repositioning but had not yet achieved normalized
operations.
SIX MONTHS ENDED JUNE 30, 1999 (THE "1999 PERIOD") COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD")
Our revenues were $295.7 million for the 1999 Period, a 59.6% increase over
revenues of $185.3 million for the 1998 Period. Of this $110.4 million increase,
$104.1 million was attributable to the acquisition of AMI and the merger with
Impac.
The following table summarizes certain operating data for our hotels for the
six months ended June 30, 1999 and 1998. The Stabilized, Stabilizing and Being
Repositioned Hotels refers to classifications in these respective categories as
of January 1, 1999.
<TABLE>
<CAPTION>
HOTELS (1) ADR OCCUPANCY REVPAR
------------- -------------------- -------------------- ---------
1999 1998 1999 1998 1999 1998 1999
----- ----- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Stabilized........................................ 77 50 $ 74.57 $ 74.68 66.3% 65.8% $ 49.45
Stabilizing....................................... 33 12 $ 75.56 $ 71.50 61.2% 56.0% $ 46.26
Being Repositioned................................ 21 22 $ 78.50 $ 74.75 51.3% 54.8% $ 40.29
--- --- --------- --------- --------- --------- ---------
Total............................................. 131 84 $ 75.42 $ 73.61 62.3% 62.1% $ 46.95
--- --- --------- --------- --------- --------- ---------
--- --- --------- --------- --------- --------- ---------
<CAPTION>
1998
---------
<S> <C>
Stabilized........................................ $ 49.17
Stabilizing....................................... $ 40.02
Being Repositioned................................ $ 40.97
---------
Total............................................. $ 45.72
---------
---------
</TABLE>
- ------------------------------
(1) Excludes two hotels managed for third parties and the one partially owned
non-consolidated hotel. All 1998 figures in the table exclude AMI (prior to
the acquisition date) and the Merger.
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Our direct operating expenses were $115.9 million (39.2% of direct revenues)
for the 1999 Period and $77.9 million (42.0% of direct revenue) for the 1998
Period. Of the $38.0 million increase, $39.0 million was attributable to the
acquisition of AMI and the Merger.
General and administrative expenses were $11.4 million in the 1999 Period
and $4.8 million in the 1998 Period. Of the $6.6 million increase, approximately
$4.8 million was attributable to the acquisition of AMI and the Merger.
Additionally, approximately $.8 million represents expenses associated with the
expansion of the corporate sales and marketing staff and the regional offices.
Further, $.5 million represents non-recurring expenses, principally severance.
Depreciation and amortization expense was $27.5 million in the 1999 Period
and $14.8 million in the 1998 Period. The $12.7 million increase was
attributable to the acquisition of AMI, the Merger and the completion of
renovation projects.
Other hotel operating expenses were $85.1 million in the 1999 Period and
$53.6 million in the 1998 Period. Of the $31.5 million increase, $31.4 million
was attributable to the acquisition of AMI and the merger with Impac. In
addition, $1.0 million was attributable to our share of loss from an
unconsolidated partnership, essentially all of which was represented by
depreciation.
As a result of the above, income from operations was $55.8 million in the
1999 Period as compared to $34.2 million in the 1998 Period.
Interest expense was $37.1 million in the 1999 Period and $16.1 million in
the 1998 Period. This increase was primarily a result of an increase in the
level of debt associated with the acquisition of AMI and the Merger.
Minority interest expense was $8.1 million in the 1999 Period and $1.1
million in the 1998 Period. Of the $7.0 million increase, $6.5 million
represents interest on our CRESTS that were issued in June 1998.
After a provision for income taxes of $4.5 million in the 1999 Period and
$6.9 million in the 1998 Period, we had net income of $6.8 million ($0.25 per
share) in the 1999 Period compared with income before extraordinary item of
$10.3 million ($.49 per share) in the 1998 Period. In the 1998 Period, we had an
extraordinary item (net of income tax benefit of $.7 million) of $1.1 million
($.05 loss per share) from the loss on early extinguishment of debt. Net income
for the 1998 Period amounted to $9.2 million ($.44 per share).
YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
At December 31, 1998, we owned 141 hotels, managed two hotels for third
party owners and had a minority investment in one hotel compared with 68 hotels
owned, two managed for third party owners and a minority investment in one hotel
at December 31, 1997.
Our revenues were $395.2 million for 1998, a 42.8% increase over revenues of
$276.7 million for 1997. Of this $118.5 million increase in revenues, the 1997
acquisitions, which were not operated for the full year of 1997, contributed
approximately $49.5 million to the increase in revenues. The 1998 acquisitions
contributed approximately $33.6 million to the increase in revenues. The 21 days
of revenues from the Impac Hotels contributed approximately $7.3 million to the
increase in revenues. The remaining increase in revenues of approximately $28.1
is attributed to the balance of the portfolio.
Our direct operating expenses were $156.9 million for 1998 and $110.5
million for 1997. Of the $46.4 million increase, $20.4 million is directly
attributable to the Reposition Hotels with approximately $13.2 million relating
to acquisitions in 1998. The direct operating expenses decreased as a percentage
of direct revenue from 42.5% in 1997 as compared to 41.8% in 1998. The decrease
in operating expenses as a percentage of revenues was a result of the combined
effect of strong revenue growth and continued emphasis on cost controls. Other
operating expenses were $130.0 million for 1998 and $88.0 million for 1997. This
increase of $42.0 million represents the expenses incurred with respect to the
1998 acquisitions
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and by the Reposition Hotels. Our depreciation and amortization expense was
$31.1 million for 1998 and $23.0 million for 1997. Included in this $8.1 million
increase was $3.0 million associated with the Reposition Hotels and the
remaining increase was related to the 1998 acquisitions, and to equipment
purchases and improvements made at the Stabilized Hotels.
As a result of the above, income from operations was $67.1 million for 1998
as compared to $46.1 million for 1997.
We incurred $21.2 million (net of a tax benefit of $14.1 million) in
non-recurring charges during 1998. During August 1998, we entered into treasury
rate lock transactions with notional amounts of $175.0 million and $200.0
million with a lender for the purpose of hedging our interest rate exposure on
two anticipated financing transactions. During September 1998, we determined
that it was not probable that we could consummate the anticipated transactions
and recognized a loss of $18.9 million (net of tax benefit of $12.6 million). In
addition, we incurred approximately $3.4 million of severance and other expenses
in connection with the Merger which have been substantially paid at December 31,
1998. These expenses consisted primarily of costs associated with the closing
and relocation of Servico's West Palm Beach, Florida corporate headquarters to
our headquarters in Atlanta, Georgia and termination or relocation of certain
employees.
Interest expense, net of interest income, was $29.1 million for 1998, a $4.9
million increase from the $24.2 million for 1997. The increase was primarily a
result of an increase in the level of debt associated with the 1998
acquisitions.
Minority interests in net income of consolidated partnerships were
approximately $1.4 million for 1998 and $1.0 million for 1997.
During 1998 we repaid, prior to maturity, approximately $247.0 million in
debt, and as a result recorded an extraordinary loss on early extinguishment of
debt of approximately $2.1 million (net of income tax benefit of $1.4 million)
relating to the write-off of unamortized loan costs associated with the debt. We
recognized an extraordinary loss on early extinguishment of debt of $3.8
million, after taxes, in 1997 which related to the refinancing of certain
hotels.
After a benefit for income taxes of $2.1 million in 1998 and a provision for
income taxes of $8.4 million in 1997, we had a net loss of $5.2 million ($(.26)
per share) for 1998 and net income of $8.8 million ($.56 per share) for 1997.
Excluding the non-recurring items discussed above, we had recurring income of
$18.0 million for 1998 ($.89 per share) and $12.6 million for 1997 ($.80 per
share) in 1998 and 1997, respectively.
YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
At December 31, 1997, we owned 68 hotels, managed two hotels for third party
owners and had a minority investment in one hotel compared with 56 hotels owned,
four managed for third party owners and a minority investment in one hotel at
December 31, 1996.
Our revenues were $276.7 million for 1997, a 15.5% increase over revenues of
$239.5 million for 1996. Of this $37.2 million increase in revenues,
approximately $9.2 million was attributable to the Stabilized Hotels primarily
as a result of a 6.4% increase in RevPAR. The Reposition Hotels contributed
approximately $28 million to the increase in revenues, of which approximately
$14.6 million related to the Reposition Hotels acquired in 1996 which were not
operated for the full year of 1996 but were operated for the full year of 1997.
Reposition Hotels acquired in 1997 contributed the remaining balance of
approximately $13.4 million.
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<PAGE>
Our direct operating expenses were $110.5 million for 1997 and $96.4 million
for 1996. The decrease in operating expenses as a percentage of revenues was a
result of the combined effect of strong revenue growth and continued emphasis on
cost controls. Our other operating expenses were $88.0 million for 1997 and
$77.2 million for 1996. Our depreciation and amortization expense was $23.0
million for 1997 and $18.7 million for 1996. Included in this $4.3 million
increase was $2.7 million associated with the Reposition Hotels and the
remaining increase was related to equipment purchases and improvements made at
the Stabilized Hotels.
As a result of the above, income from operations was $46.1 million for 1997
as compared to $37.9 million for 1996. Included in 1996 was a non-recurring
charge of $.8 million relating to a severance payment.
Interest expense, net of interest income, was $24.2 million for 1997, a $3.5
million decrease from the $27.7 million for 1996. The decrease was offset in
part by a $1.2 million increase relating to acquisitions in 1997. The decrease
was primarily a result of a reduction in the level of debt and effective
interest rate in connection with certain debt which was repaid with the proceeds
of a common stock offering.
Included in other income for 1996 was a non-recurring $3.6 million gain on
litigation settlement (net of expenses) in connection with a lawsuit brought on
our behalf against a bank group and law firm based on alleged breaches of their
duties to us.
Minority interests in net income of consolidated partnerships were
approximately $1.0 million for 1997 and $2.1 million for 1996. Of this $1.1
million decrease, $.9 million related to three hotels in which we increased its
ownership from 51% to 100% during 1997.
During 1997 we repaid, prior to maturity, approximately $128.0 million in
debt, and as a result recorded an extraordinary loss on early extinguishment of
debt of approximately $3.8 million (net of income tax benefit of $2.5 million)
relating to the write-off of unamortized loan costs associated with the debt. We
recognized an extraordinary loss on early extinguishment of debt of $.3 million,
after taxes in 1996 which related to the refinancing of certain hotels.
After a provision for income taxes of $8.4 million for 1997 and $3.2 million
for 1996, we had net income of $8.8 million ($.56 per share) for 1997 and $8.2
million ($.84 per share) for 1996. Without consideration of the non-recurring
items discussed above, we had recurring income of $12.6 million for 1997 ($.80
per share) and $5.4 million for 1996 ($.55 per share).
HISTORICAL RESULTS OF OPERATIONS--IMPAC
Impac owned or managed primarily upscale or mid-market full service hotels,
including 52 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 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 units, all of
the assets of Impac, Inc. and IDC. See Note 1 to Impac's financial statements.
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 1996 through June 1998, Impac acquired 26 hotels and
developed nine hotels. In addition, Impac had five hotels under construction at
June 30, 1998. The
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acquired hotels underwent significant renovations and therefore revenue trends
are not comparable to revenues which would be realized had these properties been
stabilized. In addition, during the fiscal years ended December 31, 1996 and
December 31, 1995, Impac sold seven and three hotels, respectively. The
historical financial statements of the years ended December 31, 1997, 1996 and
1995 and for the six months ended June 30, 1998 and 1997 reflect differing
numbers of owned hotels throughout the periods. Due to the timing and magnitude
of the acquisitions made during these periods, it is difficult to compare
results of the periods to each other.
SIX MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") AS COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD")
As of June 30, 1998, Impac owned and operated 52 hotels (including five
under construction) and managed two hotels for third-party owners. One hotel was
partially owned. This compared to 42 hotels (including three under construction)
owned and operated and two hotels managed for third parties at June 30, 1997.
Impac acquired or opened two hotels during the 1998 Period compared to 12 hotels
during the 1997 Period. Sixteen hotels were under significant renovation during
the 1998 Period compared to 20 in the 1997 Period.
Revenues for the 1998 Period were $75.9 million as compared to $52.8 million
for the 1997 Period. The revenue increase primarily is attributable to the
inclusion of a full six months of revenue in the 1998 Period for 12 hotels that
were opened or purchased during the 1997 Period. During the 1997 Period, 20
properties returned to full operating capacity. However, revenue growth in both
the 1998 Period and 1997 Period was adversely affected by the 16 and 20 hotels,
respectively, that were under renovation.
Total operating expenses before depreciation and amortization increased to
$60.1 million for the 1998 Period from $43.7 million for the 1997 Period. As a
percentage of revenue, operating expenses before depreciation and amortization
were 79% for the 1998 Period compared to 83% for the 1997 Period. The decrease
as a percentage of revenue is attributable to properties coming out of
renovation in late 1997 and early 1998 which had been under renovation or
recently purchased in the 1997 Period. Operating efficiencies also contributed
to the decrease.
Depreciation and amortization costs increased by 51% to $7.4 million for the
1998 Period from $4.9 million for the 1997 Period.
Interest expense rose to $14.2 million in the 1998 Period as compared to
$8.9 million in the 1997 Period. The increase was attributable to increased debt
levels associated with the addition of the hotels described above.
In connection with the Merger, Impac incurred costs of $3.1 million through
June 30, 1998. These costs were expensed in the 1998 Period.
Extraordinary losses related to costs incurred in the early extinguishment
of indebtedness of $13.3 million were incurred during the 1997 Period. Impac
completed a reorganization of its partnerships and corporations into one entity
during March 1997. See Note 1 to Impac's financial statements. 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 deferred financing costs were written
off.
A net loss of $8.7 million was recorded (after provision for merger costs of
$3.1 million) for the 1998 Period as compared to a net loss of $17.9 million for
the 1997 Period. EBITDA increased by 72% to $15.8 million for the 1998 Period
compared to $9.2 million for the 1997 Period.
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YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 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 three 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. The renovation process adversely
affects net income and EBITDA as a consequence of decreased revenue.
Total operating expenses before depreciation and amortization were $102.8
million in 1997. This compares to $55.8 million in 1996. As a percentage of
revenues, operating expenses before depreciation and amortization were 86% for
1997 and 82% for 1996. This percentage increase is 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 typically 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 invested significant amounts in staffing and corporate infrastructure
beginning in 1996 for Impac's in-house construction department, the Impac
revenue center (a centralized reservations center), and for 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.
Depreciation and amortization costs increased by 92% to $11.1 million as
compared to $5.8 million for 1996. The increase is attributable to increased
investment in hotel properties and to the step-up of the asset basis resulting
from the reorganization completed in 1997. See Note 2 to Impac's financial
statements.
As a result of the factors described above, income from operations decreased
to $5.9 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 was 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.
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 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 deferred financing costs
were written off.
Impac recorded a net loss of $29.4 million for 1997 as compared to income of
$14.1 million for 1996. EBITDA increased to $17.1 million as compared to $12.0
million for 1996.
INCOME TAXES
As of December 31, 1998, Lodgian had net operating loss carryforwards of
approximately $50.0 million for federal income tax purposes, which expire in
2005 through 2018. Our ability to use these net operating loss carryforwards to
offset our future income is subject to certain limitations, and may be
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subject to additional limitations in the future. Due to these limitations, a
portion or all of these net operating loss carryforwards could expire unused.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity consist of existing cash balances, cash
flow from operations and financing. We had earnings from operations before
interest, taxes, depreciation and amortization ("EBITDA") for the 1999 Period of
$84.3 million, a 71.1% increase from the $49.3 million for the 1998 Period.
EBITDA is a widely regarded industry measure of lodging performance used in the
assessment of hotel property values, although EBITDA is not indicative of and
should not be used as an alternative to net income or net cash provided by
operations as specified by generally accepted accounting principles. Net cash
provided by operating activities for the 1999 Period was $20.3 million as
compared with $33.3 million for the 1998 Period.
Cash flows used in investing activities were $34.5 million and $63.8 million
in the six months ended June 30, 1999 and 1998, respectively. The 1999 amount
includes capital expenditures of $46.2 million and net proceeds from the sale of
assets of $11.1 million, including the disposition of our investment in six
European hotels. The 1998 amount consists of capital expenditures of $83.3
million, including the acquisition of the AMI hotels, net of assumed debt, and
proceeds from capital expenditure escrows of $15.7 million.
Cash flows provided by financing activities were $15.4 million and $54.3
million in the six months ended June 30, 1999 and 1998, respectively. The 1999
amount consists primarily of the net proceeds from the issuance and repayment of
long-term obligations. The 1998 amount includes the net proceeds from the
issuance and repayment of long-term obligations of $68.8 million (including
$168.5 million of net proceeds from the issuance of CRESTS) reduced by $15.6
million from the repurchase of common stock.
At June 30, 1999, we had a working capital deficit of $40.0 million as
compared with a working capital deficit of $65.1 million at December 31, 1998.
At June 30, 1999 our long-term obligations were $833.4 million, not
including $175 million of CRESTS. Our long-term obligations were $816.6 million
at December 31, 1998.
Certain of our hotels are operated under license agreements that require us
to make capital improvements in accordance with a specified time schedule.
Additionally, in connection with the refinancing of hotels, we have agreed to
make certain capital improvements and, as of June 30, 1999, we have
approximately $29.8 million escrowed for such improvements. We estimate our
remaining obligations for all of such commitments to be approximately $52.2
million, of which approximately $17.2 million is expected to be spent during
1999, with the balance to be spent thereafter. During the balance of 1999 and
the first quarter of 2000, we expect to spend approximately $23.8 million to
complete the construction of three new hotels. Substantially all of the funds
necessary to complete construction of these hotels are expected to be provided
by existing loan facilities.
In connection with the Merger on December 11, 1998, we obtained $265 million
of mortgage notes from Lehman Brothers Holding, Inc. ("Lehman"). The net
proceeds were used to repay existing debt and related obligations. This
financing contains various covenants and coverage ratios, with which we are in
compliance at June 30, 1999.
At the time of the Merger, $23 million of the $265 million provided by
Lehman was set aside in escrow for future capital improvements. In March 1999,
Lehman released $15 million from escrow, and simultaneously issued us a
commitment for $15 million to replenish this escrow at a future date. This
additional loan was closed in June, thereby increasing the total facility to
$280 million on the same terms and conditions as previously described.
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In July, we sold $200 million of the Notes. In addition, we entered into a
new, multi-tranche Senior, Secured loan credit facility. The facility consists
of development loans with a maximum capacity of $75 million (the tranche A and C
loans), a $240 million tranche B term loan and a $50 million revolving credit
facility. The tranche A and C loans will be used for hotel development projects.
The tranche B loan, along with the proceeds from the Senior Subordinated Notes
was used to repay the Lehman loan and, in September, a $132.5 million loan (one
of three facilities) from Nomura Asset Capital Corporation.
Continuation of our current growth strategy beyond the facilities described
above will require additional financing. Our financial position may, in the
future, be strengthened through an increase in revenues, the refinancing of its
properties or capital from equity or debt markets. We cannot guarantee that we
will be successful in these efforts.
INFLATION
The rate of inflation has not had a material effect on our revenues or costs
and expenses in the three most recent fiscal years, and it is not anticipated
that inflation will have a material effect on us in the near term.
YEAR 2000 MATTERS
The Year 2000 issue is the result of certain computer programs being written
using two digits rather than four to define the applicable year. Certain of our
computer programs may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in miscalculations causing disruptions to our
corporate operations, including accounting and financial reporting, budgeting,
tax, accounts receivable and payable, word processing, spreadsheet applications
and to hotel operations, including the temporary inability to process
transactions, including processing reservations, collection of payment,
purchasing, distributing, sending invoices, or engaging in similar normal
business activities.
The systems that we have identified as being critical include but may not be
limited to the following: Unix operating system, property management systems,
point of sale systems, Oracle general ledger system and credit card processing,
as well as our banking relationships and telecommunications vendors. We have
also identified non-critical issues including, but not limited to, stand alone
personal computers, other third party vendors and possible security issues.
THE COMPANY'S STATE OF READINESS
Based on our recent assessment, we determined that we will have to modify or
replace portions of our existing software so that our computer systems will
properly utilize dates beyond December 31, 1999. Remediation plans have been
established for all major systems we have identified that may be potentially
affected by the Year 2000 issue. The current status of the plans for information
technology-based systems are summarized as follows:
1. IDENTIFICATION OF ALL APPLICATIONS AND HARDWARE WITH POTENTIAL YEAR 2000
ISSUES. To the best of our knowledge, this has been completed.
2. FOR EACH ITEM IDENTIFIED, PERFORMANCE OF AN ASSESSMENT TO DETERMINE AN
APPROPRIATE ACTION PLAN AND TIMETABLE FOR REMEDIATION OF EACH ITEM. The
plan consists of replacement, upgrade or elimination of the application.
This phase has been completed.
3. IMPLEMENTATION OF THE SPECIFIC ACTION PLAN. Action plans have been
completed for all known mission critical systems, including property
management systems and corporate systems.
4. TESTING EACH APPLICATION UPON COMPLETION. We will use both internal and
external resources to reprogram, or replace, and test the software for
Year 2000 modifications. All internally developed systems have been
tested and found to be compliant. Vendor-supplied software has been
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upgraded to Year 2000 compliant versions for our software vendors and we
have received certification of compliance from them. The remaining
vendors have informed us that testing is expected to be completed at the
latest by the third quarter of 1999.
5. PLACEMENT OF THE NEW PROCESS INTO PRODUCTION. All applications and
systems are expected to be updated by September 30, 1999.
We have initiated formal communications with our significant suppliers and
vendors for corporate and hotel operations to determine our vulnerability to
those third parties' failure to remediate their own Year 2000 Issue.
Identification of areas of potential third party risk is nearly complete and,
for those areas identified to date, remediation plans are being developed.
Identification and assessment should be completed by the end of the second
quarter of 1999 and implemented by the end of the third quarter of 1999. We
cannot guarantee that the systems of our suppliers will be timely converted and
would not disrupt operations and have an adverse effect on us.
We are in the process of identifying all non-information technology based
systems which include equipment and services containing embedded microprocessors
such as alarm systems and voice mail systems. We are in the process of
identifying, developing, implementing and testing appropriate remediation plans.
We expect to fully implement such plans by the end of the third quarter of 1999.
THE COSTS INVOLVED
Our total cost of achieving Year 2000 compliance is not expected to exceed
$2.0 million and will consist of the utilization of both internal and external
resources. Spending to date totals approximately $250,000. Expenditures either
have been appropriately allocated for through the 1999 capital improvements
budget by property or are expected to be expensed as appropriate. All costs
related to achieving Year 2000 compliance are based on management's best
estimates. We cannot guarantee that these results will be achieved, and actual
results may differ materially from those anticipated.
RISKS AND CONTINGENCY PLAN
We are in the process of determining the risks we would face in the event
certain aspects of our Year 2000 remediation plan failed. We are also developing
contingency plans for all critical processes including replacement of certain
vendors, increases in staffing to process transactions and alternate hosting of
critical systems. Under a "worst case" scenario, our corporate operations would
be disrupted due to internal system failures including the ability to properly
and timely process corporate records and transactions and accounting functions.
Our hotel operations could be disrupted based on the inability of vendors and
suppliers to deliver products for our food, beverage and lodging operations. In
addition our hotel's reservation and payment collection processes would be
disrupted. While these systems can be replaced with manual systems on a
temporary basis, it could cause substantial delays and inefficiencies in hotel
operations. The failure of national and worldwide banking information systems or
the loss of essential utilities services due to the Year 2000 issue could result
in the inability of many businesses, including ours, to conduct business. Risk
assessment has been completed, and contingency plans should be completed in the
third quarter of 1999.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The table below provides information about our financial instruments which
are sensitive to changes in interest rates, including CRESTS and debt
obligations. For debt obligations, the table presents principal cash flows and
related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date. As of December 31, 1998, the change in current yields
between one-year and five-year U.S. Treasury bonds is
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three basis points, thus, minimal fluctuations in the average interest rates are
anticipated over the maturity periods.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
----------------------------------------------------- FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
--------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Liabilities
Long-term Debt:
Mortgage notes payable with interest
at variable rate of LIBOR plus
3.25%.............................. $ 18,000 $ 247,000 $ -- $ -- $ -- $ -- $ 265,000 $ 265,000
Credit facilities totaling $396
million with interest at variable
rate of LIBOR plus 2.25% to 2.75%
maturing through 2011. Each loan
converts to term loans with a fixed
rate of interest and a 20-year
amortization period................ 722 3,842 6,816 7,940 8,580 295,844 323,744 323,744
Mortgage notes payable with an
interest rate of 9%................ 10,000 62,000 -- -- -- -- 72,000 72,000
Mortgage notes payable with fixed
rates ranging from 8.6% to 10.7%
payable through 2010............... 3,715 4,174 4,584 5,024 38,655 107,957 164,109 164,109
Other................................ 3,697 8,033 5,197 279 307 10,412 27,925 27,925
--------- --------- --------- --------- --------- ----------- --------- ---------
Total.................................. $ 36,134 $ 325,049 $ 16,597 $ 13,243 $ 47,542 $ 414,213 $ 852,778 $ 852,778
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
Average interest rate.................. 11.2% 11.9% 8.6% 8.6% 8.6% 8.5% 10.0%
Other:
Convertible preferred securities..... $ -- $ -- $ -- $ -- $ -- $ 175,000 $ 175,000 $ 78,750
Interest rate protection agreement:
Notional amount...................... $ -- $ 54,000 $ -- $ -- $ -- $ -- $ 54,000 $ 5,000
Weighted average rate................ -- 10.5% -- -- -- -- 10.5% --
</TABLE>
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
GENERAL
In connection with the sale of our 12 1/4% Senior Subordinated Notes due
2009, Series A (the "Old Notes") to Morgan Stanley & Co. Incorporated, Lehman
Brothers Inc. and Bear, Stearns & Co. Inc. (the "Placement Agents") pursuant to
the Placement Agreement, dated July 20, 1999, among Lodgian Financing Corp.
("Lodgian Financing," and together with its subsidiaries, the "Company") and
Lodgian, Inc. and the guarantors named therein (collectively, the "Guarantors")
and the Placement Agents, the holders of the Old Notes became entitled to the
benefits of the Registration Rights Agreement, dated as of July 20, 1999 (the
"Registration Rights Agreement"), among Lodgian Financing, the Guarantors and
the Placement Agents.
Under the Registration Rights Agreement, Lodgian became obligated to cause
the notes to be generally freely transferable under the Securities Act no later
than six months after the closing of the offering of the Old Notes. The Exchange
Offer being made hereby, if consummated within the required time periods, will
satisfy Lodgian Financing's obligations under the Registration Rights Agreement.
Lodgian Financing understands that there are approximately beneficial
owners of such Old Notes. This Prospectus, together with the Letter of
Transmittal, is being sent to all such beneficial holders known to Lodgian
Financing.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, Lodgian Financing will accept all
Old Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date (as defined). Lodgian Financing will issue $1,000
principal amount of exchange notes in exchange for each $1,000 principal amount
of outstanding Old Notes accepted in the Exchange Offer. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer.
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in Morgan Stanley & Co. Incorporated,
SEC No-Action Letter (available June 5, 1991) (the "Morgan Stanley Letter"),
Exxon Capital Holdings Corporation, SEC No-Action Letter (available May 13,
1988) (the "Exxon Capital Letter") and similar letters, Lodgian believes that
the 12 1/4% Senior Subordinated Notes due 2009, Series B (the "Exchange Notes")
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any person who received such
Exchange Notes, whether or not such person is the holder (other than any such
holder or other person which is (i) a broker-dealer that receives Exchange Notes
for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making or other trading
activities, or (ii) an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, PROVIDED that such
Exchange Notes are acquired in the ordinary course of such holder's or other
person's business, neither such holder nor such other person is engaged in or
intends to engage in any distribution of the Exchange Notes and such holders or
other persons have no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes.
If any person were to be participating in the Exchange Offer for the
purposes of participating in a distribution of the Exchange Notes in a manner
not permitted by the Commission's interpretation, such person (a) could not rely
upon the Morgan Stanley Letter, the Exxon Capital Letter or similar letters and
(b) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such
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Exchange Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as result
of market-making activities or other trading activities. Lodgian Financing has
agreed that, for a period of 180 days after consummation of the Exchange Offer,
it will make this Prospectus, as it may be amended or supplemented from time to
time, available to any broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
Lodgian Financing will not receive any proceeds from the Exchange Offer. See
"Use of Proceeds." Lodgian Financing has agreed to bear the expenses of the
Exchange Offer pursuant to the Registration Rights Agreement. No underwriter is
being used in connection with the Exchange Offer.
Lodgian Financing shall be deemed to have accepted validly tendered Old
Notes when, as and if Lodgian Financing has given oral or written notice thereof
to Bankers Trust Company, as exchange agent (the "Exchange Agent"). The Exchange
Agent will act as agent for the tendering holders of Old Notes for the purposes
of receiving the Exchange Notes from Lodgian Financing and delivering Exchange
Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain conditions set forth herein under
"--Conditions" without waiver by Lodgian Financing, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. Lodgian Financing will pay all charges and
expenses, other than certain applicable taxes in connection with the Exchange
Offer. See "--Fees and Expenses."
In the event the Exchange Offer is consummated, Lodgian Financing will not
be required to register the Old Notes. In such event, holders of Old Notes
seeking liquidity in their investment would have to rely on exemptions to
registration requirements under the securities laws, including the Securities
Act. See "Risk Factors--Consequences of Failure to Exchange."
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The term "Expiration Date" shall mean the expiration date set forth on the
cover page of this Prospectus, unless Lodgian Financing, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date to which the Exchange Offer is extended.
In order to extend the Expiration Date, Lodgian Financing will notify the
Exchange Agent of any extension by oral or written notice and will issue a
public announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Such
announcement may state that Lodgian Financing is extending the Exchange Offer
for a specified period of time.
Lodgian Financing reserves the right (a) to delay accepting any Old Notes,
to extend the Exchange Offer or to terminate the Exchange Offer and not accept
Old Notes not previously accepted if any of the conditions set forth herein
under "--Conditions" shall have occurred and shall not have been waived by
Lodgian Financing (if permitted to be waived by Lodgian Financing), by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, or (b) to amend the terms of the Exchange Offer in any manner deemed by
it to be advantageous to the holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof. If the Exchange Offer is amended
in a manner determined by Lodgian Financing to
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constitute a material change, Lodgian Financing will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment, and Lodgian Financing may extend the Exchange Offer for
a period of up to ten business days, depending upon the significance of the
amendment and the manner of disclosure to holders of the Old Notes, if the
Exchange Offer would otherwise expire during such extension period.
Without limiting the manner in which Lodgian Financing may choose to make
public announcement of any extension, amendment or termination of the Exchange
Offer, Lodgian Financing shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from July 23, 1999, payable
semiannually on January 15 and July 15 of each year, commencing January 15,
2000, at the rate of 12 1/4% per annum. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued and unpaid up until the
date of the issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by instruction 3 of the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes and any other required documents. To be validly tendered, such
documents must reach the Exchange Agent on or before 5:00 p.m., New York City
time, on the Expiration Date.
The tender by a holder of Old Notes will constitute an agreement between
such holder and Lodgian Financing in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or other nominees to effect such tender for
such holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery to the Exchange Agent on or before 5:00 p.m.
New York City time, on the Expiration Date. No Letter of Transmittal or Old
Notes should be sent to Lodgian Financing or the Guarantors.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of Lodgian Financing or any other
person who has obtained a properly completed bond power from the registered
holder.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such registered holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
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<PAGE>
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States (an "Eligible Institution") unless the Old Notes tendered pursuant
thereto are tendered (a) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (b) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers and a proxy which authorizes such person
to tender the Old Notes on behalf of the registered holder, in each case signed
as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Lodgian Financing,
evidence satisfactory to Lodgian Financing of their authority so to act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Old Notes will be determined by Lodgian
Financing in its sole discretion, which determination will be final and binding.
Lodgian Financing reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes Lodgian Financing's acceptance of which
would, in the opinion of counsel for Lodgian Financing, be unlawful. Lodgian
Financing also reserves the right to waive any irregularities or conditions of
tender as to particular Old Notes. Lodgian Financing's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Notes must be
cured within such time as Lodgian Financing shall determine. None of Lodgian
Financing, the Guarantors, the Exchange Agent or any other person shall be under
any duty to give notification of defects or irregularities with respect to
tenders of Old Notes, nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering holders of Old Notes, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, Lodgian Financing reserves the right in its sole discretion to
(a) purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date or, as set forth under "--Conditions," to terminate the
Exchange Offer in accordance with the terms of the Registration Rights Agreement
and (b) to the extent permitted by applicable law, purchase Old Notes in the
open market, in privately negotiated transactions or otherwise. The terms of any
such purchases or offers will differ from the terms of the Exchange Offer.
By tendering, each holder will represent to Lodgian Financing that, among
other things, (a) the Exchange Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of such holder or other
person, (b) neither such holder nor such other person is engaged in or intends
to engage in a distribution of the Exchange Notes (c) neither such holder or
other person has any arrangement or understanding with any person to participate
in the distribution of such Exchange Notes, and (d) such holder or other person
is not an "affiliate," as defined under Rule 405 of the Securities Act, of
Lodgian Financing or, if such holder or other person is such an affiliate, will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
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Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as result
of market-making activities or other trading activities. Lodgian Financing has
agreed that, for a period of 180 days after consummation of the Exchange Offer,
it will make this Prospectus, as it may be amended or supplemented from time to
time, available to any broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
Lodgian Financing will not receive any proceeds from the Exchange Offer. See
"Use of Proceeds." Lodgian Financing has agreed to bear the expenses of the
Exchange Offer pursuant to the Registration Rights Agreement. No underwriter is
being used in connection with the Exchange Offer.
The Old Notes were issued on July 23, 1999, and there is no public market
for them at present. To the extent Old Notes are tendered and accepted in the
Exchange Offer, the principal amount of outstanding Old Notes will decrease with
a resulting decrease in the liquidity in the market therefor. Following the
consummation of the Exchange Offer, holders of Old Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for the Old Notes could be adversely affected.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (a) whose Old Notes are not
immediately available or (b) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if: (i) the tender is make through an
Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby, and guaranteeing
that, within three business days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s) representing
the Old Notes to be tendered in proper form for transfer and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing all tendered Old Notes in proper form for transfer
and all other documents required by the Letter of Transmittal are received by
the Exchange Agent within three business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,
unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (a) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"), (b)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (c) be signed by the Depositor
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by
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documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the Depositor
withdrawing the tender and (d) specify the name in which any such Old Notes are
to be registered, if different from that of the Depositor. All questions as to
the validity, form and eligibility (including time of receipt) of such
withdrawal notices will be determined by Lodgian Financing, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no Exchange Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Any Old Notes which have been tendered but
which are not accepted for exchange will be returned to the holder thereof
without cost to such holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may
be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Lodgian Financing will
not be required to accept for exchange, or exchange notes for, any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes, if Lodgian Financing
or the holders of at least a majority in principal amount of Old Notes
reasonably determine in good faith that any of the following conditions exist:
(a) the Exchange Notes to be received by such holders of Old Notes in the
Exchange Offer, upon receipt, will not be tradable by each such holder (other
than a holder which is an affiliate of Lodgian Financing at any time on or prior
to the consummation of the Exchange Offer) without restriction under the
Securities Act and the Exchange Act and without material restrictions under the
blue sky or securities laws of substantially all of the states of the United
States, (b) the interests of the holders of the Old Notes, taken as a whole,
would be materially adversely affected by the consummation of the Exchange Offer
or (c) after conferring with counsel, the Commission is unlikely to permit the
making of the Exchange Offer prior to January 23, 2000.
Pursuant to the Registration Rights Agreement, if an Exchange Offer shall
not be consummated prior to the Exchange Offer Termination Date, Lodgian
Financing will be obligated to cause to be filed with the Commission a shelf
registration statement with respect to the Old Notes (the "Shelf Registration
Statement") as promptly as practicable after the Exchange Offer Termination Date
and thereafter use its best efforts to have the Shelf Registration Statement
declared effective.
"Exchange Offer Termination Date" means the date on which the earliest of
any of the following events occurs: (a) applicable interpretations of the staff
of the Commission do not permit to effect the Exchange Offer, (b) any holder of
Notes notifies Lodgian Financing that either (i) such holder is not eligible to
participate in the Exchange Offer or (ii) such holder participates in the
Exchange Offer and does not receive freely transferable Exchange Notes in
exchange for tendered Old Notes or (c) the Exchange Offer is not consummated
within six months after the closing after the Issue Date.
If any of the conditions described above exist, Lodgian Financing will
refuse to accept any Old Notes and will return all tendered Old Notes to
exchanging holders of the Old Notes.
EXCHANGE AGENT
Bankers Trust Company has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance and requests for additional copies
of this Prospectus or of the Letter of
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<PAGE>
Transmittal and deliveries of completed Letters of Transmittal with tendered Old
Notes should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
BY MAIL: BY OVERNIGHT MAIL OR COURIER:
BT Services Tennessee, Inc. BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit
Nashville, Tennessee 37229-2737 648 Grassmere Park Road
Fax: (615) 835-3701 Nashville, Tennessee 37211
Confirm by Telephone
(615) 835-3572
</TABLE>
BY HAND:
Bankers Trust Company
Corporate Trust and Agency Group
Attn: Reorganization Department
Receipt & Delivery Window
123 Washington Street, 1st Floor
New York, New York 10006
Information (800) 735-7777
Lodgian Financing will indemnify the Exchange Agent and its agents for any
loss, liability or expense incurred by them, including reasonable costs and
expenses of their defense, except for any such loss, liability or expense caused
by negligence or bad faith.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by Lodgian Financing. The principal solicitation for tenders pursuant to
the Exchange Offer is being made by mail. Additional solicitations may be made
by officers and regular employees of Lodgian Financing and its affiliates in
person, by telephone or facsimile.
Lodgian Financing will not make any payments to brokers, dealers, or other
persons soliciting acceptances of the Exchange Offer. Lodgian Financing,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse the Exchange Agent for its reasonable out-of-pocket
expenses in connection therewith. Lodgian Financing may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the Old
Notes, and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees and expenses, will be paid by Lodgian Financing, and are estimated in the
aggregate to be approximately $500,000.
Lodgian Financing will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes (or Old Notes for principal amounts not tendered or
accepted for exchange) are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or
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exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
Lodgian Financing will not recognize any gain or loss for accounting
purposes upon the consummation of the Exchange Offer. The expense of the
Exchange Offer will be amortized by Lodgian Financing over the term of the
Exchange Notes under U.S. GAAP.
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BUSINESS
GENERAL
We are one of the largest owners and operators of full-service hotels in the
United States, with 134 hotels containing approximately 25,375 rooms located in
35 states and Canada. Our hotels include 121 wholly-owned hotels (including
three under construction), 11 hotels in which we have a 50% or greater equity
interest, one hotel in which we have a minority equity interest and one hotel
managed for a third party. Our hotels are primarily full-service properties
which offer food and beverage services, meeting space and banquet facilities and
compete in the mid-price and upscale segments of the lodging industry. We
believe that these segments have more consistent demand generators than other
segments of the lodging industry and that they have recently experienced less
development of new properties than other lodging segments, such as the limited
service, economy and budget segments. Substantially all of our hotels are
affiliated with nationally recognized hospitality franchises. We own and operate
hotels under franchise agreements with Marriott International, Bass Hotels and
Resorts, the franchisor for the Holiday Inn and Crowne Plaza brands, and the
franchisors of the Doubletree, Hilton, Omni, Radisson and Sheraton brands, among
others. We are one of the largest Holiday Inn franchisees and one of the largest
Marriott franchisees nationally.
Our success in managing, developing, renovating and repositioning our hotels
has resulted in strong relationships with our franchisors. We pride ourselves on
the recognition and awards we have received from our franchisors. These awards
include, among others:
- Seven Modernization Awards during the last four consecutive years from
Bass Hotels and Resorts;
- Torchbearer Award for quality for several hotels from Bass Hotels and
Resorts;
- President's Award for quality for three hotels in 1998 from Marriott
International;
- Best New Hotel Opening in 1997 for the Courtyard by Marriott, Tulsa and in
1998 for the Denver Airport Marriott, in each case from Marriott
International;
- Hotel of the Year for the Club Hotel by Doubletree in Philadelphia from
Promus Hotels; and
- "Best New Franchisee" in 1995 from Marriott International.
Lodgian was formed by Servico's merger with Impac in December 1998. We
believe that the Merger enhances our growth potential and provides significant
opportunities for operating synergies, due to the complementary nature of the
two companies' property portfolios, strategies and core competencies. Both
companies had portfolios consisting of full-service properties in the mid-price
and upscale segments with leading franchise brands, such as Holiday Inn,
Sheraton, Hilton and Doubletree. Both companies pursued a strategy of renovating
and repositioning their hotel properties to achieve growth in revenue per
available room and profitability and strong returns on capital. Impac developed
significant in-house development and construction management capabilities and
expertise, while Servico generally relied on others, including Impac, for
renovation and redevelopment services. We believe that the addition of Impac's
in-house development capabilities and relationships with high quality
franchisors, such as Marriott, will enable us to take advantage of more
opportunities to reposition our existing hotels, as well as to selectively
acquire and develop new hotels. We also believe that we have opportunities to
improve the operating performance of Impac's hotels by applying Servico's
operating expertise and "best practices." In addition, we believe that we will
be able to generate greater value from our portfolio through operating synergies
(including opportunities for cost savings in overhead, purchasing, insurance and
related activities) achieved as a result of, among other things, national
purchasing contracts.
Servico was incorporated in 1956 under the laws of the State of Delaware.
From 1956 through 1990, the predecessor engaged in the ownership and operation
of hotels under a series of different ownerships. In September 1990, Servico
filed for protection under Chapter 11 of the United States Bankruptcy Code. The
predecessor emerged from reorganization proceedings in August 1992 as Servico,
Inc., a Florida corporation.
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GROWTH STRATEGY
We have developed a strategy designed to increase our revenues, cash flow
and profitability while focusing on return on investment as the primary
criterion for growth. Our growth strategy consists primarily of (1) realizing
the built-in growth of our existing portfolio, (2) acquiring existing
full-service, mid-price and upscale hotels that are in need of substantial
renovation and repositioning and (3) developing new full-service, mid-price and
upscale hotels, primarily franchised under Marriott brands.
REALIZE BUILT-IN GROWTH. We intend to capitalize on the substantial
investments we have made in the development and renovation of the hotels in our
portfolio. From January 1, 1996 to June 30, 1999, Servico grew from 46 owned
hotels with approximately 9,031 rooms to 135 owned hotels (including Impac's
hotels, three of which were under construction) with approximately 25,525 rooms,
largely through acquisitions. From January 1, 1996 to the Merger, Impac grew
from 19 hotels with approximately 3,502 rooms to 53 hotels with 8,895 rooms.
From January 1, 1996 to June 30, 1999, Servico acquired 41 hotels (excluding six
European hotels) with 8,458 rooms at an average purchase price of $36,800 per
room. In that time, Servico spent approximately $9,400 per room in renovations
and other capital assets. During this same period, Impac acquired 24 hotels with
4,185 rooms at an average purchase price of $40,000 per room and spent an
average of an additional $16,700 on renovations and other capital assets. In
addition, from January 1, 1996 to June 30, 1999, Impac completed the development
of 11 hotels and initiated development of three hotels. From January 1, 1997 to
June 30, 1999, Servico completed renovations on 27 hotels, Impac completed
renovations on 31 hotels, and we completed renovations on two hotels since the
Merger, including renovations on hotels acquired since January 1, 1996. We plan
to spend an additional $26.1 million for planned renovations to these acquired
properties and expect our total cost per room for the properties acquired by
Servico and Impac to be $51,800.
Through the implementation of our operating strategies, we expect to be
well-positioned to realize the built-in growth of our recently renovated and
developed properties. We expect to realize significant EBITDA contribution from
four newly developed hotels which were completed in 1998, including the Marriott
at the Denver Airport in Denver, Colorado, the Residence Inn Little Rock in
Little Rock, Arkansas, the Hilton Garden Rio Rancho in Rio Rancho, New Mexico
and the Residence Inn Dedham in Boston, Massachusetts. Furthermore, we expect
substantial EBITDA contribution from recently renovated hotels, including the
Doubletree Club Hollywood in Hollywood, California, the Holiday Inn Anchorage in
Anchorage, Alaska, the Mayfair House Coconut Grove in Miami, Florida and the
Sheraton West Palm Beach in West Palm Beach, Florida. We cannot assure you that
we will realize these expected EBITDA contributions.
ACQUIRE AND IMPROVE UNDERPERFORMING HOTELS. We seek to capitalize on our
management, renovation and development expertise by continuing to acquire
underperforming hotels and implementing operational initiatives and
repositioning programs to achieve revenue growth and margin improvements. We
have generally invested significant capital to renovate and reposition newly
acquired hotels. In certain instances, we re-brand hotels to highlight property
improvements to the marketplace and to improve average daily rates and market
share. We believe that our total cost to acquire and renovate hotels has been
significantly less than the cost to construct new hotels with similar
facilities. We expect that our relationships throughout the industry and our
in-house development capabilities will continue to provide us with a competitive
advantage in identifying, evaluating, acquiring, redeveloping and managing
hotels that meet our criteria.
We believe that a number of lodging industry trends will enable us to
continue to successfully execute our acquisition, renovation and repositioning
strategy, including the following: (1) there has generally been less competition
to purchase underperforming hotels than other properties because of the level of
expertise required to purchase and efficiently reposition such hotels, and (2) a
number of major franchisors, such as Bass Hotels and Resorts, have launched
quality improvement initiatives under which owners are required to invest
substantial amounts of capital to upgrade older properties or risk having the
franchise agreement terminated. We believe that these initiatives will provide
us with new acquisition
56
<PAGE>
opportunities, as individual or small-portfolio owners are unable or unwilling
to invest the capital required to raise quality standards to the level required
by franchisors.
SELECTIVELY DEVELOP NEW HOTELS. We plan to continue to selectively develop
new full-service, mid-price and upscale hotels. We intend to develop these
properties primarily under the Marriott and Courtyard by Marriott brands due to
the high quality image, strong reservations and marketing networks and overall
quality management of these brands. We have focused our development in suburbs
of metropolitan areas that are experiencing significant demand growth where
there have not historically been suitable acquisition targets. We believe that
the expertise required to develop such assets generally limits access to the
marketplace, and that our in-house development capabilities enable us to develop
hotels more efficiently than our competitors.
Our historical objective has been to develop each property as cost
efficiently as possible while meeting quality standards and return on investment
objectives. We have developed 12 hotels with 1,389 rooms since 1995. In
addition, we have three upscale hotels with 552 rooms under construction,
including the Marriott in downtown Portland, Oregon and the Courtyard by
Marriott in Livermore, California, which are both scheduled to open in the third
quarter of 1999, and the Hilton Garden Inn in Lake Oswego, Oregon, which is
scheduled to open in the first quarter of 2000. In addition, at June 30, 1999,
we owned five land parcels and held an option to purchase one additional land
parcel that together would permit the development of six new hotels with a total
capacity of approximately 1,270 rooms.
OPERATING STRATEGY
We have developed a highly focused operating strategy designed to maximize
the financial performance of our hotels while providing our guests with high
quality service and value. Key elements of our operating strategy include:
ENHANCE HOTEL PERFORMANCE THROUGH DISCIPLINED CAPITAL INVESTMENT. We seek
to reposition and renovate our hotels based on strategic plans designed to
address the opportunities presented by each hotel and the hotel's particular
market. Renovations include enhancing lobbies, restaurants and public areas,
upgrading guest rooms and converting unprofitable lounge areas to meeting rooms
to accommodate the needs of business travelers. Renovations often include a
substantial exterior renovation to improve the property's overall appearance and
appeal. We believe that these renovations enable us to increase both occupancy
and room rates and generate attractive returns on our investment.
SELECTIVE USE OF PREMIUM BRANDS. We believe that the selection of an
appropriate franchise brand is essential in positioning a hotel optimally within
its local market. Because we are not bound by a single franchise brand, we can
choose a franchise relationship that will maximize a hotel's performance in a
particular market and complement our management strategies and those of the
individual hotel. Since January 1, 1996, we have rebranded 14 hotels to better
position them in their competitive markets. We select brands based on factors
such as revenue contribution, product quality standards, local presence of the
franchisor, brand recognition, target demographics and purchasing efficiencies
offered by franchisors.
INDIVIDUAL HOTEL MANAGEMENT. We seek to maximize the performance of our
hotels by developing marketing and business plans specifically tailored for each
individual hotel. We develop and implement marketing plans that properly
position each hotel within its local market and facilitate targeted sales and
marketing efforts. These plans focus on maximizing revenues and improving market
share, guest satisfaction and cost controls. We believe that experienced and
hands-on management of hotel operations is the most critical element in
maximizing revenue and cash flow of hotels, especially in full service hotels.
In order to maintain strong performance of the individual hotels, we stress
management accountability and entrepreneurship and provide performance-based
compensation at the individual hotel and regional levels that we believe is
among the most attractive in the industry.
EFFECTIVE CENTRALIZED CONTROLS AND SUPPORT. We have implemented centralized
controls and support that seek to provide corporate and group support services
while promoting flexibility and encouraging associates to develop innovative
solutions. Our hotels are organized into six regions, each headed by a
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<PAGE>
regional vice president who reports to the chief operating officer. This
structure enables us to provide close oversight of property managers at the
regional and local levels while ensuring that information, standards and goals
are communicated effectively across our entire portfolio. We have established
certain uniform productivity standards and skill requirements for hotel
associates that we believe increase operating efficiencies by enhancing our
ability to measure performance and to allocate associates efficiently within our
hotel system.
LEADING EDGE TECHNOLOGY. We have invested substantial capital in advanced
information systems that allow for increased timely and accurate reporting of
operational and financial data, among many other capabilities. We are also in
the process of implementing Oracle web-based technology, which will permit (1)
more accurate and efficient revenue and expense reporting and forecasting by
providing real-time access to financial information, (2) improved labor and cash
management and (3) the ability to monitor from any location daily revenue
results, labor costs and expenses of every one of our hotels. Through our
intranet, we also can provide real-time reporting, distribute corporate
communications and disseminate critical information to our associates
company-wide.
CENTRALIZED RESERVATIONS AND SALES SUPPORT. We currently operate a revenue
center in Baton Rouge, Louisiana that maintains the reservation system for 47
Holiday Inn hotels, with 30 hotels expected to be added by the end of November
1999. We believe that the revenue center is the first of its kind in the hotel
industry, and we expect it to be able to cover multiple hotel brands in the near
future. The revenue center improves the efficiency of our hotel reservation
process by freeing up hotel associates to service guests and allowing dedicated
reservation agents to focus on taking reservations. We believe that dedicated
reservation agents convert a higher number of inquiries into actual reservations
than hotel associates with multiple responsibilities. Specialists at the revenue
center have complete access to the property management systems and price each
room according to market demand, inventory supply and competitor strategies. The
revenue center also has a group sales center which enables hotel salespeople to
focus on direct sales and marketing efforts and building and maintaining client
relationships.
OUR HOTELS
We owned or operated 136 hotels containing approximately 25,615 rooms
located in 35 states and June 30, 1999. During July 1999, we sold two
wholly-owned hotels in the United States, and effective August 1, 1999, we
ceased managing one hotel for a third party.
GROWTH THROUGH ACQUISITIONS
In 1997 and 1998, Servico and Impac each significantly expanded its
respective property portfolio. Our portfolio is shown in the following table:
COMBINED HOTELS OWNED AT FISCAL YEAR END
<TABLE>
<CAPTION>
HOTELS ROOMS
--------------------------------------- --------------------
DECEMBER 31, SERVICO IMPAC PRO FORMA SERVICO IMPAC
- -------------------------------------------------------------- ----------- ----------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996.......................................................... 57 26 83 11,059 4,496
1997.......................................................... 69 45 113 14,061 7,713
1998(1)....................................................... 89 53 142 17,994 8,895
Net Acquisitions since December 31, 1996...................... 32 27 59 6,935 4,399
<CAPTION>
DECEMBER 31, PRO FORMA
- -------------------------------------------------------------- -----------
<S> <C>
1996.......................................................... 15,555
1997.......................................................... 21,774
1998(1)....................................................... 26,889
Net Acquisitions since December 31, 1996...................... 11,334
</TABLE>
- ------------------------
(1) Includes three hotels currently under construction and 18 hotels that are
partially owned.
In connection with the Merger, we acquired 53 hotels with 8,895 rooms. Using
the purchase accounting method, the average purchase price of these hotels is
$70,500 per room. We expect to spend approximately $3,050 per room in
renovations and completion of construction for a total cost per room of $73,550.
In June 1998, Servico completed the acquisition of the 14 hotel properties from
AMI, for an aggregate acquisition value of $75.0 million, or an average purchase
price of $32,600 per room. Three of
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<PAGE>
the AMI properties were subsequently sold. We intend to invest approximately
$19,200 per room to renovate and reposition ten of the AMI properties. In
addition, during 1997 and 1998, we purchased 16 hotels (4,132 rooms) for an
average purchase price of approximately $42,500 per room. We have spent
approximately $8,400 per room in renovations and capital assets and expect to
spend an additional $13.8 million, for a total cost per room of approximately
$54,300. We believe these costs per room to acquire and renovate these hotels
are significantly less than the costs to replace these hotels.
PROPERTY CLASSIFICATION
To better illustrate and demonstrate the execution of our repositioning
strategy, we classify our hotels as either "Stabilized Hotels," "Stabilizing
Hotels" or "Being Repositioned Hotels."
- Stabilized Hotels are properties (1) which have experienced little or no
disruption to their operations over the past 24 to 36 months as the result
of redevelopment or repositioning efforts, or (2) newly-constructed hotels
which have been in service for 24 months or more.
- Stabilizing Hotels are (1) properties that have undergone renovation or
repositioning investment within the last 36 months, which work is now
completed, or (2) newly developed properties placed into service within
the past 24 months. Management believes that these properties should
experience higher rates of growth in RevPAR and operating margin than the
Stabilized Hotels. On average, our hotels which have undergone renovation
have generally reached stabilization in approximately 12 to 18 months
after their completion date, and our newly developed hotels have reached
stabilization in approximately 24 months after their completion date.
- Being Repositioned Hotels are hotels experiencing disruption to their
operations due to renovation and repositioning. During this period
(generally 12 to 18 months) hotels will usually experience lower operating
results, such as RevPAR, and operating margins. We expect significant
improvements in the operating performance of those hotels that have
undergone a repositioning once the renovation is completed. After the
repositioning work is completed, these properties will be reclassified as
Stabilizing Hotels.
STABILIZED HOTELS. As of January 1, 1999, we had 77 Stabilized Hotels
(representing 14,084 rooms) which, based on management's determination, have
achieved normalized operations. The following table sets forth the number of our
Stabilized Hotels on which we completed renovation or construction in the
periods presented.
<TABLE>
<CAPTION>
STABILIZED HOTELS
YEAR OF LAST RENOVATION OR CONSTRUCTION
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PRIOR TO 1995 1995 1996 1997 1998
--------------- --------- --------- --------- ---------
Hotels....................................................... 11 13 21 22 10
Rooms........................................................ 1,886 2,442 4,328 3,692 1,736
<CAPTION>
<S> <C>
TOTAL(1)
-----------
Hotels....................................................... 77
Rooms........................................................ 14,084
</TABLE>
- ------------------------
(1) Excludes two managed hotels and one hotel in which we have a minority
interest.
STABILIZING HOTELS. As of January 1, 1999, we had 33 Stabilizing Hotels
(representing 6,056 rooms). Set forth below is the date of completion of
renovation or new construction of our Stabilizing Hotels in the periods
presented.
<TABLE>
<CAPTION>
STABILIZING HOTELS
PERIOD OF LAST RENOVATION OR CONSTRUCTION
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JAN 97-JUN 97 JUL 97-DEC 97(1) JAN 98-JUN 98(2) JUL 98-DEC 98(3) TOTAL
----------------- ------------------- ----------------- ----------------- ---------
Hotels............................... 1 4 14 14 33
Rooms................................ 106 635 2,847 2,468 6,056
</TABLE>
- ------------------------
(1) Includes one newly constructed hotel (90 rooms).
(2) Includes one newly constructed hotel (81 rooms).
(3) Includes three newly constructed hotels (463 rooms).
59
<PAGE>
On January 1, 1999, 31 hotels became stabilized. Of these hotels, we
completed renovations on 18 in 1997 and 13 in 1998. As shown below, RevPAR
increased from $43.72 in 1996 to $49.27 in 1998 for the hotels we completed
renovating in 1997 and from $45.64 in 1996 to $51.87 in 1998 for the hotels we
completed renovating in 1998. The following table sets forth additional
operating data for the 1997 and 1998 renovations which became stabilized on
January 1, 1999.
<TABLE>
<CAPTION>
HOTELS THAT BECAME STABILIZED ON
JANUARY 1, 1999
-------------------------------------
<S> <C> <C> <C>
1996 1997 1998
----------- ----------- -----------
1997 RENOVATIONS:
Average Daily Rate.................................................................. $ 65.91 $ 75.29 $ 77.50
Occupancy........................................................................... 66.3% 59.9% 63.6%
RevPAR.............................................................................. $ 43.72 $ 45.07 $ 49.27
EBITDA Margin....................................................................... 21.8% 20.2% 24.9%
1998 RENOVATIONS:
Average Daily Rate.................................................................. $ 71.50 $ 74.86 $ 77.70
Occupancy........................................................................... 63.8% 64.2% 66.8%
RevPAR.............................................................................. $ 45.64 $ 48.04 $ 51.87
EBITDA Margin....................................................................... 27.4% 26.8% 29.0%
</TABLE>
BEING REPOSITIONED HOTELS. As of June 30, 1999, we had 21 Being
Repositioned Hotels in the U.S. (representing 4,593 rooms). We are in the
process of repositioning and renovating the Being Repositioned Hotels based on
strategic plans designed to address the opportunities presented by each hotel
and the hotel's particular market. Renovations are chosen based on meeting
return on investment criteria and brand standards. These renovations include
improving exteriors, enhancing lobbies, restaurants and public areas, upgrading
guest rooms and converting unprofitable lounge areas to meeting rooms to
accommodate the needs of business travelers. In certain instances, hotel
properties are rebranded to improve market share and further identify the
improved property to the community. We believe that these renovations enable us
to increase both occupancy and room rates. The following table sets forth the
periods in which we expect to complete renovation of our Being Repositioned
Hotels.
<TABLE>
<CAPTION>
BEING REPOSITIONED HOTELS
EXPECTED DATE OF COMPLETION OF RENOVATION
--------------------------------------------
2Q'99 3Q'99 4Q'99 1Q'00 TOTAL(1)
----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Hotels................................................................. 2 4 4 11 21
Rooms.................................................................. 540 1,050 690 2,313 4,593
</TABLE>
- ------------------------
(1) Excludes six European hotels which we sold.
The timing of the renovation for the Being Repositioned hotels may vary and
will depend upon a number of factors, including costs of renovation exceeding
budgeted or contracted amounts, the availability of capital, delays in
completion of construction, work stoppages and relationships with contractors.
See "Risk Factors--Risks Related to the Development of New Projects,
Acquisitions and Renovations--We Cannot Guarantee the Success of Any Future
Projects."
60
<PAGE>
NEW DEVELOPMENT PROPERTIES
Our objective is to develop properties as cost efficiently as possible while
meeting quality standards. We have developed 12 hotels with 1,389 rooms since
1995, including the Marriott in Denver, Colorado which opened in November 1998
and the Hilton Garden Inn in Rio Rancho, New Mexico which opened in December
1998. We have an additional three hotels with 552 rooms under construction: the
Marriott in downtown Portland, Oregon and the Courtyard by Marriott in
Livermore, California, both of which are scheduled to open in the third quarter
of 1999, and the Hilton Garden Inn in Lake Oswego, Oregon, which is scheduled to
open in the first quarter of 2000. In addition, at June 30, 1999, we owned five
land parcels and held an option to purchase one additional land parcel that
together would permit the development of six new hotels with a total capacity of
approximately 1,270 rooms.
The timing of the development of new properties may vary and will depend
upon a number of factors, including costs of development exceeding budgeted or
contracted amounts, delays in completion of construction, the failure to obtain
necessary construction permits, availability of financing, work stoppages,
relationships with contractors and changes in general economic and business
conditions. See "Risk Factors--Risks Related to the Development of New Projects,
Acquisitions and Renovations--We Cannot Guarantee the Success of Any Future
Projects."
PORTFOLIO
Our hotel portfolio (with classifications as of January 1, 1999) is set
forth below.
LODGIAN HOTEL PORTFOLIO
<TABLE>
<CAPTION>
YEAR OF LAST
RENOVATION OR
HOTEL NAME NO. OF ROOMS LOCATION CONSTRUCTION
- ------------------------------------------------------ ------------- ---------------------------- ---------------
<S> <C> <C> <C>
STABILIZED
- ------------------------------------------------------
Best Western Central Omaha............................ 213 Omaha, NE 1997
Best Western Council Bluffs........................... 89 Council Bluffs, IA 1997
Best Western Northwoods Atrium Inn.................... 197 Charleston, SC 1994
Clarion Royce Hotel................................... 193 Pittsburgh, PA 1995
Comfort Inn Roseville................................. 118 Roseville, MN 1993
Comfort Inn San Antonio............................... 203 San Antonio, TX 1997
Comfort Suites Greenville............................. 85 Greenville, SC 1996
Courtyard by Marriott Abilene(1)...................... 99 Abilene, TX 1996
Courtyard by Marriott Bentonville(1).................. 90 Bentonville, AR 1996
Courtyard by Marriott Buckhead(1)..................... 181 Atlanta, GA 1996
Courtyard by Marriott Florence(1)..................... 78 Florence, KY 1995
Courtyard by Marriott Paducah(1)...................... 100 Paducah, KY 1997
Courtyard by Marriott Tifton(1)(2).................... 90 Tifton, GA 1996
Courtyard by Marriott Tulsa(1)........................ 122 Tulsa, OK 1997
Crowne Plaza Saginaw(3)............................... 177 Saginaw, MI 1996
Crowne Plaza Worcester(3)............................. 243 Worcester, MA 1996
Doubletree Club Louisville............................ 399 Louisville, KY 1996
Doubletree Club Philadelphia.......................... 188 Philadelphia, PA 1997
Fairfield Inn Valdosta................................ 108 Valdosta, GA 1997
Four Points Hilton Head............................... 139 Hilton Head, SC 1997
French Quarter Suites Memphis......................... 105 Memphis, TN 1997
Hampton Inn Dothan.................................... 113 Dothan, AL 1996
Hampton Inn Pensacola................................. 124 Pensacola, FL 1995
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LAST
RENOVATION OR
HOTEL NAME NO. OF ROOMS LOCATION CONSTRUCTION
- ------------------------------------------------------ ------------- ---------------------------- ---------------
<S> <C> <C> <C>
Hilton Fort Wayne..................................... 245 Fort Wayne, IN 1996
Hilton Inn Columbia................................... 152 Columbia, MD 1998
Hilton Inn Northfield................................. 186 Northfield, MI 1997
Hilton Inn Sioux City(3).............................. 193 Sioux City, IA 1994
Holiday Inn Arden Hills............................... 156 St. Paul, MN 1995
Holiday Inn Austin (South)............................ 210 Austin, TX 1994
Holiday Inn Birmingham................................ 166 Birmingham, AL 1996
Holiday Inn Bloomington............................... 187 Bloomington, IN 1992
Holiday Inn Brunswick (I-95).......................... 126 Brunswick, GA 1998
Holiday Inn City Center(4)............................ 240 Columbus, OH 1996
Holiday Inn Clarksburg................................ 160 Clarksburg, WV 1997
Holiday Inn Dothan.................................... 102 Dothan, AL 1996
Holiday Inn Express Fort Pierce....................... 100 Fort Pierce, FL 1998
Holiday Inn Express Gadsden........................... 141 Gadsden, AL 1997
Holiday Inn Express Palm Desert....................... 129 Palm Desert, CA 1992
Holiday Inn Express Pensacola......................... 214 Pensacola, FL 1996
Holiday Inn Fairmont.................................. 106 Fairmont, WV 1997
Holiday Inn Fayetteville.............................. 198 Fayetteville, NC 1997
Holiday Inn Fort Wayne(3)............................. 208 Fort Wayne, IN 1995
Holiday Inn Greentree................................. 200 Pittsburgh, PA 1998
Holiday Inn Hamburg................................... 129 Buffalo, NY 1998
Holiday Inn Hilton Head............................... 201 Hilton Head, SC 1995
Holiday Inn Lawrence.................................. 192 Lawrence, KS 1996
Holiday Inn Manhattan................................. 197 Manhattan, KS 1996
Holiday Inn Marietta.................................. 196 Atlanta, GA 1996
Holiday Inn McKnight Rd.(3)........................... 147 Pittsburgh, PA 1995
Holiday Inn Meadow Lands.............................. 138 Pittsburgh, PA 1996
Holiday Inn Melbourne(3).............................. 293 Melbourne, FL 1996
Holiday Inn Monroeville............................... 189 Pittsburgh, PA 1998
Holiday Inn Morgantown................................ 147 Morgantown, WV 1997
Holiday Inn Myrtle Beach.............................. 133 Myrtle Beach, SC 1998
Holiday Inn Parkway East.............................. 180 Pittsburgh, PA 1996
Holiday Inn Phoenix West.............................. 144 Phoenix, AZ 1995
Holiday Inn Raleigh Downtown.......................... 202 Raleigh, NC 1994
Holiday Inn Santa Fe.................................. 130 Santa Fe, NM 1992
Holiday Inn Select Airport Phoenix.................... 298 Phoenix, AZ 1995
Holiday Inn Select DFW................................ 282 Dallas, TX 1997
Holiday Inn Select Strongsville....................... 304 Cleveland, OH 1996
Holiday Inn Select Windsor, Ontario................... 214 Windsor, Ontario 1998
Holiday Inn Sheffield................................. 201 Sheffield, AL 1994
Holiday Inn St. Louis North........................... 391 St. Louis, MO 1996
Holiday Inn St. Louis West............................ 249 St. Louis, MO 1998
Holiday Inn Syracuse.................................. 153 Syracuse, NY 1997
Holiday Inn University Mall........................... 152 Pensacola, FL 1997
Holiday Inn Valdosta.................................. 173 Valdosta, GA 1997
Omni Albany NY........................................ 386 Albany, NY 1995
Omni West Palm Beach(3)............................... 219 West Palm Beach, FL 1994
Quality Hotel & Conference Ctr........................ 204 New Orleans, LA 1995
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LAST
RENOVATION OR
HOTEL NAME NO. OF ROOMS LOCATION CONSTRUCTION
- ------------------------------------------------------ ------------- ---------------------------- ---------------
<S> <C> <C> <C>
Radisson New Orleans(3)............................... 244 New Orleans, LA 1998
Radisson Phoenix Hotel................................ 163 Phoenix, AZ 1995
Sheraton Hotel Concord................................ 323 Concord, CA 1996
Super 8 Hazard........................................ 52 Hazard, KY 1997
Super 8 Prestonburg................................... 80 Prestonburg, KY 1997
Westin William Penn Pittsburgh........................ 595 Pittsburgh, PA 1997
------
SUBTOTAL.......................................... 14,174
------
STABILIZING
- ------------------------------------------------------
Courtyard by Marriott Lafayette (1)................... 90 Lafayette, LA 1997
Crowne Plaza Cedar Rapids............................. 275 Cedar Rapids, IA 1998
Crowne Plaza Macon(3)................................. 298 Macon, GA 1998
Doubletree Club Hollywood............................. 160 Hollywood, CA 1998
Fairfield Inn Augusta................................. 117 Augusta, GA 1998
Fairfield Inn Colchester.............................. 117 Burlington, VT 1998
Fairfield Inn Jackson................................. 105 Jackson, TN 1998
Fairfield Inn Merrimack............................... 116 Merrimack, NH 1998
Four Points Omaha..................................... 168 Omaha, NE 1997
Four Points West Des Moines........................... 161 Des Moines, IA 1997
Hilton Garden Rio Rancho(1)........................... 129 Rio Rancho, NM 1998
Holiday Inn Anchorage................................. 251 Anchorage, AK 1998
Holiday Inn Augusta(3)................................ 239 Augusta, GA 1998
Holiday Inn Boise..................................... 265 Boise, ID 1998
Holiday Inn Cincinnati................................ 244 Cincinnati, OH 1998
Holiday Inn Florence.................................. 106 Florence, KY 1997
Holiday Inn Fort Mitchell............................. 214 Fort Mitchell, KY 1998
Holiday Inn Frisco.................................... 216 Frisco, CO 1997
Holiday Inn Jamestown................................. 150 Jamestown, NY 1998
Holiday Inn Lansing West.............................. 239 Lansing, MI 1998
Holiday Inn Market Center Dallas...................... 246 Dallas, TX 1998
Holiday Inn Memphis................................... 175 Memphis, TN 1998
Holiday Inn North Miami............................... 98 Miami, FL 1998
Holiday Inn Richfield(3).............................. 219 Richfield, OH 1998
Holiday Inn Select Riverside.......................... 286 Riverside, CA 1998
Holiday Inn Select Wilsonville........................ 169 Portland, OR 1998
Holiday Inn Silver Spring............................. 232 Silver Spring, MD 1998
Holiday Inn Wichita Airport........................... 152 Wichita, KS 1998
Holiday Inn Winter Haven.............................. 225 Winter Haven, FL 1998
Marriott Denver(1).................................... 238 Denver, CO 1998
Mayfair House Coconut Grove........................... 179 Miami, FL 1998
Residence Inn Dedham(1)............................... 96 Boston, MA 1998
Residence Inn Little Rock(1).......................... 81 Little Rock, AR 1998
------
SUBTOTAL.......................................... 6,056
------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXPECTED
HOTEL NAME NO. OF ROOMS LOCATION COMPLETION DATE
- ---------------------------------------------------- ------------- ---------------------------- -----------------
<S> <C> <C> <C>
BEING REPOSITIONED
- ----------------------------------------------------
Courtyard by Marriott Revere........................ 120 Boston, MA 3Q99
Crowne Plaza Houston................................ 298 Houston, TX 3Q99
Four Points by Sheraton, Niagara Inn................ 190 Niagara Falls, NY 2Q99
Holiday Inn Belmont................................. 135 Belmont, MD 4Q99
Holiday Inn BWI Airport............................. 259 Baltimore, MD 4Q99
Holiday Inn Cromwell Bridge......................... 139 Cromwell Bridge, MD 4Q99
Holiday Inn East Hartford........................... 130 East Hartford, CT 1Q00
Holiday Inn Express Nashville....................... 210 Nashville, TN 3Q99
Holiday Inn Frederick............................... 157 Frederick, MD 4Q99
Holiday Inn Glen Burnie North....................... 128 Glen Burnie, MD 1Q00
Holiday Inn Grand Island............................ 265 Grand Island, NY 1Q00
Holiday Inn Inner Harbor............................ 373 Baltimore, MD 1Q00
Holiday Inn Jekyll Island........................... 199 Jekyll Island, GA 1Q00
Holiday Inn Lancaster (East)........................ 189 Lancaster, PA 1Q00
Holiday Inn New Haven............................... 160 New Haven, CT 1Q00
Holiday Inn Rolling Meadows......................... 422 Rolling Meadows, IL 3Q99
Holiday Inn Select Niagara Falls.................... 395 Niagara Falls, NY 1Q00
Holiday Inn York (Arsenal Rd.)...................... 100 York, PA 1Q00
Holiday Inn York (Market St.)(5).................... 120 York, PA N/A
Sheraton West Palm Beach............................ 350 West Palm Beach, FL 2Q99
Town Center Hotel Silver Spring..................... 254 Silver Spring, MD 1Q00
------
SUBTOTAL........................................ 4,593
------
UNDER CONSTRUCTION
- ----------------------------------------------------
Courtyard by Marriott Livermore..................... 122 San Francisco, CA 3Q99
Hilton Garden Inn Lake Oswego....................... 181 Lake Oswego, OR 1Q00
Marriott City Center Portland....................... 249 Portland, OR 3Q99
------
SUBTOTAL........................................ 552
------
TOTAL........................................... 25,375
------
------
</TABLE>
- ------------------------
(1) These hotels were newly constructed.
(2) This hotel is owned by third parties and is currently being renovated.
(3) These hotels are partially owned and consolidated.
(4) This hotel is partially owned and not consolidated.
(5) We are in the process of selling this hotel.
Sixteen of our hotels are located on land subject to long-term leases.
Generally, the leases are for terms in excess of the depreciable lives of the
improvements or contain a purchase option and provide for fixed rents. In
certain instances, additional rents, based on a percentage of revenue or cash
flow, may be payable. The leases generally require us to pay the cost of
repairs, insurance and real estate taxes.
FRANCHISE AFFILIATIONS
We believe that our strong brand affiliations bring many benefits in terms
of guest loyalty and market share premiums. With 73% of our portfolio composed
of Holiday Inn and Marriott hotels, we believe that we are well-positioned to
take advantage of superior brand equity, quality standards and reservation
contribution. As a result of our renovations and improvements, as well as
improvements made by other
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franchisees under the "Holiday Inn Worldwide Core Modernization" program, we
believe that the Holiday Inn image will be greatly enhanced. In addition, we
believe that Marriott continues to be a very strong name among travelers and in
the industry, providing consistently high quality products and service. Our
hotels also benefit from both franchisors' toll free reservation numbers, which
contribute approximately 30% of our total reservations for these brands.
At July 31, 1999, substantially all of our owned hotels were affiliated with
national franchisors, as set forth in the following table:
<TABLE>
<CAPTION>
TOTAL
------------------------------
<S> <C> <C>
NO. OF HOTELS NO. OF ROOMS
--------------- -------------
Bass Hotels and Resorts(1)....................................... 81 16,266
Marriott International(2)........................................ 18 2,229
Starwood(3)...................................................... 6 1,736
Hilton........................................................... 6 1,086
Promus(4)........................................................ 5 984
Choice Hotel(5).................................................. 5 803
Omni............................................................. 2 605
Best Western..................................................... 3 499
Radisson......................................................... 2 407
Cendant.......................................................... 2 132
Other............................................................ 3 538
--- ------
Total owned.............................................. 133 25,285
--- ------
--- ------
</TABLE>
- ------------------------
(1) Holiday Inn, Holiday Inn Select and Crowne Plaza brands.
(2) Marriott, Courtyard by Marriott and Fairfield Inn brands.
(3) Westin, Four Points and Sheraton brands.
(4) Doubletree brands.
(5) Comfort Inn and Suites and Clarion brands.
Franchisors provide a number of services to hotel operators which can
positively contribute to the improved financial performance of their properties,
including national reservation systems, marketing and advertising programs and
direct sales programs. We believe that noted franchisors with larger numbers of
hotels enjoy greater brand awareness among potential hotel guests than those
with fewer numbers of hotels. Hotels typically operate with high fixed costs,
and increases in revenues generated by affiliation with a national franchisor
can, at times, contribute positively to a hotel's financial performance.
Our license agreements with the national hotel franchisors typically
authorize the operation of a hotel under the licensed name, at a specific
location or within a specific area, and require that the hotel be operated in
accordance with standards specified by the licensor. Generally, the license
agreements require us to pay a royalty fee, an advertising/marketing fee, a fee
for the use of the licensor's nationwide reservation system and certain
ancillary charges. Royalty fees under our various license agreements generally
range from 3% to 6.5% of gross room revenues, while advertising/marketing fees
provided for in the agreements generally range from 1% to 2% of gross room
revenues and reservation system fees generally range from 1% to 2.5% of gross
room revenues. In the aggregate, royalty fees, advertising/ marketing fees and
reservation system fees range from 6% to 9% of gross revenues. The license
agreements are subject to cancellation in the event of a default, including the
failure to operate the hotel in accordance with the quality standards and
specifications of the licensor. The license agreements generally have an
original ten-year term, although certain license agreements provide for original
15 and 20-year terms. The majority of our license agreements have five to ten
years remaining on the term. The licensor may require us to upgrade our
facilities at any time to comply with the licensor's then current standards. The
licensee may apply for a license renewal as existing licenses expire. In
connection with license
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renewals, the licensor may require payment of a renewal fee, increased royalty
and other recurring fees and substantial renovation of the facility or the
licensor may elect not to renew the license. It is our policy to review
individual property franchise affiliations at the time of property acquisition
and, thereafter, on a regular basis. These reviews may result in changes in such
affiliations.
JOINT VENTURES; MANAGEMENT AGREEMENTS
In addition to operating the 121 hotels which we wholly owned at June 30,
1999, we operated 11 hotels owned in partnerships in which we have a 50% or
greater equity interest and one hotel owned in partnership in which we have a
minority equity interest. In each case in which a hotel is owned in partnership,
to varying extents we share decision making authority with our joint venture
partners and may not have sole discretion with respect to a hotel's disposition.
We are currently negotiating the terms of a development joint venture, under
which we would contribute three development parcels for a 15% interest in the
venture, sell two existing hotels to the venture for fair market value and be
retained by the venture as manager of the venture's properties. If the venture
is completed, we would expect to receive management fees equal to 2% of gross
revenues with an incentive fee for exceeding certain negotiated amounts.
In addition to the hotels we own or in which we have an ownership interest,
at June 30, 1999, we managed two hotels for third parties: the Courtyard by
Marriott in Tifton, Georgia and the Radisson in Chattanooga, Tennessee. These
hotels are managed in accordance with written management agreements. Our
management agreements provide that we be paid a base fee calculated as a
percentage of gross revenues and generally provide for an accounting services
fee and an incentive management fee. The incentive fees are generally a
percentage of gross operating profits exceeding negotiated amounts. All
operating and other expenses are paid by the owner. The existing management
agreements have remaining terms of one and five years and pay us management fees
of 3% and 4% of gross sales, respectively.
One of our hotels, the Westin William Penn Hotel located in Pittsburgh,
Pennsylvania, is managed by Starwood Hotels & Resorts, an unaffiliated third
party. The terms of this management agreement, which expires in December 31,
2010, provide for the manager to receive the greater of a base fee of 3% of
gross revenues or an incentive fee based on profits available for debt service.
The agreement also provides that we are responsible to make funds available for
capital improvements.
COMPETITION AND SEASONALITY
The hotel business is highly competitive. We compete with other facilities
on various bases, including room prices, quality, service, location and
amenities customarily offered to the traveling public. The demand for
accommodations and the resulting cash flow vary seasonally. The off-season tends
to be the winter months for properties located in colder weather climates and
the summer months for properties located in warmer weather climates. Levels of
demand are dependent upon many factors including general and local economic
conditions and changes in levels of tourism and business-related travel. Our
hotels depend upon both commercial and tourist travelers for revenues.
Generally, our hotels operate in areas that contain numerous other competitive
lodging facilities, including hotels associated with franchisors which may have
more extensive reservation networks than those which may be available to us.
We also compete with other hotel owners and operators with respect to (1)
licensing upscale and mid-priced franchises in targeted markets, (2) acquiring
hotel properties to renovate and reposition, and (3) acquiring development sites
for new hotel properties. Our competition is highly fragmented and is composed
of relatively small, private owners and operators of hotel properties, public
REITs and private equity funds.
EMPLOYEES
At June 30, 1999, we had approximately 8,000 full-time and 4,000 part-time
associates. We had 150 full time associates engaged in administrative and
executive activities. The balance of our associates manage,
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operate and maintain our properties. At June 30, 1999, approximately 1,500 of
our full- and part-time associates located at 11 hotels were covered by
collective bargaining agreements which expire between September 1999 and
December 2001. We consider relations with our associates to be good.
INSURANCE
We maintain insurance covering liabilities for personal injuries and
property damage. We also maintain, among other types of insurance coverage, real
and personal property insurance, directors and officers liability insurance,
liquor liability insurance, workers' compensation insurance, travel accident
insurance for certain of our employees, fiduciary liability insurance and
business automobile insurance. We believe we maintain sufficient insurance
coverage for the operation of our business.
REGULATION
Our hotels are subject to certain federal, state and local regulations and
we must obtain and maintain various licenses and permits. All such licenses and
permits must be periodically renewed and may be revoked or suspended for cause
at any time. Certain of these licenses and permits are material to our business
and the loss of such licenses could have a material adverse effect on our
financial condition and results of operations. We are not aware of any reason
why we should not be in a position to maintain our licenses.
We are subject to certain federal and state labor laws and regulations such
as minimum wage requirements, regulations relating to working conditions, laws
restricting the employment of illegal aliens and the Americans with Disabilities
Act. As a provider of restaurant services, we are also subject to certain
federal, state and local health laws and regulations. We believe we comply with
such laws and regulations in all material respects. We are also subject in
certain states to dramshop statutes, which may give an injured person the right
to recover damages from any establishment which wrongfully served alcoholic
beverages to the person who, while intoxicated, caused the injury. We believe
that our insurance coverage with respect to any such liquor liability is
adequate.
To date, federal and state environmental regulations have not had a material
effect on our operations. However, such laws potentially impose cleanup costs
for hazardous waste contamination on property owners. If any material hazardous
waste contamination problems do exist on any of our properties, we may be
exposed to liability for the costs associated with the cleanup of such sites.
LEGAL PROCEEDINGS
On June 1, 1999, a contractor hired by Servico to perform work on six
properties in New York, Illinois and Texas filed a summons with notice against
us in the Supreme Court of the State of New York, claiming breach of contract
and quantum meruit, among other things. The contractor is seeking damages in the
aggregate amount of $45 million. The contractor is required to file a formal
complaint. We have filed an appearance to the summons and will vigorously defend
our position. We believe we have valid defenses and counterclaims and that the
outcome will not have a material adverse effect on our financial position or
results of operations.
We are a party to other legal proceedings arising in the ordinary course of
our business, the impact of which would not, either individually or in the
aggregate, in management's opinion, have a material adverse effect on our
financial condition or results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of our
directors, nominee for director and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Robert S. Cole.................................... 37 Chief Executive Officer, President and Director
Karyn Marasco..................................... 41 Chief Operating Officer and Executive Vice
President
Kenneth R. Posner................................. 51 Chief Financial Officer and Executive Vice
President
Joseph C. Calabro................................. 48 Chairman of the Office of the Chairman of the
Board of Directors and Director
Peter R. Tyson.................................... 52 Director
John Lang......................................... 44 Director
Michael A. Leven.................................. 62 Director
Richard H. Weiner................................. 49 Director
</TABLE>
ROBERT S. COLE has been the Chief Executive Officer and President of Lodgian
since the Merger. From 1990 until the Merger, Mr. Cole was the President of
Impac and its predecessors and affiliates. Prior to that time, he held a variety
of general manager positions in hotels throughout the United States.
KARYN MARASCO has been the Chief Operating Officer and Executive Vice
President of Lodgian since the Merger. From 1997 until the Merger, Ms. Marasco
was the Chief Operating Officer and Executive Vice President of Servico. Prior
to such time, Ms. Marasco was affiliated with Westin Hotels & Resorts for 18
years. Most recently, Ms. Marasco served as Westin's Area Managing Director,
based in Chicago.
KENNETH R. POSNER was appointed Chief Financial Officer and Executive Vice
President of Lodgian, effective April 1999. From 1981 until he joined Lodgian,
Mr. Posner served as Chief Financial Officer of the Hyatt Group of Companies.
JOSEPH C. CALABRO has been a director of Lodgian since the Merger and was a
director of Servico from August 1992 until the Merger. Mr. Calabro has been a
principal of Joseph C. Calabro, C.P.A., a Devon, Pennsylvania accounting firm,
since 1982. Mr. Calabro has also been an officer and director of Bibsy
Corporation, which previously owned and operated a Holiday Inn hotel in
Bensalem, Pennsylvania, since 1971.
JOHN M. LANG has been a director of Lodgian since the Merger. Mr. Lang is
the President of Lang Capital Partners, LLC, a private real estate venture firm
based in Atlanta, Georgia. From June 1996 until May 1998, Mr. Lang served as
Chief Executive Officer of ProTrust Capital, Inc. ("ProTrust"), a private
investment firm based in Atlanta, Georgia. Prior to joining ProTrust in June
1996, Mr. Lang, an attorney, was the managing partner of Reece & Lang, P.S.C., a
London, Kentucky law firm with offices in Atlanta.
MICHAEL A. LEVEN has been a director of Lodgian since the Merger and was a
director of Servico from August 1997 until the Merger. Since October 1995, Mr.
Leven has been President and Chief Executive Officer of US Franchise Systems,
Inc., which sells franchises for Hawthorne Suites, Best Inns and Microtel
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Inns hotel brands. From October 1990 until September 1995, Mr. Leven was
President and Chief Operating Officer of Holiday Inn Worldwide.
PETER R. TYSON has been a director of Lodgian since the Merger and was a
director of Servico from August 1992 until the Merger. From December 1990 to the
present, Mr. Tyson has been President of Peter R. Tyson & Associates, Inc., a
firm offering consulting services to clients in the hospitality industry. Prior
to forming Peter R. Tyson & Associates, Inc., Mr. Tyson was the
partner-in-charge of the hospitality industry consulting practice in the
Philadelphia office of the accounting and consulting firm of Laventhol &
Horwath, with which he was associated for 20 years.
RICHARD H. WEINER has been a director of Lodgian since the Merger and was a
director of Servico from August 1992 until the Merger. Mr. Weiner is a senior
partner in the Albany, New York law firm of Cooper, Erving, Savage, Nolan &
Heller, where he has practiced law since 1975.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by us, to or on behalf of the Chief Executive
Officer and to each of our three most highly compensated executive officers
other than the Chief Executive Officer during the year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ AWARDS
OTHER SECURITIES ALL OTHER
ANNUAL UNDERLYING COMPEN-
COMPEN- OPTIONS/SARS SATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION (7) (8)
- ------------------------------------------- --------- ---------- ---------- ------------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cole............................. 1998 $ 17,308 $ -- $ -- 185,000 $ --
Chief Executive Officer and President(1)
David Buddemeyer........................... 1998 $ 358,269 $ -- $ 1,282,500(5) -- $ --
Chairman of the Board, Chief Executive 1997 385,000 120,000 -- 400,000 2,948
Officer and President(2) 1996 350,000 96,745 -- 13,500 4,726
Karyn Marasco.............................. 1998 $ 235,000 $ 100,000 $ -- -- $ 20,106
Chief Operating Officer and Executive 1997 137,269 60,000 -- 125,000 --
Vice President(3)
Warren M. Knight........................... 1998 $ 215,000 $ 60,000 $ -- -- $ 2,500
Chief Financial Officer and Vice 1997 188,000 60,000 -- 75,000 3,556
President--Finance 1996 170,000 46,990 -- 13,500 4,844
Peter J. Walz.............................. 1998 $ 157,500 $ -- $ 249,909(6) -- $ 2,500
Vice President--Acquisitions(4) 1997 150,000 -- 174,700(6) 100,000 3,793
1996 122,596 139,438(6) 15,000 2,375
</TABLE>
- ------------------------
(1) Mr. Cole has served as President and Chief Executive Officer of Lodgian
since December 11, 1998.
(2) Mr. Buddemeyer served as Chairman of the Board, President and Chief
Executive Officer of Servico until his resignation on November 10, 1998.
(3) Ms. Marasco's employment with Servico began in May 1997.
(4) Mr. Walz's employment with Servico began in January 1996.
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<PAGE>
(5) Represents severance payments made to Mr. Buddemeyer in connection with his
separation from Servico.
(6) Represents commission payments made to Mr. Walz.
(7) Represents the number of shares of common stock underlying the options/SARs.
(8) 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, except for Ms. Marasco, whose figure also includes a
relocation allowance of $19,687.
STOCK OPTION PLAN
Our Stock Option Plan provides for the issuance of incentive stock options
within the meaning of Section 422A of the Internal Revenue Code of 1986 (the
"Internal Revenue Code") and non-qualified stock options not intended to meet
the requirements of Section 422A of the Internal Revenue Code. The plan is
administered by a committee of the Board of Directors which, subject to the
terms of the plan, determines to whom grants are made and the vesting, timing
and amounts of such grants.
The following table sets forth information concerning stock option grants
made during 1998 to the executive officers named in the "Summary Compensation
Table," including the potential realizable value of each grant assuming that the
market value of the Common Stock appreciates from the date of grant to the
expiration of the option at annualized rates of 5% and 10%, in each case
compounded annually over the term of the option. These assumed rates of
appreciation have been specified by the Securities and Exchange Commission for
illustration purposes only and are not intended to predict future prices of the
Common Stock. The actual future value of the options will depend on the market
value of the Common Stock.
STOCK OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF
SECURITIES TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS/SARS EXERCISE APPRECIATION FOR OPTION
OPTIONS/SARS GRANTED TO PRICE EXPIRATION ------------------------
NAME GRANTED EMPLOYEES ($/SH) DATE 5% 10%
- -------------------------------------------- ------------- --------------- ----------- ----------- ---------- ------------
Robert S. Cole (1).......................... 185,000 24.5% $ 6.125 12/11/08 $ 712,616 $ 1,805,909
David Buddemeyer (2)........................ -- -- -- -- -- --
Karyn Marasco............................... -- -- -- -- -- --
Warren M. Knight............................ -- -- -- -- -- --
Peter J. Walz............................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Mr. Cole has served as President and Chief Executive Officer of Lodgian
since December 11, 1998; Mr. Cole's options were initially issued with an
exercise price of $17.75, but were repriced on December 18, 1998 to $6.125.
(2) Mr. Buddemeyer served as Chairman of the Board, President and Chief
Executive Officer of Servico until his resignation on November 10, 1998.
The following table sets forth certain summary information concerning
exercised and unexercised options to purchase Servico's Common Stock as of
December 31, 1998, under Servico's Stock Option Plan held by the executive
officers named in the "Summary Compensation Table."
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STOCK OPTION EXERCISES IN FISCAL YEAR
1998 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS HELD AT FISCAL OPTIONS/SARS AT
VALUE YEAR-END (#) FISCAL YEAR-END ($) (3)
NAME AND POSITION DURING ACQUIRED ON REALIZED --------------------------- --------------------------
1998 FISCAL YEAR EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ------------- ----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cole........................... -- -- -- 185,000 -- --
Chief Executive Officer and
President(1)
David Buddemeyer......................... -- -- 270,700 252,800 78,750 --
Chairman of the Board, President and
Chief Executive Officer(2)
Karyn Marasco............................ -- -- 50,000 75,000 -- --
Chief Operating Officer and Executive
Vice President
Warren M. Knight......................... -- -- 130,900 55,100 69,375 --
Chief Financial Officer and
Vice President--Finance
Peter J. Walz............................ -- -- 46,000 69,000 -- --
Vice President--Acquisitions
</TABLE>
- ------------------------
(1) Mr. Cole has served as President and Chief Executive Officer of Lodgian
since December 11, 1998.
(2) Mr. Buddemeyer served as Chairman of the Board, President and Chief
Executive Officer of Servico until his resignation on November 10, 1998.
(3) The value of unexercised in-the-money options/SARs represents the number of
options/SARs held at year-end 1998 multiplied by the difference between the
exercise price and $4.75, the closing price of Lodgian's Common Stock at
year-end 1998.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT
EMPLOYMENT AGREEMENTS
ROBERT COLE entered into an employment agreement with Lodgian relating to
his employment as President and Chief Executive Officer, as of December 11,
1998. The employment agreement provided for a base salary subject to increases
and bonuses, including a bonus of up to 100% of his base salary, in each case,
at the discretion of the Board of Directors. The base salary paid to Mr. Cole
during 1998 was $17,308 (base salary of $300,000 for the period of December 11,
1998 through year end). Mr. Cole also receives paid health insurance, paid
disability insurance and is entitled to participate, to the extent eligible,
under any benefit plans provided to other executives of Lodgian. Mr. Cole is
entitled to a minimum of four weeks paid vacation annually. Mr. Cole's
employment agreement contains provisions for payments to Mr. Cole in the event
of a change in control, as described more fully under "--Arrangements Regarding
Termination of Employment and Changes of Control."
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 and continued in that position until his resignation on November 10,
1998. The employment agreement provided for a base salary subject to increases
and bonuses, in each case, at the discretion of the Board of Directors. The base
salary paid to Mr. Buddemeyer during 1998 was $348,411 (base salary of $405,000
for the period of January 1, 1998 through November 10, 1998). Mr. Buddemeyer
also received paid health insurance, paid disability insurance and was entitled
to
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participate, to the extent eligible, under any benefit plans provided to other
executives of Servico. Mr. Buddemeyer was entitled to a minimum of four weeks
paid vacation annually.
KENNETH POSNER entered into a two-year automatically extendable employment
agreement with Lodgian relating to his employment as Chief Financial Officer, as
of April 9, 1999. The employment agreement provides for a base salary of
$250,000 subject to increases and bonuses, in each case at the discretion of the
Board of Directors. Mr. Posner also receives paid health insurance, paid
disability insurance and is entitled to participate, to the extent possible,
under any benefit plans provided to other executives of Lodgian. Mr. Posner is
entitled to a minimum of four weeks paid vacation annually. Posner is also
entitled to receive the benefits offered other executive officers, including a
bonus of up to 100% of salary, payable at the discretion of the Board. Pursuant
to the terms of his employment agreement, Mr. Posner was granted options to
acquire 400,000 shares of Lodgian Common Stock, 20% of which will vest per year
beginning April 9, 2000. The employment agreement is terminable upon 30 days
notice but in the event Mr. Posner is terminated other than "for Cause," as
defined in the agreement, he will be entitled to his base salary and benefits
under the agreement for the greater of the unexpired term or one year.
KARYN MARASCO entered into a three-year employment agreement with Servico
relating to her employment as Executive Vice President and Chief Operating
Officer of Servico on May 2, 1997. On November 24, 1998, the agreement was
extended for a period of one year. This agreement was assumed by Lodgian and is
still in effect. The employment agreement provides for a base salary of $235,000
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 her employment agreement, in 1997 Ms. Marasco was granted
options to acquire 50,000 shares of Lodgian 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 30 days notice but in the
event Ms. Marasco is terminated other than "for Cause," as defined in the
agreement, she will be entitled to her base salary and benefits under the
agreement for the greater of the unexpired term or one year.
ARRANGEMENTS REGARDING TERMINATION OF EMPLOYMENT AND CHANGES OF CONTROL
On November 10, 1998, David Buddemeyer, Servico's Chairman and Chief
Executive Officer, resigned from Servico. Servico and Lodgian paid to Mr.
Buddemeyer an aggregate severance pay equal to $1,282,500. Lodgian will continue
insurance coverage for Mr. Buddemeyer, on the same terms and conditions as would
be applicable if Mr. Buddemeyer were an active employee, under Lodgian's life
insurance, group disability benefits and similar welfare benefit plans for a
period of one year. Mr. Buddemeyer holds currently exercisable stock options to
purchase 423,500 shares of Lodgian's Common Stock which were originally granted
to him pursuant to Servico's Stock Option Plan and 100,000 stock appreciation
rights. The stock options or stock appreciation rights will continue to vest at
the same time they would have vested had Mr. Buddemeyer remained an employee of
Lodgian.
In addition, on February 28, 1999, Warren Knight, Lodgian's then Chief
Financial Officer, resigned and was replaced on an interim basis by Lawrence
Carballo. Lodgian paid to Mr. Knight an aggregate severance pay equal to
$350,000 and a bonus in compensation for services rendered during 1998 equal to
$60,000. Lodgian will continue insurance coverage for Mr. Knight, on the same
terms and conditions as would be applicable if Mr. Knight were an active
employee, under the Company's life insurance, group disability benefits and
similar welfare benefit plans for a period of one year. Mr. Knight holds
currently exercisable stock options to purchase 173,500 shares of Lodgian's
Common Stock which were originally granted to him pursuant to Servico's Stock
Option Plan and 12,500 stock appreciation rights. The stock options or stock
appreciation rights will continue to vest at the same time they would have
vested had Mr. Knight remained an employee of Lodgian.
The employment agreement between Lodgian and Mr. Cole provides for payments
to Mr. Cole in an amount equal to two and one-half times his annual base
compensation, less any other cash severance
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payments contractually owed to him 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 50% of Lodgian's outstanding Common Stock,
and the duties or responsibilities of Mr. Cole are materially diminished within
24 months thereafter.
DIRECTOR COMPENSATION
During 1998, Servico paid non-employee directors a total annual retainer of
$18,000, as well as a fee per board meeting or board committee meeting of
$1,000. Mr. David Buddemeyer, who served as Chairman of the Board of Servico
until his resignation from that Board in November 1998, received no compensation
for serving as Servico's Chairman from January to November 1998.
In December 1998, Lodgian adopted a fee schedule for board members to
provide for a $24,000 total annual retainer, as well as fees of $1,500 per board
meeting, $1,000 per board committee meeting, and $500 per telephonic board or
board committee meeting. In addition, Mr. Joseph C. Calabro, in lieu of the
normal annual retainer and per meeting fees, is receiving annual director
compensation of $100,000 for services rendered to Lodgian in his capacity as
Chairman of the Office of the Chairman of the Board. Mr. Robert Cole, who served
on Lodgian's Board of Directors from December 11 until December 31, 1998,
received no compensation for serving as a member of Lodgian's Board.
Servico and Lodgian also reimbursed directors for expenses associated with
attending Board and committee meetings of the respective companies.
Under Lodgian's Stock Option Plan, each non-employee director is
automatically granted, on the date such director's term of office commences and
each year thereafter on the day following any annual meeting of stockholders (as
long as such director's term as a director is continuing for the ensuing year),
an option to acquire 5,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant. All options
granted to non-employee directors become exercisable upon grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, through the time of the Merger, the following directors served
on the Compensation Committee of the Board of Directors: Joseph C. Calabro,
Peter R. Tyson and Richard H. Weiner. Following the Merger, the following
directors served on the Compensation Committee: John M. Lang, Michael A. Leven,
Peter R. Tyson and Richard H. Weiner. None of such persons is or has been an
executive officer of Lodgian, and no interlocking relationships exist between
any such person and the directors or executive officers of Lodgian.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
Common Stock as of June 25, 1999, by (1) each person known to Lodgian to be the
beneficial owner of more than 5% of the issued and outstanding Common Stock as
of June 25, 1999, (2) each of the members of Lodgian's Board of Directors, (3)
each of Lodgian's executive officers named in the "Summary Compensation Table"
under "Executive Compensation" below, and (4) all directors and executive
officers of Lodgian as a group. All shares were owned directly with sole voting
and investment power unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER AND ADDRESS OF 5% BENEFICIAL OWNER OWNED (1) OWNED (2)
- --------------------------------------------------------------- ----------------------- ---------------------------
<S> <C> <C>
BENEFICIAL OWNERS OF 5% OR MORE OF OUTSTANDING
COMMON STOCK:
Heitman/PRA Securities Advisors, Inc. ......................... 2,205,100(3) 8.1%
180 North LaSalle Street, Suite 3600
Chicago, IL 60601
Prudential Insurance Company of America ....................... 2,113,000(4) 7.8%
751 Broad Street
Newark, NJ 07102-3777
Eagle Asset Management, Inc. .................................. 1,788,310(5) 6.6%
880 Carillon Parkway
St. Petersburg, FL 33716
Dimensional Fund Advisors ..................................... 1,538,000(6) 5.7%
1299 Ocean Avenue, 11(th) Floor
Santa Monica, CA 90401
DIRECTORS:
Robert S. Cole................................................. 622,843 2.3%
Joseph C. Calabro.............................................. 261,100(7) *
John M. Lang................................................... 326,116(8) 1.2%
Michael A. Leven............................................... 30,700(9) *
Peter R. Tyson................................................. 55,500(10) *
Richard H. Weiner.............................................. 55,100(10) *
NON-DIRECTOR EXECUTIVE OFFICERS:
David Buddemeyer............................................... 304,219(11) 1.1%
Karyn Marasco.................................................. 77,700(10) *
Warren M. Knight............................................... 138,311(12) *
Peter J. Walz.................................................. 49,000(13) *
Lawrence Carballo.............................................. 17,400(14) *
All directors and executive officers as a group (11 persons)... 1,937,989(15) 6.9%
</TABLE>
- ------------------------
* Represents less than 1%.
(1) This number does not include those shares of Lodgian to be distributed upon
conversion of Servico shares and Impac units pursuant to the Merger which
have as yet not been converted.
(2) Ownership percentages are based on 27,218,161 shares of Common Stock
(including 15,689 shares to be issued pursuant to Lodgian's Stock Option
Plan) outstanding as of June 25, 1999 and any Common Stock that such named
individual or group has the right to acquire within 60 days.
(3) Heitman/PRA Securities Advisors, Inc. filed a Schedule 13G dated October 15,
1998 with the SEC reporting ownership of 2,205,100 shares of Common Stock of
Lodgian's predecessor, Servico, with
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sole voting power with respect to 2,147,400 shares, sole dispositive power
with respect to 2,172,500 shares, and shared dispositive power with respect
to 32,600 shares.
(4) Prudential Insurance Company of America filed a Schedule 13G dated January
8, 1999 with the SEC reporting ownership of 2,113,000 shares of Common Stock
with sole voting and dispositive power with respect to 1,204,100 shares and
with shared voting and dispositive power with respect to 908,900 shares.
(5) Eagle Asset Management, Inc. filed a Schedule 13G dated January 29, 1999
with the SEC reporting ownership of 1,788,310 shares of Common Stock with
sole voting and dispositive power with respect to such shares.
(6) Dimensional Fund Advisors filed a Schedule 13G dated February 12, 1999 with
the SEC reporting ownership of 1,538,000 shares of Common Stock with sole
voting and dispositive power with respect to such shares.
(7) 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 spouse.
(8) The shares in the table above do not include shares beneficially owned by
Hotel Capital II, LLC, a limited liability company whose manager, with sole
voting and dispositive power, is Robert H. Woods (a partner in Lang Capital
Partners, LLC). Mr. Lang is not a member or manager of Hotel Capital II, LLC
and does not have voting or dispositive power with respect to shares owned
by Hotel Capital II, LLC; therefore, such shares are not included in Mr.
Lang's beneficial ownership.
(9) Includes currently exercisable options to purchase 25,000 shares of Common
Stock and 5,700 shares owned by Mr. Leven's spouse.
(10) Includes currently exercisable options to purchase 55,000 shares of Common
Stock.
(11) Includes currently exercisable options to purchase 274,400 shares of Common
Stock.
(12) Includes currently exercisable options to purchase 134,600 shares of Common
Stock.
(13) Includes currently exercisable options to purchase 49,000 shares of Common
Stock.
(14) Includes currently exercisable options to purchase 17,400 shares of Common
Stock.
(15) Includes currently exercisable options to purchase 720,400 shares of Common
Stock.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following parties had a direct or indirect material interest in
transactions with the Company since the beginning of its most recently completed
fiscal year and such transactions are described below.
Mr. Cole is a minority shareholder of Impac Hotel Development ("IHD"), which
provided acquisition and property development services to Impac for a
development fee of 4% 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 4%
development fee (not to exceed $2.5 million in the aggregate) in the event
Lodgian acquires or develops any of the hotels or properties identified in the
merger agreement as Impac's acquisition and development pipeline.
IHD had contracted with Elegant Interiors, LLC ("Elegant"), an entity wholly
owned by Sheila Lang (the spouse of John M. Lang) to provide interior design
consulting services. In the event IHD, or its assignee, receives payment of the
above-referenced development fees, IHD, or its assignee, will pay Elegant
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.
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DESCRIPTION OF CERTAIN INDEBTEDNESS AND PREFERRED STOCK
The following description of our indebtedness does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the agreements related to the indebtedness. The following
description of the indebtedness sets forth the terms of certain material credit
agreements currently in place and anticipated to survive the consummation of the
offering.
GMAC COMMERCIAL MORTGAGE CORPORATION LOANS
GENERAL
The GMAC loans are composed of, and evidenced by, among other things, three
separate loan agreements (the "GMAC Loan Agreements"), among several of our
operating subsidiaries (the "GMAC Loan Subsidiaries") and GMAC Commercial
Mortgage Corporation ("GMAC") and three separate mortgage notes (the "GMAC
Mortgage Notes"). The three loan agreements are referred to as "Seldin" (which
includes five hotels in Iowa, Kansas and Nebraska), "Heartland Hotels" (which
includes three hotels in Georgia, Iowa and Ohio) and Lansing (which pertains to
a hotel in Michigan). The aggregate outstanding principal amount under the GMAC
Loans was approximately $34.0 million at June 30, 1999.
INTEREST
The Seldin and Lansing mortgage notes bear interest at 9.875% and the
Heartland Hotels mortgage bears interest at 8.625%.
SECURITY
The indebtedness of the GMAC Mortgage Notes is secured by a limited recourse
mortgage on, and an assignment of the leases and rents from, the nine hotels
referred to above.
TERM AND PREPAYMENT
The notes are repayable in equal monthly installments of principal and
interest based on a seven-year amortization schedule. All amounts outstanding
under the GMAC Mortgage Notes are due and payable February 1, 2003 (Heartland
Hotels), June 1, 2003 (Lansing) and August 1, 2003 (Seldin). The principal
balance of each of the GMAC Loans may be prepaid upon notice, payment of accrued
interest, payment of all other sums due under the GMAC Loan documents and
payment of a prepayment fee.
CERTAIN COVENANTS
In addition to customary covenants, the GMAC Mortgage Notes require, among
other things, that the GMAC Loan Subsidiaries: (a) not transfer or encumber the
mortgaged property; (b) not incur any indebtedness other than the GMAC Mortgage
Notes and certain other limited indebtedness; (c) not permit any lien to exist
on any of its property, assets or revenues, except the limited liens in favor of
GMAC, existing liens and certain other liens; (d) not make any loans to any
third party; and (e) not incur any guarantee obligations, except the guarantee
obligations related to the GMAC Mortgage Notes and certain other guarantee
obligations.
EVENTS OF DEFAULT
Events of default, under the GMAC Mortgage Notes, include, without
limitation, the following: (i) any failure by any of the GMAC Loan Subsidiaries
to pay principal, interest or other obligations under the GMAC Mortgage Notes
when due, (ii) any representation or warranty made by any of the GMAC Loan
Subsidiaries in the GMAC Loan Agreements and related documents proves to have
been untrue in any material respect when made, (iii) any default by GMAC Loan
Subsidiaries in the observance or performance of covenants or other agreements
contained in any of the GMAC Loan Agreements or
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related agreements, (iv) certain events of bankruptcy or insolvency of the GMAC
Loan Subsidiaries or any guarantor, and (v) the occurrence of an event of
default under any other GMAC Loan document.
COLUMN FINANCIAL, INC. LOANS ("COLUMN FINANCIAL LOANS")
GENERAL
The Column Financial Loans are evidenced by, among other things, three loan
agreements (the "Column Financial Loan Agreements"), among several of our
operating subsidiaries (the "Column Financial Loan Subsidiaries"), and Column
Financial, Inc. ("Column Financial"), an affiliate of Donaldson, Lufkin &
Jenrette. The aggregate outstanding principal balance of the Column Financial
Loans was approximately $69.4 million at June 30, 1999.
INTEREST
The Column Financial Loans bear interest at rates of 9.45%, 10.59% and
10.74% on principal balances of $10.1 million, $55.7 million and $3.6 million,
respectively.
SECURITY
The Column Financial Loans are secured by mortgages and assignments of
leases and rents on all of the Column Financial Loan Subsidiaries' 12 hotels.
TERM
The Column Financial Loans mature in March 2005 (for the $3.6 million loan),
in March 2010 (for the $55.7 million loan) and July 2010 (for the $10.1 million
loan).
CERTAIN COVENANTS
In addition to customary covenants, the Column Financial Loans require,
among other things, that the Column Financial Loan Subsidiaries: (a) not incur,
create or assume any outstanding debt other than the Column Financial Loans and
certain other limited indebtedness; (b) not make any advances or loans to any
third party; (c) not enter into or be a party to any transaction with an
affiliate of a Column Financial Loan Subsidiary, with certain limited
exceptions; (d) not permit any lien to exist on any of their properties, assets
or revenues, except the liens in favor of Column Financial, existing liens and
certain other liens; and (e) not amend or modify, terminate or extend, or
consent to assignment of any franchise agreement between any Column Financial
Loan Subsidiary and any franchisor.
EVENTS OF DEFAULT
The Column Financial Loan Agreements contain certain events of default,
including, without limitation, the following: (i) any failure by any of the
Column Financial Loan Subsidiaries to pay principal, interest or other
obligations under the Column Financial Loans when due, (ii) any representation
or warranty made by any of the Column Financial Loan Subsidiaries in the Column
Financial Loan Agreements or related agreements proves to have been untrue in
any material respect when made, (iii) any default by any Column Financial Loan
Subsidiaries in the observance or performance of covenants or other agreements
contained in any Credit Agreement or related agreements, (iv) certain events of
bankruptcy or insolvency of the Column Financial Loan Subsidiaries, and (v) the
occurrence of an event of default under any other Column Financial Loan
documents.
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NOMURA ASSET CAPITAL CORPORATION LOANS ("NOMURA LOANS")
THREE SEPARATE LOAN FACILITIES
Nomura Asset Capital Corporation ("NACC") entered into three separate loan
facilities with certain subsidiaries of Impac in an aggregate principal loan
amount of $337.7 million as of June 30, 1999. The three facilities are
hereinafter referred to as "Nomura I," "Nomura II" and "Nomura III."
NOMURA I
GENERAL
In March 1997, NACC made a $132.5 million term loan (the "Nomura I Loan") to
Impac Hotels I, L.L.C. ("Impac I"), a subsidiary of Impac, to refinance existing
debt on 22 hotel properties acquired by Impac I (the "Nomura I Properties").
NACC has assigned the Nomura I Loan to LaSalle National Bank, as Trustee for
Nomura Depositor Trust ST I, Commercial Mortgage Pass-Through Certificates,
Series 1998-ST I (together with its successors and assigns, the "Nomura I
Lender"). The Nomura I Loan is evidenced by, among other things, a loan
agreement between Impac I and NACC dated as of March 12, 1997 (the "Nomura I
Loan Agreement").
INTEREST
Prior to the Nomura I Adjustment Date (September 11, 1999), the Nomura I
Loan bears interest at a floating interest rate that fluctuates monthly, equal
to 30-day LIBOR plus 2.25%. From and after the Nomura 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 "Nomura I Interest Rate
Agreement"), and (ii) the third business day prior to the Nomura I Adjustment
Date (the "Nomura I Benchmark Treasury Rate"), plus (b) a spread based on the
debt service coverage ratio ("DSCR") of the Nomura I Properties (which spread
ranges from a low of 1.925% to a high of 3.025%), plus (c), until the Nomura I
Optional Prepayment Date (as defined below), the Additional Nomura I Spread (as
defined below), plus (d) from and after the Nomura I Optional Prepayment Date,
the Additional Nomura I Hyperamortization Spread (as defined below). The
"Additional Nomura I Hyperamortization Spread" is 2.00% for the first monthly
debt service period after the Nomura I Optional Prepayment Date, and 5.00%
thereafter.
INTEREST RATE PROTECTION
Impac I may, from time to time, lock the Nomura I Benchmark Treasury Rate to
be used in calculating the base rate on all or a portion of the Nomura I Loan.
In addition, if prior to the Nomura 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 Nomura I Benchmark Treasury Rate on a
portion of the Nomura I Loan or prepay a portion of the Nomura I Loan. NACC can
also lock the Nomura 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 Nomura I Loan. If NACC determines prior to the Nomura 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 Nomura I Loan in
excess of 25% of the net equity of Impac I in the Nomura 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
Nomura I Properties. Such collateral is returned to Impac I (1) if it converts
the rate-locked portion of the Nomura I Loan to a fixed rate loan, or (2) in the
event such collateral exceeds actual hedging losses, under which circumstances
Impac I is required to pay a monthly maintenance fee equal to eight basis points
on the principal amount of the Nomura I Loan on which the Nomura 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)
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will be recovered by NACC by adding an additional spread (the "Additional Nomura
I Spread") to the base rate from and after the Nomura I Adjustment Date and
prior to the Nomura I Optional Prepayment Date. In addition to the other
collateral described herein, the obligations of Impac and Impac I under the
Nomura 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 Nomura I Loan are due and payable monthly,
prior to the Nomura I Adjustment Date. After the Nomura I Adjustment Date, the
Nomura I Loan is repayable in equal, monthly installments of principal and
interest based on a 20-year amortization schedule. If the Nomura I Loan or any
Split Nomura I Loan has not been prepaid in full by the tenth anniversary of the
applicable Nomura I Adjustment Date (the "Nomura I Optional Prepayment Date"),
excess cash flow from the Nomura I Properties financed by the Nomura I Loan or
the applicable Split Nomura 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 Nomura I Loan is March 11, 2019.
PREPAYMENT
The Nomura I Loan may be prepaid in whole or in part without penalty or
premium on or after the Nomura I Optional Prepayment Date. Prior to the Nomura I
Adjustment Date, up to 40% of the Nomura 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 Nomura I Properties, subject to a scale of increasing premiums
ranging from 0% to 3% of the principal so prepaid. Upon the reacquisition of the
Nomura I Loan from the current Nomura I Lender by Capital Company of America LLC
("CCA") or its designee on the Nomura I Adjustment Date, the Impac I Loan
Agreement will be amended to permit the Nomura I Loan to be prepaid in full, at
the option of Impac I, on the Nomura I Loan reacquisition date, at a prepayment
price equal to (a) 101% of the outstanding principal amount of the Nomura I Loan
or (b) if the Nomura III Loan shall have been prepaid in full (see "Nomura
III--Prepayment" below), 100.5% of the outstanding principal amount of the Impac
I Loan. If the DSCR of the remaining Nomura I Properties as of the Nomura I
Adjustment Date is less than 1.40, the Nomura I Loan must be prepaid in the
amount necessary to bring the DSCR up to 1.40. No prepayment of the Nomura I
Loan or any Split Nomura I Loans is permitted after the Nomura I Adjustment Date
and prior to the Optional Nomura I Prepayment Date; however; Impac I may obtain
the release of one or more Nomura I Properties from the applicable mortgage(s)
securing the Nomura I Loan or the applicable Split Nomura I Loan by defeasing
the portion of such loan allocated to each such Nomura I Property. Defeasance is
achieved by using equity proceeds or proceeds from the sale of each such Nomura
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 Nomura I Property, 100%
of the allocated loan amount), which securities are delivered to the servicer of
the Nomura I Loan or such Split Nomura I Loan as replacement collateral for the
released Nomura I Properties.
Pursuant to an agreement with NACC, we expect to repay this loan on or about
September 11, 1999 with proceeds from our new credit facility.
SPLIT LOANS
The term "Split Nomura I Loans" refers to any refinancing loan made by NACC
pursuant to the Nomura I Loan Agreement to a bankruptcy-remote affiliate of
Impac to which Impac I has transferred a segregated pool of Nomura I Properties
for the purposes of effectively fixing the interest rate on a portion of the
Nomura I Loan and facilitating the securitization thereof by NACC.
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COLLATERAL
The Nomura I Loan is secured by mortgages on each of the 22 Nomura I
Properties (the "Nomura I Mortgages") and by a general security interest in all
personal property and fixtures of Impac I. The Nomura I Mortgages are
cross-collateralized and cross-defaulted with each other.
CERTAIN COVENANTS
In addition to customary covenants, the Nomura Loans require, among other
things, that the Nomura Loan Subsidiaries: (a) not purchase or lease real
property or hold assets other than assets related to the properties subject to
the Nomura Loans; (b) not incur any indebtedness other than the Nomura Loans and
certain other indebtedness; (c) not dissolve, liquidate or merge; and (d) not
engage in any transactions with an affiliate. In addition, Lodgian is required
to maintain a minimum net worth of $133.0 million.
EVENTS OF DEFAULT
The Nomura Loan Agreements contain certain events of default, including,
without limitation, the following: (i) any failure by any of the Nomura Loan
Subsidiaries to pay principal, interest or other obligations under the Nomura
Loans when due, (ii) any representation or warranty made by any of the Nomura
Loan Subsidiaries in the Nomura Loan agreements or related agreements proves to
have been untrue in any material respect when made, (iii) any default by the
Nomura Loan Subsidiaries in the observance or performance of covenants or other
agreements contained in any Nomura Loan documents, (iv) certain events of
bankruptcy or insolvency of any of the Nomura Loan Subsidiaries or any managing
member thereof, and (v) the entering of a judgment or decree against any Nomura
Loan Subsidiary involving an aggregate liability of $1.0 million or more.
NOMURA II
GENERAL
NACC entered into a loan facility (the "Nomura II Loan") with a subsidiary
of Impac, Impac Hotels II, L.L.C. ("Impac II") with an original maximum loan
amount of $150 million. As of June 30, 1999, $160.9 million was outstanding. The
loan amount was later increased to $163.5 million. The loan was made pursuant to
a loan agreement dated as of March 12, 1997 (as amended, the "Nomura II Loan
Agreement") between Impac II and NACC to finance a portion of the cost of
acquiring, constructing and rehabilitating 18 additional hotel properties (the
"Nomura II Properties"). NACC has transferred the Nomura II Loan to CCA
(together with its successors and assigns, the "Nomura II Lender"). The entire
Nomura II Loan has been committed to identified Impac II Properties. All
advances under the Nomura II Loan Agreement must be made and all construction
and rehabilitation of the Nomura II Properties completed by October 18, 1999.
INTEREST
Prior to the Nomura II Adjustment Date (as defined below) the Nomura II Loan
bears interest at a floating interest rate that fluctuates monthly, equal to
30-day LIBOR plus 2.75%. From and after the Nomura II Adjustment Date, interest
converts to a fixed rate as described above in "Nomura I--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 the
Nomura II Lender (the "Nomura II Interest Rate Lock Agreement"), and (ii) the
spread based on the DSCR of the Nomura II Properties ranges from a low of 1.925%
to a high of 3.250%.
The Nomura II Adjustment Date will be the earlier of (y) October 18, 2000,
and (z) with respect to any portion of the Nomura II Loan that becomes a Split
Nomura II Loan (as defined below), the date on which such portion of the Nomura
II Loan becomes a Split Nomura II Loan. It is anticipated that Nomura
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II Lender will securitize the Nomura II Loan and any Split Nomura II Loan after
the applicable Nomura II Adjustment Date.
INTEREST RATE PROTECTION
The Nomura II Interest Rate Lock Agreement contains substantially similar
terms as those set forth under "Nomura I--Interest Rate Protection" above except
that the Nomura 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 Nomura II Benchmark Treasury Rate exceeds the pre-determined
thresholds. Pursuant to the terms of the Nomura II Interest Rate Agreement,
Impac II locked the Nomura II Benchmark Treasury Rate on $54 million of the
Nomura 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 Nomura II Lender.
REPAYMENT OF PRINCIPAL
Principal and interest payments are to be made on the same terms as are
described above under "Nomura I--Repayment of Principal," except that the
schedule refers to the Nomura II Adjustment Date and the Nomura II Optional
Prepayment Date (which is the tenth anniversary of the Nomura II Adjustment
Date). The final maturity date of the Nomura II Loan is October 31, 2020.
PREPAYMENT
The Nomura II Loan may be prepaid on the same terms and under the same
conditions as are described under "Nomura I--Prepayment" above, except that all
references to Nomura I refer instead to Nomura II and except that Impac II does
not have the right to prepay the Nomura II Loan in full on the Nomura II
Adjustment Date.
SPLIT LOANS
Prior to the scheduled Nomura II Adjustment Date, the Nomura II Loan can be
split at the option of Impac II to effectively fix the interest rate thereon,
similar to the concept of Split Nomura I Loans discussed under the heading
"Nomura I--Split Loans" above (each portion so split, a "Split Nomura II Loan").
COLLATERAL
The Nomura II Loan is secured by first-priority mortgages on each Nomura II
Property (the "Nomura II Mortgages") and by a general security interest in all
personal property and fixtures of Impac II. The Nomura II Mortgages are
cross-collateralized and cross-defaulted with each other.
GUARANTEES
Impac has guaranteed the repayment of the portion of the Nomura II Loan
funding rehabilitation and construction costs (but not the acquisition costs) of
the Nomura II Properties. These guarantees expire upon completion of
rehabilitation or construction (as applicable). Currently, only $24.3 million of
such guarantees remain outstanding related to the Marriott Hotel being
constructed in Portland, Oregon which is expected to be completed no later than
the fall of 1999. In addition, where Impac II elected to increase the Nomura II
Loan for any particular Nomura II Property above 65% of the approved project
costs (but not higher than 80%), Impac has guaranteed repayment of such excess
(the "Guaranteed Differential") until the Nomura II Properties in question have
achieved a trailing 12-month DSCR of not less than 1.20. Three hotels have
passed the DSCR test, resulting in the expiration of Impac's guaranty of the
Guaranteed Differential with respect to such hotels. The aggregate amount of the
Guaranteed Differential still guaranteed by Impac is approximately $23.5
million.
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In December, 1998, as a condition to obtaining the consent of the Nomura II
Lender to the Merger transaction, Lodgian executed a joinder agreement pursuant
to which it became jointly and severally liable with Impac under the foregoing
payment guarantees pertaining to the Nomura II Loan.
CERTAIN COVENANTS AND EVENTS OF DEFAULT
The covenants and events of default provisions of the Nomura II Loan are in
all material respects essentially the same as those for the Nomura I Loan.
NOMURA III
GENERAL
NACC has extended a loan (the "Nomura III Loan") to a subsidiary of Impac,
Impac Hotels III, LLC. ("Impac III") in a maximum amount of $100 million, of
which approximately $44.4 million was funded at June 30, 1999. The loan was made
pursuant to a loan agreement between Impac III and NACC dated as of October 29,
1997 (as amended, the "Nomura III Loan Agreement") to finance a portion of the
cost of acquiring, constructing and rehabilitating nine hotel properties (the
"Nomura III Properties"). NACC has transferred the Nomura III Loan to CCA
(together with its successors and assigns, the "Nomura III Lender").
TERMS AND CONDITIONS
The terms and conditions of the Nomura III Loan are in all material respects
essentially the same as those for the Nomura II Loan, except as follows: (a) the
outside Nomura III Adjustment Date is October 11, 2001, (b) all advances under
the Nomura III Loan for the acquisition of a Nomura III Property must have been
made by October 31, 1998, (c) the rehabilitation and construction of the Nomura
III Properties must be completed by October 31, 2000, (d) the Nomura III Loan
has a final maturity date of November 11, 2021, (e) the maximum loan amount of
the Nomura III Loan relating to any particular Nomura III Property is 70% of
NACC-approved project costs, approved by the Nomura III Lender, (f) there are no
Impac and Lodgian payment guaranties, (g) the entire Nomura III Loan is subject
to optional prepayment in whole or in part from certain sources (e.g.,
additional equity, sale proceeds and short-term bridge financing) prior to the
Nomura III Adjustment Date at premiums increasing from 0% to 4% of the principal
prepaid, and (h) the Nomura III Loan is secured by mortgages and security
interests on the Nomura III Properties. Under an agreement with NACC, the Nomura
III Loan may be prepaid in full, at the option of Impac III, contemporaneously
with the consummation of this offering and the new credit facility at 105% of
face value.
BANC ONE CAPITAL FUNDING CORPORATION LOANS ("BANC ONE LOANS")
GENERAL
The Banc One Loans are evidenced by, among other things, loan agreements
dated as of December 8, 1998 among several of our operating subsidiaries (the
"Banc One Loan Subsidiaries") and Banc One Capital Funding Corporation ("Banc
One"). In addition, each loan is evidenced by two separate promissory notes, one
for an aggregate of $62.0 million (the "Primary Notes") and one for an aggregate
of $10.0 million (the "Additional Notes.") The aggregate principal balance of
the Banc One Loans was $67.0 million at June 30, 1999.
PAYMENT OF INTEREST AND PRINCIPAL
The interest rate payable on the Banc One Loans is 9% and after November 30,
2000, it may be increased up to the maximum rate allowable by applicable law
(as, and to the extent that, the interest rate on United States Treasury Issues
with maturity dates as closely as possible to November 30, 2001 exceeds 5.5%).
The principal balance of the Additional Notes must be repaid by July 1999.
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SECURITY
The Banc One Loan Subsidiaries have granted to Banc One a first priority
mortgage on substantially all of their real property, encompassing six
properties. Lodgian and certain affiliates have entered into guaranty and
indemnity agreements with Banc One in favor of the Banc One Operating
Subsidiaries, guaranteeing the prompt and complete payment and performance of
principal, interest and other monetary obligations of the Banc One Operating
Subsidiaries under the Primary and Additional Notes. Lodgian's payment guarantee
is limited in time and terminates upon completion of the renovation work
contemplated by the Banc One loan agreements.
TERM AND PREPAYMENT
The Primary Notes of the Banc One Loans mature on November 30, 2000, but may
be extended until November 30, 2001 provided that the extension fee (in the
amount specified in the Banc One Primary Notes) is paid on or before November
30, 2000. The Additional Notes have a maturity date of July 1999. The principal
balance of the Primary Notes may be prepaid in full after December 1, 1999 upon
payment of a prepayment fee. In addition, certain prepayments of the outstanding
principal balance may be required, if necessary to attain a certain debt
coverage ratio.
CERTAIN COVENANTS
In addition to customary covenants, the Banc One Loans require, among other
things, that the Banc One Loan Subsidiaries (a) maintain a debt service coverage
ratio of at least 1.25:1 or, subsequent to January 20, 2000, 1.40:1, (b) not
incur any indebtedness other than permitted indebtedness, (c) not permit any
lien to exist on any of their property, assets or revenues, except permitted
liens and (d) not incur any guarantee obligations, except the guarantee
obligations related to the Banc One Loans and certain other guarantee
obligations.
EVENTS OF DEFAULT
The Banc One loan agreements contain certain events of default, including,
without limitation, the following: (1) any failure by any of the Banc One Loan
Subsidiaries to pay principal, interest or other obligations under the Banc One
Loans when due, (2) any representation or warranty made by any of the Banc One
Loan Subsidiaries in any of the Banc One loan agreements or related agreements
proves to have been untrue in any material respect when made, (3) any default by
any of the Banc One Loan Subsidiaries in the observance or performance of
covenants or other agreements contained in any of the Banc One Loan agreements
or related agreements, (4) certain events of bankruptcy or insolvency of any of
the Banc One Loan Subsidiaries, (5) the entering of a judgment or decree against
any Banc One Loan Subsidiary involving an aggregate liability of $50,000 or
more, and (6) the occurrence of an event of default under any franchise
agreement between a franchisor and any Banc One Loan Subsidiary.
SINGLE ASSET MORTGAGES
We also have 18 loans totaling $86.5 million at June 30, 1999 with various
other lenders secured by single properties. The interest rates on such loans
range from 6% to 14% with maturities ranging from 2001 to 2016. The agreements
contain customary covenants and events of default.
CRESTS
In June 1998, Lodgian Capital Trust I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), issued $175 million of
CRESTS. The CRESTS bear interest at 7% and are convertible into shares of our
common stock. The sole assets of the Trust are $175 million principal amount of
Lodgian's Convertible Debentures.
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TERMS OF THE CRESTS
The holders of the CRESTS receive distributions on the CRESTS at a fixed
annual rate of $3.50 per each $50 of CRESTS, subject to increase if certain
events occur. Payments may be deferred if interest on the Convertible Debentures
is deferred as described below.
The CRESTS are convertible, at the option of the holders, into shares of
Common Stock of Lodgian at a price equal to $21.42 per share of Common Stock (or
2.3343 shares of Common Stock per CRESTS). The CRESTS will be redeemed upon
repayment of the Convertible Debentures on June 30, 2010 or their earlier
redemption, in a liquidation amount equal to the principal amount of the related
Convertible Debentures maturing or being redeemed and at a redemption price
equal to the redemption price of the Convertible Debentures plus accumulated and
unpaid distributions to the date of redemption.
TERMS OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures will mature on June 30, 2010, unless previously
redeemed. The convertible debentures are subordinate and junior in right of
payment to all indebtedness of Lodgian.
Lodgian has the option to redeem all or a part of the Convertible Debentures
for cash with the sale proceeds of its equity securities beginning July 3, 2002
at a price through July 27, 2003 equal to 104.2% of the aggregate principal
amount of the Convertible Debentures to be redeemed, declining annually to 100%
on June 30, 2008 (together with accrued and unpaid interest to the redemption
date).
Lodgian also has the option to redeem all or part of the Convertible
Debentures for cash beginning on July 3, 2002 at a price equal to 100% of the
aggregate principal amount of the Convertible Debentures to be redeemed (plus
accrued and unpaid interest to the redemption date). Lodgian may however,
exercise this option only if (1) for any 20 trading days within any 30
consecutive trading days, the closing price of its Common Stock on the New York
Stock Exchange exceeds $25.71 per share (subject to adjustments in certain
circumstances) and (2) on or prior to the notice of redemption, Lodgian has
entered into an agreement with a nationally recognized investment banking firm
to buy and sell at least the same number of shares of Lodgian Common Stock as
would be issuable upon conversion of the unconverted Convertible Debentures.
Lodgian may defer payments of interest on the Convertible Debentures by
extending the interest payment period on the Convertible Debentures. However,
the total extension period (together with all extensions) may not exceed 20
consecutive quarterly periods or extend beyond June 30, 2010. During any
extension period, interest on the Convertible Debentures will continue to accrue
at the applicable annual rate, compounded quarterly. As a result of such an
extension, distributions on the CRESTS would also be deferred by the Trust
during the extension period; however such distributions would continue to
accumulate at the applicable rate, compounded quarterly. If Lodgian defers its
interest payments, then, subject to limited exceptions, Lodgian may not, and
will not permit its subsidiaries to, (1) declare or pay any dividend on, make
any distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, or (2) pay any
principal, interest or premium on, or repay, repurchase or redeem any of its
debt securities or make any guarantee payment on any debt securities of its
subsidiaries that are similarly ranked with or junior in interest to the
Convertible Debentures.
EVENTS OF DEFAULT
Events of Default with respect to the Convertible Debentures include: (a)
default in paying interest for 30 days after notice is given (provided that
Lodgian has not exercised its option to extend interest); (b) default in paying
(i) liquidated damages for having failed to register the CRESTS under the
registration rights agreement or (ii) principal on the Convertible Debentures;
(c) breach of any other covenant under the Indenture for 90 days after notice is
given; (d) failure to deliver Lodgian's common stock upon conversion of the
CRESTS; (e) cross-default under any debt in excess of $10 million for 30 days
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after notice is given; (f) certain events of bankruptcy; and (g) dissolution of
the Trust (except where the holders of the CRESTS get a distribution of the
Convertible Debentures, the CRESTS are redeemed or the Trust is merged or
amalgamated as provided in the Trust declaration).
If an event of default occurs, the Trustee has the right to accelerate the
Convertible Debentures. If the Trustee fails to enforce its rights under the
Convertible Debentures, the holders of the CRESTS may institute legal
proceedings against Lodgian to enforce the Trustee's rights under the
Convertible Debentures. In addition, if any event of default relates to the
CRESTS and is attributable to a failure of Lodgian to pay interest or principal
on the Convertible Debentures on the date that interest and principal is
otherwise payable, then the holders of the CRESTS may directly institute a
proceeding for enforcement of payment to the holder of the principal of or
interest on the Convertible Debentures having a principal amount equal to the
aggregate liquidation amount of the CRESTS of the holder on or after the
respective due date specified in the Convertible Debentures.
GUARANTEE BY LODGIAN
As a result of the Merger, Lodgian has guaranteed, to the extent the Trust
has available funds, payments of distributions on the CRESTS and payments on
liquidation of the Trust or the redemption of the CRESTS. Lodgian's obligations
under the guarantee are subordinate to all of its liabilities and rank equally
with the most senior preferred stock which it may issue and with any guarantee
which it may issue in respect of any preferred stock of any of its affiliates.
LIQUIDATION RIGHTS
If the Trust liquidates, after satisfying any claims of the Trust's
creditors, the holders of the CRESTS will receive a liquidation amount of $50
per CRESTS (plus accumulated and unpaid distributions to the date of payment),
which may be in the form of a distribution of such amount in Convertible
Debentures.
SPECIAL EVENT DISTRIBUTION OF THE CONVERTIBLE DEBENTURES
Upon the occurrence of a special event such as a change in laws or
regulations or a change in the interpretation or application of laws or
regulations relating to the Trust's tax status or status under the Investment
Company Act of 1940, the Trust may be dissolved and the Convertible Debentures
distributed to the holders of the CRESTS.
THE NEW SENIOR CREDIT FACILITY
GENERAL
Concurrently with the closing of the offering of the Old Notes, Lodgian
Financing entered into a credit agreement establishing $315.0 million in a
secured credit facility (the "Credit Facility"). The Credit Facility is composed
of a $25.0 million delayed draw term loan facility ("Tranche A"), a $240.0
million term loan facility ("Tranche B") and a $50.0 million revolving credit
facility (the "Revolver"). At the closing of the offering, approximately $107.5
million of Tranche B was drawn. We will draw $132.5 million of Tranche B on
September 13, 1999 to repay the Nomura Impac I mortgage notes. The Tranche A
facility is available to be drawn during a 15-month period following the closing
date and can be utilized only to finance, in part, hotel development and
repositioning projects and to pay fees and expenses incurred in connection with
the Credit Facility. The Revolver is available to meet working capital
requirements, for hotel development and repositioning projects and for general
corporate purposes.
INTEREST
The Credit Facility bears interest and an applicable margin in excess of
base or LIBOR rates. The applicable margin is based on our senior secured debt
rating and range from 3.5% to 4.25% for Tranche A
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and Tranche B LIBOR-based loans, 2.25% to 3.0% for Tranche A and Tranche B base
rate loans, 3.25% to 4.00% for Revolver LIBOR-based loans or 2.0% to 2.75% for
Revolver base rate loans.
SECURITY AND GUARANTEES
The Credit Facility is secured by mortgages on the hotels owned through
Lodgian Financing, and a pledge of the capital stock of Lodgian Financing and
its subsidiaries, and limited guarantees from certain subsidiaries of Lodgian
other than Lodgian Financing. In addition, Lodgian will guarantee the Credit
Facility upon expiration of Lodgian's guarantees under the Nomura II Loan
described under "Description of Certain Indebtedness and Preferred Stock--Nomura
Asset Capital Corporation Loans--Nomura II-- Guarantees."
TERM
The final maturity of the Tranche A and Tranche B loans is the earlier of
(i) seven years after the closing date or (ii) the final maturity of the Banc
One Loans as extended whether through amendment or refinancing. The final
maturity of the Revolver is April 15, 2004.
CERTAIN COVENANTS
The Credit Facility limits the amount of our senior debt and provide for
minimum fixed charge coverage and interest coverage ratios. In addition, the
Credit Facility restricts
- liens (other than liens securing the Credit Facilities);
- debt (other than the issuance of up to $100 million of subordinated debt
(in addition to the Notes) on terms and conditions reasonably satisfactory
to the lenders), guarantees or other contingent obligations (including,
without limitation, the subordination of all intercompany indebtedness on
terms satisfactory to the lenders);
- lease obligations;
- mergers and consolidations;
- sales, transfers and other dispositions of assets (other than sales of
inventory in the ordinary course of business);
- loans, acquisitions, joint ventures and other investments;
- dividends and other distributions to stockholders (including, without
limitation, the Convertible Debentures);
- creating new subsidiaries;
- becoming a general partner in any partnership;
- repurchasing shares of capital stock;
- prepaying, redeeming or repurchasing debt;
- capital expenditures;
- granting negative pledges;
- changing the nature of our business;
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- amending organizational documents, or amending or otherwise modifying any
debt, any related document or any other material agreement; and
- changing accounting policies or reporting practices, in each case, with
such exceptions as may be agreed upon in the loan documentation.
EVENTS OF DEFAULT
Events of default under the Credit Facility include:
- failure to pay principal when due or to pay interest or other amounts
within three business days after the same becomes due;
- any representation or warranty proving to have been materially incorrect
when made or confirmed;
- failure to perform or observe convenants set forth in the Credit Facility
within a specified period of time, where customary and appropriate, after
notice or knowledge of such failure;
- cross-defaults to other indebtedness in an amount to be agreed in the
Credit Facility;
- bankruptcy and insolvency defaults (with grace period for involuntary
proceedings);
- monetary judgment defaults and nonmonetary judgment defaults that could
reasonably be expected to have a material adverse effect as defined in the
Credit Facility.
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DESCRIPTION OF THE NOTES
Lodgian Financing Corp. issued the Old Notes, and will issue the Exchange
Notes (together with the Old Notes, the "Notes") under an Indenture, dated as of
July 23, 1999, among Lodgian Financing Corp., as issuer, Lodgian, Inc. and the
Initial Subsidiary Guarantors, as guarantors, and Bankers Trust Company (the
"Trustee"). The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939.
The following is a summary of the material provisions of the Indenture but
does not restate the Indenture in its entirety. You can find the definitions of
certain capitalized terms used in the following summary under the subheading
"--Definitions." We urge you to read the Indenture because it, and not this
description, defines your rights as holders of the Notes. A copy of the
Indenture is available upon request from Lodgian Financing Corp. For purposes of
this "Description of the Notes," the term "Lodgian" means Lodgian, Inc. and its
successors under the Indenture and the term "Lodgian Financing Corp." means
Lodgian Financing Corp. and its successors under the Indenture, in each case
excluding its subsidiaries.
GENERAL
The Notes are unsecured senior subordinated obligations of Lodgian Financing
Corp., initially limited to $200.0 million aggregate principal amount. The Notes
will mature on July 15, 2009. Subject to the covenants described below under
"--Covenants" and applicable law, Lodgian Financing Corp. may issue additional
Notes ("Additional Notes") under the Indenture. The Notes offered hereby and any
Additional Notes subsequently issued would be treated as a single class for all
purposes under the Indenture.
Each Note will initially bear interest at 12 1/4% per annum from the Closing
Date or from the most recent Interest Payment Date to which interest has been
paid. Interest on the Notes will be payable semiannually on January 15 and July
15 of each year, commencing January 15, 2000. Interest will be paid to Holders
of record at the close of business on the January 1 or July 1 immediately
preceding the Interest Payment Date. Interest is computed on the basis of a
360-day year of twelve 30-day months on a U.S. corporate bond basis.
If by the date that is six months after the Closing Date, Lodgian Financing
Corp. has not consummated a registered exchange offer for the Notes or caused a
shelf registration statement with respect to resales of the Notes to be declared
effective, the annual interest rate on the Notes will increase by .5%, and if an
exchange offer is not consummated or a shelf registration statement is not
declared effective on the date that is nine months after the Closing Date, the
annual interest rate on the Notes will increase by an additional .5%, until the
consummation of a registered exchange offer or the effectiveness of a shelf
registration statement. See "--Registration Rights."
The Notes may be exchanged or transferred at the office or agency of Lodgian
Financing Corp. in the Borough of Manhattan, the City of New York. Initially,
the corporate trust office of the Trustee at 4 Albany Street, 4th Floor, New
York, NY 10004 will serve as such office. If you give Lodgian Financing Corp.
wire transfer instructions, Lodgian Financing Corp. will pay all principal,
premium and interest on your Notes in accordance with your instructions. If you
do not give Lodgian Financing Corp. wire transfer instructions, payments of
principal, premium and interest will be made at the office or agency of the
paying agent which will initially be the Trustee, unless Lodgian Financing Corp.
elects to make interest payments by check mailed to the Holders.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount and multiples of $1,000. See
"--Book-Entry; Delivery and Form." No service charge will be made for any
registration of transfer or exchange of Notes, but Lodgian Financing Corp. may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
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OPTIONAL REDEMPTION
Lodgian Financing Corp. may redeem the Notes at any time on or after July
15, 2004. The Redemption Price for the Notes (expressed in percentages of
principal amount), plus accrued interest to the Redemption Date, if redeemed
during the 12-month period commencing July 15, of the years set forth below will
be as follows:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2004........................................................................ 106.125%
2005........................................................................ 104.083%
2006........................................................................ 102.042%
2007 and thereafter......................................................... 100.000%
</TABLE>
In addition, at any time prior to July 15, 2002, Lodgian Financing Corp. may
redeem up to 35% of the principal amount of the Notes with the Net Cash Proceeds
of one or more sales of Capital Stock (other than Disqualified Stock) of Lodgian
or Lodgian Financing Corp. at a Redemption Price (expressed as a percentage of
principal amount) of 112.250%, plus accrued interest to the Redemption Date;
PROVIDED that at least 65% of the aggregate principal amount of Notes originally
issued on the Closing Date remains outstanding after each such redemption and
notice of any such redemption is mailed within 60 days of each such sale of
Capital Stock.
Lodgian Financing Corp. will give not less than 30 days' nor more than 60
days' notice of any redemption. If less than all of the Notes are to be
redeemed, selection of the Notes for redemption will be made by the Trustee:
- in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed, or
- if the Notes are not listed on a national securities exchange, by lot or
by such other method as the Trustee in its sole discretion shall deem to
be fair and appropriate.
However, no Note of $1,000 in principal amount or less shall be redeemed in
part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note will state the portion of the principal amount to be
redeemed. A new Note in principal amount equal to the unredeemed portion will be
issued upon cancellation of the original Note.
RANKING
SUMMARY
The Notes are senior subordinated Indebtedness of Lodgian Financing Corp.
This means that the payment of the principal, premium and interest on the Notes
is subordinated to the prior payment in full of all existing and future Senior
Indebtedness of Lodgian Financing Corp. See "Risk Factors--Subordination of the
Notes and Notes Guarantees; Asset Encumbrances--Existence of Senior Debt Could
Limit the Ability of Lodgian Financing and the Guarantors to Fulfill Their
Obligations Under the Notes and the Note Guarantees." However, payment from the
money or the proceeds of U.S. Government Obligations held in any defeasance
trust described under "--Defeasance" below, will not be subordinated to any
Senior Indebtedness or subject to the restrictions described below.
The Note Guarantees are senior subordinated Indebtedness of Lodgian and the
Initial Subsidiary Guarantors. The Indebtedness evidenced by the Note Guarantees
is subordinated on the same basis to Senior Indebtedness of Lodgian and the
Initial Subsidiary Guarantors as the Notes are subordinated to Senior
Indebtedness of Lodgian Financing Corp. However, until Lodgian repays the Impac
I Debt in September 1999, the Note Guarantee of Lodgian, Inc. will be junior
solely to the guarantees under the Impac loans and the Credit Agreement.
Assuming the offering of the Notes, the borrowings under the new credit
facility and the application of the proceeds as described in "Use of Proceeds"
had occurred on June 30, 1999, Lodgian and Lodgian
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Financing Corp. and the Initial Subsidiary Guarantors would have had $890.0
million of consolidated Indebtedness, of which $349.8 million would have been
Senior Indebtedness (which includes $109.8 million of Guarantees of Indebtedness
of subsidiaries that are not guaranteeing the Notes) and Lodgian's subsidiaries
other than the Initial Subsidiary Guarantors would have had $465.4 million of
Indebtedness which would have been effectively senior to the Notes.
By reason of the subordination provisions described below, in the event of
liquidation or insolvency, creditors of Lodgian Financing Corp. who are not
holders of Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than Holders of the Notes.
TERMS OF SUBORDINATION
Except with respect to the money, securities or proceeds held under any
defeasance trust established in accordance with the Indenture, upon any payment
or distribution of assets or securities of Lodgian Financing Corp. of any kind
or character, whether in cash, property or securities, upon any dissolution or
winding up or total or partial liquidation or reorganization of Lodgian
Financing Corp., whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full, in cash or cash equivalents,
before the Holders of the Notes or the Trustee on behalf of the Holders of the
Notes shall be entitled to receive (1) any payment by, or on behalf of, Lodgian
Financing Corp. on account of Senior Subordinated Obligations or (2) any payment
to acquire any of the Notes for cash, property or securities, or (3) any
distribution with respect to the Notes of any cash, property or securities.
Before any payment may be made by, or on behalf of, Lodgian Financing Corp.
on any Senior Subordinated Obligations (other than with the money, securities or
proceeds held under any defeasance trust established in accordance with the
Indenture), upon any such dissolution, winding up, liquidation or
reorganization, any payment or distribution of assets or securities of Lodgian
Financing Corp. of any kind or character, whether in cash, property or
securities, to which the Holders of the Notes or the Trustee on behalf of the
Holders of the Notes would be entitled, but for the subordination provisions of
the Indenture, shall be made by Lodgian Financing Corp. or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person making
such payment or distribution or by the Holders of the Notes or the Trustee if
received by them or it, directly to the holders of the Senior Indebtedness
(proportionately to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their representatives or to any
trustee or trustees under any indenture pursuant to which any such Senior
Indebtedness may have been issued, as their respective interests appear, to the
extent necessary to pay all such Senior Indebtedness in full, in cash or cash
equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
The words "cash, property or securities" do not include securities of
Lodgian Financing Corp. or any other corporation provided for by a plan of
reorganization or readjustment that are subordinated, at least to the extent
that the Notes are subordinated, to the payment of all Senior Indebtedness then
outstanding; PROVIDED that:
(1) this does not to cause the Notes to be treated in any case or
proceeding or similar event described above as part of the same class of
claims as the Senior Indebtedness or any class of claims PARI PASSU with, or
senior to, the Senior Indebtedness for any payment or distribution,
(2) if a new corporation results from such reorganization or
readjustment, such corporation assumes the Senior Indebtedness and
(3) the rights of the holders of the Senior Indebtedness are not,
without the consent of such holders, altered by such reorganization or
readjustment.
No direct or indirect payment by or on behalf of Lodgian Financing Corp. of
Senior Subordinated Obligations (other than with the money, securities or
proceeds held under any defeasance trust established in accordance with the
Indenture), whether pursuant to the terms of the Notes or upon acceleration or
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otherwise shall be made if, at the time of such payment, there exists a default
in the payment of all or any portion of the obligations on any Senior
Indebtedness of Lodgian Financing Corp. and such default shall not have been
cured or waived or the benefits of this sentence waived by or on behalf of the
holders of such Senior Indebtedness. In addition, during the continuance of any
other event of default with respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated, upon receipt by the
Trustee of written notice from the trustee or other representative for the
holders of such Designated Senior Indebtedness (or the holders of at least a
majority in principal amount of such Designated Senior Indebtedness then
outstanding), no payment of Senior Subordinated Obligations (other than with the
money, securities or proceeds held under any defeasance trust established in
accordance with the Indenture) may be made by or on behalf of Lodgian Financing
Corp. upon or in respect of the Notes for a period (a "Payment Blockage Period")
commencing on the date of receipt of such notice and ending 179 days thereafter
(unless, in each case, such Payment Blockage Period shall be terminated by
written notice to the Trustee from such trustee of, or other representatives
for, such holders or by payment in full, in cash or cash equivalents, of such
Designated Senior Indebtedness or such event of default has been cured or
waived). Not more than one Payment Blockage Period may be commenced with respect
to the Notes during any period of 360 consecutive days. Notwithstanding anything
in the Indenture to the contrary, there must be 180 consecutive days in any
360-day period in which no Payment Blockage Period is in effect. No event of
default (other than an event of default pursuant to the financial maintenance
covenants under the Credit Agreement) that existed or was continuing (it being
acknowledged that any subsequent action that would give rise to an event of
default pursuant to any provision under which an event of default previously
existed or was continuing shall constitute a new event of default for this
purpose) on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period shall be, or shall be made, the basis for the commencement of a second
Payment Blockage Period by the representative for, or the holders of, such
Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
To the extent any payment of Senior Indebtedness (whether by or on behalf of
Lodgian Financing Corp., as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred. To the extent the obligation to repay any Senior
Indebtedness is declared to be fraudulent, invalid, or otherwise set aside under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such obligation
not been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
GUARANTEES
Payment of the principal of, premium, if any, and interest on the Notes is
Guaranteed, jointly and severally, on an unsecured senior subordinated basis by
Lodgian and the Initial Subsidiary Guarantors. However, until Lodgian repays the
Impac I Debt in September 1999, the Note Guarantee of Lodgian, Inc. will be
junior solely to the guantees under the Impac loans and the Credit Agreement. In
addition, if any Restricted Subsidiary that is not a Subsidiary Guarantor
Guarantees any Indebtedness of Lodgian or any Restricted Subsidiary (other than
a Foreign Subsidiary), Lodgian will cause such Restricted Subsidiary to
Guarantee Lodgian Financing Corp.'s obligations under the Notes; provided that
the Restricted Subsidiaries of Lodgian Financing Corp. existing on the Closing
Date may guarantee Lodgian Financing
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Corp.'s obligations under the Credit Agreement. See "--Covenants--Limitation on
Issuances of Guarantees by Restricted Subsidiaries."
Payments under any Note Guarantee will be subordinated in right of payment
to all existing and future Senior Indebtedness of the Guarantor to the same
extent as the Notes are subordinated to Senior Indebtedness of Lodgian Financing
Corp.
The obligations of each Guarantor under its Note Guarantee will be limited
so as not to constitute a fraudulent conveyance under applicable Federal or
state laws. Each Guarantor that makes a payment or distribution under its Note
Guarantee will be entitled to contribution from any other Guarantor.
The Note Guarantee issued by any Subsidiary Guarantor will be automatically
and unconditionally released and discharged upon (1) any sale, exchange or
transfer to any Person (other than an Affiliate of the Company) of all of the
Capital Stock of such Subsidiary Guarantor or (2) the designation of such
Subsidiary Guarantor as an Unrestricted Subsidiary, in each case in compliance
with the terms of the Indenture.
SINKING FUND
There will be no sinking fund payments for the Notes.
REGISTRATION RIGHTS
The following is a summary of the material provisions of the Registration
Rights Agreement. You should read the proposed form of the Registration Rights
Agreement. A copy of the proposed form of Registration Rights Agreement is
available from Lodgian Financing Corp. upon request.
Lodgian Financing Corp. and each Guarantor have agreed with the placement
agents, for the benefit of the Holders, that they will use their best efforts,
at their cost, to file and cause to become effective a registration statement
with respect to a registered offer (the "Exchange Offer") to exchange the Notes
for an issue of senior subordinated notes of Lodgian Financing Corp. (the
"Exchange Notes"), guaranteed by the Guarantors, with terms identical to the
Notes (except that the Exchange Notes will not bear legends restricting
transfer).
The Exchange Offer will remain open for not less than 20 business days from
when we mail notice of the Exchange Offer to Holders. For each Note surrendered
to Lodgian Financing Corp. under the Exchange Offer, the Holder will receive an
Exchange Note of equal principal amount. Interest on each Exchange Note shall
accrue from the last Interest Payment Date on which interest was paid on the
Notes so surrendered or, if no interest has been paid on such Notes, from the
Closing Date. If Lodgian Financing Corp. effects the Exchange Offer, Lodgian
Financing Corp. will be entitled to close the Exchange Offer 20 business days
after the commencement thereof, PROVIDED that it has accepted all Notes validly
surrendered in accordance with the terms of the Exchange Offer. Notes not
tendered in the Exchange Offer will bear interest at the rate set forth on the
cover page of this memorandum and be subject to all of the terms and conditions
specified in the Indenture and to the transfer restrictions described in
"Transfer Restrictions."
In the event that applicable interpretations of the staff of the Securities
and Exchange Commission do not permit us to effect the Exchange Offer, or under
other specified circumstances, we will, at our cost, use our best efforts to
cause to become effective a shelf registration statement (the "Shelf
Registration Statement") with respect to resales of the Notes. Lodgian Financing
Corp. and the Guarantors will use their best efforts to keep such Shelf
Registration Statement effective until the expiration of the time period
referred to in Rule 144(k) under the Securities Act after the Closing Date, or
such shorter period that will terminate when all Notes covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement. Lodgian Financing Corp. and the Guarantors will, in the event of such
a shelf registration, provide to each Holder copies of the prospectus, notify
each Holder when the Shelf Registration Statement for the Notes has become
effective and take certain other actions as are required to permit resales of
the Notes. A Holder that sells its Notes pursuant to the Shelf Registration
Statement generally (1) will be required to be named as a selling security
holder in the related prospectus and to
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deliver a prospectus to purchasers, (2) will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
(3) will be bound by the provisions of the Registration Rights Agreement that
are applicable to such a Holder (including certain indemnification obligations).
In the event that the Exchange Offer is not consummated and a Shelf
Registration Statement is not declared effective on or prior to the date that is
six months after the Closing Date, the annual interest rate borne by the Notes
will be increased by .5% over the rate shown on the cover page of the memorandum
and if the Exchange Offer is not consummated or the Shelf Registration Statement
is not declared effective on or prior to the date that is nine months after the
Closing Date, the annual interest rate borne by the Notes shall be increased by
an additional .5%. Once the Exchange Offer is consummated or a Shelf
Registration Statement is declared effective, the annual interest rate borne by
the Notes shall be changed to again be the rate shown on the cover page of this
memorandum.
COVENANTS
OVERVIEW
In the Indenture, Lodgian has agreed to certain covenants that limit its and
its Restricted Subsidiaries' ability, among other things, to:
- incur additional debt;
- pay dividends, pay interest on the Convertible Debentures, acquire shares
of capital stock, make payments on subordinated debt or make investments;
- place limitations on distributions from Restricted Subsidiaries;
- issue or sell capital stock of Restricted Subsidiaries;
- issue guarantees;
- sell or exchange assets;
- enter into transactions with shareholders and affiliates;
- create liens; and
- effect mergers.
In addition, if a Change of Control occurs, each Holder of Notes will have
the right to require Lodgian Financing Corp. to repurchase all or a part of the
Holder's Notes at a price equal to 101% of their principal amount, plus any
accrued interest to the date of repurchase.
LIMITATION ON INDEBTEDNESS
(a) Lodgian will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes, the Note
Guarantees and other Indebtedness existing on the Closing Date); PROVIDED that
Lodgian, Lodgian Financing Corp. or any Subsidiary Guarantor may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Fixed Charge Coverage
Ratio would be greater than (x) 1.85:1, for Indebtedness Incurred based on any
four fiscal quarters ended no later than September 30, 1999 and (y) for
Indebtedness Incurred based on any four fiscal quarters ended after September
30, 1999, (I) 2.0:1, for Indebtedness Incurred on or before June 30, 2001, (II)
2.25:1 for Indebtedness Incurred after June 30, 2001 and on or before December
31, 2002 and (III) 2.5:1 for Indebtedness Incurred after December 31, 2002.
Notwithstanding the foregoing, Lodgian and Lodgian Financing Corp. and, as
specified below, any other Restricted Subsidiary may Incur each and all of the
following:
(1) Indebtedness outstanding under the Credit Agreement in an aggregate
principal amount (together with refinancings thereof) at any time not to
exceed $300 million minus the amount of Impac I Debt then outstanding and
the amount of such Indebtedness permanently repaid as provided under the
"Limitation on Asset Sales" covenant;
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(2) Indebtedness owed (A) to Lodgian, Lodgian Financing Corp. or any
Subsidiary Guarantor evidenced by a promissory note or (B) to any other
Restricted Subsidiary; PROVIDED that any event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to Lodgian or another
Restricted Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (2);
(3) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness (other than
Indebtedness outstanding under clause (2) or (9) or the Convertible
Debentures and CRESTS) and any refinancings thereof in an amount not to
exceed the amount so refinanced or refunded (plus premiums, accrued
interest, fees and expenses); PROVIDED that
(a) Indebtedness the proceeds of which are used to refinance or
refund the Notes or Indebtedness that is PARI PASSU with, or subordinated
in right of payment to, the Notes or a Note Guarantee shall only be
permitted under this clause (3) if (x) in case the Notes are refinanced
in part or the Indebtedness to be refinanced is PARI PASSU with the Notes
or a Note Guarantee, such new Indebtedness, by its terms or by the terms
of any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made PARI PASSU with, or subordinate in right
of payment to, the remaining Notes or the Note Guarantee, or (y) in case
the Indebtedness to be refinanced is subordinated in right of payment to
the Notes or a Note Guarantee, such new Indebtedness, by its terms or by
the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made
subordinate in right of payment to the Notes or the Note Guarantee at
least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes or the Note Guarantee,
(b) such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated Maturity of
the Indebtedness to be refinanced or refunded, and the Average Life of
such new Indebtedness is at least equal to the remaining Average Life of
the Indebtedness to be refinanced or refunded, and
(c) such new Indebtedness is Incurred by Lodgian Financing Corp. or a
Guarantor or by the Restricted Subsidiary who is the obligor on the
Indebtedness to be refinanced or refunded;
(4) Indebtedness of Lodgian or Lodgian Financing Corp., to the extent
the net proceeds thereof are promptly (a) used to purchase Notes tendered in
an Offer to Purchase made as a result of a Change in Control or (b)
deposited to defease the Notes as described under "Defeasance";
(5) Guarantees of the Notes and Guarantees of Indebtedness of Lodgian,
Lodgian Financing Corp. or any Subsidiary Guarantor by any Restricted
Subsidiary provided the Guarantee of such Indebtedness is permitted by and
made in accordance with the "Limitation on Issuance of Guarantees by
Restricted Subsidiaries" covenant;
(6) Indebtedness of any Restricted Subsidiary in an aggregate principal
amount outstanding at any time (together with refinancings thereof) not to
exceed $18 million, less any amount of such Indebtedness permanently repaid
as provided under the "Limitation on Asset Sales" covenant;
(7) Purchase Money Indebtedness of Lodgian, Lodgian Financing Corp. or
any Subsidiary Guarantor in an aggregate amount outstanding at any time
(together with refinancings thereof) not to exceed $10 million;
(8) Indebtedness of Lodgian or Lodgian Financing Corp. issued in
exchange for, or the net proceeds of which are used to repurchase the
Convertible Debentures and CRESTS; provided that either
(a) after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, (x) the Fixed
Charge Coverage Ratio would be greater than 2.0:1 and (y) Lodgian or
Lodgian Financing Corp. could Incur at least $1.00 of Indebtedness under
the first
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paragraph of this "Limitation on Indebtedness" covenant; PROVIDED,
HOWEVER, that such Indebtedness (1) is expressly made subordinate in
right of payment to the Notes or Lodgian's Note Guarantee, as the case
may be, at least to the extent that the Convertible Debentures are
subordinated to Lodgian's Note Guarantee on the Closing Date and (2) does
not mature prior to the Stated Maturity of the Convertible Debentures,
and the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Convertible Debentures, determined as of
the date of Incurrence of such Indebtedness; or
(b) such Indebtedness (w) is expressly made subordinate in right of
payment to the Notes or Lodgian's Note Guarantee, as the case may be, at
least to the extent that the Convertible Debentures are subordinated to
Lodgian's Note Guarantee on the Closing Date, (x) does not mature prior
to the Stated Maturity of the Convertible Debentures and the Average Life
of such new Indebtedness is at least equal to the remaining Average Life
of the Convertible Debentures, determined as of the date of the
Incurrence of such Indebtedness, (y) permits interest on such
Indebtedness to be deferred on terms at least as favorable to the Holders
as the Convertible Debentures and (z) on a pro forma basis does not cause
the Fixed Charge Coverage Ratio to be less than the Fixed Charge Coverage
Ratio prior to the exchange or repurchase, assuming that the interest on
the Convertible Debentures constituted Consolidated Interest Expense;
(9) performance or completion guarantees arising in the ordinary course
of business in an aggregate amount outstanding at any time not to exceed 5%
of Adjusted Consolidated Net Tangible Assets (determined as of the last day
of the last fiscal quarter preceding the date of such guarantee for which
reports have been filed with the SEC or provided to the Trustee); and
(10) Indebtedness of Lodgian, Lodgian Financing Corp. or any Subsidiary
Guarantor (in addition to Indebtedness permitted under clauses (1) through
(9) above) in an aggregate principal amount outstanding at any time
(together with refinancings thereof) not to exceed $10 million, less any
amount of such Indebtedness permanently repaid as provided under the
"Limitation on Asset Sales" covenant.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that may be Incurred
pursuant to this "Limitation on Indebtedness" covenant will not be deemed to be
exceeded, with respect to any outstanding Indebtedness due solely to the result
of fluctuations in the exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (x) Indebtedness Incurred under the
Credit Agreement on or prior to the Closing Date shall be treated as Incurred
pursuant to clause (1) of the second paragraph of clause (a) of this "Limitation
on Indebtedness" covenant, (y) Guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (z) any Liens
granted pursuant to the equal and ratable provisions referred to in the
"Limitation on Liens" covenant shall not be treated as Indebtedness. For
purposes of determining compliance with this "Limitation on Indebtedness"
covenant, in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above (other than Indebtedness
referred to in clause (x) of the preceding sentence), including under the first
paragraph of part (a), Lodgian, in its sole discretion, shall classify, and from
time to time may reclassify, such item of Indebtedness.
(d) Notwithstanding the foregoing, neither Lodgian nor any Restricted
Subsidiary will issue any Indebtedness in exchange for, or the net proceeds of
which will be used to, refinance or refund the Convertible Debentures or the
CRESTS unless (x) such Indebtedness is expressly made subordinate in right of
payment to Lodgian's Note Guarantees or the Note Guarantee at least to the
extent as the Convertible Debentures are subordinated to Lodgian's Note
Guarantee and (y) such new Indebtedness, determined as of the date of Incurrence
of such Indebtedness, does not mature prior to the Stated
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Maturity of the Convertible Debentures, and the Average Life of such new
Indebtedness is at least equal to the remaining Average Life of the Convertible
Debentures.
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS
Lodgian will not, and will not permit Lodgian Financing Corp. or any
Subsidiary Guarantor to, Incur any Indebtedness that is subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness is PARI PASSU with,
or subordinated in right of payment to, the Notes or any Note Guarantee;
PROVIDED that the foregoing limitation shall not apply to distinctions between
categories of Senior Indebtedness that exist by reason of any Liens or
Guarantees arising or created in respect of some but not all such Senior
Indebtedness.
LIMITATION ON RESTRICTED PAYMENTS
Lodgian will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, (1) declare or pay any dividend or make any distribution on or
with respect to its Capital Stock (other than dividends or distributions payable
solely in shares of its Capital Stock (other than Disqualified Stock) or in
options, warrants or other rights to acquire shares of such Capital Stock) held
by Persons other than Lodgian or any of its Restricted Subsidiaries or make any
payment on the Convertible Debentures or the CRESTS (including payments pursuant
to the Lodgian Capital Trust Guarantee), (2) purchase, call for redemption or
redeem, retire or otherwise acquire for value any shares of Capital Stock of (A)
Lodgian, Lodgian Financing Corp., Lodgian Capital Trust or any Subsidiary
Guarantor (including options, warrants or other rights to acquire such shares of
Capital Stock) held by any Person or (B) a Restricted Subsidiary other than
Lodgian Financing Corp. or a Subsidiary Guarantor (including options, warrants
or other rights to acquire such shares of Capital Stock) held by any Affiliate
of Lodgian (other than a Wholly Owned Restricted Subsidiary) or any holder (or
any Affiliate of such holder) of 5% or more of the Capital Stock of Lodgian, (3)
make any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
value, of Indebtedness of Lodgian Financing Corp. that is subordinated in right
of payment to the Notes or any Indebtedness of Lodgian or a Subsidiary Guarantor
that is subordinated in right of payment to a Note Guarantee or (4) make any
Investment, other than a Permitted Investment, in any Person (such payments or
any other actions described in clauses (1) through (4) above being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing,
(B) Lodgian could not Incur at least $1.00 of Indebtedness under the
first paragraph of part (a) of the "Limitation on Indebtedness" covenant or
(C) the aggregate amount of all Restricted Payments (the amount, if
other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) made after April 1, 1999 shall exceed the sum of:
(1) the excess of (x) 100% of the aggregate amount of Consolidated
EBITDA accrued on a cumulative basis during the period (taken as one
accounting period) beginning on April 1, 1999 and ending on the last day
of the last fiscal quarter preceding the Transaction Date for which
reports have been filed with the SEC or provided to the Trustee over (y)
2.0 times the aggregate amount of Consolidated Interest Expense accrued
on a cumulative basis during the period (taken as one accounting period)
beginning on April 1, 1999 and ending on the last day of the last fiscal
quarter preceding the Transaction Date for which reports have been filed
with the SEC or provided to the Trustee PLUS
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(2) the aggregate Net Cash Proceeds received by Lodgian after the
Closing Date from the issuance and sale permitted by the Indenture of its
Capital Stock (other than Disqualified Stock) to a Person who is not a
Subsidiary of Lodgian, including an issuance or sale permitted by the
Indenture of Indebtedness of Lodgian or any Restricted Subsidiary for
cash subsequent to the Closing Date upon the conversion of such
Indebtedness into Capital Stock (other than Disqualified Stock) of
Lodgian, or from the issuance to a Person who is not a Subsidiary of
Lodgian of any options, warrants or other rights to acquire Capital Stock
of Lodgian (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of
the holder, or are required to be redeemed, prior to the Stated Maturity
of the Notes) PLUS
(3) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments) in any Person resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to Lodgian or any
Restricted Subsidiary or from the Net Cash Proceeds from the sale of any
such Investment (except, in each case, to the extent any such payment or
proceeds are included in the calculation of Adjusted Consolidated Net
Income), from the release of any Guarantee or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case
as provided in the definition of "Investments"), not to exceed, in each
case, the amount of Investments previously made by Lodgian or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of:
(1) the payment of any dividend or redemption of any Capital Stock
within 60 days after the related date of declaration or call for redemption
if, at said date of declaration or call for redemption, such payment or
redemption would comply with the preceding paragraph;
(2) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the Notes or any Note Guarantee including premium, if any, and
accrued interest, with the proceeds of, or in exchange for, Indebtedness
Incurred under clause (3) of the second paragraph of part (a) of the
"Limitation on Indebtedness" covenant;
(3) the repurchase, redemption or other acquisition of Capital Stock of
Lodgian, Lodgian Financing Corp., Lodgian Capital Trust or a Subsidiary
Guarantor (or options, warrants or other rights to acquire such Capital
Stock) in exchange for, or out of the proceeds of a substantially concurrent
offering of, shares of Capital Stock (other than Disqualified Stock) of
Lodgian or Lodgian Financing Corp. (or options, warrants or other rights to
acquire such Capital Stock; PROVIDED that such options, warrants or other
rights are not redeemable prior to the Stated Maturity of the Notes);
(4) the making of any principal payment or the repurchase, redemption,
retirement, defeasance or other acquisition for value of Indebtedness which
is subordinated in right of payment to the Notes or any Note Guarantee in
exchange for, or out of the proceeds of, a substantially concurrent offering
of, shares of the Capital Stock (other than Disqualified Stock) of Lodgian
or Lodgian Financing Corp. (or options, warrants or other rights to acquire
such Capital Stock; PROVIDED that such options, warrants or other rights are
not redeemable prior to the Stated Maturity of the Notes);
(5) payments or distributions, to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially
all of the property and assets of Lodgian;
(6) Investments acquired in exchange for, or out of the proceeds of a
substantially concurrent offering of, Capital Stock (other than Disqualified
Stock) of Lodgian;
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(7) the declaration or payment of dividends on Capital Stock (other
than Disqualified Stock) of Lodgian in an aggregate annual amount not to
exceed 6% of the Net Cash Proceeds received by Lodgian after the Closing
Date from the sale of such Capital Stock;
(8) the payment of interest or liquidated damages on the Convertible
Debentures or the declaration or payment of dividends or liquidated damages
on the CRESTS; PROVIDED that the time of any such payment, Lodgian could not
defer any such payment;
(9) any purchase of any fractional shares of Common Stock in connection
with the conversion of the Convertible Debentures or CRESTS;
(10) Investments in any Person the primary business of which is
related, ancillary or complementary to the business of Lodgian and its
Restricted Subsidiaries on the date of such Investment; PROVIDED that the
aggregate amount of such Investments under this clause (10) does not exceed
(a) 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
last day of the last fiscal quarter preceding the date of such Investment
for which reports have been filed with the SEC or provided to the Trustee),
plus (b) the net reduction in Investments made pursuant to this clause (10)
resulting from distributions on or repayments of such Investments, including
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other distributions or other transfers of assets, in each case
to Lodgian or any Restricted Subsidiary, or from the Net Cash Proceeds from
the sale or other disposition of any such Investment (except, in each case,
to the extent of any gain on such sale or disposition that would be included
in the calculation of Adjusted Consolidated Net Income), from the release of
any Guarantee or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition
of "Investments"); PROVIDED that the net reduction in any such Investments
shall not exceed the amount of such Investments in such Person;
(11) the repurchase or other acquisition of Convertible Debentures and
CRESTS with the proceeds of, or in exchange for, Indebtedness Incurred under
clause (8) of the "Limitation on Indebtedness" covenant or Preferred Stock
of a Restricted Subsidiary issued under clause (5) of the "Limitation on the
Issuance and Sale of Capital Stock of Restricted Subsidiaries" covenant; or
(12) other Restricted Payments in an aggregate amount not to exceed $10
million;
PROVIDED that, except in the case of clauses (1) and (3), no Default or Event of
Default shall have occurred and be continuing or occur as a consequence of the
actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payment referred to in clause (2) thereof, an exchange of
Capital Stock for Capital Stock or Indebtedness referred to in clause (3) or (4)
thereof, an Investment acquired in exchange for Capital Stock referred to in
clause (6) thereof and the repurchase or other acquisition of Convertible
Debentures and CRESTS referred to clause (11) thereof), and the Net Cash
Proceeds from any issuance of Capital Stock referred to in clauses (3), (4) and
(6), shall be included in calculating whether the conditions of clause (C) of
the first paragraph of this "Limitation on Restricted Payments" covenant have
been met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of Lodgian are used for the redemption,
repurchase or other acquisition of the Notes, or Indebtedness that is PARI PASSU
with the Notes or any Note Guarantee, then the Net Cash Proceeds of such
issuance shall be included in clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant only to the extent such proceeds
are not used for such redemption, repurchase or other acquisition of
Indebtedness. For purposes of determining compliance with this "Limitation on
Restricted Payments" covenant, in the event that a Restricted Payment meets the
criteria of more than one of the types of Restricted Payments described in the
above clauses, including the first paragraph of this "Limitation on Restricted
Payments" covenant, Lodgian, in its sole discretion, may order and classify, and
from time to time may reclassify, such
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Restricted Payment if it would have been permitted at the time such Restricted
Payment was made and at the time of such reclassification.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
Lodgian will not, and will not permit any Restricted Subsidiary to, create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (1) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by
Lodgian or any other Restricted Subsidiary, (2) pay any Indebtedness owed to
Lodgian or any other Restricted Subsidiary, (3) make loans or advances to
Lodgian or any other Restricted Subsidiary or (4) transfer any of its property
or assets to Lodgian or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(1) existing on the Closing Date in the Credit Agreement, the Indenture
or any other agreements in effect on the Closing Date, and any extensions,
refinancings, renewals or replacements of such agreements; PROVIDED that the
encumbrances and restrictions in any such extensions, refinancings, renewals
or replacements taken as a whole are no less favorable in any material
respect to the Holders than those encumbrances or restrictions that are then
in effect and that are being extended, refinanced, renewed or replaced;
(2) existing under or by reason of applicable law;
(3) with respect to any Person or the property or assets of such Person
acquired by Lodgian or any Restricted Subsidiary, existing at the time of
such acquisition and not incurred in contemplation thereof, which
encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property or
assets of such Person so acquired;
(4) in the case of clause (4) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant, (A) that restrict in a customary manner the
subletting, assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B) existing
by virtue of any transfer of, agreement to transfer, option or right with
respect to, or Lien on, any property or assets of Lodgian or any Restricted
Subsidiary not otherwise prohibited by the Indenture or (C) arising or
agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract
from the value of property or assets of Lodgian or any Restricted Subsidiary
in any manner material to Lodgian or any Restricted Subsidiary;
(5) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary;
(6) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if:
(A) the encumbrance or restriction applies only in the event of a
payment default or a default with respect to a financial covenant
contained in such Indebtedness or agreement,
(B) the encumbrance or restriction is not materially more
disadvantageous to the Holders of the Notes than is customary in
comparable financings (as determined by Lodgian in good faith) and
(C) Lodgian determines that any such encumbrance or restriction will
not materially affect Lodgian Financing Corp.'s ability to make principal
or interest payments on the Notes; or
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(7) relating to a Subsidiary Guarantor and contained in the terms of
any Indebtedness or any agreement pursuant to which such Indebtedness was
issued if:
(A) the encumbrance or restriction is not materially more
disadvantageous to the Holders of the Notes than is customary in
comparable financings (as determined by Lodgian in good faith) and
(B) Lodgian determines that any such encumbrance or restriction will
not materially affect Lodgian Financing Corp.'s ability to make principal
or interest payments on the Notes.
Nothing contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent Lodgian or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of Lodgian or
any of its Restricted Subsidiaries that secure Indebtedness of Lodgian or any of
its Restricted Subsidiaries.
LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
Lodgian will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except:
(1) to Lodgian or a Wholly Owned Restricted Subsidiary;
(2) issuances of director's qualifying shares or sales to foreign
nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to
the extent required by applicable law;
(3) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and
any Investment in such Person remaining after giving effect to such issuance
or sale would have been permitted to be made under the "Limitation on
Restricted Payments" covenant if made on the date of such issuance or sale;
(4) sales of Common Stock (including options, warrants or other rights
to purchase shares of such Common Stock) of a Restricted Subsidiary by
Lodgian or a Restricted Subsidiary, PROVIDED that Lodgian or such Restricted
Subsidiary applies the Net Cash Proceeds of any such sale in accordance with
clause (A) or (B) of the "Limitation on Asset Sales" covenant described
below; or
(5) sales of Preferred Stock of a Restricted Subsidiary whose sole
assets consist of Indebtedness of Lodgian or Lodgian Financing Corp., in
exchange for or the proceeds of which are used to repurchase the Convertible
Debentures and CRESTS, PROVIDED such Indebtedness (a) is expressly made
subordinate in right of payment to the Notes or Lodgian's Note Guarantee, as
the case may be, at least to the extent that the Convertible Debentures are
subordinated to Lodgian's Note Guarantee on the Closing Date, (b) does not
mature prior to the Stated Maturity of the Convertible Debentures and the
Average Life of such new Indebtedness is at least equal to the remaining
Average Life of the Convertible Debentures, (c) on a pro forma basis does
not cause the Fixed Charge Coverage Ratio to be less than the Fixed Charge
Coverage Ratio prior to such sale, assuming the interest on such
Indebtedness and the Convertible Debentures constituted Consolidated
Interest Expense and (d) permits interest on such Indebtedness to be
deferred on terms at least as favorable to the Holders as the Convertible
Debentures.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
Lodgian will not permit any Restricted Subsidiary which is not a Subsidiary
Guarantor, directly or indirectly, to Guarantee any Indebtedness of Lodgian,
Lodgian Financing Corp. or any other Restricted Subsidiary (other than a Foreign
Subsidiary), unless (1) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Guarantee (a
"Subsidiary
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Guarantee") of payment of the Notes by such Restricted Subsidiary and (2) such
Restricted Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against Lodgian or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee; PROVIDED that this covenant shall not apply to any
Guarantee existing on the Closing Date of Lodgian Finance Corp.'s obligations
under the Credit Agreement by a Restricted Subsidiary. The Subsidiary Guarantee
may be subordinated to the Senior Indebtedness of the Subsidiary Guarantor to
the same extent as the Notes are subordinated to the Senior Indebtedness of
Lodgian Financing Corp.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (x) any sale, exchange or transfer,
to any Person not an Affiliate of Lodgian, of all of Lodgian's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (y) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
Lodgian will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or the
rendering of any service) with any holder (or any Affiliate of such holder) of
5% or more of any class of Capital Stock of Lodgian or with any Affiliate of
Lodgian or any Restricted Subsidiary, except upon fair and reasonable terms no
less favorable to Lodgian or such Restricted Subsidiary than could be obtained,
at the time of such transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement providing therefor, in
a comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(1) transactions (A) approved by a majority of the disinterested
members of the Board of Directors or (B) for which Lodgian or a Restricted
Subsidiary delivers to the Trustee a written opinion of a nationally
recognized investment banking, accounting, valuation or appraisal firm
stating that the transaction is fair to Lodgian or such Restricted
Subsidiary from a financial point of view;
(2) any transaction solely between Lodgian and any of its Wholly Owned
Restricted Subsidiaries or solely among Wholly Owned Restricted
Subsidiaries;
(3) the payment of reasonable and customary regular fees to directors
of Lodgian who are not employees of Lodgian and indemnification arrangements
entered into by Lodgian in the ordinary course of business and consistent
with past practices of Lodgian;
(4) any payments or other transactions pursuant to any tax-sharing
agreement between Lodgian and any other Person with which Lodgian files a
consolidated tax return or with which Lodgian is part of a consolidated
group for tax purposes;
(5) any sale of shares of Capital Stock (other than Disqualified Stock)
of Lodgian or Lodgian Financing Corp.;
(6) development, management and administrative services and performance
and completion guarantees provided in the ordinary course of business by
Lodgian or any Restricted Subsidiary to any Person in which Lodgian or any
Restricted Subsidiary has an Investment; or
(7) any Permitted Investments or any Restricted Payments not prohibited
by the "Limitation on Restricted Payments" covenant.
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Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not covered by clauses (2) through (7)
of this paragraph, (a) the aggregate amount of which exceeds $1 million in
value, must be approved or determined to be fair in the manner provided for in
clause (1)(A) or (B) above and (b) the aggregate amount of which exceeds $5
million in value, must be determined to be fair in the manner provided for in
clause (1)(B) above.
LIMITATION ON LIENS
Lodgian will not, and will not permit Lodgian Financing Corp. or any
Subsidiary Guarantor to, Incur any Indebtedness secured by a Lien ("Secured
Indebtedness") which is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the Notes or the Note Guarantee
equally and ratably with (or, if the Secured Indebtedness is subordinated in
right of payment to the Notes or the Note Guarantees, prior to) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
The foregoing limitation does not apply to:
(1) Liens (including extensions and renewals thereof) upon real or
personal property acquired after the Closing Date; PROVIDED that such Lien
is created solely for the purpose of securing Indebtedness Incurred, in
accordance with the "Limitation on Indebtedness" covenant, to finance the
cost (including the cost of improvement or construction) of the item of
property or assets subject thereto and such Lien is created prior to, at the
time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property;
(2) any interest or title of a lessor in the property subject to any
Capitalized Lease;
(3) Liens on shares of Capital Stock of any Unrestricted Subsidiary to
secure Indebtedness of such Unrestricted Subsidiary; and
(4) Liens on cash set aside at the time of the Incurrence of any
Indebtedness, or government securities purchased with such cash, in either
case to the extent that such cash or government securities prefund the
payment of interest on such Indebtedness and are held in an escrow account
or similar arrangements to be applied for such purpose.
LIMITATION ON ASSET SALES
Lodgian will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (1) the consideration received by Lodgian or
such Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (2) at least 75% of the consideration received
consists of (a) cash or Temporary Cash Investments, (b) the assumption of
Indebtedness of Lodgian or any Restricted Subsidiary (other than Indebtedness to
Lodgian or any Restricted Subsidiary), PROVIDED that Lodgian or such Restricted
Subsidiary is irrevocably and unconditionally released from all liability under
such Indebtedness or (c) Replacement Assets.
In the event and to the extent that the Net Cash Proceeds received by
Lodgian or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after the Closing Date in any period of 12 consecutive months
exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of Lodgian and its Subsidiaries has been filed with
the SEC or provided to the Trustee), then Lodgian shall or shall cause the
relevant Restricted Subsidiary to:
(1) within twelve months after the date Net Cash Proceeds so received
exceed 10% of Adjusted Consolidated Net Tangible Assets,
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(A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay Senior Indebtedness of Lodgian, Lodgian Financing Corp.
or of any Subsidiary Guarantor or Indebtedness of any other Restricted
Subsidiary, in each case owing to a Person other than Lodgian or any of
its Restricted Subsidiaries, or
(B) invest an equal amount, or the amount not so applied pursuant to
clause (A) (or enter into a definitive agreement committing to so invest
within 12 months after the date of such agreement), in Replacement
Assets, and
(2) apply (no later than the end of the 12-month period referred to in
clause (1)) such excess Net Cash Proceeds (to the extent not applied
pursuant to clause (1)) as provided in the following paragraph of this
"Limitation on Asset Sales" covenant.
The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (1)
of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, Lodgian
Financing Corp. must commence, not later than the fifteenth Business Day of such
month, and consummate an Offer to Purchase from the Holders (and if required by
the terms of any Indebtedness that is PARI PASSU with the Notes ("Pari Passu
Indebtedness"), from the holders of such Pari Passu Indebtedness) on a pro rata
basis an aggregate principal amount of Notes (and Pari Passu Indebtedness) equal
to the Excess Proceeds on such date, at a purchase price equal to 100% of the
principal amount thereof, plus, in each case, accrued interest (if any) to the
Payment Date.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
Lodgian Financing Corp. must commence, within 30 days of the occurrence of a
Change of Control, and consummate an Offer to Purchase for all Notes then
outstanding, at a purchase price equal to 101% of the principal amount thereof,
plus accrued interest (if any) to the Payment Date.
There can be no assurance that Lodgian Financing Corp. will have sufficient
funds available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of Lodgian Financing Corp. which might be
outstanding at the time).
Lodgian Financing Corp.'s ability to repurchase Notes upon a Change of
Control may be limited by the terms of its then existing contractual
obligations. In particular, the repurchase of the Notes upon a Change of Control
may constitute a default under the Credit Agreement. Any future credit
agreements or other agreements relating to Senior Indebtedness may contain
similar restrictive provisions.
The above covenant requiring Lodgian Financing Corp. to repurchase the Notes
will, unless consents are obtained, require Lodgian Financing Corp. to repay all
indebtedness then outstanding which by its terms would prohibit such Note
repurchase, either prior to or concurrently with such Note repurchase.
SEC REPORTS AND REPORTS TO HOLDERS
Whether or not Lodgian is then required to file reports with the SEC,
Lodgian shall file with the SEC all such reports and other information as it
would be required to file with the SEC by Section 13(a) or 15(d) under the
Securities Exchange Act of 1934 if it were subject thereto. Lodgian shall supply
to the Trustee and to each Holder or shall supply to the Trustee for forwarding
to each such Holder, without cost to such Holder, copies of such reports and
other information.
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EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture:
(a) default in the payment of principal of (or premium, if any, on) any
Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise, whether or not such payment is prohibited by the
provisions described under "--Ranking--Terms of Subordination";
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days,
whether or not such payment is prohibited by the provisions described under
"--Ranking--Terms of Subordination";
(c) default in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of Lodgian or Lodgian Financing Corp. or the
failure by Lodgian Financing Corp. to make or consummate an Offer to
Purchase in accordance with the "Limitation on Asset Sales" or "Repurchase
of Notes upon a Change of Control" covenant;
(d) Lodgian, Lodgian Financing Corp. or any Subsidiary Guarantor
defaults in the performance of or breaches any other covenant or agreement
in the Indenture or under the Notes (other than a default specified in
clause (a), (b) or (c) above) and such default or breach continues for a
period of 30 consecutive days after written notice by the Trustee or the
Holders of 25% or more in aggregate principal amount of the Notes;
(e) there occurs with respect to any issue or issues of Indebtedness of
Lodgian, Lodgian Financing Corp., any Subsidiary Guarantor or any
Significant Subsidiary having an outstanding principal amount of $5 million
or more in the aggregate for all such issues of all such Persons, whether
such Indebtedness now exists or shall hereafter be created, (I) an event of
default that has caused the holder thereof to declare such Indebtedness to
be due and payable prior to its Stated Maturity and such Indebtedness has
not been discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure to make
a principal payment at the final (but not any interim) fixed maturity and
such defaulted payment shall not have been made, waived or extended within
30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $5 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against
Lodgian, Lodgian Financing Corp., any Subsidiary Guarantor or any
Significant Subsidiary and shall not be paid or discharged, and there shall
be any period of 30 consecutive days following entry of the final judgment
or order that causes the aggregate amount for all such final judgments or
orders outstanding and not paid or discharged against all such Persons to
exceed $5 million during which a stay of enforcement of such final judgment
or order, by reason of a pending appeal or otherwise, shall not be in
effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of Lodgian, Lodgian Financing Corp., any
Subsidiary Guarantor or any Significant Subsidiary in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of Lodgian, Lodgian
Financing Corp., any Subsidiary Guarantor or any Significant Subsidiary or
for all or substantially all of the property and assets of Lodgian, Lodgian
Financing Corp., any Subsidiary Guarantor or any Significant Subsidiary or
(C) the winding up or liquidation of the affairs of Lodgian, Lodgian
Financing Corp., any Subsidiary Guarantor or any Significant Subsidiary and,
in each case, such decree or order shall remain unstayed and in effect for a
period of 30 consecutive days;
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(h) Lodgian, Lodgian Financing Corp., any Subsidiary Guarantor or any
Significant Subsidiary (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under
any such law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of Lodgian, Lodgian Financing Corp., any Subsidiary Guarantor or
any Significant Subsidiary or for all or substantially all of the property
and assets of Lodgian, Lodgian Financing Corp., any Subsidiary Guarantor or
any Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors; or
(i) Lodgian or any Subsidiary Guarantor repudiates its obligations
under its Note Guarantee or, except as permitted by the Indenture, any Note
Guarantee is determined to be unenforceable or invalid or shall for any
reason cease to be in full force and effect.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to Lodgian, Lodgian Financing Corp.,
or any Subsidiary Guarantor) occurs and is continuing under the Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes, then outstanding, by written notice to Lodgian Financing Corp. (and to
the Trustee if such notice is given by the Holders), may, and the Trustee at the
request of such Holders shall, declare the principal of, premium, if any, and
accrued interest on the Notes to be immediately due and payable. Upon a
declaration of acceleration, such principal of, premium, if any, and accrued
interest shall be immediately due and payable; PROVIDED that any such
declaration of acceleration shall not become effective until the earlier of (x)
five Business Days after receipt of the acceleration notice by the Bank Agent
and Lodgian Financing Corp. or (y) acceleration of the Indebtedness under the
Credit Agreement; PROVIDED FURTHER that such acceleration shall automatically be
rescinded and annulled without any further action required on the part of the
Holders in the event that any and all Events of Default specified in the
acceleration notice under the Indenture shall have been cured, waived or
otherwise remedied as provided in the Indenture prior to the expiration of the
period referred to in the preceding clauses (x) and (y). In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by Lodgian,
Lodgian Financing Corp. or the relevant Significant Subsidiary or waived by the
holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in clause
(g) or (h) above occurs with respect to Lodgian, Lodgian Financing Corp. or any
Subsidiary Guarantor, the principal of, premium, if any, and accrued interest on
the Notes then outstanding shall automatically become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. The Holders of at least a majority in principal amount of the
outstanding Notes by written notice to Lodgian Financing Corp. and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (x) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, and interest on the
Notes that have become due solely by such declaration of acceleration, have been
cured or waived and (y) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction. For information as to the waiver of
defaults, see "--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may 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. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless:
(1) the Holder gives the Trustee written notice of a continuing Event
of Default;
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(2) the Holders of at least 25% in aggregate principal amount of
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer the Trustee indemnity satisfactory to
the Trustee against any costs, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request.
However, such limitations do not apply to the right of any Holder of a Note to
receive payment of the principal of, premium, if any, or interest on, such Note
or to bring suit for the enforcement of any such payment, on or after the due
date expressed in the Notes, which right shall not be impaired or affected
without the consent of the Holder.
Officers of Lodgian must certify, on or before a date not more than 90 days
after the end of each fiscal year, that a review has been conducted of the
activities of Lodgian and its Restricted Subsidiaries and Lodgian's and its
Restricted Subsidiaries' performance under the Indenture and that Lodgian has
fulfilled all obligations thereunder, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the nature
and status thereof. Lodgian will also be obligated to notify the Trustee of any
default or defaults in the performance of any covenants or agreements under the
Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Neither Lodgian nor Lodgian Financing Corp. will consolidate with, merge
with or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially an
entirety in one transaction or a series of related transactions) to, any Person
or permit any Person to merge with or into it, unless:
(1) it shall be the continuing Person, or the Person (if other than it)
formed by such consolidation or into which it is merged or that acquired or
leased such property and assets (the "Surviving Person") shall be a
corporation organized and validly existing under the laws of the United
States of America or any jurisdiction thereof and shall expressly assume, by
a supplemental indenture, executed and delivered to the Trustee, all of its
obligations under the Indenture and the Notes;
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction on a pro forma
basis, Lodgian or Lodgian Financing Corp. or the Surviving Person, as the
case may be, shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of Lodgian or Lodgian Financing Corp., as the
case may be, immediately prior to such transaction;
(4) immediately after giving effect to such transaction on a PRO FORMA
basis, Lodgian or Lodgian Financing Corp. or the Surviving Person, as the
case may be, could Incur at least $1.00 of Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant; PROVIDED that this
clause (4) shall not apply to a consolidation, merger or sale of all (but
not less than all) of the assets of Lodgian or Lodgian Financing Corp., as
the case may be, if all Liens and Indebtedness of Lodgian or Lodgian
Financing Corp. or the Surviving Person, as the case may be, and its
Restricted Subsidiaries outstanding immediately after such transaction would
have been permitted (and all such Liens and Indebtedness, other than Liens
and Indebtedness of Lodgian and its Restricted Subsidiaries outstanding
immediately prior to the transaction, shall be deemed to have been Incurred)
for all purposes of the Indenture;
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(5) it delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (3) and (4))
and Opinion of Counsel, in each case stating that such consolidation, merger
or transfer and such supplemental indenture complies with this provision and
that all conditions precedent provided for herein relating to such
transaction have been complied with; and
(6) each Guarantor, unless such Guarantor is the Person with which
Lodgian or Lodgian Financing Corp. has entered into a transaction under this
"Consolidation, Merger and Sale of Assets" section, shall have by amendment
to its Note Guarantee confirmed that its Note Guarantee shall apply to the
obligations of Lodgian Financing Corp. or the Surviving Person in accordance
with the Notes and the Indenture;
PROVIDED, HOWEVER, that clauses (3) and (4) above do not apply if, in the good
faith determination of the Board of Directors of Lodgian, whose determination
shall be evidenced by a Board Resolution, the principal purpose of such
transaction is to change the state of incorporation of Lodgian or Lodgian
Financing Corp. and any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations.
DEFEASANCE
DEFEASANCE AND DISCHARGE. The Indenture will provide that Lodgian Financing
Corp. will be deemed to have paid and will be discharged from any and all
obligations in respect of the Notes on the 123rd day after the deposit referred
to below, and the provisions of the Indenture will no longer be in effect with
respect to the Notes (except for, among other matters, certain obligations to
register the transfer or exchange of the Notes, to replace stolen, lost or
mutilated Notes, to maintain paying agencies and to hold monies for payment in
trust) if, among other things:
(A) Lodgian Financing Corp. has deposited with the Trustee, in trust,
money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms
will provide money in an amount sufficient to pay the principal of, premium,
if any, and accrued interest on the Notes on the Stated Maturity of such
payments in accordance with the terms of the Indenture and the Notes,
(B) Lodgian Financing Corp. has delivered to the Trustee (1) either (x)
an Opinion of Counsel to the effect that Holders will not recognize income,
gain or loss for federal income tax purposes as a result of Lodgian
Financing Corp.'s exercise of its option under this "Defeasance" provision
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, which Opinion of Counsel must be
based upon (and accompanied by a copy of) a ruling of the Internal Revenue
Service to the same effect unless there has been a change in applicable
federal income tax law after the Closing Date such that a ruling is no
longer required or (y) a ruling directed to the Trustee received from the
Internal Revenue Service to the same effect as the aforementioned Opinion of
Counsel and (2) an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and
after the passage of 123 days following the deposit, the trust fund will not
be subject to the effect of Section 547 of the United States Bankruptcy Code
or Section 15 of the New York Debtor and Creditor Law,
(C) immediately after giving effect to such deposit on a PRO FORMA
basis, no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending on
the 123rd day after the date of such deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any other
agreement or instrument to which Lodgian or any of its Subsidiaries is a
party or by which Lodgian or any of its Subsidiaries is bound,
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(D) Lodgian Financing Corp. is not prohibited from making payments in
respect of the Notes by the provisions described under "--Ranking--Terms of
Subordination," and
(E) if at such time the Notes are listed on a national securities
exchange, Lodgian Financing Corp. has delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result of
such deposit, defeasance and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. The
Indenture further will provide that the provisions of the Indenture will no
longer be in effect with respect to clauses (3) and (4) under "Consolidation,
Merger and Sale of Assets" and all the covenants described herein under
"Covenants," clause (c) under "Events of Default" with respect to such clauses
(3) and (4) under "Consolidation, Merger and Sale of Assets," clause (d) under
"Events of Default" with respect to such other covenants and clauses (e) and (f)
under "Events of Default" shall be deemed not to be Events of Default upon,
among other things, the deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Notes on the Stated Maturity of such payments in accordance with the terms of
the Indenture and the Notes, the satisfaction of the provisions described in
clauses (B)(2), (C), (D) and (E) of the preceding paragraph and the delivery by
Lodgian Financing Corp. to the Trustee of an Opinion of Counsel to the effect
that, among other things, the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and defeasance of
certain covenants and Events of Default 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 and defeasance had not occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT. In the event Lodgian
Financing Corp. exercises its option to omit compliance with certain covenants
and provisions of the Indenture with respect to the Notes as described in the
immediately preceding paragraph and the Notes are declared due and payable
because of the occurrence of an Event of Default that remains applicable, the
amount of money and/or U.S. Government Obligations on deposit with the Trustee
will be sufficient to pay amounts due on the Notes at the time of their Stated
Maturity but may not be sufficient to pay amounts due on the Notes at the time
of the acceleration resulting from such Event of Default. However, Lodgian
Financing Corp. will remain liable for such payments and Lodgian's and any
Subsidiary Guarantor's Note Guarantee with respect to such payments will remain
in effect.
MODIFICATION AND WAIVER
The Indenture may be amended, without the consent of any Holder, to:
(1) cure any ambiguity, defect or inconsistency in the Indenture;
(2) comply with the provisions described under "Consolidation, Merger
and Sale of Assets";
(3) comply with any requirements of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act;
(4) evidence and provide for the acceptance of appointment by a
successor Trustee; or
(5) make any change that, in the good faith opinion of the Board of
Directors, does not materially and adversely affect the rights of any
Holder.
Modifications and amendments of the Indenture may be made by Lodgian
Financing Corp. and the Trustee with the consent of the Holders of not less than
a majority in aggregate principal amount of the outstanding Notes; PROVIDED,
HOWEVER, that no such modification or amendment may, without the consent of each
Holder affected thereby:
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Note,
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(2) change the optional redemption dates or optional redemption prices
of the Notes from that stated under the caption "Optional Redemption",
(3) reduce the principal amount of, or premium, if any, or interest on,
any Note,
(4) change the place or currency of payment of principal of, or
premium, if any, or interest on, any Note,
(5) impair the right to institute suit for the enforcement of any
payment on or after the Stated Maturity (or, in the case of a redemption, on
or after the Redemption Date) of any Note,
(6) waive a default in the payment of principal of, premium, if any, or
interest on the Notes,
(7) release any Guarantor from its Note Guarantee, except as provided
in the Indenture,
(8) modify the subordination provisions in a manner adverse to the
Holders, or
(9) reduce the percentage or aggregate principal amount of outstanding
Notes the consent of whose Holders is necessary for waiver of compliance
with certain provisions of the Indenture or for waiver of certain defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of Lodgian in the Indenture, or in any of the Notes or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer, director, employee or controlling person of
Lodgian or of any successor Person thereof. Each Holder, by accepting the Notes,
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will not be liable, except for the performance of such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will use the same degree of care and skill in its
exercise of the rights and powers vested in it under the Indenture as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee, should it become a creditor of Lodgian Financing Corp., to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; PROVIDED, HOWEVER, that if it
acquires any conflicting interest, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form without interest coupons. Notes sold in offshore transactions in reliance
on Regulation S under the Securities Act will initially be represented by one or
more permanent global Notes in definitive, fully registered form without
interest coupons (each a "Regulation S Global Note") and will be deposited with
the Trustee as custodian for, and registered in the name of a nominee of, The
Depository Trust Company ("DTC") for the accounts of Euroclear and Cedelbank.
Prior to the 40th day after the Closing Date, beneficial interests in the
Regulation S Global Notes may only be held through Euroclear or Cedelbank, and
any resale or transfer of
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such interests to U.S. persons shall not be permitted during such period unless
such resale or transfer is made pursuant to Rule 144A or Regulation S.
Notes sold in reliance on Rule 144A will be represented by one or more
permanent global Notes in definitive, fully registered form without interest
coupons (each a "Restricted Global Note"; and together with the Regulation S
Global Notes, the "Global Notes") and will be deposited with the Trustee as
custodian for, and registered in the name of a nominee of, DTC.
Each Global Note (and any Notes issued for exchange therefor) will be
subject to certain restrictions on transfer set forth therein as described under
"Transfer Restrictions."
Notes transferred to institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional
Accredited Investor") who are not qualified institutional buyers ("Non-Global
Purchasers") will be in registered form without interest coupons ("Certificated
Notes"). Upon the transfer of Certificated Notes initially issued to a
Non-Global Purchaser to a qualified institutional buyer or in accordance with
Regulation S, such Certificated Notes will, unless the relevant Global Note has
previously been exchanged in whole for Certificated Notes, be exchanged for an
interest in a Global Note. For a description of the restrictions on the transfer
of Certificated Notes, see "Transfer Restrictions."
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Qualified institutional buyers may hold their
interests in a Restricted Global Note directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system.
Investors may hold their interests in a Regulation S Global Note directly
through Cedelbank or Euroclear, if they are participants in such systems, or
indirectly through organizations that are participants in such system. On or
after the 40th day following the Closing Date, investors may also hold such
interests through organizations other than Cedelbank or Euroclear that are
participants in the DTC system. Cedelbank and Euroclear will hold interests in
the Regulation S Global Notes on behalf of their participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture and, if applicable, those of Euroclear and Cedelbank.
Payments of the principal of, and interest on, a Global Note will be made to
DTC or its nominee, as the case may be, as the registered owner thereof. Neither
Lodgian Financing Corp., the Trustee nor any Paying Agent will 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 Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Lodgian Financing Corp. expects that DTC or its nominee, upon receipt of any
payment of principal or interest in respect of a Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. Lodgian Financing Corp. also expects
that payments by participants to owners of beneficial interests in such Global
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of
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customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedelbank will be effected in the ordinary
way in accordance with their respective rules and operating procedures.
Lodgian Financing Corp. expects that DTC will take any action permitted to
be taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in a Global Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC will exchange the applicable Global
Note for Certificated Notes, which it will distribute to its participants and
which may be legended as set forth under the heading "Transfer Restrictions."
Lodgian Financing Corp. understands that: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Indirect access to the DTC system is
available to others such as banks, brokers, dealers and trust companies and
certain other organizations that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Although DTC, Euroclear and Cedelbank are expected to follow the foregoing
procedures in order to facilitate transfers of interests in a Global Note among
participants of DTC, Euroclear and Cedelbank, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither Lodgian Financing Corp. nor the Trustee will
have any responsibility for the performance by DTC, Euroclear or Cedelbank or
their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by Lodgian
Financing Corp. within 90 days, Lodgian Financing Corp. will issue Certificated
Notes, which may bear the legend referred to under "Transfer Restrictions," in
exchange for the Global Notes. Holders of an interest in a Global Note may
receive Certificated Notes, which may bear the legend referred to under
"Transfer Restrictions," in accordance with the DTC's rules and procedures in
addition to those provided for under the Indenture.
DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used in this "Description of the Notes" for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary; PROVIDED that Indebtedness of such
Person which is redeemed, defeased, retired or otherwise repaid at the time of
or immediately upon consummation of the transactions by which such Person
becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired
Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of Lodgian and its Restricted Subsidiaries for such period
determined in conformity with GAAP; PROVIDED
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that the following items shall be excluded in computing Adjusted Consolidated
Net Income (without duplication):
(1) the net income (or loss) of any Person that is not a Restricted
Subsidiary;
(2) the net income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with
Lodgian or any of its Restricted Subsidiaries or all or substantially all of
the property and assets of such Person are acquired by Lodgian or any of its
Restricted Subsidiaries;
(3) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable
to such Restricted Subsidiary;
(4) any gains or losses (on an after-tax basis) attributable to sales
of assets outside the ordinary course of business of Lodgian and its
Restricted Subsidiaries;
(5) solely for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
the "Limitation on Restricted Payments" covenant, (a) any amount paid or
accrued as dividends on Preferred Stock of Lodgian owned by Persons other
than Lodgian and any of its Restricted Subsidiaries and (b) any amount paid
as interest on the Convertible Debentures or dividends on the CRESTS; and
(6) all extraordinary gains and, for purposes of calculating the Fixed
Charge Coverage Ratio only, extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of assets
of Lodgian and its Restricted Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (1) all
current liabilities of Lodgian and its Restricted Subsidiaries (excluding
intercompany items) and (2) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent quarterly or annual consolidated balance sheet of
Lodgian and its Restricted Subsidiaries, prepared in conformity with GAAP and
filed with the SEC or provided to the Trustee.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (1) an investment by Lodgian or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with
Lodgian or any of its Restricted Subsidiaries; PROVIDED that such Person's
primary business is related, ancillary or complementary to the businesses of
Lodgian and its Restricted Subsidiaries on the date of such investment or (2) an
acquisition by Lodgian or any of its Restricted Subsidiaries of the property and
assets of any Person other than Lodgian or any of its Restricted Subsidiaries
that constitute substantially all of a division or line of business of such
Person; PROVIDED that the property and assets acquired are related, ancillary or
complementary to the businesses of Lodgian and its Restricted Subsidiaries on
the date of such acquisition.
"Asset Disposition" means the sale or other disposition by Lodgian or any of
its Restricted Subsidiaries (other than to Lodgian or another Restricted
Subsidiary) of (1) all or substantially all of the Capital Stock of any
Restricted Subsidiary or (2) all or substantially all of the assets that
constitute a division or line of business of Lodgian or any of its Restricted
Subsidiaries.
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"Asset Sale" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or a
series of related transactions by Lodgian or any of its Restricted Subsidiaries
to any Person other than Lodgian or any of its Restricted Subsidiaries of (1)
all or any of the Capital Stock of any Restricted Subsidiary, (2) all or
substantially all of the property and assets of an operating unit or business of
Lodgian or any of its Restricted Subsidiaries or (3) any other property and
assets (other than the Capital Stock or other Investment in an Unrestricted
Subsidiary) of Lodgian or any of its Restricted Subsidiaries outside the
ordinary course of business of Lodgian or such Restricted Subsidiary and, in
each case, that is not governed by the provisions of the Indenture applicable to
mergers, consolidations and sales of assets of Lodgian; PROVIDED that "Asset
Sale" shall not include (a) sales or other dispositions of inventory,
receivables and other current assets or (b) sales, transfers or other
dispositions of assets with a fair market value not in excess of $1.0 million in
any transaction or series of related transactions, (c) sales, transfers or other
dispositions of assets constituting a Permitted Investment or a Restricted
Payment permitted to be made under the "Limitation on Restricted Payments"
covenant, or (d) any sale, transfer, assignment or other disposition of any
property or equipment that has become damaged, worn out, obsolete or otherwise
unsuitable for use in connection with the business of Lodgian or its Restricted
Subsidiaries.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (1) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (2) the sum of all such principal payments.
"Bank Agent" means the agent for the lenders under the Credit Agreement or
its successors as agent for the lenders under the Credit Agreement.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means such time as (1) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 35% of the total voting power of the Voting Stock of Lodgian on a fully
diluted basis; or (2) individuals who on the Closing Date constitute the Board
of Directors (together with any new directors whose election by the Board of
Directors or whose nomination by the Board of Directors for election by
Lodgian's stockholders was approved by a vote of at least a majority of the
members of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office.
"Closing Date" means the date on which the Notes are originally issued under
the Indenture.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income:
(1) Consolidated Interest Expense and accrued but unpaid interest on
the Convertible Debentures or accrued but unpaid dividends on the CRESTS;
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(2) income taxes;
(3) depreciation expense;
(4) amortization expense; and
(5) all other non-cash items reducing Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an accrual
or reserve is, or is required by GAAP to be, made), less all non-cash items
increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for Lodgian and its Restricted Subsidiaries in conformity
with GAAP;
PROVIDED that, if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (a) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by (b) the percentage ownership interest in the income of such
Restricted Subsidiary not owned on the last day of such period by Lodgian or any
of its Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, (1) the aggregate
amount of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by Lodgian or any of its Restricted
Subsidiaries) paid or accrued by Lodgian and its Restricted Subsidiaries during
such period, (2) all but the principal component of rentals in respect of
Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by Lodgian and its Restricted Subsidiaries during such period and (3)
solely for calculating the Fixed Charge Coverage Ratio, the aggregate amount of
interest on the Convertible Debentures or dividends on the CRESTS paid by
Lodgian and its Restricted Subsidiaries during such period for such period to
the extent paid under clause (8) of the "Limitation on Restricted Payments"
covenant; EXCLUDING, HOWEVER, (1) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (3) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (3) of the definition thereof) and (2) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Notes, the establishment of the Credit Agreement and
any concurrent repayment of Indebtedness, all as determined on a consolidated
basis (without taking into account Unrestricted Subsidiaries) in conformity with
GAAP.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity plus, to the extent not included, any Preferred Stock of Lodgian as set
forth on the most recently available quarterly or annual consolidated balance
sheet of Lodgian and its Restricted Subsidiaries (which shall be as of a date
not more than 90 days prior to the date of such computation, and which shall not
take into account Unrestricted Subsidiaries), less any amounts attributable to
Disqualified Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of Lodgian or any
of its Restricted Subsidiaries, each item to be determined in conformity with
GAAP (excluding the effects of foreign currency exchange adjustments under
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 52).
"Consolidated Operating Rental Expense" of any Person means, for any period,
the aggregate amount of rental expense with respect to any Operating Leases
deducted in computing net income of such Person during such period.
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"Convertible Debentures" means the 7% Convertible Debentures due 2010 issued
pursuant to the indenture dated June 17, 1998 among Servico, Inc., as issuer,
Lodgian, and Wilmington Trust Company, as trustee, as amended (including any
amendment and restatement thereof), supplemented, extended, renewed, replaced or
otherwise modified from time to time and including any agreement extending the
maturity of, refinancing or otherwise restructuring all or any portion of the
Indebtedness under such indenture or any successor agreement, as such agreement
may be amended, renewed, extended, substituted, replaced, restated or otherwise
modified from time to time.
"Credit Agreement" means the credit agreement to be dated as of the Closing
Date among Lodgian Financing Corp., the guarantors named therein and Morgan
Stanley Senior Funding, Inc. and any other lenders and parties thereto, together
with any agreements, instruments and documents executed or delivered pursuant to
or in connection with such credit agreement (including, without limitation, any
Guarantees and security documents), in each case as such credit agreement or
such agreements, instruments or documents may be amended (including any
amendment and restatement thereof), supplemented, extended, renewed, replaced or
otherwise modified from time to time and including any agreement extending the
maturity of, refinancing or otherwise restructuring (including, but not limited
to, the inclusion of additional borrowers thereunder that are Subsidiaries of
Lodgian) all or any portion of the Indebtedness under such agreement or any
successor agreement, as such agreement may be amended, renewed, extended,
substituted, replaced, restated or otherwise modified from time to time.
"CRESTS" means the 7% Convertible Redeemable Equity Structured Trust
Securities of Lodgian Capital Trust.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (1) any Indebtedness under the Credit
Agreement (except that any Indebtedness which represents a partial refinancing
of Indebtedness theretofore outstanding pursuant to the Credit Agreement, rather
than a complete refinancing thereof, shall only constitute Designated Senior
Indebtedness if such partial refinancing meets the requirements of clause (2)
below) and (2) any other Indebtedness constituting Senior Indebtedness that, at
the date of determination, has an aggregate principal amount outstanding of at
least $25 million and that is specifically designated, in the instrument
creating or evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (1) required to be redeemed prior to
the Stated Maturity of the Notes, (2) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (3) convertible into or exchangeable for Capital Stock referred
to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior
to the Stated Maturity of the Notes; PROVIDED that any Capital Stock that would
not constitute Disqualified Stock but for provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such Capital
Stock upon the occurrence of an "asset sale" or "change of control" occurring
prior to the Stated Maturity of the Notes shall not constitute Disqualified
Stock if the "asset sale" or "change of control" provisions applicable to such
Capital Stock are no more favorable to the holders of such Capital Stock than
the provisions contained in "Limitation on Asset Sales" and "Repurchase of Notes
upon a Change of Control" covenants and such Capital Stock specifically provides
that such Person will not repurchase or redeem any such stock pursuant to such
provision prior to Lodgian Financing Corp.'s repurchase of such Notes as are
required to be repurchased pursuant to the "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants.
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"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
"Fixed Charge Coverage Ratio" means, on any Transaction Date, the ratio of
(1) the aggregate amount of Consolidated EBITDA and one-third of Consolidated
Operating Rental Expense for the then most recent four fiscal quarters prior to
such Transaction Date for which reports have been filed with the SEC or provided
to the Trustee (the "Four Quarter Period") to (2) the aggregate Consolidated
Interest Expense and one-third of Consolidated Operating Rental Expense during
such Four Quarter Period. In making the foregoing calculation, (A) PRO FORMA
effect shall be given to any Indebtedness Incurred or repaid during the period
(the "Reference Period") commencing on the first day of the Four Quarter Period
and ending on the Transaction Date (other than Indebtedness Incurred under a
revolving credit or similar arrangement to the extent of the commitment
thereunder (or under any predecessor revolving credit or similar arrangement) in
effect on the last day of such Four Quarter Period unless any portion of such
Indebtedness is projected, in the reasonable judgment of the senior management
of Lodgian, to remain outstanding for a period in excess of 12 months from the
date of the Incurrence thereof), in each case as if such Indebtedness had been
Incurred or repaid on the first day of the Reference Period; (B) PRO FORMA
effect shall be given to any Operating Leases entered into during such Reference
Period as if they had been entered into on the first day of such Reference
Period; (C) Consolidated Interest Expense attributable to interest on any
Indebtedness (whether existing or being Incurred) computed on a PRO FORMA basis
and bearing a floating interest rate shall be computed as if the rate in effect
on the Transaction Date (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months or, if shorter, at least equal to the remaining term
of such Indebtedness) had been the applicable rate for the entire period; (D)
PRO FORMA effect shall be given to Asset Dispositions and Asset Acquisitions
(including giving PRO FORMA effect to the application of proceeds of any Asset
Disposition) that occur during such Reference Period as if they had occurred and
such proceeds had been applied on the first day of such Reference Period; and
(E) PRO FORMA effect shall be given to asset dispositions and asset acquisitions
(including giving PRO FORMA effect to the application of proceeds of any asset
disposition) that have been made by any Person that has become a Restricted
Subsidiary or has been merged with or into Lodgian or any Restricted Subsidiary
during such Reference Period and that would have constituted Asset Dispositions
or Asset Acquisitions had such transactions occurred when such Person was a
Restricted Subsidiary as if such asset dispositions or asset acquisitions were
Asset Dispositions or Asset Acquisitions that occurred on the first day of such
Reference Period; PROVIDED that to the extent that clause (D) or (E) of this
sentence requires that PRO FORMA effect be given to an Asset Acquisition or
Asset Disposition, such PRO FORMA calculation shall be based upon the four full
fiscal quarters immediately preceding the Transaction Date of the Person, or
division or line of business of the Person, that is acquired or disposed for
which financial information is available.
"Foreign Subsidiary" means any Subsidiary of Lodgian that is an entity which
is a controlled foreign corporation under Section 957 of the Internal Revenue
Code.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Indenture shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Notes, the establishment of the Credit
Agreement and any concurrent repayment of Indebtedness and (ii) except as
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otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (1) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise) or (2) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); PROVIDED that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means Lodgian, an Initial Subsidiary Guarantor or any other
Restricted Subsidiary that provides a Guarantee of Lodgian Financing Corp.'s
obligations under the Indenture and the Notes.
"Impac I Debt" means the loan in the aggregate principal amount of $132.459
million extended by Nomura Asset Capital Corporation to Impac Hotel I, L.L.C. in
March 1997.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Acquired Indebtedness; PROVIDED that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication):
(1) all indebtedness of such Person for borrowed money;
(2) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto, but excluding obligations with respect to letters of credit
(including trade letters of credit) securing obligations (other than
obligations described in (1) or (2) above or (5), (6) or (7) below) entered
into in the ordinary course of business of such Person to the extent such
letters of credit are not drawn upon or, if drawn upon, to the extent such
drawing is reimbursed no later than the third Business Day following receipt
by such Person of a demand for reimbursement);
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services, except Trade
Payables;
(5) all Capitalized Lease Obligations;
(6) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED that the amount of such Indebtedness shall be the lesser of (A) the
fair market value of such asset at such date of determination and (B) the
amount of such Indebtedness;
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(7) all Indebtedness of other Persons Guaranteed by such Person to the
extent such Indebtedness is Guaranteed by such Person; and
(8) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements (other
than Currency Agreements and Interest Rate Agreements designed solely to
protect Lodgian or its Restricted Subsidiaries against fluctuations in
foreign currency exchange rates or interest rates and that do not increase
the Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates
or by reason of fees, indemnities and compensation payable thereunder).
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, PROVIDED (A) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP, (B) that money borrowed and set
aside at the time of the Incurrence of any Indebtedness in order to prefund the
payment of the interest on such Indebtedness shall not be deemed to be
"Indebtedness" and (C) that Indebtedness shall not include (x) any liability for
federal, state, local or other taxes, (y) performance, surety or appeal bonds
provided in the ordinary course of business or (z) agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of Lodgian or any of its Restricted Subsidiaries pursuant to such
agreements, in any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness
Incurred by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such acquisition), so long as
the principal amount does not to exceed the gross proceeds actually received by
Lodgian or any Restricted Subsidiary in connection with such disposition.
"Initial Subsidiary Guarantors" means each wholly-owned subsidiary of
Lodgian Financing Corp.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers or suppliers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable, prepaid expenses or deposits on the balance sheet of
Lodgian or its Restricted Subsidiaries and endorsements for collection or
deposit arising in the ordinary course of business) or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, such Person and shall include (1) the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary and (2) the retention of the
Capital Stock (or any other Investment) by Lodgian or any of its Restricted
Subsidiaries, of (or in) any Person that has ceased to be a Restricted
Subsidiary, including, without limitation, by reason of any transaction
permitted by clause (3) of the "Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries" covenant. For purposes of the definition of
"Unrestricted Subsidiary" and the "Limitation on Restricted Payments" covenant,
(a) the amount of or a reduction in an Investment shall be equal to the fair
market value thereof at the time such Investment is made or reduced and (b) in
the event Lodgian or a Restricted Subsidiary makes an Investment by transferring
assets to any Person and as part of such transaction receives Net Cash Proceeds,
the amount of such Investment shall be the fair market value of
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the assets less the amount of Net Cash Proceeds so received, provided that the
Net Cash Proceeds are applied in accordance with clause (A) or (B) of the
"Limitation on Asset Sales" covenant.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Lodgian Capital Trust" means Lodgian Capital Trust I, a statutory business
trust formed under the laws of the State of Delaware.
"Lodgian Capital Trust Declaration" means the amended and restated
declaration of trust dated June 17, 1998 among Lodgian (as successor of Servico,
Inc.) as sponsor, David Buddemeyer, Phillip R. Hale and Charles M. Diaz as the
initial regular trustees, Wilmington Trust Company as the initial property
trustee and initial Delaware trustee, Lodgian and the holders, from time to
time, of undivided beneficial ownership interest in the trust, as in effect on
the Closing Date.
"Lodgian Capital Trust Guarantee" means the Guarantee by Lodgian (as
successor of the original guarantor Servico, Inc.) of Lodgian Capital Trust's
obligations under the CRESTS, as in effect on the Closing Date.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means:
(a) with respect to any Asset Sale, the proceeds of such Asset Sale in
the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal,
but not interest, component thereof) when received in the form of cash or
cash equivalents and proceeds from the conversion of other property received
when converted to cash or cash equivalents, net of:
(1) brokerage commissions and other fees and expenses (including
fees and expenses of counsel and investment bankers) related to such
Asset Sale;
(2) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without
regard to the consolidated results of operations of Lodgian and its
Restricted Subsidiaries, taken as a whole;
(3) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either (x) is secured by
a Lien on the property or assets sold or (y) is required to be paid as a
result of such sale; and
(4) appropriate amounts to be provided by Lodgian or any Restricted
Subsidiary as a reserve against any liabilities associated with such
Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale, all as determined in conformity with GAAP; and
(b) with respect to any issuance or sale of Capital Stock, the proceeds
of such issuance or sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant
and other fees incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
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"Note Guarantee" means any Guarantee of the obligations of Lodgian Financing
Corp. under the Indenture and the Notes by any Guarantor.
"Offer to Purchase" means an offer to purchase Notes by Lodgian Financing
Corp. from the Holders commenced by mailing a notice to the Trustee and each
Holder stating:
(1) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis;
(2) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
(3) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(4) that, unless Lodgian Financing Corp. defaults in the payment of the
purchase price, any Note accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest on and after the Payment Date;
(5) that Holders electing to have a Note purchased pursuant to the
Offer to Purchase will be required to surrender the Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(7) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; PROVIDED that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples of
$1,000.
On the Payment Date, Lodgian Financing Corp. shall (a) accept for payment on a
pro rata basis Notes or portions thereof tendered pursuant to an Offer to
Purchase; (b) deposit with the Paying Agent money sufficient to pay the purchase
price of all Notes or portions thereof so accepted; and (c) deliver, or cause to
be delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by Lodgian Financing Corp. The Paying Agent shall promptly mail to
the Holders of Notes so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail to such Holders a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered; PROVIDED that each Note purchased and each new Note issued shall be
in a principal amount of $1,000 or integral multiples of $1,000. Lodgian
Financing Corp. will publicly announce the results of an Offer to Purchase as
soon as practicable after the Payment Date. The Trustee shall act as the Paying
Agent for an Offer to Purchase. Lodgian Financing Corp. will comply with Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable, in the event
that Lodgian Financing Corp. is required to repurchase Notes pursuant to an
Offer to Purchase.
"Operating Lease" means any lease of any property (whether real, personal or
mixed) other than a Capitalized Lease.
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"Permitted Investment" means:
(1) an Investment in Lodgian or a Restricted Subsidiary or a Person
which will, upon the making of such Investment, become a Restricted
Subsidiary or be merged or consolidated with or into or transfer or convey
all or substantially all its assets to, Lodgian or a Restricted Subsidiary;
PROVIDED that (a) such person's primary business is related, ancillary or
complementary to the businesses of Lodgian and its Restricted Subsidiaries
on the date of such Investment and (b) none of Lodgian Financing Corp.,
Lodgian or any Subsidiary Guarantor will transfer any hotel properties to a
Restricted Subsidiary other than a Subsidiary Guarantor and no Restricted
Subsidiary other than Lodgian Financing Corp. or a Subsidiary Guarantor will
acquire or otherwise develop any hotels other than hotels held by such
Subsidiary on the Closing Date;
(2) Temporary Cash Investments;
(3) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP;
(4) stock, obligations or securities received in satisfaction of
judgments;
(5) an Investment in an Unrestricted Subsidiary consisting solely of an
Investment in another Unrestricted Subsidiary;
(6) Interest Rate Agreements and Currency Agreements designed solely to
protect Lodgian or its Restricted Subsidiaries against fluctuations in
interest rates or foreign currency exchange rates; and
(7) Investments in any Person the primary business of which is related,
ancillary or complementary to the business of Lodgian and its Restricted
Subsidiaries on the date of such Investment; PROVIDED that the aggregate
amount of such Investments under this clause (7) does not exceed (a) $20
million plus (b) the net reduction in Investments made pursuant to this
clause (7) resulting from distributions on or repayments of such
Investments, including payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other distributions or other transfers
of assets, in each case to Lodgian or any Restricted Subsidiary, or from the
Net Cash Proceeds from the sale or other disposition of any such Investment
(except, in each case, to the extent of any gain on such sale or disposition
that would be included in the calculation of Adjusted Consolidated Net
Income), from the release of any Guarantee or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"); PROVIDED that the net
reduction in any such Investments shall not exceed the amount of such
Investments in such Person.
"Purchase Money Indebtedness" means any Indebtedness, including Capitalized
Leases, which is Incurred to finance the acquisition, construction, installation
or improvement of any Replacement Assets and which is Incurred concurrently
with, or within six months following, such acquisition, construction,
installation or improvement.
"Replacement Assets" means, on any date, property or assets (other than
current assets) of a nature or type or that are used in a business (or an
Investment in a company having property or assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, Lodgian and its Restricted Subsidiaries
existing on such date.
"Restricted Subsidiary" means any Subsidiary of Lodgian other than an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
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"Senior Indebtedness" means the following obligations of Lodgian, Lodgian
Financing Corp. or any Subsidiary Guarantor, whether outstanding on the Closing
Date or thereafter Incurred: (1) all Indebtedness and all other monetary
obligations (including, without limitation, expenses, fees, principal, interest,
reimbursement obligations under letters of credit and indemnities payable in
connection therewith) under (or in respect of) the Credit Agreement or any
Interest Rate Agreement or Currency Agreement relating to the Indebtedness under
the Credit Agreement and (2) all Indebtedness and all other monetary obligations
of Lodgian, Lodgian Financing Corp. or any Subsidiary Guarantor (other than the
Notes and any Note Guarantee and the Convertible Debentures), including
principal and interest on such Indebtedness, unless such Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, is PARI PASSU with, or subordinated in right of payment
to, the Notes or any Note Guarantee; PROVIDED that the term "Senior
Indebtedness" shall not include (a) any Indebtedness of Lodgian, Lodgian
Financing Corp. or any Subsidiary Guarantor that, when Incurred, was without
recourse to Lodgian, Lodgian Financing Corp. or such Subsidiary Guarantor, (b)
any Indebtedness of Lodgian, Lodgian Financing Corp. or any Subsidiary Guarantor
to a Subsidiary of Lodgian, or to a joint venture in which Lodgian or any
Restricted Subsidiary has an interest, (c) any Indebtedness of Lodgian, Lodgian
Financing Corp. or any Subsidiary Guarantor, to the extent not permitted by the
"Limitation on Indebtedness" covenant or the "Limitation on Senior Subordinated
Indebtedness" covenant; provided that Indebtedness under the Credit Agreement
shall be deemed Senior Indebtedness if Lodgian, Lodgian Financing Corp. or any
Subsidiary Guarantor, as the case may be, believed in good faith at the time of
incurrence that it was permitted to incur such Indebtedness under the Indenture
and delivers an officers' certificate to the lenders under the Credit Agreement
to such effect, (d) any repurchase, redemption or other obligation in respect of
Disqualified Stock, (e) any Indebtedness to any employee of Lodgian or any of
its Subsidiaries, (f) any liability for taxes owed or owing by Lodgian, Lodgian
Financing Corp. or any Subsidiary Guarantor, or (g) any Trade Payables.
"Senior Subordinated Obligations" means any principal of, premium, if any,
or interest on the Notes payable pursuant to the terms of the Notes or any Note
Guarantee or upon acceleration, including any amounts received upon the exercise
of rights of rescission or other rights of action (including claims for damages)
or otherwise, to the extent relating to the purchase price of the Notes or
amounts corresponding to such principal, premium, if any, or interest on the
Notes.
"Significant Subsidiary" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal
year of Lodgian, accounted for more than 10% of the consolidated revenues of
Lodgian and its Restricted Subsidiaries or (ii) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of Lodgian and
its Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of Lodgian for such fiscal year.
"Stated Maturity" means (1) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (2) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"Subsidiary Guarantor" means any Initial Subsidiary Guarantor and any other
Restricted Subsidiary which provides a Guarantee of Lodgian Financing Corp.'s
obligations under the Indenture and the Notes pursuant to the "Limitation on
Issuances of Guarantees by Restricted Subsidiaries" covenant.
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"Temporary Cash Investment" means any of the following:
(1) direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by the United
States of America or any agency thereof, in each case maturing within one
year;
(2) time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued
by a bank or trust company which is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $100 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank or trust company meeting the qualifications described in
clause (2) above;
(4) commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation (other than an Affiliate of Lodgian
Financing Corp.) organized and in existence under the laws of the United
States of America, any state thereof or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P;
(5) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
S&P or Moody's; and
(6) any mutual fund that has at least 95% of its assets continuously
invested in investments of the types described in clauses (1) through (5)
above.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness, the date such Indebtedness is to be Incurred and, with respect to
any Restricted Payment, the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (1) any Subsidiary of Lodgian other than
Lodgian Financing Corp. that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided below;
and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Restricted Subsidiary (including any newly acquired or newly
formed Subsidiary of Lodgian) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, Lodgian or any Restricted Subsidiary; PROVIDED that (a) any Guarantee by
Lodgian or any Restricted Subsidiary of any Indebtedness of the Subsidiary being
so designated shall be deemed an "Incurrence" of such Indebtedness and an
"Investment" by Lodgian or such Restricted Subsidiary (or both, if applicable)
at the time of such designation; (b) either (x) the Subsidiary to be so
designated has total assets of $1,000 or less or (y) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
"Limitation on Restricted Payments" covenant and (c) if applicable, the
Incurrence of Indebtedness and the Investment referred to in clause (a)
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of this proviso would be permitted under the "Limitation on Indebtedness" and
"Limitation on Restricted Payments" covenants. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that (i) no Default or Event of Default shall have occurred and be continuing at
the time of or after giving effect to such designation and (ii) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately after such
designation would, if Incurred at such time, have been permitted to be Incurred
(and shall be deemed to have been Incurred) for all purposes of the Indenture.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means securities that are (1) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a 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 Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
125
<PAGE>
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
The following discussion summarizes certain U.S. federal tax consequences of
the Exchange Offer, and of the purchase, beneficial ownership and disposition of
Exchange Notes. For purposes of this summary, a "U.S. Holder" means a beneficial
owner of an Old Note or an Exchange Note that is for U.S. federal income tax
purposes:
- an individual who is a citizen or resident of the United States;
- a corporation, partnership or other business entity created or organized
under the laws of the United States or any state or political subdivision
thereof (including the District of Columbia);
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust with respect to which a court within the United States is able to
exercise primary supervision over its administration, and one or more
United States persons have the authority to control all of its substantial
decisions.
An individual may, subject to certain exceptions, be deemed to be a resident
of the United States by virtue of being present in the United States for at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year (counting for
such purposes of all the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year). A "Non-U.S. Holder" is a beneficial owner of an Old
Note or an Exchange Note that is not a U.S. Holder.
This summary is based on interpretations of the Internal Revenue Code of
1986, as amended (the "Code"), regulations issued thereunder, and rulings and
decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal tax consequences described herein. This summary
addresses only holders that own Old Notes or Exchange Notes as capital assets
and not as part of a "straddle" or a "conversion transaction" for U.S. federal
income tax purposes or as part of some other integrated investment. This summary
does not discuss all of the tax consequences that may be relevant to particular
investors or to investors subject to special treatment under the U.S. federal
income tax laws (such as life insurance companies, tax-exempt entities,
regulated investment companies, securities dealers, or investors whose
functional currency is not the U.S. dollar). Persons considering the exchange of
their Old Notes for Exchange Notes and persons considering the purchase of
Exchange Notes should consult their tax advisors concerning the application of
U.S. federal tax laws to their particular situations as well as any consequences
of the exchange of the Old Notes for Exchange Notes, and of the purchase,
beneficial ownership and disposition of Exchange Notes arising under the laws of
any state or other taxing jurisdiction.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER TO U.S. HOLDERS AND
NON-U.S. HOLDERS
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
will not be a taxable event for U.S. federal income tax purposes. U.S. Holders
and Non-U.S. Holders will not recognize any taxable gain or loss as a result of
such exchange and will have the same tax basis and holding period in the
Exchange Notes as they had in the Old Notes immediately before the exchange.
U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OWNERSHIP
OF EXCHANGE NOTES
For purposes of the following summary, interest and gain on the sale,
exchange or other disposition of an Exchange Note will be considered "U.S. trade
or business income" if such income or gain is:
- effectively connected with the conduct of a trade or business in the
United States; or
126
<PAGE>
- in the case of a treaty resident, attributable to a permanent
establishment (or, in the case of an individual, to a fixed base) in the
United States.
TREATMENT OF INTEREST. A Non-U.S. Holder that is not subject to U.S.
federal income tax as a result of any direct or indirect connection to the
United States other than its ownership of an Exchange Note will not be subject
to U.S. federal income or withholding tax in respect of interest income on the
Exchange Note if:
- the interest is not U.S. trade or business income;
- the Non-U.S. Holder provides an appropriate statement on Internal Revenue
Service ("IRS") Form W-8 or Form W-8BEN, together with all appropriate
attachments, signed under penalties of perjury, identifying the Non-U.S.
Holder and stating, among other things, that the Non-U.S. Holder is not a
United States person for U.S. federal income tax purposes; and
- the Non-U.S. Holder is not a "10-percent shareholder" or a "related
controlled foreign corporation" with respect to the Company as specially
defined for U.S. federal income tax purposes.
If an Exchange Note is held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide a signed statement to eliminate withholding tax. However, in such case,
the signed statement must be accompanied by a copy of the IRS Form W-8 or Form
W-8BEN or the substitute form provided by the beneficial owner to the
organization or institution. For interest paid with respect to an Exchange Note
after December 31, 2000, a Non-U.S. Holder that is treated as a partnership for
U.S. federal tax purposes generally will be required to provide an IRS Form
W-8IMY and to attach an appropriate certification by each beneficial owner of
the Non-U.S. Holder (including in certain cases, such beneficial owner's
beneficial owners). Prospective investors, including foreign partnerships and
their partners, should consult their tax advisors regarding these possible
additional reporting requirements.
To the extent these conditions are not met, a 30% withholding tax will apply
to interest income on the Exchange Note, unless an income tax treaty reduces or
eliminates such tax or unless the interest is effectively connected with the
conduct of a trade or business within the United States by such Non-U.S. Holder
and the Non-U.S. Holder provides an appropriate statement to that effect. In the
latter case, such Non-U.S. Holder generally will be subject to U.S. federal
income tax with respect to all income from the Exchange Notes at regular rates
applicable to U.S. taxpayers. Additionally, in such event, Non-U.S. Holders that
are corporations could be subject to a branch profits tax on such income.
TREATMENT OF DISPOSITIONS OF EXCHANGE NOTES. In general, a Non-U.S. Holder
will not be subject to U.S. federal income tax on any amount received (other
than amounts in respect of accrued but unpaid interest) upon retirement or
disposition of an Exchange Note unless such Non-U.S. Holder is an individual
present in the United States for 183 days or more in the taxable year of the
sale, exchange or other disposition and certain other requirements are met, or
unless the gain is U.S. trade or business income. In the latter event, Non-U.S.
Holders generally will be subject to U.S. federal income tax with respect to
such gain at regular rates applicable to U.S. taxpayers. Additionally, in such
event, Non-U.S. Holders that are corporations could be subject to a branch
profits tax on such gain.
TREATMENT OF EXCHANGE NOTES FOR U.S. FEDERAL ESTATE TAX PURPOSES. An
individual Non-U.S. Holder (who is not domiciled in the United States for U.S.
federal estate tax purposes at the time of death) will not be subject to U.S.
federal estate tax in respect of an Exchange Note, provided the Non-U.S. Holder
does not at the time of death actually or constructively own 10% or more of the
combined voting power of all classes of stock of the Company and payments of
interest on such Exchange Note would not have been considered U.S. trade or
business income at the time of such Non-U.S. Holder's death.
127
<PAGE>
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX FOR NON-U.S.
HOLDERS
Under certain circumstances, the Code requires "information reporting"
annually to the IRS and to each holder of Exchange Notes, and "backup
withholding" at a rate of 31% with respect to certain payments made on or with
respect to the Exchange Notes. Backup withholding generally does not apply with
respect to certain holders of Exchange Notes, including corporations, tax-exempt
organizations, qualified pension and profit sharing trusts and individual
retirement accounts.
A Non-U.S. Holder that provides an IRS Form W-8 or Form W-8BEN, together
with all appropriate attachments, signed under penalties of perjury, identifying
the Non-U.S. Holder and stating that the Non-U.S. Holder is not a United States
person will not be subject to IRS reporting requirements and U.S. backup
withholding. With respect to interest paid after December 31, 2000, IRS Forms
W-8BEN will be required from the beneficial owners of interests in a Non-U.S.
Holder that is treated as a partnership for U.S. federal income tax purposes.
The payment of the proceeds on the disposition of an Exchange Note to or
through the U.S. office of a broker generally will be subject to information
reporting and backup withholding at a rate of 31% unless the Non-U.S. Holder
either certifies its status as a Non-U.S. Holder under penalties of perjury on
IRS Form W-8 or Form W-8BEN (as described above) or otherwise establishes an
exemption. The payment of the proceeds on the disposition of an Exchange Note by
a Non-U.S. Holder to or through a non-U.S. office of a non-U.S. broker will not
be subject to backup withholding or information reporting unless the non-U.S.
broker is a "U.S. related person" (as defined below). The payment of proceeds on
the disposition of an Exchange Note by a Non-U.S. Holder to or through a
non-U.S. office of a U.S. broker or a U.S. related person generally will not be
subject to backup withholding but will be subject to information reporting
unless the Non-U.S. Holder certifies its status as a Non-U.S. Holder under
penalties of perjury or the broker has certain documentary evidence in its files
as to the Non-U.S. Holder's foreign status and the broker has no actual
knowledge to the contrary.
For this purpose, a "U.S. related person" is:
- a "controlled foreign corporation" for U.S. federal income tax purposes;
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment (or for such part of the period that the broker has been in
existence) is derived from activities that are effectively connected with
the conduct of a U.S. trade or business; or
- for payments made after December 31, 2000, a foreign partnership if at any
time during its tax year one or more of its partners are United States
persons who, in the aggregate, hold more than 50% of the income or capital
interest of the partnership or if, at any time during its taxable year,
the partnership is engaged in the conduct of a U.S. trade or business.
Backup withholding is not an additional tax and may be refunded (or credited
against the Non-U.S. Holder's U.S. federal income tax liability, if any),
provided that certain required information is furnished. The information
reporting requirements may apply regardless of whether withholding is required.
Copies of the information returns reporting such interest and withholding also
may be made available to the tax authorities in the country in which a Non-U.S.
Holder is a resident under the provisions of an applicable income tax treaty or
agreement.
128
<PAGE>
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of Old Notes that were acquired for the
account of such broker-dealer as a result of market-making or other trading
activities (other than Old Notes acquired directly from Lodgian Financing or any
affiliate of Lodgian Financing) may exchange such Old Notes for Exchange Notes
pursuant to the Exchange Offer; PROVIDED, that each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. Lodgian Financing has agreed that for a period of 180
days after consummation of the Exchange Offer, it will make this Prospectus, as
it may be amended or supplemented from time to time, available to any
broker-dealer for use in connection with any such resale. In addition, until
, 1999, all dealers effecting transactions in the Exchange Notes may
be required to deliver a prospectus.
Lodgian Financing will not receive any proceeds from any sale of Exchange
Notes by broker-dealers or any other holder of Exchange Notes. Exchange Notes
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the Exchange Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or he purchasers of
any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an 'underwriter' within the meaning of the Securities
Act.
For a period of 180 days after consummation of the Exchange Offer, Lodgian
Financing will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. Lodgian Financing has agreed to pay
all expenses incident to the Exchange Offer and to Lodgian Financing's
performance of, or compliance with, the Registration Rights Agreement (other
than commissions or concessions of any brokers or dealers) and will indemnify
the holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
129
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Exchange Notes
offered by this prospectus will be passed on for us by Cadwalader, Wickersham &
Taft, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and 1997, and for each of the three
years in the period ended December 31, 1998, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
The consolidated financial statements of Impac Hotel Group, LLC as of
December 31, 1997 and 1996 and for each of the three-years in the period ended
December 31, 1997, included in this prospectus, have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
130
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
LODGIAN, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets as of June 30, 1999 (Unaudited) and December 31, 1998 and
1997............................................................................... F-3
Consolidated Statements of Operations for the Six Months Ended June 30, 1999 and 1998
(Unaudited) and the Years Ended December 31, 1998, 1997 and 1996................... F-4
Consolidated Statements of Stockholders' Equity for the Six Months Ended June 30,
1999 (Unaudited) and the Years Ended December 31, 1998, 1997 and 1996.............. F-5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998
(Unaudited) and the Years Ended December 31, 1998, 1997 and 1996................... F-6
Notes to Consolidated Financial Statements........................................... F-7
IMPAC HOTEL GROUP, LLC AND SUBSIDIARIES
Report of Independent Accountants.................................................... F-35
Consolidated and Combined Balance Sheets as of June 30, 1998 (Unaudited) and December
31, 1997 and 1996.................................................................. F-36
Consolidated and Combined Statements of Operations for the Six Months Ended June 30,
1998 and 1997 (Unaudited) and the Years Ended December 31, 1997, 1996 and 1995..... F-37
Consolidated and Combined Statements of Equity for the Six Months Ended June 30, 1998
(Unaudited) and the Years Ended December 31, 1997, 1996 and 1995................... F-38
Consolidated and Combined Statements of Cash Flows for the Six Months Ended June 30,
1998 and 1997 (Unaudited) and the Years Ended December 31, 1997, 1996 and 1995..... F-39
Notes to Financial Statements........................................................ F-40
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
Lodgian, Inc.
We have audited the accompanying consolidated balance sheets of Lodgian,
Inc. (formerly known as Servico, Inc) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Lodgian, Inc.
(formerly known as Servico, Inc.) and subsidiaries at December 31, 1998 and
1997, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Atlanta, Georgia
March 31, 1999, except for Note 15,
as to which the date is June 24, 1999
F-2
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF JUNE 30 ------------------------
1999 1998 1997
-------------- ------------ ----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 20,322 $ 19,185 $ 15,243
Cash, restricted..................................................... 6,127 6,302 --
Accounts receivable, net of allowances............................... 36,593 25,498 11,023
Inventories.......................................................... 9,175 9,263 4,485
Prepaid expenses..................................................... 14,090 8,697 7,469
Other current assets................................................. 10,217 9,996 3,684
-------------- ------------ ----------
Total current assets............................................... 96,524 78,941 41,904
Property and equipment, net............................................ 1,332,522 1,317,470 534,080
Deposits for capital expenditures...................................... 29,798 30,386 30,901
Other assets, net...................................................... 61,065 71,124 20,766
-------------- ------------ ----------
$ 1,519,909 $ 1,497,921 $ 627,651
-------------- ------------ ----------
-------------- ------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................................... $ 47,756 $ 57,253 $ 7,543
Accrued liabilities.................................................. 52,687 50,633 27,355
Current portion of long-term obligations............................. 36,110 36,134 5,728
-------------- ------------ ----------
Total current liabilities.......................................... 136,553 144,020 40,626
Long-term obligations, less current portion............................ 833,442 816,644 323,320
Deferred income taxes.................................................. 68,002 63,469 10,615
Commitments and contingencies.......................................... -- -- --
Minority interests:
Preferred redeemable securities...................................... 175,000 175,000 --
Other................................................................ 15,922 15,021 13,555
Stockholders' equity:
Common stock, $.01 par value-shares authorized; 28,013,595,
27,981,501, 27,937,057 and 20,974,852 shares issued and outstanding
at June 30, 1999, December 31, 1998 and 1997, respectively......... 278 278 210
Additional paid-in capital........................................... 262,436 261,976 211,577
Retained earnings.................................................... 29,905 23,106 28,327
Accumulated other comprehensive loss................................. (1,629) (1,593) (579)
-------------- ------------ ----------
Total stockholders' equity......................................... 290,990 283,767 239,535
-------------- ------------ ----------
Total liabilities and stockholders' equity......................... $ 1,519,909 $ 1,497,921 $ 627,651
-------------- ------------ ----------
-------------- ------------ ----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms.............................................. $ 211,663 $ 124,761 $ 267,862 $ 179,956 $ 156,564
Food and beverage.................................. 69,126 50,540 107,334 80,335 68,803
Other.............................................. 14,878 9,968 20,018 16,366 14,159
---------- ---------- ---------- ---------- ----------
295,667 185,269 395,214 276,657 239,526
Operating expenses:
Direct:
Rooms............................................ 57,122 34,072 75,316 49,608 43,667
Food and beverage................................ 50,541 38,460 81,643 60,919 52,761
General and administrative........................... 11,367 4,829 10,080 8,973 9,297
Depreciation and amortization........................ 27,500 14,758 31,114 23,023 18,677
Other................................................ 93,359 58,952 129,950 88,036 77,183
---------- ---------- ---------- ---------- ----------
Total operating expenses............................. 239,889 151,071 328,103 230,559 201,585
---------- ---------- ---------- ---------- ----------
Income from operations............................... 55,778 34,198 67,111 46,098 37,941
Other income (expenses):
Interest income and other.......................... 817 700 1,260 1,720 1,723
Gain on litigation settlement...................... -- -- -- -- 3,612
Loss on asset disposition.......................... -- (432) (432) -- --
Interest expense................................... (37,139) (16,132) (30,378) (25,909) (29,443)
Settlement on swap transactions.................... -- -- (31,492) -- --
Severance and other expenses....................... -- -- (3,400) -- --
Minority interests:
Preferred redeemable securities.................... (6,814) (311) (6,475) -- --
Other.............................................. (1,310) (823) (1,436) (960) (2,060)
---------- ---------- ---------- ---------- ----------
(Loss) income before income taxes and extraordinary
item............................................... 11,332 17,200 (5,242) 20,949 11,773
(Benefit) provision for income taxes................. 4,533 6,880 (2,097) 8,379 3,225
---------- ---------- ---------- ---------- ----------
(Loss) income before extraordinary item.............. 6,799 10,320 (3,145) 12,570 8,548
Extraordinary item:
Loss on extinguishment of indebtedness, net of
income tax benefit of $1,384, $2,500 and $232 in
1998, 1997 and 1996, respectively................ -- (1,095) (2,076) (3,751) (348)
---------- ---------- ---------- ---------- ----------
Net (loss) income.................................... 6,799 $ 9,225 $ (5,221) $ 8,819 $ 8,200
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings (loss) per common share:
(Loss) income before extraordinary item............ $ 0.25 $ 0.49 $ (.16) $ .83 $ .92
Extraordinary item................................. -- (0.05) (.10) (.25) (.04)
---------- ---------- ---------- ---------- ----------
Net (loss) income per common share................. $ 0.25 $ 0.44 $ (.26) $ .58 $ .88
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings (loss) per common share-assuming dilution:
(Loss) income before extraordinary item............ $ .25 $ 0.49 $ (.16) $ .80 $ .88
Extraordinary item................................. -- (0.05) (.10) (.24) (.04)
---------- ---------- ---------- ---------- ----------
Net (loss) income per common share-assuming
dilution......................................... $ 0.25 $ 0.44 $ (.26) $ .56 $ .84
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS
SHARES AMOUNT CAPITAL EARNINGS LOSS EQUITY
------------- ----------- ---------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995................ 8,846,269 $ 88 $ 51,424 $ 11,308 $ -- $ 62,820
401(k) Plan contribution.................. 25,536 1 465 -- -- 466
Exercise of stock options................. 497,800 5 2,008 -- -- 2,013
Tax benefit from exercise of stock
options................................. -- -- 1,239 -- -- 1,239
Net income................................ -- -- -- 8,200 -- 8,200
------------- ----- ---------- --------- ------- ------------
Balance at December 31, 1996................ 9,369,605 94 55,136 19,508 -- 74,738
Issuance of common stock.................. 11,500,000 115 156,085 -- -- 156,200
401(k) Plan contribution.................. 49,847 -- 282 -- -- 282
Exercise of stock options................. 86,600 1 437 -- -- 438
Tax benefit from exercise of stock
options................................. -- -- 175 -- -- 175
Purchase of common stock.................. (31,200) -- (538) -- -- (538)
Net income................................ -- -- -- 8,819 -- 8,819
Currency translation adjustments.......... -- -- -- -- (579) (579)
------------- ----- ---------- --------- ------- ------------
Comprehensive income...................... -- -- -- -- -- 8,240
------------- ----- ---------- --------- ------- ------------
Balance at December 31, 1997................ 20,974,852 210 211,577 28,327 (579) 239,535
Issuance of common stock in connection
with purchase of Impac.................. 9,400,000 94 82,626 -- -- 82,720
401(k) Plan contribution.................. 88,205 -- 430 -- -- 430
Exercise of stock options................. 134,900 1 1,143 -- -- 1,144
Tax benefit from exercise of stock
options................................. -- -- 245 -- -- 245
Purchase of common stock.................. (2,660,900) (27) (34,045) -- -- (34,072)
Net loss.................................. -- -- -- (5,221) -- (5,221)
Currency translation adjustments.......... -- -- -- -- (1,014) (1,014)
------------- ----- ---------- --------- ------- ------------
Comprehensive loss........................ -- -- -- -- -- (6,235)
------------- ----- ---------- --------- ------- ------------
Balance at December 31, 1998................ 27,937,057 278 261,976 23,106 (1,593) 283,767
401(k) Plan contribution (unaudited)...... 61,538 -- 400 -- -- 400
Net income................................ -- -- -- (6,799) -- (6,799)
------------- ----- ---------- --------- ------- ------------
Exercise of stock options................. 15,000 -- 60 -- -- 60
Currency translation adjustments.......... -- -- -- -- (36) (36)
------------- ----- ---------- --------- ------- ------------
Comprehensive income...................... -- -- -- -- -- (6,737)
Balance at June 30, 1999 (unaudited)........ 28,013,595 $ 278 $ 262,436 $ 29,905 $ (1,629) $ 290,990
------------- ----- ---------- --------- ------- ------------
------------- ----- ---------- --------- ------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net (loss) income................................................... $ 6,799 $ 9,225 $ (5,221) $ 8,819 $ 8,200
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization..................................... 27,500 10,899 31,114 23,023 18,677
Loss on extinguishment of indebtedness............................ -- 1,825 3,460 6,251 580
Deferred income taxes............................................. 4,533 6,891 (726) 2,216 1,252
Minority interests--other......................................... 901 823 1,430 960 2,060
401(k) Plan contributions......................................... 400 147 430 282 548
Provision for (recoveries of) losses on receivables............... -- 10 77 (69) 27
Equity in (profit) loss of unconsolidated entities................ -- -- (782) (107) 63
Gain on litigation settlement..................................... -- -- -- -- (3,868)
Gain on recovery of investments................................... -- -- -- -- (134)
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable............................................. (11,095) (5,456) (6,563) (2,017) (824)
Inventories..................................................... 88 (832) (1,883) (1,458) (761)
Other assets.................................................... (1,397) (3,252) (18,412) 425 1,875
Accounts payable................................................ (9,497) 3,366 14,913 1,174 200
Accrued liabilities............................................. 2,054 9,664 11,464 2,522 3,075
--------- --------- --------- --------- ---------
Net cash provided by operating activities........................... 20,286 33,310 29,301 42,021 30,970
Investing activities:
Acquisitions of property and equipment............................ (1,929) (53,491) (67,717) (143,406) (70,312)
Acquisition of Impac.............................................. -- -- -- --
Proceeds from sale of assets...................................... 11,100 2,373 -- -- --
Capital improvements, net......................................... (44,259) (29,795) (118,667) (48,252) (26,323)
Purchase of minority interests.................................... -- -- -- (11,748) --
Net deposits for capital expenditures............................. 588 15,741 3,860 (17,247) (7,074)
Deposit for asset purchase........................................ -- -- -- -- --
Other............................................................. -- 1,361 -- -- --
Purchase of marketable securities................................. -- -- -- (500) --
Payments on notes receivable issued to related parties............ -- -- -- 470 1,200
Decrease in investment in unconsolidated entities................. -- -- -- 17 2,198
Notes receivable issued to related parties........................ -- -- -- -- (1,670)
Net proceeds from litigation settlement........................... -- -- -- -- 3,868
Net proceeds from recovery of investments......................... -- -- -- -- 556
--------- --------- --------- --------- ---------
Net cash used in investing activities............................. (34,500) (63,811) (182,524) (220,666) (97,557)
Financing activities:
Proceeds from issuance of long-term obligations................... 29,640 234,703 600,284 191,560 166,317
Proceeds from issuance of common stock............................ 60 977 1,144 156,638 2,013
Principal payments of long-term obligations....................... (12,866) (158,734) (390,026) (167,647) (92,216)
Payments of deferred loan costs................................... (1,360) (7,151) (20,165) (4,652) (6,533)
(Distributions to) contributions from minority interests.......... (123) 142 -- (946) 5,078
Payments for repurchase of common stock........................... -- (15,644) (34,072) (538) --
--------- --------- --------- --------- ---------
Net cash provided by financing activities......................... 15,351 54,293 157,165 174,415 74,659
--------- --------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents................ 1,137 23,792 3,942 (4,230) 8,072
Cash and cash equivalents at beginning of period.................... 19,185 15,243 15,243 19,473 11,401
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period.......................... $ 20,322 $ 39,035 $ 19,185 $ 15,243 $ 19,473
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental cash flow information
Cash paid during the year for:
Interest, net of amount capitalized............................... $ 35,623 $ 14,388 $ 31,512 $ 22,109 $ 23,147
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income taxes paid, net of refunds................................. $ -- $ 592 $ 5,210 $ 1,091 $ 2,531
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosure of non cash investing and financing
activities:
Non cash acquisition and related financing of property and
equipment....................................................... $ -- $ 58,061 $ 696,851 $ -- $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Issuance of stock in connection with acquisition of Impac......... $ -- $ 58,061 $ 82,700 $ -- $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
On December 11, 1998 Servico, Inc. (Servico) merged with Impac Hotel Group,
LLC (Impac), pursuant to which Servico and Impac formed a new company Lodgian,
Inc. ("Lodgian" or the "Company"). This transaction has been accounted for under
the purchase method of accounting, whereby Servico is considered the acquiring
company. For further discussion of the merger see Note 2.
As a result of the merger, Lodgian its wholly owned subsidiaries and
consolidated partnerships (collectively, the "Company"), own or manage hotels in
35 states, Canada and Europe. At December 31, 1998 and 1997, the Company owned,
either wholly or partially, or managed 144 and 71 hotels, respectively.
PRINCIPLES OF CONSOLIDATION
The financial statements consolidate the accounts of Lodgian, its wholly
owned subsidiaries and partnerships in which Lodgian exercises control over the
partnerships' assets and operations. Lodgian believes it has control of
partnerships when the Company manages and has control of the partnerships'
assets and operations, has the ability and authority to enter into financing
arrangements on behalf of the entity or to sell the assets of the entity within
reasonable business guidelines.
An unconsolidated entity (owning 1 hotel) and a joint venture which owns and
operates six hotels in Belgium and the Netherlands, in which the Company
exercises significant influence over operating and financial policies, are
accounted for on the equity method. The Company's investments in unconsolidated
entities was $10,091,000 December 31, 1998, and is included in other assets, net
in the accompanying consolidated balance sheets. All significant intercompany
accounts and transactions have been eliminated in consolidation.
QUARTERLY FINANCIAL STATEMENTS
The unaudited quarterly consolidated financial statements for June 30, 1999
and 1998 do not include all disclosures provided in the annual consolidated
financial statements. These quarterly statements should be read in conjunction
with the accompanying annual audited consolidated financial statement and the
footnotes thereto. Results for the quarterly period ended June 30, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999. However, the accompanying quarterly financial statements
reflect all adjustments which are in the opinion of management, of a normal and
recurring nature necessary for a fair presentation of the financial position and
results of operations of the Company. Unless otherwise stated, all information
subsequent to December 31, 1998 is unaudited.
INVENTORIES
Inventories consist primarily of food and beverage, linens, china, tableware
and glassware and are valued at the lower of cost (computed on the first-in,
first-out method) or market.
MINORITY INTERESTS--OTHER
Minority interests represent the minority interests' proportionate share of
equity or deficit of partnerships which are accounted for by the Company on a
consolidated basis. The Company generally allocates to minority interests their
share of any profits or losses in accordance with the provisions of the
applicable agreements. However, if the loss applicable to a minority interest
exceeds its total investment and advances, such excess is charged to the
Company.
F-7
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MINORITY INTERESTS--PREFERRED REDEEMABLE SECURITIES
Minority interests-preferred redeemable securities, represents Convertible
Redeemable Equity Structure Trust Securities ("CRESTS"). The CRESTS bear
interest at 7% and are convertible into shares of the Company's common stock.
For further discussion of the CRESTS, see Note 5.
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. Property
under capital leases is amortized using the straight line method over the
shorter of the estimated useful lives of the assets or the lease term.
The Company capitalizes interest costs incurred during the renovation and
construction of capital assets. During the years ended December 31, 1998, 1997
and 1996, the Company capitalized $3,499,000, $1,650,000 and $644,000 of
interest, respectively.
Management periodically evaluates the Company's property and equipment to
determine if there has been any impairment in the carrying value of the assets
in accordance with Financial Accounting SFAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of". SFAS 121
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.
DEFERRED COSTS
Deferred franchise, financing, and other deferred costs of $41,336,000 and
$16,371,000 at December 31, 1998 and 1997, respectively, are included in other
assets, net of accumulated amortization of $3,061,000 and $2,509,000 at December
31, 1998 and 1997, respectively, which is computed using the straight-line
method, over the terms of the related franchise, loan or other agreements The
straight-line method of amortizing deferred financing costs approximates the
interest method.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Restricted cash, consists
of amounts reserved for capital improvements, debt service, taxes and insurance.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of current assets and current liabilities are assumed to be
equal to their reported carrying amounts. The fair values of the Company's
long-term debt are estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements. In the opinion of management, the carrying value of long-term debt
approximates market value as of December 31, 1998 and 1997. The fair market
value of the Company's CRESTS which is $78,750,000 at December 31, 1998, is
based on quoted market prices. Management has estimated the fair value of the
Company's interest rate protection agreements to be approximately $5,000,000 at
December 31, 1998 based on dealer quotes.
F-8
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Concentration of credit risk associated with cash and cash equivalents is
considered low due to the credit quality of the issuers of the financial
instruments held by the Company and due to their short duration to maturity.
Accounts receivable are primarily from major credit card companies, airlines and
other travel related companies. The Company performs ongoing evaluations of its
significant customers and generally does not require collateral. The Company
maintains an allowance for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses. At December 31, 1998
and 1997, these allowances were $979,000 and $300,000, respectively.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
The Company adopted SFAS 128 "Earnings Per Share" effective for the year
ended December 31, 1998. Basic earnings per share is calculated based on the
weighted average number of common shares outstanding during the periods and
include common stock contributed or to be contributed by the Company to its
employees 401(k) Plan (the "401(k)"). Dilutive earnings per common share include
the Company's outstanding stock options and shares convertible under the
Company's CRESTS, if dilutive.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related interpretations. Under APB 25, because the
exercise price of the Company's employee stock options is equal to the market
price of the underlying stock on the date of grant, no compensation expense is
recognized. Under Financial SFAS 123, "Accounting for Stock-Based Compensation",
net income and earnings per share are not materially different from amounts
reported, therefore, no pro forma information has been presented.
The Financial Accounting Standards Board is expected to issue an
interpretation of APB 25 (the "Interpretation") in the third quarter of 1999.
Two of the key areas affected by the proposal are the accounting for stock
option repricings and options issued to non-employee directors. The
interpretation would be applied prospectively to transactions that occur after
December 15, 1998.
The Interpretation will require that once an option granted to an employee
is repriced, that option would be accounted for as if it were a variable plan,
giving rise to compensation expense for subsequent changes in stock price, from
the date the option is repriced to the date it is exercised. Under the proposal,
no compensation expense would be recorded on the date of the repricing. However,
compensation would be recorded quarterly through the date of exercise to the
extent that the fair market value of the common stock is in excess of the
exercise price of the options adjusted for the repricing. The interpretation
requires, in measuring compensation expense, the use of the higher of the
repriced exercise price of the options or the fair market value of the stock on
the date the interpretation is effective.
Additionally, under the proposed Interpretation, options granted to
non-employee directors subsequent to December 15, 1998, would no longer be
accounted for under APB 25's intrinsic value method. Instead, such options would
be accounted for under the fair value method.
The Company repriced options totaling 1,408,400 on December 18, 1998 that
will be subject to these requirements when the new Interpretation becomes
effective.
F-9
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred
$2,162,000, $1,867,000 and $1,613,000 in advertising costs during 1998, 1997 and
1996, respectively.
FOREIGN CURRENCY TRANSLATION
The financial statements of foreign subsidiaries have been translated into
U.S. dollars in accordance with SFAS 52, "Foreign Currency Translation." All
balance sheet accounts have been translated using the exchange rates in effect
at the balance sheet dates. Income statement amounts have been translated using
the average rate for the year. The gains and losses resulting from the changes
in exchange rates from year to year have been reported in other comprehensive
income. The effects on the statements of operations of transaction gains and
losses is insignificant for all years presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted the SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131
superseded SFAS 14, "Financial Reporting for Segments of a Business Enterprise."
SFAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. SFAS 131 also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. It is the belief of management that the Company operates under one
reporting segment-hotel ownership and management. Therefore, the adoption of
SFAS 131 did not have a material impact on the Company's financial statement
disclosures.
As of January 1, 1998, the Company adopted SFAS 130, "Reporting
Comprehensive Income." SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's results of operations or
shareholders' equity. SFAS 130 requires the Company's foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in other comprehensive income.
2. MERGER, ACQUISITIONS AND RELATED ITEMS
On December 11, 1998, Servico merged with Impac in a transaction accounted
for under the purchase method of accounting, pursuant to APB 16, "Business
Combinations", whereby Servico is considered the acquiring company. The
operations of Impac are included in the consolidated statement of operations
from the date of acquisition. Under the terms of the Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement"), Servico's existing
shareholders received one share of Lodgian
F-10
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. MERGER, ACQUISITIONS AND RELATED ITEMS (CONTINUED)
common stock for each of Servico stock held by them (approximately 18,440,000
million shares). The purchase price of Impac approximated $104,367,000,
consisting of $15 million in cash, the issuance of 9.4 million shares of common
stock of Lodgian at $8.80, of which 1.4 million shares are contingent upon the
completion of construction of five hotels, and acquisition related costs of
approximately $6,647,000. The purchase price has been allocated to the fair
value of the net assets acquired as follows (in thousands):
<TABLE>
<S> <C>
Cash............................................................................. $ 7,027
Inventory........................................................................ 2,685
Accounts receivable.............................................................. 12,239
Property and equipment........................................................... 616,000
Goodwill and other assets........................................................ 12,089
Accounts payable................................................................. (58,432)
Long term obligations............................................................ (429,466)
Deferred income taxes............................................................ (47,900)
Accrued liabilities.............................................................. (9,875)
---------
Total purchase price............................................................. $ 104,367
---------
---------
</TABLE>
In connection with the purchase, of Impac, the Company recorded goodwill of
approximately $11 million, included in other assets above, which is being
amortized over 20 years.
The allocation of the purchase price is tentative pending completion of
valuations of the property and equipment acquired. The allocation may change
upon the completion of these valuations.
In connection with the merger with Impac, Servico incurred approximately
$3,400,000 of expenses which consisted primarily of expenses associated with the
closing and relocation of Servico's West Palm Beach, Florida corporate
headquarters to the Company's headquarters in Atlanta, Georgia and termination
and relocation of certain Servico employees. These costs have been expensed as
incurred and are included in severance and other expenses in the 1998
consolidated statement of operations. Substantially all of these costs have been
paid by December 31, 1998.
On June 1, 1998, the Company acquired the issued and outstanding units of
AMI Operating Partners, L.P. (AMI), in a transaction accounted for under the
purchase method of accounting. The purchase price of AMI approximated $74
million which included cash of $16 million and the assumption of $58 million in
debt. The operations of AMI are included in the consolidated statement of
operations from the date of acquisition. The purchase price was principally
allocated to the 15 hotel properties acquired.
The pro forma unaudited results of operations for the years ended December
31, 1998 and 1997, assuming the purchase of Impac had been consummated on
January 1, 1997, follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Revenues.................................................................................. $ 545,794 $ 396,516
Net (loss) income before extraordinary item............................................... (19,070) 2,917
Net loss.................................................................................. (21,146) (8,837)
Net loss per common share:
Basic and diluted....................................................................... (.75) (.38)
</TABLE>
F-11
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. MERGER, ACQUISITIONS AND RELATED ITEMS (CONTINUED)
During November 1998, the President and Chief Executive Officer of Servico
announced his resignation effective the date of the merger with Impac. In
connection with his resignation, Mr. Buddemeyer was provided a severance package
approximating $1.3 million. This amount was expensed during the fourth quarter
of 1998 and is included in severance and other expenses in the 1998 consolidated
statement of operations. Approximately $164,000 of this amount relates to
compensation expense associated with the extension of the terms of his stock
options, pursuant to APB 25.
F-12
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
3. PROPERTY AND EQUIPMENT
At December 31, 1998 and 1997, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
USEFUL LIVES
(YEARS) 1998 1997
------------- ------------ ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Land...................................................................... -- $ 168,303 $ 48,798
Buildings and improvements................................................ 10-40 976,608 430,363
Furnishings and equipment................................................. 3-10 187,055 99,487
----- ------------ ----------
1,331,966 578,648
Less accumulated depreciation and amortization............................ (104,528) (75,976)
Construction in progress.................................................. 90,032 31,408
------------ ----------
$ 1,317,470 $ 534,080
------------ ----------
------------ ----------
</TABLE>
During the year ended December 31, 1997, the Company purchased 12 hotels for
an aggregate purchase price of $140,300,000 which were paid for by the delivery
of mortgage notes totaling $72,655,000 and cash for the balance. The 12 hotels
purchased, containing an aggregate of 3,002 guest rooms, are operated under
license agreements with nationally recognized franchisors and are managed by the
Company. In addition, Company increased its ownership interests in the
partnerships, owning three hotels, from 51% to 100% for approximately
$11,800,000.
4. ACCRUED LIABILITIES
At December 31, 1998 and 1997, accrued liabilities consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Salaries and related costs.................................................................. $ 26,798 $ 10,775
Real estate taxes........................................................................... 9,095 4,118
Interest.................................................................................... 4,370 1,969
Advance deposits............................................................................ 3,799 1,666
Sales taxes................................................................................. 5,412 2,523
Other....................................................................................... 1,159 6,304
--------- ---------
$ 50,633 $ 27,355
--------- ---------
--------- ---------
</TABLE>
F-13
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. LONG-TERM OBLIGATIONS AND PREFERRED REDEEMABLE SECURITIES
Long-term obligations consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Mortgage notes payable with interest at a variable rate of LIBOR (5% at December 31, 1998
plus 3.25%). The notes are payable through 2000......................................... $ 265,000 $ --
Credit facilities, of $396 million with interest LIBOR + 2.25% to 2.75% maturing through
2001. At maturity, each loan converts to term loans amortizing over a 20 year period.... 323,744 --
Mortgage notes with an interest rate of 9% payable through 2000........................... 72,000 --
Mortgage notes with fixed rates ranging from 8.6% to 10.7% payable through 2010........... 164,109 152,469
Mortgage notes with variable rates of interest............................................ -- 166,817
Other..................................................................................... 27,925 9,762
---------- ----------
852,778 329,048
Less current portion of long-term obligations............................................. (36,134) (5,728)
---------- ----------
$ 816,644 $ 323,320
---------- ----------
---------- ----------
</TABLE>
Substantially, all of the Company's property and equipment are pledged as
collateral for long-term obligations of which approximately $403,249,000 has
been guaranteed by Lodgian, Inc. Certain of the mortgage notes are subject to a
prepayment penalty if repaid prior to their maturity.
On December 11, 1998, the Company consummated financing agreements, which
resulted in net proceeds of approximately $337 million. The net proceeds were
primarily used to pay the costs of the merger with Impac, escrow funds for
renovations on certain properties and to repay, prior to maturity, approximately
$142,205,000 in debt secured by 27 of its hotels. As a result, the Company
recorded an extraordinary loss on early extinguishment of debt of approximately
$934,000 (net of income tax benefit of $622,000) relating to the write-off of
unamortized deferred financing costs. Approximately $31.5 million of the $337
million relates to the settlement on two swap transactions entered into by the
Company with its lender. For further discussion of swap transaction see Note 6.
In June 1998, the Company issued $175 million of Convertible Redeemable
Equity Structures Trust Securities ("CRESTS"). The CRESTS bear interest at 7%
and are convertible into shares of the Company's common stock at an initial
conversion price of $21.42 per share. The sale of the CRESTS generated $168.5
million in net proceeds, substantially, all of which were used to repay existing
debt prior to maturity. As a result, the Company recorded an extraordinary loss
on early extinguishment of debt of approximately $1,142,000 (net of income tax
benefit of $761,000) relating to the write off of unamortized financing costs.
The CRESTS are included in the accompany consolidated balance sheet as Minority
Interests-Preferred Redeemable Securities. The interest expense incurred on the
CRESTS have been included as "Minority Interests--Preferred Redeemable
Securities" in the Consolidated Statement of Operations.
During 1997 Lodgian completed a secondary offering of 11.5 million shares of
common stock at $14.50 per share, which resulted in net proceeds to Lodgian of
$156,000,000. The Company repaid, prior to maturity, approximately $128,000,000
in debt secured by 21 of its hotels and, as a result, recorded an extraordinary
loss on early extinguishment of debt of approximately $3,800,000 (net of income
tax benefit of $2,500,000) relating to the write-off of unamortized loan costs
associated with the debt. Seventeen of
F-14
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. LONG-TERM OBLIGATIONS AND PREFERRED REDEEMABLE SECURITIES (CONTINUED)
these hotels have subsequently been used to secure approximately $81,200,000 in
new variable rate mortgage notes which generated approximately $78,300,000 of
net proceeds for use in the acquisition of new properties. The Company has also
refinanced eight other properties generating approximately $3,100,000 in net
proceeds.
The Company has entered into an interest rate protection agreement on $54
million related to one of the above credit facilities. Pursuant to the terms of
this agreement, when the loan matures in 2001 and converts to term loans, the
interest rate will be based on a benchmark treasury rate of 7.235%. In the event
the company determines that it is in its best interest to "break" that interest
rate lock, it may be required to pay a significant fee to the lender.
Maturities of long-term obligations for each of the five years after
December 31, 1998 and thereafter, are as follows (in thousands):
<TABLE>
<S> <C>
1999.............................................................. $ 36,134
2000.............................................................. 325,049
2001.............................................................. 16,597
2002.............................................................. 13,243
2003.............................................................. 47,542
Thereafter........................................................ 414,213
---------
$ 852,778
---------
---------
</TABLE>
6. SETTLEMENT ON SWAP TRANSACTIONS
During August 1998, the Company entered into treasury rate lock transactions
with notional amounts of $175 million and $200 million (collectively, the
"Swaps") with a lender for the purpose of hedging their interest rate exposure
on two anticipated financing transactions. During September 1998, the Company
determined that it was not probable that it would consummate the anticipated
transactions and recognized a loss in the consolidated statement of operations
of $31.5 million related to the settlement of the Swaps. The obligation related
to the settlement of the Swaps was included in the $337 million financing
transaction discussed in Note 5.
7. STOCKHOLDERS' EQUITY
During 1998, in accordance with previously announced share buyback programs,
the Company has repurchased in open market transactions and retired 2,660,900
shares of its common stock.
8. INCOME TAXES
Provision (benefit) for income taxes for the Company is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996
------------------------------- ----------------------------------- ------------------------
<CAPTION>
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED
--------- --------- --------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal............................ $ (1,140) $ (481) $ (1,621) $ 3,289 $ 3,186 $ 6,475 $ 1,322 $ 1,170
State and local.................... (423) (53) (476) 1,693 211 1,904 651 82
--------- --------- --------- ----------- ----------- --------- ----------- -----------
$ (1,563) $ (534) $ (2,097) $ 4,982 $ 3,397 $ 8,379 $ 1,973 $ 1,252
--------- --------- --------- ----------- ----------- --------- ----------- -----------
--------- --------- --------- ----------- ----------- --------- ----------- -----------
<CAPTION>
<S> <C>
TOTAL
---------
<S> <C>
Federal............................ $ 2,492
State and local.................... 733
---------
$ 3,225
---------
---------
</TABLE>
F-15
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
8. INCOME TAXES (CONTINUED)
The components of the cumulative effect of temporary differences in the
deferred income tax liability and asset balances at December 31, 1998 and 1997,
are as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
NON-CURRENT NON-CURRENT
CURRENT -------------------- CURRENT --------------------
TOTAL ASSET LIABILITY TOTAL ASSET LIABILITY
--------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Property and equipment................................... $ 78,523 $ -- $ 78,523 $ 21,151 $ -- $ 21,151
Net operating loss carryforward.......................... (16,015) (605) (15,410) (7,905) (605) (7,300)
Alternative minimum tax credits.......................... (999) -- (999) (3,739) -- (3,739)
Self-insurance reserve................................... (1,360) (1,360) -- (878) (878) --
Vacation pay accrual..................................... (745) (745) -- (681) (681) --
Other.................................................... 1,240 (115) 1,355 413 (90) 503
--------- --------- --------- --------- --------- ---------
$ 60,644 $ (2,825) $ 63,469 $ 8,361 $ (2,254) $ 10,615
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
The difference between income taxes using the effective income tax rate and
the federal income tax statutory rate of 34% is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax at statutory federal rate........................................ $ (1,782) $ 7,123 $ 4,003
State income taxes, net............................................................. (315) 1,256 483
Tax benefit with respect to legal settlement........................................ -- -- (1,261)
--------- --------- ---------
$ (2,097) $ 8,379 $ 3,225
--------- --------- ---------
--------- --------- ---------
</TABLE>
As of December 31, 1998, the Company had net operating loss carry forwards
of approximately $45,300,000 for federal income tax purposes which expire in
years 2005 through 2018. The full amount of the income tax benefit of this net
operating loss carryforward has been reflected in the Consolidated Financial
Statements of the Company in prior years.
9. RELATED PARTY TRANSACTIONS
The Company's President was a shareholder of Impac Hotel Development
("IHD"), which provided acquisition and property development services to Impac
for a development fee of four percent of the total project cost of each property
acquired or developed. Impac agreed to terminate this agreement prior to the
consummation of the Merger so that Impac and its subsidiaries 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 or develops any of the hotels or
properties identified in the Merger Agreement as Impac's acquisition pipeline.
F-16
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
10. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Numerator:
(Loss) income before extraordinary item................... $ 6,799 $ 10,320 $ (3,145) $ 12,570 $ 8,548
Extraordinary item........................................ -- -- (2,076) (3,751) (348)
Effect of dilutive securitites:...........................
Minority interest-preferred redeemable securitities..... -- 187 -- -- --
--------- --------- --------- --------- ---------
Net (loss) income......................................... $ 6,799 $ 10,507 $ (5,221) $ 8,819 $ 8,200
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Denominator:
Denominator for basic earnings per share--
weighted-average shares................................. 26,909 20,871 20,245 15,183 9,295
Effect of dilutive securities:
Employee stock options.................................. -- 403 -- 457 456
Convertible preferred securities........................ -- 359 -- -- --
--------- --------- --------- --------- ---------
Denominator for dilutive earnings per share-- adjusted
weighted-average shares................................. 26,909 21,633 20,245 15,640 9,751
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Basic earnings per share:
(Loss) income before extraordinary item................... 0.25 0.49 $ (.16) $ .83 $ .92
Extraordinary item........................................ -- (0.05) (.10) (.25) (.04)
--------- --------- --------- --------- ---------
Net (loss) income......................................... 0.25 $ 0.44 $ (.26) $ .58 $ .88
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted earnings per share:
Income before extraordinary item.......................... 0.25 $ 0.49 $ (.16) $ .80 $ .88
Extraordinary item........................................ (0.05) (.10) (.24) (.04)
--------- --------- --------- --------- ---------
Net (loss) income......................................... 0.25 $ 0.44 $ (.26) $ .56 $ .84
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
All prior-period earnings per share amounts have been restated to conform to
the SFAS 128 "Earnings per share".
The computation of diluted EPS for the year ended December 31, 1998, 1997,
and 1996, did not include shares associated with the assumed conversion of the
CRESTS or stock options totaling 8,169,935 because their inclusion would have
been antidilutive.
11. COMMITMENTS AND CONTINGENCIES
Six of the Company's hotels are subject to long-term ground leases expiring
from 2014 through 2075 which provide for minimum payments as well as incentive
rent payments and most of the Company's hotels have noncancellable operating
leases, mainly for operating equipment. The land covered by one lease can be
purchased by the Company for approximately $2,600,000. For the years ended
December 31, 1998, 1997 and 1996, lease expense for the five noncancellable
ground leases was approximately $2,400,000, $1,624,000 and $1,381,000,
respectively.
F-17
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
At December 31, 1998, the future minimum commitments for noncancellable
ground leases are as follows (in thousands):
<TABLE>
<S> <C>
1999............................................................... $ 3,438
2000............................................................... 3,444
2001............................................................... 3,427
2002............................................................... 3,434
2003............................................................... 2,405
Thereafter......................................................... 73,429
---------
$ 89,577
---------
---------
</TABLE>
The Company has entered into license agreements with various hotel chains
which require annual payments for license fees, reservation services and
advertising fees. The license agreements generally have an original ten year
term. The majority of the Company's license agreements have five to ten years
remaining on the term. The licensors may require the Company to upgrade its
facilities at any time to comply with the licensor's then current standards.
Upon the expiration of the term of a license, the Company may apply for a
license renewal. In connection with the renewal of a license, the licensor may
require payment of a renewal fee, increased license, reservation and advertising
fees, as well as substantial renovation of the facility. Payments made in
connection with these agreements totaled approximately $19,268,000, $14,498,000
and $12,401,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
The license agreements are subject to cancellation in the event of a
default, including the failure to operate the hotel in accordance with the
quality standards and specifications of the licensors. The Company believes that
the loss of a license for any individual hotel would not have a material adverse
effect on the Company's financial condition and results of operations. The
Company believes it will be able to renew its current licenses or obtain
replacements of a comparable quality.
Twenty-five hotels which the Company owns are operated under license
agreements that require the Company to make certain capital improvements in
accordance with a specified time schedule. Further, in connection with the
financing of the Company's hotels (see Note 4) and the acquisition of other
hotels (see Note 2), the Company has agreed to make certain capital improvements
and had approximately $30 million escrowed for such improvements which is
included in other assets on the accompanying balance sheet. The Company
estimates its remaining obligations for all the above commitments to be
approximately $85 million of which approximately $50 million is expected to be
spent in 1999 and the balance during 2000 and 2001.
The Company has maintenance agreements, primarily on a one to three year
basis, which resulted in expenses of approximately $3,557,000, $2,497,000 and
$2,106,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
A wholly-owned subsidiary of Lodgian, Inc. has provided a guarantee of the
debt of a joint venture in which the Company accounts for under the equity
method of accounting. As of December 31, 1998, the balance of this obligation
approximated $80 million. Assets with a carrying value of approximately $100
million collateralize this obligation.
The Company is a party to legal proceedings 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
F-18
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
known by management and the advice of counsel, have a material adverse effect on
the Company's financial condition or results of operations.
12. EMPLOYEE BENEFITS PLANS AND STOCK OPTION PLAN
The Company makes contributions to several multi-employer pension plans for
employees of various subsidiaries covered by collective bargaining agreements.
These plans are not administered by the Company and contributions are determined
in accordance with provisions of negotiated labor contracts. Certain withdrawal
penalties may exist, the amount of which are not determinable at this time. The
cost of such contributions during the years ended December 31, 1998, 1997 and
1996, was approximately $500,000, $412,000 and $499,000, respectively.
The Company adopted, the 401(k) for the benefit of its non-union employees
under which participating employees may elect to contribute up to 10% of their
compensation. The Company may match an employee's elective contributions to the
401(k), subject to certain conditions, with shares of the Company's common stock
equal to up to 100% of the amount of such employee's elective contributions.
These employer contributions vest at a rate of 20% per year beginning in the
third year of employment. The cost of these contributions during the years ended
December 31, 1998, 1997 and 1996, was $430,000, $282,000 and $548,000,
respectively. The 401(k) does not require a contribution by the Company.
The Company has also adopted the Lodgian, Inc. Stock Option Plan, as
amended, (the "Option Plan"). In accordance with the Option Plan, options to
acquire up to 3,250,000 shares of common stock may be granted to employees,
directors, independent contractors and agents as determined by a committee
appointed by the Board of Directors. Options may be granted at an exercise price
not less than fair market value on the date of grant. These options will
generally vest over five years.
In addition, in August 1997 each non-employee director was awarded an option
to acquire 20,000 shares of common stock at an exercise price equal to the fair
market price on date of grant. Such options became exercisable upon date of
grant and were granted outside of the Lodgian Stock Option plan.
On December 18, 1998, the Company re-priced its options. See discussion of
impact of pending accounting pronouncement related to stock option repricings in
Note 1.
The following table indicates all options granted and their status:
<TABLE>
<CAPTION>
OPTION PRICE
-------------------------------------
<S> <C> <C>
NUMBER OF SHARES RANGE PER SHARE
----------------- ------------------
Balance December 31, 1995.................................................. 1,137,200 $ 4.00 -- $ 9.50
Granted.................................................................. 216,500 10.75 -- 16.13
Exercised................................................................ (497,800) 4.00 -- 9.50
Forfeited................................................................ (38,900) 8.63 -- 10.75
-----------------
Balance December 31, 1996.................................................. 817,000 4.00 -- 16.13
Granted.................................................................. 977,700 15.25 -- 16.81
Exercised................................................................ (86,600) 4.00 -- 10.75
Forfeited................................................................ (19,400) 8.63 -- 10.75
-----------------
Balance December 31, 1997.................................................. 1,688,700 4.00 -- 16.81
Granted.................................................................. 755,000 6.13 --
Exercised................................................................ (134,900) 4.00 -- 16.75
Forfeited................................................................ (27,900) 8.63 -- 16.75
-----------------
Balance December 31, 1998.................................................. 2,280,900 4.00 -- 6.15
-----------------
-----------------
</TABLE>
F-19
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
12. EMPLOYEE BENEFITS PLANS AND STOCK OPTION PLAN (CONTINUED)
At December 31, 1998, there were 911,280 options exercisable. The income tax
benefit, if any, associated with the exercise of stock options is credited to
additional paid-in capital.
13. CERTAIN OTHER EVENTS
In January 1996, the Company entered into an agreement with its former Chief
Executive Officer in connection with his resignation from the Company and its
Board of Directors. This agreement provided for payments totaling approximately
$830,000 over a twenty-four month period, the cost of which is included in other
operating expenses for the year ended December 31, 1996.
In March 1996, the Company received approximately $3,900,000 in connection
with the settlement of a lawsuit brought on behalf of Servico, against a bank
group and law firm, based on alleged breaches prior to 1990 of their duties to
the Company. This amount, less approximately $300,000 of associated expenses, is
included in other income for the year ended December 31, 1996.
14. SUBSEQUENT EVENTS
In March 1999, a lender released $15 million of an original $23 million
escrow initiated at the time their $265 million loan was closed. This holdback
related to future capital improvements. Simultaneously, the lender issued the
Company a commitment for $15 million to replenish this escrow at a future date
subject to the same terms and conditions as the original loan.
On March 30, 1999, the board of directors adopted a Shareholder Rights Plan
and declared one Right on each outstanding share of the Company's common stock.
The dividend will be paid on April 19, 1999 to stockholders of record on April
14, 1999. Initially the Rights will trade with the common stock of the Company
and will not be exercisable. The Right will separate from the common stock and
become exercisable upon the occurrence of events typical of shareholder rights
plans. In general, such separation will occur when any person or group of
affiliated persons acquires or makes an offer to acquire 15% or more of the
Company's common stock. Thereafter, separate Right Certificates will be
distributed and each Right will entitle its holder to purchase one-hundredth of
a share of the Company's Participating Preferred Stock for an exercise price of
$25. Each one-hundredth of a share of Preferred Stock has economic and voting
terms equivalent to those of one share of the Company's common stock.
15. OTHER SUBSEQUENT EVENTS AND SUPPLEMENTAL GUARANTOR INFORMATION
On June 1, 1999, a contractor hired by Servico to perform work on six
properties in New York, Illinois and Texas filed a summons with notice against
us in the Supreme Court of the State of New York, claiming breach of contract
and quantum meruit, among other things. The contractor is seeking damages in the
aggregate amount of $45 million. The contractor is required to file a formal
complaint.
We have filed an appearance to the summons and will vigorously defend our
position. We believe we have valid defenses and counterclaims and that any
possible outcome will not have a material adverse effect on our financial
position or results of operations.
In connection with the Company's offer to sell $200 million principal amount
of Senior Subordinated Notes due 2009 (the "Notes"), certain of the Company's
subsidiaries (the "Subsidiary Guarantors") will fully and unconditionally
guarantee, on a joint and several basis, the Company's obligations to pay
principal and interest with respect to the Notes. Each Subsidiary Guarantor is
wholly owned and management has determined that separate financial statements
for the Subsidiary Guarantors are not
F-20
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
15. OTHER SUBSEQUENT EVENTS AND SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
material to investors. The subsidiaries of the Company that are not Subsidiary
Guarantors are referred to in this note as the "Non-Guarantor Subsidiaries."
The following supplemental consolidating condensed financial statements
present balance sheets as of June 30, 1999 (Unaudited), December 31, 1998 and
1997 and statements of operations and of cash flows for the six months ended
June 30, 1999 (Unaudited) and 1998 (Unaudited) and for the years ended December
31, 1998, 1997 and 1996. In the consolidating condensed financial statements,
Lodgian, Inc. or Servico, Inc. (the "Parent") accounts for its investments in
wholly-owned subsidiaries using the equity method.
F-21
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
ASSETS PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............... $ 1,941 $ 5,944 $ 12,437 $ -- $ 20,322
Restricted cash......................... -- -- 6,127 -- 6,127
Accounts receivable, net of
allowances............................ -- 10,256 26,337 -- 36,593
Other current assets.................... 2,634 16,721 14,127 -- 33,482
------------ ----------- ------------- ------------ ------------
Total current assets...................... 4,575 32,921 59,028 -- 96,524
Property and equipment, net............... -- 329,544 1,002,978 -- 1,332,522
Deposits for capital expenditures......... -- -- 29,798 -- 29,798
Investment in consolidated entities....... 138,037 -- -- (138,037) --
Due from to affiliates.................... 138,712 (123,874) (14,838) -- --
Other assets, net......................... 21,060 31,345 8,660 -- 61,065
------------ ----------- ------------- ------------ ------------
$ 302,384 $ 269,936 $ 1,085,626 $ (138,037) $1,519,909
------------ ----------- ------------- ------------ ------------
------------ ----------- ------------- ------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable, trade................. $ 120 $ 9,196 $ 38,440 $ -- $ 47,756
Accrued liabilities..................... -- 16,967 35,720 -- 52,687
Current portion long-term obligations... -- 18,829 17,281 -- 36,110
------------ ----------- ------------- ------------ ------------
Total current liabilities................. 120 44,992 91,441 -- 136,553
Long-term obligations, less current
portion................................. 7,722 245,171 580,549 -- 833,442
Deferred income taxes..................... 1,923 (5,273) 71,352 -- 68,002
Minority interests:
Preferred redeemable securities......... -- -- 175,000 -- 175,000
Other................................... -- -- 15,922 -- 15,922
Stockholder's equity:
Common stock............................ 278 34 672 (706) 278
Additional paid-in capital.............. 262,436 10,184 538 (10,722) 262,436
Retained earnings (accumulated
deficit).............................. 29,905 (23,543) 141,979 (118,436) 29,905
Members' equity......................... -- -- 8,173 (8,173) --
Accumulated other comprehensive loss.... -- (1,629) -- -- (1,629)
------------ ----------- ------------- ------------ ------------
Total stockholders' equity................ 292,619 (14,954) 151,362 (138,037) 280,990
------------ ----------- ------------- ------------ ------------
Total liabilities and stockholders'
equity.................................. $ 302,384 $ 269,936 $ 1,085,626 $ (138,037) $1,519,909
------------ ----------- ------------- ------------ ------------
------------ ----------- ------------- ------------ ------------
</TABLE>
F-22
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
ASSETS PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 1,648 $ 5,864 $ 11,673 $ -- $ 19,185
Restricted cash............................ -- -- 6,302 -- 6,302
Accounts receivable, net of allowances..... -- 6,228 19,270 -- 25,498
Other current assets....................... 3,023 31,495 (6,562) -- 27,956
---------- ----------- ------------- ------------ ------------
Total current assets......................... 4,671 43,587 30,683 -- 78,941
Property and equipment, net.................. -- 336,556 980,914 -- 1,317,470
Deposits for capital expenditures............ -- -- 30,386 -- 30,386
Investment in consolidated entities.......... 74,056 -- -- (74,056) --
Due from (to) affiliates..................... 178,948 (145,507) (33,441) -- --
Other assets, net............................ 38,095 24,121 8,908 -- 71,124
---------- ----------- ------------- ------------ ------------
$ 295,770 $ 258,757 $ 1,017,450 $ (74,056) $1,497,921
---------- ----------- ------------- ------------ ------------
---------- ----------- ------------- ------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable, trade.................... $ 132 $ 11,054 $ 46,067 $ -- $ 57,253
Accrued liabilities........................ -- 11.852 38,781 -- 50,633
Current portion long-term obligations...... -- 829 35,305 -- 36,134
---------- ----------- ------------- ------------ ------------
Total current liabilities.................... 132 23,735 120,153 -- 144,020
Long-term obligations, less current
portion.................................... 7,722 258,462 550,460 -- 816,644
Deferred income taxes........................ 2,556 (6,533) 67,446 -- 63,469
Minority interests:
Preferred redeemable securities............ -- -- 175,000 -- 175,000
Other...................................... -- -- 15,021 -- 15,021
Stockholder's equity:
Common stock............................... 278 34 492 (526) 278
Additional paid-in capital................. 261,976 9,687 718 (10,405) 261,976
Retained earnings (accumulated deficit).... 23,106 (25,035) 79,987 (54,952) 23,106
Members equity............................. -- -- 8,173 (8,173) --
Accumulated other comprehensive loss....... -- (1,593) -- -- (1,593)
---------- ----------- ------------- ------------ ------------
Total stockholders' equity................... 285,360 (16,907) 89,370 (74,056) 283,767
---------- ----------- ------------- ------------ ------------
Total liabilities and stockholders' equity... $ 295,770 $ 258,757 $ 1,017,450 $ (74,056) $1,497,921
---------- ----------- ------------- ------------ ------------
---------- ----------- ------------- ------------ ------------
</TABLE>
F-23
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
<CAPTION>
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................. $ 14,208 $ 1,811 $ (776) $ -- $ 15,243
Restricted cash........................... -- -- -- -- --
Accounts receivable, net of allowances.... -- 4,539 6,484 -- 11,023
Other current assets...................... 2,344 4,071 9.223 -- 15,638
----------- ----------- ------------- ------------ ------------
Total current assets........................ 16,552 10,421 14,931 -- 41,904
Property and equipment, net................. -- 245,083 288,997 -- 534,080
Deposits for capital expenditures........... -- 25,467 5,434 -- 30,901
Due from (to) affiliates.................... 212,806 (117,222) (95,584) -- --
Investment in consolidated entities......... 3,715 -- -- (3,715) --
Other assets, net........................... 11,779 8,951 36 -- 20,766
----------- ----------- ------------- ------------ ------------
$ 244,852 $ 172,700 $ 213,814 $ (3,715) $ 627,651
----------- ----------- ------------- ------------ ------------
----------- ----------- ------------- ------------ ------------
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable, trade................... $ 4 $ 2,925 $ 4,614 $ -- $ 7,543
Accrued liabilities....................... 989 10,390 15,976 -- 27,355
Current portion long-term obligations..... 79 930 4,719 -- 5,728
----------- ----------- ------------- ------------ ------------
Total current liabilities................... 1,072 14,245 25,309 -- 40,626
Long-term obligations, less current
portion................................... 986 162,937 159,397 -- 323,320
Deferred income taxes....................... 2,680 347 7,588 -- 10,615
Minority interests.......................... -- -- 13,555 -- 13,555
Stockholder's equity:
Common stock.............................. 210 32 488 (520) 210
Additional paid-in capital................ 211,577 9,685 538 (10,223) 211,577
Retained earnings (accumulated deficit)... 28,327 (13,967) 6,939 7,028 28,327
Accumulated other comprehensive loss...... -- (579) -- -- (579)
----------- ----------- ------------- ------------ ------------
Total stockholders' equity.................. 240,114 (4,829) 7,965 (3,715) 239,535
----------- ----------- ------------- ------------ ------------
Total liabilities and stockholders' equity.. $ 244,852 $ 172,700 $ 213,814 $ (3,715) $ 627,651
----------- ----------- ------------- ------------ ------------
----------- ----------- ------------- ------------ ------------
</TABLE>
F-24
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues
Rooms....................................... $ -- $ 64,915 $ 146,748 $ -- $ 211,663
Food and beverage........................... -- 23,155 45,971 -- 69,126
Other....................................... -- 4,766 10,112 -- 14,878
--------- ----------- ------------- ------------ ------------
Total revenues.......................... -- 92,836 202,831 -- 295,667
--------- ----------- ------------- ------------ ------------
Operating expenses
Direct:
Rooms..................................... -- 17,715 39,407 -- 57,122
Food and beverage......................... -- 16,771 33,770 -- 50,541
Other hotel operating expenses............ -- 2,667 5,549 -- 8,216
General and administrative.................. -- -- 11,367 -- 11,367
Depreciation and amortization............... -- 8,535 18,965 -- 27,500
Other....................................... 29,470 55,673 85,143
--------- ----------- ------------- ------------ ------------
Total operating expenses................ -- 75,158 164,731 -- 239,889
--------- ----------- ------------- ------------ ------------
Income from operations........................ -- 17,678 38,100 -- 55,778
Other income (expenses):
Other income................................ -- (78) 895 -- 817
Interest expense............................ -- (14,506) (22,633) -- (37,139)
Equity in earnings of consolidated
subsidiaries.............................. 11,332 -- -- (11,332)
Minority interests:
Preferred redeemable securities............. -- -- (6,814) -- (6,814)
Other....................................... -- -- (1,310) -- (1,310)
--------- ----------- ------------- ------------ ------------
Income before income taxes.................... 11,332 3,094 8,238 (11,332) 11,332
Provision for income taxes.................... 4,533 1,238 3,295 (4,533) 4,533
--------- ----------- ------------- ------------ ------------
Net Income.................................... $ 6,799 $ 1,856 $ 4,943 $ (6,799) $ 6,799
--------- ----------- ------------- ------------ ------------
--------- ----------- ------------- ------------ ------------
</TABLE>
F-25
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES CONSOLIDATED
--------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net cash flows operating activities.......................... $ -- $ 10,888 $ 9,398 $ 20,286
Investing activities:
Acquisitions of property and equipment..................... -- -- (1,929) (1,929)
Capital improvements, net.................................. -- (1,425) (42,834) (44,259)
Net deposits for capital expenditures...................... -- 8,241 (7,653) 588
Net proceeds from sale of assets............................. -- -- 11,100 11,100
--------- ----------- ------------- ------------
Net cash flows from investing activities:.................... -- 6,816 (41,316) (34,500)
Financing activities:
Proceeds from issuance of long-term obligations............ -- 15,000 14,640 29,640
Principal payments of long-term obligations................ -- (2,821) (10,045) (12,866)
Proceeds from issuance of common stock..................... 60 -- -- 60
Proceeds from related parties, net......................... 233 (29,103) 28,870 --
(Distributions to) contributions from minority interest.... -- -- (123) (123)
Payment of deferred loan costs............................. -- (700) (660) (1,360)
--------- ----------- ------------- ------------
Net cash flows from financing activities..................... 293 (17,624) 32,682 15,351
--------- ----------- ------------- ------------
Change in cash and cash equivalents.......................... 293 80 764 1,137
Cash and cash equivalents at beginning of period............. 1,648 5,864 11,673 19,185
--------- ----------- ------------- ------------
Cash and cash equivalents at end of period................... $ 1,941 $ 5,944 $ 12,437 $ 20,322
--------- ----------- ------------- ------------
--------- ----------- ------------- ------------
</TABLE>
F-26
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms....................................... $ -- $ 55,578 $ 69,183 $ -- $ 124,761
Food and beverage........................... -- 20,633 29,907 -- 50,540
Other....................................... -- 4,744 5,224 -- 9,968
--------- ----------- ------------- ------------ ------------
Total revenues.......................... -- 80,955 104,314 -- 185,269
--------- ----------- ------------- ------------ ------------
Operating expenses:
Direct:
Rooms..................................... -- 15,572 18,500 -- 34,072
Food and beverage......................... -- 15,697 22,763 -- 38,460
Other..................................... -- 2,638 2,680 -- 5,318
General and administrative.................. -- -- 4,829 -- 4.829
Depreciation and amortization............... -- 6,079 8,679 -- 14,758
Other hotel operating expenses.............. -- 26,563 27,071 -- 53,634
--------- ----------- ------------- ------------ ------------
Total operating expenses................ -- 66,549 84,522 -- 151,071
--------- ----------- ------------- ------------ ------------
Income from operations........................ -- 14,406 19,792 -- 34,196
Other income (expenses):
Other income................................ -- -- 268 -- 268
Interest expense............................ -- (7,682) (8,450) -- (16,132)
Equity in earnings of consolidated
subsidiaries.............................. 17,200 -- -- 17,200 --
Minority interests............................
Preferred redeemable securities............. -- -- (311) -- (311)
Other -- -- (823) -- (823)
--------- ----------- ------------- ------------ ------------
Income before income taxes and extraordinary
item........................................ 17,200 6,724 10,476 (17,200) 17,200
Provision for income taxes.................... 6,880 2,690 4,190 (6,880) 6,880
--------- ----------- ------------- ------------ ------------
Income before extraordinary item.............. 10,320 4,034 6,286 (10,320) 10,320
Extraordinary item, net of taxes.............. -- -- (1,095) -- (1,095)
--------- ----------- ------------- ------------ ------------
Net income.................................... $ 10,320 $ 4,034 $ 5,191 $ (10,320) $ 9,225
--------- ----------- ------------- ------------ ------------
--------- ----------- ------------- ------------ ------------
</TABLE>
F-27
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES CONSOLIDATED
---------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net cash flows from operating activities................... $ 4,939 $ 10,095 $ 18,276 $ 33,310
Investing activities:
Acquisitions of property and equipment................... -- (36,950) (16,541) (53,491)
Capital improvements, net................................ -- (12,423) (17,372) (29,795)
Net deposits for capital expenditures.................... -- 14,614 1,127 15,741
Net proceeds from sale of assets......................... -- -- 2,373 2,373
Other.................................................... -- -- 1,361 1,361
---------- ----------- ------------- ------------
Net cash flows from investing activities:.................. -- (34,759) (29,052) (63,811)
Financing activities:
Proceeds from issuance of long-term obligations.......... 6,963 48,475 179,265 234,703
Principal payments of long-term obligations.............. -- (88,070) (70,664) (158,734)
Proceeds from issuance of common stock................... 977 -- -- 977
Contributions from minority interest..................... -- -- 142 142
Payments of deferred loans costs......................... -- -- (7,151) (7,151)
Repurchase of common stock............................... (15,644) -- -- (15,644)
Proceeds from related parties, net....................... 16,894 65,430 82,324 --
---------- ----------- ------------- ------------
Net cash flows from financing activities................... 9,190 25,835 19,268 54,293
---------- ----------- ------------- ------------
Change in cash and cash equivalents........................ 14,129 1,171 8,492 23,792
Cash and cash equivalents at beginning of period........... 14,208 1,811 (776) 15,243
---------- ----------- ------------- ------------
Cash and cash equivalents at end of period................. $ 28,337 $ 2,982 $ 7,716 $ 39,035
---------- ----------- ------------- ------------
---------- ----------- ------------- ------------
</TABLE>
F-28
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms....................................... $ -- $ 118,041 $ 149,821 $ -- $ 267,862
Food and beverage........................... -- 42,849 64,485 -- 107,334
Other....................................... -- 9,633 10,385 -- 20,018
--------- ----------- ------------- ------ ------------
Total revenues............................ -- 170,523 224,691 -- 395,214
--------- ----------- ------------- ------ ------------
Operating expenses:
Direct:
Rooms..................................... -- 34,001 41,315 -- 75,316
Food and beverage......................... -- 32,891 48,752 -- 81,643
General and administrative.................. 527 -- 9,553 -- 10,080
Other....................................... 435 63,174 66,341 -- 129,950
Depreciation and amortization............... -- 12,550 18,564 -- 31,114
--------- ----------- ------------- ------ ------------
Total operating expenses.................. 962 142,616 184,525 -- 328,103
--------- ----------- ------------- ------ ------------
(Loss) income from operations................. (962) 27,907 40,166 -- 67,111
Other income (expenses):
Other income................................ 2,864 -- (2,036) -- 828
Other expenses.............................. -- (29,033) (5,859) -- (34,892)
Interest expense............................ (1,557) (16,079) (12,742) -- (30,378)
Equity in loss of consolidated
subsidiaries.............................. (5,587) -- -- 5,587 --
Minority interests:
Preferred redeemable securities............. -- -- (6,475) -- (6,475)
Other....................................... -- -- (1,436) -- (1,436)
--------- ----------- ------------- ------ ------------
(Loss) income before income taxes and
extraordinary item.......................... (5,242) (17,205) 11,618 5,587 (5,242)
(Benefit) provision for income taxes.......... (2,097) (6,882) 4,647 2,235 (2,097)
--------- ----------- ------------- ------ ------------
(Loss) income before extraordinary items...... (3,145) (10,323) 6,971 3,352 (3,145)
--------- ----------- ------------- ------ ------------
Extraordinary items, net of taxes............. -- -- (2,076) -- (2,076)
--------- ----------- ------------- ------ ------------
Net (loss) income............................. $ (3,145) $ (10,323) $ 4,895 $ 3,352 $ (5,221)
--------- ----------- ------------- ------ ------------
--------- ----------- ------------- ------ ------------
</TABLE>
F-29
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES CONSOLIDATED
--------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net cash flows from operating activities.................... $ 20,394 $ 9,529 ($ 622) 29,301
Investing activities:
Acquisitions of property and equipment.................. -- (56,589) (11,128) (67,717)
Capital improvements, net............................... -- (47,434) (71,233) (118,667)
Other................................................... -- 25,467 (21,607) 3,860
--------- ----------- ------------- ------------
Net cash flows from investing activities.................... -- (78,556) (103,968) (182,524)
Financing activities:
Proceeds from issuance of long-term obligations......... 6,736 251,662 341,886 600,284
Principal payments of long-term obligations............. -- (162,937) (227,089) (390,026)
Other................................................... (39,690) (15,645) 2,242 (53,093)
--------- ----------- ------------- ------------
Net cash flows from financing activities.................... (32,954) 73,080 117,039 157,165
--------- ----------- ------------- ------------
Change in cash and cash equivalents......................... (12,560) 4,053 12,449 3,942
Cash and cash equivalents at beginning of year.............. 14,208 1,811 (776) 15,243
--------- ----------- ------------- ------------
Cash and cash equivalents at end of year.................... $ 1,648 $ 5,864 $ 11,673 $ 19,185
--------- ----------- ------------- ------------
--------- ----------- ------------- ------------
</TABLE>
F-30
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms.................................... $ -- $ 62,618 $ 117,338 $ -- $ 179,956
Food and beverage........................ -- 24,629 55,706 -- 80,335
Other.................................... -- 5,135 11,231 -- 16,366
----------- ----------- ------------- ------------ ------------
Total revenues......................... -- 92,382 184,275 -- 276,657
----------- ----------- ------------- ------------ ------------
Operating expenses:
Direct:
Rooms.................................. -- 17,338 32,270 -- 49,608
Food and beverage...................... -- 18,911 42,008 -- 60,919
General and administrative............... 424 -- 8,549 -- 8,973
Other.................................... 283 31,694 56,059 -- 88,036
Depreciation and amortization............ -- 8,022 15,001 -- 23,023
----------- ----------- ------------- ------------ ------------
Total operating expenses............... 707 75,965 153,887 -- 230,559
----------- ----------- ------------- ------------ ------------
(Loss) income from operations.............. (707) 16,417 30,388 -- 46,098
Other income (expenses):
Other income............................. 1,928 (6,850) 6,642 -- 1,720
Interest expense......................... (8) (9,972) (15,929) -- (25,909)
Equity in earnings of consolidated
subsidiaries........................... 19,736 -- -- (19,736) --
Minority interests......................... -- -- (960) -- (960)
----------- ----------- ------------- ------------ ------------
Income (loss) before income taxes and
extraordinary item....................... 20,949 (405) 20,141 (19,736) 20,949
Provision (benefit) for income taxes....... 8,380 (162) 8,056 (7,895) 8,379
----------- ----------- ------------- ------------ ------------
Income (loss) before extraordinary item.... 12,569 (243) 12,085 (11,841) 12,570
Extraordinary item, net of taxes........... -- -- (3,751) -- (3,751)
----------- ----------- ------------- ------------ ------------
Net income (loss).......................... $ 12,569 $ (243) $ 8,334 $ (11,841) $ 8,819
----------- ----------- ------------- ------------ ------------
----------- ----------- ------------- ------------ ------------
</TABLE>
F-31
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES CONSOLIDATED
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net cash flows from operating activities.................. $ (152,267) $ 118,520 $ 75,768 $ 42,021
Investing activities:
Acquisitions of property and equipment................ -- (118,700) (24,706) (143,406)
Capital improvements, net............................. -- (11,007) (37,245) (48,252)
Other................................................. -- (23,420) (5,588) (29,008)
----------- ----------- ------------- ------------
Net cash flows from investing activities.................. -- (153,127) (67,539) (220,666)
Financing activities:
Proceeds from issuance of long-term obligations....... -- 64,989 126,571 191,560
Principal payments of long-term obligations........... (6,387) (26,644) (134,616) (167,647)
Proceeds from issuance of common stock................ 156,638 -- -- 156,638
Other................................................. (31) (2,749) (3,356) (6,136)
----------- ----------- ------------- ------------
Net cash flows from financing activities.................. 150,220 35,596 (11,401) 174,415
----------- ----------- ------------- ------------
Change in cash and cash equivalents....................... (2,047) 989 (3,172) (4,230)
Cash and cash equivalents at beginning of year............ 16,255 822 2,396 19,473
----------- ----------- ------------- ------------
Cash and cash equivalents at end of year.................. $ 14,208 $ 1,811 $ (776) $ 15,243
----------- ----------- ------------- ------------
----------- ----------- ------------- ------------
</TABLE>
F-32
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms....................................... $ -- $ 53,642 $ 102,922 $ -- $ 156,564
Food and beverage........................... -- 20,916 47,887 -- 68,803
Other....................................... -- 3,987 10,172 -- 14,159
--------- ----------- ------------- ------------ ------------
Total revenues............................ -- 78,545 160,981 -- 239,526
--------- ----------- ------------- ------------ ------------
Operating expenses:
Direct:
Rooms..................................... -- 15,115 28,552 -- 43,667
Food and beverage......................... -- 16,016 36,745 -- 52,761
General and administrative.................. 546 -- 8,751 -- 9,297
Other....................................... 646 26,016 50,521 -- 77,183
Depreciation and amortization............... -- 6,551 12,126 -- 18,677
--------- ----------- ------------- ------------ ------------
Total operating expenses.................. 1,192 63,698 136,695 -- 201,585
--------- ----------- ------------- ------------ ------------
(Loss) income from operations................. (1,192) 14,847 24,286 -- 37,941
Other income (expenses):
Other income................................ 1,949 (2,005) 5,391 -- 5,335
Interest expense............................ (169) (13,196) (16,078) -- (29,443)
Equity in earnings of consolidated
subsidiaries.............................. 11,185 -- -- (11,185) --
Minority interests............................ -- -- (2,060) -- (2,060)
--------- ----------- ------------- ------------ ------------
Income (loss) before income taxes and
extraordinary item.......................... 11,773 (354) 11,539 (11,185) 11,773
Provision (benefit) for income taxes.......... 4,709 (141) 3,131 (4,474) 3,225
--------- ----------- ------------- ------------ ------------
Income (loss) before extraordinary item....... 7,064 (213) 8,408 (6,711) 8,548
Extraordinary item, net of tax................ -- -- (348) -- (348)
--------- ----------- ------------- ------------ ------------
Net income (loss)............................. $ 7,064 $ (213) $ 8,060 $ (6,711) $ 8,200
--------- ----------- ------------- ------------ ------------
--------- ----------- ------------- ------------ ------------
</TABLE>
F-33
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR TOTAL
PARENT GUARANTORS SUBSIDIARIES CONSOLIDATED
--------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net cash flows from operating activities.................... $ 7,741 ($ 9,189) $ 32,418 $ 30,970
Investing activities:
Acquisitions of property and equipment.................. -- (7,100) (63,212) (70,312)
Capital Improvements, net............................... -- (7,741) (18,582) (26,323)
Other................................................... -- 726 (1,648) (922)
--------- ----------- ------------- ------------
Net cash flows from investing activities.................... -- (14,115) (83,442) (97,557)
Financing activities:
Proceeds from issuance of long-term obligations......... 343 56,868 109,106 166,317
Principal payments of long-term obligations............. -- (22,128) (70,088) (92,216)
Other................................................... 5,074 (11,400) 6,884 558
--------- ----------- ------------- ------------
Net cash flows from financing activities.................... 5,417 23,340 45,902 74,659
--------- ----------- ------------- ------------
Change in cash and cash equivalents......................... 13,158 36 (5,122) 8,072
Cash and cash equivalents at beginning of year.............. 3,097 786 7,518 11,401
--------- ----------- ------------- ------------
Cash and cash equivalents at end of year.................... $ 16,255 $ 822 $ 2,396 $ 19,473
--------- ----------- ------------- ------------
--------- ----------- ------------- ------------
</TABLE>
F-34
<PAGE>
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.
PRICEWATERHOUSECOOPERS LLP
Atlanta, Georgia
April 10, 1998, except
for Note 9 as to which
the date is December 11, 1998
F-35
<PAGE>
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
CONSOLIDATED AND COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 864 $ 10,877 $ 5,199
Cash, restricted.......................................................... 4,687 5,271 --
Accounts receivable, net.................................................. 8,078 5,886 2,583
Inventories............................................................... 607 585 335
Other current assets...................................................... 4,094 2,807 310
----------- ---------- ----------
Total current assets.................................................... 18,330 25,426 8,427
Property and equipment, net................................................. 426,637 378,204 175,910
Other assets, net........................................................... 18,152 14,150 7,329
----------- ---------- ----------
$ 463,119 $ 417,780 $ 191,666
----------- ---------- ----------
----------- ---------- ----------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable.......................................................... $ 23,548 $ 15,156 $ 8,463
Accrued liabilities....................................................... 9,003 9,031 6,429
Accrued merger related costs.............................................. 2,900 1,200 --
Current portion of long-term obligations.................................. -- -- 1,163
----------- ---------- ----------
Total current liabilities............................................... 35,451 25,387 16,055
Long-term obligations, less current portion................................. 400,071 355,236 155,851
Commitments and contingencies............................................... -- -- --
Minority interests.......................................................... 248 187 --
Equity:
Impac Hotel Group, L.L.C. and Predecessors:
Partners' and stockholders' equity...................................... -- -- 18,798
Members' equity......................................................... 33,613 41,559 --
Impac Hotel Development, Inc.:
Stockholders' equity (deficit).......................................... (6,264) (4,589) 962
----------- ---------- ----------
Total equity.......................................................... 27,349 36,970 19,760
----------- ---------- ----------
$ 463,119 $ 417,780 $ 191,666
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-36
<PAGE>
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995
--------- ---------- ---------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Rooms.................................................. $ 57,608 $ 39,873 $ 90,139 $ 52,043 $ 42,442
Food and beverage...................................... 14,072 10,498 23,429 11,813 9,800
Other.................................................. 4,204 2,459 6,291 3,957 3,334
--------- ---------- ---------- --------- ---------
Total revenue........................................ 75,884 52,830 119,859 67,813 55,576
--------- ---------- ---------- --------- ---------
Operating expenses:
Direct:
Rooms................................................ 14,054 10,419 28,303 16,840 12,965
Food and beverage.................................... 11,403 8,455 19,322 9,734 7,365
Other:
Administrative and general........................... 5,756 3,451 10,212 4,306 2,439
Property management.................................. 7,550 5,655 13,273 7,642 5,517
Advertising and promotion............................ 7,351 4,004 9,064 3,415 2,880
Utilities............................................ 4,007 3,172 7,143 4,140 3,286
Repairs and maintenance.............................. 3,981 3,023 6,573 3,455 3,289
Depreciation and amortization........................ 7,367 4,894 11,136 5,814 3,978
Property taxes and insurance......................... 3,407 2,431 4,779 2,957 2,214
Other................................................ 2,591 3,061 4,114 3,338 3,836
--------- ---------- ---------- --------- ---------
Total operating expenses........................... 67,467 48,565 113,919 61,641 47,769
--------- ---------- ---------- --------- ---------
Income from operations................................... 8,417 4,265 5,940 6,172 7,807
Other income (expenses):
Other income, primarily gain on sale of hotels......... 184 22 271 19,701 5,049
Minority interests..................................... (61) (6) 220 -- --
Interest expense....................................... (14,170) (8,870) (21,265) (11,809) (7,237)
Merger related costs................................... (3,084) -- (1,255) -- --
--------- ---------- ---------- --------- ---------
Total other income (expenses)...................... (17,131) (8,854) (22,029) 7,892 (2,188)
--------- ---------- ---------- --------- ---------
Income (loss) before extraordinary item.................. (8,714) (4,589) (16,089) 14,064 5,619
Extraordinary item--
Loss on extinguishment of indebtedness................. -- (13,332) (13,332) -- --
--------- ---------- ---------- --------- ---------
Net income (loss)........................................ $ (8,714) $ (17,921) $ (29,421) $ 14,064 $ 5,619
--------- ---------- ---------- --------- ---------
--------- ---------- ---------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-37
<PAGE>
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
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'
STOCKHOLDERS' MEMBERS' EQUITY
EQUITY EQUITY (DEFICIT) 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 (unaudited)................................... -- (8,039) (675) (8,714)
Issuance of membership units, net (unaudited).......... -- 93 -- 93
Distributions to members (unaudited)................... -- -- (1,000) (1,000)
------------ ---------- -------- ----------
Balance at June 30, 1998 (unaudited)..................... $ -- $ 33,613 $ (6,264) $ 27,349
------------ ---------- -------- ----------
------------ ---------- -------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-38
<PAGE>
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ -----------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Operating activities:
Net income (loss)........................................ $ (8,714) $ (17,921) $ (29,421) $ 14,064 $ 5,619
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization.......................... 7,367 4,894 11,136 5,814 3,978
Minority interest...................................... 61 6 (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.................................. (2,192) (6,120) (3,303) (109) 713
Inventories.......................................... (22) (250) (250) (66) (45)
Other assets......................................... (1,287) (642) (1,853) (441) (2,543)
Accounts payable and accrued expenses................ 10,064 6,302 11,255 4,151 5,280
----------- ----------- ----------- ---------- ----------
Net cash provided by (used in) operating
activities....................................... 5,277 (399) 676 4,044 7,648
----------- ----------- ----------- ---------- ----------
Investing activities:
Acquisition and development of hotel properties.......... (16,692) (84,675) (148,094) (60,860) (29,708)
Capital improvements..................................... (38,734) (32,760) (41,949) (50,463) (27,610)
Deposit on hotel purchase................................ (4,165) -- -- -- --
Proceeds from sales of hotel properties.................. 55,494 18,972
Cash, restricted......................................... 584 (4,535) (5,271) -- --
Loans to members......................................... -- (585) (960) -- --
Loans to partners........................................ -- -- -- (973) (227)
----------- ----------- ----------- ---------- ----------
Net cash used in investing activities.............. (59,007) (122,555) (196,274) (56,802) (38,573)
----------- ----------- ----------- ---------- ----------
Financing activities:
Proceeds from issuance of long-term obligations.......... 44,835 294,970 354,957 83,151 45,084
Payments of deferred loan costs.......................... -- (8,624) (12,391) (2,366) (1,451)
Payments of franchise fees and other deferred costs...... (211) (307) (453) (688) (197)
Capital contributions, net............................... 93 11,752 37,810 22,025 13,024
Equity distributions..................................... (1,000) (3,368) (7,619) (28,764) (10,385)
Repayment of long-term obligations....................... -- (156,214) (156,695) (19,815) (13,245)
Retirement of membership units........................... -- (5,300) (5,300) -- --
Prepayment penalties..................................... -- (8,640) (8,640) -- --
Contribution by joint venture partner.................... -- 407 407 -- --
Loan from members........................................ -- -- -- -- --
Repayment of related party loans......................... -- (800) (800) -- --
Proceeds from issuance of related party notes............ -- -- -- 400 400
----------- ----------- ----------- ---------- ----------
Net cash provided by financing activities.......... 43,717 123,876 201,276 53,943 33,230
----------- ----------- ----------- ---------- ----------
Net change in cash and cash equivalents.................... (10,013) 922 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................. $ 864 $ 6,121 $ 10,877 $ 5,199 $ 4,014
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Supplemental disclosures of cash flow information--
Cash payments for interest............................... $ 15,708 $ 9,447 $ 21,370 $ 12,633 $ 6,938
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-39
<PAGE>
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,
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%; 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 management of the hotels, the Cole family controlled each of the
Predecessors. On February 26, 1997 Impac 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 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 interests in the Predecessor entities. 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 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.
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
F-40
<PAGE>
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)
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 and IHD
are presented on a combined basis due to the common control that existed during
those periods. 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.
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.
F-41
<PAGE>
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)
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 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.
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.
RECLASSIFICATIONS
Certain amounts from prior years have been reclassified to conform with the
June 30, 1998 presentation.
F-42
<PAGE>
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
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
USEFUL LIVES ----------- ----------------------
(YEARS) 1998 1997 1996
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Land...................................... $ 60,606 $ 60,012 $ 30,981
Buildings and improvements................ 35-39 265,436 231,710 112,079
Furnishings and equipment................. 5-15 58,753 55,709 28,490
----- ----------- ---------- ----------
384,795 347,431 171,550
Less accumulated depreciation............. (28,853) (21,860) (11,410)
----------- ---------- ----------
355,942 325,571 160,140
Construction in progress.................. 70,695 52,633 15,770
----------- ---------- ----------
$ 426,637 $ 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 a cost of approximately $50 million.
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-43
<PAGE>
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>
DECEMBER 31,
JUNE 30, --------------------
1998 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Salaries and related costs................................... 2,150 $ 2,750 $ 1,960
Real estate taxes............................................ 1,832 1,486 468
Interest..................................................... 2,021 2,042 1,090
Advanced deposits............................................ 444 263 246
Sales taxes.................................................. 1,454 1,813 1,751
Other........................................................ 1,102 677 914
----------- --------- ---------
$ 9,003 $ 9,031 $ 6,429
----------- --------- ---------
----------- --------- ---------
</TABLE>
4. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
(UNAUDITED)
Credit facility with a financial institution............ $ 298,075 $ 265,262 $ --
Subordinated promissory note payable to a bank.......... 78,500 71,018 --
Other mortgages and notes............................... 23,496 18,956 156,214
Loans to a related party................................ -- -- 800
----------- ---------- ----------
400,071 355,236 157,014
Less: current portion of long-term obligations.......... -- -- 1,163
----------- ---------- ----------
$ 400,071 $ 355,236 $ 155,851
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
F-44
<PAGE>
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 June 30, 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>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
(UNAUDITED)
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....................................... 137,245 107,727
Loan, totaling $100 million, with interest at LIBOR
plus 2.75%, maturing in 2001, and requiring interest
only payments to maturity....................................... 28,371 25,076
----------- ------------
$ 298,075 $ 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.
SUBORDINATED PROMISSORY NOTE
Impac has a subordinated promissory note ("Note") with a bank totaling $78.5
million which is subordinated to the Facility agreement. Advances on the Note,
totaling $78.5 and $71 million at June 30, 1998 and December 31, 1997,
respectively, 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
F-45
<PAGE>
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)
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 $19.1 million
(unaudited), $14.6 million and $156.2 million at June 30, 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%.
Impac also has two promissory notes totaling $4.4 million at June 30, 1998
(unaudited) 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.
F-46
<PAGE>
IMPAC HOTEL GROUP, L. L. C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. EQUITY
Equity consisted of the following (in thousands except share amounts):
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------
1998 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Impac Hotel Group, L.L.C. and Predecessors:
Member units, 11,559,527 issued and outstanding.......... $ 33,613 $ 41,559 $ --
Partners' and Stockholders' equity....................... -- -- 18,798
----------- --------- ---------
33,613 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......................................... (5,146) (4,471) (1,460)
Loans to members......................................... (1,570) (1,570) --
Loans to partners........................................ -- -- (1,200)
----------- --------- ---------
(6,264) (4,589) 962
----------- --------- ---------
Total.................................................... $ 27,349 $ 36,970 $ 19,760
----------- --------- ---------
----------- --------- ---------
</TABLE>
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
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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 (CONTINUED)
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.
8. RELATED PARTY TRANSACTIONS
IHD loaned certain employees funds to purchase units in Impac. Such loans
are included as a component of stockholders' equity in the consolidated and
combined financial statements. Certain of these loans to members of
approximately $590,000 were satisfied through a charge to administrative and
general expenses during 1997.
IHD incurred fees of approximately $100,000, $580,000, $160,000 and $575,000
during six months ended June 30, 1998 and the years ended December 31, 1997,
1996 and 1995, respectively, 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 EVENTS
On December 11, 1998, Servico merged with Impac and IHD in a transaction
accounted for under the purchase method of accounting, pursuant to APB 16,
"Business Combinations" whereby Servico is considered the acquiring company.
Under the terms of the Amended and Restated Agreement and Plan of Merger (the
"Merger Agreement"), Servico's existing shareholders received one share of
Lodgian common stock for each of Servico stock held by them (approximately
18,440,000 million shares). The purchase price of Impac and IHD approximated
$104,367,000, consisting of $15 million in cash, the issuance of 9.4 million
shares of common stock of Lodgian at $8.80, of which 1.4 million shares are
contingent upon the completion of construction of five hotels, and acquisition
related costs of approximately $6,647,000.
The Company has incurred legal, accounting, consulting and investment
bankers fees relating to the proposed merger totaling $3,084,000 (unaudited)
during the six months ended June 30, 1998 and $1,255,000 during the year ended
December 31, 1997. Approximately $2,900,000 (unaudited) and $1,200,000 of these
expenses are unpaid and included in accrued merger costs on the accompanying
balance sheet as of June 30, 1998 and December 31, 1997, respectively. In
addition, the Company, upon completion of the merger, owed investment bankers an
additional amount totaling $2,100,000. This amount has not been accrued in the
accompanying financial statements.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION OR TO MAKE ANY
REPRESENTATION TO YOU THAT IS NOT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. YOU SHOULD NOT UNDER ANY CIRCUMSTANCES ASSUME THAT THE INFORMATION IN
THIS PROSPECTUS IS CORRECT ON ANY DATE AFTER THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary........................................ 5
Risk Factors................................... 18
Use of Proceeds................................ 27
Capitalization................................. 28
Unaudited Pro Forma Consolidated Financial
Data......................................... 29
Selected Historical Financial Information of
Lodgian...................................... 32
Selected Historical Financial Information of
Impac........................................ 35
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 36
The Exchange Offer............................. 47
Business....................................... 55
Management..................................... 68
Security Ownership of Certain Beneficial Owners
and Management............................... 74
Certain Relationships and Related
Transactions................................. 76
Description of Certain Indebtedness and
Preferred Stock.............................. 77
Description of the Notes....................... 89
Certain U.S. Federal Tax Considerations........ 126
Plan of Distribution........................... 129
Legal Matters.................................. 130
Experts........................................ 130
Index to Consolidated Financial Statements..... F-1
</TABLE>
UNTIL (40 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
LODGIAN FINANCING CORP.
EXCHANGE OFFER
FOR
12 1/4% SENIOR SUBORDINATED NOTES
DUE 2009
GUARANTEED BY:
LODGIAN, INC.
AND THE SUBSIDIARIES OF
LODGIAN FINANCING CORP.
---------------------
PROSPECTUS
---------------------
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- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of Delaware
(the "DGCL") empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or complete
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, 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 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 cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, 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 and except that no indemnification may be made
in respect to 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 or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Section 145 of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) or in
the 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; that indemnification or advancement of expenses
provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him or 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 liabilities
under Section 145.
The Certificates of Incorporation of Lodgian Financing Corp. ("Lodgian
Financing"), Lodgian, Inc. ("Lodgian"), Servico Ft. Pierce, Inc., Servico
Pensacola 7200, Inc., Servico Pensacola 7330, Inc., and Servico Pensacola, Inc.,
and AMIOP Acquisition Corp. (the general partner of the AMI Operating Partners,
L.P., a Delaware limited partnership), each a Delaware corporation
(collectively, the "Delaware Companies"), provide that a director shall not be
personally liable to the Delaware Companies or their 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 Delaware Companies or their
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derives an improper
personal benefit. The Certificates of Incorporation of the Delaware Companies
also provide that the Delaware Companies shall indemnify every director or
officer to the fullest extent permitted by law.
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<PAGE>
The Bylaws of each of the Delaware Companies, other than AMIOP Acquisition
Corp., provide, in effect, that the Delaware Companies, other than AMIOP
Acquisition Corp., shall indemnify every person who was or is a party, or is or
was threatened to be made a party, to any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of the fact that he
or she is or was a director, officer, employee, or agent of any of the Delaware
Companies, other than AMIOP Acquisition Corp., or is or was serving at the
request of any of the Delaware Companies, other than AMIOP Acquisition Corp., as
a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise, 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 proceedings, to the fullest extent permitted by applicable law.
Such indemnifications may, in the discretion of the board of directors, include
advances of the person's expenses in advance of final disposition of such
action, suit, or proceeding, subject to the provisions of any applicable
statute. The Delaware Companies, other than AMIOP Acquisition Corp., are
empowered to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee, or agent of any of the Delaware Companies,
other than AMIOP Acquisition Corp., or is or was serving at the request of any
of the Delaware Companies, other than AMIOP Acquisition Corp., as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against any liability incurred by such person in
such capacity, or arising out of such person's capacity.
Sections 722 and 723 of the Business Corporation Law of New York (the
"NYBCL") empower Servico Jamestown, Inc., Servico Grand Island, Inc., Servico
New York, Inc., and Servico Niagara Falls, Inc., each a New York corporation
(collectively, the "New York Companies"), to indemnify, subject to the
limitations and standards set forth therein, any person made or threatened to be
made a party to an action or proceeding brought or threatened by reason of the
fact that such person is or was a director or officer of the New York Companies.
Section 726 of the NYBCL provides that the New York Companies may purchase
insurance on behalf of any such director or officer. The Certificates of
Incorporation of the New York Companies provide, in effect, for the
indemnification by the New York Companies of each director, officer, employee or
agent of the New York Companies to the full extent permitted by the NYBCL.
The Alabama Business Corporation Act (the "ABCA") gives Alabama corporations
broad powers to indemnify their present and former directors and officers
against expenses incurred in the defense of any lawsuit to which they are made
parties by reason of being or having been such directors or officers. Subject to
specific conditions and exclusions, the ABCA requires an Alabama corporation to
indemnify directors and officers who successfully defend actions, and it permits
a corporation to indemnify its directors and officers under other circumstances
as the corporation deems appropriate, if certain statutory standards are met.
The indemnification required and permitted under the ABCA is not exclusive of
any other rights to which those indemnified may be entitled under any statute,
provision of the articles of incorporation, by-law, agreement, vote of
shareholders or disinterested directors or otherwise. The ABCA also authorizes
Alabama corporations to buy directors' and officers' liability insurance
regardless of the corporation's authority to indemnify the director or officer
per applicable statutes.
Specifically, subsection 10-2B-8.51(a) of the ABCA empowers a corporation,
subject to a finding of authorization by the corporation pursuant to subsection
10-2B-8.55, to indemnify an individual who was, is, or is threatened to be made
a party to a threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative because he/she is or
was a director of the corporation (or, while a director of the corporation is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise)
against liability incurred in such proceeding (including reasonable expenses),
provided the individual (1) conducted himself/herself in good faith and (2)
reasonably believed that he/she was acting (in his/her official capacity) in the
best interests of the corporation (or, in other than his/her official capacity,
reasonably believed to be acting in a manner not opposed to the best interests
of the corporation), and (3) with respect to any criminal
II-2
<PAGE>
proceeding, the individual had no reasonable cause to believe his/her conduct
was unlawful. Subsection 10-2B-8.51(c) provides that the termination of a
proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE (or its equivalent) is not, in itself, determinative that the
director did not meet the standard of conduct in subsection 10-2B-8.51(a).
Subsection 10-2B-8.56(b) permits a corporation to indemnify an officer who is
not a director of the corporation to the same extent as permissible for a
director.
Further, subsection 10-2B-8.51(d) of the ABCA prohibits a corporation from
indemnifying a director either (1) in connection with a proceeding by or in the
right of the corporation wherein the director was adjudged liable to the
corporation or (2) in connection with any other proceeding charging improper
personal benefit to the director (regardless of the existence of official
capacity) wherein the director was adjudged liable to the corporation based on
the receipt of such improper benefit. This restriction does not apply, however,
to the extent that the court in which the action is brought determines that such
officer or director is entitled to indemnity for particular limited expenses.
Finally, subsection 10-2B-8.52 of the ABCA mandates that a corporation
indemnify a director or officer who successfully defends a proceeding (or a
claim, issue, or matter therein) where he/she was a party to the proceeding
based upon his/her status as a director of the corporation, against reasonable
expenses (including counsel fees) incurred therein, notwithstanding the outcome
of any other claim, issue, or matter in any such proceeding.
Sheffield Motel Enterprises, Inc.'s Fourth Amended and Restated Articles of
Incorporation, Gadsden Hospitality, Inc.'s Second Amended and Restated Articles
of Incorporation, Dothan Hospitality 3053, Inc.'s Second Amended and Restated
Articles of Incorporation and Dothan Hospitality 3071, Inc.'s Second Amended and
Restated Articles of Incorporation (collectively, the "Alabama Articles")
mandate that the Alabama corporations shall indemnify their current and former
directors and officers to the fullest extent permitted by law. However, the
Articles provide that the Alabama corporations' obligation to indemnify its
directors and officers shall be subordinate, in all respects, to obligations of
the corporations arising out of certain loan documents and shall not constitute
a claim against the corporation to the extent that the corporation is unable to
pay any amounts it is obligated to pay under such loan documents.
The Arizona Business Corporation Act (the "AZBCA") gives Arizona
corporations broad powers to indemnify their present and former directors and
officers against expenses incurred in the defense of any lawsuit to which they
are made parties by reason of being or having been such directors or officers.
Subject to specific conditions and exclusions, the AZBCA requires an Arizona
corporation to indemnify directors and officers who successfully defend actions,
and it permits a corporation to indemnify its directors and officers under other
circumstances as the corporation deems appropriate, if certain statutory
standards are met. The indemnification required and permitted under the AZBCA is
not exclusive of any other rights to which those indemnified may be entitled
under any statute, provision of the articles of incorporation, by-law,
agreement, vote of shareholders or disinterested directors or otherwise. The
AZBCA also authorizes Arizona corporations to buy directors' and officers'
liability insurance regardless of the corporation's authority to indemnify the
director or officer per applicable statutes.
Specifically, subsection 10-851-A of the AZBCA empowers a corporation,
subject to a finding of authorization by the corporation pursuant to subsection
10-855, to indemnify an individual who was, is, or is threatened to be made a
party to a threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative because he/she is or
was a director of the corporation (or, while a director of the corporation is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise)
against liability incurred in such proceeding (including reasonable expenses),
provided the individual (1) conducted himself/herself in good faith and (2)
reasonably believed that he/she was acting (in his/her official capacity) in the
best interests of the corporation (or, in other than his/her official capacity,
reasonably believed to be acting in a
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<PAGE>
manner not opposed to the best interests of the corporation), and (3) with
respect to any criminal proceeding, the individual had no reasonable cause to
believe his/her conduct was unlawful. Subsection 10-851-C provides that the
termination of a proceeding by judgment, order, settlement, conviction, or on a
plea of no contest is not, in itself, determinative that the director did not
meet the standard of conduct in subsection 10-851. Subsection 10-856 permits a
corporation to indemnify an officer who is not a director of the corporation to
the same extent as permissible for a director.
Further, subsection 10-851-D of the AZBCA prohibits a corporation from
indemnifying a director either (1) in connection with a proceeding by or in the
right of the corporation wherein the director was adjudged liable to the
corporation or (2) in connection with any other proceeding charging improper
personal benefit to the director (regardless of the existence of official
capacity) wherein the director was adjudged liable to the corporation based on
the receipt of such improper benefit. This restriction does not apply, however,
to the extent that the court in which the action is brought determines that such
officer or director is entitled to indemnity for particular limited expenses.
Finally, subsection 10-852 of the AZBCA mandates that a corporation
indemnify a director or officer who successfully defends a proceeding (or a
claim, issue, or matter therein) where he/she was a party to the proceeding
based upon his/her status as a director of the corporation, against reasonable
expenses (including counsel fees) incurred therein, notwithstanding the outcome
of any other claim, issue, or matter in any such proceeding.
Servico Flagstaff, Inc.'s Second Amended and Restated Articles of
Incorporation (the "Arizona Articles") mandate that Servico Flagstaff, Inc.
shall indemnify its current and former directors and officers to the fullest
extent permitted by law. However, the Arizona Articles provide that Servico
Flagstaff, Inc.'s obligation to indemnify its directors and officers shall be
subordinate, in all respects, to obligations of the corporation arising out of
certain loan documents and shall not constitute a claim against the corporation
to the extent that the corporation is unable to pay any amounts it is obligated
to pay under such loan documents.
Section 317 of the California Corporations Code generally allows
indemnification in matters not involving the rights of the corporation to
indemnify an agent of the corporation if such person acted in good faith, in a
manner such person reasonably believed to be in the best interests of the
corporation and, in the case of a criminal matter, had no reasonable cause to
believe the conduct of such person was unlawful. California law, with respect to
matters involving the rights of a corporation, allows indemnification of an
agent of the corporation if such person acted in good faith and in a manner such
person believed to be in the best interests of the corporation and its
shareholders; provided, however, that indemnification shall not be permitted
for: (i) expenses incurred in defending pending matters which are settled
without court approval; or (ii) matters in which such director or officer shall
have been adjudged to be liable to the corporation and its shareholders, unless
the court determined that such person is entitled to be indemnified.
In addition, as permitted by section 204(a)(10) of the California
Corporations Code, the Articles of Incorporation of Lodgian Anaheim, Inc. and
Lodgian Ontario, Inc. ("the California Corporations") provide that the liability
of a director to the California Corporations for monetary damages shall be
eliminated to the fullest extent permissible under California law. In accordance
with California law, however, such limitation of liability will not act to limit
the liability of a director for: (i) acts or omissions that involve intentional
misconduct or a knowing and culpable violation of the law; (ii) acts or
omissions that a director believes to be contrary to the best interest of the
California Corporations or its (their) shareholders or that involve the absence
of good faith on the part of the director, (iii) any transaction from which a
director derived an improper personal benefit; (iv) acts or omissions that show
a reckless disregard for the director's duty to the California Corporations or
its (their) shareholders in circumstances in which the director was aware or
should have been aware, in the ordinary course of performing director's duties,
of a risk of serious injury to the California Corporations or its (their)
shareholders; (v) acts or omissions
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<PAGE>
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the California Corporations or its (their)
shareholders; (vi) any improper transactions between a director and the
Registrant(s) in which the director has a material financial interest; or (vii)
any unlawful distributions to the shareholders of the California Corporations or
any unlawful loan of money or property to, or guarantee of the obligation of,
any director or officer of the California Corporations.
The Florida Business Corporation Act, as amended (the "FBCA"), provides
that, in general, a business corporation may indemnify any person who is or was
a party to any proceeding (other than an action by, or in the right of, the
corporation) by reason of the fact that he or she is or was a director or
officer of the corporation, against liability incurred in connection with such
proceeding, including any appeal thereof, provided certain standards are met,
including that such officer or director acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and provided further that, with respect to any criminal action
or proceeding, the officer or director had no reasonable cause to believe his or
her conduct was unlawful. In the case of proceedings by or in the right of the
corporation, the FBCA provides that, in general, a corporation may indemnify any
person who was or is a party to any such proceeding by reason of the fact that
he or she is or was a director or officer of the corporation against expenses
and amounts paid in settlement actually and reasonably incurred in connection
with the defense or settlement of such proceeding, including any appeal thereof,
provided that such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim as to which such person is adjudged liable unless a court of competent
jurisdiction determines upon application that such person is fairly and
reasonably entitled to indemnity. To the extent that any officers or directors
are successful on the merits or otherwise in the defense of any of the
proceedings described above, the FBCA provides that the corporation is required
to indemnify such officers or directors against expenses actually and reasonably
incurred in connection therewith. However, the FBCA further provides that, in
general, indemnification or advancement of expenses shall not be made to or on
behalf of any officer or director if a judgment or other final adjudication
establishes that his or her actions, or omissions to act, were material to the
cause of action so adjudicated and constitute: (i) a violation of the criminal
law, unless the director or officer had reasonable cause to believe his or her
conduct was lawful or had no reasonable cause to believe it was unlawful; (ii) a
transaction from which the director or officer derived an improper personal
benefit; (iii) in the case of a director, a circumstance under which the
director has voted for or assented to a distribution made in violation of the
FBCA or the corporation's articles of incorporation; or (iv) willful misconduct
or a conscious disregard for the best interests of the corporation in a
proceeding by or in the right of the corporation to procure a judgment in its
favor or in a proceeding by or in the right of a shareholder.
The Second Amended and Restated Articles of Incorporation (the "Florida
Articles") of Servico Winter Haven, Inc., Servico West Palm Beach, Inc., Palm
Beach Motel Enterprises, Inc., Albany Hotel, Inc., Servico Northwoods, Inc. and
Servico Windsor, Inc. (collectively, the "Florida Corporations") mandate that
the Florida Corporations shall indemnify its current and former directors and
officers to the fullest extent permitted by law, such right not being exclusive
of any other rights to which any director, officer, employee or agent may be
entitled as a matter of law or which he may be lawfully granted. However, the
Florida Articles provide that the Florida Corporations' obligation to indemnify
its directors and officers shall be subordinate, in all respects, to obligations
of the Florida Corporations arising out of certain loan documents and shall not
constitute a claim against the Florida Corporations to the extent that the
Florida Corporations are unable to pay any amounts it is obligated to pay under
such loan documents.
The bylaws of Servico Northwoods, Inc. and Albany, Inc. mandate that Servico
Northwoods, Inc. and Albany, Inc. shall indemnify, to the fullest extent
authorized or permitted by the provisions at Section 607.0850 of the FBCA (other
than Section 607.0850(7) of the FBCA), as amended, any person, and his heirs,
executors, administrators and legal representatives, who is or was a party to
any proceeding by reason of the fact that such person is or was serving as a
director, officer, employee, or agent of
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Servico, Inc. or is or was serving as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise at
the request of Servico Northwoods, Inc. or Albany, Inc., respectively. Officers
and directors who are so entitled to be indemnified shall be paid their expenses
in advance of a final disposition of the proceeding to the maximum extent
authorized or permitted by the provisions of 607.0850(6) of the FBCA or any
amended or successor section. The bylaws further provide that the corporation
may indemnify and advance expenses pursuant to Section 607.0850(7) of the FBCA,
or any amended or successor section, to the extent desired by Northwoods, Inc.
or Albany, Inc., respectively, and permitted by law.
With respect to Brunswick Motel Enterprises, Inc., a Georgia corporation
(the "Georgia Corporation"), Section 14-2-850 et seq. of the Georgia Business
Corporation Code and Article 8 of the Amended and Restated Articles of
Incorporation set forth the extent to which the Georgia Corporation's directors
and officers may be indemnified by the Georgia Corporation against liability
that they may incur while serving in such capacity. These provisions generally
provide that the directors and officers of the Georgia Corporation will be
indemnified by the Georgia Corporation against any losses incurred in connection
with 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 Georgia Corporation by reason of the fact that he is or was a
director or officer of the Georgia Corporation or served as such with another
corporation, partnership, joint venture, trust or other enterprise at the
request of the Georgia Corporation if such director or officer acted in a manner
he reasonably believed to be in or not opposed to the best interest of the
Georgia Corporation, and with respect to any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. Under these provisions,
the Georgia Corporation may provide advances for expenses incurred in defending
any such action, suit or proceeding, upon receipt of an undertaking by or on
behalf of such officer or director to repay such advances unless it is
ultimately determined that he is entitled to indemnification by the Georgia
Corporation. The Georgia Corporation shall not indemnify a director or officer
for any liability incurred in a proceeding in which the director is judged
liable to the Georgia Corporation or is subjected to injunctive relief in favor
of the Georgia Corporation: (i) for any appropriation, in violation of the
director's duties, of any business opportunity of the Georgia Corporation; (ii)
for acts or omissions which involve intentional misconduct or knowing violation
of law; (iii) for certain liabilities for unlawful distributions specified by
the Georgia Business Corporation Code or for any transaction from which he or
she received an improper personal benefit.
The Georgia Business Corporation Code and Article 7 of the Amended and
Restated Articles of Incorporation of the Georgia Corporation provide that no
director of the Georgia Corporation shall be personally liable to the Georgia
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 Georgia Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Sections 14-2-830 and 14-2-832 of the Georgia
Business Corporation Code, or (iv) for any transaction from which the director
derived an improper personal benefit.
With respect to Atlanta-Hillsboro Lodging L.L.C. and Lodgian Richmond,
L.L.C., each a Georgia limited liability company (collectively, the "Georgia
LLCs"), under Section 14-11-306 of the Georgia Limited Liability Company Act,
the Georgia LLCs are empowered to indemnify and hold harmless any member or
manager or other person from and against any and all claims and demands
whatsoever arising in connection with the Georgia LLCs except the liability of a
member or manager shall not be eliminated or limited for intentional misconduct
or a knowing violation of law or for any transaction for which the person
received a personal benefit in violation or breach of any provisions of the
written operating agreement of the Registrant.
Each Georgia LLC has agreed to indemnify its manager and officers from and
against any claim, loss, expense, liability, action or demand incurred by the
manager or officers in respect of any omission to act or of any act performed by
them in the good faith belief that they were acting or refraining from acting
within
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the scope of their authority under the operating agreement, on behalf of the
Georgia LLCs or in furtherance of the Georgia LLCs' interests. However, no such
manager or officer shall be entitled to any indemnity for any loss sustained or
fees or expenses incurred by reason of the fraud, gross negligence or willful
misfeasance of such manager or officer.
With respect to Little Rock Lodging Associates I, L.P., a Georgia limited
partnership (the "Georgia LP"), the Georgia Limited Partnership Act empowers the
Georgia LP to indemnify and hold harmless any partner or other person from and
against any and all claims and demands whatsoever except (i) for intentional
misconduct or knowing violation of law or (ii) for any transaction for which the
person received a personal benefit in violation or breach of any provision of
the partnership agreement. In addition, the Georgia Limited Partnership Act
permits the exculpation of a partner's liability except for provisions which
eliminate or limit the liability of a partner for intentional misconduct or a
knowing violation of law or for any transaction for which the partner received a
personal benefit in violation or breach of any provision of the partnership
agreement. Under the Georgia LP's limited partnership agreement, the partnership
agrees to indemnify, defend and save harmless the general partner from and
against any claim, loss, expense, liability, action or demand incurred by the
general partner in respect of any omission to act or any act performed by the
general partner, in the good faith belief that it was acting or refraining from
acting in the scope of its authority on behalf of the Registrant or in
furtherance of the Georgia LP's interests. However, the general partner is not
entitled to indemnification for any loss sustained or fees or expenses incurred
by a general partner by reason of the fraud, gross negligence or willful
misfeasance of the general partner.
Article VII of the Articles of Incorporation of Servico Cedar Rapids, Inc.,
an Iowa corporation ("Servico Cedar Rapids"), provide that Servico Cedar Rapids
shall indemnify any present or former officer or director to the fullest extent
permitted by law. Subsection 1 of Section 851 of the Iowa Business Corporation
Act (the "IBCA") allows Servico Cedar Rapids to indemnify an individual that is
made or threatened to be made a party to a proceeding, whether civil, criminal,
administrative or investigative, because the individual is or was a director
against liability incurred in the proceeding if the individual (i) acted in good
faith (ii) reasonably believing that, in the case of conduct in the individual's
official capacity with Servico Cedar Rapids, that the individual's conduct was
in Servico Cedar Rapids's best interests, and in all other cases, that the
individual's conduct was at least not opposed to Servico Cedar Rapids's best
interests, (iii) with respect to any criminal proceeding, the individual had no
reasonable cause to believe the conduct was unlawful and (iv) with respect to a
proceeding by or in the right of Servico Cedar Rapids, the director was not
adjudged liable to Servico Cedar Rapids, and in connection with any other
proceeding charging improper personal benefit to the director (whether or not
involving action in the director's official capacity), the director was not
adjudged liable on the basis that personal benefit was improperly received by
the director. Any indemnification provided pursuant to Section 851 of the IBCA
in connection with a proceeding by or in the right of the corporation shall be
limited to reasonable expenses incurred in connection with the proceeding. A
decision as to required indemnification is made by a disinterested majority of
the Board of Directors present at a meeting at which a disinterested quorum is
present, or by a designated committee of the Board, by special legal counsel or
by the shareholders.
Section 853 of the IBCA permits Servico Cedar Rapids to pay for or reimburse
the reasonable expenses incurred by a director who is a party to a proceeding in
advance of final disposition of the proceeding if (i) the director furnishes
Servico Cedar Rapids either a written affirmation of the director's good faith
belief that the director has met the standard of conduct in Section 851 of the
IBCA or a written undertaking, executed personally or on the director's behalf,
to repay the advance if it is ultimately determined that the director did not
meet the standard of conduct, or (ii) a determination is made that the facts
then known would not preclude indemnification under Section 851 of the IBCA.
Pursuant to Section 852 of the IBCA, Servico Cedar Rapids must indemnify a
director or an officer who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which the director or the officer was a party
because the director or officer is or was a director or officer of the
corporation.
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Indemnification shall be limited to reasonable expenses incurred by the director
or the officer in connection with the proceeding.
A director or an officer of Servico Cedar Rapids who is a party to a
proceeding may apply for court-ordered indemnification pursuant to Section 854
of the IBCA. The court may order indemnification if it determines (i) the
director or officer is entitled to mandatory indemnification under Section 852
of the IBCA, in which event Servico Cedar Rapids shall pay the director's or
officer's reasonable expenses incurred to obtain court-ordered indemnification,
or (ii) the director or officer is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, regardless of whether
the director or officer met the standard of conduct or was adjudged liable as
described in Section 851 of the IBCA (but if the director or officer was
adjudged liable, indemnification shall be limited to reasonable expenses
incurred).
Subsection 2 of Section 856 of the IBCA permits Servico Cedar Rapids to
indemnify and advance expenses to an officer, employee or agent of the
corporation to the same extent as a director.
Subsection (a) of Section 8.75 of the Illinois Business Corporation Act of
1983 (the "IBCA") empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she 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 expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
Subsection (b) of Section 8.75 of the IBCA empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification may be made in respect to 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 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 shall deem proper.
Section 8.75 of the IBCA further provides: (a) that to the extent a
director, officer, employee or agent of a corporation has been successful on the
merits or otherwise in the defense of any action, suit or proceeding referred to
in subsections (a) and (b) or in the defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith;
(b) that indemnification or advancement of expenses provided for by Section 8.75
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled; and (c) empowers the
corporation to purchase and maintain insurance on behalf of any person acting in
any of the capacities set forth above against any liability asserted against
such person or incurred by him or her in any such capacity or arising out of his
or her status as such whether or not the corporation would have the power to
indemnify him or her against such liabilities under Section 8.75.
The corporate deocuments of Servico Rolling Meadows, an Illinois
corporation, do not contain any indemnification provisions.
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Section 83 of the Louisiana Business Corporation Law, Title 12, Chapter 1 of
the Louisiana Revised Statutes, ("LBCL") empowers a corporation to indemnify its
directors and officers. Subsection (A) of Section 83 of the LBCL empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any action, suit, or proceedings, whether civil, criminal,
administrative, or investigative, including any 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 business,
foreign or nonprofit corporation, partnership, joint venture, or other
enterprise 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 proceedings 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.
In case of actions by or in the right of the corporation, this indemnity is
limited to expenses, including attorneys' fees and amounts paid in settlement
not exceeding, in the judgment of the board of directors, the estimated expense
of litigating the action to conclusion, actually and reasonably incurred in
connection with the defense or settlement of such action, and no indemnification
may be made in respect of any claim, issue, or matter as to which such person
shall have been adjudged by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable for willful or intentional misconduct in
the performance of his duty to the corporation, unless, and only to the extent
that, the court shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, he is fairly and
reasonably entitled to indemnity for such expenses which the court deems proper.
Subsection (B) of Section 83 of the LBCL provides that to the extent that a
director, officer, employee, or agent of a corporation has been successful on
the merits or otherwise in defense of any such action, suit, or proceeding, 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; that indemnification or advancement of expenses
provided for by Section 83 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; that a corporation may purchase and
maintain insurance on behalf of a director, officer, employee, or agent of the
corporation against any liability asserted against him or 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 liabilities under
Section 145. Without limiting the power of a corporation to procure such
insurance, a corporation may, under Section 83 of the LBCL, create a trust fund
or other form of self-insurance arrangement for the benefit of persons
indemnified by the corporation and may procure or maintain such insurance with
any insurer deemed appropriate by the board of directors regardless of whether
all or part of the stock or other securities thereof are owned in whole or in
part by the corporation. In the absence of actual fraud, the judgment of the
board of directors as of the terms and conditions of such insurance or
self-insurance arrangement shall be conclusive. As an alternative to
self-insurance, Section 83 of the LBCL provides that the Louisiana Insurance
Code, Title 22 of the Louisiana Revised Statute of 1950, shall not apply to a
wholly-owned subsidiary of a business corporation that issues no contracts of
insurance other then as permitted by Section 83 of LBCL for coverage of a person
who is or was a director, officer, employee, or agent of its parent corporation,
or who is or was serving at the request of the parent corporation as a director,
officer, employee, or agent of another business, nonprofit or foreign
corporation, partnership, joint venture, or other enterprise, which contracts of
insurance for such directors, officer, employees, or agents may be issued by
such wholly- owned subsidiary without compliance with the provisions of the
Insurance Code.
Article 8 of the Articles of Incorporation of Servico Metairie, Inc.
provides that no director of the corporation shall be personally liable to the
corporation or its shareholders 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
II-9
<PAGE>
intentional misconduct or a knowing violation of law, (iii) under Section 92 of
the LBCL, or (iv) for any transaction from which the director derived an
improper personal benefit. It further provides that if the LBCL is amended after
April 1, 1996 to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the LBCL, as so amended.
Section 2-418 of the Maryland General Corporation Law ("MGCL") provides that
a Maryland corporation may indemnify directors and officers against liabilities
they may incur in such capacities unless it is established that: (a) the
director's act or omission was material and (i) was committed in bad faith or
(ii) was the result of active and deliberate dishonesty; or (b) the director
actually received an improper personal benefit; or (c) the director had
reasonable cause to believe that the act or omission was unlawful. Unless
limited by the charter, a corporation is required to indemnify directors and
officers against expenses they may incur in defending actions against them in
such capacities if they are successful on the merits or otherwise in the defense
of such actions. The MGCL provides that the foregoing provisions shall not be
deemed exclusive of any other rights to which a director or officer seeking
indemnification may be entitled under, among other things, any charter or bylaws
provision.
The Articles of Amendment and Restatement of Servico Colesville, Inc.,
Servico Columbia, Inc., and Servico Maryland, Inc. (collectively, the "Maryland
Companies") provide that each Maryland Company shall indemnify any officer or
director or any former officer or director of such Maryland Company to the
fullest extent permitted by law. The right to indemnification is not exclusive
of any other rights to which any director, officer, employee or agent may be
entitled as a matter of law or which may be lawfully granted. The obligations of
each Maryland Company to indemnify any officer or director is subordinate in all
respects to the obligations of each Maryland Company arising out of the loan
documents related to a certain credit agreement, among Lodgian Financing Corp.,
as borrower, Lodgian, Inc., Impac Hotel Group, LLC, Servico, Inc., and other
affiliated entities, as affiliate guarantors, among others, for the financing or
refinancing of certain property located at 8727 Colesville Road, Silver Spring,
Maryland, as to Servico Colesville, Inc., 5485 Twin Knolls Road, Columbia,
Maryland, as to Servico Columbia, Inc., and 8777 Georgia Avenue, Silver Spring,
Maryland, as to Servico Maryland, Inc., and shall not constitute a claim against
the Maryland Company to the extent that the Maryland Company is unable to pay
any amounts it is obligated to pay under such loan documents.
Section 561 of the Michigan Business Corporation Act (the "MBCA") empowers a
Michigan corporation to indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, and
whether formal or informal (other than an action by or in the right of the
corporation) by reason of the fact that he or she 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, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, against expenses (including
attorneys' fees), judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred, if the person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders (or if a criminal proceeding,
had no reasonable cause to believe his or her conduct was unlawful).
Sections 562 and 564c of the MBCA empower a Michigan corporation to
indemnify a person who was or is a party or is threatened to be made a party to
a 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 such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees), and amounts paid in settlement, actually and
reasonably incurred, if the person acted in good faith and in a manner he or she
reasonably believed to be in and not opposed to the best interests of the
corporation or its shareholders, except that no indemnification may be made if
such person has been found liable to the corporation, unless a court
determination is made that such person is fairly and reasonably entitled to such
indemnification, in which case his or her indemnification is limited to
reasonable expenses incurred.
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Section 563 of the MBCA further provides that to the extent a director,
officer, employee or agent of a Michigan corporation has been successful in the
defense of any action, suit or proceeding referred to in Sections 561 and 562 or
in the defense of any claim, issue or matter therein, he or she shall be
indemnified against actual and reasonable expenses (including attorneys' fees),
incurred by him or her in connection therewith and incurred in connection with
an action, suit or proceeding brought to enforce the mandatory indemnification
provided in Section 563.
Section 565 of the MBCA provides that the indemnification or advancement of
expenses provided under the above-discussed Sections is not exclusive of other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under the articles of incorporation, bylaws, or a contractual
agreement. However, the total amount of expenses advanced or indemnified from
all sources combined cannot exceed the amount of actual expenses incurred by the
person seeking indemnification or advancement of expenses.
Section 567 of the MBCA further empowers a Michigan corporation to purchase
and maintain insurance on behalf of a director, officer, employee or agent of
the corporation against any liability asserted against him or her or incurred by
him or her in any such capacity or arising out of his or her status as such
whether or not the corporation would have the power to indemnify him or her
against such liabilities under Sections 561 to 565, inclusive, of the MBCA.
Article VIII of the Articles of Incorporation of NH Motel Enterprises, Inc.
("NH Motel") provides, in effect, for the indemnification by NH Motel, of any
officer or director of NH Motel to the fullest extent permitted by law.
Article VII of NH Motel's By-laws provide, in effect, that NH Motel shall
indemnify to the fullest extent permitted by the MBCA any person who is made or
threatened to be made a party to an action, suit or proceeding, whether civil,
criminal, administrative or investigative, by the reason of the fact that such
person is or was a director, officer, employee or agent of NH Motel or serves or
served any other enterprise at the request of NH Motel.
Article VII of NH Motel's Articles of Incorporation further provide that a
director of NH Motel shall not be personally liable to NH Motel or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of a director's duty of loyalty to NH
Motel or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 551 of the MBCA, or (iv) for any transaction from which the director
derived an improper personal benefit. It also provides that if the MBCA is
amended to authorize corporate action further eliminating or limiting the
personal liability of NH Motel's directors, then the liability of each director
of NH Motel shall be eliminated or limited to the fullest extent permitted by
the MBCA, as so amended.
Pursuant to Subdivision 2 of Section 302A.521 of the Minnesota Statutes, a
corporation shall indemnify a person (referred to herein as the "Prospective
Indemnitee") who is, or is threatened to be, a party to a proceeding that is
threatened, pending or completed, whether civil, criminal, administrative,
arbitration or investigative, including a proceeding by or in the right of the
corporation (a "Proceeding"), by reason of the fact that Prospective Indemnitee
is, or was, a director, holder of an elective or appointive office or position,
member of a committee of such corporation's board of directors, or employee of
such corporation, or by reason of the fact that Prospective Indemnitee, who,
while a director, officer or employee of such corporation, was serving at the
request of such corporation, or whose duties required, Prospective Indemnitee to
serve as a director, officer, partner, trustee, employee, or agent of another
organization, or employee benefit plan, against judgments, penalties, and fines,
including excise taxes assessed against Prospective Indemnitee with respect to
an employee benefit plan, settlements, and reasonable expenses, including
attorneys' fees and disbursements, incurred by Prospective Indemnitee, in
connection with the Proceeding; so long as, with respect to the acts or
omissions of Prospective Indemnitee (such acts and omissions being referred to
herein as "Acts"):
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1. Prospective Indemnitee was not indemnified by another organization or
employee benefit plan with respect to the same Acts;
2. Prospective Indemnitee acted in good faith;
3. Prospective Indemnitee received no improper personal benefit, and, if
applicable, the provisions of Section 302A.255 of the Minnesota Statutes,
concerning conflicts of interest of a director of a corporation, are
satisfied;
4. Prospective Indemnitee, in the case of a Proceeding that is a criminal
proceeding, had no reasonable cause to believe that the conduct in
question was unlawful; and
5. (a) (i) with respect to Acts of a Prospective Indemnitee acting in the
capacity of a director of such corporation; or (ii) with respect to a
non-director Prospective Indemnitee, acting in the capacity of officer,
member of a committee of the board of directors, or employee of such
corporation; Prospective Indemnitee reasonably believed that the Acts
were in the best interest of the corporation; or (b) with respect to a
Prospective Indemnitee, who while a director, officer, or employee of
such corporation, was serving at the request of such corporation or whose
duties required Prospective Indemnitee to serve as a director, officer,
partner, trustee, employee, or agent of another organization, or employee
benefit plan, Prospective Indemnitee reasonably believed that his Acts in
such capacity were not opposed to the best interests of such corporation
or, with respect to Acts on behalf of an employee benefit plan, such Acts
were performed with the reasonable belief on the part of the Prospective
Indemnitee that the Acts were in the best interests of the participants
or beneficiaries of the employee benefit plan.
Pursuant to Subdivision 4 of Section 302A.521 of the Minnesota Statutes, a
corporation may expressly prohibit or limit the indemnification set forth above,
if such prohibition or limitations apply equally to all persons or to all
persons within a given class.
Subdivision 7 of Section 302A.521 of the Minnesota Statutes permits a
corporation to purchase and maintain insurance on behalf of a person in such
person's official capacity as director, officer, or employee of the corporation
against any liability asserted against such person or incurred by such person in
any such capacity or arising out of such person's status as such whether or not
the corporation would have the power to indemnify such person against such
liabilities pursuant to Section 302a.521.
Article VII of the Second Amended and Restated Articles of Incorporation of
Service Roseville, Inc. (the "Roseville Articles") provides that Roseville shall
indemnify any officer or director, or former officer or director, to the fullest
extent of the law, provided, however, that such indemnification obligation shall
be subordinate to Roseville's obligations arising out of the "Loan Documents"
(as such term is defined therein). There are no indemnification provisions in
Roseville's Bylaws.
Accordingly, Roseville's indemnification of its past and present officers
and directors is limited (a) by the provisions of Section 302A.521 as discussed
above, and (b) to the extent that Roseville's obligations arising out of the
Loan Documents preclude Roseville from satisfying any such indemnification
obligation. However, because there is no mention made of Roseville's employees
in Article VII of the Roseville Articles, and the statute provides for mandatory
indemnification, unless expressly limited by the corporation, it would appear
that Roseville's indemnification for its past and present employees who are not
also officers or directors is subject only to the statutory limitation and not
the limitation with respect to Roseville's obligations under the Loan Documents.
Article VII of the Second Amended and Restated Articles of Incorporation of
Minneapolis Motel Enterprises, Inc. (the "Minneapolis Articles") provides that
Minneapolis shall indemnify any officer or director, or former officer or
director, to the fullest extent of the law, provided, however, that such
indemnification obligation shall be subordinate to Minneapolis's obligations
arising out of the "Loan Documents" (as such term is defined therein). There are
no indemnification provisions in Minneapolis's Bylaws.
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Accordingly, Minneapolis's indemnification of its officers and directors is
limited (a) by the provisions of Section 302A.521 as discussed above, and (b) to
the extent that Minneapolis's obligations arising out of the Loan Documents
preclude Minneapolis from satisfying any such indemnification obligation.
However, because there is no mention made of Minneapolis's employees in Article
VII of the Minneapolis Articles, and the statute provides for mandatory
indemnification, unless expressly limited by the corporation, it would appear
that Minneapolis's indemnification for its past and present employees who are
not also officers or directors is subject only to the statutory limitation and
not the limitation with respect to Minneapolis' obligations under the Loan
Documents.
The New Jersey Business Corporation Act ("NJBCA") provides a detailed
statutory framework for the indemnification of "corporate agents" against
expenses and liability in connection with their positions with the corporation
and the performance of their corporate duties. The provisions of the NJBCA are
found in New Jersey Statutes N.J.S. 14A:1-1, et seq. "Corporate agents" are
defined as any person who is or was a director, officer, trustee, employee, or
agent of the indemnifying Corporation and any person who is or was a director,
officer, trustee, employee or agent of another enterprise but serving at the
request of the indemnifying corporation. [N.J.S. 14A:3-5(1)(a)]. A corporation
may indemnify a corporate agent against expenses and liabilities incurred in
connection with any proceeding involving the agent because of his or her status,
as long as the agent acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the corporation, or not opposed to those
interests [N.J.S. 14A:3-5(2)(a), 14A:3-5(3)]. Additionally, with respect to any
criminal proceeding, the agent must have had no reasonable cause to believe that
his or her conduct was unlawful [N.J.S. 14A:3-5(2)(b)]. If an agent is adjudged
liable to the corporation, no indemnity is permitted unless the court deems
indemnification proper [N.J.S. 14A:3-5(3)].
A corporation may only authorize the indemnification of an agent after first
making a determination that indemnification is proper under the circumstances
because the agent met the applicable standard of conduct, unless a court has
ordered indemnification. [N.J.S. 14A3-5(5)]. Unless otherwise provided in the
certificate of incorporation or by-laws, that determination is to be made by the
board of directors, or a committee of the board, acting by a majority vote of a
quorum of disinterested directors [N.J.S. 14A:3-5(5)(a)]. If a quorum is not
obtainable, or if so directed by majority vote of the disinterested directors,
the determination may be made by independent legal counsel designated by the
board [N.J.S. 14A:3-5(5)(b)]. The determination must be made by the shareholders
if required by the certificate of incorporation, the by-laws, or a resolution of
the board of the shareholders. [N.J.S. 14A:3-5(5)(c)].
A corporation must indemnify an agent against expenses to the extent that he
or she has been successful on the merits or otherwise in any proceeding or in
defense of any claim [N.J.S. 14A:3-5(4)]. The agent may petition the court for
an award of indemnification if the corporation improperly denies mandatory
indemnification [N.J.S. 14A:3-5(7)(a)]. Except when indemnification is
mandatory, no indemnification may be made by the corporation or authorized by a
court if the power to indemnify or the right to receive indemnification is
prohibited, limited, or otherwise conditioned by the certificate of
incorporation, the by-laws, a resolution of the board or the shareholders, an
agreement, or other proper corporate action in effect when the alleged cause of
action accrued [N.J.S. 14A:3-5(11)].
There are no statutory limitations on a corporation's power to indemnify a
current or former director for expenses incurred in connection with the
director's appearance as a witness in a proceeding to which the director is not
a party. [N.J.S. 14A:3-5(12)].
The corporation may exercise the statutory powers of indemnification in the
absence of any provision in the certificate or by-laws authorizing
indemnification [N.J.S. 14A:3-5(10)]. These statutory powers are not exclusive,
and a corporate agent may be entitled to other indemnification rights under the
certificate of incorporation, the by-laws, an agreement, a vote of shareholders,
or otherwise, including the right to be indemnified against liabilities and
expenses incurred in proceedings by or in the right of the corporation. [N.J.S.
14A:3-5(8)]. No indemnification is permitted, however, if a judgment or other
final adjudication
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establishes that the agent's conduct (1) breached the duty of loyalty to the
corporation or its shareholders, as defined in New Jersey Statutes Section
14A:2-7(3), (2) was not undertaken in good faith, (3) involved a knowing
violation of the law, or (4) resulted in the receipt by the agent of an improper
personal benefit. [N.J.S. 14A:3-5(8)].
The Certificate of Incorporation of Lodgian Mount Laurel, Inc., a New Jersey
corporation ("Lodgian Mount Laurel") provides, in effect, for indemnification by
Lodgian Mount Laurel of any officer or director, or any former officer or
director, to the fullest extent permitted by law. The By-Laws of Lodgian Mount
Laurel contain no additional indemnification provisions.
Subsection (a) of Section 55-8-51 of the North Carolina Business Corporation
Act (the "NCBCA") empowers a corporation to indemnify an individual made a party
to a proceeding because he is or was a director against liability incurred in
the proceeding if he conducted himself in good faith, he reasonably believed (i)
in the case of conduct in his official capacity with the corporation, that his
conduct was in its best interests or (ii) in all other cases, that his conduct
was at least not opposed to its best interests, and, with respect to any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. However, a corporation may not indemnify a director under Subsection
(a) of Section 55-8-51 in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation, or in
connection with any other proceeding charging improper personal benefit to such
director in which such director was adjudged liable on the basis that personal
benefit was improperly received by such director.
Section 55-8-52 of the NCBCA requires a corporation, unless limited by its
articles of incorporation, to indemnify a director who was wholly successful, on
the merits or otherwise, in the defense of any proceeding to which he was a
party because he is or was a director of the corporation against reasonable
expenses incurred by a director in connection with the proceeding.
In addition, unless the corporation's articles of incorporation provide
otherwise, Section 55-8-54 of the NCBCA provides that a court in any proceeding
may, upon the application of a director who is a party to such proceeding, order
indemnification of such director, whether or not a director met the standard of
conduct in NCBCA Section 55-8-51, if the court determines that the director is
fairly and reasonably entitled to indemnification in view of all of the relevant
circumstances.
For purposes of the above-described provisions, Section 55-8-50 of the NCBCA
defines a "director" of a corporation to include a director of such corporation
who, while a director, is serving at the corporation's request as a director,
officer, partner, trustee, employee or agent of another corporation or certain
other entities. Section 55-8-56 of the NCBCA provides that officers of a
corporation are entitled to mandatory indemnification, and a corporation may
indemnify its officers, employees and agents, to the same extent as directors of
the corporation.
The Amended and Restated Articles of Incorporation of Fayetteville Motel
Enterprises, Inc., a North Carolina corporation (the "Fayetteville"), provides
that a director of Fayetteville shall not be personally liable to Fayetteville
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 Fayetteville or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 55-8-33 of the NCBCA, or (iv) for any transaction from
which the director derived an improper personal benefit.
Article Eighth of the Amended and Restated Articles of Incorporation of
Fayetteville further provides that Fayetteville shall indemnify any officer or
director, or any former officer or director of Fayetteville, to the fullest
extent permitted by law. Such Article Eighth provides that Fayetteville's
indemnification obligation thereunder is subordinate to the obligations of
Fayetteville arising out of the Lodgian credit facility.
II-14
<PAGE>
Section 1741 of the Business Corporation Law of the Commonwealth of
Pennsylvania empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action 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 representative of the corporation or is
or was serving at the request of the corporation as a representative of another
domestic or foreign corporation for profit or not-for-profit, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonable
incurred by him in connection with such action 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 proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of
any action 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 did not act 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 proceeding, had reasonable cause
to believe that this conduct was unlawful.
Section 1742 of the Business Corporation Law of the Commonwealth of
Pennsylvania specifically provides, that unless otherwise restricted in its
by-laws, a corporation shall have the power to indemnify any person who was or
is a party, or is threatened to be made a party, to any threatened, pending or
completed action 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 representative of the
corporation or is or was serving at the request of the corporation as a
representative of another domestic or foreign corporation for profit or not-for
profit, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually or reasonably incurred by him in co ection
with the defense or settlement of the action 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. Indemnification shall not be made under this section in respect
to any claim, issue or matter as to which the person has been adjudged to be
liable to the corporation unless and only to the extent that the Court of Common
Pleas of the Judicial District embracing the county in which the registered
office of the corporation is located or the court in which the action was
brought determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses tha the Court of Common Pleas
or other court deems proper.
Section 1743 of the Business Corporation Law of the Commonwealth of
Pennsylvania specifically provides, that to the extent that a representative of
a corporation has been successful on the merits or otherwise in defense of any
action or proceeding referred to in Section 1741 or 1742, 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.
The Amended and Restated Articles of Incorporation of Apico Hills, Inc., and
the Amended and Restated Articles of Incorporation for Apico Inns of Green Tree,
Inc., each a Pennsylvania Corporation (collectively, the "Pennsylvania
Companies"), specifically provide that a director shall not be personally liable
to the Pennsylvania Companies or their stock holders for money 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 Pennsylvania Companies or their stock
holders, (ii) for acts or omissions not in good faith or which would involve
intentional misconduct or a knowing violation of law, (iii) under Section 513 of
the Pennsylvania Business Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit. The above-referenced
Amended and Restated Articles of Incorporation further specifically provide that
if a Pennsylvania Business Corporation Law is amended after the date of the
Amended and Restated Articles which authorizes corporate action which further
eliminates or limits the personal liability of directors, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Pennsylvania Business Corporation Law, as so amended.
II-15
<PAGE>
The Amended and Restated Articles of Incorporation of each of the
Pennsylvania Companies specifically provides that each corporation shall
indemnify any office or director, or former officer or director of the
corporation, to the fullest extent permitted by law. However, the
above-referenced Amended and Restated Articles of Incorporation further provide
that the foregoing right of indemnification shall be subordinate in all respects
to the obligations of the Pennsylvania Companies arising out of certain loan
documents and shall not constitute a claim against the Pennsylvania Companies to
the extent that the Pennsylvania Companies are unable to pay any amounts they
are obligated to pay under the loan documents.
The South Carolina Business Corporation Act empowers a South Carolina
corporation to indemnify directors and officers against liabilities and
reasonable expenses incurred in connection with any action, suit or proceeding
to which such person may be a party because he is or was a director or officer
of the corporation or serving in a similar capacity at the corporation's request
for another entity or an employee benefit plan. Under the laws of the State of
South Carolina, unless limited by its articles of incorporation, a corporation
shall indemnify a director or officer who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which he was a party because
he is or was a director or officer of such corporation, against reasonable
expenses incurred by him in connection with the proceeding. South Carolina law
also provides that indemnification of a director or officer may be made if he
acted (a) in good faith and (b) in a manner reasonably believed to be, (i) with
respect to conduct in his official capacity, in the best interests of the
corporation, or, (ii) with respect to all other cases, in a manner he reasonably
believed to be not opposed to the best interests of the corporation. Further,
with respect to any criminal action or proceeding, a director or officer must
also have had no reason to believe his conduct was unlawful in order to qualify
for indemnification. With respect to suits by or in the right of the
corporation, such a person may be indemnified if he acted in good faith and, in
the case of conduct within his official capacity, he reasonably believed his
conduct to be in the corporation's best interest, and, in all other cases, he
shall not have been adjudged to be liable to the corporation. A South Carolina
corporation may purchase and maintain insurance against liabilities of its
directors and executive officers whether or not such liabilities are subject to
indemnification.
The Articles of Incorporation of Service Hilton Head, Inc., a South Carolina
corporation ("Servico Hilton Head"), provide for indemnification of directors
and officers (and former directors and officers) to the fullest extent permitted
by South Carolina law. The Articles of Incorporation also provide that the
obligation of Servico Hilton Head to indemnify its directors and officers is
subordinate in all respects to its obligations as a guarantor under the loan
documents described therein.
Subsection A(16) of Article 2.02 of the Texas Business Corporations Act (the
"TBCA") empowers a corporation organized under the TBCA to indemnify directors,
officers, employees, and agents of such corporation and to purchase and maintain
liability insurance for those persons.
Section B of Article 2.02-1 provides that a corporation may indemnify a
person who was, is, or is threatened to be made a named defendant or respondent
in a proceeding because the person is or was a director only if it is determined
in accordance with Section F that the person: (1) conducted himself in good
faith; (2) reasonably believed: (a) in the case of conduct in his official
capacity as a director of the corporation, that his conduct was in the
corporation's best interests; and (b) in all other cases, that his conduct was
at least not opposed to the corporation's best interests; and (3) in the case of
any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section F of Article 2.02-1 provides that this above mentioned determination
must be made: (1) by a majority vote of a quorum consisting of directors who at
the time of the vote are not named defendants in the proceeding; (2) but if such
a quorum cannot be obtained, by a majority vote of a committee of the board of
directors designated to act in the matter by a majority vote all directors
consisting solely of two or more directors who at the time of the vote are not
named defendants or respondents in the proceedings; (3) by a special legal
counsel designated by the board of directors or a committee of the board by vote
as
II-16
<PAGE>
set forth in (1) or (2) immediately above, or, if such a quorum cannot be
obtained and such a committee cannot be established, by a majority vote of all
directors; or (4) by the shareholders in a vote that excludes the shares held by
directors who are named defendants or respondents in the proceeding.
Section C of Article 2.02-1 provides that except as permitted in Section E,
a director may not be indemnified under Section B relating to a proceeding (1)
in which the person is found liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity; or (2) in which the person is found
liable to the corporation.
Section E of Article 2.02-1 E provides that a person may be indemnified
under Section B against judgments, penalties (including excise and similar
taxes), fines, settlements, and reasonable expenses actually incurred by the
person in connection with the proceeding; but if the person is found liable to
the corporation or is found liable on the basis that personal benefit was
improperly received by the person, the indemnification (1) is limited to
reasonable expenses actually incurred by the person in connection with the
proceeding and (2) shall not be made in respect of any proceeding in which the
person shall have been found liable for willful or intentional misconduct in the
performance of his duty to the corporation.
Section H of Article 2.02-1 provides that a corporation shall indemnify a
director against reasonable expenses incurred by him in connection with a
proceeding in which he is a named defendant or respondent because he is or was a
director if he has been wholly successful, on the merits or otherwise, in the
defense of the proceeding.
Section I of Article 2.02-1 provides that if, in a suit for the
indemnification required by Section H of Article 2.02-1, a court of competent
jurisdiction determines that the director is entitled to indemnification under
that section, the court shall order indemnification and shall award to the
director the expenses incurred in securing the indemnification. A later Section
provides that under certain circumstances a court may order the indemnification
that the court determines is proper and equitable, whether or not he has met the
requirements set forth in Section B or has been found liable in the
circumstances described by Section C.
Section O of Article 2.02-1 provides that an officer of the corporation
shall be indemnified as, and to the same extent, provided by Sections H, I, and
J of Article 2.02-1 for a director and is entitled to seek indemnification under
those sections to the same extent as a director.
Section Q of Article 2.02-1 provides that a corporation may indemnify and
advance expenses to an officer, employee, agent, or person identified in Section
P of Article 2.02-1 and who is not a director to such further extent, consistent
with law, as may be provided by its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract or as permitted or
required by common law.
Section T of Article 2.02-1 provides that for purposes of Article 2.02-1,
the corporation is deemed to have requested a director to serve as a trustee,
employee, agent, or similar functionary of an employee benefit plan whenever the
performance by him of his duties to the corporation also imposes duties on or
otherwise involves services by him to the plan or participants or beneficiaries
of the plan. Excise taxes assessed on a director with respect to an employee
benefit plan pursuant to applicable law are deemed fines. Action taken or
omitted by a director with respect to an employee benefit plan in the
performance of his duties for a purpose reasonably believed by him to be in the
interest of the participants and beneficiaries of the plan is deemed to be for a
purpose which is not opposed to the best interests of the corporation.
Other provisions of Article 2.02-1 provide that: (i) under certain
circumstances, a corporation may pay the reasonable expenses prior to final
disposition of the proceeding; (ii) a corporation may pay or reimburse expenses
incurred by a director in connection with his appearance as a witness or other
participation in a proceeding at a time when he is not a named defendant or
respondent in the proceeding; and (iii) the articles of incorporation of a
corporation may restrict the circumstances under which the
II-17
<PAGE>
corporation is required or permitted to indemnify a person under Section H, I,
J, O, P, or Q of Article 2.02-1.
The Articles of Incorporation of Servico Market Center, Inc., a Texas
corporation, Servico Houston, Inc., a Texas corporation and Servico Austin,
Inc., a Texas corporation (collectively, the "Texas Corporations") provide that
the Texas Corporations shall indemnify any officer or director, or any former
officer of director of the Texas Corporations, to the fullest extent permitted
by law. This indemnification is not exclusive of any other rights to which any
director, officer, employee or agent are entitled as a matter of law or which
may be lawfully granted. The Texas Corporations' obligations to indemnify their
officers and directors pursuant to their respective Articles of Incorporation
are subordinate in all respects to the Texas Corporations' obligations arising
out of the Loan Documents (as defined in their respective Articles of
Incorporation) and shall not constitute a claim against the Texas Corporations
to the extent that the Texas Corporations are unable to pay any amounts they are
obligated to pay under the Liodgian credit facility.
The Bylaws of the respective Texas Corporations do not address
indemnification of directors or officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement, dated June 9, 1998, by Lodgian Capital Trust I and NationsBanc Montgomery Securities
LLC (incorporated by reference to Exhibit 1.1 to the Company's Registration Statement on Form S-1, as
amended, filed on July 14, 1999 (Registration Number 333-82859))
3.1.1 Certificate of Incorporation of Lodgian Financing Corp.(1)
3.1.2 Bylaws of Lodgian Financing Corp.(1)
3.2.1 Restated Certificate of Incorporation of Lodgian, Inc. (incorporated by reference to Appendix 6 to the
Company's Registration Statement on Form S-4, as amended, filed on July 17, 1998 (Registration Number.
333- 59315))
3.2.2 Restated Bylaws of Lodgian, Inc. (incorporated by reference to Appendix H to the Company's Registration
Statement on Form S-4, as amended, filed on July 17, 1998 (Registration Number 333-59315))
3.3.1 Amended and Restated Articles of Incorporation of Dothan Hospitality 3053, Inc.(1)
3.3.2 Bylaws of Dothan Hospitality 3053, Inc.(1)
3.4.1 Amended and Restated Articles of Incorporation of Dothan Hospitality 3071, Inc.
3.4.2 Bylaws of Dothan Hospitality 3071, Inc.(1)
3.5.1 Amended and Restated Articles of Incorporation of Gadsden Hospitality, Inc.(1)
3.5.2 Bylaws of Gadsden Hospitality, Inc.(1)
3.6.1 Amended and Restated Articles of Incorporation of Sheffield Motel Enterprises, Inc.(1)
3.6.2 Bylaws of Sheffield Motel Enterprises, Inc.(1)
3.7.1 Articles of Incorporation of Lodgian Anaheim Inc.(1)
3.7.2 Bylaws of Lodgian Anaheim Inc.(1)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.8.1 Articles of Incorporation of Lodgian Ontario Inc.(1)
3.8.2 Bylaws of Lodgian Ontario Inc.(1)
3.9.1 Amended and Restated Articles of Incorporation of Servico Ft. Pierce, Inc.(1)
3.9.2 Bylaws of Servico Ft. Pierce, Inc.(1)
3.10.1 Amended and Restated Articles of Incorporation of Servico Pensacola 7200, Inc.(1)
3.10.2 Bylaws of Servico Pensacola 7200, Inc.(1)
3.11.1 Amended and Restated Articles of Incorporation of Servico Pensacola 7330, Inc.(1)
3.11.2 Bylaws of Servico Pensacola 7330, Inc.(1)
3.12.1 Amended and Restated Articles of Incorporation of Servico Pensacola, Inc.(1)
3.12.2 Bylaws of Servico Pensacola, Inc.(1)
3.13.1 Partnership Agreement of AMI Operating Partners, L.P., as amended.(1)
3.14.1 Amended and Restated Articles of Incorporation of Albany Hotel, Inc.(1)
3.14.2 Bylaws of Albany Hotel, Inc.(1)
3.15.1 Amended and Restated Articles of Incorporation of Servico Flagstaff, Inc.
3.15.2 Bylaws of Servico Flagstaff, Inc.(1)
3.16.1 Amended and Restated Articles of Incorporation of Servico Northwoods, Inc.(1)
3.16.2 Bylaws of Servico Northwoods, Inc.(1)
3.17.1 Amended and Restated Articles of Incorporation of Servico Silver Spring, Inc.(1)
3.17.2 Bylaws of Servico Silver Spring, Inc.(1)
3.18.1 Amended and Restated Articles of Incorporation of Servico West Palm Beach, Inc.(1)
3.18.2 Bylaws of Servico West Palm Beach, Inc.(1)
3.19.1 Amended and Restated Articles of Incorporation of Servico Windsor, Inc.(1)
3.19.2 Bylaws of Servico Windsor, Inc.(1)
3.20.1 Amended and Restated Articles of Incorporation of Servico Winter Haven, Inc.(1)
3.20.2 Bylaws of Servico Winter Haven, Inc.(1)
3.21.1 Amended and Restated Articles of Incorporation of Brunswick Motel Enterprises, Inc.(1)
3.21.2 Bylaws of Brunswick Motel Enterprises, Inc.(1)
3.22.1 Operating Agreement of Atlanta-Hillsboro Lodging, LLC(1)
3.23.1 Operating Agreement of Lodgian Richmond, LLC(1)
3.24.1 Partnership Agreement of Little Rock Lodging Associates I, L.P.
3.25.1 Amended and Restated Articles of Incorporation of Servico Cedar Rapids, Inc.(1)
3.25.2 Bylaws of Servico Cedar Rapids, Inc.(1)
3.26.1 Amended and Restated Articles of Incorporation of Servico Rolling Meadows, Inc.(1)
</TABLE>
II-19
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.26.2 Bylaws of Servico Rolling Meadows, Inc.(1)
3.27.1 Amended and Restated Articles of Incorporation of Servico Metairie, Inc.(1)
3.27.2 Bylaws of Servico Metairie, Inc.(1)
3.28.1 Amended and Restated Articles of Incorporation of Servico Colesville, Inc.(1)
3.28.2 Bylaws of Servico Colesville, Inc.(1)
3.29.1 Amended and Restated Articles of Incorporation of Servico Columbia, Inc.(1)
3.29.2 Bylaws of Servico Columbia, Inc.(1)
3.30.1 Amended and Restated Articles of Incorporation of Servico Maryland, Inc.(1)
3.30.2 Bylaws of Servico Maryland, Inc.(1)
3.31.1 Amended and Restated Articles of Incorporation of NH Motel Enterprises, Inc.(1)
3.31.2 Bylaws of NH Motel Enterprises, Inc.(1)
3.32.1 Amended and Restated Articles of Incorporation of Minneapolis Motel Enterprises, Inc.
3.32.2 Bylaws of Minneapolis Motel Enterprises, Inc.(1)
3.33.1 Amended and Restated Articles of Incorporation of Servico Roseville, Inc.
3.33.2 Bylaws of Servico Roseville, Inc.(1)
3.34.1 Amended and Restated Articles of Incorporation of Lodgian Mount Laurel, Inc.
3.34.2 Bylaws of Lodgian Mount Laurel, Inc.(1)
3.35.1 Amended and Restated Articles of Incorporation of Servico Grand Island, Inc.(1)
3.35.2 Bylaws of Servico Grand Island, Inc.(1)
3.36.1 Amended and Restated Articles of Incorporation of Servico Jamestown, Inc.(1)
3.36.2 Bylaws of Servico Jamestown, Inc.(1)
3.37.1 Amended and Restated Articles of Incorporation of Servico New York, Inc.(1)
3.37.2 Bylaws of Servico New York, Inc.(1)
3.38.1 Amended and Restated Articles of Incorporation of Servico Niagara Falls, Inc.(1)
3.38.2 Bylaws of Servico Niagara Falls, Inc.(1)
3.39.1 Amended and Restated Articles of Incorporation of Fayetteville Motel Enterprises, Inc.(1)
3.39.2 Bylaws of Fayetteville Motel Enterprises, Inc.(1)
3.40.1 Amended and Restated Articles of Incorporation of Apico Hills, Inc.(1)
3.40.2 Bylaws of Apico Hills, Inc.(1)
3.41.1 Amended and Restated Articles of Incorporation of Apico Inns of Green Tree, Inc.(1)
3.41.2 Bylaws of Apico Inns of Green Tree, Inc.(1)
3.42.1 Amended and Restated Articles of Incorporation of Servico Hilton Head, Inc.(1)
3.42.2 Bylaws of Servico Hilton Head, Inc.(1)
</TABLE>
II-20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.43.1 Amended and Restated Articles of Incorporation of Servico Austin, Inc.(1)
3.43.2 Bylaws of Servico Austin, Inc.(1)
3.44.1 Amended and Restated Articles of Incorporation of Servico Houston, Inc.(1)
3.44.2 Bylaws of Servico Houston, Inc.(1)
3.45.1 Amended and Restated Articles of Incorporation of Servico Market Center, Inc.(1)
3.45.2 Bylaws of Servico Market Center, Inc.(1)
3.46.1 Amended and Restated Articles of Incorporation of Palm Beach Motel Enterprises, Inc.
3.46.2 Bylaws of Palm Beach Motel Enterprises, Inc.
4.1 Indenture, dated as of July 23, 1999, by and among Lodgian Financing Corp., Lodgian, Inc., the
subsidiary guarantors named therein and Bankers Trust Company, as trustee(1)
4.2 Registration Rights Agreement, dated as of July 20, 1999, by and among Lodgian Financing Corp., Lodgian,
Inc., the subsidiary guarantors named therein and Morgan Stanley & Co. Incorporated, Lehman Brothers Inc
and Bear, Stearns & Co. Inc.(1)
4.3 Form of Letter of Transmittal(1)
4.4 Indenture, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc. and Wilmington Trust Company,
as Trustee (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form
S-4, as amended, filed on July 17, 1998 (Registration Number 333-59315))
4.5 First Supplemental Indenture, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc. and
Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-4, as amended, filed on July 17, 1998 (Registration Number 333-59315))
4.6 Guarantee Agreement, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc. and Wilmington
Trust Company, as Guarantee Trustee (incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-4, as amended, filed on July 17, 1998 (Registration Number 333-59315))
4.7 Amended and Restated Declaration of Trust of Lodgian Capital Trust I, dated as of June 17, 1998, between
Servico, Inc., as Sponsor, David A. Buddemeyer, Charles M. Diaz and Phillip R. Hale, as Regular
Trustees, and Wilmington Trust Company, as Delaware Trust and Property Trustee (incorporated by
reference to Exhibit 10.5 to the Company's Registration Statement on Form S-4, as amended, filed on July
17, 1998 (Registration Number 333-59315))
4.8 Specimen Note (included as an exhibit to 4.1)(1)
4.9 Specimen CRESTS (included as an exhibit to Exhibit 4.4)(1)
4.10 Specimen Convertible Debenture (included as an exhibit to Exhibit 4.4)
5.1 Form of Opinion of Cadwalader, Wickersham & Taft regarding the validity of the issuance of the Notes
being registered hereby(1)
8.1 Tax Opinion of Cadwalader, Wickersham & Taft (included in Exhibit 5.1)
</TABLE>
II-21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.1 Credit Agreement, dated as of July 23, 1999, among Lodgian Financing Corp, Lodgian, Inc., Impac Hotel
Group, LLC, Servico, Inc., and the other affiliate guarantors party thereto and the initial lenders and
initial issuing bank named therein and Morgan Stanley Senior Funding, Inc., as Administrative Agent and
Collateral Agent, and Morgan Stanley Senior Funding, Inc., as Co-Lead Arranger, Joint-Book Manager and
Syndication Agent, and Lehman Brothers Inc., as Co-Lead Arranger and Joint-Book Manager
10.2 Security Agreement, dated July 23, 1999, from Lodgian Financing Corp., Servico, Inc., Impac Hotel Group,
LLC, and the other grantors referred to therein to Morgan Stanley Senior Funding, Inc., as Collateral
Agent
10.3.1 Loan Agreement, dated December 8, 1998, between Sheraton Concord, Inc. and Banc One Capital Funding
Corporation(1)
10.3.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian AMI, Inc., Penmoco, Inc. and Island
Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.3.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of Banc One
Capital Funding Corporation(1)
10.4.1 Loan Agreement, dated December 8, 1998, between Island Motel Enterprises, Inc., Penmoco, Inc. and Banc
One Capital Funding Corporation(1)
10.4.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc. and Lodgian AMI, Inc.
in favor of Banc One Capital Funding Corporation(1)
10.4.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of Banc One
Capital Funding Corporation(1)
10.5.1 Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc. and Banc One Capital Funding
Corporation (relating to Holiday Inn--Lancaster East)(1)
10.5.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco, Inc. and
Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.5.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of Banc One
Capital Funding Corporation(1)
10.6.1 Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc. and Banc One Capital Funding
Corporation (relating to Holdiay Inn--International Airport)(1)
10.6.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco, Inc. and
Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.6.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of Banc One
Capital Funding Corporation(1)
10.7.1 Loan Agreement dated as of July 18, 1996, among GMAC Commercial Mortgage Corporation and Servico Council
Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc., and
Servico Wichita, Inc.(1)
10.7.2 Mortgage Note in the amount of $16.84 million, dated as of July 18, 1996, by Servico Council Bluffs,
Inc., Servico West Des Moines, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc., and Servico
Wichita, Inc., in favor of GMAC Commercial Mortgage Corporation(1)
</TABLE>
II-22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.8.1 Loan Agreement dated as of May 7, 1996, between GMAC Commercial Mortgage Corporation and Servico
Lansing, Inc.(1)
10.8.2 Mortgage Note in the original amount of $5.687 million, dated as of May 7, 1996, by Servico Lansing,
Inc. in favor of GMAC Commercial Mortgage Corporation.(1)
10.9.1 Loan Agreement dated as of January 17, 1996, among GMAC Commercial Mortgage Corporation and Brecksville
Hospitality, L.P., Sioux City Hospitality, L.P. and 1075 Hospitality, L.P.(1)
10.9.2 Mortgage Note in the original amount of $12.91 million by Brecksville Hospitality, L.P., Sioux City
Hospitality, L.P. and 1075 Hospitality, L.P. in favor of GMAC Commercial Mortgage Corporation.(1)
10.10.1 Loan Agreement dated as of January 31, 1995, by and among Column Financial, Inc., and Servico Fort
Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc.,
Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motel Associates, Ltd., Wilpen,
Inc., Hilton Head Motel Enterprises, Inc., and Moon Airport Hotel, Inc.(1)
10.10.2 Promissory Note in the original amount of $60.5 million, dated as of January 31, 1995, by Servico Fort
Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc.,
Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motel Associates, Ltd., Wilpen,
Inc., Hilton Head Motel Enterprises, Inc., and Moon Airport Hotel, Inc. in favor of Column Financial,
Inc.(1)
10.11.1 Loan Agreement dated as of June 29, 1995, between Column Financial, Inc., and East Washington
Hospitality Limited Partnership.(1)
10.11.2 Promissory Note in the original amount of $11.0 million, dated as of June 29, 1995, by East Washington
Hospitality Limited Partnership in favor of Column Financial, Inc.(1)
10.12.1 Loan Agreement, dated as of January 31, 1995 and amended as of June 29, 1995, between Column Financial,
Inc., and McKnight Motel, Inc.(1)
10.12.2 Promissory Note in the original amount of $3.9 million, dated as of January 31, 1995 and amended as of
June 29, 1995, by McKnight Motel, Inc. in favor of Column Financial, Inc.(1)
10.13.1 Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc. and Banc One Capital Funding
Corporation (relating to Holiday Inn--Glen Burnie)(1)
10.13.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco, Inc. and
Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.13.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of Banc One
Capital Funding Corporation(1)
10.14.1 Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc. and Banc One Capital Funding
Corporation (relating to Holiday Inn--Inner Harbor)(1)
10.14.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco, Inc. and
Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.14.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of Banc One
Capital Funding Corporation(1)
</TABLE>
II-23
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
12.1 Statement Regarding Computation of Earnings to Fixed Charges (incorporated by reference to the Company's
Registration Statement on Form S-1, as amended, filed on July 14, 1999 (Registration Number 333-82859))
21.1 Subsidiaries of Lodgian Financing Corp. (incorporated by reference to the Company's Registration
Statement on Form S-1, as amended, filed on July 14, 1999 (Registration Number 333-82859))
23.1 Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney(1)
25.1 Form T-1: Statement of Eligibility of Bankers Trust Company(1)
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the CRESTS
Guarantee (incorporated by reference to the Company's Registration Statement on Form S-1, as amended,
filed on July 14, 1999 (Registration Number 333-82859))
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the CRESTS
Indenture (incorporated by reference to the Company's Registration Statement on Form S-1, as amended,
filed on July 14, 1999 (Registration Number 333-82859))
25.4 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the CRESTS
Amended and Restated Declaration of Trust (incorporated by reference to the Company's Registration
Statement on Form S-1, as amended, filed on July 14, 1999 (Registration Number 333-82859))
27.1 Financial Data Schedule (incorporated by reference to the Company's Registration Statement on Form S-1,
as amended, filed on July 14, 1999 (Registration Number 333-82859))
</TABLE>
- ------------------------
(1) Previously filed.
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling any
Registrant pursuant to the foregoing provisions, each Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of a 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, each 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-24
<PAGE>
The undersigned Registrants hereby undertake:
(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. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(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.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrants hereby undertake 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.
The undersigned Registrants hereby undertake to supply be 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.
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
registrants has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on , 1999.
<TABLE>
<S> <C> <C>
LODGIAN FINANCING CORP.
BY: /S/ ROBERT S. COLE
-----------------------------------------
Robert S. Cole
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LODGIAN, INC.
BY: /S/ ROBERT S. COLE
-----------------------------------------
Robert S. Cole
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SHEFFIELD MOTEL ENTERPRISES, INC.
DOTHAN HOSPITALITY 3053, INC.
DOTHAN HOSPITALITY 3071, INC.
GADSDEN HOSPITALITY, INC.
SERVICO FLAGSTAFF, INC.
LODGIAN ANAHEIM, INC.
LODGIAN ONTARIO INC.
SERVICO PENSACOLA, INC.
SERVICO PENSACOLA 7200, INC.
SERVICO PENSACOLA 7330, INC.
SERVICO FT. PIERCE, INC.
PALM BEACH MOTEL ENTERPRISES, INC.
SERVICO WEST PALM BEACH, INC.
SERVICO WINTER HAVEN, INC.
SERVICO SILVER SPRING, INC.
ALBANY HOTEL, INC.
SERVICO NORTHWOODS, INC.
SERVICO WINDSOR, INC.
BRUNSWICK MOTEL ENTERPRISES, INC.
SERVICO ROLLING MEADOWS, INC.
SERVICO CEDAR RAPIDS, INC.
SERVICO METAIRIE, INC.
SERVICO COLUMBIA, INC.
SERVICO COLESVILLE, INC.
SERVICO MARYLAND, INC.
NH MOTEL ENTERPRISES, INC.
MINNEAPOLIS MOTEL ENTERPRISES, INC.
SERVICO ROSEVILLE, INC.
LODGIAN MOUNT LAUREL, INC.
SERVICO JAMESTOWN, INC.
SERVICO NEW YORK, INC.
SERVICO NIAGARA FALLS, INC.
</TABLE>
II-26
<PAGE>
<TABLE>
<S> <C> <C>
SERVICO GRAND ISLAND, INC.
FAYETTEVILLE MOTEL ENTERPRISES, INC.
APICO INNS OF GREEN TREE, INC.
APICO HILLS, INC.
SERVICO HILTON HEAD, INC.
SERVICO AUSTIN, INC.
SERVICO MARKET CENTER, INC.
SERVICO HOUSTON, INC.
By: /s/ ROBERT M. FLANDERS
-----------------------------------------
Robert M. Flanders
PRESIDENT
AMI OPERATING PARTNERS, L.P.
By: /s/ ROBERT M. FLANDERS
-----------------------------------------
Robert M. Flanders
PRESIDENT OF AMIOP ACQUSITION CORP., GENERAL
PARTNER OF AMI OPERATING PARTNERS, L.P.
LITTLE ROCK LODGING ASSOCIATES I, L.P.
LODGIAN RICHMOND, LLC
By: /s/ ROBERT M. FLANDERS
-----------------------------------------
Robert M. Flanders
PRESIDENT OF LODGIAN RICHMOND SPE, INC.,
GENERAL
PARTNER OF LITTLE ROCK LODGING ASSOCIATES I,
L.P. AND
MANAGING MEMBER OF LODGIAN RICHMOND, LLC
ATLANTA HILLSBORO LODGING, LLC
By: /s/ ROBERT S. COLE
-----------------------------------------
Robert S. Cole
MANAGER
</TABLE>
II-27
<PAGE>
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 on , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
Lodgian Financing Corp.
* Director and President
- ------------------------------ (Principal Executive
Robert S. Cole Officer)
Executive Vice President
* and Chief Financial
- ------------------------------ Officer (Principal
Kenneth R. Posner Financial and Accounting
Officer)
* Director
- ------------------------------
Joseph C. Calabro
Lodgian, Inc.
Chief Executive Officer,
* President and Director
- ------------------------------ (Principal Executive
Robert S. Cole Officer)
Executive Vice President
* and Chief Financial
- ------------------------------ Officer (Principal
Kenneth R. Posner Financial and Accounting
Officer)
* Director
- ------------------------------
Joseph C. Calabro
* Director
- ------------------------------
Peter R. Tyson
</TABLE>
II-28
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
* Director
- ------------------------------
* Director
- ------------------------------
Michael A. Leven
* Director
- ------------------------------
Richard H. Wiener
Sheffield Motel Enterprises, Inc.
Dothan Hospitality 3053, Inc.
Dothan Hospitality 3071, Inc.
Gadsden Hospitality, Inc.
Servico Flagstaff, Inc.
Servico Pensacola, Inc.
Servico Pensacola 7200, Inc.
Servico Pensacola 7330, Inc.
Servico Ft. Pierce, Inc.
Palm Beach Motel Enterprises, Inc.
Servico West Palm Beach, Inc.
Servico Winter Haven, Inc.
Servico Silver Spring, Inc.
Albany Hotel, Inc.
Servico Northwoods, Inc.
Servico Windsor, Inc.
Brunswick Motel Enterprises, Inc.
Servico Rolling Meadows, Inc.
Servico Cedar Rapids, Inc.
Servico Metairie, Inc.
Servico Columbia, Inc.
Servico Colesville, Inc.
Servico Maryland, Inc.
NH Motel Enterprises, Inc.
Minneapolis Motel Enterprises, Inc.
Servico Roseville, Inc.
Lodgian Mount Laurel, Inc.
Servico Jamestown, Inc.
Servico New York, Inc.
Servico Niagara Falls, Inc.
Servico Grand Island, Inc.
Fayetteville Motel Enterprises, Inc.
Apico Inns of Green Tree, Inc.
Apico Hills, Inc.
Servico Hilton Head, Inc.
Servico Austin, Inc.
Servico Market Center, Inc.
Servico Houston, Inc.
</TABLE>
II-29
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
* President and Director
- ------------------------------ (Principal Executive
Robert M. Flanders Officer)
Chief Financial Officer of
all entities listed
above, except Brunswick
* Motel Enterprises, Inc.
- ------------------------------ of which he is Vice
Kenneth R. Posner President-Finance
(Principal Financial and
Accounting Officer)
* Director
- ------------------------------
Mark K. Rafuse
* Director
- ------------------------------
Carl McKenry
Lodgian Anaheim, Inc.
Lodgian Ontario Inc.
* President and Director
- ------------------------------ (Principal Executive
Robert M. Flanders Officer)
* Chief Financial Officer
- ------------------------------ (Principal Financial and
Kenneth R. Posner Accounting Officer)
* Director
- ------------------------------
Mark K. Rafuse
AMI Operating Partners, L.P.
President and Director
(Principal Executive
* Officer) of AMIOP
- ------------------------------ Acquisition Corp.,
Robert M. Flanders general partner of AMI
Operating Partners, L.P.
Chief Financial Officer
(Principal Financial and
* Accounting Officer) of
- ------------------------------ AMIOP Acquisition Corp.,
Kenneth R. Posner general partner of AMI
Operating Partners, L.P.
</TABLE>
II-30
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
Director of AMIOP
* Acquisition Corp.,
- ------------------------------ general partner of AMI
Mark K. Rafuse Operating Partners, L.P.
Director of AMIOP
* Acquisition Corp.,
- ------------------------------ general partner of AMI
Carl McKenry Operating Partners, L.P.
Little Rock Lodging Associates I, L.P.
Lodgian Richmond, LLC
President and Director
(Principal Executive
Officer) of Lodgian
* Richmond SPEC, Inc.,
- ------------------------------ general partner of Little
Robert M. Flanders Rock Lodging
Associates I, LP and
managing member of
Lodgian Richmond, LLC
Chief Financial Officer
(Principal Financial and
Accounting Officer) of
* Lodgian Richmond SPE,
- ------------------------------ Inc., general partner of
Kenneth R. Posner Little Rock Lodging
Associates I, LP and
managing member of
Lodgian Richmond, LLC
Director of Lodgian
Richmond SPE, Inc.,
* general
- ------------------------------ partner of Little Rock
Mark K. Rafuse Lodging Associates I, LP
and managing member of
Lodgian Richmond, LLC
Director of Lodgian
Richmond SPE, Inc.,
* general
- ------------------------------ partner of Little Rock
Carl McKenry Lodging Associates I, LP
and managing member of
Lodgian Richmond, LLC
Atlanta-Hillsboro Lodging, LLC
* Manager and President
- ------------------------------ (Principal Executive
Robert S. Cole Officer)
* Vice President--Finance
- ------------------------------ (Principal Financial and
Kenneth R. Posner Accounting Officer)
</TABLE>
<TABLE>
<S> <C> <C>
*By: /s/ ROBERT M. FLANDERS
- ------------------------------
Robert M. Flanders
ATTORNEY-IN-FACT
</TABLE>
II-31
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
1.1 Purchase Agreement, dated June 9, 1998, by Lodgian Capital Trust I and NationsBanc Montgomery
Securities LLC (incorporated by reference to Exhibit 1.1 to the Company's Registration Statement
on Form S-1, as amended, filed on July 14, 1999 (Registration Number 333-82859))
3.1.1 Certificate of Incorporation of Lodgian Financing Corp.(1)
3.1.2 Bylaws of Lodgian Financing Corp.(1)
3.2.1 Restated Certificate of Incorporation of Lodgian, Inc. (incorporated by reference to Appendix 6
to the Company's Registration Statement on Form S-4, as amended, filed on July 17, 1998
(Registration Number. 333- 59315))
3.2.2 Restated Bylaws of Lodgian, Inc. (incorporated by reference to Appendix H to the Company's
Registration Statement on Form S-4, as amended, filed on July 17, 1998 (Registration Number
333-59315))
3.3.1 Amended and Restated Articles of Incorporation of Dothan Hospitality 3053, Inc.(1)
3.3.2 Bylaws of Dothan Hospitality 3053, Inc.(1)
3.4.1 Amended and Restated Articles of Incorporation of Dothan Hospitality 3071, Inc.
3.4.2 Bylaws of Dothan Hospitality 3071, Inc.(1)
3.5.1 Amended and Restated Articles of Incorporation of Gadsden Hospitality, Inc.(1)
3.5.2 Bylaws of Gadsden Hospitality, Inc.(1)
3.6.1 Amended and Restated Articles of Incorporation of Sheffield Motel Enterprises, Inc.(1)
3.6.2 Bylaws of Sheffield Motel Enterprises, Inc.(1)
3.7.1 Articles of Incorporation of Lodgian Anaheim Inc.(1)
3.7.2 Bylaws of Lodgian Anaheim Inc.(1)
3.8.1 Articles of Incorporation of Lodgian Ontario Inc.(1)
3.8.2 Bylaws of Lodgian Ontario Inc.(1)
3.9.1 Amended and Restated Articles of Incorporation of Servico Ft. Pierce, Inc.(1)
3.9.2 Bylaws of Servico Ft. Pierce, Inc.(1)
3.10.1 Amended and Restated Articles of Incorporation of Servico Pensacola 7200, Inc.(1)
3.10.2 Bylaws of Servico Pensacola 7200, Inc.(1)
3.11.1 Amended and Restated Articles of Incorporation of Servico Pensacola 7330, Inc.(1)
3.11.2 Bylaws of Servico Pensacola 7330, Inc.(1)
3.12.1 Amended and Restated Articles of Incorporation of Servico Pensacola, Inc.(1)
3.12.2 Bylaws of Servico Pensacola, Inc.(1)
3.13.1 Partnership Agreement of AMI Operating Partners, L.P., as amended.(1)
3.14.1 Amended and Restated Articles of Incorporation of Albany Hotel, Inc.(1)
3.14.2 Bylaws of Albany Hotel, Inc.(1)
3.15.1 Amended and Restated Articles of Incorporation of Servico Flagstaff, Inc.
3.15.2 Bylaws of Servico Flagstaff, Inc.(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
3.16.1 Amended and Restated Articles of Incorporation of Servico Northwoods, Inc.(1)
3.16.2 Bylaws of Servico Northwoods, Inc.(1)
3.17.1 Amended and Restated Articles of Incorporation of Servico Silver Spring, Inc.(1)
3.17.2 Bylaws of Servico Silver Spring, Inc.(1)
3.18.1 Amended and Restated Articles of Incorporation of Servico West Palm Beach, Inc.(1)
3.18.2 Bylaws of Servico West Palm Beach, Inc.(1)
3.19.1 Amended and Restated Articles of Incorporation of Servico Windsor, Inc.(1)
3.19.2 Bylaws of Servico Windsor, Inc.(1)
3.20.1 Amended and Restated Articles of Incorporation of Servico Winter Haven, Inc.(1)
3.20.2 Bylaws of Servico Winter Haven, Inc.(1)
3.21.1 Amended and Restated Articles of Incorporation of Brunswick Motel Enterprises, Inc.(1)
3.21.2 Bylaws of Brunswick Motel Enterprises, Inc.(1)
3.22.1 Operating Agreement of Atlanta-Hillsboro Lodging, LLC(1)
3.23.1 Operating Agreement of Lodgian Richmond, LLC(1)
3.24.1 Partnership Agreement of Little Rock Lodging Associates I, L.P.
3.25.1 Amended and Restated Articles of Incorporation of Servico Cedar Rapids, Inc.(1)
3.25.2 Bylaws of Servico Cedar Rapids, Inc.(1)
3.26.1 Amended and Restated Articles of Incorporation of Servico Rolling Meadows, Inc.(1)
3.26.2 Bylaws of Servico Rolling Meadows, Inc.(1)
3.27.1 Amended and Restated Articles of Incorporation of Servico Metairie, Inc.(1)
3.27.2 Bylaws of Servico Metairie, Inc.(1)
3.28.1 Amended and Restated Articles of Incorporation of Servico Colesville, Inc.(1)
3.28.2 Bylaws of Servico Colesville, Inc.(1)
3.29.1 Amended and Restated Articles of Incorporation of Servico Columbia, Inc.(1)
3.29.2 Bylaws of Servico Columbia, Inc.(1)
3.30.1 Amended and Restated Articles of Incorporation of Servico Maryland, Inc.(1)
3.30.2 Bylaws of Servico Maryland, Inc.(1)
3.31.1 Amended and Restated Articles of Incorporation of NH Motel Enterprises, Inc.(1)
3.31.2 Bylaws of NH Motel Enterprises, Inc.(1)
3.32.1 Amended and Restated Articles of Incorporation of Minneapolis Motel Enterprises, Inc.
3.32.2 Bylaws of Minneapolis Motel Enterprises, Inc.(1)
3.33.1 Amended and Restated Articles of Incorporation of Servico Roseville, Inc.
3.33.2 Bylaws of Servico Roseville, Inc.(1)
3.34.1 Amended and Restated Articles of Incorporation of Lodgian Mount Laurel, Inc.
3.34.2 Bylaws of Lodgian Mount Laurel, Inc.(1)
3.35.1 Amended and Restated Articles of Incorporation of Servico Grand Island, Inc.(1)
3.35.2 Bylaws of Servico Grand Island, Inc.(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
3.36.1 Amended and Restated Articles of Incorporation of Servico Jamestown, Inc.(1)
3.36.2 Bylaws of Servico Jamestown, Inc.(1)
3.37.1 Amended and Restated Articles of Incorporation of Servico New York, Inc.(1)
3.37.2 Bylaws of Servico New York, Inc.(1)
3.38.1 Amended and Restated Articles of Incorporation of Servico Niagara Falls, Inc.(1)
3.38.2 Bylaws of Servico Niagara Falls, Inc.(1)
3.39.1 Amended and Restated Articles of Incorporation of Fayetteville Motel Enterprises, Inc.(1)
3.39.2 Bylaws of Fayetteville Motel Enterprises, Inc.(1)
3.40.1 Amended and Restated Articles of Incorporation of Apico Hills, Inc.(1)
3.40.2 Bylaws of Apico Hills, Inc.(1)
3.41.1 Amended and Restated Articles of Incorporation of Apico Inns of Green Tree, Inc.(1)
3.41.2 Bylaws of Apico Inns of Green Tree, Inc.(1)
3.42.1 Amended and Restated Articles of Incorporation of Servico Hilton Head, Inc.(1)
3.42.2 Bylaws of Servico Hilton Head, Inc.(1)
3.43.1 Amended and Restated Articles of Incorporation of Servico Austin, Inc.(1)
3.43.2 Bylaws of Servico Austin, Inc.(1)
3.44.1 Amended and Restated Articles of Incorporation of Servico Houston, Inc.(1)
3.44.2 Bylaws of Servico Houston, Inc.(1)
3.45.1 Amended and Restated Articles of Incorporation of Servico Market Center, Inc.(1)
3.45.2 Bylaws of Servico Market Center, Inc.(1)
3.46.1 Amended and Restated Articles of Incorporation of Palm Beach Motel Enterprises, Inc.
3.46.2 Bylaws of Palm Beach Motel Enterprises, Inc.
4.1 Indenture, dated as of July 23, 1999, by and among Lodgian Financing Corp., Lodgian, Inc., the
subsidiary guarantors named therein and Bankers Trust Company, as trustee(1)
4.2 Registration Rights Agreement, dated as of July 20, 1999, by and among Lodgian Financing Corp.,
Lodgian, Inc., the subsidiary guarantors named therein and Morgan Stanley & Co. Incorporated,
Lehman Brothers Inc and Bear, Stearns & Co. Inc.(1)
4.3 Form of Letter of Transmittal(1)
4.4 Indenture, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc. and Wilmington Trust
Company, as Trustee (incorporated by reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-4, as amended, filed on July 17, 1998 (Registration Number 333-59315))
4.5 First Supplemental Indenture, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc.
and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form S-4, as amended, filed on July 17, 1998 (Registration
Number 333-59315))
4.6 Guarantee Agreement, dated as of June 17, 1998, between Servico, Inc., Lodgian, Inc. and
Wilmington Trust Company, as Guarantee Trustee (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-4, as amended, filed on July 17, 1998 (Registration
Number 333-59315))
</TABLE>
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4.7 Amended and Restated Declaration of Trust of Lodgian Capital Trust I, dated as of June 17, 1998,
between Servico, Inc., as Sponsor, David A. Buddemeyer, Charles M. Diaz and Phillip R. Hale, as
Regular Trustees, and Wilmington Trust Company, as Delaware Trust and Property Trustee
(incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-4,
as amended, filed on July 17, 1998 (Registration Number 333-59315))
4.8 Specimen Note (included as an exhibit to 4.1)(1)
4.9 Specimen CRESTS (included as an exhibit to Exhibit 4.4)(1)
4.10 Specimen Convertible Debenture (included as an exhibit to Exhibit 4.4)
5.1 Form of Opinion of Cadwalader, Wickersham & Taft regarding the validity of the issuance of the
Notes being registered hereby(1)
8.1 Tax Opinion of Cadwalader, Wickersham & Taft (included in Exhibit 5.1)
10.1 Credit Agreement, dated as of July 23, 1999, among Lodgian Financing Corp, Lodgian, Inc., Impac
Hotel Group, LLC, Servico, Inc., and the other affiliate guarantors party thereto and the
initial lenders and initial issuing bank named therein and Morgan Stanley Senior Funding, Inc.,
as Administrative Agent and Collateral Agent, and Morgan Stanley Senior Funding, Inc., as
Co-Lead Arranger, Joint-Book Manager and Syndication Agent, and Lehman Brothers Inc., as Co-Lead
Arranger and Joint-Book Manager
10.2 Security Agreement, dated July 23, 1999, from Lodgian Financing Corp., Servico, Inc., Impac
Hotel Group, LLC, and the other grantors referred to therein to Morgan Stanley Senior Funding,
Inc., as Collateral Agent
10.3.1 Loan Agreement, dated December 8, 1998, between Sheraton Concord, Inc. and Banc One Capital
Funding Corporation(1)
10.3.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Lodgian AMI, Inc., Penmoco, Inc.
and Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.3.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of
Banc One Capital Funding Corporation(1)
10.4.1 Loan Agreement, dated December 8, 1998, between Island Motel Enterprises, Inc., Penmoco, Inc.
and Banc One Capital Funding Corporation(1)
10.4.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc. and Lodgian
AMI, Inc. in favor of Banc One Capital Funding Corporation(1)
10.4.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of
Banc One Capital Funding Corporation(1)
10.5.1 Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc. and Banc One Capital Funding
Corporation (relating to Holiday Inn--Lancaster East)(1)
10.5.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco,
Inc. and Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.5.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of
Banc One Capital Funding Corporation(1)
10.6.1 Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc. and Banc One Capital Funding
Corporation (relating to Holdiay Inn--International Airport)(1)
</TABLE>
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10.6.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco,
Inc. and Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.6.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of
Banc One Capital Funding Corporation(1)
10.7.1 Loan Agreement dated as of July 18, 1996, among GMAC Commercial Mortgage Corporation and Servico
Council Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha, Inc., Servico Omaha Central,
Inc., and Servico Wichita, Inc.(1)
10.7.2 Mortgage Note in the amount of $16.84 million, dated as of July 18, 1996, by Servico Council
Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc.,
and Servico Wichita, Inc., in favor of GMAC Commercial Mortgage Corporation(1)
10.8.1 Loan Agreement dated as of May 7, 1996, between GMAC Commercial Mortgage Corporation and Servico
Lansing, Inc.(1)
10.8.2 Mortgage Note in the original amount of $5.687 million, dated as of May 7, 1996, by Servico
Lansing, Inc. in favor of GMAC Commercial Mortgage Corporation.(1)
10.9.1 Loan Agreement dated as of January 17, 1996, among GMAC Commercial Mortgage Corporation and
Brecksville Hospitality, L.P., Sioux City Hospitality, L.P. and 1075 Hospitality, L.P.(1)
10.9.2 Mortgage Note in the original amount of $12.91 million by Brecksville Hospitality, L.P., Sioux
City Hospitality, L.P. and 1075 Hospitality, L.P. in favor of GMAC Commercial Mortgage
Corporation.(1)
10.10.1 Loan Agreement dated as of January 31, 1995, by and among Column Financial, Inc., and Servico
Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II,
Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motel Associates,
Ltd., Wilpen, Inc., Hilton Head Motel Enterprises, Inc., and Moon Airport Hotel, Inc.(1)
10.10.2 Promissory Note in the original amount of $60.5 million, dated as of January 31, 1995, by
Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels I, Inc., Servico
Hotels II, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc., New Orleans Airport Motel
Associates, Ltd., Wilpen, Inc., Hilton Head Motel Enterprises, Inc., and Moon Airport Hotel,
Inc. in favor of Column Financial, Inc.(1)
10.11.1 Loan Agreement dated as of June 29, 1995, between Column Financial, Inc., and East Washington
Hospitality Limited Partnership.(1)
10.11.2 Promissory Note in the original amount of $11.0 million, dated as of June 29, 1995, by East
Washington Hospitality Limited Partnership in favor of Column Financial, Inc.(1)
10.12.1 Loan Agreement, dated as of January 31, 1995 and amended as of June 29, 1995, between Column
Financial, Inc., and McKnight Motel, Inc.(1)
10.12.2 Promissory Note in the original amount of $3.9 million, dated as of January 31, 1995 and amended
as of June 29, 1995, by McKnight Motel, Inc. in favor of Column Financial, Inc.(1)
10.13.1 Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc. and Banc One Capital Funding
Corporation (relating to Holiday Inn--Glen Burnie)(1)
10.13.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco,
Inc. and Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
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10.13.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of
Banc One Capital Funding Corporation(1)
10.14.1 Loan Agreement, dated December 8, 1998, between Lodgian AMI, Inc. and Banc One Capital Funding
Corporation (relating to Holiday Inn--Inner Harbor)(1)
10.14.2 Guaranty and Indemnity Agreement, dated December 8, 1998, by Servico Concord, Inc., Penmoco,
Inc. and Island Motel Enterprises, Inc. in favor of Banc One Capital Funding Corporation(1)
10.14.3 Limited Guaranty and Indemnity Agreement dated December 8, 1998, by Lodgian, Inc. in favor of
Banc One Capital Funding Corporation(1)
12.1 Statement Regarding Computation of Earnings to Fixed Charges (incorporated by reference to the
Company's Registration Statement on Form S-1, as amended, filed on July 14, 1999 (Registration
Number 333-82859))
21.1 Subsidiaries of Lodgian Financing Corp. (incorporated by reference to the Company's Registration
Statement on Form S-1, as amended, filed on July 14, 1999 (Registration Number 333-82859))
23.1 Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney(1)
25.1 Form T-1: Statement of Eligibility of Bankers Trust Company(1)
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the
CRESTS Guarantee (incorporated by reference to the Company's Registration Statement on Form S-1,
as amended, filed on July 14, 1999 (Registration Number 333-82859))
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the
CRESTS Indenture (incorporated by reference to the Company's Registration Statement on Form S-1,
as amended, filed on July 14, 1999 (Registration Number 333-82859))
25.4 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the
CRESTS Amended and Restated Declaration of Trust (incorporated by reference to the Company's
Registration Statement on Form S-1, as amended, filed on July 14, 1999 (Registration Number
333-82859))
27.1 Financial Data Schedule (incorporated by reference to the Company's Registration Statement on
Form S-1, as amended, filed on July 14, 1999 (Registration Number 333-82859))
</TABLE>
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(1) Previously filed.
<PAGE>
Exhibit 3.4.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
DOTHAN HOSPITALITY 3071, INC.
Pursuant to Sections 10-2B-10.06 and 10-2B-10.07 of the Alabama
Business Corporation Act, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation
(the "Corporation"), hereby certifies that these Second Amended and Restated
Articles of Incorporation (the "Amended Articles"), which contain amendments
requiring shareholder approval, were duly adopted by the Board of Directors of
the Corporation and by the sole shareholder of the Corporation by written
consent without a meeting, pursuant to Sections l0-2B-8.21 and l0-2B-7.04 of the
Alabama Business Corporation Act, as of July ___, 1998. The number of
outstanding shares of common stock of the Corporation (and the number of shares
entitled to vote thereon) is 1,000. These Amended Articles correctly set forth
the provisions of the Articles of Incorporation as heretofore amended. These
Amended Articles supercede the original Articles of Incorporation and all
amendments thereto.
ARTICLE I
The name of the Corporation is DOTHAN HOSPITALITY 3071, INC.
ARTICLE II
The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 1,000 shares of common stock, par
value $0.01 per share.
ARTICLE III
The street address of the registered office of the Corporation is
The Corporation Company, 60 Commerce Street, Suite 1100, Montgomery, Alabama
36104, and the name of its registered agent at that office is The Corporation
Company.
ARTICLE IV
The name and address of the incorporator of the Corporation was
David Buddemeyer, 1601 Belvedere Road, West Palm Beach, Florida 33406.
ARTICLE V
The number of directors constituting the board of directors of the
corporation shall be at least one (1), and the name and address of the person
who is to serve as the sole director until the annual meeting of shareholders
and until his successor is elected and shall qualify is as
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follows:
Name Address
Robert M. Flanders 3445 Peachtree Road, N.E.,
Two Live Oak Center, Suite 700,
Atlanta, GA 30326.
ARTICLE VI
(a) The purpose for which the Corporation is organized is limited
to: (i) acquiring, owning, leasing, operating, using and managing that certain
real property commonly known as the Hampton Inn, located at 3071 Ross Clark
Circle, Dothan, Alabama 36301 (the "Property"); (ii) entering into and
performing its obligations under the credit agreement, among Lodgian Financing
Corp., as borrower, Lodgian, Inc., its parent, Impac Hotel Group, LLC, Servico,
Inc. and other affiliated entities, as affiliate guarantors, the initial lenders
and initial issuing bank named therein, the collateral agent, the administrative
agent, Morgan Stanley Senior Funding, Inc., as co-lead arranger, joint-book
manager and syndication agent and Lehman Brothers, as co-lead arranger,
joint-book manager and documentation agent relating to the financing or
refinancing of the Property (the "Loan Agreement") which provides the lender
thereunder with a first priority lien on the Property, any promissory-note
evidencing indebtedness incurred pursuant to the Loan Agreement, any mortgage
securing such indebtedness and encumbering the Property (the "Mortgage") and any
other documents securing such indebtedness and any related collateral documents,
each as amended (or pursuant to a consent obtained in accordance with the terms
thereof) (collectively, the "Loan Documents"); (iii) entering into and
performing its obligations under the Indenture (the "Indenture"), among Lodgian
Financing Corp, as issuer, Lodgian, Inc., the Subsidiary Guarantors defined
therein and Bankers Trust Company, as trustee, relating to the issuance of the
12 1/4% Senior Subordinated Notes due 2009 and the Guarantee in favor of the
holders of the Notes and (iv) transacting any and all lawful business that is
incident and necessary or appropriate to the ownership and to the management of
the Property for which a corporation may be incorporated under the laws of the
State of Alabama.
(b) Notwithstanding any other provision of these Amended Articles
and any provision of law that otherwise so empowers the Corporation, until such
time as the Property is released from the lien of the Mortgage, the Corporation
shall not, without the unanimous affirmative vote of the members of its Board of
Directors, (i) amend, alter, change, repeal or adopt any resolution setting
forth a proposed amendment to, any provision of these Articles of Incorporation,
(ii) dissolve or liquidate, in whole or in part, consolidate or merge with or
into any other entity or convey, sell or transfer its properties and assets
substantially as an entirety to any entity, (iii) file a voluntary petition or
otherwise initiate, or consent to, proceedings for the Corporation to be
adjudicated insolvent or seeking an order for relief as a debtor under the
United States Bankruptcy Code, as amended (11 U.S.C. ss.ss. 101 et seq.), or
(iv) file any petition, or consent to any petition, seeking any composition,
reorganization, readjustment, liquidation, dissolution or similar relief under
the present or any future federal bankruptcy laws or any other present or future
applicable federal, state or other statute or law relative to bankruptcy,
insolvency or other relief for debtors; or (v) seek or consent to the
appointment of any trustee,
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receiver, conservator, assignee, sequestrator, custodian, or liquidator (or
other similar official) of the Corporation or of all or any substantial part of
the properties and assets of the Corporation, or (vi) make any general
assignment for the benefit of creditors, or (vii) admit in writing its inability
to pay its debts generally as they become due, or (viii) declare or effect a
moratorium on its debt or take any corporate action in furtherance of any such
action.
(c) The Board of Directors of the Corporation shall, at all times
until the Property is released from the lien of the Mortgage, include an
independent director (the "Independent Director"). The Independent Director
shall be a person who is not at the time of appointment and who has not at any
time during the prior five years been and who is not while serving as the
Independent Director (i) a director, stockholder, officer or employee of the
Corporation or any affiliates thereof, other than with respect to such person's
service as an Independent Director of the Corporation and such person's service
in similar "Independent Director" positions for affiliates of the Corporation;
(ii) a creditor, customer, supplier, independent contractor, manager or any
other person who derives more than 10% of its gross revenues from its activities
with the Corporation or any affiliates thereof; (iii) a person controlling any
such stockholder, creditor, customer, supplier, independent contractor, manager
or other person; (iv) the legal or beneficial owner, at any time while serving
as director of the Corporation, of any beneficial interest in the Corporation;
or (v) a member of the immediate family of any such stockholder, officer,
employee, creditor, customer, supplier, director, independent contractor,
manager or any other person of the Corporation. As used herein, the term
"affiliate" means any person controlling, under common control wit, or
controlled by the person in question, and the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contact or otherwise. In the event of the death,
incapacity, or resignation of an Independent Director, or the vacancy of the
Independent Director's seat on the Corporation's Board of Directors for any
reason, a successor Independent Director shall be appointed by the remaining
directors.
(d) Except as otherwise permitted by the Loan Documents, so long as
the Property is subject to the lien of the Mortgage, the Corporation shall (i)
observe all corporate formalities, including the maintenance of current minute
books; (ii) maintain its own separate and distinct books of account and
corporate records from any other person or entity; (iii) cause its financial
statements to be prepared in accordance with generally accepted accounting
principles in a manner that indicates the separate existence of the Corporation
and its assets and liabilities from any other person or entity; (iv) pay all its
liabilities out of its own funds; (v) in all dealings, identify itself, and
conduct its own business and hold itself out under its own name and as a
separate and distinct entity and correct any misunderstandings regarding its
status as a separate entity; (vi) independently make decisions with respect to
its business and daily operations; (vii) maintain an arm's length relationship
with its affiliates; (viii) pay the salaries of its employees and maintain a
sufficient number of employees in light of its contemplated business operations;
(ix) allocate fairly and reasonably any overhead for shared office space; and
(x) use separate stationery, invoices and checks.
(e) Except as otherwise permitted by the Loan Documents, so long as
the Property is subject to the lien of the Mortgage, the Corporation shall not
(i) commingle its assets with those
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of, or pledge its assets for the benefit of, any other person or entity; (ii)
assume, guarantee or become obligated, or hold out its credit as being available
to satisfy, the liabilities or obligations of any other person or entity; (iii)
reduce its capital below an amount which is adequate in light of its
contemplated business operations; (iv) acquire obligations or securities of, or
make loans or advances to, any affiliate; (v) incur or assume any indebtedness
other than (A) the indebtedness underlying the Loan Agreement (B) the
indebtedness underlying the Indenture, and (C) liabilities (including, but not
limited to, trade payables) arising in the ordinary course of the Corporation's
business relating to the acquisition, ownership, operation, lease, use or
management of the Property; (vi) amend, alter, change or repeal any provision of
Article VI and the last sentence of Article IX of these Amended Articles; (vii)
engage in any dissolution or liquidation, in whole or in part, consolidation or
merger with or into any other entity or conveyance, sale or transfer of its
properties and assets substantially as an entirety to any entity; or (viii)
engage in any business or activity other than as set forth in these Amended
Articles. Notwithstanding anything contained herein to the contrary, nothing
herein shall be deemed to prohibit or otherwise limit any dividends or other
distributions from the Corporation to its shareholders.
ARTICLE VII
The Board of Directors is expressly authorized to adopt, alter,
amend or repeal the Bylaws of the Corporation subject to the limitations set
forth in these Amended Articles. Election of directors need not be by written
ballot unless and to the extent provided in the Bylaws of the Corporation.
ARTICLE VIII
The business and affairs of the Corporation shall be managed and
regulated by the board of directors of the Corporation. No director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duties 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 on good faith or
which involve intentional misconduct or a knowing violation of law, or (iii) for
any transaction from which the director derived an improper personal benefit. If
the Alabama Business Corporation Act is amended after the date of these Amended
Articles to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Alabama Business Corporation Act, as so amended.
The rights and authority conferred in this Article VIII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of these Amended Articles or Bylaws of the
Corporation, agreement, vote of stockholders or disinterested directors, or
otherwise.
ARTICLE IX
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The Corporation shall indemnify any officer or director, or any
former officer or director of the Corporation, to the fullest extent permitted
by law. The foregoing right of indemnification shall not be exclusive of any
other rights to which any director, officer, employee or agent may be entitled
as a matter of law or which he may be lawfully granted. The Corporation's
obligation to indemnify its officers and directors pursuant to this Article
shall be subordinate in all respects to the obligations of the Corporation
arising out of the Loan Documents and shall not constitute a claim against the
Corporation to the extent that the Corporation is unable to pay any amounts it
is obligated to pay under the Loan Documents.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Second
Amended and Restated Articles of Incorporation this 27th day of July, 1999.
DOTHAN HOSPITALITY 3071, INC.
By: /s/ Thomas S. Gryboski
------------------------------------
Name:
Title:
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<PAGE>
Exhibit 3.15.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SERVICO FLAGSTAFF, INC.
(AN ARIZONA BUSINESS CORPORATION)
Pursuant to Sections 10-061 and 10-064 of the Arizona General
Corporation Law, SERVICO FLAGSTAFF, INC., an Arizona corporation (the
"Corporation"), hereby certifies that these Amended and Restated Articles of
Incorporation (the "Amended Articles"), which contain amendments requiring
shareholder approval, were duly adopted by the Board of Directors of the
Corporation and by the sole shareholder of the Corporation by written consent
without a meeting, pursuant to Sections l0-821 and l0-704 of the Arizona
Business Corporation Act, as of July 23, 1999. The number of outstanding shares
of common stock of the Corporation (and the number of shares entitled to vote
thereon) is 1,000. These Amended Articles correctly set forth the provisions of
the Articles of Incorporation as theretofore amended. These Amended Articles
supercede the original Articles of Incorporation and all amendments thereto.
1. NAME. The name of the Corporation is SERVICO FLAGSTAFF,
INC.
2. PURPOSE.
(a) The purpose for which the Corporation is organized is
limited to: (i) acquiring, owning, leasing, operating, using and managing that
certain real property commonly known as the Howard Johnson Flagstaff, located at
2200 East Butler Avenue, Flagstaff, Arizona 88001 (the "Property"); (ii)
entering into and performing its obligations under the credit agreement, among
Lodgian Financing Corp., as borrower, Lodgian, Inc., its parent, Impac Hotel
Group, LLC, Servico, Inc. and other affiliated entities, as affiliate
guarantors, the initial lenders and initial issuing bank named therein, the
collateral agent, the administrative agent, Morgan Stanley Senior Funding, Inc.,
as co-lead arranger, joint-book manager and syndication agent and Lehman
Brothers, as co-lead arranger, joint-book manager and documentation agent
relating to the financing or refinancing of the Property (the "Loan Agreement")
which provides the lender thereunder with a first priority lien on the Property,
any promissory-note evidencing indebtedness incurred pursuant to the Loan
Agreement, any mortgage securing such indebtedness and encumbering the Property
(the "Mortgage") and any other documents securing such indebtedness and any
related collateral documents, each as amended (or pursuant to a consent obtained
in accordance with the terms thereof) (collectively, the "Loan Documents");
(iii) entering into and performing its obligations under the Indenture (the
"Indenture"), among Lodgian Financing Corp, as issuer, Lodgian, Inc., the
Subsidiary Guarantors defined therein and Bankers Trust Company, as trustee,
relating to the issuance of the 12 1/4% Senior Subordinated Notes due 2009 and
the Guarantee in favor of the holders of the Notes and (iv) transacting any and
all lawful business that is incident and necessary or appropriate to the
ownership and to the management of the Property for which a corporation may be
incorporated under the laws of the State of Arizona.
(b) Notwithstanding any other provision of these Amended
Articles and any provision of law that otherwise so empowers the Corporation,
until such time as the Property is released from the lien of the Mortgage, the
Corporation shall not, without the unanimous affirmative vote of the members of
its Board of Directors, (i) amend, alter, change, repeal or adopt any resolution
setting forth a proposed amendment to, any provision of these Articles of
Incorporation, (ii) dissolve or liquidate, in whole or in part, consolidate or
merge with or into any other entity or convey, sell or transfer its properties
and assets substantially as an entirety to any entity, (iii) file a voluntary
petition or otherwise initiate, or consent to, proceedings for the Corporation
to be adjudicated insolvent or seeking an order for relief as a debtor under the
United States Bankruptcy Code, as amended (11 U.S.C. ss.ss. 101 ET seq.), or
(iv) file any petition, or consent to any petition, seeking any composition,
reorganization, readjustment, liquidation, dissolution or similar relief under
the present or any future federal bankruptcy laws or any other present or future
applicable federal, state or other statute or law relative to bankruptcy,
insolvency or other relief for debtors; or (v) seek or consent to the
appointment of any trustee, receiver, conservator, assignee, sequestrator,
custodian, or liquidator (or other similar official) of the Corporation or of
all or any substantial part of the properties and assets of the Corporation, or
(vi) make any general assignment for the benefit of creditors, or (vii) admit in
writing its inability to pay its debts generally as they become due, or (viii)
declare or effect a moratorium on its debt or take any corporate action in
furtherance of any such action.
(c) The Board of Directors of the Corporation shall, at all
times until the Property is released from the lien of the Mortgage, include an
independent director (the "Independent Director"). The Independent Director
shall be a person who is not at the time of appointment and who has not at any
time during the prior five years been and who is not while serving as the
Independent Director (i) a director, stockholder, officer or employee of the
Corporation or any affiliates thereof, other than with respect to such person's
service as an Independent Director of the Corporation and such person's service
in similar "Independent Director" positions for affiliates of the Corporation;
(ii) a creditor, customer, supplier, independent contractor, manager or any
other person who derives more than 10% of its gross revenues from its activities
wit the Corporation or any affiliates thereof; (iii) a person controlling any
such stockholder, creditor, customer, supplier, independent contractor, manager
or other person; (iv) the legal or beneficial owner, at any time while serving
as director of the Corporation, of any beneficial interest in the Corporation;
or (v) a member of the immediate family of any such stockholder, officer,
employee, creditor, customer, supplier, director, independent contractor,
manager or any other person of the Corporation. As used herein, the term
"affiliate" means any person controlling, under common control with, or
controlled by the person in question, and the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contract or otherwise. In the event of the death,
incapacity, or resignation of an Independent Director, or the vacancy of the
Independent Director's seat on the Corporation's Board of Directors for any
reason, a successor Independent Director shall be appointed by the remaining
directors.
(d) Except as otherwise permitted by the Loan Documents, so
long as the Property is subject to the lien of the Mortgage, the Corporation
shall (i) observe all corporate formalities, including the maintenance of
current minute books; (ii) maintain its own separate and distinct books of
account and corporate records from any other person or entity; (iii) cause
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its financial statements to be prepared in accordance with generally accepted
accounting principles in a manner that indicates the separate existence of the
Corporation and its assets and liabilities from any other person or entity; (iv)
pay all its liabilities out of its own funds; (v) in all dealings, identify
itself, and conduct its own business and hold itself out under its own name and
as a separate and distinct entity and correct any misunderstandings regarding
its status as a separate entity; (vi) independently make decisions with respect
to its business and daily operations; (vii) maintain an arm's length
relationship with its affiliates; (viii) pay the salaries of its employees and
maintain a sufficient number of employees in light of its contemplated business
operations; (ix) allocate fairly and reasonably any overhead for shared office
space; and (x) use separate stationery, invoices and checks.
(e) Except as otherwise permitted by the Loan Documents, so
long as the Property is subject to the lien of the Mortgage, the Corporation
shall not (i) commingle its assets with those of, or pledge its assets for the
benefit of, any other person or entity; (ii) assume, guarantee or become
obligated, or hold out its credit as being available to satisfy, the liabilities
or obligations of any other person or entity; (iii) reduce its capital below an
amount which is adequate in light of its contemplated business operations; (iv)
acquire obligations or securities of, or make loans or advances to, any
affiliate; (v) incur or assume any indebtedness other than (A) the indebtedness
underlying the Loan Agreement, (B) the indebtedness underlying the Indenture,
and (C) liabilities (including, but not limited to, trade payables) arising in
the ordinary course of the Corporation's business relating to the acquisition,
ownership, operation, lease, use or management of the Property; (vi) amend,
alter, change or repeal any provision of Article 2 and the last sentence of
Article 10 of these Amended Articles; (vii) engage in any dissolution or
liquidation, in whole or in part, consolidation or merger with or into any other
entity or conveyance, sale or transfer of its properties and assets
substantially as an entirety to any entity; or (viii) engage in any business or
activity other than as set forth in these Amended Articles. Notwithstanding
anything contained herein to the contrary, nothing herein shall be deemed to
prohibit or otherwise limit any dividends or other distributions from the
Corporation to its shareholders.
3. INITIAL BUSINESS. The Corporation initially intended to
conduct and currently conducts the business of owning, operating, using and
managing a hotel in the State of Arizona.
4. AUTHORIZED CAPITAL. The Corporation shall have authority to
issue One Thousand (1,000) shares of common stock, one cent ($0.01) par value
per share.
5. KNOWN PLACE OF BUSINESS. (In Arizona)
The street address of the known place of business of
the Corporation is:
c/o CT Corporation System
3325 North Central Avenue
Phoenix, Maricopa County, AZ 85012
6. STATUTORY AGENT. (In Arizona)
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The name and address of the statutory agent of the
Corporation is:
c/o CT Corporation System
3325 North Central Avenue
Phoenix, Maricopa County, AZ 85012
7. BOARD OF DIRECTORS. The Board of Directors of the
Corporation shall consist of at least one (1) director. The number of directors
may be either increased or decreased from time to time as provided for in the
Bylaws of the Corporation, but shall never be less than one. The name and
address of the persons who are to serve as the members of the board of directors
until the annual meeting of shareholders or until their successors are elected
and qualified are:
Robert M. Flanders 3345 Peachtree Road, N.E.
Two Live Oak Center, Suite 700
Atlanta, GA 30326
Mark K. Rafuse 3345 Peachtree Road, N.E.
Two Live Oak Center, Suite 700
Atlanta, GA 30326
Carl E.B. McKenry c/o University of Miami
School of Business
414 Jenkins Bldg.
Coral Gables, Florida 33124-9145
The said Carl E.B. McKenry is identified as the independent
Director. The number of Directors of the Corporation may be changed in
accordance with the By-Laws of the Corporation, but shall be composed of at
least one (1) member.
8. BYLAWS; ELECTION OF DIRECTORS. The Board of Directors is
expressly authorized to adopt, alter, amend or repeal the Bylaws of the
Corporation subject to the limitations set forth in these Amended Articles.
Election of directors need not be by written ballot unless and to the extent
provided in the Bylaws of the Corporation.
9. DIRECTORS' LIABILITY. No director of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 10-833 of the
Arizona Business Corporations Act, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Arizona Business
Corporation Act is amended after the date of these Amended Articles to authorize
corporate action further limiting or eliminating the personal liability of
directors, then the liability of each director of the Corporation shall be
limited or eliminated to the fullest extent permitted by the Arizona Business
Corporation Act, as so amended.
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The right and authority conferred in this Article 9 shall not
be exclusive of any other rights that any person may have or hereafter acquire
under any statute, provision of these Amended Articles or the Bylaws of the
Corporation, agreement, vote of the stockholders or disinterested directors or
otherwise.
10. INDEMNIFICATION. The Corporation shall indemnify any
officer or director, or any former officer or director of the Corporation, to
the fullest extent permitted by law. The foregoing right of indemnification
shall not be exclusive of any other rights to which any director, officer,
employee or agent may be entitled as a matter of law or which he may be lawfully
granted. The Corporation's obligation to indemnify its officers and directors
pursuant to this Article shall be subordinate in all respects to the obligations
of the Corporation arising out of the Loan Documents and shall not constitute a
claim against the Corporation to the extent that the Corporation is unable to
pay any amounts it is obligated to pay under the Loan Documents.
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IN WITNESS WHEREOF, the undersigned has executed these Second
Amended and Restated Articles of Incorporation this 23rd day of July, 1999.
SERVICO FLAGSTAFF, INC.
By: /s/ ROBERT M. FLANDERS
------------------------------
Name: Robert M. Flanders
Title: President
BY: /s/ THOMAS S. GRYBOSKI
------------------------------
Name: Thomas S. Gryboski
Title: Assistant Secretary
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EXHIBIT 3.24.1
LIMITED PARTNERSHIP AGREEMENT
Little Rock Lodging Associates I, Limited Partnership
Little Rock Lodging Associates, Inc., an Arkansas corporation (the
"General Partner"), and each of the persons named in the Signature pages or
Exhibit "A" attached hereto (collectively as the "Limited Partners"), desiring
to form a limited partnership pursuant to the provisions of the Georgia Revised
Uniform Limited Partnership Act (the "Act") do, for that purpose, hereby enter
into this Limited Partnership Agreement ("Agreement") as of the 18 day of
October, 1996 (the "Closing Date").
ARTICLE I
FORMATION, CERTIFICATE OF LIMITED PARTNERSHIP,
NAME, ETC.
Section 1.1 Formation: The parties hereto do hereby enter into and form a
limited partnership pursuant to Sections 14-9-100 to 14-9-1204 of the Official
Code of Georgia Annotated ("O.C.G.A."), and under the laws of the State of
Georgia (the "Partnership"), on the terms and conditions hereinafter set forth.
Section 1.2 Certificate: The General Partner has executed a Certificate of
Limited Partnership and filed it with the Secretary of State of Georgia on
August 29, 1996.
Section 1.3 Name: The name of the Partnership shall be "Little Rock
Lodging Associates I, Limited Partnership" a Georgia limited partnership.
Section 1.4 Registered and Principal Office. The registered office and
principal place of business of the Partnership shall be at 3399 Peachtree Road,
N.E., Suite #1220, Atlanta, Georgia 30326, but substitute or additional places
of business may be established at such other locations as may, torn time to
time, be determined by the General Partner. The General Partner shall promptly
give notice to the other Partners of any change in the principal office or place
of business.
Section 1.5 Name and Address or Place of Residence of General Partner and
Registered Agent:
(a) The name and address of the General Partner of the Partnership
is as follows:
Little Rock Lodging Associates, Inc.
3399 Peachtree Road, N.E.
Suite #1220
Atlanta, Georgia 30326
(b) The name and place of legal residence of each of the Limited
Partners are set forth in Exhibit "A" attached hereto and made a part hereof.
The Limited Partners, who are so identified on the date hereof, are hereby
admitted as Limited Partners. Any change in interests shall be reflected in an
amendment to Exhibit "A". All references in this Agreement to Exhibit "A" mean
Exhibit "A" as in effect at the relevant time, including any amendments thereto.
(c) The registered agent for service of process shall be the General
Partner.
Section 1.6 Term: The Partnership became effective upon the execution of
the Certificate and the accomplishment of all filings required for limited
partnerships under the laws of the Stare of Georgia, and shall terminate on
October 1, 2020, unless the Partnership is sooner dissolved in accordance with
other provisions of this Agreement.
Section 1.7 Purpose: The sole purpose of the Partnership is: (i) to
acquire and conduct the "Project", as hereinafter defined; (ii) to operate,
manage, improve, lease or sell (in whole or in part) the Project; and (iii) for
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all such other purposes as may be necessary or appropriate in furtherance of the
purposes identified in items (i) and (ii) above, and as permitted under Georgia
law.
Section 1.8 Authority: In order to carry our its purpose, the Partnership
is authorized, subject to other provisions of this Agreement, to do any and all
acts and things necessary, advisable or incidental to or convenient for the
furtherance and accomplishment of its purpose, and for the protection and
benefit of the Partnership, including, but not limited to, the following:
(a) To acquire, own, maintain, operate and lease the Project or sell
all or any part thereof;
(b) To borrow money and issue evidence of indebtedness in
furtherance of the Partnership business and secure any such indebtedness by
mortgage, pledge, or lien on the Project;
(c) To operate and maintain the Project including entering into
agreements with managing agents for the management of the Project;
(d) To negotiate for and conclude agreements for the sale, exchange,
lease, or other disposition of all or substantially all of the property of the
Partnership or for the refinancing of any mortgage loan on the property of the
Partnership;
(e) To prepay, in whole or in part, refinance, recast, increase,
modify or extend any mortgage, and in connection therewith to execute any
extensions, renewals or modifications thereof.
(f) To enter into any other kind of activity and to, perform and
carry out contracts of any kind, including contracts with Affiliates, necessary
to, or in conjunction with or incidental to, the accomplishment of the business
and purposes of the Partnership.
(g) Specifically, the Partnership may enter into a management
agreement with Impac Hotel Group, Inc., a hotel management concern and an
Affiliate of the General Partner, and, pursuant to which, the Partnership will
pay fees at the rate of 3% of the monthly gross hotel revenues (as defined in
the management agreement) so long as the management agreement is in effect.
(h) Specifically, the Partnership may enter into a construction
management and development agreement with Impac Hotel Development, Inc. and
Impac Design and Construction, Inc., affiliates of the General Partner. As part
of the consideration for the total fee of $428,653, the entities will fund the
fees related to the applications for a Residence Inn by Marriott franchise, and
shall only be reimbursed those costs if the project is purchased and Residence
Inn franchise is granted.
(i) To enter into an indemnification agreement with Robert Cole,
Charles Cole and Robert Flanders each of whom and all of whom are or may be
Affiliates, if any or all of them are required to guarantee the warranties and
representations made by the Partnership to any Lender.
Section 1.9 Books and Records: The General Partner shall maintain at the
Partnership's principal office the following records: (a) a current alphabetical
and separate listing of all general and limited partners of the Partnership,
including their full names and last known business addresses; (2) copies of the
Partnership's certificate of limited partnership and any amendments thereto; (3)
copies of the Partnership's four most recent years, federal, state and local
income tax returns; and (4) copies of the current written Partnership Agreement,
any merger agreement in which the Partnership is the surviving partnership, and
financial statement for the Partnership's four most recent Fiscal years. The
Partnership's Partners may inspect and copy, at the Partner's expense, these
records at the Partnership's principal office during normal business hours.
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ARTICLE II
CERTAIN DEFINITIONS
"Affiliate" means with respect to a specified person who, directly or
indirectly through one or more intermediates, controls, or is controlled by or
is under common control with the person specified.
"Agreement" means this Limited Partnership Agreement, as the same may be
amended from time to time.
"Capital Account" means, in respect to any Partner, the Capital
Contribution of such Partner as set forth in this Agreement, adjusted as set
forth in Article III hereunder. The Capital Account of the Partnership shall be
the sum of the Capital Accounts of all Partners.
"Capital Cash Flow" shall mean the proceeds received by the Partnership
from (i) any sale or other disposition of all or any substantial part of the
Project; (ii) any damage recoveries or insurance recoveries not used for repair
or restoration; (iii) any condemnation proceeds for the taking of all or part of
the Project not used for repair or restoration; (iv) any refinancing of the
Partnership Mortgages less any expenses incurred in connection with the receipt
or collection of any such proceeds, not applied or set aside for the reduction
of Partnership liabilities or the repair, restoration or improvement of the
Project.
"Capital Contribution" means, in respect to any Partner, the total amount
of money or fair market value of property contributed or agreed to be
contributed to the Partnership by such Partner as shown in Exhibit "A" and shall
include any additional Capital Contribution and Excess Capital Contribution, if
any, made pursuant to Section 3.8.
"Capital Item" shall mean (i) sale of all or part of the Project, (ii) any
insurance payments or damage recoveries paid to the Partnership in respect of
the Project not used for repair or restoration, (iii) any condemnation proceeds
paid to the Partnership for the taking of all or part of the Project not used
for repair or restoration, (iv) any proceeds derived from any refinancing of the
Partnership's Mortgages less any expenses incurred in connection with the
receipt or collection of any such proceeds, not applied or set aside for the
reduction of Partnership liabilities or the repair, restoration or improvement
of the Project.
"Certificate" means the Certificate of Limited Partnership of the
Partnership, as duly flied, and as amended from time to time as herein required,
in accordance with the laws of the State of Georgia.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or corresponding provisions of subsequent laws.
"Fiscal Year" means the calendar year.
"General Partner" means Little Rock Lodging Associates, Inc., a Texas
corporation, and any substituted or additional General Partner a provided
herein.
"General Partner Interest" means that percent of the total interest in
capital and profits of the Partnership owned by the General Partner, subject to
adjustment as provided in Section 3.8 hereof.
"Involuntary Withdrawal" or "Involuntary Withdrawals" means the death,
incompetency or bankruptcy of the General Partner. For purposes of this
definition, bankruptcy of the General Partner shall be deemed to occur when such
General Partner files a petition in bankruptcy or voluntarily takes advantage of
any bankruptcy or insolvency laws, or is adjudicated a bankrupt, or a petition
or answer is filed proposing the adjudication of such General Partner as a
bankrupt and such General Partner consents to the filing thereof.
"Limited Partnership Interest" means that percent of the total interest in
capital and profits of the Partnership owned by a Limited Partner, subject to
adjustment as provided in Section 3.8 hereof.
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"Limited Partnership Offering" shall mean the offer to sell one hundred
(100) units of Limited Partnership Interests pursuant to the Private Placement
Memorandum of the Partnership of which the General Partner will obtain one (1)
Unit.
"Lender" means a national banking association, state banking corporation
or any other commercial lending institution selected by the General Partner.
"Limited Partners" means the persons executing this Agreement as Limited
Partners and any persons subsequently admitted to the Partnership as substituted
or additional Limited Partners.
"Limited Partners' Capital" means the sum of the Capital Contributions of
the Limited Partners.
"Nonrecourse Debt" means a Partnership liability with respect to which
none of the Partners has any personal liability as determined under Treasury
Regulation 1.752-1.
"Operating Cash Flow" shall mean the excess of cash revenue from operation
of the Project over (i) cash disbursements for costs, expenses, obligations and
liabilities of the Partnership, including debt service, without deduction for
depreciation; (ii) a Replacement Reserve Account; and (iii) a reasonable
allowance for other cash reserves for costs or expenses incident to the
ownership or operation of the Project, as determined by the General Partner.
Operating Cash Flow shall not include Capital Cash Flow.
"Partners" means, collectively, the General Partner and the Limited
Partners, and, individually, any one of the General Partner and Limited
Partners.
"Partnership" means the Limited Partnership formed pursuant to this
Agreement and the Certificate.
"Partnership Interests" means collectively the General Partnership
Interests and the Limited Partnership Interests.
"Partnership Mortgages" means any mortgage or security agreement executed
by the Partnership securing a note made by the Partnership and encumbering the
Project, or any part thereof, as such mortgages may be amended or supplemented
from time to time as therein provided.
"Partnership Notes" means any promissory notes secured by the Partnership
Mortgages, as such notes may be amended from time to time as therein provided.
"Partnership Term" means the period of time between the date the
Partnership becomes effective and the date it ceases to be effective.
"Percentage of Partnership Interest" of a Partner means the particular
Partner's Percentage of Interest in the Partnership as set forth opposite the
Partner's name in Exhibit "A" attached hereto, subject to adjustment as provided
in Section 3.8 hereof.
"Person" means any individual, partnership, corporation, trust, or other
entity.
"Profits and Losses" means the profits and losses of the Partnership for
federal income tax purposes for each Fiscal Year determined in accordance with
the accounting method followed by the Partnership for such purposes, including,
without limitation, each item of Partnership income, gain, loss, deduction
(including nonrecourse deductions as defined in Treasury Regulation 1.704-2) or
credit.
"Project" means a hotel, meeting rooms, structures and public spaces, to
be known as "Residence Inn-Little Rock," including all fixtures, furniture,
equipment and personal property located therein or thereon, together with the
real property located in Irving, Texas.
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"Representative" means the executor, administrator, guardian, trustee, or
other personal representative of a Partner.
"Replacement Reserve Account" shall mean a cash reserve account up to four
(4%) percent per year of the total such revenues of the Partnership (excluding
Capital Cash Flow) for the purpose of funding the repair, restoration or
replacement of furniture, fixtures and equipment of the Project or as that
Replacement Reserve Account is adjusted by General Partner as required by
Lender.
"Substituted Limited Partner" means any person admitted to the Partnership
as a Limited Partner pursuant to Article XI.
"Transfer" means any sale, assignment, gift, pledge or other disposition,
whether voluntary or by operation of law, of an Interest.
"Voluntary Withdrawal" or "Voluntary Withdrawls" means the resignation or
withdrawal of a General Partner other than an Involuntary Withdrawal.
Defined terms used in this Agreement and not set forth in this Article II
shall have the meanings set forth elsewhere in this Agreement, and all of such
defined terms, wherever set forth, shall be equally applicable to both the
singular and plural forms of the terms defined.
ARTICLE III
CAPITAL CONTRIBUTIONS; ACCOUNTS
Section 3.1 Contributions of the Partners:
(a) General Partner: The General Partner's initial contribution to
the capital of the Partnership is set forth in Exhibit "A"; provided, however,
the General Partner shall be obligated to contribute an amount which is not less
than one percent (1%) of the aggregate capital contributions of all Partners in
the Partnership at any time. In consideration of exposing its assets to the
liabilities incurred by the Partnership and undertaking other obligations as set
forth herein, the General Partner shall receive the interest in the Partnership
allocated to it in Section 5.6(b).
(b) Limited Partners: (i) Each Limited Partner shall in accordance
with the amounts set forth opposite his name on Exhibit "A" hereto, pay his
Capital Contribution subject to the conditions hereinafter set forth in Section
3.4 below. Each such person shall become a Limited Partner in the Partnership,
effective as of the date the General Partner accepts subscription of all or part
of the Limited Partner's subscribed Units.
(c) Partnership Interest: The General Partner's Partnership Interest
and each Limited Partner's Partnership Interest, as set forth in Exhibit "A",
shall represent his interest in the Partnership (subject to adjustment pursuant
to Section 3.8) and shall represent his proportionate interest in the
Partnership's business, property, assets, capital, profits and losses, subject
to all of the provisions of this Agreement.
Section 3.2 Capital Accounts: A Capital Account shall be maintained
for each Partner. Capital Accounts shall be increased by:
(a) The amount of money and the fair market value of property
contributed by the Partner (net of liabilities that the Partnership assumes or
takes subject to under Section 752 of the Code).
(b) The amount of any Partnership income and gain allocated to the
Partner.
Capital Accounts shall be decreased by:
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(c) The amount of money and the fair market value of property
distributed to the Partner by the Partnership (net of any liabilities that the
member assumes or takes subject to under Section 752 of the Code).
(d) Allocations to the Partner of Partnership expenditures that are
not deductible in computing the Partnership's taxable income and that are not
capital expenditures.
(e) Allocations to the Partner of Partnership loss, credit and
deduction.
Section 3.3 Compliance with Treasury Regulation 1.704-1(b)(2)(iv). The
manner in which Capital Accounts are to be maintained pursuant to this Agreement
are intended to comply with the requirements of Treasury Regulation
1.704-1(b)(2)(iv) and shall be interpreted and applied in a manner consistent
with such regulation throughout the full term of this Agreement. The following
special allocations shall be made in the following order:
(a) Minimum Gain Chargeback. If there is a net decrease in
Partnership minimum gain during the year, each Partner shall be specially
allocated items of Partnership income and gain for the year (and, if applicable,
subsequent years) equal to such Partner's share of the net decrease in
Partnership minimum gain. This allocation shall be defined, interpreted and
determined in accordance with applicable Treasury Regulations.
(b) Partner Minimum Gain Chargeback. If there is net decrease in
Partner minimum gain attributable to a Partner non-recourse debt during the
year, each Partner with a share of the Partner minimum gain shall be specially
allocated items of Partnership income and gain for the year equal to such
Partner's share of the decrease in Partner minimum gain attributable to such
Partner. This allocation shall be defined, interpreted, and determined in
accordance with applicable Treasury Regulations.
(c) Qualified Income Off-Set. If a Partner unexpectedly receives any
adjustments, allocations, or distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(a)(4)-(6), items of Partnership income and gain shall
be specially allocated to each Partner in an amount and manner sufficient to
eliminate, to the extent required by Treasury Regulations, the negative Capital
Account balance of such Partner as quickly a possible. This allocation shall be
made only if a Partner would have a negative Capital Account balance after all
other allocations in this Article III are made.
Section 3.4 Limited Liability of Limited Partners: No Limited Partner
shall be liable for any of the losses, debts, liabilities, or obligations of the
Partnership or be required (except as provided in Section 3.8 hereof) to
contribute any capital beyond his required Capital Contribution or to lend any
funds to the Partnership except that a Limited Partner may be required by law
pursuant to the Act to return any or all of that portion of his Capital
Contribution which has been distributed to him.
Section 3.5 Withdrawal of Capital: Prior to the dissolution and
liquidation of the Partnership, no Limited Partner shall be entitled, without
the consent of the General Partner, to withdraw any part of his Capital
Contribution, except that distributions made in accordance with Article IV may
represent in whole or in part a return of capital.
Section 3.6 No Priority Among Limited Partners: No Limited Partner has any
priority over any other Limited Partner as to the return of his Capital
Contribution or as to allocation of profits and losses or distribution of cash.
Section 3.7 General Provisions: Loans by any Partner shall not be
considered contributions to the Partnership Capital. A Partner shall not be
entitled to withdraw any part of his Capital Contribution or to receive any
distribution from the Partnership, except as provided in Article IV and Article
XIII. A Partner shall not be entitled to make any additional Capital
Contributions to the Partnership other than the Capital Contributions required
or permitted to be made by such Partner under this Agreement. No interest shall
be paid on any capital contributed to the Partnership.
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Section 3.8 Additions to Partnership Capital: The General Partner may from
time to time determine that additional Partnership capital is required in order
to improve or to continue the ownership and operation of the Project. Upon such
a determination, additional funds may be obtained at the option of the General
Partner, in its sole discretion, by additional partnership financing in the
following manner from the following sources, without any authorization from the
Limited Partners, and such sources may be utilized as necessary, in any order or
priority by borrowing from:
(A) commercial banks;
(B) other prime lenders;
(C) General Partner;
(D) Limited Partners; or
(E) lenders other than prime lenders (including
loans secured by secondary financing against the Partnership property).
In the event that the General Partner, in its sole discretion, determines
that the most desirable source for additional Partnership capital is Additional
Capital Contributions from the Partners, the General Partner shall advise all of
the Partners by notice of (a) the aggregate amount of additional Capital
Contributions required, (b) each Partner's pro-rata share thereof based upon
each Partner's percentage interest, and (c) the date on which such Additional
Capital Contributions are required, which date shall not be earlier than 15 days
following the date of such notice. Each Partner shall have the right and option
to make Additional Capital Contributions to the Partnership in the amount of the
Partner's pro-rata share (based on the Partner's percentage interest) of such
Additional Capital Contributions on or before the date provided for in such
notice. If and to the extent that any of the Partners fails to contribute his
pro-rata share of such Additional Capital Contributions, the General Partner may
(but shall not be required to) make Capital Contributions in excess of the
General Partner's pro-rata share of the Additional Capital Contributions (herein
referred to as "Excess Capital Contributions") in order to provide wholly or
partly for the aggregate Additional Capital Contributions required by the
Partnership. The decision of the General Partner to make an Excess Capital
Contribution on behalf of any one Partner shall not obligate the General Partner
to make similar Excess Capital Contributions on behalf of any other Partner who
shall have failed to make an Additional Capital Contribution. In the event any
Partner fails to make an Additional Capital Contribution (whether or not the
General Partner elects to make an Excess Capital Contribution), then the
percentage interests of all Partners shall be automatically recalculated so that
the percentage interests of each Partner is pro-rata in accordance with the
Partner's total Capital Contributions. In the event of an adjustment in
percentage interests, Exhibit "A" shall be deemed automatically amended for all
purposes of this Agreement to reflect such modification of percentage interests.
Section 3.9 No Rights in Third Parties: The provisions of this Agreement
are for the benefit of the Partnership and the Partners, and are not intended to
be for the benefit of any person to whom any debts, liabilities or obligations
are owed by, or who otherwise has any claim against, the Partnership or any
Partner, and no creditor or other person shall obtain any rights under such
provisions or solely by reason of such provisions.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS
Section 4.1 Profit and Losses:
(a) The Profits and Losses of the Partnership shall be determined
and allocated with respect to each Fiscal Year of the Partnership as of, the end
of such year.
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(b) All Profits and Losses, other than those arising from a sale or
other disposition of all or any portion of the Project, shall be allocated to
the General Partner and to the Limited Partners in accordance with each
Partner's Percentage of Partnership Interest.
Section 4.2 Distributions of Operating Cash Flow: At the discretion of the
General Partner, the Operating Cash Flow of the Partnership shall be distributed
among the Partners. All distributions of Operating Cash Flow shall be
distributed to the Partners, pro-rata, in proportion to the Partner's Percentage
of Interest.
Section 4.3 Distributions of Capital Cash Flow: Distributions of Capital
Cash Flow shall be made as follows:
(i) First, to the Partners until such time as each Partner shall
have received distributions of Capital Cash Flow sufficient to reduce his
Capital Account to zero:
(ii) Then, on a pro rata basis, to the Partners in proportion to the
Partner's Percentage of Interest.
Section 4.4 Restrictions with Respect to Distributions: The General
Partner shall make the distributions required or permitted by this Article IV,
subject to the following limitations, restrictions and conditions:
(a) At the time of any distribution, the Partnership must have
available to it unencumbered cash funds sufficient for such distribution after
taking into account (except in the case of liquidation of the Partnership) the
amounts which should be set aside to provide for the Replacement Reserve Account
or other reasonable reserves for the continuing conduct of the business of the
Partnership and for normal working capital.
(b) No distribution shall be made by the Partnership if immediately
after such distribution the Partnership assets do not exceed all liabilities of
the Partnership, exclusive of liabilities to the Partners on account of their
Capital Contributions and liabilities to any General Partner and liabilities
resulting from Partnership Mortgages and Partnership Notes. For purposes of this
subparagraph all assets shall be valued at market value.
(c) Distributions shall not be required to be made more frequently
than quarterly during each year, but at least annually (within 2 months
following the end of each such year).
Section 4.5 No Interest on Distributions: If any Partner shall not
withdraw the whole or any part of his share of the Operating Cash Flow upon
distribution, such Partner shall not be entitled to receive any interest
thereon; nor shall any such sum(s) thus undrawn be deemed an increase in such
Partner's share of the capital of the Partnership without the express written
consent of all other Partners.
Section 4.6 Allocations Among Partners:
(a) Whenever a proportionate part of the Partnership Profit or Loss
is credited or charged to a Partner's account, every item of income, gain, loss,
deduction or credit entering into the computation of such Profit or Loss, or
applicable to the period during which such Profit or Loss is realized, shall be
considered credited or charged, the case may be, to such account in the same
proportion. As between a Limited Partner and his transferee, unless otherwise
agreed by them, Profits and Losses for any Fiscal Year shall be allocated on a
daily basis, and the transferee shall be allocated Profits and Losses with
respect to the period commencing with the day of transfer.
(b) Distributions to General Partner or Limited Partners pursuant to
Sections 4.2 and 4.3 shall be shared by such Partners in proportion to their
respective General Partners' Percentage or Limited Partners' Percentage and made
as such percentages shall appear of record on the Partnership's books maintained
by the General Partner at the time of the distribution. The General Partner and
the Partnership shall incur no liability for making distributions in accordance
with the provisions of the preceding sentence, whether or not the General
Partner or the Partnership has knowledge or notice of any transfer of ownership
of any Interests.
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Section 4.7 Minimum Allocations to General Partner. Notwithstanding
anything to the contrary in this Article 4, if at any time the allocation
provisions of this Agreement do not result in the General Partner being
allocated at least 1% of all of the Partnership's items of income, gain, loss,
deduction or credit, then this Section shall become operative and cause the
General Partner to be allocated pro rata so much more of each of those items as
will cause it to be allocated at all times 1% of those items.
ARTICLE V
RIGHTS, POWERS AND DUTIES OF General Partner
Section 5.1 Rights and Powers of General Partner: Except as may be
expressly limited by the provisions of this Agreement, the General Partner shall
have complete authority over and exclusive control and management of the
business and affairs of the Partnership and shall devote such time to the
Partnership as may be reasonably required for the achievement of its purposes.
If not otherwise specifically stated, and except as specifically authorized in
Section 1.7, the references to action by the General Partner or by the
Partnership shall mean only action as provided in this Section 5.1. In
connection with the management of the business and affairs of the Partnership,
the General Partner may employ on behalf of the Partnership any other persons to
perform services for the Partnership, including persons employed by, affiliated
with, or related to any Partner. The General Partner, in its sole discretion,
shall have the fullest power and authority permitted by law, and without
limiting its authority and powers, the General Partner, shall have the right,
if, as and when it deems necessary or appropriate, on behalf of the Partnership,
subject only to the terms and conditions of this Agreement:
(i) To acquire, operate, maintain, and improve (including capital
expenditures of, any type) the Project in such manner and on such terms and
conditions as the General Partner shall deem necessary or appropriate;
(ii) To exercise for the Partnership any and all rights, privileges
and powers available to the Partnership as holder of any Partnership property
including, without limitation, the refinancing, replacement, renewal,
consolidation, extension, modification and creation of encumbrances, mortgages
and other secured indebtedness on the Partnership property or any part thereof,
and the modification, cancellation, extension or waiver of instruments, rights,
options, and obligations pertaining to or affecting the Partnership property or
any part thereof, all upon such terms and conditions as it deems proper;
(iii) To borrow money for Partnership purposes, and in connection
with such borrowing to execute promissory note on behalf of the Partnership; to
mortgage, pledge or otherwise encumber the property and assets held by the
Partnership to secure the obligations of the Partnership, and in connection with
any such mortgage, to grant a confession of judgment on the part of Partnership
and include in such mortgage, pledge or other instrument of security, such
provision a may be required by any lender;
(iv) To consent to the initial execution, modification, renewal or
extension of any obligations, whether or not secured, or of any guarantees, or
of any terms or provisions of any such guaranty, or to the release of any
obligers under any such guaranty; to refrain from instituting suits or actions
against such obligers; and to pay or to abstain from the payment of taxes, water
rents, sewer charges, assessments, mortgage payments, insurance premiums, and
maintenance expenses, all at such time or times and upon such terms and
conditions and under such circumstances as the General Partner, in its sole
discretion, shall deem proper;
(v) To adjust, compromise, settle or refer to arbitration any claims
in favor of or against the Partnership or any nominee of the Partnership or any
property held by the Partnership or its nominee, and to institute, prosecute and
defend any legal proceedings or arbitration proceedings as the General Partner
shall deem advisable;
(vi) To perform or cause to be performed all of the Partnership's
obligations under any agreement to which the Partnership is a party;
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(vii) To execute, acknowledge and deliver any and all instruments in
connection with any or all of the foregoing;
(viii) To expend the capital and revenues of the Partnership in
furtherance of the Partnership's business;
(ix) To sell, transfer, assign, convey, trade, exchange, or
otherwise dispose of all or any portion of the real or personal property of the
Partnership upon such terms and conditions and for such consideration as the
General Partner deems appropriate;
(x) To delegate all or any of its duties hereunder and in
furtherance of any such delegation to appoint, employ, or contract with any
person the General Partner may in its sole discretion deem necessary, including
entities owned or controlled by the General Partner (including Affiliates of the
General Partner), or desirable for the transaction of the business of the
Partnership, which persons may, under the supervision of the General Partner,
perform any of the following or other acts or services for the Partnership as
the General Partner may approve, provided, however, that the General Partner
shall continue to be primarily responsible for the performance of all such
obligations; serve as the Partnership's advisor and consultant in connection
with policy decisions made by the General Partner; act as consultants,
accountants, correspondents, attorneys, brokers, escrow agents, or in any other
capacity deemed by the General Partner necessary or desirable; investigate,
select and, on behalf of the Partnership, conduct relations with persons acting
in such capacities and pay appropriate fees to, and enter into appropriate
contracts with, or employ, or retain services performed or to be performed by,
any of them in connection with the Project; and perform or assist in the
performance of administrative or managerial functions necessary in the
management of the Partnership;
(xi) To terminate, modify, enforce, continue or otherwise deal with
the Partnership Notes and Mortgages, to refinance or sell the Partnership
property, and to take any other action with respect to agreements made between
the Partnership and a lender or any Affiliate thereof;
(xii) Generally, to possess and exercise any and all of the rights,
powers and privileges of a General Partner under the laws of the State of
Georgia.
Section 5.2 Duties: The General Partner shall manage and control the
Partnership, its business and affairs, and to carry out the business of the
Partnership as set forth herein. The General Partner shall devote itself to the
business of the Partnership to the extent it deems necessary to conduct it and
shall render to the Limited Partners, whenever reasonably requested by any of
them, a just and faithful account of all dealings and transactions in relation
to the business of the Partnership. The General Partner shall execute such
further documents and take such further action as shall be appropriate to comply
with the requirements of the Act or other laws by which the Partnership is
bound. The General Partner shall not be required to devote full time to such
duties.
Section 5.3 Dealings with Third Parties: All rights and powers of the
Partnership generally and as specifically enumerated above, may be exercised by
the General Partner and any party dealing with the Partnership may rely upon the
actions of the General Partner exercising the rights and powers authorized by
this Agreement. No party dealing with the General Partner in relation to this
Partnership shall be obliged to see to the application of any money or property
loaned, paid, or transferred to the General Partner or to see that the terms of
this Partnership Agreement are complied with or to determine whether any action
or failure to act on the part of the General Partner is in accordance with or
authorized by the terms of this Partnership. Every instrument executed by the
General Partner shall be conclusively interpreted in favor of every person
acting thereon that (i) at the time of the delivery of such instrument this
Partnership was in full force and effect; (ii) said instrument was issued in
accordance with the terms and provisions of this Partnership; (iii) the General
Partner was duly authorized and empowered to execute such instrument. The
receipt given by it shall discharge said party or parties, and they shall not be
bound to see to the application of any such money or property or be answerable
for the loss or misapplication thereof.
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Should anyone ever question the authority of the General Partner to do any
of the things provided in this Article, and thereby bind the Limited Partners,
and specifically including the General Partner's authority to mortgage, pledge,
or otherwise encumber the property and assets of the Partnership, except as
provided in Section 5.4 herein, then and in that event, the Limited Partners do
by these presents hereby name, constitute and appoint the General Partner, as
their agent and attorney-in-fact, with full and complete authority to do any and
all of the things specified in this Article, including, but not limited to,
authority to confess judgement and waive appraisement, insofar as the same
affects said constituent, or the said Partnership, or any rights or interests
that it may have in any property, real, personal or mixed, to the same extant as
though said constituent personally executed the said instrument, and for the
further purposes and to the same extent as hereinafter set forth in Section 8.1.
Section 5.4 Restrictions on Authority of General Partner:
(a) In addition to other acts expressly prohibited by this Agreement
or by law, the General Partner shall not have any authority to:
(i) do any act in contravention of this Agreement;
(ii) do any act which would make it impossible to carry on the
ordinary business of the Partnership, except as contemplated in this Agreement;
(iii) execute or deliver any general assignment for the
benefit of the creditors of the Partnership;
(iv) possess Partnership property or assign the rights of the
Partnership in specific property for other than a Partnership purpose;
(v) admit a person as a General or Limited Partner except as
otherwise provided in this Agreement; or,
(vi) knowingly or willingly consent to any act (except an act
expressly permitted by this Agreement) which would cause the Partnership to
become an association taxable as a corporation.
(b) Without the written consent of the Partners owning a majority of the
Partnership Interest, the General Partner shall not take any of the following
actions on behalf or in the name of the Partnership:
(i) demolish or drastically alter the Project;
(ii) undertake any lease or other transaction outside the
ordinary course of business then being conducted by the Partnership;
(iii) admit additional Limited Partners after the full
subscription of the Limited Partnership Offering except as otherwise provided
for in Article XI.
Section 5.6 Compensation of General Partner:
(a) General: Except as expressly provided in this Agreement, the
General Partner shall receive no compensation for serving as General Partner.
(b) Management: As compensation for its management of the
Partnership business, the General Partner shall be entitled to its General
Partnership Interest as set forth on Exhibit "A" and such interest shall be
fully earned and nonrefundable when received.
Section 5.7 Tax Matters Partner. The General Partner is hereby designated
as the "Tax Matters Partner" in accordance with Section 6231(a)(7) of the Code
and, in connection therewith and in addition to all other
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powers given thereunder, shall have all other powers needed to fully perform
hereunder, including, without limitation, the power to retain all attorneys and
accountants of its choice and the right to settle any audits without the consent
of the Limited Partners. The designation made in this paragraph is hereby
expressly consented to by each Partner as an express condition to becoming a
Partner.
ARTICLE VI
RECORDS AND ACCOUNTING
Section 6.1 Books of Account: The General Partner shall keep or cause to
be kept complete and true books of account of the Partnership in accordance with
the accounting method followed by the Partnership for Federal income tax
purposes and otherwise in accordance with sound accounting principles and
procedures applied on a consistent basis, which shall reflect all Partnership
transactions and shall be appropriate and adequate for the Partnership's
business. Such books of account, records and documents of the Partnership shall
be kept at the principal place of business of the Partnership and each Limited
Partner and his authorized representatives shall have at all times, during
normal business hours and upon reasonable notice, free access to and the right
to inspect and copy, at his expense, such books of account.
Section 6.2 Financial Reports:
(a) As soon as practicable after the close of each fiscal year, but
in no event later than 75 days after the close of any such year, the General
Partner shall deliver to each Partner an annual financial unedited report of the
Partnership for such fiscal year, including a balance sheet, a profit and loss
statement and a statement showing distributions to the Partners and allocations
to the Partners of Partnership Profits or Losses (i.e., taxable income, gains,
losses, deductions, credits and items of tax preference), and such other
information as is reasonably available to the Partnership which may be helpful
in determining the amount of taxable income to be included by each Partner in
his federal, state and local income tax returns for such year. Such annual
statement shall also be provided to any person who was a Partner at any time
during the year covered by such annual statements.
(b) The General Partner shall came the Partnership's accountants to
prepare or review the federal, state and local tax returns of the Partnership
for each fiscal year and shall timely file such returns and such returns shall
be completed on the method of tax accounting deemed appropriate by the General
Partner in accordance with Section 6.5.
Section 6.3 Fiscal Year: The fiscal year of the Partnership for both
reporting and federal income tax purposes shall begin with the first day of
January and end on the 31st day of December in each calendar year.
Section 6.4 Banking: The funds of the Partnership shall be deposited in
such bank or banks as the General Partner shall deem appropriate. Such funds
shall be withdrawn only by the General Partner or its duly authorized agents.
All deposits and other funds not needed in the operations of the business of the
Partnership may be deposited in interest-bearing accounts or invested in
short-term United States Government or other governmental (state or local)
obligations or in certificates of deposit, master notes or other evidences of
indebtedness or "Money-Market Funds.
Section 6.5 Accounting Decisions and Tax Elections: All decisions as to
accounting matters and tax elections, except as specifically provided to the
contrary herein, required or permitted to be made by the Partnership shall be
made by the General Partner in its sole discretion. Such decisions may be based
on the advice of the Partnership's accountants, upon which the General Partner
may rely.
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ARTICLE VII
LIABILITY AND INDEMNIFICATION OF THE GENERAL PARTNER
Section 7.1 Return of Capital Contribution: Anything in this Agreement to
the contrary notwithstanding, the General Partner shall not be personally liable
for the return of the Capital Contributions of the Limited Partners, or any
portion thereof, it being expressly understood that any such return shall be
made solely from Partnership assets.
Section 7.2 Liability for Actions or Omissions: The General Partner shall
nor be liable, responsible or accountable in damages or otherwise to any of the
Partners or the Partnership for any act or omission of the General Partner, or
any of them, in good faith on behalf of the Partnership and in a manner
reasonably believed by the General Partner to be within the scope of the
authority granted to the General Partner by this Agreement. The foregoing shall
not relieve the General Partner of liability for fraud, gross negligence or
wilful misfeasance.
Section 7.3 Indemnification by Partnership:
(a) The Partnership shall and hereby does indemnify, defend and save
harmless the General Partner from and against any claim, loss, expense,
liability, action or demand incurred by the General Partner in respect of any
omission to act or of any act performed by the General Partner, in the good
faith belief that it was acting or refraining from acting within the scope of
its authority under this Agreement, on behalf of the Partnership or in
furtherance of the Partnership's interests, including, without limitation,
reasonable fees and expenses of litigation and appeal (including, without
limitation, reasonable fees and expenses of attorneys engaged by the General
Partner in defense of such act or omission).
(b) The General Partner shall not be entitled to any indemnity for
any loss sustained or fees or expenses incurred by a General Partner by reason
of the fraud, gross negligence or willful misfeasance of a General Partner.
ARTICLE VIII
POWER OF ATTORNEY
Section 8.1 Appointment:
(a) Each Limited Partner hereby makes, constitutes and appoints the
General Partner, and any successor General Partner, with full power of
substitution and resubstitution, his or its true and lawful attorney-in-fact for
him and in his name, place and stead and for his use and benefit, from time to
time:
(i) To file and record this Agreement and any separation
Certificate or amended Certificate which is required to be filed or which the
General Partner deems it is advisable to file;
(ii) To make, file and record, all agreements amending this
Agreement, as now or hereafter amended, that may be appropriate to reflect or
effect, as the case may be,
(A) a change of the name or the location of the
principal place of business of the Partnership;
(B) the Transfer or acquisition of any Interests by a
Limited Partner or a General Partner in any manner permitted by this Agreement;
(C) a person becoming a substituted Limited Partner of
the Partnership as permitted by this Agreement;
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(D) a change in any provision of this Agreement effected
by the exercise by any person of any right or rights hereunder; and
(E) the dissolution of the Partnership pursuant to this
Agreement:
(iii) To make such certificates, instruments and documents as
may be required by, or may be appropriate under Georgia law in connection with
the use of the name of the Partnership by the Partnership; and
(iv) To make such certificates, instruments and documents as
such Limited Partner may be required, or as may be appropriate for such Limited
Partner to make, by Georgia law to reflect:
(A) a change of name or address of such Limited Partner;
(B) any changes in or amendments of this Agreement, or
pertaining to the Partnership, of any kind referred to in this Section; and
(C) any other changes in or amendments of this Agreement
in accordance with Section 15.1 hereof;
(v) To make, file and record amendments of the Partnership
Agreement to comply with any requirements of the Code, or the regulations
promulgated thereunder, provided the same does not materially adversely affect
the rights of the Limited Partners.
(vi) To make, file and record any documents which may be
required in connection with borrowings by the Partnership, including, without
limitation, documents required by financial institutions, and including
correction of or insertions to any document executed by a Limited Partner.
(vii) To make, file and record any documents which may be
required in connection with any filings with federal or state securities
commissions or other federal or state authorities; and
(viii) To make, file and record any instrument which the
General Partner deems to be in the best interests of the Partnership to file and
which is not inconsistent with the provisions of this Agreement.
(b) Each of the agreements, certificates, instruments and documents
made pursuant to Section 8.1(a) shall be in such form as the General Partner and
counsel for the Partnership shall deem appropriate. The power conferred by this
Article to make agreements, certificates, instruments and documents, shall be
deemed to include without limitation the powers to sign, execute, acknowledge,
swear to, verify, deliver, file, record or publish the same.
(c) Each Limited Partner authorizes the General Partner as such
attorney-in-fact to take any further action which such General Partner shall
consider necessary or advisable in connection with any action taken pursuant to
this Section 8.1 hereby giving such General Partner as such attorney-in-fact
full power and authority to do and perform each and every act or thing
whatsoever requisite or advisable to be done in and about any action taken
pursuant to this Section 8.1, as fully as such Limited Partner might or could do
if personally present, and hereby ratifying and confirming all that the General
Partner as such attorney-in-fact shall lawfully do or cause to be done by virtue
of this Section 8.1, provided, however, that the power and authority granted in
this Article VIII shall not include the power or authority to vote on behalf of
a Limited Partner if it is granted by this agreement or by the Act and is not
otherwise precluded by this Agreement.
Section 8.2 Irrevocability; Manner of Exercise: The power of attorney
granted pursuant to Section 8.1:
(a) is a special power of attorney coupled with an interest and is
irrevocable;
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(b) may be exercised by a General Partner as such
attorney-in-fact, by listing all of the Limited Partners executing any
agreement, certificate, instrument or document with the single signature of such
General Partner acting as attorney-in-fact for all of them;
(c) shall survive the Transfer by a Limited Partner of the
whole or a portion of his Interests, except that where the purchaser, transferee
or assignee thereof with the consent of the General Partner is admitted as a
substituted Limited Partner, the power of attorney shall survive the Transfer
for the sole purpose of enabling such attorney-in-fact to execute, acknowledge
and swear to and file any such agreement, certificate, instrument or document
necessary to effect such substitution; and
(d) shall, to the extent permitted under the laws of the
domicile of such Limited Partner, survive the death, incapacity or incompetency
of the Limited Partner.
ARTICLE IX
LIMITED PARTNERS
Section 9.1 Negative Covenant: No Limited Partner shall be:
(a) Allowed to take part in the management or control of the
Partnership affairs, or to sign for or bind the Partnership, such power to vest
solely and exclusively in the General Partner;
(b) Entitled to be paid any salary or to have a Partnership drawing
account;
(c) Withdraw or reduce his Capital Contribution except as a result
of the dissolution of the Partnership or as otherwise provided by law;
(d) Cause the termination or dissolution of the Partnership by
consent or otherwise (including by consent under O.C.G.A. Section 14-9-801(2),
as may be amended from time to time) such right being specifically waived by the
Limited Partners; or
(e) Demand or receive property other than cash in return for his
Capital Contribution.
Section 9.2 Representations and Warranties:
(a) Each Limited Partner warrants and represents that (i) he is
acquiring his Limited Partnership Interests in the Partnership for investment
purposes only and exclusively for his own account, and that he has no agreement,
understanding, arrangement or intention to divide or share ownership of his
Limited Partnership Interests with anyone else or to resell, transfer or dispose
of all or any portion of such Interests to any other person, and (ii) he has
either (a) an individual net worth, or joint net worth with his spouse
(exclusive of houses, home furnishings and personal automobiles) which is in
excess of $l,000,000, and (b) individual income in excess of $200,000 for the
two most recent year and for foreseeable future tax years (without taking into
account the effect of any acquisition of the Partnership Interests).
(b) Each Limited Partner acknowledges:
(i) that he and/or his purchaser representative (if any) have
such knowledge and experience in financial and business matters that he is or
they are capable of evaluating the merits and risks of the investment involved
in the purchase of a Limited Partnership Interest in the Partnership and has so
evaluated same;
(ii) that he is aware that this investment is speculative and
represents a substantial risk of loss;
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(iii) that he is able to bear the economic risk of such
investment, even if it involves a complete loss of this investments;
(iv) that in connection with his purchase of Limited
Partnership Interests in the Partnership, he has been fully informed as to the
circumstances under which he is required to take and hold such Limited
Partnership Interests pursuant to the requirements of the Securities Act of 1933
(the "Securities Act"), and applicable state securities or "Blue Sky" laws; and
(v) that the General Partner has informed him that his Limited
Partnership Interests are not registered under the Securities Act or any Blue
Sky law and may not be transferred, assigned or otherwise disposed of unless
such Limited Partnership Interests are subsequently registered under the
Securities Act and any applicable Blue Sky laws, or exemptions from such
registration requirement are then available.
(c) Each Limited Partner understands:
(i) that the Partnership and the General Partner is under no
obligation to register such Limited Partnership Interests under the Securities
Act or under any Blue Sky law or to comply with any applicable exemption under
the Securities Act or under the Blue Sky law with respect to such Limited
Partnership Interests; and
(ii) that the Partnership will not be required to supply him
with any information necessary to enable him to make a sale of such Limited
Partnership Interests pursuant to Rule 144 under the Securities Act (assuming
such Rule is applicable and is otherwise available to him with respect to such
Limited Partnership Interests).
ARTICLE X
CHANGES IN GENERAL PARTNER
Section 10.1 Voluntary Withdrawal: Unless a General Partner which is not a
corporation will remain upon and after the Voluntary Withdrawal of another
General Partner, a General Partner shall not have the right to Voluntary
Withdraw from the Partnership unless the General Partner seeking to Voluntary
Withdraw finds a person or entity willing to accept the responsibility of the
management and control of the Partnership as a substitute General Patter
entitled to the fees and allocations as to which that General Partner is
entitled pursuant to Article IV, and nominates such person for approval by the
Partners where (i) such proposed successor General Partner has had or employs
persons who have had substantial experience in real estate in general, (ii) the
Partnership would not cease to be classified as a partnership for federal income
tax purposes if such proposed successor General Partner became a General Partner
of the Partnership, (iii) the withdrawal of a General Partner and his
replacement by the successor would not result in termination of the Partnership
pursuant to Section 708(b) of the Code. A nomination shall be approved if,
within ninety (90) days after mailing the nomination, the General Partner
receives written approval (including a facsimile, telegraph or telex message)
from a majority of all Partners. A General Partner may Voluntary Withdraw from
the Partnership even if the person nominated as successor General Partner is not
approved by the Partners provided (a) the General Partner advises the Partners
when nominating a successor General Partner that it will Voluntary Withdraw
whether or not the successor General Partner is approved, and (b) the date of
retirement, which shall be specified in the aforesaid notice, is not less than
120 days after the mailing of the aforesaid notice.
If a General Partner Voluntarily Withdraws from the Partnership other than
in accordance with the foregoing provisions or if, in any such Voluntary
Withdrawal, the conditions in (i) through (iii) of this Section are not
satisfied, then
(a) the measure of the damages resulting from such retirement shall
be the after-tax effects on the Partners of any reclassification of the
Partnership as an association taxable as a corporation for federal income tax
purposes or from any termination of the Partnership under Section 708(b) of the
Code resulting from such
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retirement and the reasonable expenses of defending against a reclassification
or alleged termination of the Partnership for federal income tax purposes
resulting from such retirement; and
(b) the withdrawing General Partner shall be entitled only to such
distributions under Article IV hereof as have become due and are unpaid on such
retirement date. Thereafter, it shall have no right to any distributions of any
kind from the Partnership absent an express agreement to the contrary.
Section 10.2 Admission of General Partner: No person shall be admitted as
a substitute or additional General Partner without the prior written consent of
all General Partners.
ARTICLE XI
TRANSFER OF PARTNERSHIP INTERESTS
ATTENTION GEORGIA RESIDENTS
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE IN PART ON PARAGRAPH (13)
OF CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,' AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
Section 11.1 Transfer of Partnership Interest of General Partner: A
General Partner may transfer, whether voluntarily or by operation of law, at
judicial sale or otherwise, pledge, hypothecate or grant a security interest in
all or any portion of his Partnership Interest, but no person acquiring or
succeeding the such interest shall become or have the right to become a
substitute or additional General Partner except as provided in Article X.
Section 11.2 Transfer of Limited Partners' Interest: The Withdrawal of a
Limited Partner, the admission of a Limited Partner or the assignment by a
Limited Partner of his interests shall not dissolve or terminate the
Partnership.
(a) Requirement for Transfer: Except as otherwise provided in
Sections 11.2(b), 11.3 and 11.4, a Limited Partner or the transferee of a
Limited Partner may transfer all or part of his Interests, provided, unless
otherwise consented to by the General Partner, (i) that the transferee, if an
individual, is at least 21 years of age, (ii) that the transferee executes an
instrument reasonably satisfactory to the General Partner accepting and adopting
the provisions and agreements set forth herein, and (iii) the General Partner
shall consent to such Transfer, which consent may be given or withheld in the
General Partner' sole discretion, provided, however, that such consent shall be
withheld if the transferor Limited Partner (other than a transferor Limited
Partner who is also a General Partner) does not obtain a legal opinion,
acceptable to counsel for the Partnership, that (1) such Transfer would not
result in the close of the Partnership's taxable year with respect to all
Partners, impair the ability of the Partnership to be taxed as a partnership,
cause the termination of the Partnership within the meaning of Section 708(b) of
the Code, or cause the termination of its status as a partnership under the
Code, and (2) such Transfer does not violate any provision of any Federal or
state securities law.
(b) Requirement for Substitute: No transferee of the whole or a
portion of a Limited Partner's Limited Partnership Interest shall have the right
to become a Substituted Limited Partner in place of his assignor unless and
until all of the following conditions are satisfied:
(i) A duly executed and acknowledged written instrument of
transfer approved by the General Partner has been filed with the Partnership
setting forth the intention of the transferor that the transferee become a
Substituted Limited Partner in his place.
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(ii) The transferor and transferee execute and acknowledge
such other instrument as the General Partner may reasonably deem necessary or
desirable to effect such substitution, including the written acceptance and
adoption by the transferee of the provisions of this Agreement.
(iii) The written consent of the General Partner to such
substitution shall be obtained, the granting or denial of which shall be within
the sole and absolute discretion of the General Partner.
(iv) A reasonable transfer fee has been paid to the
Partnership sufficient to cover all reasonable expenses connected with the
transfer and substitution.
(v) An appropriate amendment of the Certificate has been duly
filed and recorded. The General Partner agree to file such amendment and cause
it to be recorded promptly after the conditions specified in subparagraphs (i)
through (iv) above have been satisfied.
(vi) The Partnership has received an opinion of counsel, at
the request of the General Partner, satisfactory to the Partnership and its
counsel that such transfer can be made without registration under federal or
state Securities Laws together with a written representation and warranty
identical to the representation and warranty contained in Section 9.2 in its
entirety.
(c) The Partnership shall make an appropriate notation in the
records of the Partnership describing the limitations on resale contained in
section 11.2.
Any Transfer, pledge or other disposition of the Interests made or
attempted in contravention of the restrictions of this Section 11.2 is void.
Section 11.3 Death, Bankruptcy or Incompetence of a Limited Partner: The
death, bankruptcy or adjudication of incompetence of a Limited Partner will not
terminate the Partnership.
(a) In the event of the death or legal incompetency of an individual
Limited Partner, except as hereinafter provided in this Section 11.3, his
Representative shall succeed to his Interests and shall be liable for all the
liabilities and obligations of such Limited Partner under this Agreement, but
shall have the right to become a Substituted Limited Partner only in accordance
with the provisions of Section 11.2. For the purpose of settling the estate of
the deceased Limited Partner, the Representative shall have only such rights of
a Limited Partner as are necessary for such purpose.
(b) Upon the bankruptcy, insolvency, dissolution or other cessation
to exist as a legal entity of a Limited Partner who is not an individual, the
authorized representative of such entity shall have all the rights and
obligations of such Limited Partner and such power as such entity possesses to
constitute an assignee as a successor of such Interest and to join with such
assignee in making application to substitute such assignee as a Limited Partner.
Section 11.4 Effectiveness of Transfer:
(a) The Transfer by a Limited Partner or a transferee of a Limited
Partner, with the consent of the General Partner, of all or part of his
Interests shall become effective on the first day of the month following receipt
by the General Partner of evidence of such Transfer in form and substance
reasonably satisfactory to the General Partner and a transfer fee sufficient to
cover all reasonable expenses of the Partnership connected with such Transfer,
and provided that the General Partner have consented to such Transfer in
accordance with Section 11.2; provided further that the General Partner may, in
their sole discretion, establish an earlier effective date for the Transfer if
requested to do so by the transferor or transferee.
(b) No Transfer of Partnership Interests or any part thereof which
is in violation of this Article shall be valid or effective and the Partnership
shall not recognize the same for the purposes of allocating Profits and Losses,
making distributions of Distributable Cash or Sale or Refinancing Proceeds,
return of Capital Contribution
18
<PAGE>
or other distribution with respect to such Partnership Interests, or part
thereof. The Partnership may enforce the provisions of this Article either
directly or indirectly or through its agents by refusing to register or Transfer
or permit the registration or Transfer on its books of any proposed Transfer not
in accordance with this Article XI.
(c) The Partnership shall, from such time as Partnership Interests
are registered in the name of the transferee on the Partnership's books in
accordance with the above provisions, pay to the transferee all further
distributions or other compensation by way of income or return of capital, on
account of the Partnership Interest transferred. Until the registration or
Transfer on the Partnership's books, the General Partner may proceed as if no
Transfer has occurred.
Section 11.5 Purchase of Interest by General Partner: If a General Partner
acquires an Interest as a Limited Partner, said General Partner shall, with
respect to such Interest, enjoy all of the rights and, except as provided in
Section 11.2(a), be subject to all of the obligations and duties of a Limited
Partner, provided, however, a General Partner shall not acquire directly or
indirectly (within the meaning of Section 318 of the Code) such Interests, if
such acquisition would give the General Partner eighty (80%) per cent or more
(but less than one hundred (100%) per cent) of the Interests owned by Limited
Partners, and provided further that such acquisition of such Interests shall not
reduce any liability of such General Partner under this Agreement.
ARTICLE XII
DISSOLUTION AND SUCCESSOR PARTNERSHIP
Section 12.1 Dissolution of Partnership: The Partnership shall dissolve on
October 1, 2020, or upon the earlier occurrence of any of the following events:
(a) the Involuntary Withdrawal of the General Partner if no General
Partner remains after such Involuntary Withdrawal or an event of Voluntary
Withdrawal in respect of any General Partner unless there remains a General
Partner of the Partnership after the Voluntary Withdrawal or all of the
remaining Partners agree in writing within ninety (90) days after such event of
Voluntary Withdrawal to continue the business of the Partnership and to the
appointment of one (1) or more General Partners, if necessary;
(b) upon the mutual agreement of the General Partner and Limited
Partners having an aggregate Limited Partner Percentage of at least seventy-five
(75%) percent setting forth their determination that the Partnership should be
dissolved;
(c) the sale or other disposition of the Project, unless the
Partnership receives therefrom a purchase money note or unless the disposition
involves a like-kind exchange of property in which events the Partnership shall
continue until the note is fully paid or the property received in exchange is
sold or otherwise disposed of without receipt of a purchase money note or an
exchange of property; or
(d) The vote of the Partners owning a majority of the Partnership
Interest to remove the General Partner "for cause" unless the Limited Partners
owning a majority of the Limited Partnership Interest also elect to admit one or
more substitute General Partners and to continue the business of the
Partnership. For the purpose of this sub-section (d), "for cause" shall mean (i)
willful and continuing or repeated failure or refusal by the General Partner to
perform substantial duties, or (ii) material abuse of office or malfeasance or
gross negligence by the General Partner, or if the General Partner should be
convicted of, plead guilty to, or confess to fraud, misappropriation,
embezzlement or commission of any felony in connection with Partnership property
or the Partnership; or
(e) otherwise by operation of law.
Section 12.2 Successor Partnership: If the Partnership is dissolved or to
be dissolved by reason of the Voluntary Withdrawal of all of the General
Partner, and any Limited Partner shall deliver to each of the other
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<PAGE>
Limited Partners within Thirty (30) days of such Voluntary Withdrawal, a written
notice demanding that a meeting of Limited Partners be held at the principal
place of business of the Partnership at the time set forth in such notice (which
shall be not less than ten (10) nor more than thirty (30) days after the date of
such notice), the Limited Partners shall hold such meeting. Limited Partners
attending such meeting, either in person or by proxy, and having an aggregate
Limited Partner Percentage of not less than one-hundred (100%) percent of the
Limited Partnership Percentage held by Limited Partners may continue the
business of the Partnership and reconstitute the Partnership as a successor
limited partnership with a new General Partner having the capacity to serve as
such and who is able to meet any requirements then imposed by the Code or any
rulings or regulations thereunder with respect to General Partner of limited
partnerships in order that the Partnership not become an association taxable as
a corporation. If such Limited Partners shall exercise such right to continue
the business of the Partnership, the person appointed by them as the new General
Partner and each of the Limited Partners shall execute an Agreement of Limited
Partnership and shall cause to be filed a Certificate of Limited Partnership.
Both the Certificate and Agreement of Limited Partnership shall contain
substantially the same provisions as those contained herein, except that the new
General Partner shall be allocated such share of the profits, losses and
distributions of the Partnership or shall be paid such fees, as the Limited
Partners appointing such new General Partner shall determine. Such new General
Partner shall indicate his acceptance of the appointment by the execution of
each of such Certificate and Agreement of Limited Partnership.
ARTICLE XIII
LIQUIDATION OF PARTNERSHIP
Section 13.1 Procedure: Unless the business of the Partnership is
continued pursuant to Section 12.2, upon the dissolution of the Partnership, the
General Partner or the person required by law to wind up the Partnership's
affairs shall cause the cancellation of this Agreement and the following shall
be accomplished:
(i) a statement setting forth the assets and liabilities of the
Partnership as at the date of dissolution shall be prepared by the Partnership's
accountant or firm of accountants and such statement shall be furnished to all
of the Partners;
(ii) the assets of the Partnership shall be liquidated as promptly
as possible, but in an orderly and businesslike manner so as not to involve
undue sacrifice;
(iii) any gain or loss realized by the Partnership upon the sale or
other disposition of its property and assets shall be allocated among the
Partners as provided in Article IV.
Section 13.2 Distribution Upon Dissolution: The proceeds of sale and all
other assets of the Partnership shall be applied and distributed as follows, and
in the following order of priority:
(i) First, to the creditors of the Partnership (including the
General Partner and Affiliates thereof) in payment of the unpaid Liabilities of
the Partnership to the extent required under agreements with such creditors and
the reasonable expenses of liquidation;
(ii) Second, to the setting up of any reserves which the General
Partner or the person required by law to wind up the Partnership's affairs may
deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership arising out of or in connection with the
Partnership's business. Said reserves may, in the discretion of the General
Partner or the person required by law to wind up the Partnership's affairs, be
paid over to an escrow agent selected by them to be held by it as escrowee for
the purpose of disbursing such reserves in payment of any of the aforementioned
contingencies, to the expiration of such period as the General Partner shall
deem advisable, to distribute the balance thereafter remaining as hereinafter
provided in this section;
(iii) Third, to the Partners in the same manner as is provided for
with respect to distribution of Capital Cash flow in Article IV.
20
<PAGE>
ARTICLE XIV
PARTNER'S ACTIVITIES
Any Limited Partner, the General Partner, any Affiliate, any shareholder,
officer, director or employee thereof may, notwithstanding the existence of this
Agreement, engage in or possess an interest in any other business or venture of
every nature and description, independently or with others including, but not
limited to, the ownership, financing, leasing, operation, management, brokerage
and development of real property, whether the same be competitive with the
Partnership or otherwise, without having or incurring any obligation to offer
any interest in such activities to the Partnership or any party hereto. Neither
this Partnership Agreement nor any activity undertaken pursuant hereto shall
prevent the General Partner or any Limited Partner from engaging in such
activities, or require the General Partner to permit the Partnership or any
Limited Partner to participate in any such activities and as a material part of
the consideration for the General Partner's execution hereof and admission of
each Limited Partner, each Limited Partner hereby waives, relinquishes and
renounces any such right or claim of participation. Neither the Partnership nor
any General or Limited Partner shall have the right to the income of proceeds
derived from any party's other business interest, even if that business interest
is competitive with the Partnership business and such business interest shall
not be deemed wrongful or improper.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Amendments:
(a) Amendments may be made to this Agreement from time to time by
the General Partner without the consent of the Limited Partners:
(i) to add to the representations, duties or obligations of
the General Partner
(ii) to cure any ambiguity or correct or supplement any
provision hereunder which may be inconsistent with any other provision
hereunder;
(iii) to delete or add any provision to this Agreement
required or requested to be so deleted or added by the Internal Revenue Service,
staff of the Securities and Exchange Commission, or any other Federal Agency or
by any state "Blue Sky" Commissioner or similar such official, or any lender
(other than the General Partner or an Affiliate thereof) or surety even though
such deletion or addition may adversely affect rights of Limited Partners (but
no change in the rights of Limited Partners to profits, losses or cash
distributions or to make Capital Contributions shall be made without the consent
of all Limited Partners);
(iv) to modify the allocation provisions in Articles III and
IV to comply with final Regulations subsequently issued by the Treasury
Department. The intent of such change will be to conform as closely as practical
with the present provisions Articles III and IV.
(b) Except as otherwise provided herein this Agreement may be
modified or amended only with the written consent of the General Partner and
Limited Partners owning at least fifty one (51%) per cent of the Limited
Partnership Interests.
(c) Notwithstanding any provisions of the preceding paragraphs to
the contrary, no modification or amendment of this Agreement, without the prior
written consent of all the Partners, shall:
(i) enlarge, detract from or otherwise modify the purposes of
the Partnership, or the character of its business, as set forth in Section 1.7;
21
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(ii) impose or create any new or additional liability on any
Limited Partner or enlarge the obligations of any Partner or make contributions
to the capital of the Partnership as provided in this Agreement;
(iii) enlarge, detract from or otherwise modify any
obligations of the General Partner as provided in this Agreement;
(iv) alter the order of distribution and the allocations of
distributions and profits and losses set forth in this Agreement;
(v) alter the Partnership in such a manner as will result in
the Partnership no longer being classified as a "Partnership" for Federal income
tax purposes; or
(vi) modify or amend this Section 15.1 or any other provision
of this Agreement which requires the consent, action or approval of the Limited
Partners.
(d) If this Agreement shall be amended as a result of adding or
substituting a Limited Partner, the amendment to this Agreement shall be signed
by all General Partners and by the person to be substituted or added (or his
attorney-in-fact) and, if a Limited Partner is to be substituted, by the
assigning Limited Partner or his attorney-in-fact. If this Agreement shall be
amended to reflect the designation of an additional or successor General
Partner, such amendment shall be signed by all General Partner and by such
additional or successor General Partner. If this Agreement shall be amended to
reflect the withdrawal of a General Partner and the business of the Partnership
is continued, such amendment shall be signed by the remaining or successor
General Partner.
(e) In making any amendments, the General Partner shall prepare all
required documentation and make all official filings and publications as are
required by its undertakings and the other persons affected by such amendment
shall cooperate with the General Partner to the extent reasonably necessary to
enable the General Partner to meet their obligations.
Section 15.2 Complete Agreement: This Agreement sets forth all of the
promises, agreements, conditions, understandings, warranties and representations
among the parties hereto with respect to the Partnership, the Partnership
business and the property of the Partnership, and there are no promises,
agreements, conditions, understandings, warranties or representations, oral or
written, express or implied, among them other than as set forth in this
Agreement and in the other agreements referred to in this Section 15.2.
Section 15.3 Meetings and Voting: All decision and action of the
Partnership may be taken by the Partners entitled to participate therein by
submitting notices to the Partners entitled to participate in such decisions or
actions and obtaining the written consent of the requisite number of percentage
of Partners. There shall be no meetings of the Partnership, except pursuant to
Section 12.2 hereof.
Section 15.4 Notices: Any notice, payment, demand or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be deemed to have been delivered and given for all purposes
(a) if delivered personally to the party or to an officer of the party to whom
the same is directed, or (b) whether or not the same is actually received, if
sent by registered or certified mail, postage and charges Prepaid, addressed:
(i) if to a General Partner, to his address set forth in Section 1.5 or to such
other address as the General Partner may from time to time specify by written
notice to the Partners, and (ii) if to a Limited Partner, at such Limited
Partner's address set forth on the signature pages hereto, or to such other
address as such Limited Partner may from time to time specify by written notice
to the General Partner. Any such notice shall be deemed to be given as of the
date so delivered, if delivered personally, or as of the date on which the same
was deposited in a regularly maintained receptacle for the deposit of United
Stares mail, addressed and sent as aforesaid. Any such notice may at any time be
waived by the person entitled to receive such notice.
Section 15.5 Counterparts: This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one agreement binding on all parties
22
<PAGE>
hereto, notwithstanding that all the parties shall not have signed the same
counterpart, except that no counterpart shall be binding unless signed by all
General Partner.
Section 15.6 Section Headings: The headings in this Agreement are inserted
for convenience and identification only and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Agreement or any
provisions hereof.
Section 15.7 Pronouns and Plurals: All pronouns used herein shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons, or entity or entities, may require in the
context, and the singular form of nouns, pronouns and verbs shall include the
plural, and vice versa, whichever the context may require.
Section 15.8 Successors: Subject to the limits on transferability and
assignability contained in this Agreement, each and all of the covenants, terms,
provisions and agreements contained in this Agreement shall be binding, upon and
inure to the benefit of the successors, heirs, and assigns of the respective
parties hereto.
Section 15.9 Applicable Law: This Agreement shall be construed and
enforced in accordance with the laws of the State of Georgia and the Georgia
Revised Uniform Limited Partnership Act, without regard to the choice of law
principles thereof, as now in effect shall govern and supersede any provision of
this Agreement which would otherwise be in violation of such Act.
Section 15.10 Time of Essence; Number of Days. Time is of the essence in
this Agreement. In computing the number of days for purposes of this Agreement,
all days shall be counted, including Saturdays, Sundays, and holidays; provided,
however, that if the final day of any time period falls on a Saturday, Sunday,
or holiday, then the final day shall be deemed to be the next day which is not a
Saturday, Sunday or holiday.
Section 15.11 Severability: Every provision of this Agreement is intended
to be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.
Section 15.12 Waiver of Action for Partition: Each of the Partners
irrevocably waives during the term of the Partnership and during the period of
its liquidation following any dissolution, any right that such Partner may have
to maintain any action for partition with respect to any of the assets of the
Partnership.
Section 15.13 Interpretation. No provision of this Agreement is to be
interpreted for or against any party because that party or that party's legal
representative drafted such provision.
23
<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Agreement as of
the day and year first written. Each of the Limited Partners has executed this
Agreement by a separate Limited Partner's signature page hereto.
GENERAL PARTNER:
Little Rock Lodging Associates, Inc.
By: /s Robert S. Cole
---------------------------------
Robert S. Cole
President
Attested:
s/ Robert M. Flanders
---------------------------------
Robert M. Flanders
Secretary
24
<PAGE>
Little Rock Lodging Associates I, Limited Partnership
EXHIBIT A
CAPITAL
GENERAL PARTNER: UNITS CONTRIBUTION
- ---------------- ----- ------------
Little Rock Lodging Associates, Inc., 1 $ 18,935
an Arkansas corporation
c/o Impac Hotel Group
The Lenox Building - Suite 1220
3399 Peachtree Road N.E
Atlanta, Georgia 30326
LIMITED PARTNERS
Impac Hotel Development, Inc., 28 $ 530,180
a Delaware corporation
c/o Impac Hotel Group
The Lenox Building - Suite 1220
3399 Peachtree Road N.E
Atlanta, Georgia 30326
House Family Limited Partnership, 5 $ 94,675
a Kentucky limited partnership
c/o Earnest Matt House, General Partner
510 South Main Street
London, Kentucky 40741
ProTrust Properties V, Ltd., 60 $1,136,100
a Kentucky limited partnership
771 Corporate Dr.- Suite 101
Lexington, KY 40503
c/o ProTrust
3399 Peachtree Road - Suite 2000
Atlanta, Georgia 30326
RFG Associates XIII, 5 $ 94,675
a New York general partnership
c/o Mr. Mark Paganelli
190 Linden Oaks Drive - Suite B
Rochester, New York 14625
<PAGE>
CAPITAL
UNITS CONTRIBUTION
----- ------------
Echota Fabrics, Inc., 1 $ 18,935
a Georgia corporation
c/o Joel Ostuw
1394 U.S. 41 North
Calhoun, Georgia 30701
-2-
<PAGE>
LIMITED PARTNER'S SIGNATURE PAGE
1. The undersigned specifically adopts and approves each and every
provision of the Agreement of Limited Partnership of Little Rock Lodging
Associates I. Limited Partnership to which this Signature Page is attached,
including, but not by way of limitation, the power of attorney to the General
Partner.
2. The undersigned acknowledges that until his Signature Page has been
executed by the General Partner and attached to a master copy of the Agreement
of Limited Partnership, there will be no acceptance of the undersigned as a
Limited Partner. Upon execution of this Signature Page by the General Partner,
the undersigned will become a Limited Partner.
3. This Signature Page has been executed in duplicate by the undersigned
and one executed copy of this Signature Page will be attached to the
undersigned's copy of the Agreement of Limited Partnership. It is agreed that
the other executed copy of this Signature Page may be attached to a master copy
of the Agreement of Limited Partnership together with the Signature Pages which
may be executed by other persons.
4. Under penalties of perjury, the undersigned certifies that (i) the
number shown on this form is the undersigned's correct taxpayer identification
number, (ii) the undersigned is not subject to backup withholding because (A)
the undersigned has not been notified that the undersigned is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the undersigned that the undersigned
is no longer subject to backup withholding and (iii) the undersigned is not a
foreign person within the meaning of sections 1445 and 1446 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
IN WITNESS WHEREOF, this Signature Page has been executed by the
undersigned this 7th day of October, 1996.
LIMITED PARTNER:
/s/ Joel Ostuw
-------------------------------
Signature
Joel Ostuw/Echota Fabrics, Inc.
-------------------------------
Name, Printed or Typed
ACCEPTED:
Little Rock Lodging Associates, Inc., -------------------------------
General Partner Street Address
By: /s/ Robert S. Cole
---------------------------------- -------------------------------
City, State and Zip Code
Title:
------------------------------- -------------------------------
Taxpayer Identification Number
Date:
--------------------------------
<PAGE>
LIMITED PARTNER'S SIGNATURE PAGE
1. The undersigned specifically adopts and approves each and every
provision of the Agreement of Limited Partnership of Little Rock Lodging
Associates I. Limited Partnership to which this Signature Page is attached,
including, but not by way of limitation, the power of attorney to the General
Partner.
2. The undersigned acknowledges that until his Signature Page has been
executed by the General Partner and attached to a master copy of the Agreement
of Limited Partnership, there will be no acceptance of the undersigned as a
Limited Partner. Upon execution of this Signature Page by the General Partner,
the undersigned will become a Limited Partner.
3. This Signature Page has been executed in duplicate by the undersigned
and one executed copy of this Signature Page will be attached to the
undersigned's copy of the Agreement of Limited Partnership. It is agreed that
the other executed copy of this Signature Page may be attached to a master copy
of the Agreement of Limited Partnership together with the Signature Pages which
may be executed by other persons.
4. Under penalties of perjury, the undersigned certifies that (i) the
number shown on this form is the undersigned's correct taxpayer identification
number, (ii) the undersigned is not subject to backup withholding because (A)
the undersigned has not been notified that the undersigned is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the undersigned that the undersigned
is no longer subject to backup withholding and (iii) the undersigned is not a
foreign person within the meaning of sections 1445 and 1446 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
IN WITNESS WHEREOF, this Signature Page has been executed by the
undersigned this 8th day of October, 1996.
LIMITED PARTNER:
RFG Associates III
By: JML Associates.
/s/ Mark Paganelli, Vice President
----------------------------------
Signature
Mark Paganelli
----------------------------------
Name, Printed or Typed
ACCEPTED:
190 Linden Oaks Drive
Little Rock Lodging Associates, Inc., ----------------------------------
General Partner Street Address
By: /s/ Robert S. Cole Rochester, New York 14625
---------------------------------- ----------------------------------
City, State and Zip Code
Title: President Applied For
------------------------------- ----------------------------------
Taxpayer Identification Number
Date: Oct 8, 1996
--------------------------------
<PAGE>
LIMITED PARTNER'S SIGNATURE PAGE
1. The undersigned specifically adopts and approves each and every
provision of the Agreement of Limited Partnership of Little Rock Lodging
Associates I. Limited Partnership to which this Signature Page is attached,
including, but not by way of limitation, the power of attorney to the General
Partner.
2 The undersigned acknowledges that until his Signature Page has been
executed by the General Partner and attached to a master copy of the Agreement
of Limited Partnership, there will be no acceptance of the undersigned as a
Limited Partner. Upon execution of this Signature Page by the General Partner,
the undersigned will become a Limited Partner.
3. This Signature Page has been executed in duplicate by the undersigned
and one executed copy of this Signature Page will be attached to the
undersigned's copy of the Agreement of Limited Partnership. It is agreed that
the other executed copy of this Signature Page may be attached to a master copy
of the Agreement of Limited Partnership together with the Signature Pages which
may be executed by other persons.
4. Under penalties of perjury, the undersigned certifies that (i) the
number shown on this form is the undersigned's correct taxpayer identification
number, (ii) the undersigned is not subject to backup withholding because (A)
the undersigned has not been notified that the undersigned is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the undersigned that the undersigned
is no longer subject to backup withholding and (iii) the undersigned is not a
foreign person within the meaning of sections 1445 and 1446 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
IN WITNESS WHEREOF, this Signature Page has been executed by the
undersigned this 1 day of October, 1996.
LIMITED PARTNER:
/s/ Robert M. Flanders
-------------------------------
Signature
Robert M. Flanders
-------------------------------
Name, Printed or Typed
ACCEPTED:
3445 Peachtree Rd NE
Little Rock Lodging Associates, Inc., -------------------------------
General Partner Street Address
By: /s/ Robert S. Cole Atlanta, GA 30326
---------------------------------- -------------------------------
City, State and Zip Code
Title: President [ILLEGIBLE]
------------------------------- -------------------------------
Taxpayer Identification Number
Date: Oct 8, 1996
--------------------------------
<PAGE>
LIMITED PARTNER'S SIGNATURE PAGE
1. The undersigned specifically adopts and approves each and every
provision of the Agreement of Limited Partnership of Little Rock Lodging
Associates I. Limited Partnership to which this Signature Page is attached,
including, but not by way of limitation, the power of attorney to the General
Partner.
2 The undersigned acknowledges that until his Signature Page has been
executed by the General Partner and attached to a master copy of the Agreement
of Limited Partnership, there will be no acceptance of the undersigned as a
Limited Partner. Upon execution of this Signature Page by the General Partner,
the undersigned will become a Limited Partner.
3. This Signature Page has been executed in duplicate by the undersigned
and one executed copy of this Signature Page will be attached to the
undersigned's copy of the Agreement of Limited Partnership. It is agreed that
the other executed copy of this Signature Page may be attached to a master copy
of the Agreement of Limited Partnership together with the Signature Pages which
may be executed by other persons.
4. Under penalties of perjury, the undersigned certifies that (i) the
number shown on this form is the undersigned's correct taxpayer identification
number, (ii) the undersigned is not subject to backup withholding because (A)
the undersigned has not been notified that the undersigned is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the internal Revenue Service has notified the undersigned that the undersigned
is no longer subject to backup withholding and (iii) the undersigned is not a
foreign person within the meaning of sections 1445 and 1446 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
IN WITNESS WHEREOF, this Signature Page has been executed by the
undersigned this 7 day of October, 1996.
LIMITED PARTNER:
HOUSE FAMILY LIMITED PARTNERSHIP
/s/ Earnest Matt House GENERAL PARTNER
--------------------------------------
Signature
EARNEST MATT HOUSE
--------------------------------------
Name, Printed or Typed
ACCEPTED:
1195 West Laurel Road
Little Rock Lodging Associates, Inc., -------------------------------------
General Partner Street Address
By: /s/ Robert S. Cole LONDON, KENTUCKY 40741
---------------------------------- --------------------------------------
City, State and Zip Code
Title: President 61-1278912
------------------------------- --------------------------------------
Taxpayer Identification Number
Date: Oct 8, 1996
-------------------------------
<PAGE>
LIMITED PARTNER'S SIGNATURE PAGE
1. The undersigned specifically adopts and approves each and every
provision of the Agreement of Limited Partnership of Little Rock Lodging
Associates I. Limited Partnership to which this Signature Page is attached,
including, but not by way of limitation, the power of attorney to the General
Partner.
2. The undersigned acknowledges that until his Signature Page has been
executed by the General Partner and attached to a master copy of the Agreement
of Limited Partnership, there will be no acceptance of the undersigned as a
Limited Partner. Upon execution of this Signature Page by the General Partner,
the undersigned will become a Limited Partner.
3. This Signature Page has been executed in duplicate by the undersigned
and one executed copy of this Signature Page will be attached to the
undersigned's copy of the Agreement of Limited Partnership. It is agreed that
the other executed copy of this Signature Page may be attached to a master copy
of the Agreement of Limited Partnership together with the Signature Pages which
may be executed by other persons.
4. Under penalties of perjury, the undersigned certifies that (i) the
number shown on this form is the undersigned's correct taxpayer identification
number, (ii) the undersigned is not subject to backup withholding because (A)
the undersigned has not been notified that the undersigned is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the undersigned that the undersigned
is no longer subject to backup withholding and (iii) the undersigned is not a
foreign person within the meaning of sections 1445 and 1446 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
IN WITNESS WHEREOF, this Signature Page has been executed by the
undersigned this 16th day of October, 1996.
LIMITED PARTNER:
ProTrust Properties V, Ltd
By ProTrust Holdings II, LLC
/s/ Jeffrey J. Neal, Manager
--------------------------------------
Signature
Jeffrey J. Neal
--------------------------------------
Name, Printed or Typed
ACCEPTED:
3399 Peachtree Rd. N.E. Suite 2050
Little Rock Lodging Associates, Inc., --------------------------------------
General Partner Street Address
By: /s/ Robert S. Cole Atlanta, GA 36326
---------------------------------- --------------------------------------
City, State and Zip Code
Title: President 61-1308515
------------------------------- --------------------------------------
Taxpayer Identification Number
Date: Oct 16, 1996
--------------------------------
<PAGE>
AMENDMENT TO
THE LIMITED PARTNERSHIP AGREEMENT
OF LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP
This Amendment to the Limited Partnership Agreement of Little Rock Lodging
Associates I, Limited Partnership (the "Limited Partnership") is made and
entered into as of the 1 day of January, 1998 by and among Little Rock Lodging
Associates, Inc., an Arkansas corporation, (the "General Partner") the sole
general partner of the Limited Partnership and each or the limited partners
whose names and signatures appear hereafter (the "Limited Partners")
(collectively, with the General Partner, the "Partners"). The Partners desire to
amend that certain Limited Partnership Agreement, as amended, between the
General Partner and the Limited Partners, dated as or the 16th day or October,
1996 (the "Partnership Agreement").
NOW, THEREFORE in consideration of the premises and certain other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Partners agree as follows:
1. The Partnership Agreement is hereby amended by deleting Section 1.5(a) of the
Partnership Agreement and replacing it with the following:
(a) The name and address of the General Partner of the
Partnership is as follows:
Impac SPE #3, Inc.
3445 Peachtree Rd., N.E.
Suite 700
Atlanta, Georgia 30326
2. Exhibit A to the Partnership Agreement is hereby deleted and the Amendment to
Exhibit A to the Partnership Agreement attached hereto is hereby approved and
substituted.
IN WITNESS WHEREOF, the General Partner and the Limited Partner have
executed this Amendment to the Partnership Agreement on the date first written
above.
[SIGNATURE PAGES TO FOLLOW]
<PAGE>
GENERAL PARTNER SIGNATURE PAGE
The undersigned specifically adopts and approve each and every provision
of the Amendment to the Limited Partnership Agreement of Little Rock Lodging
Associates I, Limited Partnership to which this signature page shall be attached
and made a part thereof.
IN WITNESS WHEREOF, the General Partner has executed this Agreement as of
the day and year first written above. Each of the Limited Partners required to
authorized this Amendment has executed this Agreement by separate Limited
Partner's signature page hereto.
GENERAL PARTNER:
LITTLE ROCK LODGING ASSOCIATES, INC.
By: /s/ Robert S. Cole
----------------------------------
Robert S. Cole
President
SEEN AND AGREED:
IMPAC SPE #3, INC.
By: /s/ Robert S. Cole
----------------------------------
Robert S. Cole
President
<PAGE>
LIMITED PARTNERS SIGNATURE PAGE
The undersigned (i) if a party to the Partnership Agreement prior to the
date of this Amendment does hereby specifically adopt and approve each and every
provision of this Amendment to the Partnership Agreement of Little Rock Lodging
Associates I, Limited Partnership to which this signature page shall be attached
and made a part thereof and (ii) if the undersigned was not a party to the
Partnership Agreement prior to the date of this amendment, the undersigned
hereby agrees to become a party to the Partnership agreement and be bound by its
terms.
IN WITNESS WHEREOF, the undersigned Limited Partner has executed this
Agreement as of the day and year written above. The General Partner has executed
this Agreement by separate General Partner's signature page hereto.
LIMITED PARTNER:
IMPAC HOTEL GROUP, L.L.C
By: /s/ Robert S. Cole
----------------------------------
Robert S. Cole, Managing Member
<PAGE>
AMENDMENT TO EXHIBIT A TO THE
LIMITED PARTNERSHIP AGREEMENT OF
LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP
Capital Contribution
--------------------
Limited Partner
Impac Hotel Group, L.L.C. $_________________
3445 Peachtree Road
Suite 700
Atlanta, Georgia 30326
General Partner
Impac SPE, #3 Inc. $_________________
3445 Peachtree Road
Suite 700
Atlanta, Georgia 30326
<PAGE>
AMENDMENT NO. 2 TO
THE LIMITED PARTNERSHIP AGREEMENT
OF LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP
This Amendment to the Limited Partnership Agreement of Little Rock Lodging
Associates I, Limited Partnership (the "Limited Partnership") is made and
entered into as of the 23rd day of July, 1999 by and among Impac SPE #3, Inc.,
an Arkansas corporation, (the "General Partner") the sole general partner of the
Limited Partnership and each of the limited partners whose names and signatures
appear hereafter (the "Limited Partners") (collectively, with the General
Partner, the "Partners"). The Partners desire to amend that certain Limited
Partnership Agreement, as amended, between the General Partner and the Limited
Partners, dated as of the 16th day of October, 1996 (the "Partnership
Agreement").
NOW, THEREFORE in consideration of the premises and certain other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Partners agree as follows:
1. The Partnership Agreement is hereby amended by deleting Section 1.5(a) of the
Partnership Agreement and replacing it with the following:
(a) The name and address of the General Partner of the
Partnership is as follows:
Lodgian Richmond SPE, Inc.
3445 Peachtree Rd., N.E.
Suite 700
Atlanta, Georgia 30326
2. Exhibit A to the Partnership Agreement is hereby deleted and the Amendment to
Exhibit A to the Partnership Agreement attached hereto is hereby approved and
substituted.
IN WITNESS WHEREOF, the General Partner and the Limited Partner have
executed this Amendment to the Partnership Agreement on the date first written
above.
[SIGNATURE PAGES TO FOLLOW]
<PAGE>
GENERAL PARTNER SIGNATURE PAGE
The undersigned hereby specifically adopts and approves each and every
provision of the Amendment to the Limited Partnership Agreement of Little Rock
Lodging Associates I, Limited Partnership to which this signature page shall be
attached and of which made a part.
IN WITNESS WHEREOF, the General Partner has executed this Agreement as of
the day and year written above. Each of the Limited Partners required to
authorize this Amendment has executed this Agreement by separate Limited
Partner's signature page hereto.
GENERAL PARTNER:
IMPAC SPE #3, INC.
By: /s/ Robert S. Cole
----------------------------------
Robert S. Cole
President
SEEN AND AGREED:
LODGIAN RICHMOND SPE, INC.
By: /s/ Robert S. Cole
----------------------------------
Robert S. Cole
President
-2-
<PAGE>
LIMITED PARTNERS SIGNATURE PAGE
The undersigned (i) if a party to the Partnership Agreement prior to the
date of this Amendment does hereby specifically adopt and approve each and every
provision of this Amendment to the Partnership Agreement of Little Rock Lodging
Associates I, Limited Partnership to which this signature page shall be attached
and made a part thereof and (ii) if the undersigned was not a party to the
Partnership Agreement prior to the date of this amendment, the undersigned
hereby agrees to become a party to the Partnership Agreement and be bound by its
terms.
IN WITNESS WHEREOF, the undersigned Limited Partner has executed this
Agreement as of the day and year first written above. The General Partner has
executed this Agreement by separate General Partner's signature page hereto.
LIMITED PARTNER:
IMPAC HOTEL GROUP, L.L.C.
By: /s/ Robert S. Cole
----------------------------------
Robert S. Cole, Managing Partner
-3-
<PAGE>
AMENDMENT TO EXHIBIT A TO THE
LIMITED PARTNERSHIP AGREEMENT OF
LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP
Capital Contribution
Limited Partner
Impac Hotel Group, L.L.C. $____________________
3445 Peachtree Road
Suite 700
Atlanta, Georgia 30326
General Partner
Lodgian Richmond SPE, Inc. $_____________________
3445 Peachtree Road
Suite 700
Atlanta, Georgia 30326
-4-
<PAGE>
Exhibit 3.32.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
MINNEAPOLIS MOTEL ENTERPRISES, INC.
Pursuant to Section 302A.139 of the Minnesota Business Corporation Act
(the "Act"), MINNEAPOLIS MOTEL ENTERPRISES, INC., an Iowa corporation (the
"Corporation"), hereby certifies that these Amended and Restated Articles of
Incorporation (the "Amended Articles"), which contain amendments requiring
shareholder approval, were duly adopted by the Board of Directors of the
Corporation and by the sole shareholder of the Corporation by written consent
without a meeting, pursuant to Sections 302A.441 and 302A.239 of the Act, as of
July ___, 1999. The number of votes cast was sufficient for approval. The
Amended Articles were adopted pursuant to Minnesota Statutes Chapter 302A. The
Articles shall be amended and restated to read as herein set forth in full:
ARTICLE I
The name of the Corporation is MINNEAPOLIS MOTEL ENTERPRISES, INC.
ARTICLE II
The registered office of the Corporation is located at 405 Second
Avenue, South Minneapolis, Minnesota, 55401. The name of its registered agent at
that address is CT Corporation System.
ARTICLE III
(a) The purpose for which the Corporation is organized is limited to:
(i) acquiring, owning, leasing, operating, using and managing that certain real
property commonly known as the Holiday Inn St. Paul, located at 1201 West County
Road East, St. Paul, Minnesota 55112 (the "Property"); (ii) entering into and
performing its obligations under the credit agreement, among Lodgian Financing
Corp., as borrower, Lodgian, Inc., its parent, Impac Hotel Group, LLC, Servico,
Inc. and other affiliated entities, as affiliate guarantors, the initial lenders
and initial issuing bank named therein, the collateral agent, the administrative
agent, Morgan Stanley Senior Funding, Inc., as co-lead arranger, joint-book
manager and syndication agent and Lehman Brothers, as co-lead arranger,
joint-book manager and documentation agent relating to the financing or
refinancing of the Property (the "Loan Agreement") which provides the lender
thereunder with a first priority lien on the Property, any promissory-note
evidencing indebtedness incurred pursuant to the Loan Agreement, any mortgage
securing such indebtedness and encumbering the Property (the "Mortgage") and any
other documents securing such indebtedness and any related collateral documents,
each as amended (or pursuant to a consent obtained in accordance with the terms
thereof) (collectively, the "Loan Documents"); (iii) entering into and
performing its obligations under the Indenture (the "Indenture"), among Lodgian
Financing Corp, as issuer, Lodgian, Inc., the Subsidiary Guarantors defined
therein and Bankers Trust Company, as trustee, relating to the issuance of the
12 1/4% Senior Subordinated Notes due 2009 and the Guarantee in favor of the
holders of the Notes and (iv) transacting any
<PAGE>
and all lawful business that is incident and necessary or appropriate to the
ownership and to the management of the Property for which a corporation may be
incorporated under the laws of the State of Minnesota.
(b) Notwithstanding any other provision of these Amended Articles and
any provision of law that otherwise so empowers the Corporation, until such time
as the Property is released from the lien of the Mortgage, the Corporation shall
not, without the unanimous affirmative vote of the members of its Board of
Directors, (i) amend, alter, change, repeal or adopt any resolution setting
forth a proposed amendment to, any provision of these Articles of Incorporation,
(ii) dissolve or liquidate, in whole or in part, consolidate or merge with or
into any other entity or convey, sell or transfer its properties and assets
substantially as an entirety to any entity, (iii) file a voluntary petition or
otherwise initiate, or consent to, proceedings for the Corporation to be
adjudicated insolvent or seeking an order for relief as a debtor under the
United States Bankruptcy Code, as amended (11 U.S.C. Sections 101 ET SEQ.), or
(iv) file any petition, or consent to any petition, seeking any composition,
reorganization, readjustment, liquidation, dissolution or similar relief under
the present or any future federal bankruptcy laws or any other present or future
applicable federal, state or other statute or law relative to bankruptcy,
insolvency or other relief for debtors; or (v) seek or consent to the
appointment of any trustee, receiver, conservator, assignee, sequestrator,
custodian, or liquidator (or other similar official) of the Corporation or of
all or any substantial part of the properties and assets of the Corporation, or
(vi) make any general assignment for the benefit of creditors, or (vii) admit in
writing its inability to pay its debts generally as they become due, or (viii)
declare or effect a moratorium on its debt or take any corporate action in
furtherance of any such action.
(c) The Board of Directors of the Corporation shall, at all times until
the Property is released from the lien of the Mortgage, include an independent
director (the "Independent Director"). The Independent Director shall be a
person who is not at the time of appointment and who has not at any time during
the prior five years been and who is not while serving as the Independent
Director (i) a director, stockholder, officer or employee of the Corporation or
any affiliates thereof, other than with respect to such person's service as an
Independent Director of the Corporation and such person's service in similar
"Independent Director" positions for affiliates of the Corporation; (ii) a
creditor, customer, supplier, independent contractor, manager or any other
person who derives more than 10% of its gross revenues from its activities wit
the Corporation or any affiliates thereof; (iii) a person controlling any such
stockholder, creditor, customer, supplier, independent contractor, manager or
other person; (iv) the legal or beneficial owner, at any time while serving as
director of the Corporation, of any beneficial interest in the Corporation; or
(v) a member of the immediate family of any such stockholder, officer, employee,
creditor, customer, supplier, director, independent contractor, manager or any
other person of the Corporation. As used herein, the term "affiliate" means any
person controlling, under common control with, or controlled by the person in
question, and the term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person, whether through ownership of voting securities, by contract or
otherwise. In the event of the death, incapacity, or resignation of an
Independent Director, or the vacancy of the Independent Director's seat on the
Corporation's Board of Directors for any reason, a successor Independent
Director shall be appointed by the remaining directors.
-2-
<PAGE>
(d) Except as otherwise permitted by the Loan Documents, so long as the
Property is subject to the lien of the Mortgage, the Corporation shall (i)
observe all corporate formalities, including the maintenance of current minute
books; (ii) maintain its own separate and distinct books of account and
corporate records from any other person or entity; (iii) cause its financial
statements to be prepared in accordance with generally accepted accounting
principles in a manner that indicates the separate existence of the Corporation
and its assets and liabilities from any other person or entity; (iv) pay all its
liabilities out of its own funds; (v) in all dealings, identify itself, and
conduct its own business and hold itself out under its own name and as a
separate and distinct entity and correct any misunderstandings regarding its
status as a separate entity; (vi) independently make decisions with respect to
its business and daily operations; (vii) maintain an arm's length relationship
with its affiliates; (viii) pay the salaries of its employees and maintain a
sufficient number of employees in light of its contemplated business operations;
(ix) allocate fairly and reasonably any overhead for shared office space; and
(x) use separate stationery, invoices and checks.
(e) Except as otherwise permitted by the Loan Documents, so long as the
Property is subject to the lien of the Mortgage, the Corporation shall not (i)
commingle its assets with those of, or pledge its assets for the benefit of, any
other person or entity; (ii) assume, guarantee or become obligated, or hold out
its credit as being available to satisfy, the liabilities or obligations of any
other person or entity; (iii) reduce its capital below an amount which is
adequate in light of its contemplated business operations; (iv) acquire
obligations or securities of, or make loans or advances to, any affiliate; (v)
incur or assume any indebtedness other than (A) the indebtedness underlying the
Loan Agreement, (B) the indebtedness underlying the Indenture, and (C)
liabilities (including, but not limited to, trade payables) arising in the
ordinary course of the Corporation's business relating to the acquisition,
ownership, operation, lease, use or management of the Property; (vi) amend,
alter, change or repeal any provision of Article III and the last sentence of
Article VII of these Amended Articles; (vii) engage in any dissolution or
liquidation, in whole or in part, consolidation or merger with or into any other
entity or conveyance, sale or transfer of its properties and assets
substantially as an entirety to any entity; or (viii) engage in any business or
activity other than as set forth in these Amended Articles. Notwithstanding
anything contained herein to the contrary, nothing herein shall be deemed to
prohibit or otherwise limit any dividends or other distributions from the
Corporation to its shareholders.
ARTICLE IV
The total number of shares of stock which the Corporation shall have
the authority to issue is One Thousand (1,00) shares of common stock, One Dollar
($1.00) par value per share.
ARTICLE V
The Board of Directors is expressly authorized to adopt, alter, amend
or repeal the Bylaws of the Corporation subject to the limitations set forth in
these Amended Articles. Election of directors need not be by written ballot
unless and to the extent provided in the Bylaws of the Corporation.
-3-
<PAGE>
ARTICLE VI
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 308A.325 of the Minnesota Statutes, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the Minnesota Statutes is amended after the date of these Amended
Articles to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of each director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Minnesota Statutes, as so amended.
The right and authority conferred in this Article VI shall not be
exclusive of any other rights that any person may have or hereafter acquire
under any statute, provision of these Amended Articles or the Bylaws of the
Corporation, agreement, vote of the stockholders or disinterested directors or
otherwise.
ARTICLE VII
The Corporation shall indemnify any officer or director, or any former
officer or director of the Corporation, to the fullest extent permitted by law.
The foregoing right of indemnification shall not be exclusive of any other
rights to which any director, officer, employee or agent may be entitled as a
matter of law or which he may be lawfully granted. The Corporation's obligation
to indemnify its officers and directors pursuant to this Article shall be
subordinate in all respects to the obligations of the Corporation arising out of
the Loan Documents and shall not constitute a claim against the Corporation to
the extent that the Corporation is unable to pay any amounts it is obligated to
pay under the Loan Documents.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned President of Servico Roseville Inc.
certifies that she is authorized to execute these Amended Articles and further
certifies that she understands that by signing these Amended Articles, she is
subject to the penalties of perjury as set forth in Minnesota Statutes Section
609.48 as if she had signed these Amended Articles under oath.
Dated this ___ day of July, 1999.
MINNEAPOLIS MOTEL ENTERPRISES, INC.
By: /s/ Thomas S. Gryboski
-----------------------------
Name: Thomas S. Gryboski
Title: Assistant Secretary
<PAGE>
Exhibit 3.33.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
SERVICO ROSEVILLE, INC.
Pursuant to Section 302A.139 of the Minnesota Business Corporation Act
(the "Act"), SERVICO ROSEVILLE, INC., an Iowa corporation (the "Corporation"),
hereby certifies that these Amended and Restated Articles of Incorporation (the
"Amended Articles"), which contain amendments requiring shareholder approval,
were duly adopted by the Board of Directors of the Corporation and by the sole
shareholder of the Corporation by written consent without a meeting, pursuant to
Sections 302A.441 and 302A.239 of the Act, as of July ___, 1999. The number of
votes cast was sufficient for approval. The Amended Articles were adopted
pursuant to Minnesota Statutes Chapter 302A. The Articles shall be amended and
restated to read as herein set forth in full:
ARTICLE I
The name of the Corporation is SERVICO ROSEVILLE, INC.
ARTICLE II
The registered office of the Corporation is located at 405 Second
Avenue, South Minneapolis, Minnesota, 55401. The name of its registered agent at
that address is CT Corporation System.
ARTICLE III
(a) The purpose for which the Corporation is organized is limited to: (i)
acquiring, owning, leasing, operating, using and managing that certain real
property commonly known as the Comfort Inn Roseville, located at 2715 Long Lake
Road, Roseville, Minnesota 55113 (the "Property"); (ii) entering into and
performing its obligations under the credit agreement, among Lodgian Financing
Corp., as borrower, Lodgian, Inc., its parent, Impac Hotel Group, LLC, Servico,
Inc. and other affiliated entities, as affiliate guarantors, the initial lenders
and initial issuing bank named therein, the collateral agent, the administrative
agent, Morgan Stanley Senior Funding, Inc., as co-lead arranger, joint-book
manager and syndication agent and Lehman Brothers, as co-lead arranger,
joint-book manager and documentation agent relating to the financing or
refinancing of the Property (the "Loan Agreement") which provides the lender
thereunder with a first priority lien on the Property, any promissory-note
evidencing indebtedness incurred pursuant to the Loan Agreement, any mortgage
securing such indebtedness and encumbering the Property (the "Mortgage") and any
other documents securing such indebtedness and any related collateral documents,
each as amended (or pursuant to a consent obtained in accordance with the terms
thereof) (collectively, the "Loan Documents"); (iii) entering into and
performing its obligations under the Indenture (the "Indenture"), among Lodgian
Financing Corp, as issuer, Lodgian, Inc., the Subsidiary Guarantors defined
therein and Bankers Trust Company, as trustee, relating to the issuance of the
12 1/4% Senior Subordinated Notes due 2009 and the Guarantee in favor of the
holders of the Notes and (iv) transacting any
<PAGE>
and all lawful business that is incident and necessary or appropriate to the
ownership and to the management of the Property for which a corporation may be
incorporated under the laws of the State of Minnesota.
(b) Notwithstanding any other provision of these Amended Articles and
any provision of law that otherwise so empowers the Corporation, until such time
as the Property is released from the lien of the Mortgage, the Corporation shall
not, without the unanimous affirmative vote of the members of its Board of
Directors, (i) amend, alter, change, repeal or adopt any resolution setting
forth a proposed amendment to, any provision of these Articles of Incorporation,
(ii) dissolve or liquidate, in whole or in part, consolidate or merge with or
into any other entity or convey, sell or transfer its properties and assets
substantially as an entirety to any entity, (iii) file a voluntary petition or
otherwise initiate, or consent to, proceedings for the Corporation to be
adjudicated insolvent or seeking an order for relief as a debtor under the
United States Bankruptcy Code, as amended (11 U.S.C. Section 101 ET SEQ.), or
(iv) file any petition, or consent to any petition, seeking any composition,
reorganization, readjustment, liquidation, dissolution or similar relief under
the present or any future federal bankruptcy laws or any other present or future
applicable federal, state or other statute or law relative to bankruptcy,
insolvency or other relief for debtors; or (v) seek or consent to the
appointment of any trustee, receiver, conservator, assignee, sequestrator,
custodian, or liquidator (or other similar official) of the Corporation or of
all or any substantial part of the properties and assets of the Corporation, or
(vi) make any general assignment for the benefit of creditors, or (vii) admit in
writing its inability to pay its debts generally as they become due, or (viii)
declare or effect a moratorium on its debt or take any corporate action in
furtherance of any such action.
(c) The Board of Directors of the Corporation shall, at all times until
the Property is released from the lien of the Mortgage, include an independent
director (the "Independent Director"). The Independent Director shall be a
person who is not at the time of appointment and who has not at any time during
the prior five years been and who is not while serving as the Independent
Director (i) a director, stockholder, officer or employee of the Corporation or
any affiliates thereof, other than with respect to such person's service as an
Independent Director of the Corporation and such person's service in similar
"Independent Director" positions for affiliates of the Corporation; (ii) a
creditor, customer, supplier, independent contractor, manager or any other
person who derives more than 10% of its gross revenues from its activities wit
the Corporation or any affiliates thereof; (iii) a person controlling any such
stockholder, creditor, customer, supplier, independent contractor, manager or
other person; (iv) the legal or beneficial owner, at any time while serving as
director of the Corporation, of any beneficial interest in the Corporation; or
(v) a member of the immediate family of any such stockholder, officer, employee,
creditor, customer, supplier, director, independent contractor, manager or any
other person of the Corporation. As used herein, the term "affiliate" means any
person controlling, under common control with, or controlled by the person in
question, and the term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person, whether through ownership of voting securities, by contract or
otherwise. In the event of the death, incapacity, or resignation of an
Independent Director, or the vacancy of the Independent Director's seat on the
Corporation's Board of Directors for any reason, a successor Independent
Director shall be appointed by the remaining directors.
-2-
<PAGE>
(d) Except as otherwise permitted by the Loan Documents, so long as the
Property is subject to the lien of the Mortgage, the Corporation shall (i)
observe all corporate formalities, including the maintenance of current minute
books; (ii) maintain its own separate and distinct books of account and
corporate records from any other person or entity; (iii) cause its financial
statements to be prepared in accordance with generally accepted accounting
principles in a manner that indicates the separate existence of the Corporation
and its assets and liabilities from any other person or entity; (iv) pay all its
liabilities out of its own funds; (v) in all dealings, identify itself, and
conduct its own business and hold itself out under its own name and as a
separate and distinct entity and correct any misunderstandings regarding its
status as a separate entity; (vi) independently make decisions with respect to
its business and daily operations; (vii) maintain an arm's length relationship
with its affiliates; (viii) pay the salaries of its employees and maintain a
sufficient number of employees in light of its contemplated business operations;
(ix) allocate fairly and reasonably any overhead for shared office space; and
(x) use separate stationery, invoices and checks.
(e) Except as otherwise permitted by the Loan Documents, so long as the
Property is subject to the lien of the Mortgage, the Corporation shall not (i)
commingle its assets with those of, or pledge its assets for the benefit of, any
other person or entity; (ii) assume, guarantee or become obligated, or hold out
its credit as being available to satisfy, the liabilities or obligations of any
other person or entity; (iii) reduce its capital below an amount which is
adequate in light of its contemplated business operations; (iv) acquire
obligations or securities of, or make loans or advances to, any affiliate; (v)
incur or assume any indebtedness other than (A) the indebtedness underlying the
Loan Agreement, (B) the indebtedness underlying the Indenture, and (C)
liabilities (including, but not limited to, trade payables) arising in the
ordinary course of the Corporation's business relating to the acquisition,
ownership, operation, lease, use or management of the Property; (vi) amend,
alter, change or repeal any provision of Article III and the last sentence of
Article VII of these Amended Articles; (vii) engage in any dissolution or
liquidation, in whole or in part, consolidation or merger with or into any other
entity or conveyance, sale or transfer of its properties and assets
substantially as an entirety to any entity; or (viii) engage in any business or
activity other than as set forth in these Amended Articles. Notwithstanding
anything contained herein to the contrary, nothing herein shall be deemed to
prohibit or otherwise limit any dividends or other distributions from the
Corporation to its shareholders.
ARTICLE IV
The total number of shares of stock which the Corporation shall have
the authority to issue is One Thousand (1,00) shares of common stock, One Dollar
($1.00) par value per share.
ARTICLE V
The Board of Directors is expressly authorized to adopt, alter, amend
or repeal the Bylaws of the Corporation subject to the limitations set forth in
these Amended Articles. Election of directors need not be by written ballot
unless and to the extent provided in the Bylaws of the Corporation.
-3-
<PAGE>
ARTICLE VI
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 308A.325 of the Minnesota Statutes, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the Minnesota Statutes is amended after the date of these Amended
Articles to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of each director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Minnesota Statutes, as so amended.
The right and authority conferred in this Article VI shall not be
exclusive of any other rights that any person may have or hereafter acquire
under any statute, provision of these Amended Articles or the Bylaws of the
Corporation, agreement, vote of the stockholders or disinterested directors or
otherwise.
ARTICLE VII
The Corporation shall indemnify any officer or director, or any former
officer or director of the Corporation, to the fullest extent permitted by law.
The foregoing right of indemnification shall not be exclusive of any other
rights to which any director, officer, employee or agent may be entitled as a
matter of law or which he may be lawfully granted. The Corporation's obligation
to indemnify its officers and directors pursuant to this Article shall be
subordinate in all respects to the obligations of the Corporation arising out of
the Loan Documents and shall not constitute a claim against the Corporation to
the extent that the Corporation is unable to pay any amounts it is obligated to
pay under the Loan Documents.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned President of Servico
Roseville Inc. certifies that she is authorized to execute these Amended
Articles and further certifies that she understands that by signing these
Amended Articles, she is subject to the penalties of perjury as set forth in
Minnesota Statutes Section 609.48 as if she had signed these Amended Articles
under oath.
Dated this ___ day of July, 1999.
SERVICO ROSEVILLE, INC.
By: /s/ Thomas S. Gryboski
--------------------------
Name: Thomas S. Gryboski
Title: Assistant Secretary
-5-
<PAGE>
Exhibit 3.34.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LODGIAN MOUNT LAUREL, INC.
THIS IS TO CERTIFY that LODGIAN MOUNT LAUREL, INC. (the "Corporation"),
a corporation under and by virtue of N.J.S. 14A:1-1 ET SEQ., the "New Jersey
Business Corporation Act", does hereby, pursuant to N.J.S. 14:9-5: (i) amend its
Certificate of Incorporation to reflect certain conditions required by its
lenders in connection with a corporate loan transaction; and (ii) restate its
Certificate of Incorporation to embody in one document its original Certificate
and all such amendments described above.
The Corporation hereby certifies the following which (i) sets forth in
full its Certificate of Incorporation as of this date, and (ii) supersedes and
replaces its original Certificate of Incorporation and any amendments filed
prior to the date hereof:
ARTICLE I
The name of the Corporation is LODGIAN MOUNT LAUREL, INC.
ARTICLE II
(a) The purpose for which the Corporation is organized is limited to:
(i) acquiring, owning, leasing, operating, using and managing that certain real
property set forth on Exhibit "A" attached hereto and made a part hereof (the
"Property"); (ii) entering into and performing its obligations under the credit
agreement, among Lodgian Financing Corp., as borrower, Lodgian, Inc., its
parent, Impac Hotel Group, LLC, Servico, Inc. and other affiliated entities, as
affiliate guarantors, the initial lenders and initial issuing bank named
therein, the collateral agent, the administrative agent, Morgan Stanley Senior
Funding, Inc., as co-lead arranger, joint-book manager and syndication agent and
Lehman Brothers, as co-lead arranger, joint-book manager and documentation agent
relating to the financing or refinancing of the Property (the "Loan Agreement")
which provides the lender thereunder with a first priority lien on the Property,
any promissory-note evidencing indebtedness incurred pursuant to the Loan
Agreement, any mortgage securing such indebtedness and encumbering the Property
(the "Mortgage") and any other documents securing such indebtedness and any
related collateral documents, each as amended (or pursuant to a consent obtained
in accordance with the terms thereof) (collectively, the "Loan Documents");
(iii) entering into and performing its obligations under the Indenture (the
"Indenture"), among Lodgian Financing Corp, as issuer, Lodgian, Inc., the
Subsidiary Guarantors defined therein and Bankers Trust Company, as trustee,
relating to the issuance of the 12 1/4% Senior Subordinated Notes due 2009 and
the Guarantee in favor of the holders of the Notes and (iv) transacting any and
all lawful business that is incident and necessary or appropriate to the
ownership and to the management of the Property and for which a corporation may
be incorporated under the "New Jersey Business Corporation Act" N.J.S. 14A:1-1
et seq.
<PAGE>
(b) Notwithstanding any other provision of this Amended Certificate of
Incorporation and any provision of law that otherwise so empowers the
Corporation, until such time as the Property is released from the lien of the
Mortgage, the Corporation shall not, without the unanimous affirmative vote of
the members of its Board of Directors, (i) amend, alter, change, repeal or adopt
any resolution setting forth a proposed amendment to, any provision of this
Certificate of Incorporation, (ii) dissolve or liquidate, in whole or in part,
consolidate or merge with or into any other entity or convey, sell or transfer
its properties and assets substantially as an entirety to any entity, (iii) file
a voluntary petition or otherwise initiate, or consent to, proceedings for the
Corporation to be adjudicated insolvent or seeking an order for relief as a
debtor under the United States Bankruptcy Code, as amended (11 U.S.C. ss.ss. 101
ET seq.), or (iv) fILE any petition, or consent to any petition, seeking any
composition, reorganization, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy laws or any other
present or future applicable federal, state or other statute or law relative to
bankruptcy, insolvency or other relief for debtors; or (v) seek or consent to
the appointment of any trustee, receiver, conservator, assignee, sequestrator,
custodian, or liquidator (or other similar official) of the Corporation or of
all or any substantial part of the properties and assets of the Corporation, or
(vi) make any general assignment for the benefit of creditors, or (vii) admit in
writing its inability to pay its debts generally as they become due, or (viii)
declare or effect a moratorium on its debt or take any corporate action in
furtherance of any such action.
(c) The Board of Directors of the Corporation shall, at all times until
the Property is released from the lien of the Mortgage, include an independent
director (the "Independent Director"). The Independent Director shall be a
person who is not at the time of appointment and who has not at any time during
the prior five (5) years been and who is not while serving as the Independent
Director (i) a director, stockholder, officer or employee of the Corporation or
any affiliates thereof, other than with respect to such person's service as an
Independent Director of the Corporation and such person's service in similar
"Independent Director" positions for affiliates of the Corporation; (ii) a
creditor, customer, supplier, independent contractor, manager or any other
person who derives more than ten percent (10%) of its gross revenues from its
activities with the Corporation or any affiliates thereof; (iii) a person
controlling any such stockholder, creditor, customer, supplier, independent
contractor, manager or other person; (iv) the legal or beneficial owner, at any
time while serving as director of the Corporation, of any beneficial interest in
the Corporation; or (v) a member of the immediate family of any such
stockholder, officer, employee, creditor, customer, supplier, director,
independent contractor, manager or any other person of the Corporation. As used
herein, the term "affiliate" means any person controlling, under common control
with, or controlled by the person in question, and the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contract or otherwise. In the event of the death,
incapacity, or resignation of an Independent Director, or the vacancy of the
Independent Director's seat on the Corporation's Board of Directors for any
reason, a successor Independent Director shall be appointed by the remaining
directors.
(d) Except as otherwise permitted by the Loan Documents, so long as the
Property is subject to the lien of the Mortgage, the Corporation shall (i)
observe all corporate formalities, including the maintenance of current minute
books; (ii) maintain its own separate
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<PAGE>
and distinct books of account and corporate records from any other person or
entity; (iii) cause its financial statements to be prepared in accordance with
generally accepted accounting principles in a manner that indicates the separate
existence of the Corporation and its assets and liabilities from any other
person or entity; (iv) pay all its liabilities out of its own funds; (v) in all
dealings, identify itself, and conduct its own business and hold itself out
under its own name and as a separate and distinct entity and correct any
misunderstandings regarding its status as a separate entity; (vi) independently
make decisions with respect to its business and daily operations; (vii) maintain
an arm's length relationship with its affiliates; (viii) pay the salaries of its
employees and maintain a sufficient number of employees in light of its
contemplated business operations; (ix) allocate fairly and reasonably any
overhead for shared office space; and (x) use separate stationery, invoices and
checks.
(e) Except as otherwise permitted by the Loan Documents, so long as the
Property is subject to the lien of the Mortgage, the Corporation shall not (i)
commingle its assets with those of, or pledge its assets for the benefit of, any
other person or entity; (ii) assume, guarantee or become obligated, or hold out
its credit as being available to satisfy, the liabilities or obligations of any
other person or entity; (iii) reduce its capital below an amount which is
adequate in light of its contemplated business operations; (iv) acquire
obligations or securities of, or make loans or advances to, any affiliate; (v)
incur or assume any indebtedness other than (A) the indebtedness underlying the
Loan Agreement, (B) the indebtedness underlying the Indenture, and (C)
liabilities (including, but not limited to, trade payables) arising in the
ordinary course of the Corporation's business relating to the acquisition,
ownership, operation, lease, use or management of the Property; (vi) amend,
alter, change or repeal any provision of Article II and the last sentence of
Article VI of this Amended Certificate of Incorporation; (vii) engage in any
dissolution or liquidation, in whole or in part, consolidation or merger with or
into any other entity or conveyance, sale or transfer of its properties and
assets substantially as an entirety to any entity; or (viii) engage in any
business or activity other than as set forth in these Amended Articles.
Notwithstanding anything contained herein to the contrary, nothing herein shall
be deemed to prohibit or otherwise limit any dividends or other distributions
from the Corporation to its shareholders.
ARTICLE III
The address (and zip code) of the Corporation's registered office is
Parker, McCay & Criscuolo, 401 Three Greentree Centre, Marlton, New Jersey,
08053, and the name of the Corporation's registered agent at such address is
John Michael Devlin, Esquire.
ARTICLE IV
The aggregate number of shares which the Corporation shall have the
authority to issue is One Thousand (1,000) shares, all of one class, of the par
value of Zero Dollars and One Cent ($0.01) each and of the aggregate par value
of Ten Dollars ($10.00).
-3-
<PAGE>
ARTICLE V
The Board of Directors of the Corporation shall consist of three (3)
directors. The name and address of each person who is to serve as Director is:
Name Address Zip Code
---- ------- --------
Robert M. Flanders c/o Lodgian, Inc. 30326
Two Live Oak Center
Suite 700
3445 Peachtree Road, N.E.
Atlanta, Georgia
Mark K. Rafuse c/o Lodgian, Inc. 30326
Two Live Oak Center
Suite 700
3445 Peachtree Road, N.E.
Atlanta, Georgia
Carl E.B. McKenry c/o University of Miami 33124-9145
School of Business
414 Jenkins Bldg.
Coral Gables, Florida
The said Carl E.B. McKenry is identified as the independent Director.
The number of Directors of the Corporation may be changed in accordance with the
By-Laws of the Corporation, but shall be composed of at least one (1) member.
ARTICLE VI
The Corporation shall indemnify any officer or director, or any former
officer or director of the Corporation, to the fullest extent permitted by law.
The foregoing right of indemnification shall not be exclusive of any other
rights to which any director, officer, employee or agent may be entitled as a
matter of law or which he may be lawfully granted. The Corporation's obligation
to indemnify its officers and directors pursuant to this Article shall be
subordinate in all respects to the obligations of the Corporation arising out of
the Loan Documents and shall not constitute a claim against the Corporation to
the extent that the Corporation is unable to pay any amounts it is obligated to
pay under the Loan Documents.
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<PAGE>
IN WITNESS WHEREOF, the undersigned President of Lodgian Mount Laurel,
Inc. has signed this Amended and Restated Certificate of Incorporation as of the
23rd day of July, 1999.
LODGIAN MOUNT LAUREL, INC.
By: /s/ ROBERT M. FLANDERS
-----------------------------------
Name: Robert M. Flanders
Title: President
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<PAGE>
CERTIFICATE ATTACHED TO AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF LODGIAN MOUNT LAUREL, INC.
1. The name of the Corporation is Lodgian Mount Laurel, Inc. (the
"Corporation").
2. The Amended and Restated Certificate of Incorporation was adopted by
its sole shareholder, Servico, Inc., on July 23, 1999.
3. The number of shares entitled to vote on the Amended and Restated
Certificate of Incorporation was 1000 shares of common stock.
The number of shares voted for and against the Restated Certificate was
1000 for and 0 against.
4. The Amendment to the Certificate of Incorporation provides for
certain amendments required by certain of the Corporation's lenders in
connection with a certain loan transaction between the Corporation and said
lenders.
5. The Amendment to the Certificate of Incorporation is to become
effective upon filing.
IN WITNESS WHEREOF, I have hereunto set my hand as of this 23rd day of
July, 1999.
LODGIAN MOUNT LAUREL, INC.
By:_________________________________
Robert M. Flanders, President
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<PAGE>
Exhibit 3.46.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PALM BEACH MOTEL ENTERPRISES, INC. (AS AMENDED)
Pursuant to Sections 607.1006 and 607.1007 of the Florida General
Corporation Act (the "Act"), PALM BEACH MOTEL ENTERPRISES, INC. a Florida
corporation (the "Corporation"), hereby executes and submits for filing with the
Department of State, State of Florida, these Second Amended and Restated
Articles of Incorporation (the "Amended Articles"), to read as follows:
ARTICLE I
The name of the Corporation is PALM BEACH MOTEL ENTERPRISES,
INC.
ARTICLE II
(a) The purpose for which the Corporation is organized is limited to
acting as a general partner of Servico Centre Associates, Ltd., a Florida
limited partnership (the "Partnership"), which shall include: (i) owning and
holding partnership interests in the Partnership pursuant to the terms and
conditions of the Second Amended and Restated Agreement of Limited Partnership
of the Partnership, as may be amended from time to time (the "Partnership
Agreement"); (ii) operating, using and managing, as general partner of the
Partnership, that certain real property owned by the Partnership commonly known
as Omni Hotel West Palm Beach, 1601 Belvedere Road, West Palm Beach, Florida
33406 (the "Property"); (iii) entering into and performing its obligations on
its own behalf and on behalf of the Partnership under the credit agreement,
among Lodgian Financing Corp., as borrower, Lodgian, Inc., its parent, Impac
Hotel Group, LLC, Servico, Inc. and other affiliated entities, as affiliate
guarantors, the initial lenders and initial issuing bank named therein, the
collateral agent, the administrative agent, Morgan Stanley Senior Funding,
Inc., as co-lead arranger, joint-book manager and syndication agent and
Lehman Brothers, as co-lead arranger, joint-book manager and documentation
agent relating to the financing or refinancing of the Property (the "Loan
Agreement") which provides the lender thereunder with a first priority lien
on the Property, any promissory-note evidencing indebtedness incurred
pursuant to the Loan Agreement, any mortgage securing such indebtedness and
encumbering the Property (the "Mortgage") and any other documents securing
such indebtedness and any related collateral documents, each as amended (or
pursuant to a consent obtained in accordance with the terms thereof)
(collectively, the "Loan Documents"); (iv) entering into and performing its
obligations on its own behalf and on behalf of the Partnership under the
Indenture (the "Indenture"), among Lodgian Financing Corp, as issuer,
Lodgian, Inc., the Subsidiary Guarantors defined therein and Bankers Trust
Company, as trustee, relating to the issuance of the 12 1/4% Senior
Subordinated Notes due 2009 and the Guarantee in favor of the holders of the
Notes; and (v) transacting any and all lawful business that is incident and
necessary or appropriate to the ownership of a partnership interest in the
Partnership and to the management
<PAGE>
of the Property for which a corporation may be incorporated under the laws of
the State of Florida.
(b) Notwithstanding any other provision of these Amended Articles
and any provision of law that otherwise so empowers the Corporation, until
such time as the Property is released from the lien of the Mortgage, the
Corporation shall not, without the unanimous affirmative vote of the members
of its Board of Directors, (i) withdraw as general partner from the
Partnership; or (ii) file, or cause the Partnership to file a voluntary
petition or otherwise initiate, or consent to, or cause the Partnership to
initiate or consent to, proceedings for the Corporation or the Partnership to
be adjudicated insolvent or seeking an order for relief as a debtor under the
United States Bankruptcy Code, as amended (11 U.S.C. Sections 101 ET seq.);
or (iii) file, or cause the Partnership to file, any petition, or consent or
to cause the Partnership to consent to any petition seeking any composition,
reorganization, readjustment, liquidation, dissolution or similar relief
under the present or any future federal bankruptcy laws or any other present
or future applicable federal, state or other statute or law relative to
bankruptcy, insolvency or other relief for debtors; or (iv) seek or consent
to the appointment of any trustee, receiver, conservator, assignee,
sequestrator, custodian, or liquidator (or other similar official) of the
Corporation or the Partnership or of all or any substantial part of the
properties and assets of the Corporation or the Partnership; or (v) make, or
cause the Partnership to make, any general assignment for the benefit of
creditors; or (vi) admit in writing or cause the Partnership to admit in
writing, its inability to pay its debts generally as they become due; or
(viii) declare or effect, or cause the Partnership to declare or effect, a
moratorium on its debt or take any corporate action, or cause the Partnership
to take any partnership action, in furtherance of any such action.
(c) The Board of Directors of the Corporation shall, at all times until
the Property is released from the lien of the Mortgage, include an independent
director (the "Independent Director"). The Independent Director shall be a
person who is not at the time of appointment and who has not at any time during
the prior five years been and who is not while serving as the Independent
Director (i) a director, stockholder, officer or employee of the Corporation,
the Partnership or any affiliates thereof, other than with respect to such
person's service as an Independent Director of the Corporation and such person's
service in similar "Independent Director" positions for affiliates of the
Corporation; (ii) a creditor, customer, supplier, independent contractor,
manager or any other person who derives more than 10% of its gross revenues from
its activities with the Corporation, the Partnership or any affiliates thereof;
(iii) a person controlling any such stockholder, creditor, customer, supplier,
independent contractor, manager or other person; (iv) the legal or beneficial
owner, at any time while serving as director of the Corporation, of any
beneficial interest in the Corporation or the Partnership; or (v) a member of
the immediate family of any such stockholder, officer, employee, creditor,
customer, supplier, director, independent contractor, manager or any other
person of the Corporation or the Partnership. As used herein, the term
"affiliate" means any person controlling, under common control wit, or
controlled by the person in question, and the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contact or otherwise. In the event of the death,
incapacity, or resignation of an Independent Director, or the vacancy of the
Independent Director's seat on the Corporation's Board of Directors for any
reason, a successor Independent Director shall be appointed by the remaining
directors.
-2-
<PAGE>
(d) Except as otherwise permitted by the Loan Documents, so long as the
Property is subject to the lien of the Mortgage, the Corporation shall, and
shall cause the Partnership to, (i) observe all corporate formalities, including
the maintenance of current minute books; (ii) maintain its own separate and
distinct books of account and corporate records from any other person or entity;
(iii) cause its financial statements to be prepared in accordance with generally
accepted accounting principles in a manner that indicates the separate existence
of the Corporation or Partnership, as applicable, and its assets and liabilities
from any other person or entity; (iv) pay all its liabilities out of its own
funds; (v) in all dealings, identify itself, and conduct its own business and
hold itself out under its own name and as a separate and distinct entity and
correct any misunderstandings regarding its status as a separate entity; (vi)
independently make decisions with respect to its business and daily operations;
(vii) maintain an arm's length relationship with its affiliates; (viii) pay the
salaries of its employees and maintain a sufficient number of employees in light
of its contemplated business operations; (ix) allocate fairly and reasonably any
overhead for shared office space; and (x) use separate stationery, invoices and
checks.
(e) Except as otherwise permitted by the Loan Documents, so long as the
Property is subject to the lien of the Mortgage, the Corporation shall not, and
shall not permit the Partnership to, (i) commingle its assets with those of, or
pledge its assets for the benefit of, any other person or entity; (ii) assume,
guarantee or become obligated, or hold out its credit as being available to
satisfy, the liabilities or obligations of any other person or entity; (iii)
reduce its capital below an amount which is adequate in light of its
contemplated business operations; (iv) acquire obligations or securities of, or
make loans or advances to, any affiliate; (v) incur or assume any indebtedness
other than (A) the indebtedness underlying the Loan Agreement (B) the
indebtedness underlying the Indenture, and (C) liabilities (including, but not
limited to, trade payables) arising in the ordinary course of the Corporation's
business relating to the acquisition, ownership, operation, lease, use or
management of the Property; (vi) amend, alter, change or repeal any provision of
Article II and the last sentence of Article VII of these Amended Articles; (vii)
engage in any dissolution or liquidation, in whole or in part, consolidation or
merger with or into any other entity or conveyance, sale or transfer of its
properties and assets substantially as an entirety to any entity, or cause the
Partnership to dissolve, wind up or liquidate, in whole or in part, or cause the
Partnership to consolidate or merge with or into any other entity, or cause the
Partnership to convey, sell or transfer of its properties and assets
substantially as an entirety to any entity; or (viii) engage in any business or
activity other than as set forth in these Amended Articles, or cause the
Partnership to engage in any business or activity other than as set forth in
these Partnership Agreement. Notwithstanding anything contained herein to the
contrary, nothing herein shall be deemed to prohibit or otherwise limit any
dividends or other distributions from the Corporation to its shareholders or
distributions from the Partnership to its partners, as applicable.
ARTICLE III
The total number of shares of stock which may be issued by the
Corporation is Sixty (60) shares of Common Stock, each of which to be without
par value.
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<PAGE>
ARTICLE IV
The Corporation is to have perpetual existence.
ARTICLE V
The post office address of the registered office of the Corporation
shall be c/o CT Corporation System, 1200 South Pine Island Road, Suite 250, City
of Plantation, Florida 33324, and the name of the registered agent of the
Corporation at that address is CT Corporation System.
ARTICLE VI
The number of directors of the Corporation shall be at least One (1),
which may be changed in accordance with the Bylaws of the Corporation.
ARTICLE VII
The Corporation shall indemnify any officer or director, or any former
officer or director of the Corporation, to the fullest extent permitted by law.
The foregoing right of indemnification shall not be exclusive of any other
rights to which any director, officer, employee or agent may be entitled as a
matter of law or which he may be lawfully granted. The Corporation's obligation
to indemnify its officers and directors pursuant to this Article shall be
subordinate in all respects to the obligations of the Corporation arising out of
the Loan Documents and shall not constitute a claim against the Corporation to
the extent that the Corporation is unable to pay any amounts it is obligated to
pay under the Loan Documents.
The foregoing Second Amended and Restated Articles of Incorporation
were duly adopted and approved by the sole shareholder and the Board of
Directors of the Corporation by unanimous written consent in lieu of a meeting,
pursuant to Sections 607.0704 and 607.0821 of the Florida General Corporation
Act, as of July 23, 1999. The number of votes cast was sufficient for approval.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Second Amended
and Restated Articles of Incorporation this 23rd day of July, 1999.
PALM BEACH MOTEL ENTERPRISES, INC.
By:/s/ THOMAS S. GRYBOSKI
------------------------------------
Name: Thomas S. Gryboski
Title: Assistant Secretary
<PAGE>
Exhibit 3.46.2
BY-LAWS OF
PALM BEACH MOTEL ENTERPRISES, INC.
ARTICLE I - OFFICES
The principal office of the corporation shall be established and
maintained at such places within or without the State of Florida as the board
may from time to time establish.
ARTICLE II SHAREHOLDERS
1. PLACE OF MEETINGS
Meetings of shareholders shall be held at the principal office of the
corporation or at such place within or without the State of Florida as the board
shall authorize.
2. ANNUAL MEETING
The annual meeting of shareholders shall be held during the month of June
or July in each year on such date as the board shall authorize. The shareholders
shall elect a board of directors and transact such other business as may
properly come before the meeting.
3. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the board or by the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting. A meeting requested by shareholders shall be called for a date not less
than ten nor more than sixty days after the request is made. The secretary shall
issue the call for the meeting unless the president, the board or the
shareholders shall designate another to make said call.
FL A
<PAGE>
4. NOTICE OF MEETINGS
Written notice of each meeting of shareholders shall state the place, day
and hour of the meeting and in the case of a special meeting the purpose or
purposes for which the meeting is called. Notice shall be delivered personally
or by first class mail to each shareholder of record having the right and
entitled to vote at such meeting at his last address as it appears on the
records of the corporation, not less than ten nor more than sixty days before
the date set for such meeting. Such notice shall be sufficient for the meeting
and any adjournment thereof. If any shareholder shall transfer his stock after
notice, it shall not be necessary to notify the transferee. Any shareholder may
waive notice of any meeting either before, during or after the meeting.
5. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other purpose, the board may provide that the stock
transfer books shall be closed for a stated period but not to exceed, in any
case, sixty (60) days. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders such books shall be closed for at least ten (10) days
immediately preceding such meeting.
In lieu of closing the stock transfer books, the board may fix in advance
a date as the record date for any such determination of shareholders, such date
in any case to be not more than sixty (60) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for
the determination of shareholders entitled to notice or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
6. VOTING
Every shareholder shall be entitled at each meeting and upon each proposal
presented at each meeting to one vote for each share recorded in the
shareholder's name on the books of the corporation on the record date. The books
of records of shareholders shall be produced at the meeting upon the request of
any shareholder. Upon the demand of any shareholder, the vote for directors and
the vote upon any question before the meeting, shall be by ballot. The
affirmative vote of a majority of the shares represented at the meeting shall be
the act of the shareholders.
FL B
<PAGE>
7. QUORUM
The presence, in person or by proxy, of shareholders holding a majority of
the shares of the corporation entitled to vote shall constitute a quorum at all
meetings of the shareholders. In no event shall a quorum consist of less than
one-third of the shares entitled to vote at the meeting. In case a quorum shall
not be present at any meeting, a majority of the shareholders entitled to vote
thereat, present in person or by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
the requisite amount of shares entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of shares entitled to vote shall
be represented, any business may be transacted which might have been transacted
at the meeting as originally noticed; but only those entitled to vote at the
meeting as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof.
8. PROXIES
At any shareholders meeting or any adjournment thereof, any shareholder of
record having the right and entitled to vote thereat may be represented and vote
by proxy appointed in a written instrument. No such proxy shall be voted after
eleven months from the date thereof unless otherwise provided in the proxy. In
the event a proxy provides for two or more persons to act as proxies, a majority
of such persons present at the meeting, or if only one be present, that one,
shall have all the powers conferred by the instrument upon all the persons so
designated unless the proxy shall provide otherwise.
ARTICLE III - DIRECTORS
1. BOARD OF DIRECTORS
The business of the corporation shall be managed and its corporate powers
exercised by a board of three (3) directors. It shall not be necessary for
directors to be residents of the State of Florida or shareholders.
2. ELECTION AND TERM OF DIRECTORS
Directors shall be elected at the annual meeting of shareholders and each
director elected shall hold office until the director's successor has been
elected and qualified, or until prior resignation or removal.
3. VACANCIES
Any vacancy occurring in the board including any vacancy created by reason
of an increase in the number of directors, may be filled by the affirmative vote
of a majority of the remaining
FL C
<PAGE>
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
shareholders.
4. REMOVAL OF DIRECTORS
Any or all of the directors may be removed with or without cause by vote
of a majority of all the shares outstanding and entitled to vote at a special
meeting of shareholders called for that purpose.
5. RESIGNATION
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary
to make it effective.
6. QUORUM OF DIRECTORS
A majority of the directors shall constitute a quorum for the transaction
of business. If at any meeting of the board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum is obtained, and no further notice thereof need be given other
than by announcement at the meeting which shall be so adjourned.
7. PLACE AND TIME OF BOARD MEETINGS
The board may hold its meetings at the office of the corporation or at
such other places, either within or without the State of Florida as it may from
time to time determine. Participation in a meeting by communication methods
whereby all persons can hear each other at the same time shall constitute
presence in person at a meeting.
8. REGULAR ANNUAL MEETING
A regular annual meeting of the board shall be held immediately following
the annual meeting of shareholders at the place of such annual meeting of
shareholders.
9. NOTICE OF MEETINGS OF THE BOARD
Regular meetings of the board may be held without notice at such time and
place as it shall from time to time determine. Special meetings of the board
shall be held upon notice to the directors and may be called by the president
upon three days notice to each director either personally or by mail or by wire;
special meetings shall be called by the president or by the secretary in a like
manner on written request of two directors. Notice of a
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meeting need not be given to any director who submits a waiver of notice whether
before or after the meeting or who attends the meeting without protesting prior
thereto or at its commencement, the lack of notice to him.
10. EXECUTIVE AND OTHER COMMITTEES
The board, by resolution, may designate from among its members two or more
of their number to one or more committees, which, to the extent provided in said
resolution or these By-Laws may exercise the powers of the board in the
management of the business of the corporation.
11. COMPENSATION
The board shall have the authority to fix the compensation of directors.
ARTICLE IV - OFFICERS
1. OFFICERS, ELECTION AND TERM
a) The board may elect or appoint a president, a vice-president, a
secretary and a treasurer, and such other officers as it may determine, who
shall have such duties and powers as hereinafter provided.
b) In the event of the death, resignation or removal of an officer, the
board in its discretion may elect or appoint a successor to fill the unexpired
term.
c) Any two or more offices may be held by the same person.
d) The salaries of all officers shall be fixed by the board.
e) The directors may require any officer to give security for the faithful
performance of his duties.
3. PRESIDENT
The president shall be the chief executive officer of the corporation and
shall have the general powers and duties of supervision and management usually
vested in the office of president of a corporation. He shall preside at all
meetings of the shareholders if present thereat and shall have general
supervision, direction and control of the business of the corporation. Except as
the board shall authorize the execution thereof in some other manner, he shall
execute bonds, mortgages and other contracts in behalf of the corporation, and
shall cause the seal to be affixed to any instrument requiring it and when so
affixed, the seal shall be
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attested by the signature of the secretary or the treasurer or an assistant
secretary or an assistant treasurer.
4. VICE-PRESIDENT
During the absence or disability of the president, the vice-president, if
one be elected, or if there are more than one, the executive vice-president,
shall have all the powers and functions of the president. Each vice-president
shall perform such other duties as the board shall prescribe.
5. SECRETARY
The secretary shall attend all meetings of the board and of the
shareholders, record all votes and minutes of all proceedings in a book to be
kept for that purpose, give or cause to be given notice of all meetings of
shareholders and of special meetings of the board, keep in safe custody the seal
of the corporation and affix it to any instrument when authorized by the board,
when required prepare or cause to be prepared and available at each meeting of
shareholders a certified list in alphabetical order of the names of shareholders
entitled to vote thereat, indicating the number of shares of each respective
class held by each, keep all the documents and records of the corporation as
required by law or otherwise in a proper and safe manner, and perform such other
duties as may be prescribed by the board, or assigned to him by the president.
6. ASSISTANT-SECRETARIES
During the absence or disability of the secretary, the
assistant-secretary, or if there are more than one, the one so designated by the
secretary or by the board, shall have the powers and functions of the secretary.
7. TREASURER
The treasurer shall have the custody of the corporate funds and
securities, keep full and accurate accounts of receipts and disbursements in the
corporate books, deposit all money and other valuables in the name and to the
credit of the corporation in such depositories as may be designated by the
board, disburse the funds of the corporation as may be ordered or authorized by
the board and preserve proper vouchers for such disbursements, render to the
president and board at the regular meetings of the board, or whenever they
require it, an account of all transactions as treasurer and of the financial
condition of the corporation, render a full financial report at the annual
meeting of the shareholders if so requested, be furnished by all corporate
officers and agents on request with such reports and statements as required as
to all financial transactions of the corporation, and perform such other duties
as are given by these By-Laws or as from time to time are assigned by the board
or the president.
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B. ASSISTANT-TREASURER
During the absence or disability of the treasurer, the
assistant-treasurer, or if there are more than one, the one so designated by
the secretary or by the board, shall have all the powers and functions of the
treasurer.
9. SURETIES AND BONDS
In case the board shall so require, any officer or agent of the
corporation shall execute to the corporation a bond in such sum and with such
surety or sureties as the board may direct, conditioned upon the faithful
performance of their duties to the corporation and including responsibility for
negligence and for the accounting for all property, funds or securities of the
corporation which may come into their hands.
ARTICLE V - CERTIFICATES FOR SHARES
1. CERTIFICATES
The shares of the corporation shall be represented by certificates. They
shall be numbered and entered in the books of the corporation as they are
issued. They shall exhibit the holder's name and the number of shares and shall
be signed by the president or a vice-president and the secretary or an
assistant secretary and shall bear the corporate seal. When such certificates
are signed by a transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the corporation and a registrar, the signatures of
such officers may be facsimiles.
2. LOST OR DESTROYED CERTIFICATES
The board may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the corporation,
alleged to have been lost or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or the owner's
legal representative, to advertise the same in such manner as it shall require
and/or give the corporation a bond in such sum and with such surety or sureties
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
3. TRANSFERS OF SHARES
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or
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accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, and cancel the old certificate; every such transfer
shall be entered on the transfer book of the corporation which shall be kept at
its principal office. Whenever a transfer shall be made for collateral security,
and not absolutely, it shall be so expressed on the entry of the transfer. No
transfer shall be made within ten days next preceding the annual meeting of
shareholders.
ARTICLE VI - DIVIDENDS
The board may out of funds legally available therefor at any regular or
special meeting, declare dividends upon the shares of the corporation in cash,
property or its own shares as and when it deems expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the board from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
board shall deem conducive to the interests of the corporation.
ARTICLE VII - CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name of
the corporation, the year of its organization and the words "CORPORATE SEAL,
FLORIDA." The seal may be used by causing it to be impressed directly on the
instrument or writing to be sealed, or upon adhesive substance affixed thereto.
The seal on the certificates for shares or on any corporate obligation for the
payment of money may be facsimile, engraved or printed.
ARTICLE VIII - EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or countersigned,
executed, verified or acknowledged by such officer or officers or other person
or persons as the board may from time to time designate.
All checks, drafts or other orders for the payment of money, notes or
other evidences, of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, agent or agents of the corporation, and in
such manner as shall be determined from time to time by resolution of the board.
ARTICLE IX - FISCAL YEAR
The fiscal year shall begin the first day of January in each year.
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ARTICLE X - NOTICE AND WAIVER OF NOTICE
Whenever any notice is required by these By-Laws to be given, personal
notice is not meant unless expressly so stated, and any notice so required shall
be deemed to be sufficient if given by depositing the same in a post office box
in a sealed post-paid wrapper, addressed to the person entitled thereto at his
last known post office address, and such notice shall be deemed to have been
given on the day of such mailing. Shareholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
Statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Articles of Incorporation of the
corporation or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE XI - CONSTRUCTION
Whenever a conflict arises between the language of these ByLaws and the
Articles of Incorporation, the Articles of Incorporation shall govern.
ARTICLE XII - INFORMAL MANAGEMENT
1. CONDUCT OF BUSINESS WITHOUT MEETINGS - UNANIMOUS CONSENT
Any action of the shareholders, directors or committee may be taken
without a meeting if consent in writing, setting forth the action so taken,
shall be signed by all persons who would be entitled to vote on such action at a
meeting and filed with the secretary of the corporation as part of the
proceedings of the shareholders, directors or committees as the case may be.
Such consent shall have the same effect as a unanimous vote. Any action of the
shareholders may be taken without a meeting, with less than unanimous consent,
as provided by law.
2. MANAGEMENT BY SHAREHOLDERS
In the event the shareholders are named in the Articles of Incorporation
and are empowered therein to manage the affairs of the corporation in lieu of
directors, the shareholders of the corporation shall be deemed directors for the
purposes of these By-Laws and wherever the word "directors", "board of
directors" or "board" appear in these By-Laws those words shall be taken to mean
share-
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holders.
The shareholders may, by majority vote, create a board of directors to
manage the business of the corporation and exercise its corporate powers.
ARTICLE XIII - AMENDMENTS
The board may adopt, alter, amend or repeal By-Laws. By-Laws adopted by
the board or by the shareholders may be repealed or changed, new By-Laws may be
adopted by the shareholders, and shareholders may prescribe in any By-Law made
by them that such By-Law shall not be altered, amended or repealed by the board.
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Exhibit 10.1
EXECUTED COPY
$365,000,000
CREDIT AGREEMENT
Dated as of July 23, 1999
Among
LODGIAN FINANCING CORP.
as Borrower
and
LODGIAN, INC.
its Parent
and
IMPAC HOTEL GROUP, LLC,
SERVICO, INC.
and
THE OTHER AFFILIATE GUARANTORS
PARTY HERETO
as Affiliate Guarantors
and
THE INITIAL LENDERS AND INITIAL ISSUING BANK
NAMED HEREIN
as Initial Lenders and Initial Issuing Bank
and
MORGAN STANLEY SENIOR FUNDING, INC.
as Administrative Agent and Collateral Agent
and
MORGAN STANLEY SENIOR FUNDING, INC.
as Co-Lead Arranger, Joint-Book Manager and Syndication Agent
and
LEHMAN BROTHERS INC.
as Co-Lead Arranger and Joint-Book Manager
and
LEHMAN COMMERCIAL PAPER INC.
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 2
1.01. Certain Defined Terms 2
1.02. Computation of Time Periods; Other Definitional Provisions 30
1.03. Accounting Terms 30
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCESAND THE LETTERS OF CREDIT 30
2.01. The Advances and the Letters of Credit 30
2.02. Making the Advances 32
2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit 35
2.04. Repayment of Advances 36
2.05. Termination or Reduction of the Commitments 39
2.06. Prepayments 40
2.07. Interest 43
2.08. Fees 44
2.09. Conversion of Advances 45
2.10. Increased Costs, Etc. 45
2.11. Payments and Computations 47
2.12. Taxes 49
2.13. Sharing of Payments, Etc. 52
2.14. Use of Proceeds 52
2.15. Defaulting Lenders 53
ARTICLE III CONDITIONS OF LENDING ANDISSUANCES OF LETTERS OF CREDIT 56
3.01. Conditions Precedent to Initial Extension of Credit 56
3.02. Conditions Precedent to Each Borrowing and Issuance
and Renewal 62
3.03. Determinations Under Section 3.01 63
ARTICLE IV REPRESENTATIONS AND WARRANTIES 64
4.01. Representations and Warranties of the Borrower 64
ARTICLE V COVENANTS OF THE BORROWER 70
5.01. Affirmative Covenants 70
5.02. Negative Covenants 77
5.03. Reporting Requirements 85
5.04. Financial Covenants 89
ARTICLE VI EVENTS OF DEFAULT 93
6.01. Events of Default 93
6.02. Actions in Respect of the Letters of Credit upon Default 96
ARTICLE VII AFFILIATE GUARANTY 97
7.01. Guaranty 97
7.02. Guaranty Absolute 98
7.03. Waiver 99
7.04. Subrogation 99
ARTICLE VIII THE AGENTS 100
8.01. Authorization and Action 100
8.02. Agents' Reliance, Etc. 101
8.03. Morgan Stanley, Lehman Brothers and Affiliates 101
8.04. Lender Party Credit Decision 101
8.05. Indemnification 102
8.06. Successor Agents 103
ARTICLE IX MISCELLANEOUS 104
9.01. Amendments, Etc. 104
9.02. Notices, Etc. 104
9.03. No Waiver; Remedies 105
9.04. Costs and Expenses 105
9.05. Right of Set-off 107
9.06. Binding Effect 107
9.07. Assignments and Participations 107
9.08. Execution in Counterparts 110
9.09. No Liability of the Issuing Bank 110
<PAGE>
Section Page
9.10. Confidentiality 111
9.11. Release of Hotel Collateral 111
9.12. Jurisdiction, Etc. 111
9.14 Governing Law 112
9.15. Waiver of Jury Trial 112
<PAGE>
SCHEDULES
Schedule I - Commitments and Applicable Lending Offices
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and Filings
Schedule 4.01(o) - Plans, Multiemployer Plans and Welfare Plans
Schedule 4.01(p) - Environmental Disclosure
Schedule 4.01(s) - Existing Debt
Schedule 4.01(t) - Surviving Debt
Schedule 4.01(u) - Liens
Schedule 4.01(v) - Owned Real Property
Schedule 4.01(w) - Leased Real Property
Schedule 4.01(x) - Investments
Schedule 4.01(y) - Patents, Trademarks, Tradenames, Servicemarks and
Copyrights
Schedule 4.01(z) - Material Contracts
EXHIBITS
Exhibit A-1 - Form of Term A Note
Exhibit A-2 - Form of Term B Note
Exhibit A-3 - Form of Working Capital Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement
Exhibit E - Form of Solvency Certificate
Exhibit F - Form of Opinion of Counsel to the Loan Parties
Exhibit G - Form of Term C Supplement
Exhibit H - Form of Affiliate Guaranty Supplement
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of July 23, 1999 among LODGIAN FINANCING
CORP., a Delaware corporation (the "Borrower"), LODGIAN, INC., a Delaware
corporation (the "Parent"), SERVICO, INC., a Florida corporation ("Servico"),
IMPAC HOTEL GROUP, LLC, a Georgia limited liability company ("Impac"), the other
Affiliates (as hereinafter defined) of the Borrower listed on the signature
pages hereof under the caption "Affiliate Guarantors" and the Additional
Affiliate Guarantors (as hereinafter defined) (such Affiliates so listed,
together with the Additional Affiliate Guarantors, Servico and Impac, the
"Affiliate Guarantors"), the banks, financial institutions and other
institutional lenders listed on the signature pages hereof as the Initial
Lenders (the "Initial Lenders"), the bank listed on the signature pages hereof
as the Initial Issuing Bank (the "Initial Issuing Bank") and, together with the
Initial Lenders, the "Initial Lender Parties") and the Swing Line Bank (as
hereinafter defined), Morgan Stanley Senior Funding, Inc. ("Morgan Stanley"), as
collateral agent (together with any successor collateral agent appointed
pursuant to Article VIII, the "Collateral Agent"), Morgan Stanley, as
administrative agent (together with any successor administrative agent appointed
pursuant to Article VIII, the "Administrative Agent"), MORGAN STANLEY SENIOR
FUNDING, INC. ("MSSF") as co-lead arranger, joint-book manager and syndication
agent (in such capacity, together with any successor syndication agent appointed
pursuant to Article VIII, the "Syndication Agent") and LEHMAN BROTHERS INC.
("Lehman" and together with MSSF, the "Arrangers") as co-lead arranger and
joint-book manager, and LEHMAN COMMERCIAL PAPER INC. as documentation agent
(together with any successor documentation agent appointed pursuant to Article
VIII, the "Documentation Agent" and together with the Collateral Agent, the
Administrative Agent and the Syndication Agent, the "Agents") for the Lender
Parties (as hereinafter defined).
PRELIMINARY STATEMENTS:
(1) The Borrower was organized by the Parent in connection with the
refinancing of certain Existing Debt (as hereinafter defined) of the Parent and
certain of its Subsidiaries (as hereinafter defined) (the "Refinancing") and the
proposed financing of certain hotel development and repositioning projects (the
"Financing").
(2) The Financing and Refinancing will be funded, in part, by the
issuance by the Borrower (either by private placement or underwritten public
sale) of the Subordinated Notes.
(3) The Borrower has requested that, in connection with the
Refinancing and the Financing, the Lender Parties make loans and other financial
accommodations to the Borrower in an aggregate amount up to $375,000,000. The
Lender Parties have agreed to make such loans and financial accommodations on
the terms and conditions of this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Additional Affiliate Guarantor" has the meaning specified in
Section 7.
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent as the Administrative Agent shall specify in writing
to the Lender Parties.
"Advance" means a Term A Advance, a Term B Advance, a Term C
Advance, a Working Capital Advance, a Swing Line Advance or a Letter of
Credit Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 10% or more of the
Voting Interests of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Interests, by contract or otherwise.
"Affiliate Guarantors" has the meaning specified in the recital of
parties to this Agreement.
"Affiliate Guaranty" means the guaranty of each of the Affiliate
Guarantors set forth in Article VII.
"Affiliate Guaranty Supplement" has the meaning specified in Section
7.05.
"Agents" has the meaning specified in the recital of parties to this
Agreement.
"Agreement Value" means, for each Hedge Agreement, on any date of
determination, an amount determined by the Administrative Agent equal to:
(a) in the case of a Hedge Agreement documented pursuant to the Master
Agreement (Multicurrency-Cross Border) published by the International Swap
and Derivatives
<PAGE>
Association, Inc. (the "Master Agreement"), the amount, if any, that would
be payable by any Loan Party or any of its Subsidiaries to its
counterparty to such Hedge Agreement, as if (i) such Hedge Agreement was
being terminated early on such date of determination, (ii) such Loan Party
or Subsidiary was the sole "Affected Party", and (iii) the Administrative
Agent was the sole party determining such payment amount (with the
Administrative Agent making such determination pursuant to the provisions
of the form of Master Agreement); or (b) in the case of a Hedge Agreement
traded on an exchange, the mark-to-market value of such Hedge Agreement,
which will be the unrealized loss on such Hedge Agreement to the Loan
Party or Subsidiary of a Loan Party party to such Hedge Agreement
determined by the Administrative Agent based on the settlement price of
such Hedge Agreement on such date of determination, or (c) in all other
cases, the mark-to-market value of such Hedge Agreement, which will be the
unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of
a Loan Party party to such Hedge Agreement determined by the
Administrative Agent as the amount, if any, by which (i) the present value
of the future cash flows to be paid by such Loan Party or Subsidiary
exceeds (ii) the present value of the future cash flows to be received by
such Loan Party or Subsidiary pursuant to such Hedge Agreement (provided
that in determining the Agreement Value of a Hedge Agreement between a
Loan Party and a counterparty, there shall be taken into account any
offsetting gains under other hedging arrangements between such Loan Party
and such counterparty so long as such Loan Party and such counterparty are
party to a netting agreement); capitalized terms used and not otherwise
defined in this definition shall have the respective meanings set forth in
the above described Master Agreement.
"Applicable Lending Office" means, with respect to each Lender
Party, such Lender Party's Domestic Lending Office in the case of a Base
Rate Advance and such Lender Party's Eurodollar Lending Office in the case
of a Eurodollar Rate Advance.
"Applicable Margin" means, as of any date, a percentage per annum
determined by reference to the Public Debt Rating of the Parent, as of
such date, as set forth below:
================================================================================
Eurodollar
Eurodollar Base Rate Rate
Base Rate Rate Working Working
Term Term Capital Capital
Public Debt Rating Advances Advances Advances Advances
================================================================================
Level I
Rated Ba2/BB and above 2.25% 3.50% 2.00% 3.25%
- --------------------------------------------------------------------------------
Level II
Rated less than Level I
but at least Ba3/BB- 2.50% 3.75% 2.25% 3.50%
- --------------------------------------------------------------------------------
Level III
Rated less than Level II
but at least B1/B+ 2.75% 4.00% 2.50% 3.75%
================================================================================
Level IV
Rated less than Level III 3.00% 4.25% 2.75% 4.00%
================================================================================
<PAGE>
The Applicable Margin for each Base Rate Advance shall be determined by
reference to the Public Debt Rating in effect from time to time and the
Applicable Margin for each Eurodollar Rate Advance shall be determined by
reference to the Public Debt Rating in effect on the first day of each
Interest Period for such Advance. The Applicable Margin in respect of the
Term C Facility shall be as set forth in the Term C Supplement.
"Appraisal" has the meaning specified in Section 3.01(a)(iii).
"Appraised Value" has the meaning specified in Section 3.01(a)(iii).
"Appropriate Lender" means, at any time, with respect to (a) any of
the Term A Facility, the Term B Facility, the Term C Facility or the
Working Capital Facility, a Lender that has a Commitment with respect to
such Facility at such time, (b) the Letter of Credit Facility, (i) the
Issuing Bank and (ii) if the other Working Capital Lenders have made
Letter of Credit Advances pursuant to Section 2.03(c) that are outstanding
at such time, each such other Working Capital Lender and (c) the Swing
Line Facility, (i) the Swing Line Bank and (ii) if the other Working
Capital Lenders have made Swing Line Advances pursuant to Section 2.02(b)
that are outstanding at such time, each such other Working Capital Lender.
"Approved Fund" means, with respect to any Lender that is a fund
that invests in bank loans, any other fund that invests in bank loans and
is advised or managed by the same investment advisor as such Lender or by
an Affiliate of such investment advisor.
"Arrangers" has the meaning specified in the recital of parties to
this Agreement.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee, and accepted by
the Administrative Agent, in accordance with Section 9.07 and in
substantially the form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any time, the
maximum amount available to be drawn under such Letter of Credit at such
time (assuming compliance at such time with all conditions to drawing).
"Banc One Facility" means the loan agreements, dated as of December
8, 1998, amount several operating Subsidiaries of the Parent and Banc One
Capital Funding Corporation.
"Bankruptcy Law" has the meaning specified in Section 7.01(b)(i).
"Base Rate" means a fluctuating interest rate per annum in effect
from time to time, which rate per annum shall at all times be equal to the
higher of:
<PAGE>
(a) the rate of interest announced publicly by Citibank, N.A.
in New York, New York, from time to time, as it's base commercial lending
rate; and
(b) 1/2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means an Advance that bears interest as provided
in Section 2.07(a)(i).
"Borrower" has the meaning specified in the recital of parties to
this Agreement.
"Borrower's Account" means the account of the Borrower maintained by
the Borrower as the Borrower shall specify in writing to the
Administrative Agent.
"Borrowing" means a Term A Borrowing, a Term B Borrowing, a Term C
Borrowing, a Working Capital Borrowing or a Swing Line Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on which
dealings are carried on in the London interbank market.
"Canadian Documents" means (i) the Debenture Pledge Agreement dated
as of July 23, 1999 between Servico Windsor, Inc. and the Collateral
Agent, (ii) the Guarantee dated as of July 23, 1999 between Servico
Windsor, Inc. and the Collateral Agent and (iii) the Demand Debenture
dated July 23, 1999 between Servico Windsor, Inc. and the Collateral
Agent.
"Capital Expenditures" means, for any Person for any period, the sum
of, without duplication, (a) all expenditures made, directly or
indirectly, by such Person or any of its Subsidiaries during such period
for equipment, fixed assets, real property or improvements, or for
replacements or substitutions therefor or additions thereto, that have
been or should be, in accordance with GAAP, reflected as additions to
property, plant or equipment on a Consolidated balance sheet of such
Person or have a useful life of more than one year plus (b) the aggregate
principal amount of all Debt (including Obligations under Capitalized
Leases) assumed or incurred in connection with any such expenditures. For
purposes of this definition, the purchase price of equipment that is
purchased simultaneously with the trade-in of existing equipment or with
insurance proceeds shall be included in Capital Expenditures only to the
extent of the gross amount of such purchase price less the credit granted
by the seller of such equipment for the equipment being traded in at such
time or the amount of such proceeds, as the case may be.
"Capitalized Leases" means all leases that have been or should be,
in accordance with GAAP, recorded as capitalized leases.
<PAGE>
"Cash Equivalents" means any of the following, to the extent owned
by the Borrower or any of its Subsidiaries free and clear of all Liens
other than Liens created under the Collateral Documents and having a
maturity of not greater than (i) in the case of clauses (a) and (b) below,
360 days from the date of issuance thereof and (ii) in the case of clause
(c) below, 270 days from the date of issuance thereof: (a) readily
marketable direct obligations of the Government of the United States or
any agency or instrumentality thereof or obligations unconditionally
guaranteed by the full faith and credit of the Government of the United
States, (b) insured certificates of deposit of or time deposits with any
commercial bank that is a Lender Party or a member of the Federal Reserve
System, issues (or the parent of which issues) commercial paper rated as
described in clause (c) below, is organized under the laws of the United
States or any State thereof and has combined capital and surplus of at
least $1 billion or (c) commercial paper in an aggregate amount of no more
than $2,500,000 per issuer outstanding at any time, issued by any
corporation organized under the laws of any State of the United States and
rated at least "Prime-1" (or the then equivalent grade) by Moody's or
"A-1" (or the then equivalent grade) by S&P.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Change of Control" means the occurrence of any of the following:
(a) any Person or two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934), directly or indirectly, of Voting Interests of the Parent (or other
securities convertible into such Voting Interests) representing 35% or
more of the combined voting power of all Voting Interests of the Parent;
or (b) during any period of up to 24 consecutive months, commencing after
the date of this Agreement, individuals who at the beginning of such
24-month period were directors of the Parent (together with any new
directors whose election by such board of directors was approved by a
majority of the directors then still in office who are entitled to vote to
elect such new directors and were either directors at the beginning of
such period or Persons whose election as directors was previously so
approved) shall cease for any reason to constitute a majority of the board
of directors of the Parent; or (c) any Person or two or more Persons
acting in concert shall have acquired by contract or otherwise, or shall
have entered into a contract or arrangement that, upon consummation, will
result in its or their acquisition of the power to exercise, directly or
indirectly, a controlling influence over the management or policies of the
Parent; or (d) the Parent shall cease to own 100% of the Equity Interests
in the Borrower; or (e) the Borrower shall cease to own, directly or
indirectly, 100% of the Equity Interests each of the Subsidiary
Guarantors.
"Clean-Down Period" means a period of 30 consecutive days commencing
on August 1, 2000 and on each anniversary thereof.
<PAGE>
"Collateral Account" has the meaning specified in the Security
Agreement.
"Collateral Agent" has the meaning specified in the recital of
parties to this Agreement.
"Collateral Documents" means the Security Agreement, the Mortgages,
the Canadian Documents and any other agreement that creates or purports to
create a Lien in favor of the Collateral Agent or the Administrative Agent
for the benefit of the Secured Parties.
"Commitment" means a Term A Commitment, a Term B Commitment, a Term
C Commitment, a Working Capital Commitment or a Letter of Credit
Commitment.
"Confidential Information" means information that any Loan Party
furnishes to any Agent or any Lender Party on a confidential basis, but
does not include any such information that is or becomes generally
available to the public other than as a result of a breach by such Agent
or any Lender Party of its obligations hereunder or that is or becomes
available to such Agent or such Lender Party from a source other than the
Loan Parties that is not, to the best of such Agent's or such Lender
Party's knowledge, acting in violation of a confidentiality agreement with
a Loan Party.
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Contingent Obligation" means, with respect to any Person, any
Obligation or arrangement of such Person to guarantee or intended to
guarantee any Debt, leases, dividends or other payment Obligations
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, (a)
the direct or indirect guarantee, endorsement (other than for collection
or deposit in the ordinary course of business), co-making, discounting
with recourse or sale with recourse by such Person of the Obligation of a
primary obligor, (b) the Obligation to make take-or-pay or similar
payments, if required, regardless of nonperformance by any other party or
parties to an agreement or (c) any Obligation of such Person, whether or
not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to
advance or supply funds (A) for the purchase or payment of any such
primary obligation or (B) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of
the primary obligor, (iii) to purchase property, assets, securities or
services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or hold harmless
the holder of such primary obligation against loss in respect thereof. The
amount of any Contingent Obligation shall be deemed to be an amount equal
to the stated or determinable amount of the primary obligation in respect
of which such Contingent Obligation is made (or, if less, the maximum
amount of such primary obligation for which such Person may be liable
pursuant to the terms of the instrument evidencing such
<PAGE>
Contingent Obligation) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person
is required to perform thereunder), as determined by such Person in good
faith.
"Conversion", "Convert" and "Converted" each refer to a conversion
of Advances of one Type into Advances of the other Type pursuant to
Section 2.09 or 2.10.
"CRESTS" means the $175 million of convertible redeemable equity
structure trust securities issued by Lodgian Capital Trust I in June,
1998.
"Debt" of any Person means, without duplication for purposes of
calculating financial ratios, (a) all indebtedness of such Person for
borrowed money, (b) all Obligations of such Person for the deferred
purchase price of property or services (other than trade payables not
overdue by more than 60 days incurred in the ordinary course of such
Person's business), (c) all Obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all Obligations of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such property), (e) all Obligations of such Person as lessee under
Capitalized Leases, (f) all Obligations of such Person under acceptance,
letter of credit or similar facilities, (g) all Obligations of such Person
to purchase, redeem, retire, defease or otherwise make any payment in
respect of any Equity Interests in such Person or any other Person or any
warrants, rights or options to acquire such capital stock, valued, in the
case of Redeemable Preferred Interests, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (h)
all Obligations of such Person in respect of Hedge Agreements, (i) all
Contingent Obligations of such Person and (j) all indebtedness and other
payment Obligations referred to in clauses (a) through (i) above of
another Person secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness or other payment Obligations.
"Debt/EBITDA Ratio" means, at any date of determination, the ratio
of Consolidated total Debt for Borrowed Money of the Parent and its
Subsidiaries as at the end of the most recently ended fiscal quarter of
the Parent for which financial statements are required to be delivered to
the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be,
to Consolidated EBITDA of the Parent and its Subsidiaries for such fiscal
quarter and the immediately preceding three fiscal quarters.
Notwithstanding the foregoing, Debt/EBITDA Ratio for the fiscal quarter
ending September 30, 1999 shall be determined on an annualized basis, by
multiplying Consolidated EBITDA of the Parent and its Subsidiaries for the
first three fiscal quarters of 1999 by one and one-third (1 ).
<PAGE>
"Debt for Borrowed Money" of any Person means all items that, in
accordance with GAAP, would be classified as indebtedness on a
Consolidated balance sheet of such Person.
"Declining Lender" has the meaning specified in Section 2.06(c).
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Defaulted Advance" means, with respect to any Lender Party at any
time, the portion of any Advance required to be made by such Lender Party
to the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time
that has not been made by such Lender Party or by the Administrative Agent
for the account of such Lender Party pursuant to Section 2.02(e) as of
such time. In the event that a portion of a Defaulted Advance shall be
deemed made pursuant to Section 2.15(a), the remaining portion of such
Defaulted Advance shall be considered a Defaulted Advance originally
required to be made pursuant to Section 2.01 on the same date as the
Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at any
time, any amount required to be paid by such Lender Party to any Agent or
any other Lender Party hereunder or under any other Loan Document at or
prior to such time that has not been so paid as of such time, including,
without limitation, any amount required to be paid by such Lender Party to
(a) the Swing Line Bank pursuant to Section 2.02(b) to purchase a portion
of a Swing Line Advance made by the Swing Line Bank, (b) the Issuing Bank
pursuant to Section 2.03(c) to purchase a portion of a Letter of Credit
Advance made by such Issuing Bank, (c) the Administrative Agent pursuant
to Section 2.02(d) to reimburse the Administrative Agent for the amount of
any Advance made by the Administrative Agent for the account of such
Lender Party, (d) any other Lender Party pursuant to Section 2.13 to
purchase any participation in Advances owing to such other Lender Party
and (e) any Agent or the Issuing Bank pursuant to Section 7.05 to
reimburse such Agent or the Issuing Bank for such Lender Party's ratable
share of any amount required to be paid by the Lender Parties to such
Agent or the Issuing Bank as provided therein. In the event that a portion
of a Defaulted Amount shall be deemed paid pursuant to Section 2.15(b),
the remaining portion of such Defaulted Amount shall be considered a
Defaulted Amount originally required to be paid hereunder or under any
other Loan Document on the same date as the Defaulted Amount so deemed
paid in part.
"Defaulting Lender" means, at any time, any Lender Party that, at
such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall
take any action or be the subject of any action or proceeding of a type
described in Section 6.01(f).
"Disclosed Litigation" has the meaning specified in Section 3.01(e).
<PAGE>
"Documentation Agent" has the meaning specified in the recital of
parties to this Agreement.
"Domestic Lending Office" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party, as the case may be, or such
other office of such Lender Party as such Lender Party may from time to
time specify to the Borrower and the Administrative Agent.
"Domestic Subsidiary" means any Subsidiary other than a Foreign
Subsidiary.
"EBITDA" means, for any period, the sum, determined on a
Consolidated basis, of (a) net income (or net loss), (b) interest expense,
(c) income tax expense, (d) depreciation expense, (e) amortization
expense, in each case of the Parent and its Subsidiaries, determined in
accordance with GAAP for such period; provided however that "EBITDA" shall
be calculated without taking into account (without duplication) (i)
extraordinary or non-recurring gains and losses, and (ii) gains and losses
from sales, transfers and other dispositions of assets outside the
ordinary course of business; provided further that "EBITDA" shall only
include the net income for such period of any Person that is not a
Subsidiary of the Parent to the extent of dividends or distributions or
other payments paid in cash to the Parent or any of its wholly-owned
Subsidiaries.
"Effective Date" means the first date on which the conditions set
forth in Article III shall have been satisfied.
"Eligible Assignee" means any commercial bank or financial
institution (including, without limitation, any fund that regularly
invests in loans similar to the Term B Advances) as approved by the
Administrative Agent and, so long as no Event of Default has occurred and
is continuing at the time of such assignment, by the Borrower (such
approval not to be unreasonably withheld); provided, however, that neither
any Loan Party nor any Affiliate of a Loan Party shall qualify as an
Eligible Assignee under this definition.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of liability
or potential liability, investigation, proceeding, consent order or
consent agreement relating in any way to any Environmental Law, any
Environmental Permit or Hazardous Material or arising from alleged injury
or threat to health, safety or the environment, including, without
limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or third party
for damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any Federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or
<PAGE>
agency interpretation, policy or guidance relating to pollution or
protection of the environment, health, safety or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"Equity Interests" means, with respect to any Person, shares of
capital stock of (or other ownership or profit interests in) such Person,
warrants, options or other rights for the purchase or other acquisition
from such Person of shares of capital stock of (or other ownership or
profit interests in) such Person, securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for the purchase
or other acquisition from such Person of such shares (or such other
interests), and other ownership or profit interests in such Person
(including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or otherwise
existing on any date of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of any Loan Party, or under
common control with any Loan Party, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a)(i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA
apply with respect to a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30 days;
(b) the application for a minimum funding waiver with respect to a Plan;
(c) the provision by the administrator of any Plan of a notice of intent
to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including
any such notice with respect to a plan amendment referred to in Section
4041(e) of ERISA); (d) the cessation of operations at a facility of any
Loan Party or any ERISA Affiliate in the circumstances described in
Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any
ERISA Affiliate from a Multiple Employer Plan during a plan year for which
it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for imposition of a lien under Section 302(f) of ERISA
shall have been met with respect to any Plan; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a
<PAGE>
Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that constitutes grounds for
the termination of, or the appointment of a trustee to administer, such
Plan.
"Eurocurrency Liabilities" has the meaning specified in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Eurodollar Lending Office" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender Party (or, if no such
office is specified, its Domestic Lending Office), or such other office of
such Lender Party as such Lender Party may from time to time specify to
the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in U.S. dollars at 11:00 A.M. (London
time) two Business Days before the first day of such Interest Period for a
period equal to such Interest Period (provided that, if for any reason
such rate is not available, the term "Eurodollar Rate" shall mean, for any
Interest Period for all Eurodollar Rate Advances comprising part of the
same Borrowing, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided, however,
if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates) by (b) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York
City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurodollar Rate Advances is determined) having a term equal to such
Interest Period.
<PAGE>
"Events of Default" has the meaning specified in Section 6.01.
"Excess Cash Flow" means, for any period,
(a) the sum of:
(i) Consolidated net income (or loss) of the
Parent and its Subsidiaries for such period plus
(ii) the aggregate amount of all non-cash charges
deducted in arriving at such Consolidated net income (or loss)
less
(b) the sum of:
(i) the aggregate amount of all non-cash credits
included in arriving at such Consolidated net income (or loss)
plus
(ii) the aggregate amount of Capital Expenditures
of the Parent and its Subsidiaries paid in cash during such
period to the extent permitted by this Agreement plus
(iii) the aggregate amount of all regularly
scheduled principal payments of Funded Debt made during such
period plus
(iv) the aggregate principal amount of all
optional prepayments of Term Advances made during such period
pursuant to Section 2.06(a) plus
(v) the aggregate amount of all dividends paid by
the Parent during such period plus
(vi) the aggregate amount of Investments in Permitted
Joint Ventures by the Parent and its Subsidiaries paid in cash
during such period to the extent permitted by this Agreement.
"Existing Debt" means Debt of each Loan Party and its Subsidiaries
outstanding immediately before giving effect to the consummation of the
transactions contemplated by the Transaction Documents.
"Extraordinary Receipt" means any cash received by or paid to or for
the account of any Person not in the ordinary course of business,
including, without limitation, tax refunds, pension plan reversions,
proceeds of insurance (including, without limitation, any key man life
insurance but excluding proceeds of business interruption insurance to
<PAGE>
the extent such proceeds constitute compensation for lost earnings),
condemnation awards (and payments in lieu thereof), indemnity payments and
any purchase price adjustment received in connection with any purchase
agreement; provided, however, that an Extraordinary Receipt shall not
include (a) tax refunds and (b) cash receipts received from proceeds of
insurance, condemnation awards (or payments in lieu thereof) or indemnity
payments to the extent that such proceeds, awards or payments (A) in
respect of loss or damage to equipment, fixed assets or real property are
applied (or in respect of which expenditures were previously incurred) to
replace or repair the equipment, fixed assets or real property in respect
of which such proceeds were received in accordance with the terms of the
Loan Documents, so long as such application is committed in writing to be
made within 6 months following the occurrence of such damage or loss and
actually made within 12 months after the occurrence of such damage or loss
or (B) are received by any Person in respect of any third party claim
against such Person and applied to pay (or to reimburse such Person for
its prior payment of) such claim and the costs and expenses of such Person
with respect thereto; provided further that, if in any Fiscal Year,
Extraordinary Receipts consisting of the type described in clause (b) in
the prior proviso exceeds $10 million, such Extraordinary Receipts shall
be applied as set forth in Annex A.
"Facility" means the Term A Facility, the Term B Facility, the Term
C Facility, the Working Capital Facility, the Swing Line Facility or the
Letter of Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"Fee Letter" means the fee letter dated July 22, 1999 between the
Parent and the Administrative Agent, as amended.
"Financing" has the meaning specified in the Preliminary Statements.
"Fiscal Year" means a fiscal year of the Parent and its Consolidated
Subsidiaries ending on December 31 in any calendar year.
"Fixed Charge Coverage Ratio" means, at any date of determination,
the ratio of (a) Consolidated EBITDA to (b) the sum of (i) interest
payable on, and amortization of debt discount in respect of, all Debt for
Borrowed Money plus (ii) the greater of (A) the recurring property Capital
Expenditures for such period and (B) 4% of the gross property revenue
derived by the Parent and its Subsidiaries from such property plus (iii)
all scheduled principal amortization (excluding balloon payments due at
maturity) of all Debt for Borrowed Money payable plus (iv) dividends and
other distributions on Equity
<PAGE>
Interests, to the extent paid or payable in cash or Cash Equivalents plus
(v) cash payments payable in respect of taxes, in each case, of or by the
Parent and its Subsidiaries during the four consecutive fiscal quarters
most recently ended for which financial statements are required to be
delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the
case may be.
"Foreign Subsidiary" means a Subsidiary organized under the laws of
a jurisdiction other than the United States or any State thereof or the
District of Columbia.
"Funded Debt" of any Person means Debt in respect of the Advances,
in the case of the Borrower, and all other Debt of such Person that by its
terms matures more than one year after the date of determination or
matures within one year from such date but is renewable or extendible, at
the option of such Person, to a date more than one year after such date or
arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
after such date, including, without limitation, all amounts of Funded Debt
of such Person required to be paid or prepaid within one year after the
date of determination.
"GAAP" has the meaning specified in Section 1.03.
"Guaranties" means the Affiliate Guaranty and the Subsidiary
Guaranty.
"Guarantors" means the Affiliate Guarantors and the Subsidiary
Guarantors.
"Hazardous Materials" means (a) petroleum or petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other hedging
agreements.
"Hedge Bank" means any Lender Party or an Affiliate of a Lender
Party in its capacity as a party to a Secured Hedge Agreement.
"Hotel Collateral" means all "Collateral" referred to in the
Collateral Documents and all other property that is or is intended to be
subject to any Lien in favor of the Collateral Agent or the Administrative
Agent for the benefit of the Secured Parties.
"Hotel Collateral EBITDA" means, in respect of any period, EBITDA
for such period derived solely from or attributable solely to Hotel
Collateral Properties less, to the extent not previously deducted, the sum
of (i) the greater of (A) actual management fees in respect of such Hotel
Collateral Properties during such period and (B) 4% of gross
<PAGE>
revenues in respect of such Hotel Collateral Properties during such period
and (ii) the greater of (A) actual franchise fees in respect of such Hotel
Collateral Properties during such period and (B) 4% of gross room revenues
in respect of such Hotel Collateral Properties during such period.
"Hotel Collateral Properties" means all real property owned or
leased by any Loan Party or any of its Subsidiaries in which such Loan
Party or such Subsidiary has good, marketable and insurable fee simple
title to such real property or, in the case of leased properties, valid
and subsisting leasehold interests, free and clear of all Liens, other
than Liens created or permitted by the Loan Documents.
"Impac" has the meaning specified in the recital of parties to this
Agreement.
"Indemnified Party" has the meaning specified in Section 9.04(b).
"Information Memorandum" means the information memorandum dated June
19, 1999 used by the Arrangers in connection with the syndication of the
Commitments.
"Initial Extension of Credit" means the earlier to occur of the
initial Borrowing and the initial issuance of a Letter of Credit
hereunder.
"Initial Issuing Bank", "Initial Lender Parties" and "Initial
Lenders" each has the meaning specified in the recital of parties to this
Agreement.
"Insufficiency" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Interest Coverage Ratio" means, at any date of determination, the
ratio of (a) Consolidated EBITDA to (b) interest payable on, and
amortization of debt discount in respect of, all Debt for Borrowed Money,
in each case, of or by the Parent and its Consolidated Subsidiaries during
the four consecutive fiscal quarters most recently ended for which
financial statements are required to be delivered to the Lender Parties
pursuant to Section 5.03(b) or (c), as the case may be. Notwithstanding
the foregoing, Interest Coverage Ratio for the fiscal quarter ending
September 30, 1999 shall be determined on an annualized basis, by
multiplying each component thereof, in each case, of the Parent and its
Consolidated Subsidiaries for the first three fiscal quarters of 1999 by
one and one-third (11/3).
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Base Rate
Advance into such Eurodollar Rate Advance, and ending on the last day of
the period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such
<PAGE>
Interest Period shall be one, two, three, six or, if available to all
Lenders, twelve months, as the Borrower may, upon notice received by the
Administrative Agent not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the first day of such Interest Period, select;
provided, however, that:
(a) the Borrower may not select any Interest Period with
respect to any Eurodollar Rate Advance under a Facility that ends
after any principal repayment installment date for such Facility
unless, after giving effect to such selection, the aggregate
principal amount of Base Rate Advances and of Eurodollar Rate
Advances having Interest Periods that end on or prior to such
principal repayment installment date for such Facility shall be at
least equal to the aggregate principal amount of Advances under such
Facility due and payable on or prior to such date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing shall
be of the same duration;
(c) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that, if such extension
would cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day; and
(d) whenever the first day of any Interest Period occurs
on a day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that succeeds
such initial calendar month by the number of months equal to the
number of months in such Interest Period, such Interest Period shall
end on the last Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any Equity Interests or Debt or the
assets comprising a division or business unit or a substantial part or all
of the business of such Person, any capital contribution to such Person or
any other direct or indirect investment in such Person, including, without
limitation, any acquisition by way of a merger or consolidation and any
arrangement pursuant to which the investor incurs Debt of the types
referred to in clause (i) or (j) of the definition of "Debt" in respect of
such Person.
"Issuing Bank" means the Initial Issuing Bank and any Eligible
Assignee to which the entire Letter of Credit Commitment hereunder has
been assigned pursuant to Section 9.07 so long as such Eligible Assignee
expressly agrees to perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to
<PAGE>
be performed by it as the Issuing Bank and notifies the Administrative
Agent of its Applicable Lending Office and the amount of its Letter of
Credit Commitment (which information shall be recorded by the
Administrative Agent in the Register), for so long as the Initial Issuing
Bank or Eligible Assignee, as the case may be, shall have the Letter of
Credit Commitment.
"L/C Cash Collateral Account" has the meaning specified in the
Security Agreement.
"L/C Related Documents" has the meaning specified in Section
2.04(d)(ii).
"Lehman" has the meaning specified in the recital of parties to this
Agreement.
"Lender Party" means any Lender, the Issuing Bank or the Swing Line
Bank.
"Lenders" means the Initial Lenders and each Person that shall
become a Lender hereunder pursuant to Section 9.07 for so long as such
Initial Lender or Person, as the case may be, shall be a party to this
Agreement.
"Letter of Credit Advance" means an advance made by the Issuing Bank
or any Working Capital Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in Section
2.03(a).
"Letter of Credit Commitment" means, with respect to the Issuing
Bank at any time, the amount set forth opposite the Issuing Bank's name on
Schedule I hereto under the caption "Letter of Credit Commitment" or, if
the Issuing Bank has entered into an Assignment and Acceptance, set forth
for the Issuing Bank in the Register maintained by the Administrative
Agent pursuant to Section 9.07(d) as the Issuing Bank's "Letter of Credit
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount equal to
the Issuing Bank's Letter of Credit Commitments at such time, as such
amount may be reduced at or prior to such time pursuant to Section 2.05.
"Letters of Credit" has the meaning specified in Section 2.01(d).
"Lien" means any lien, security interest or other similar charge or
encumbrance, or any other similar type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property (and shall include the filing of a Financing
Statement under the Uniform Commercial Code of any jurisdiction and the
existence of any security agreement which authorizes any secured party
thereunder to file a Financing Statement).
<PAGE>
"Loan Documents" means (a) for purposes of this Agreement and the
Notes and any amendment, supplement or modification hereof or thereof, (i)
this Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the Collateral
Documents, (v) the Fee Letter, and (vi) each Letter of Credit Agreement
and (b) for purposes of the Guaranties and the Collateral Documents and
for all other purposes other than for purposes of this Agreement and the
Notes, (i) this Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the
Collateral Documents, (v) the Fee Letter, (vi) each Letter of Credit
Agreement and (vii) each Secured Hedge Agreement, in each case as amended.
"Loan Parties" means the Parent, the Borrower and the Guarantors.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries, (b)
the rights and remedies of any Agent or any Lender Party under any
Transaction Document or (c) the ability of any Loan Party to perform its
Obligations under any Transaction Document to which it is or is to be a
party.
"Material Contract" means, with respect to any Person, (i) each
Franchise Agreement described in Annex A and (ii) each other similar
franchise agreement between a Loan Party and a hotel franchisor.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage Policies" has the meaning specified in Section
3.01(a)(iv)(B).
"Mortgages" has the meaning specified in Section 3.01(a)(iv).
"MSSF" has the meaning specified in the recital of parties to this
Agreement.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and at least one Person other than the
Loan Parties and the ERISA Affiliates or (b) was so maintained and in
respect of which any Loan Party or any ERISA
<PAGE>
Affiliate could have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer
or other disposition of any asset or the incurrence or issuance of any
Debt or the sale or issuance of any Equity Interests (including, without
limitation, any capital contribution) by any Person, or any Extraordinary
Receipt received by or paid to or for the account of any Person, the
aggregate amount of cash received from time to time (whether as initial
consideration or through payment or disposition of deferred consideration)
by or on behalf of such Person in connection with such transaction after
deducting therefrom only (without duplication) (a) reasonable and
customary brokerage commissions, underwriting fees and discounts, legal
fees, finder's fees and other similar fees and commissions, (b) the amount
of taxes payable in connection with or as a result of such transaction and
(c) the amount of any Debt secured by a Lien on such asset that, by the
terms of the agreement or instrument governing such Debt, is required to
be repaid upon such disposition, in each case to the extent, but only to
the extent, that the amounts so deducted are, at the time of receipt of
such cash, actually paid to a Person that is not an Affiliate of such
Person or any Loan Party or any Affiliate of any Loan Party and are
properly attributable to such transaction or to the asset that is the
subject thereof; provided, however, that in the case of taxes that are
deductible under clause (b) above but for the fact that, at the time of
receipt of such cash, such taxes have not been actually paid or are not
then payable, such Loan Party or such Subsidiary may deduct an amount (the
"Reserved Amount") equal to the amount reserved in accordance with GAAP
for such Loan Party's or such Subsidiary's reasonable estimate of such
taxes, other than taxes for which such Loan Party or such Subsidiary is
indemnified, provided further, however, that, at the time such taxes are
paid, an amount equal to the amount, if any, by which the Reserved Amount
for such taxes exceeds the amount of such taxes actually paid shall
constitute "Net Cash Proceeds" of the type for which such taxes were
reserved for all purposes hereunder; provided further that "Net Cash
Proceeds" from the sale, lease, transfer or other disposition of any asset
shall not include any amount of cash proceeds received in connection with
such transaction to the extent such cash proceeds are applied to replace
the asset in respect of which such cash proceeds were received or are
reinvested in the business of the Parent and its Subsidiaries in a manner
consistent with the requirements of Section 5.02(a), so long as the
commencement of such application is made within twelve months after the
occurrence of such sale, lease, transfer or other disposition.
"Nomura Impac I Facility" means the Loan Agreement, dated March 12,
1997, between Impac Hotels I, L.L.C. and Nomura Asset Capital Corporation.
"Non-Core Assets" means the asset set forth on Schedule 5.02(e).
"Nonratable Assignment" means an assignment by a Lender Party
pursuant to Section 9.07(a) of a portion of its rights and obligations
under this Agreement, other than an assignment of a uniform, and not a
varying, percentage of all of the rights and
<PAGE>
obligations of such Lender Party under and in respect of all of the
Facilities (other than the Letter of Credit Facility and the Swing Line
Facility).
"Note" means a Term A Note, a Term B Note, a Term C Note or a
Working Capital Note.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Issuance" has the meaning specified in Section 2.03(a).
"Notice of Renewal" has the meaning specified in Section 2.01(d).
"Notice of Swing Line Borrowing" has the meaning specified in
Section 2.02(b).
"Notice of Termination" has the meaning specified in Section
2.01(d).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether or
not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01(f). Without limiting the generality
of the foregoing, the Obligations of any Loan Party under the Loan
Documents include (a) the obligation to pay principal, interest, Letter of
Credit commissions, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by such Loan Party
under any Loan Document and (b) the obligation of such Loan Party to
reimburse any amount in respect of any of the foregoing that any Lender
Party, in its sole discretion, may elect to pay or advance on behalf of
such Loan Party.
"OECD" means the Organization for Economic Cooperation and
Development.
"Open Year" has the meaning specified in Section 4.01(q)(iii).
"Other Taxes" has the meaning specified in Section 2.12(b).
"Parent" has the meaning specified in the recital of parties to this
Agreement
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Encumbrances" has the meaning specified in Annex A.
<PAGE>
"Permitted Joint Venture" means a joint venture between a Subsidiary
of the Parent and a third party which owns or operates one or more hotel
properties that are not Hotel Collateral, and may include a joint venture
in which such Subsidiary owns greater than a 50% ownership interest.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section
5.01(b); (b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens and other similar Liens arising
in the ordinary course of business securing obligations that (i) are not
overdue for a period of more than 30 days and (ii) individually or
together with all other Permitted Liens outstanding on any date of
determination do not materially adversely affect the use of the property
to which they relate; (c) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure public or
statutory obligations; and (d) Permitted Encumbrances; provided, however,
that with respect to any real property subject to a Mortgage, the term
"Permitted Liens" shall only mean Permitted Encumbrances.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledged Debt" has the meaning specified in the Security Agreement.
"Preferred Interests" means, with respect to any Person, Equity
Interests issued by such Person that are entitled to a preference or
priority over any other Equity Interests issued by such Person upon any
distribution of such Person's property and assets, whether by dividend or
upon liquidation.
"Pro Rata Share" of any amount means, with respect to any Working
Capital Lender at any time, the product of such amount times a fraction
the numerator of which is the amount of such Lender's Working Capital
Commitment at such time (or, if the Commitments shall have been terminated
pursuant to Section 2.05 or 6.01, such Lender's Working Capital Commitment
as in effect immediately prior to such termination) and the denominator of
which is the Working Capital Facility at such time (or, if the Commitments
shall have been terminated pursuant to Section 2.05 or 6.01, the Working
Capital Facility as in effect immediately prior to such termination).
"Public Debt Rating" means, as of any date, the higher of (a) the
rating that has been most recently announced by either S&P or Moody's, as
the case may be, for any class of long-term senior secured debt issued by
the Parent, or (b) the senior implied or
<PAGE>
corporate credit rating of the Parent as determined by either S&P or
Moody's, as the case may be. For purposes of the foregoing, (a) if only
one of S&P or Moody's shall have in effect a Public Debt Rating, the
Applicable Margin shall be determined by reference to the available
rating; (b) if neither of S&P or Moody's shall have in effect a Public
Debt Rating, the Applicable Margin will be set in accordance with Level IV
under the definition of "Applicable Margin"; (c) if any rating established
by S&P or Moody's shall be changed, such change shall be effective as of
the date on which such change is first announced publicly by the rating
agency making such change; (d) if S&P or Moody's shall change the basis on
which ratings are established, each reference to the Public Debt Rating
announced by S&P or Moody's, as the case may be, shall refer to the then
equivalent rating by S&P or Moody's, as the case may be; and (e) if the
ratings established by S&P or Moody's shall fall within different levels,
the Applicable Margin shall be based upon the lower rating..
"Redeemable" means, with respect to any Equity Interest, any Debt or
any other right or Obligation, any such Equity Interest, Debt, right or
Obligation that (a) the issuer has undertaken to redeem at a fixed or
determinable date or dates, whether by operation of a sinking fund or
otherwise, or upon the occurrence of a condition not solely within the
control of the issuer or (b) is redeemable at the option of the holder.
"Reduction Amount" has the meaning specified in Section 2.06(b)(vi).
"Refinancing" has the meaning specified in the Preliminary
Statements.
"Register" has the meaning specified in Section 9.07(d).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Related Documents" means the Subordinated Debt Documents, any
intercompany notes issued pursuant to Section 5.02(b)(i)(B) or (ii) and
the Tax Sharing Agreement.
"Required Lenders" means, at any time, Lenders owed or holding at
least a majority in interest of the sum of (a) the aggregate principal
amount of the Advances outstanding at such time, (b) the aggregate
Available Amount of all Letters of Credit outstanding at such time, (c)
the aggregate Unused Term A Commitments at such time, (d) the aggregate
Unused Term B Commitments at such time, (e) the aggregate Unused Working
Capital Commitments at such time and (f) the aggregate unused Term C
Commitments (if any) at such time; provided, however, that if any Lender
shall be a Defaulting Lender at such time, there shall be excluded from
the determination of Required Lenders at such time (A) the aggregate
principal amount of the Advances owing to such Lender (in its capacity as
a Lender) and outstanding at such time, (B) such Lender's Pro Rata Share
of the aggregate Available Amount of all Letters of Credit outstanding at
such time, (C) the Unused Term A Commitment of such Lender at such time,
(D) the Unused Term B Commitment at such time, (E) the Unused Working
Capital
<PAGE>
Commitment of such Lender at such time and (F) the unused Term C
Commitment (if any) of such Lender at such time. For purposes of this
definition, the aggregate principal amount of Swing Line Advances owing to
the Swing Line Bank and of Letter of Credit Advances owing to the Issuing
Bank and the Available Amount of each Letter of Credit shall be considered
to be owed to the Working Capital Lenders ratably in accordance with their
respective Working Capital Commitments.
"Responsible Officer" means any officer of any Loan Party or any of
its Subsidiaries.
"S&P" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc.
"Secured Hedge Agreement" means any Hedge Agreement required or
permitted under Article V that is entered into by and between the Borrower
and any Hedge Bank.
"Secured Obligations" has the meaning specified in Section 2 of the
Security Agreement.
"Secured Parties" means the Agents, the Lender Parties and the Hedge
Banks..
"Security Agreement" has the meaning specified in Section
3.01(a)(ii).
"Senior Debt" shall mean the principal amount of (a) the Obligations
of the Borrower hereunder at any time outstanding and (b) any other
Consolidated total Debt for Borrowed Money of the Borrower and its
Subsidiaries (other than the Subordinated Debt) the repayment of which is
secured by a Lien upon or which otherwise constitutes a claim upon Hotel
Collateral EBITDA, in each case as of the end of the most recently ended
fiscal quarter of the Borrower.
"Senior Debt/Hotel Collateral EBITDA Ratio" means, at any date of
determination, the ratio of Consolidated total Senior Debt of the Borrower
and its Subsidiaries as at the end of the most recently ended fiscal
quarter of the Borrower for which financial statements are required to be
delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the
case may be, to Consolidated Hotel Collateral EBITDA of the Borrower and
its Subsidiaries for such fiscal quarter and the immediately preceding
three fiscal quarters. Notwithstanding the foregoing, Senior Debt/Hotel
Collateral EBITDA Ratio for the fiscal quarter ending September 30, 1999
shall be determined on an annualized basis, by multiplying Consolidated
Hotel Collateral EBITDA of the Borrower and its Subsidiaries for the first
three fiscal quarters of 1999 by one and one-third (11/3).
"Servico" has the meaning specified in the recital of parties to
this Agreement.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or
<PAGE>
any ERISA Affiliate and no Person other than the Loan Parties and the
ERISA Affiliates or (b) was so maintained and in respect of which any Loan
Party or any ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay such debts and liabilities
as they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute an unreasonably small
capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Standby Letter of Credit" means any Letter of Credit issued under
the Letter of Credit Facility, other than a Trade Letter of Credit.
"Subordinated Debt" means the Subordinated Notes and any other Debt
of any Loan Party that is subordinated to the Obligations of such Loan
Party under the Loan Documents on, and that otherwise contains, terms and
conditions satisfactory to the Required Lenders.
"Subordinated Debt Documents" means the Indenture dated as of July
23, 1999, by and among the Borrower, the Parent, the Affiliate Guarantors
(other than Servico and Impac) and Bankers Trust Company, as trustee,
relating to the issuance by the Borrower of the Subordinated Notes, the
Placement Agreement, dated July 20, 1999, among the Borrower, the Parent,
the Affiliated Guarantors (other than Servico and Impac) and Morgan
Stanley & Co. Incorporated, Lehman Brothers Inc. and Bear, Stearns & Co.
Inc. as placement agents, the Registration Rights Agreement dated July 20,
1999 by and among the Borrower, the Parent, the Affiliate Guarantors
(other than Servico and Impac) and Morgan Stanley & Co. Incorporated,
Lehman Brothers Inc. and Bear Stearns & Co. Inc. and all other agreements,
indentures and instruments pursuant to which Subordinated Debt is issued,
in each case as amended, to the extent permitted under the Loan Documents.
"Subordinated Notes" means the 12.25% of Senior Subordinated Notes
due 2009 issued by the Borrower in an initial aggregate principal amount
of $200,000,000.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the
<PAGE>
issued and outstanding capital stock having ordinary voting power to elect
a majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such
partnership, joint venture or limited liability company or (c) the
beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries; provided, however, that for all purposes of the Loan
Documents, a Permitted Joint Venture shall be deemed not to be a
Subsidiary.
"Surviving Debt" means Debt of each Loan Party and its Subsidiaries
outstanding immediately before and after giving effect to the Transaction.
"Swing Line Advance" means an advance made by (a) the Swing Line
Bank pursuant to Section 2.01(f) or (b) any Working Capital Lender
pursuant to Section 2.02(b).
"Swing Line Bank" means Morgan Stanley or any successor or assign of
Morgan Stanley.
"Swing Line Borrowing" means a borrowing consisting of a Swing Line
Advance made by the Swing Line Bank pursuant to Section 2.01(e) or the
Working Capital Lenders pursuant to Section 2.02(b).
"Swing Line Facility" has the meaning specified in Section 2.01(e).
"Syndication Agent" has the meaning specified in the recital of
parties to this Agreement.
"Tax Returns" has the meaning specified in Section 4.01(q)(ii).
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
July 23, 1999 by and among the Parent, the Borrower, Servico, Impac and
Sixteen Hotels, Inc., as amended, supplemented or otherwise modified from
time to time.
"Taxes" has the meaning specified in Section 2.12(a).
"Term Advances" means the Term A Advances, the Term B Advances and
the Term C Advances.
"Term A Advance" has the meaning specified in Section 2.01(a).
"Term A Borrowing" means a borrowing consisting of simultaneous Term
A Advances of the same Type made by the Term A Lenders.
<PAGE>
"Term A Commitment" means, with respect to any Term A Lender at any
time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Term A Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, set forth for such
Lender in the Register maintained by the Administrative Agent pursuant to
Section 9.07(d) as such Lender's "Term A Commitment", as such amount may
be reduced at or prior to such time pursuant to Section 2.05.
"Term A Facility" means, at any time, the aggregate amount of the
Term A Lenders' Term A Commitments at such time.
"Term A Lender" means any Lender that has a Term A Commitment.
"Term A Note" means a promissory note of the Borrower payable to the
order of any Term A Lender, in substantially the form of Exhibit A-1
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Term A Advance made by such Lender, as amended.
"Term B Advance" has the meaning specified in Section 2.01(b).
"Term B Borrowing" means a borrowing consisting of simultaneous Term
B Advances of the same Type made by the Term B Lenders.
"Term B Commitment" means, with respect to any Term B Lender at any
time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Term B Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, set forth for such
Lender in the Register maintained by the Administrative Agent pursuant to
Section 9.07(d) as such Lender's "Term B Commitment", as such amount may
be reduced at or prior to such time pursuant to Section 2.05.
"Term B Facility" means, at any time, the aggregate amount of the
Term B Lenders' Term B Commitments at such time.
"Term B Lender" means any Lender that has a Term B Commitment.
"Term B Note" means a promissory note of the Borrower payable to the
order of any Term B Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from a Term B Advance made by such Lender, as amended.
"Term C Advance" has the meaning specified in Section 2.16.
"Term C Borrowing" means a borrowing consisting of simultaneous Term
C Advances of the same Type made by the Term C Lenders.
<PAGE>
"Term C Commitment" means, with respect to any Term C Lender at any
time, the amount set forth opposite such Lender's name on Schedule I to
the Term C Supplement under the caption "Term C Commitment" or, if such
Lender has entered into one or more Assignment and Acceptances, set forth
for such Lender in the Register maintained by the Administrative Agent
pursuant to Section 9.07(d) as such Lender's "Term C Commitment", as such
amount may be reduced at or prior to such time pursuant to Section 2.05.
"Term C Facility" means, at any time, the aggregate amount of the
Term C Lenders' Term C Commitments at such time.
"Term C Lender" means any Lender that executes a Term C Supplement.
"Term C Note" means a promissory note of the Borrower payable to the
order of any Term C Lender, in substantially the form of Exhibit A-4
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from a Term C Advance made by such Lender, as amended.
"Term C Supplement" means a supplement to this Agreement
substantially in the form of Exhibit G hereto which shall (i) be executed
and delivered by the Borrower and each Lender that has agreed to have a
Term C Commitment, (ii) set forth the maturity date and scheduled
amortization of the Term C Facility, (iii) set forth the interest rate,
commitment fees and other amounts which shall be payable in respect of the
Term C Facility. All of the matters set forth in a Term C Supplement shall
be subject to the restrictions and limitations set forth in Section 2.16.
"Term Facilities" means the Term A Facility, the Term B Facility and
the Term C Facility.
"Termination Date" means the earlier of (a) the date of termination
in whole of the Working Capital Commitments, the Letter of Credit
Commitments, the Term A Commitments and the Term B Commitments pursuant to
Section 2.05 or 6.01 and (b) (i) for purposes of the Working Capital
Facility and the Letter of Credit Facility, April 15, 2004, (ii) for
purposes of the Term A Facility, the Term B Facility and for all other
purposes, the earlier of (a) the final maturity date of the Banc One
Facility and (b) September 15, 2006 and (iii) for purposes of the Term C
Facility, the final maturity date for the Term C Facility set forth in the
Term C Supplement.
"Trade Letter of Credit" means any Letter of Credit that is issued
under the Letter of Credit Facility for the benefit of a supplier of
inventory to the Borrower or any of its Subsidiaries to effect payment for
such inventory.
"Transactions" means the Financing, the Refinancing and the
transactions contemplated by the Transaction Documents.
<PAGE>
"Transaction Documents" means, collectively, the Loan Documents and
the Related Documents.
"Type" refers to the distinction between Advances bearing interest
at the Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Term A Commitment" means, with respect to any Term A Lender
at any time, (a) such Lender's Term A Commitment at such time minus the
aggregate principal amount of all Term A Advances made by such Lender and
outstanding at such time.
"Unused Working Capital Commitment" means, with respect to any
Working Capital Lender at any time, (a) such Lender's Working Capital
Commitment at such time minus (b) the sum of (i) the aggregate principal
amount of all Working Capital Advances, Swing Line Advances and Letter of
Credit Advances made by such Lender (in its capacity as a Lender) and
outstanding at such time plus (ii) such Lender's Pro Rata Share of (A) the
aggregate Available Amount of all Letters of Credit outstanding at such
time, (B) the aggregate principal amount of all Letter of Credit Advances
made by the Issuing Bank pursuant to Section 2.03(c) and outstanding at
such time and (C) the aggregate principal amount of all Swing Line
Advances made by the Swing Line Bank pursuant to Section 2.01(e) and
outstanding at such time.
"Voting Interests" means shares of capital stock issued by a
corporation, or equivalent Equity Interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies, entitled
to vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been suspended
by the happening of such a contingency.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
ERISA, that is maintained for employees of any Loan Party or in respect of
which any Loan Party could have liability.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
"Working Capital Advance" has the meaning specified in Section
2.01(c).
"Working Capital Borrowing" means a borrowing consisting of
simultaneous Working Capital Advances of the same Type made by the Working
Capital Lenders.
"Working Capital Commitment" means, with respect to any Working
Capital Lender at any time, the amount set forth opposite such Lender's
name on Schedule I hereto under the caption "Working Capital Commitment"
or, if such Lender has entered into one or more Assignment and
Acceptances, set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 9.07(d) as such Lender's "Working
Capital Commitment", as such amount may be reduced at or prior to such
time pursuant to Section 2.05.
<PAGE>
"Working Capital Facility" means, at any time, the aggregate amount
of the Working Capital Lenders' Working Capital Commitments at such time.
"Working Capital Lender" means any Lender that has a Working Capital
Commitment.
"Working Capital Note" means a promissory note of the Borrower
payable to the order of any Working Capital Lender, in substantially the
form of Exhibit A-3 hereto, evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from the Working Capital Advances,
Letter of Credit Advances and Swing Line Advances made by such Lender, as
amended.
SECTION 1.02. Computation of Time Periods; Other Definitional
Provisions. In this Agreement and the other Loan Documents in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding". References in the Loan Documents to any agreement or contract "as
amended" shall mean and be a reference to such agreement or contract as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with its terms.
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(g) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances and the Letters of Credit. (a) The Term A
Advances. Each Term A Lender severally agrees, on the terms and conditions
hereinafter set forth, to make up to 12 advances (each a "Term A Advance") to
the Borrower on any Business Day during the period from the Effective Date until
October 30, 2000 in an amount for each such Advance not to exceed such Lender's
Unused Term A Commitment at such time. Each Term A Borrowing shall be in an
aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof and shall consist of Term A Advances made simultaneously by the Term A
Lenders ratably according to their Term A Commitments. Amounts borrowed under
this Section 2.01(a) and repaid or prepaid may not be reborrowed.
(b) The Term B Advances. Each Term B Lender severally agrees, on the
terms and conditions hereinafter set forth, to make two advances (each a "Term B
Advance") to the Borrower. The first Term B Borrowing shall be made on the
Effective Date in an aggregate
<PAGE>
amount not to exceed $107,500,000 and the second Term B Borrowing shall be made
on September 13, 1999 in an aggregate amount not to exceed $132,500,000
(provided that on the date of the second Term B Borrowing, the Borrower shall
deliver to each Term B Lender a Term B Note evidencing the Term B Advance made
by such Lender on such date). Each Term B Borrowing shall consist of Term B
Advances made simultaneously by the Term B Lenders ratably according to their
Term B Commitments. Amounts borrowed under this Section 2.01(b) and repaid or
prepaid may not be reborrowed.
(c) The Working Capital Advances. Each Working Capital Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each a "Working Capital Advance") to the Borrower from time to time on
any Business Day during the period from the date hereof until the Termination
Date in an amount for each such Advance not to exceed such Lender's Unused
Working Capital Commitment at such time. Each Working Capital Borrowing shall be
in an aggregate amount of $1,000,000 or an integral multiple of $1,000,000 in
excess thereof (other than a Borrowing the proceeds of which shall be used
solely to repay or prepay in full outstanding Letter of Credit Advances) and
shall consist of Working Capital Advances made simultaneously by the Working
Capital Lenders ratably according to their Working Capital Commitments. Within
the limits of each Working Capital Lender's Unused Working Capital Commitment in
effect from time to time, the Borrower may borrow under this Section 2.01(c),
prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(c).
(d) The Letters of Credit. The Issuing Bank agrees, on the terms and
conditions hereinafter set forth, to issue (or cause its Affiliate that is a
commercial bank to issue on its behalf) letters of credit (the "Letters of
Credit") for the account of the Borrower from time to time on any Business Day
during the period from the date hereof until 30 days before the Termination Date
in an aggregate Available Amount (i) for all Letters of Credit not to exceed at
any time the Issuing Bank's Letter of Credit Commitment at such time and (ii)
for each such Letter of Credit not to exceed the Unused Working Capital
Commitments of the Working Capital Lenders at such time. No Letter of Credit
shall have an expiration date (including all rights of the Borrower or the
beneficiary to require renewal) later than the earlier of 30 days before the
Termination Date and (A) in the case of a Standby Letter of Credit, one year
after the date of issuance thereof, but may by its terms be renewable annually
upon notice (a "Notice of Renewal") given to the Issuing Bank and the
Administrative Agent on or prior to any date for notice of renewal set forth in
such Letter of Credit but in any event at least three Business Days prior to the
date of the proposed renewal of such Standby Letter of Credit and upon
fulfillment of the applicable conditions set forth in Article III unless the
Issuing Bank has notified the Borrower (with a copy to the Administrative Agent)
on or prior to the date for notice of termination set forth in such Letter of
Credit but in any event at least 30 Business Days prior to the date of automatic
renewal of its election not to renew such Standby Letter of Credit (a "Notice of
Termination") and (B) in the case of a Trade Letter of Credit, 60 days after the
date of issuance thereof; provided that the terms of each Standby Letter of
Credit that is automatically renewable annually shall (x) require the Issuing
Bank to give the beneficiary named in such Standby Letter of Credit notice of
any Notice of Termination, (y) permit such beneficiary, upon receipt of such
notice, to draw under such Standby Letter of Credit prior to the date such
Standby Letter of Credit otherwise would have been automatically renewed and (z)
not permit the expiration date
<PAGE>
(after giving effect to any renewal) of such Standby Letter of Credit in any
event to be extended to a date later than 15 days before the Termination Date.
If either a Notice of Renewal is not given by the Borrower or a Notice of
Termination is given by the Issuing Bank pursuant to the immediately preceding
sentence, such Standby Letter of Credit shall expire on the date on which it
otherwise would have been automatically renewed; provided, however, that even in
the absence of receipt of a Notice of Renewal the Issuing Bank may in its
discretion, unless instructed to the contrary by the Administrative Agent or the
Borrower, deem that a Notice of Renewal had been timely delivered and in such
case, a Notice of Renewal shall be deemed to have been so delivered for all
purposes under this Agreement. Within the limits of the Letter of Credit
Facility, and subject to the limits referred to above, the Borrower may request
the issuance of Letters of Credit under this Section 2.01(d), repay any Letter
of Credit Advances resulting from drawings thereunder pursuant to Section
2.03(c) and request the issuance of additional Letters of Credit under this
Section 2.01(d).
(e) The Swing Line Advances. The Borrower may request the Swing Line
Bank to make, and the Swing Line Bank shall make, on the terms and conditions
hereinafter set forth, Swing Line Advances to the Borrower from time to time on
any Business Day during the period from the date hereof until the Termination
Date (i) in an aggregate amount not to exceed at any time outstanding
$10,000,000 (the "Swing Line Facility") and (ii) in an amount for each such
Swing Line Borrowing not to exceed the aggregate of the Unused Working Capital
Commitments of the Working Capital Lenders at such time. No Swing Line Advance
shall be used for the purpose of funding the payment of principal of any other
Swing Line Advance. Each Swing Line Borrowing shall be in an amount of
$1,000,000 or an integral multiple of $100,000 in excess thereof and shall be
made as a Base Rate Advance within the limits of the Swing Line Facility and
within the limits referred to in clause (ii) above, the Borrower may borrow
under this Section 2.01(e), repay pursuant to Section 2.04(d) or prepay pursuant
to Section 2.06(a) and reborrow under this Section 2.01(e).
(f) Clean-Down. Notwithstanding the provisions of Sections 2.01(c)
and 2.01(d), no Borrowings may be made under Section 2.01(c) and no Letters of
Credit may be issued under Section 2.01(d), during any Clean-Down Period, unless
the sum of the aggregate principal amount of Working Capital Advances and Letter
of Credit Advances plus the aggregate Available Amount of Letters of Credit
outstanding after giving effect to such Borrowing or the issuance of such Letter
of Credit shall not exceed $35,000,000.
SECTION 2.02. Making the Advances. (a) Except as otherwise provided
in Sections 2.02(b) and 2.03, each Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) on the third Business Day prior to
the date of the proposed Borrowing in the case of a Borrowing consisting of
Eurodollar Rate Advances, or the first Business Day prior to the date of the
proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances,
by the Borrower to the Administrative Agent, which shall give to each
Appropriate Lender prompt notice thereof by telex or telecopier. Each such
notice of a Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed
immediately in writing, or telex or telecopier, in substantially the form of
Exhibit B hereto, specifying therein the requested (i) date of such Borrowing,
(ii) Facility under which such Borrowing is to be made,
<PAGE>
(iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such
Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate
Advances, initial Interest Period for each such Advance. Each Appropriate Lender
shall, before 11:00 A.M. (New York City time) on the date of such Borrowing,
make available for the account of its Applicable Lending Office to the
Administrative Agent at the Administrative Agent's Account, in same day funds,
such Lender's ratable portion of such Borrowing in accordance with the
respective Commitments under the applicable Facility of such Lender and the
other Appropriate Lenders. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Administrative Agent will make such funds available to the Borrower by
crediting the Borrower's Account; provided, however, that, in the case of any
Working Capital Borrowing, the Administrative Agent shall first make a portion
of such funds equal to the aggregate principal amount of any Swing Line Advances
and Letter of Credit Advances made by the Swing Line Bank or the Issuing Bank,
as the case may be, and by any other Working Capital Lender and outstanding on
the date of such Working Capital Borrowing, plus interest accrued and unpaid
thereon to and as of such date, available to the Swing Line Bank or the Issuing
Bank, as the case may be, and such other Working Capital Lenders for repayment
of such Swing Line Advances and Letter of Credit Advances.
(b) Each Swing Line Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) on the date proposed Swing Line
Borrowing, by the Borrower to the Swing Line Bank and the Administrative Agent.
Each such notice of a Swing Line Borrowing (a "Notice of Swing Line Borrowing")
shall be by telephone, confirmed immediately in writing, or telex or telecopier,
specifying therein the requested (i) date of such Borrowing, (ii) amount of such
Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later
than the seventh day after the requested date of such Borrowing). The Swing Line
Bank will make the amount thereof available to the Administrative Agent at the
Administrative Agent's Account, in same day funds. After the Administrative
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Administrative Agent will make such funds
available to the Borrower by crediting the Borrower's Account. Upon written
demand by the Swing Line Bank, with a copy of such demand to the Administrative
Agent, each other Working Capital Lender shall purchase from the Swing Line
Bank, and the Swing Line Bank shall sell and assign to each such other Working
Capital Lender, such other Lender's Pro Rata Share of such outstanding Swing
Line Advance as of the date of such demand, by making available for the account
of its Applicable Lending Office to the Administrative Agent for the account of
the Swing Line Bank, by deposit to the Administrative Agent's Account, in same
day funds, an amount equal to the portion of the outstanding principal amount of
such Swing Line Advance to be purchased by such Lender. The Borrower hereby
agrees to each such sale and assignment. Each Working Capital Lender agrees to
purchase its Pro Rata Share of an outstanding Swing Line Advance on (i) the
Business Day on which demand therefor is made by the Swing Line Bank, provided
that notice of such demand is given not later than 11:00 A.M. (New York City
time) on such Business Day or (ii) the first Business Day succeeding such demand
if notice of such demand is given after such time. Upon any such assignment by
the Swing Line Bank to any other Working Capital Lender of a portion of a Swing
Line Advance, the Swing Line Bank represents and warrants to such other Lender
that the Swing Line Bank is the legal and beneficial owner of such interest
being assigned by it, but makes no other
<PAGE>
representation or warranty and assumes no responsibility with respect to such
Swing Line Advance, the Loan Documents or any Loan Party. If and to the extent
that any Working Capital Lender shall not have so made the amount of such Swing
Line Advance available to the Administrative Agent, such Working Capital Lender
agrees to pay to the Administrative Agent forthwith on demand such amount
together with interest thereon, for each day from the date of demand by the
Swing Line Bank until the date such amount is paid to the Administrative Agent,
at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent
such amount for the account of the Swing Line Bank on any Business Day, such
amount so paid in respect of principal shall constitute a Swing Line Advance
made by such Lender on such Business Day for the purposes of this Agreement, and
the outstanding principal amount of the Swing Line Advance made by the Swing
Line Bank shall be reduced by such amount on such Business Day.
(c) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
any Borrowing if the aggregate amount of such Borrowing is less than $1,000,000
or if the obligation of the Appropriate Lenders to make Eurodollar Rate Advances
shall then be suspended pursuant to Section 2.09 or 2.10 and (ii) the Term A
Advances may not be outstanding as part of more than 5 separate Borrowings, the
Term B Advances may not be outstanding as part of more than 5 separate
Borrowings and the Working Capital Advances may not be outstanding as part of
more than 5 separate Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line Borrowing
shall be irrevocable and binding on the Borrower. In the case of any Borrowing
that the related Notice of Borrowing specifies is to be comprised of Eurodollar
Rate Advances, the Borrower shall indemnify each Appropriate Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Borrowing for such
Borrowing the applicable conditions set forth in Article III, including, without
limitation, any loss (but, in any event, excluding loss of anticipated profits
or margin), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(e) Unless the Administrative Agent shall have received notice from
a Lender prior to the date of any Borrowing under a Facility under which such
Lender has a Commitment that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay or pay to the Administrative Agent
forthwith on demand such corresponding amount and to pay interest thereon, for
each day from the date such amount is made available to the Borrower until the
date such amount is repaid or paid to the Administrative Agent, at (i) in the
case of the Borrower, the interest rate applicable at such time under Section
2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall pay to the
<PAGE>
Administrative Agent such corresponding amount, such amount so paid shall
constitute such Lender's Advance as part of such Borrowing for all purposes.
(f) The failure of any Lender to make the Advance to be made by it
as part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Advance on the date of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be
issued upon notice, given not later than 11:00 A.M. (New York City time) on the
fifth Business Day prior to the date of the proposed issuance of such Letter of
Credit (or such later Business Day as the Issuing Bank may agree), by the
Borrower to the Issuing Bank, which shall give to the Administrative Agent and
each Working Capital Lender prompt notice thereof by telex or telecopier. Each
such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be
by telephone, confirmed immediately in writing, or telex or telecopier,
specifying therein the requested (A) date of such issuance (which shall be a
Business Day), (B) Available Amount of such Letter of Credit, (C) expiration
date of such Letter of Credit, (D) name and address of the beneficiary of such
Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied
by such application and agreement for letter of credit as the Issuing Bank may
specify to the Borrower for use in connection with such requested Letter of
Credit (a "Letter of Credit Agreement"). If (x) the requested form of such
Letter of Credit is acceptable to the Issuing Bank in its sole discretion and
(y) it has not received notice of objection to such issuance from the Required
Lenders, such Issuing Bank will, upon fulfillment of the applicable conditions
set forth in Article III, make such Letter of Credit available to the Borrower
at its office referred to in Section 9.02 or as otherwise agreed with the
Borrower in connection with such issuance. In the event and to the extent that
the provisions of any Letter of Credit Agreement shall conflict with this
Agreement, the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish (A) to
the Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued during the
previous week and drawings during such week under all Letters of Credit issued
by the Issuing Bank, (B) to each Working Capital Lender on the first Business
Day of each month a written report summarizing issuance and expiration dates of
Letters of Credit during the preceding month and drawings during such month
under all Letters of Credit issued and (C) to the Administrative Agent and each
Working Capital Lender on the first Business Day of each calendar quarter a
written report setting forth the average daily aggregate Available Amount during
the preceding calendar quarter of all Letters of Credit issued.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a
draft drawn under the Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Letter of Credit Advance, which
shall be a Base Rate Advance, in the amount of such draft. Upon written demand
by the Issuing Bank, with a copy of such demand to
<PAGE>
the Administrative Agent, each Working Capital Lender shall purchase from the
Issuing Bank, and the Issuing Bank shall sell and assign to each such Working
Capital Lender, such Lender's Pro Rata Share of such outstanding Letter of
Credit Advance as of the date of such purchase, by making available for the
account of its Applicable Lending Office to the Administrative Agent for the
account of the Issuing Bank, by deposit to the Administrative Agent's Account,
in same day funds, an amount equal to the portion of the outstanding principal
amount of such Letter of Credit Advance to be purchased by such Lender. Promptly
after receipt thereof, the Administrative Agent shall transfer such funds to the
Issuing Bank. The Borrower hereby agrees to each such sale and assignment. Each
Working Capital Lender agrees to purchase its Pro Rata Share of an outstanding
Letter of Credit Advance on (i) the Business Day on which demand therefor is
made by the Issuing Bank, provided that notice of such demand is given not later
than 11:00 A.M. (New York City time) on such Business Day, or (ii) the first
Business Day next succeeding such demand if notice of such demand is given after
such time. Upon any such assignment by the Issuing Bank to any Working Capital
Lender of a portion of a Letter of Credit Advance, the Issuing Bank represents
and warrants to such other Lender that the Issuing Bank is the legal and
beneficial owner of such interest being assigned by it, free and clear of any
liens, but makes no other representation or warranty and assumes no
responsibility with respect to such Letter of Credit Advance, the Loan Documents
or any Loan Party. If and to the extent that any Working Capital Lender shall
not have so made the amount of such Letter of Credit Advance available to the
Administrative Agent, such Working Capital Lender agrees to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by the Issuing Bank until the date
such amount is paid to the Administrative Agent, at the Federal Funds Rate for
its account or the account of the Issuing Bank, as applicable. If such Working
Capital Lender shall pay to the Administrative Agent such amount for the account
of the Issuing Bank on any Business Day, such amount so paid in respect of
principal shall constitute a Letter of Credit Advance made by such Lender on
such Business Day for purposes of this Agreement, and the outstanding principal
amount of the Letter of Credit Advance made by the Issuing Bank shall be reduced
by such amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any
Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Term A Advances. The
Borrower shall repay to the Administrative Agent for the ratable account of the
Term A Lenders the aggregate outstanding principal amount of the Term A Advances
outstanding on the following dates in an amount equal to the percentage set
forth below for such date of the aggregate amount of the Term A Advances
outstanding on December 31, 2000 (which amounts shall be reduced as a result of
the application of prepayments in accordance with the order of priority set
forth in Section 2.06):
Date Percentage
---- ----------
December 31, 2000 0.33%
March 31, 2001 0.33%
<PAGE>
June 30, 2001 0.34%
September 30, 2001 1.25%
December 31, 2001 1.25%
March 31, 2002 1.25%
June 30, 2002 1.25%
September 30, 2002 2.50%
December 31, 2002 2.50%
March 31, 2003 2.50%
June 30, 2003 2.50%
September 30, 2003 3.75%
December 31, 2003 3.75%
March 31, 2004 3.75%
June 30, 2004 3.75%
September 30, 2004 6.25%
December 31, 2004 6.25%
March 31, 2005 6.25%
June 30, 2005 6.25%
September 30, 2005 11.00%
December 31, 2005 11.00%
March 31, 2006 11.00%
July 15, 2006 11.00%
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the Term A Advances outstanding on such date.
(b) Term B Advances. The Borrower shall repay to the Administrative
Agent for the ratable account of the Term B Lenders the aggregate outstanding
principal amount of the Term B Advances outstanding on the following dates in an
amount equal to the percentage set forth below for such date of the aggregate
amount of the Term B Advance outstanding on September 13, 1999 (which amounts
shall be reduced as a result of the application of prepayments in accordance
with the order of priority set forth in Section 2.06):
Date Percentage
---- ----------
September 30, 1999 0.25%
December 31, 1999 0.25%
March 31, 2000 0.25%
June 30, 2000 0.25%
September 30, 2000 0.25%
December 31, 2000 0.25%
March 31, 2001 0.25%
June 30, 2001 0.25%
September 30, 2001 0.25%
December 31, 2001 0.25%
March 31, 2002 0.25%
June 30, 2002 0.25%
September 30, 2002 0.25%
December 31, 2002 0.25%
<PAGE>
March 31, 2003 0.25%
June 30, 2003 0.25%
September 30, 2003 0.25%
December 31, 2003 0.25%
March 31, 2004 0.25%
June 30, 2004 0.25%
September 30, 2004 3.75%
December 31, 2004 3.75%
March 31, 2005 3.75%
June 30, 2005 3.75%
September 30, 2005 20.00%
December 31, 2005 20.00%
March 31, 2006 20.00%
July 15, 2006 20.00%
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the Term B Advances outstanding on such date.
(c) Working Capital Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Working Capital Lenders on
the Termination Date the aggregate principal amount of the Working Capital
Advances then outstanding.
(d) Swing Line Advances. The Borrower shall repay to the
Administrative Agent for the account of the Swing Line Bank and each other
Working Capital Lender that made a Swing Line Advance the outstanding principal
amount of each Swing Line Advance made by each of them on the earlier of the
maturity date specified in the applicable Notice of Swing Line Borrowing (which
maturity shall be no later than the seventh day after the requested date of such
Borrowing) and the Termination Date.
(e) Letter of Credit Advances. (i) The Borrower shall repay to the
Administrative Agent for the account of the Issuing Bank and each other Working
Capital Lender that has made a Letter of Credit Advance on the earlier of demand
and the Termination Date the outstanding principal amount of each Letter of
Credit Advance made by each of them.
(ii) The Obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances (it being understood
that any such payment by the Borrower is without prejudice to, and does not
constitute a waiver of, any rights the Borrower might have or might acquire
(including, without limitation, against the Issuing Bank) as a result of the
payment by the Issuing Bank of any draft or the reimbursement by the Borrower
thereof):
<PAGE>
(A) any lack of validity or enforceability of any Loan Document, any
Letter of Credit Agreement, any Letter of Credit or any other agreement or
instrument relating thereto (all of the foregoing being, collectively, the
"L/C Related Documents");
(B) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of
any L/C Related Document or any other amendment or waiver of or any
consent to departure from all or any of the L/C Related Documents;
(C) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for which any such
beneficiary or any such transferee may be acting), any Issuing Bank or any
other Person, whether in connection with the transactions contemplated by
the L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(E) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any Hotel Collateral
or other collateral, or any release or amendment or waiver of or consent
to departure from the Guaranties or any other guarantee, for all or any of
the Obligations of the Borrower in respect of the L/C Related Documents;
or
(G) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor.
(f) Term C Advances. The Borrower shall repay to the Administrative
Agent for the ratable account of the Term C Lenders the aggregate
principal amount of the Term C Capital Advances on the dates and in the
amounts set forth in the Term C Supplement. .
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. The Borrower may, upon at least five Business Days' notice to the
Administrative Agent, terminate in whole or reduce in part the unused portions
of the Term B Commitments, the Term C Commitments and the Letter of Credit
Facility, the Unused Term A Commitments and the Unused Working Capital
Commitments; provided, however, that each partial reduction of a Facility (i)
shall be in an aggregate amount of $1,000,000 or an integral multiple of
$1,000,000 in excess thereof and (ii) shall be made ratably among the
Appropriate Lenders in accordance with their Commitments with respect to such
Facility.
<PAGE>
(b) Mandatory. (i) On each date of a Term A Borrowing, the aggregate
Term A Commitments of the Lenders shall be automatically and permanently
reduced, on a pro rata basis, by an amount equal to the amount of such Term A
Borrowing.
(ii) On the date of each Term B Borrowing, the aggregate Term B
Commitments of the Term B Lenders shall be automatically and permanently
reduced, on a pro rata basis, by an amount equal to the amount of such Term B
Borrowing.
(iii) The Letter of Credit Facility shall be permanently reduced
from time to time on the date of each reduction in the Working Capital Facility
by the amount, if any, by which the amount of the Letter of Credit Facility
exceeds the Working Capital Facility after giving effect to such reduction of
the Working Capital Facility.
(iv) The Working Capital Facility shall be automatically and
permanently reduced, on a pro rata basis, on each date on which prepayment
thereof is required to be made pursuant to Section 2.06(b)(i) or (ii) in an
amount equal to the applicable Reduction Amount, provided that each such
reduction of the Working Capital Facility shall be made ratably among the
Working Capital Lenders in accordance with their Working Capital Commitments.
SECTION 2.06. Prepayments. (a) Optional. The Borrower may, upon at
least one Business Day's notice in the case of Base Rate Advances and three
Business Days' notice in the case of Eurodollar Rate Advances, in each case to
the Administrative Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding aggregate principal amount of the Advances comprising part of
the same Borrowing in whole or ratably in part, together with (i) accrued
interest to the date of such prepayment on the aggregate principal amount
prepaid and (ii) in the case of any such prepayment on or prior to the third
anniversary of the Effective Date of any Advances other than Working Capital
Advances or Letter of Credit Advances, a premium of (a) 3% of the aggregate
principal amount so prepaid, if such prepayment is made on or prior to the first
anniversary of the Effective Date, (b) 2% of the aggregate principal amount so
prepaid, if such prepayment is made on or prior to the second anniversary of the
Effective Date and (c) 1% of the aggregate principal amount so prepaid, if such
prepayment is made on or prior to the third anniversary of the Effective Date;
provided, however, that (x) each partial prepayment shall be in an aggregate
principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof and (y) if any prepayment of a Eurodollar Rate Advance is made on a date
other than the last day of an Interest Period for such Advance, the Borrower
shall also pay any amounts owing pursuant to Section 9.04(c). Any prepayment of
the Term Facilities with the Net Cash Proceeds from the incurrence or issuance
of any Debt by the Parent and its Subsidiaries or any refinancing of the Term
Facilities shall be deemed to be an optional prepayment for purposes of the
premium referred to in clause (ii) above.
(b) Mandatory. (i) The Borrower shall, on the 90th day following the
end of each Fiscal Year, prepay an aggregate principal amount of the Advances
comprising part of the same Borrowings and deposit an amount in the L/C Cash
Collateral Account in an amount equal
<PAGE>
to 50% of the amount of Excess Cash Flow for such Fiscal Year. Each such
prepayment shall be applied as follows:
first, subject to subsection (c) below, ratably to the Term A
Facility, the Term B Facility and the Term C Facility and, in each case,
ratably to the principal installments thereof, and
second, to the extent that no Term Advances remain outstanding,
permanently to reduce the Working Capital Facility as set forth in clause
(vi) below.
(ii) The Borrower shall, on the date of receipt of the Net Cash
Proceeds by the Parent or any of its Subsidiaries from (A) the sale, lease,
transfer or other disposition of any assets of the Parent or any of its
Subsidiaries but excluding any sale, lease, transfer or other disposition of
assets pursuant to clause (i), (ii) or (iii) of Section 5.02(e), (B) the
incurrence or issuance by the Parent or any of its Subsidiaries of any Debt
(other than any Debt permitted by Section 5.02(b) as of the date hereof), (C)
the sale or issuance by the Parent or any of its Subsidiaries of any Equity
Interests (including, without limitation, receipt of any capital contribution,
but excluding any such proceeds that are applied to redeem or repay the CRESTS)
and (D) any Extraordinary Receipt received by or paid to or for the account of
the Parent or any of its Subsidiaries and not otherwise included in clause (A),
(B) or (C) above, prepay an aggregate principal amount of the Advances
comprising part of the same Borrowings and deposit an amount in the L/C Cash
Collateral Account in an amount equal to (x) in the case of Net Cash Proceeds
received pursuant to clause (A), (B) or (D) above, the amount of such Net Cash
Proceeds and (y) in the case of Net Cash Proceeds received pursuant to clause
(C) above, 50% of the amount of such Net Cash Proceeds. To the extent Net Cash
Proceeds are not required to be applied pursuant to this Section 2.06(b)(ii) as
a result of the last proviso of the definition of "Net Cash Proceeds", then the
remaining portion of such Net Cash Proceeds not reinvested in the business of
the Parent and its Subsidiaries as required by the last proviso of the
definition of "Net Cash Proceeds" by the last day of such applicable period
shall be applied to the prepayment of the Advances on such last day as otherwise
required by this Section 2.06(b)(ii). Each such prepayment which is made shall
be applied as follows:
first, subject to subsection (c) below, ratably to the Term A
Facility, the Term C Facility and the Term C Facility and, in each case,
ratably to the principal installments thereof, and
second, to the extent that no Term Advances remain outstanding,
permanently to reduce the Working Capital Facility as set forth in clause
(vi) below.
(iii) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Working Capital Advances comprising part of the same
Borrowings and the Letter of Credit Advances and deposit an amount in the L/C
Cash Collateral Account in an amount equal to the amount by which (A) the sum of
the aggregate principal amount of (x) the Working Capital Advances, (y) the
Letter of Credit Advances and (z) the Swing Line Advances then
<PAGE>
outstanding plus the aggregate Available Amount of all Letters of Credit then
outstanding exceeds the Working Capital Facility on such Business Day.
(iv) The Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an amount
sufficient to cause the aggregate amount on deposit in the L/C Cash Collateral
Account to equal the amount by which the aggregate Available Amount of all
Letters of Credit then outstanding exceeds the Letter of Credit Facility on such
Business Day.
(v) The Borrower shall pay to the Administrative Agent, on the first
day of each Clean-Down Period, an amount equal to the amount by which the
aggregate principal amount of the Working Capital Advances, the Letter of Credit
Advances and the Swing Line Advances plus the aggregate Available Amount of
outstanding Letters of Credit exceeds $35,000,000, first to be applied to prepay
the Working Capital Advances and the Letter of Credit Advances and second to be
deposited in the L/C Cash Collateral Account.
(vi) Prepayments of the Working Capital Facility made pursuant to
clause (i), (ii), (iii) or (v) above shall be first applied to prepay Letter of
Credit Advances then outstanding until such Advances are paid in full, second
applied to prepay Swing Line Advances then outstanding until such Advances are
paid in full, third applied to prepay Working Capital Advances then outstanding
comprising part of the same Borrowings until such Advances are paid in full and
fourth deposited in the L/C Cash Collateral Account to cash collateralize 100%
of the Available Amount of the Letters of Credit then outstanding; and, in the
case of prepayments of the Working Capital Facility required pursuant to clause
(i) or (ii) above, the amount remaining (if any) after the prepayment in full of
the Advances then outstanding and the 100% cash collateralization of the
aggregate Available Amount of Letters of Credit then outstanding (the sum of
such prepayment amounts, cash collateralization amounts and remaining amount
being referred to herein as the "Reduction Amount") may be retained by the
Borrower and the Working Capital Facility shall be permanently reduced as set
forth in Section 2.05(b)(iv). Upon the drawing of any Letter of Credit for which
funds are on deposit in the L/C Cash Collateral Account, such funds shall be
applied to reimburse the relevant Issuing Bank or Working Capital Lenders, as
applicable.
(vii) All prepayments under this subsection (b) shall be made
together with accrued interest to the date of such prepayment on the principal
amount prepaid.
(c) Term B Opt-Out. With respect to any prepayment of the Term B
Advances, any Term B Lender, at its option, may elect not to accept such
prepayment, in which event the provisions of the next sentence shall apply. Any
Term B Lender may elect not to accept its ratable share of the prepayment
referred to in any Prepayment Notice, by notice given to the Agent not later
than 11:00 A.M. (New York City time) on the first Business Day prior to the
scheduled Prepayment Date (such Term B Lender being a "Declining Lender"). On
the Prepayment Date an amount equal to that portion of the Prepayment Amount
available to prepay Term B Lenders (less any amounts that would otherwise be
payable to the Declining Lenders) shall be applied to prepay Term B Advances
owing to Term B Lenders other than Declining
<PAGE>
Lenders and any amounts that would otherwise have been applied to prepay Term B
Advances owing to Declining Lenders shall instead be applied ratably to prepay
the remaining Term Advances as provided in Sections 2.06(a) and (b); provided,
however, that on prepayment in full of Term Advances owing to Term Lenders other
than Declining Lenders, the remainder of any Prepayment Amount shall be applied
ratably to prepay Term B Advances owing to Declining Lenders.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower shall
pay interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a
Base Rate Advance, a rate per annum equal at all times to the sum of (A)
the Base Rate in effect from time to time plus (B) the Applicable Margin
in effect from time to time, payable in arrears quarterly on the last day
of each March, June, September and December during such periods and on the
date such Base Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such Advance
is a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (A) the Eurodollar
Rate for such Interest Period for such Advance plus (B) the Applicable
Margin in effect on the first day of such Interest Period, payable in
arrears on the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, on each day that occurs
during such Interest Period every three months from the first day of such
Interest Period and on the date such Eurodollar Rate Advance shall be
Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance
of a Default, the Borrower shall pay interest on (i) the unpaid principal amount
of each Advance owing to each Lender, payable in arrears on the dates referred
to in clause (a)(i) or (a)(ii) above and on demand, at a rate per annum equal at
all times to 2% per annum above the rate per annum required to be paid on such
Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest
extent permitted by law, the amount of any interest, fee or other amount payable
under the Loan Documents that is not paid when due, from the date such amount
shall be due until such amount shall be paid in full, payable in arrears on the
date such amount shall be paid in full and on demand, at a rate per annum equal
at all times to 2% per annum above the rate per annum required to be paid, in
the case of interest, on the Type of Advance on which such interest has accrued
pursuant to clause (a)(i) or (a)(ii) above and, in all other cases, on Base Rate
Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Period and Interest Rate. Promptly after
receipt of a Notice of Borrowing pursuant to Section 2.02(a), a notice of
Conversion pursuant to Section 2.09 or a notice of selection of an Interest
Period pursuant to the terms of the definition of "Interest Period", the
Administrative Agent shall give notice to the Borrower and each Appropriate
Lender of the applicable Interest Period and the applicable interest rate
determined by the Administrative Agent for purposes of clause (a)(i) or (a)(ii)
above.
<PAGE>
(d) Special Canadian Provision(s). For purposes of the Interest Act
(Canada), (i) whenever any interest or fee under any Loan Document is calculate
using a rate based on a year of 360 days or 365 days, as the case may be, the
rate determined pursuant to such calculation, when expressed as an annual rate,
is equivalent to (x) the applicable rate based on a year of 360 days or 365
days, as the case may be, (y) multiplied by the actual number of days in the
calendar year in which the period for which such interest or fee is payable (or
compounded) ends, and (z) divided by 360 or 365, as the case may be, and (ii)
the principle of deemed reinvestment of interest does not apply to any interest
calculation under any Loan Document.
SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to
the Administrative Agent for the account of the Lenders a commitment fee, from
the date hereof in the case of each Initial Lender and from the effective date
specified in the Assignment and Acceptance pursuant to which it became a Lender
in the case of each other Lender until the Termination Date, payable quarterly
in arrears on the last day of each March, June, September and December,
commencing September 30, 1999, and on the Termination Date, at the rate of (i)
in respect of the Term B Facility, 1% per annum on the average daily unused
portion of each Appropriate Lender's Term B Commitment during such quarter and
(ii) in respect of the Term A Facility and the Working Capital Facility, at any
time (x) that the average aggregate amount of Advances outstanding under the
Working Capital Facility and the Term A Facility is less than 50% of the Term A
Commitments and the Working Capital Commitments, 1% per annum, (y) that the
average aggregate amount of Advances outstanding under the Working Capital
Facility and the Term A Facility during such quarter is greater than or equal to
50%, but less than 75%, of the Term A Commitments and the Working Capital
Commitments, 3/4 of 1% per annum and (y) that the average aggregate amount of
Advances outstanding under the Working Capital Facility and the Term A Facility
during such quarter is greater than or equal to 75% of the Term A Commitments
and the Working Capital Commitments, 1/2 of 1% per annum, on the average daily
unused portion of each Appropriate Lender's Term A Commitment and Working
Capital Commitment during such quarter; provided, however, that any commitment
fee accrued with respect to any of the Commitments of a Defaulting Lender during
the period prior to the time such Lender became a Defaulting Lender and unpaid
at such time shall not be payable by the Borrower so long as such Lender shall
be a Defaulting Lender except to the extent that such commitment fee shall
otherwise have been due and payable by the Borrower prior to such time; and
provided further that no commitment fee shall accrue on any of the Commitments
of a Defaulting Lender so long as such Lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the
Administrative Agent for the account of each Working Capital Lender a
commission, payable in arrears quarterly on the last day of each March, June,
September and December, commencing September 30, 1999, and on the Termination
Date, on such Lender's Pro Rata Share of the average daily aggregate Available
Amount during such quarter of all Letters of Credit outstanding from time to
time at a rate equal to the Applicable Margin.
(ii) The Borrower shall pay to each Issuing Bank, for its own
account, an issuance fee for each Letter of Credit issued by such Issuing Bank
in an amount equal to 1/8th of
<PAGE>
1% of the Available Amount of such Letter of Credit on the date of issuance of
such Letter of Credit, payable on such date and together with such other
commissions, fronting fees, transfer fees and other fees and charges in
connection with the issuance or administration of each Letter of Credit as the
Borrower and such Issuing Bank shall agree.
(c) Agents' Fees. The Borrower shall pay to each Agent for its own
account such fees as may from time to time be agreed between the Borrower and
such Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The Borrower may
on any Business Day, upon notice given to the Administrative Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Conversion and subject to the provisions of Section 2.10,
Convert all or any portion of the Advances of one Type comprising the same
Borrowing into Advances of the other Type; provided, however, that any
Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances,
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount not less than the minimum amount specified in Section 2.02(b), no
Conversion of any Advances shall result in more separate Borrowings than
permitted under Section 2.02(b) and each Conversion of Advances comprising part
of the same Borrowing under any Facility shall be made ratably among the
Appropriate Lenders in accordance with their Commitments under such Facility.
Each such notice of Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Advances to be Converted and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
initial Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $1,000,000, such
Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, be continued as a
Eurodollar Rate Advance having an Interest Period of one month.
(iii) Upon the occurrence and during the continuance of any Event of
Default, if so requested by the Required Lenders, (x) each Eurodollar Rate
Advance will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders
to make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements
<PAGE>
included in the Eurodollar Rate Reserve Percentage) in or in the interpretation
of any law or regulation or (ii) the compliance with any guideline or request
from any central bank or other governmental authority (whether or not having the
force of law), there shall be any increase in the cost to any Lender Party of
agreeing to make or of making, funding or maintaining Eurodollar Rate Advances
or of agreeing to issue or of issuing or maintaining or participating in Letters
of Credit or of agreeing to make or of making or maintaining Letter of Credit
Advances (excluding, for purposes of this Section 2.10, any such increased costs
resulting from (x) Taxes or Other Taxes (as to which Section 2.12 shall govern)
and (y) changes in the basis of taxation of overall net income or overall gross
income by the United States or by the foreign jurisdiction or state under the
laws of which such Lender Party is organized or has its Applicable Lending
Office or any political subdivision thereof), then the Borrower shall from time
to time, upon demand by such Lender Party (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender Party additional amounts sufficient to compensate such Lender Party for
such increased cost; provided, however, that a Lender Party claiming additional
amounts under this Section 2.10(a) agrees to use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to designate a
different Applicable Lending Office if the making of such a designation would
avoid the need for, or reduce the amount of, such increased cost that may
thereafter accrue and would not, in the reasonable judgment of such Lender
Party, be otherwise disadvantageous to such Lender Party. A certificate as to
the amount of such increased cost, setting forth the basis of the calculation of
such amount submitted to the Borrower by such Lender Party, shall be conclusive
and binding for all purposes, absent manifest error.
(b) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
amount of capital required or expected to be maintained by any Lender Party or
any corporation controlling such Lender Party as a result of or based upon the
existence of such Lender Party's commitment to lend or to issue or participate
in Letters of Credit hereunder and other commitments of such type or the
issuance or maintenance of or participation in the Letters of Credit (or similar
contingent obligations), then, upon demand by such Lender Party or such
corporation (with a copy of such demand to the Administrative Agent), the
Borrower shall pay to the Administrative Agent for the account of such Lender
Party, from time to time as specified by such Lender Party, additional amounts
sufficient to compensate such Lender Party in the light of such circumstances,
to the extent that such Lender Party reasonably determines such increase in
capital to be allocable to the existence of such Lender Party's commitment to
lend or to issue or participate in Letters of Credit hereunder or to the
issuance or maintenance of or participation in any Letters of Credit. A
certificate as to such amounts setting forth the basis of the calculation of
such amount, submitted to the Borrower by such Lender Party, shall be conclusive
and binding for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, the Required Lenders notify the Administrative Agent that the
Eurodollar Rate for any Interest Period for such Advances will not adequately
reflect the cost to such Lenders of making, funding or maintaining their
Eurodollar Rate Advances for such Interest Period, the Administrative Agent
<PAGE>
shall forthwith so notify the Borrower and the Appropriate Lenders, whereupon
(i) each such Eurodollar Rate Advance under such Facility will automatically, on
the last day of the then existing Interest Period therefor, Convert into a Base
Rate Advance and (ii) the obligation of the Appropriate Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower that such Lenders have determined
that the circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Administrative Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist; provided, however, that, before making any such
demand, such Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to designate a different
Eurodollar Lending Office if the making of such a designation would allow such
Lender or its Eurodollar Lending Office to continue to perform its obligations
to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar
Rate Advances and would not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender.
(e) If for any reason Eurodollar Rate Advances shall no longer be
available, the parties hereto will promptly negotiate in good faith to
substitute a determination of interest rates based on the federal funds rate
that substantially replicates the determination of interest rates based on the
Eurodollar Rate.
SECTION 2.11. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes, irrespective of any right of
counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars
to the Administrative Agent at the Administrative Agent's Account in same day
funds, with payments being received by the Administrative Agent after such time
being deemed to have been received on the next succeeding Business Day. The
Administrative Agent will promptly thereafter cause like funds to be distributed
(i) if such payment by the Borrower is in respect of principal, interest,
commitment fees or any other Obligation then payable hereunder and under the
Notes to more than one Lender Party, to such Lender Parties for the account of
their respective Applicable Lending Offices ratably in accordance with the
amounts of such respective Obligations then payable to such Lender Parties and
(ii) if such payment by the Borrower is in respect of any Obligation then
payable hereunder to one Lender Party, to such Lender Party for the account of
its Applicable Lending Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the
<PAGE>
Register pursuant to Section 9.07(d), from and after the effective date of such
Assignment and Acceptance, the Administrative Agent shall make all payments
hereunder and under the Notes in respect of the interest assigned thereby to the
Lender Party assignee thereunder, and the parties to such Assignment and
Acceptance shall make all appropriate adjustments in such payments for periods
prior to such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender Party and each of its
Affiliates, if and to the extent payment owed to such Lender Party is not made
when due hereunder or, in the case of a Lender, under the Note held by such
Lender, to charge from time to time, to the fullest extent permitted by law,
against any or all of the Borrower's accounts with such Lender Party or such
Affiliate any amount so due.
(c) All computations of interest based on the Base Rate and of fees
and Letter of Credit commissions shall be made by the Administrative Agent on
the basis of a year of 365 or 366 days, as the case may be, and all computations
of interest based on the Eurodollar Rate or the Federal Funds Rate shall be made
by the Administrative Agent on the basis of a year of 360 days, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest, fees or commissions are
payable. Each determination by the Administrative Agent of an interest rate, fee
or commission hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such Lender Party. If
and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
(f) If the Administrative Agent receives funds for application to
the Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent may, but shall not
be obligated to, elect to distribute such
<PAGE>
funds to each Lender Party ratably in accordance with such Lender Party's
proportionate share of the principal amount of all outstanding Advances and the
Available Amount of all Letters of Credit then outstanding, in repayment or
prepayment of such of the outstanding Advances or other obligations owed to such
Lender Party, and for application to such principal installments, as the
Administrative Agent shall direct.
SECTION 2.12. Taxes. (a) Any and all payments by, or for the account
of, the Borrower and the other Loan Parties hereunder and under, or in respect
of, the Notes shall be made, in accordance with Section 2.11, free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto
imposed by the United States or any other jurisdiction in which the Borrower or
any of its Subsidiaries is subject to tax on a net income basis, excluding,
income taxes, branch profit taxes or franchise taxes imposed on any Lender Party
or Agent as a result of any present or former connection between such Lender
Party or Agent, as the case may be, and the jurisdiction imposing such income
taxes, branch profit taxes or franchise taxes, other than any such connection
arising from such Lender Party or Agent having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or any
Note or exercised any rights or remedies or otherwise collected amounts due
hereunder or in respect of any Note or from owning, holding or transferring any
Note (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities in respect of payments hereunder or under the Notes
being hereinafter referred to as "Taxes"). If the Borrower shall be required by
law to deduct any taxes, levies, imposts, deductions, charges, withholdings or
liabilities from or in respect of any sum payable hereunder or under any Note to
any Lender Party or any Agent, (i) if such deduction is on account of Taxes, the
sum payable by the Borrower shall be increased as may be necessary so that after
the Borrower and the Administrative Agent have made all required deductions
(including deductions applicable to additional sums payable under this Section
2.12) such Lender Party or such Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make all such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property, transfer or similar taxes, charges or levies
imposed by the United States or any other jurisdiction in which the Borrower or
any of its Subsidiaries is subject to tax on a net income basis that arise from
any payment made hereunder or under the Notes or from the execution, delivery or
registration of, performance under, or otherwise with respect to, this Agreement
or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower shall pay each Lender Party and each Agent the full
amount of Taxes and Other Taxes, imposed on or paid by such Lender Party or such
Agent (as the case may be) and any liability (including penalties, additions to
tax, interest and expenses) arising therefrom or with respect thereto. This
payment shall be made within 30 days from the date such Lender Party or such
Agent (as the case may be) makes written demand therefor. Such written demand
shall be in a form providing reasonable detail and shall, when delivered to the
Borrower by a Lender Party or such Agent (as the case may be), be conclusive
absent manifest error.
<PAGE>
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 9.02, the original or a certified copy of a receipt (or, if such a
receipt is not available, such other written documentation reasonably
satisfactory to the Administrative Agent) evidencing such payment. In the case
of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or by or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Administrative Agent, at
such address, an opinion of counsel acceptable to the Administrative Agent
stating that such payment is exempt from Taxes. For purposes of subsections (d)
and (e) of this Section 2.12, the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall on or prior to the date of its execution and
delivery of this Agreement, in the case of each Initial Lender Party, and on the
date of the Assignment and Acceptance pursuant to which it becomes a Lender
Party, in the case of each other Lender Party, and from time to time thereafter
as requested in writing by the Borrower (but only so long thereafter as such
Lender Party remains lawfully able to do so), provide each of the Administrative
Agent and the Borrower with two original Internal Revenue Service forms 1001,
4224, form W-8, W-8ECI or W-8BEN (and, if such Lender Party delivers a form W-8
or W-8BEN, a certificate representing that such Lender Party is not a "bank" for
purposes of Section 881(c) of the Internal Revenue Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue
Code) of the Borrower and is not a controlled foreign corporation related to the
Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue
Code)), as appropriate, or any successor or other form prescribed by the
Internal Revenue Service, certifying that such Lender Party is exempt from or
entitled to a reduced rate of United States withholding tax on payments pursuant
to this Agreement or the Notes or, in the case of a Lender Party providing a
form W-8 or W-8BEN, certifying that such Lender Party is a foreign corporation,
partnership, estate or trust. If the forms provided by a Lender Party at the
time such Lender Party first becomes a party to this Agreement indicate a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered excluded from Taxes unless and until such Lender Party
provides the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such forms; provided, however, that if, at the effective
date of the Assignment and Acceptance pursuant to which a Lender Party becomes a
party to this Agreement, the Lender Party assignor was entitled to payments
under subsection (a) of this Section 2.12 in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be imposed in the future or other amounts otherwise includable in Taxes) United
States withholding tax, if any, applicable with respect to the Lender Party
assignee on such date. In addition, each Lender Party shall, at the written
request of the Borrower, provide each of the Administrative Agent and the
Borrower with such form or document, if any, as may be applicable and required
to avoid or minimize the imposition or assessment of Taxes by any jurisdiction
other than the
<PAGE>
United States, but only to the extent that such Lender Party shall, under then
applicable law, be legally able to do so. If any form or document referred to in
this subsection (e) requires the disclosure of information, other than
information necessary to compute the tax payable and information required by
Internal Revenue Service form 1001, 4224, W-8, W-8BEN or W-8ECI (or the related
certificate described above) or comparable successor forms, that the applicable
Lender Party reasonably considers to be confidential, such Lender Party shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information.
(f) For any period with respect to which a Lender Party has failed
to provide the Borrower with the appropriate form described in subsection (e)
above (other than if such failure is due to a change in law occurring after the
date on which a form originally was required to be provided or if such form
otherwise is not required under subsection (e) above), such Lender Party shall
not be entitled to the benefits of subsection (a) or (c) of this Section 2.12
with respect to Taxes imposed by the United States by reason of such failure;
provided, however, that should a Lender Party become subject to Taxes because of
its failure to deliver a form required hereunder, the Borrower shall take such
steps as such Lender Party shall reasonably request (and for which such Lender
Party shall reimburse the Borrower) to assist such Lender Party to recover such
Taxes.
(g) Any Lender Party claiming any additional amounts payable
pursuant to this Section 2.12 agrees to use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender Party, be disadvantageous to such Lender Party.
(h) If any Lender requests compensation under or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to this Section 2.12, or if any
Lender becomes a Defaulting Lender, then the Borrower may, at its sole expense
and effort, upon notice to such Lender and the administrative Agent, require
such Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in Section 9.07), all its interests,
rights and obligations under this Agreement to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) unless such assignee is another Lender, the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Working Capital Commitment is being assigned, the Issuing
Bank), which consent shall not unreasonably be withheld, and (ii) such Lender
shall have received payment of an amount equal to the outstanding principal of
its Loans and participations in Letter of Credit Advances, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts). A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
<PAGE>
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise, other than as a result of an
assignment pursuant to Section 9.07) (a) on account of Obligations due and
payable to such Lender Party hereunder and under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender Party at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time obtained by all the Lender Parties at such time or (b) on account
of Obligations owing (but not due and payable) to such Lender Party hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (i) the amount of such Obligations owing to such Lender Party
at such time to (ii) the aggregate amount of the Obligations owing (but not due
and payable) to all Lender Parties hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such interests or participating interests in the
Obligations due and payable or owing to them, as the case may be, as shall be
necessary to cause such purchasing Lender Party to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender Party, such
purchase from each other Lender Party shall be rescinded and such other Lender
Party shall repay to the purchasing Lender Party the purchase price to the
extent of such Lender Party's ratable share (according to the proportion of (i)
the purchase price paid to such Lender Party to (ii) the aggregate purchase
price paid to all Lender Parties) of such recovery together with an amount equal
to such Lender Party's ratable share (according to the proportion of (i) the
amount of such other Lender Party's required repayment to (ii) the total amount
so recovered from the purchasing Lender Party) of any interest or other amount
paid or payable by the purchasing Lender Party in respect of the total amount so
recovered; provided further that, so long as the Obligations under the Loan
Documents shall not have been accelerated, any excess payment received by any
Appropriate Lender shall be shared on a pro rata basis only with other
Appropriate Lenders. The Borrower agrees that any Lender Party so purchasing an
interest or participating interest from another Lender Party pursuant to this
Section 2.13 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such interest
or participating interest, as the case may be, as fully as if such Lender Party
were the direct creditor of the Borrower in the amount of such interest or
participating interest, as the case may be.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances and
issuances of Letters of Credit shall be available (and the Borrower agrees that
it shall use such proceeds and Letters of Credit) (i) in the case of the Term A
Facility for the Financing (provided that such proceeds are used in connection
with the Hotel Collateral) and to pay transaction fees and expenses incurred in
connection therewith, (ii) in the case of the Term B Facility for the
Refinancing and to pay transaction fees and expenses incurred in connection
therewith and (iii) in the case of the Working Capital Facility and the Letter
of Credit Facility, to provide working capital for the Parent and its
Subsidiaries, to finance hotel development and repositioning
<PAGE>
projects and for other general corporate purposes (provided that no more than
$25,000,000 of the Working Capital Advances shall be used in connection with
non-Hotel Collateral).
SECTION 2.15. Defaulting Lenders. (a) In the event that, at any one
time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default shall occur or be continuing at such time and to the fullest
extent permitted by applicable law, set off and otherwise apply the Obligation
of the Borrower to make such payment to or for the account of such Defaulting
Lender against the obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set off and
otherwise apply its obligation to make any such payment against the obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on the date of such setoff under the
Facility pursuant to which such Defaulted Advance was originally required to
have been made pursuant to Section 2.01. Such Advance shall be considered, for
all purposes of this Agreement, to comprise part of the Borrowing in connection
with which such Defaulted Advance was originally required to have been made
pursuant to Section 2.01, even if the other Advances comprising such Borrowing
shall be Eurodollar Rate Advances on the date such Advance is deemed to be made
pursuant to this subsection (a). The Borrower shall notify the Administrative
Agent at any time the Borrower exercises its right of set-off pursuant to this
subsection (a) and shall set forth in such notice (A) the name of the Defaulting
Lender and the Defaulted Advance required to be made by such Defaulting Lender
and (B) the amount set off and otherwise applied in respect of such Defaulted
Advance pursuant to this subsection (a). Any portion of such payment otherwise
required to be made by the Borrower to or for the account of such Defaulting
Lender which is paid by the Borrower, after giving effect to the amount set off
and otherwise applied by the Borrower pursuant to this subsection (a), shall be
applied by the Administrative Agent as specified in subsection (b) or (c) of
this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party shall
be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount
to any Agent or any of the other Lender Parties and (iii) the Borrower shall
make any payment hereunder or under any other Loan Document to the
Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Agents or
such other Lender Parties and to the fullest extent permitted by applicable law,
apply at such time the amount so paid by the Borrower to or for the account of
such Defaulting Lender to the payment of each such Defaulted Amount to the
extent required to pay such Defaulted Amount. In the event that the
Administrative Agent shall so apply any such amount to the payment of any such
Defaulted Amount on any date, the amount so applied by the Administrative Agent
shall constitute for all purposes of this Agreement and the other Loan Documents
payment, to such extent, of such Defaulted Amount on such date. Any such amount
so applied by the Administrative Agent shall be retained by the Administrative
Agent or distributed by the Administrative Agent to such other Agents or such
other Lender Parties, ratably in accordance
<PAGE>
with the respective portions of such Defaulted Amounts payable at such time to
the Administrative Agent, such other Agents and such other Lender Parties and,
if the amount of such payment made by the Borrower shall at such time be
insufficient to pay all Defaulted Amounts owing at such time to the
Administrative Agent, such other Agents and such other Lender Parties, in the
following order of priority:
(i) first, to the Agents for any Defaulted Amounts then owing to
them, in their capacities as such, ratably in accordance with such
respective Defaulted Amounts then owing to the Agents;
(ii) second, to the Issuing Bank and the Swing Line Bank for any
Defaulted Amounts then owing to them, in their capacities as such, ratably
in accordance with such respective Defaulted Amounts then owing to the
Issuing Bank and the Swing Line Bank; and
(iii) third, to any other Lender Parties for any Defaulted Amounts
then owing to such other Lender Parties, ratably in accordance with such
respective Defaulted Amounts then owing to such other Lender Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party shall
be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted
Advance or a Defaulted Amount and (iii) the Borrower, any Agent or any other
Lender Party shall be required to pay or distribute any amount hereunder or
under any other Loan Document to or for the account of such Defaulting Lender,
then the Borrower or such Agent or such other Lender Party shall pay such amount
to the Administrative Agent to be held by the Administrative Agent, to the
fullest extent permitted by applicable law, in escrow or the Administrative
Agent shall, to the fullest extent permitted by applicable law, hold in escrow
such amount otherwise held by it. Any funds held by the Administrative Agent in
escrow under this subsection (c) shall be deposited by the Administrative Agent
in such account as the Administrative Agent shall designate in writing to the
Borrower and the Defaulting Lender, in the name and under the control of the
Administrative Agent, but subject to the provisions of this subsection (c). The
terms applicable to such account, including the rate of interest payable with
respect to the credit balance of such account from time to time, shall be the
Administrative Agent's standard terms applicable to escrow accounts maintained
with it. Any interest credited to such account from time to time shall be held
by the Administrative Agent in escrow under, and applied by the Administrative
Agent from time to time in accordance with the provisions of, this subsection
(c). The Administrative Agent shall, to the fullest extent permitted by
applicable law, apply all funds so held in escrow from time to time to the
extent necessary to make any Advances required to be made by such Defaulting
Lender and to pay any amount payable by such Defaulting Lender hereunder and
under the other Loan Documents to the Administrative Agent or any other Lender
Party, as and when such Advances
<PAGE>
or amounts are required to be made or paid and, if the amount so held in escrow
shall at any time be insufficient to make and pay all such Advances and amounts
required to be made or paid at such time, in the following order of priority:
(i) first, to the Agents for any amounts then due and payable by
such Defaulting Lender to them hereunder, in their capacities as such,
ratably in accordance with such respective amounts then due and payable to
the Agents;
(ii) second, to the Issuing Bank and the Swing Line Bank for any
amounts then due and payable to them hereunder, in their capacities as
such, by such Defaulting Lender, ratably in accordance with such
respective amounts then due and payable to the Issuing Bank and the Swing
Line Bank;
(iii) third, to any other Lender Parties for any amount then due and
payable by such Defaulting Lender to such other Lender Parties hereunder,
ratably in accordance with such respective amounts then due and payable to
such other Lender Parties; and
(iv) fourth, to the Borrower for any Advance then required to be
made by such Defaulting Lender pursuant to a Commitment of such Defaulting
Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under this
Section 2.15 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that any Agent or any Lender Party may have against such Defaulting Lender with
respect to any Defaulted Amount.
SECTION 2.16. Term C Facility. (a) On and after the date hereof, the
Borrower may request one or more of the Lenders or any other Person that would
become a Lender pursuant to the provisions of this Agreement upon its execution
of a Tranche C Supplement, to provide commitments to make one or more term
advances to the Borrower (each a "Term C Advance"); each of which Term C
Advances shall be deemed to be an Advance under this Agreement and shall be
entitled to the benefits of this Agreement and the other Loan Documents,
provided that (i) the aggregate principal amount of the Term C Advances shall
not exceed $50 million, (ii) the final maturity date and the scheduled
amortization of the Term C Advances shall be as set forth in the Tranche C
Supplement so long as (A) no Term C Advance shall have a final maturity date
earlier than July 15, 2006 and (B) the weighted average life of the Tranche C
Advances shall be greater than the weighted average life of the Tranche B
Advances, (iii) both before and after giving effect to the making of the Tranche
C Advances, no Default shall have occurred and be continuing and (iv) the
interest rate, commitment fees and other amounts
<PAGE>
payable in respect of the Term C Advances shall be as set forth on the Tranche C
Supplement so long as such interest rate shall be expressed as a margin in
excess of the Base Rate or the Eurodollar Rate.
ARTICLE III
CONDITIONS OF LENDING AND
ISSUANCES OF LETTERS OF CREDIT
SECTION 3.01. Conditions Precedent to Initial Extension of Credit.
The obligation of each Lender to make an Advance or of the Issuing Bank to issue
a Letter of Credit on the occasion of the Initial Extension of Credit hereunder
is subject to the satisfaction of the following conditions precedent before or
concurrently with the Initial Extension of Credit:
(a) The Administrative Agent shall have received on or before the
day of the Initial Extension of Credit the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the
Lender Parties (unless otherwise specified) and (except for the Notes) in
sufficient copies for each Lender Party:
(i) The Notes (other than the Term C Notes) payable to
the Lenders or their registered assigns (provided that in the case
of the Term B Facility, the Borrower shall deliver a Term B Note for
each B Lender evidencing the first Term B Advance to be made by such
Lender).
(ii) A security agreement in substantially the form of
Exhibit D hereto (together with each other security agreement and
security agreement supplement delivered pursuant to Section 5.01(j),
in each case as amended, the "Security Agreement"), duly executed by
each Loan Party, together with:
(A) certificates representing the Pledged
Shares referred to therein accompanied by undated stock powers
executed in blank and instruments evidencing the Pledged Debt
indorsed in blank,
(B) acknowledgment copies of proper
financing statements, duly filed on or before the day of the
Initial Extension of Credit under the Uniform Commercial Code
of all jurisdictions that the Administrative Agent may deem
necessary or desirable in order to perfect and protect the
first priority liens and security interests created under the
Security Agreement, covering the Hotel Collateral described in
the Security Agreement,
(C) completed requests for information,
dated on or before the date of the Initial Extension of
Credit, listing the financing statements referred to in clause
(B) above and all other effective financing
<PAGE>
statements filed in the jurisdictions referred to in clause
(B) above that name any Loan Party as debtor, together with
copies of such other financing statements,
(D) evidence of the completion of all other
recordings and filings of or with respect to the Security
Agreement that the Administrative Agent may deem necessary or
desirable in order to perfect and protect the Liens created
thereby,
(E) evidence of the insurance required by
the terms of the Security Agreement,
(F) copies of the Assigned Agreements
referred to in the Security Agreement, together with a consent
to such assignment, in substantially the form of Exhibit B to
the Security Agreement, duly executed by each party to such
Assigned Agreements other than the Loan Parties,
(G) the Pledged Account Letters referred to
in the Security Agreement, duly executed by each Pledged
Account Bank referred to in the Security Agreement, and
(H) evidence that all other action that the
Administrative Agent may deem necessary or desirable in order
to perfect and protect the first priority liens and security
interests created under the Security Agreement has been taken
(including, without limitation, receipt of duly executed
payoff letters, UCC-3 termination statements and landlords'
and bailees' waiver and consent agreements).
(iii) Deeds of trust, trust deeds, mortgages, leasehold
mortgages, leasehold deeds of trust and/or assignments and/or
amendments and restatements of deeds of trust, trust deeds,
mortgages, leasehold mortgages and leasehold deeds of trust in form
and substance acceptable to the Administrative Agent and covering
the Hotel Collateral Properties listed on Part I of Schedules
4.01(w) and 4.01(x) hereto (together with the Assignments of Leases
and Rents referred to therein and each other mortgage or similar
document delivered pursuant to Section 5.01(j) or 5.01(p), in each
case as amended, the "Mortgages"), duly executed by the appropriate
Loan Party, together with:
(A) evidence that counterparts of the
Mortgages have been duly recorded on or before the day of the
Initial Extension of Credit in all filing or recording offices
that the Administrative Agent may deem necessary or desirable
in order to create a valid first and subsisting Lien on the
property described therein in favor of the Collateral Agent
for
<PAGE>
the benefit of the Secured Parties and that all filing and
recording taxes and fees have been paid,
(B) fully paid American Land Title
Association Lender's Extended Coverage title insurance
policies (the "Mortgage Policies") in form and substance, with
endorsements and in amount acceptable to the Administrative
Agent, issued, coinsured and reinsured by title insurers
acceptable to the Administrative Agent, insuring the Mortgages
to be valid first and subsisting Liens on the property
described therein, free and clear of all defects (including,
but not limited to, mechanics' and materialmen's Liens) and
encumbrances, excepting only Permitted Encumbrances, and
providing for such other affirmative insurance (including
endorsements for future advances under the Loan Documents and
for mechanics' and materialmen's Liens) and such coinsurance
and direct access reinsurance as the Administrative Agent may
reasonably deem necessary or desirable,
(C) American Land Title Association form
surveys, dated no more than 9 months before the day of the
Initial Extension of Credit (or, in the case of newly
constructed properties, no more than 30 days before the day of
the Initial Extension of Credit), certified to the
Administrative Agent and the issuer of the Mortgage Policies
in a manner satisfactory to the Administrative Agent by a land
surveyor duly registered and licensed in the States in which
the property described in such surveys is located and
acceptable to the Administrative Agent, showing all buildings
and other improvements, any off-site improvements, the
location of any easements, parking spaces, rights of way,
building set-back lines and other dimensional regulations and
the absence of encroachments, either by such improvements or
on to such property, and other defects, other than
encroachments and other defects acceptable to the
Administrative Agent,
(D) the Assignments of Leases and Rents
referred to in the Mortgages, duly executed by the appropriate
Loan Party,
(E) such consents and agreements of lessors
and other third parties, and such estoppel letters and other
confirmations, as the Administrative Agent may deem necessary
or desirable,
(F) evidence of the insurance required by
the terms of the Mortgages,
(G) an appraisal (each, an "Appraisal") of
each of the properties described in the Mortgages complying
with the requirements of the Federal Financial Institutions
Reform, Recovery and
<PAGE>
Enforcement Act of 1989 (the Value set forth in an Appraisal
being the "Appraisal Value") ,
(H) evidence that all other action that the
Administrative Agent may deem necessary or desirable in order
to create valid first and subsisting Liens on the property
described in the Mortgages has been taken, and
(I) any other actions required pursuant to
the terms set forth in Annex A.
(iv) Certified copies of the resolutions of the Board of
Directors of each Loan Party approving the Transaction and each
Transaction Document to which it is or is to be a party, and of all
documents evidencing other necessary corporate action and
governmental and other third party approvals and consents, if any,
with respect to the Transaction and each Transaction Document to
which it is or is to be a party.
(v) A copy of a certificate of the Secretary of State of
the jurisdiction of incorporation of each Loan Party, dated
reasonably near the date of the Initial Extension of Credit,
certifying (A) as to a true and correct copy of the charter of such
Loan Party and each amendment thereto on file in such Secretary's
office and (B) that (1) such amendments are the only amendments to
such Loan Party's charter on file in such Secretary's office and (2)
such Loan Party has paid all franchise taxes to the date of such
certificate and (C) such Loan Party is duly incorporated and in good
standing or presently subsisting under the laws of the State of the
jurisdiction of its incorporation.
(vi) A copy of a certificate of the Secretary of State
of the jurisdiction of organization of each Loan Party, dated
reasonably near the date of the Initial Extension of Credit, stating
that each Loan Party is duly qualified and in good standing as a
foreign corporation in such State and has filed all annual reports
required to be filed to the date of such certificate.
(vii) A certificate of each Loan Party, signed on behalf
of such Loan Party by its President or a Vice President and its
Secretary or any Assistant Secretary, dated the date of the Initial
Extension of Credit (the statements made in which certificate shall
be true on and as of the date of the Initial Extension of Credit),
certifying as to (A) the absence of any amendments to the charter of
such Loan Party since the date of the Secretary of State's
certificate referred to in Section 3.01(a)(v), (B) a true and
correct copy of the bylaws of such Loan Party as in effect on the
date on which the resolutions referred to in Section 3.01(a)(iv)
were adopted and on the date of the Initial Extension of Credit, (C)
the due incorporation and good standing or valid existence of such
Loan Party as a corporation organized under the laws of the
jurisdiction of its incorporation, and
<PAGE>
the absence of any proceeding for the dissolution or liquidation of
such Loan Party, (D) the truth of the representations and warranties
contained in the Loan Documents as though made on and as of the date
of the Initial Extension of Credit and (E) the absence of any event
occurring and continuing, or resulting from the Initial Extension of
Credit, that constitutes a Default.
(viii) A certificate of the Secretary or an Assistant
Secretary of each Loan Party certifying the names and true
signatures of the officers of such Loan Party authorized to sign
each Transaction Document to which it is or is to be a party and the
other documents to be delivered hereunder and thereunder.
(ix) Certified copies of each of the Related Documents,
duly executed by the parties thereto and in form and substance
satisfactory to the Lender Parties, together with all agreements,
instruments and other documents delivered in connection therewith as
the Administrative Agent shall request.
(x) Certificates, in substantially the form of Exhibit F
hereto, attesting to the Solvency of each Loan Party before and
after giving effect to the Transaction, from its Chief Financial
Officer.
(xi) Such financial, business and other information
regarding each Loan Party and its Subsidiaries as the Lender Parties
shall have requested, including, without limitation, information as
to possible contingent liabilities, tax matters, environmental
matters, obligations under Plans, Multiemployer Plans and Welfare
Plans, collective bargaining agreements and other arrangements with
employees, audited annual financial statements dated December 31,
1998, interim financial statements dated the end of the most recent
fiscal quarter for which financial statements are available (or, in
the event the Lender Parties' due diligence review reveals material
changes since such financial statements, as of a later date within
45 days of the day of the Initial Extension of Credit), pro forma
financial statements as to the Parent and it Subsidiaries and
forecasts prepared by management of the Company, in form and
substance satisfactory to the Lender Parties, of balance sheets,
income statements and cash flow statements on a quarterly basis for
the first year following the day of the Initial Extension of Credit
and on an annual basis for each year thereafter until the
Termination Date.
(xii) Evidence of insurance naming the Collateral Agent
as additional insured and loss payee with such responsible and
reputable insurance companies or associations, and in such amounts
and covering such risks, as is satisfactory to the Lender Parties,
including, without limitation, business interruption insurance.
(xiii) Certified copies of all Material Contracts of
each Loan Party and its Subsidiaries as the Administrative Agent
shall request.
<PAGE>
(xiv) A Notice of Borrowing or Notice of Issuance, as
applicable, relating to the Initial Extension of Credit.
(xv) A favorable opinion of Cadwalder, Wickersham &
Taft, counsel for the Loan Parties, in substantially the form of
Exhibit G hereto and as to such other matters as any Lender Party
through the Administrative Agent may reasonably request.
(xvi) A favorable opinion of each local counsel to the
Parties listed on Schedule 3.01(a), in form and substance
satisfactory to the Lender Parties.
(xvii) Each of the Canadian Documents duly executed by
Servico Windsor, Inc.
(b) The Lender Parties shall be satisfied with the corporate and
legal structure and capitalization of each Loan Party and each of its
Subsidiaries the Equity Interests in which Subsidiaries is being pledged
pursuant to the Loan Documents, including the terms and conditions of the
charter, bylaws and each class of Equity Interest in each Loan Party and
each such Subsidiary and of each agreement or instrument relating to such
structure or capitalization.
(c) The Lender Parties shall be satisfied that all Existing Debt,
other than Surviving Debt, has been prepaid, redeemed or defeased in full
or otherwise satisfied and extinguished and that all Surviving Debt shall
be on terms and conditions satisfactory to the Lender Parties.
(d) Before giving effect to the Transactions, there shall have
occurred no Material Adverse Change since December 31, 1998.
(e) There shall exist no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i)
could reasonably be expected to have a Material Adverse Effect other than
the matters listed on Schedule 4.01(f) hereto (the "Disclosed Litigation")
or (ii) purports to affect the legality, validity or enforceability of any
Transaction Document or the consummation of the Transactions, and there
shall have been no adverse change in the status, or financial effect on
any Loan Party or any of its Subsidiaries, of the Disclosed Litigation
from that described on Schedule 4.01(f) hereto.
(f) All governmental and third party consents and approvals
necessary in connection with the Transaction shall have been obtained
(without the imposition of any conditions that are not acceptable to the
Lender Parties) and shall remain in effect; all applicable waiting periods
in connection with the Transaction shall have expired without any action
being taken by any competent authority, and no law or regulation shall be
applicable in the judgment of the Lender Parties, in each case that
restrains, prevents or
<PAGE>
imposes materially adverse conditions upon the Transactions or the rights
of the Loan Parties or their Subsidiaries freely to transfer or otherwise
dispose of, or to create any Lien on, any properties now owned or
hereafter acquired by any of them.
(g) The Lender Parties shall have completed a due diligence
investigation of the Parent and its Subsidiaries in scope, and with
results, satisfactory to the Lender Parties, and nothing shall have come
to the attention of the Lender Parties during the course of such due
diligence investigation to lead them to believe that the Information
Memorandum was or has become misleading, incorrect or incomplete in any
material respect; without limiting the generality of the foregoing, the
Lender Parties shall have been given such access to the management,
records, books of account, contracts and properties of the Parent and its
Subsidiaries as they shall have requested; including, without limitation,
information as to possible contingent liabilities, tax matters, collective
bargaining agreements and other arrangements with employees, annual
financial statements dated December 31, 1998, interim financial statements
dated the end of the most recent fiscal quarter for which financial
statements are available (or, in the event the Lender Parties' due
diligence review reveals material changes since such financial statements,
as of a later date within 45 days of the Effective Date), pro forma
consolidated financial statements as to the Parent and its subsidiaries,
and forecasts prepared by management of the Parent, in a form satisfactory
to the Lender Parties, of balance sheets, income statements and cash flow
statements on a quarterly basis for the first year following the Effective
Date.
(h) The Borrower shall have paid all accrued fees of the Agents and
the Lender Parties and all accrued and invoiced expenses of the Agents
(including the accrued fees and expenses of counsel to the Arranger and
local counsel to the Lender Parties).
(i) The Lender Parties shall be satisfied with the terms and
conditions of the Subordinated Notes. The Borrower shall have received at
least $200 million in gross cash proceeds from the sale of the
Subordinated Notes, and all such proceeds shall have been used or shall be
used simultaneously with the Initial Extension of Credit by the Borrower
to finance the Transaction.
(j) The Lender Parties shall be reasonably satisfied with the nature
and amount of any liabilities related to existing and potential
environmental concerns associated with any Hotel Collateral Properties.
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance
and Renewal. The obligation of each Appropriate Lender to make an Advance (other
than a Letter of Credit Advance made by the Issuing Bank or a Working Capital
Lender pursuant to Section 2.03(c) and a Swing Line Advance made by a Working
Capital Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing
(including the initial Borrowing), and the obligation of the Issuing Bank to
issue a Letter of Credit (including the initial issuance) or renew a Letter of
Credit, shall be subject to the further conditions precedent that on the date of
such Borrowing or issuance or renewal (a) the following statements shall be true
and each of the
<PAGE>
giving of the applicable Notice of Borrowing, Notice of Swing Line Borrowing,
Notice of Issuance or Notice of Renewal and the acceptance by the Borrower of
the proceeds of such Borrowing or of such Letter of Credit or the renewal of
such Letter of Credit shall constitute a representation and warranty by the
Borrower that both on the date of such notice and on the date of such Borrowing
or issuance or renewal such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct in all material respects on and of such date, before
and after giving effect to such Borrowing or issuance or renewal and to
the application of the proceeds therefrom, as though made on and as of
such date, other than any such representations or warranties that, by
their terms, refer to a specific date other than the date of such
Borrowing or issuance or renewal, in which case as of such specific date;
and
(ii) no Default has occurred and is continuing, or would result from
such Borrowing or issuance or renewal or from the application of the
proceeds therefrom;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents consistent with the requirements of this Agreement as any
Appropriate Lender through the Administrative Agent may reasonably request.
Notwithstanding the foregoing, no Advance shall be made and no Letter of Credit
shall be issued on and after the date of the initial Borrowing hereunder unless
and until the Administrative Agent shall be satisfied that (i) the Secured
Parties have a perfected first and subsisting Lien on the property described in
Part I of Schedule 4.01(w) and 4.01(x), (ii) all action that the Administrative
Agent deems necessary or desirable in order to create such Lien has been taken,
(iii) all requested consents, estoppel letters, assignments and other agreements
as the Administrative Agent may reasonably request have been delivered to the
Administrative Agent, (iv) local counsel opinions in form and substance
satisfactory to the Administrative Agent shall have been delivered to the
Administrative Agent and (v) all other action that the Administrative Agent
deems necessary or desirable in connection with such Mortgages (including,
without limitation, in respect of title insurance) has been taken.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit specifying its objection thereto
and, if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall not have made available to the Administrative Agent such Lender
Party's ratable portion of such Borrowing.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Each Loan Party and each of its Subsidiaries (i) is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) is duly qualified
and in good standing as a foreign corporation in each other jurisdiction
in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the failure
to so qualify or be licensed would not be reasonably likely to have a
Material Adverse Effect and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted. All of the outstanding Equity Interests in the Borrower have
been validly issued, are fully paid and non-assessable and is owned by
Parent free and clear of all Liens, except those created under the
Collateral Documents.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Subsidiaries of each Loan Party, showing as of the date hereof
(as to each such Subsidiary) the jurisdiction of its incorporation, the
number of shares of each class of its Equity Interests authorized, and the
number outstanding, on the date hereof and the percentage of each such
class of its Equity Interests owned (directly or indirectly) by such Loan
Party and the number of shares covered by all outstanding options,
warrants, rights of conversion or purchase and similar rights at the date
hereof. All of the outstanding Equity Interests in each Loan Party's
Subsidiaries has been validly issued, are fully paid and non-assessable
and are owned by such Loan Party or one or more of its Subsidiaries free
and clear of all Liens, except those created under the Collateral
Documents.
(c) The execution, delivery and performance by each Loan Party of
each Transaction Document to which it is or is to be a party, and the
consummation of the Transaction, are within such Loan Party's corporate
powers, have been duly authorized by all necessary corporate action, and
do not (i) contravene such Loan Party's charter or bylaws, (ii) violate
any law, rule, regulation (including, without limitation, Regulation X of
the Board of Governors of the Federal Reserve System), order, writ,
judgment, injunction, decree, determination or award, (iii) conflict with
or result in the breach of, or constitute a default or require any payment
to be made under, any material contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or affecting
any Loan Party, any of its Subsidiaries or any of their properties or (iv)
except for the Liens created under the Loan Documents, result in or
require the creation or imposition of any Lien upon or with respect to any
of the properties of any Loan Party or
<PAGE>
any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in
violation of any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument, the violation or breach of which could be reasonably
likely to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the due execution, delivery,
recordation, filing or performance by any Loan Party of any Transaction
Document to which it is or is to be a party, or for the consummation of
the Transaction, (ii) the grant by any Loan Party of the Liens granted by
it pursuant to the Collateral Documents, (iii) the perfection or
maintenance of the Liens created under the Collateral Documents (including
the first priority nature thereof) or (iv) the exercise by any Agent or
any Lender Party of its rights under the Loan Documents or the remedies in
respect of the Hotel Collateral pursuant to the Collateral Documents,
except for the authorizations, approvals, actions, notices and filings
listed on Schedule 4.01(d) hereto, all of which have been duly obtained,
taken, given or made and are in full force and effect. All applicable
waiting periods in connection with the Transaction have expired without
any action having been taken by any competent authority restraining,
preventing or imposing materially adverse conditions upon the Transaction
or the rights of the Loan Parties or their Subsidiaries freely to transfer
or otherwise dispose of, or to create any Lien on, any properties now
owned or hereafter acquired by any of them.
(e) This Agreement has been, and each other Transaction Document
when delivered hereunder will have been, duly executed and delivered by
each Loan Party party thereto. This Agreement is, and each other
Transaction Document when delivered hereunder will be, the legal, valid
and binding obligation of each Loan Party party thereto, enforceable
against such Loan Party in accordance with its terms.
(f) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries, including
any Environmental Action, pending or threatened before any court,
governmental agency or arbitrator that (i) could be reasonably likely to
have a Material Adverse Effect or (ii) purports to affect the legality,
validity or enforceability of any Transaction Document or the consummation
of the Transaction.
(g) The Consolidated balance sheet of the Parent and its
Subsidiaries as at December 31, 1998, and the related Consolidated
statement of income and Consolidated statement of cash flows of the Parent
and its Subsidiaries for the fiscal year then ended, accompanied by an
unqualified opinion of Ernst & Young LLP, independent public accountants,
and the Consolidated balance sheet of the Parent and its Subsidiaries as
at March 31, 1999, and the related Consolidated statement of income and
Consolidated statement of cash flows of the Parent and its Subsidiaries
for the three months then ended, duly certified by the Chief Financial
Officer of the Parent, copies of which have been furnished to each Lender
Party, fairly present, subject, in the case of said balance sheet as
<PAGE>
at March 31, 1999, and said statements of income and cash flows for the
three months then ended, to year-end audit adjustments, the Consolidated
financial condition of the Parent and its Subsidiaries as at such dates
and the Consolidated results of operations of the Parent and its
Subsidiaries for the periods ended on such dates, all in accordance with
generally accepted accounting principles applied on a consistent basis,
and since December 31, 1998, there has been no Material Adverse Change.
(h) The Consolidated forecasted balance sheet, statement of income
and statement of cash flows of the Parent and its Subsidiaries delivered
to the Lender Parties pursuant to Section 3.01(a)(xii) or 5.03 were
prepared in good faith on the basis of the assumptions stated therein,
which assumptions were fair in light of the conditions existing at the
time of delivery of such forecasts, and represented, at the time of
delivery, the Borrower's good faith estimate of its future financial
performance.
(i) Neither the Information Memorandum nor any other information,
exhibit or report furnished by or on behalf of any Loan Party to any Agent
or any Lender Party in connection with the negotiation and syndication of
the Loan Documents or pursuant to the terms of the Loan Documents, when
taken as a whole, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements made
therein not misleading.
(j) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock, and no proceeds of
any Advance or drawings under any Letter of Credit will be used to
purchase or carry any Margin Stock or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock.
(k) Neither any Loan Party nor any of its Subsidiaries is an
"investment company", or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended. Neither any
Loan Party nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended. Neither the making of any Advances, nor the issuance of any
Letters of Credit, nor the application of the proceeds or repayment
thereof by the Borrower, nor the consummation of the other transactions
contemplated by the Transaction Documents, will violate any provision of
any such Act or any rule, regulation or order of the Securities and
Exchange Commission thereunder.
(l) Neither any Loan Party nor any of its Subsidiaries is a party to
any indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction that could
be reasonably likely to have a Material Adverse Effect.
<PAGE>
(m) All filings and other actions necessary or desirable to perfect
and protect the security interest in the Hotel Collateral created under
the Collateral Documents have been duly made or taken and are in full
force and effect, and the Collateral Documents create in favor of the
Collateral Agent for the benefit of the Secured Parties a valid and,
together with such filings and other actions, perfected first priority
security interest in the Hotel Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly
taken. The Loan Parties are the legal and beneficial owners of the Hotel
Collateral free and clear of any Lien, except for the liens and security
interests created or permitted under the Loan Documents.
(n) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(o) (i) Set forth on Schedule 4.01(o) hereto is a complete and
accurate list of all Plans, Multiemployer Plans and Welfare Plans.
(ii) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan that has resulted in or is reasonably expected to
result in a material liability of any Loan Party or any ERISA Affiliate.
(iii) Schedule B (Actuarial Information) to the most recent annual
report (Form 5500 Series) for each Plan, copies of which have been filed
with the Internal Revenue Service and furnished to the Lender Parties, is
complete and accurate and fairly presents the funding status of such Plan,
and since the date of such Schedule B there has been no material adverse
change in such funding status.
(iv) Neither any Loan Party nor any ERISA Affiliate has incurred or
is reasonably expected to incur any Withdrawal Liability exceeding
$2,500,000 to any Multiemployer Plan.
(v) Neither any Loan Party nor any ERISA Affiliate has been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of
ERISA, and no such Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of
ERISA.
(p) (i) Except as otherwise set forth on Part I of Schedule 4.01(p)
hereto, the operations and properties of each Loan Party and each of its
Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past non-compliance with
such Environmental Laws and Environmental Permits that has been the
subject of an Environmental Action against any Loan Party has been
resolved without ongoing obligations or costs, and no circumstances exist
that could be reasonably likely to (A) form the basis of an Environmental
Action against any Loan Party or any of its Subsidiaries or any of their
properties that could have a Material Adverse Effect or
<PAGE>
(B) cause any such property to be subject to any restrictions on
ownership, occupancy, use or transferability under any Environmental Law.
(ii) Except as otherwise set forth on Part II of Schedule 4.01(p)
hereto, none of the properties currently or formerly owned or operated by
any Loan Party or any of its Subsidiaries is listed or proposed for
listing on the NPL or on the CERCLIS or any analogous foreign, state or
local list or is adjacent to any such property; there are no and never
have been any underground or aboveground storage tanks or any surface
impoundments, septic tanks, pits, sumps or lagoons in which Hazardous
Materials are being or have been treated, stored or disposed on any
property currently owned or operated by any Loan Party or any of its
Subsidiaries or, to the best of its knowledge, on any property formerly
owned or operated by any Loan Party or any of its Subsidiaries; there is
no asbestos or asbestos-containing material on any property currently
owned or operated by any Loan Party or any of its Subsidiaries; and
Hazardous Materials have not been released, discharged or disposed of on
any property currently or formerly owned or operated by any Loan Party or
any of its Subsidiaries other than in material compliance with
Environmental Law.
(iii) Except as otherwise set forth on Part III of Schedule 4.01(p)
hereto, neither any Loan Party nor any of its Subsidiaries is undertaking,
and has not completed, either individually or together with other
potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental
or regulatory authority or the requirements of any Environmental Law; and
all Hazardous Materials generated, used, treated, handled or stored at, or
transported to or from, any property currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries have been disposed
of in a manner not reasonably expected to result in material liability to
any Loan Party or any of its Subsidiaries.
(q) (i) Neither any Loan Party nor any of its Subsidiaries is party
to any tax sharing agreement other than the Tax Sharing Agreement or any
other tax sharing agreement approved in writing by the Required Lenders.
(ii) Each Loan Party and its Subsidiaries has filed or caused to be
filed all material tax returns which are required to be filed, said
returns are true and correct in all material respects, and has paid all
taxes shown to be due and payable on said returns or on any assessments
made against each Loan Party and its Subsidiaries or any of their property
and all other material taxes, fees or other charges imposed on them or on
any of their property by any governmental authority (other than amounts
the validity of which are currently being contested in good faith and with
respect to which reserves in conformity with GAAP are reflected on the
financial statements delivered hereunder); no tax Lien had been filed with
respect to any such tax, fee or other charge (other than Liens for current
taxes not yet due and payable).
<PAGE>
(r) Neither the business nor the properties of any Loan Party or any
of its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy or other casualty (whether or not
covered by insurance) that could be reasonably likely to have a Material
Adverse Effect.
(s) Set forth on Schedule 4.01(s) hereto is a complete and accurate
list of all Existing Debt (other than Surviving Debt), showing as of the
date hereof the obligor and the principal amount outstanding thereunder.
(t) Set forth on Schedule 4.01(t) hereto is a complete and accurate
list of all Surviving Debt, showing as of the date hereof the obligor and
the principal amount outstanding thereunder, the maturity date thereof and
the amortization schedule therefor.
(u) Set forth on Schedule 4.01(u) hereto is a complete and accurate
list of all Liens of record on the property or assets of any Loan Party or
any of its Subsidiaries as of the date hereof, showing the lienholder
thereof, the principal amount of the obligations secured thereby and the
property or assets of such Loan Party or such Subsidiary subject thereto.
(v) Set forth on Schedule 4.01(v) hereto is a complete and accurate
list of all real property owned by any Loan Party or any of its
Subsidiaries as of the date hereof, showing the street address, county or
other relevant jurisdiction, state, record owner and book and estimated
fair value thereof. Except as set forth on Schedule 4.01(v), each Loan
Party or such Subsidiary has good, marketable and insurable fee simple
title to such real property, free and clear of all Liens, other than Liens
created or permitted by the Loan Documents.
(w) Set forth on Schedule 4.01(w) hereto is a complete and accurate
list of all leases of real property under which any Loan Party or any of
its Subsidiaries is the lessee, as of the date hereof, showing the street
address, county or other relevant jurisdiction, state, lessor, lessee,
expiration date and annual rental cost thereof. Except as set forth on
Schedule 4.01(w) hereto, each such lease is the legal, valid and binding
obligation of the lessor thereof, enforceable in accordance with its
terms.
(x) Set forth on Schedule 4.01(x) hereto is a complete and accurate
list of all Investments in excess of $5,000,000 held by any Loan Party or
any of its Subsidiaries on the date hereof, showing the amount, obligor or
issuer and maturity, if any, thereof.
(y) Set forth on Schedule 4.01(y) hereto is a complete and accurate
list of all patents, trademarks, trade names, service marks and
copyrights, and all applications therefor and licenses thereof, of each
Loan Party or any of its Subsidiaries, as of the date hereof, showing the
jurisdiction in which registered, the registration number, the date of
registration and the expiration date.
<PAGE>
(z) Set forth on Schedule 4.01(z) hereto is a complete and accurate
list of all Material Contracts of each Loan Party and its Subsidiaries, as
of the date hereof, showing the parties, subject matter and term thereof.
As of the date hereof, each such Material Contract has been duly
authorized, executed and delivered by all parties thereto, has not been
amended or otherwise modified, is in full force and effect and is binding
upon and enforceable against all parties thereto in accordance with its
terms, and there exists no default under any Material Contract by any
party thereto.
(aa) The Parent has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that could
be adversely affected by the risk that computer applications used by the
Parent or any of its Subsidiaries (or suppliers, vendors and customers)
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999 (the
"Year 2000 Problem"), (ii) developed a plan and timetable for addressing
the Year 2000 Problem on a timely basis and (iii) to date, implemented
that plan in accordance with such timetable. Based on the foregoing, the
Parent and the Borrower believe that all computer applications (including
those of its suppliers, vendors and customers) that are material to its or
any of its Subsidiaries' business and operations are reasonably expected
on a timely basis to be able to perform properly date-sensitive functions
for all dates before and after January 1, 2000 ("Year 2000 Compliant"),
except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance or any
other Obligation of any Loan Party under any Loan Document shall remain unpaid,
any Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Parent and the Borrower shall:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful claims that, if
unpaid, might by law become a Lien upon its property; provided, however,
that neither the Parent, Borrower nor any of their respective Subsidiaries
shall be required to pay or discharge any such tax, assessment, charge or
<PAGE>
claim that is being contested in good faith and by proper proceedings and
as to which appropriate reserves are being maintained, unless and until
any Lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors.
(c) Compliance with Environmental Laws. Comply, and cause each of
its Subsidiaries and all lessees and other Persons operating or occupying
its properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew and cause
each of its Subsidiaries to obtain and renew all Environmental Permits
necessary for its operations and properties; and conduct, and cause each
of its Subsidiaries to conduct, any investigation, study, sampling and
testing, and undertake any cleanup, removal, remedial or other action
required under Environmental Law to remove and clean up Hazardous
Materials from any of its properties, in accordance with the requirements
of all Environmental Laws; provided, however, that neither the Parent nor
any of its Subsidiaries shall be required to undertake any such cleanup,
removal, remedial or other action to the extent that its obligation to do
so is being contested in good faith and by proper proceedings and
appropriate reserves are being maintained with respect to such
circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Parent or
such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its
existence, legal structure, legal name, rights (charter and statutory),
permits, licenses, approvals, privileges and franchises; provided,
however, that the Parent and its Subsidiaries may consummate any merger or
consolidation permitted under Section 5.02(d) and provided further that
neither the Parent nor any of its Subsidiaries shall be required to
preserve any right, permit, license, approval, privilege or franchise if
the Board of Directors of the Parent or such Subsidiary shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Parent or such Subsidiary, as the case may be, and that
the loss thereof is not disadvantageous in any material respect to the
Parent, the Borrower, the Parent and its Subsidiaries, taken as a whole,
or the Lender Parties.
(f) Visitation Rights. At any reasonable time and from time to time
on reasonable notice, permit any of the Agents or any of the Lender
Parties, or any agents or representatives thereof, to examine and make
copies of and abstracts from the records and books of account of, and
visit the properties of, the Parent and any of its Subsidiaries, and to
discuss the affairs, finances and accounts of the Parent and any of its
Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
(g) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct
entries shall be made of all
<PAGE>
financial transactions and the assets and business of the Parent and each
such Subsidiary in accordance with generally accepted accounting
principles in effect from time to time.
(h) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted, other than where the
failure to so maintain and preserve would not, either individually or in
the aggregate, be reasonably likely to have a Material Adverse Effect.
(i) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Parent or such Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate.
(j) Covenant to Guarantee Obligations and Give Security. Upon (x)
the request of the Collateral Agent following the occurrence and during
the continuance of an Event of Default, (y) the formation or acquisition
of any new direct or indirect Domestic Subsidiaries by any Loan Party or
(z) the acquisition of any property by any Loan Party, and such property,
in the judgment of the Collateral Agent, shall not already be subject to a
perfected first priority security interest in favor of the Collateral
Agent for the benefit of the Secured Parties, then the Parent shall, in
each case at the Parent's expense:
(i) in connection with the formation or acquisition of a
Subsidiary, within 15 days after such formation or acquisition,
cause each such Subsidiary, and cause each direct and indirect
parent of such Subsidiary (if it has not already done so), to duly
execute and deliver to the Collateral Agent a guaranty or guaranty
supplement, in form and substance satisfactory to the Collateral
Agent, guaranteeing the other Loan Parties' obligations under the
Loan Documents,
(ii) within 15 days after such request, formation or
acquisition, furnish to the Collateral Agent a description of the
real and personal properties of the Loan Parties and their
respective Subsidiaries in detail satisfactory to the Collateral
Agent,
(iii) within 30 days after such request, formation or
acquisition, to the extent requested by the Administrative Agent or
the Required Lenders, duly execute and deliver, and cause each such
Subsidiary and each direct and indirect parent of such Subsidiary
(if it has not already done so) to duly execute and deliver, to the
Collateral Agent mortgages, pledges, assignments, security agreement
supplements and other security agreements, as specified by and in
form and substance satisfactory to the Collateral Agent, securing
payment of all the Obligations of the applicable Loan Party, such
Subsidiary or such parent, as the case may be, under the Loan
Documents and constituting Liens on all such properties,
<PAGE>
(iv) within 45 days after such request, formation or
acquisition, take, and cause such Subsidiary or such parent to take,
whatever action (including, without limitation, the recording of
mortgages, the filing of Uniform Commercial Code financing
statements, the giving of notices and the endorsement of notices on
title documents) may be necessary or advisable in the opinion of the
Collateral Agent to vest in the Collateral Agent (or in any
representative of the Collateral Agent designated by it) valid and
subsisting Liens on the properties purported to be subject to the
mortgages, pledges, assignments, security agreement supplements and
security agreements delivered pursuant to this Section 5.01(j),
enforceable against all third parties in accordance with their
terms,
(v) within 60 days after such request, formation or
acquisition, deliver to the Collateral Agent, upon the request of
the Collateral Agent in its sole discretion, a signed copy of a
favorable opinion, addressed to the Collateral Agent and the other
Secured Parties, of counsel for the Loan Parties acceptable to the
Collateral Agent as to the matters contained in clauses (i), (iii)
and (iv) above, as to such guaranties, guaranty supplements,
mortgages, pledges, assignments, security agreement supplements and
security agreements being legal, valid and binding obligations of
each Loan Party party thereto enforceable in accordance with their
terms, as to the matters contained in clause (iv) above, as to such
recordings, filings, notices, endorsements and other actions being
sufficient to create valid perfected Liens on such properties, and
as to such other matters as the Collateral Agent may reasonably
request,
(vi) as promptly as practicable after such request, formation
or acquisition, deliver, upon the request of the Collateral Agent in
its reasonable discretion, to the Collateral Agent with respect to
each parcel of real property owned or held by the entity that is the
subject of such request, formation or acquisition title reports,
surveys and engineering, soils and other reports, and environmental
assessment reports, each in scope, form and substance satisfactory
to the Collateral Agent, provided, however, that to the extent that
any Loan Party or any of its Subsidiaries shall have otherwise
received any of the foregoing items with respect to such real
property, such items shall, promptly after the receipt thereof, be
delivered to the Collateral Agent,
(vii) upon the occurrence and during the continuance of an
Event of Default, upon the request of the Required Lenders, promptly
cause to be deposited any and all cash dividends paid or payable to
it or any of its Subsidiaries from any of its Subsidiaries from time
to time into the Collateral Account, and with respect to all other
dividends paid or payable to it or any of its Subsidiaries from time
to time, promptly execute and deliver, or cause such Subsidiary to
promptly execute and deliver, as the case may be, any and all
further instruments and take or cause such Subsidiary to take, as
the case may be, all such other action as the Collateral Agent may
deem necessary or desirable in order to obtain and maintain from and
<PAGE>
after the time such dividend is paid or payable a perfected, first
priority lien on and security interest in such dividends, and
(viii) at any time and from time to time, promptly execute and
deliver any and all further instruments and documents and take all
such other action as the Collateral Agent may deem necessary or
desirable in obtaining the full benefits of, or in perfecting and
preserving the Liens of, such guaranties, mortgages, pledges,
assignments, security agreement supplements and security agreements.
(k) Further Assurances. (i) Promptly upon request by any Agent, or
any Lender Party through the Administrative Agent, correct, and cause each
of its Subsidiaries promptly to correct, any material defect or error that
may be discovered in any Loan Document or in the execution,
acknowledgment, filing or recordation thereof, and
(ii) Promptly upon the reasonable request by any Agent, or any
Lender Party through the Administrative Agent, do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register any
and all such further acts, deeds, conveyances, pledge agreements,
mortgages, deeds of trust, trust deeds, assignments, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments as any Agent, or
any Lender Party through the Administrative Agent, may reasonably require
from time to time in order to (A) carry out more effectively the purposes
of the Loan Documents, (B) to the fullest extent permitted by applicable
law, subject any Loan Party's or any of its Subsidiaries' properties,
assets, rights or interests to the Liens now or hereafter intended to be
covered by any of the Collateral Documents, (C) perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents
and any of the Liens intended to be created thereunder and (D) assure,
convey, grant, assign, transfer, preserve, protect and confirm more
effectively unto the Secured Parties the rights granted or now or
hereafter intended to be granted to the Secured Parties under any Loan
Document or under any other instrument executed in connection with any
Loan Document to which any Loan Party or any of its Subsidiaries is or is
to be a party, and cause each of its Subsidiaries to do so.
(l) Performance of Related Documents. Perform and observe, and cause
each of its Subsidiaries to perform and observe, all of the terms and
provisions of each Related Document to be performed or observed by it,
maintain each such Related Document in full force and effect, enforce such
Related Document in accordance with its terms, take all such action to
such end as may be from time to time requested by the Administrative Agent
and, upon request of the Administrative Agent, make to each other party to
each such Related Document such demands and requests for information and
reports or for action as any Loan Party or any of its Subsidiaries is
entitled to make under such Related Document.
<PAGE>
(m) Preparation of Environmental Reports. At the reasonable request
of the Administrative Agent or the Collateral Agent from time to time but
no more frequently than once every two years, provide to the Lender
Parties within 60 days after such request, at the expense of the Parent,
an environmental site assessment report for any of its or its
Subsidiaries' properties described in the Mortgages, prepared by an
environmental consulting firm acceptable to the Administrative Agent or
the Collateral Agent, indicating the presence or absence of Hazardous
Materials and the estimated cost of any compliance, removal or remedial
action in connection with any Hazardous Materials on such properties;
without limiting the generality of the foregoing, if the Administrative
Agent or the Collateral Agent determines at any time that a material risk
exists that any such report will not be provided within the time referred
to above, the Administrative Agent or the Collateral Agent may retain an
environmental consulting firm to prepare such report at the expense of the
Borrower, and the Borrower hereby grants and agrees to cause any
Subsidiary that owns any property described in the Mortgages to grant at
the time of such request to the Agents, the Lender Parties, such firm and
any agents or representatives thereof an irrevocable non-exclusive
license, subject to the rights of tenants, to enter onto their respective
properties to undertake such an assessment.
(n) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real
property to which the Parent or any of its Subsidiaries is a party, keep
such leases in full force and effect and not allow such leases to lapse or
be terminated or any rights to renew such leases to be forfeited or
canceled, notify the Administrative Agent of any default by any party with
respect to such leases and cooperate with the Administrative Agent in all
respects to cure any such default, and cause each of its Subsidiaries to
do so, except, in any case, where the failure to do so, either
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
(o) Performance of Material Contracts. Perform and observe all the
terms and provisions of each Material Contract to be performed or observed
by it, maintain each such Material Contract in full force and effect,
enforce each such Material Contract in accordance with its terms, take all
such action to such end as may be from time to time requested by the
Administrative Agent and, upon request of the Administrative Agent, make
to each other party to each such Material Contract such demands and
requests for information and reports or for action as any Loan Party or
any of its Subsidiaries is entitled to make under such Material Contract,
and cause each of its Subsidiaries to do so, except, in any case, where
the failure to do so, either individually or in the aggregate, could not
be reasonably likely to have a Material Adverse Effect.
(p) Nomura IMPAC I Facility. On or prior to September 13, 1999, (i)
repay, redeem or otherwise satisfy in full all obligations under the
Nomura IMPAC I Facility and (ii) deliver to the Administrative Agent
Mortgages covering the Hotel Collateral Properties listed on Schedule
5.01(p) hereto, duly executed by the appropriate Loan Party, together
with:
<PAGE>
(A) evidence that counterparts of the Mortgages have
been duly recorded on or before such date in all filing or recording
offices that the Administrative Agent may deem necessary or
desirable in order to create a valid first and subsisting Lien on
the property described therein in favor of the Collateral Agent for
the benefit of the Secured Parties and that all filing and recording
taxes and fees have been paid,
(B) fully paid American Land Title Association Lender's
Extended Coverage title insurance policies (the "Mortgage Policies")
in form and substance, with endorsements and in amount acceptable to
the Administrative Agent, issued, coinsured and reinsured by title
insurers acceptable to the Administrative Agent, insuring the
Mortgages to be valid first and subsisting Liens on the property
described therein, free and clear of all defects (including, but not
limited to, mechanics' and materialmen's Liens) and encumbrances,
excepting only Permitted Encumbrances, and providing for such other
affirmative insurance (including endorsements for future advances
under the Loan Documents and for mechanics' and materialmen's Liens)
and such coinsurance and direct access reinsurance as the
Administrative Agent may reasonably deem necessary or desirable,
(C) American Land Title Association form surveys, dated
no more than 30 days before such date, certified to the
Administrative Agent and the issuer of the Mortgage Policies in a
manner satisfactory to the Administrative Agent by a land surveyor
duly registered and licensed in the States in which the property
described in such surveys is located and acceptable to the
Administrative Agent, showing all buildings and other improvements,
any off-site improvements, the location of any easements, parking
spaces, rights of way, building set-back lines and other dimensional
regulations and the absence of encroachments, either by such
improvements or on to such property, and other defects, other than
encroachments and other defects acceptable to the Administrative
Agent,
(D) the Assignments of Leases and Rents referred to in
the Mortgages, duly executed by the appropriate Loan Party,
(E) such consents and agreements of lessors and other
third parties, and such estoppel letters and other confirmations, as
the Administrative Agent may deem necessary or desirable,
(F) evidence of the insurance required by the terms of
the Mortgages,
(G) an appraisal of each of the properties described in
the Mortgages complying with the requirements of the Federal
Financial Institutions Reform, Recovery and Enforcement Act of 1989,
and
<PAGE>
(H) evidence that all other action that the
Administrative Agent may deem necessary or desirable in order to
create valid first and subsisting Liens on the property described in
the Mortgages has been taken.
(q) Capital Investments. Make capital investments in the Hotel
Collateral Properties of not less than 4% of the gross room revenue
generated on the Hotel Collateral Properties for the purpose of
maintaining or renovating such properties, all in accordance with prudent
business practices.
SECTION 5.02. Negative Covenants. So long as any Advance or any
other Obligation of any Loan Party under any Loan Document shall remain unpaid,
any Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, neither the Parent nor the Borrower shall, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien on or with respect to any of its properties of any character
(including, without limitation, accounts) whether now owned or hereafter
acquired, or sign or file or suffer to exist, or permit any of its
Subsidiaries to sign or file or suffer to exist, under the Uniform
Commercial Code of any jurisdiction, a financing statement that names the
Parent or any of its Subsidiaries as debtor, or sign or suffer to exist,
or permit any of its Subsidiaries to sign or suffer to exist, any security
agreement authorizing any secured party thereunder to file such financing
statement, or assign, or permit any of its Subsidiaries to assign, any
accounts or other right to receive income, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof and described on
Schedule 4.01(v) hereto;
(iv) purchase money Liens upon or in real property or
equipment acquired or held by the Parent or any of its Subsidiaries
in the ordinary course of business to secure the purchase price of
such property or equipment or to secure Debt incurred solely for the
purpose of financing the acquisition, construction or improvement of
any such property or equipment to be subject to such Liens, or Liens
existing on any such property or equipment at the time of
acquisition (other than any such Liens created in contemplation of
such acquisition that do not secure the purchase price), or
extensions, renewals or replacements of any of the foregoing for the
same or a lesser amount; provided, however, that no such Lien shall
extend to or cover any property other than the property or equipment
being acquired, constructed or improved, and no such extension,
renewal or replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed or replaced;
and provided
<PAGE>
further that the aggregate principal amount of the Debt secured by
Liens permitted by this clause (iv) shall not exceed the amount
permitted under Section 5.02(b)(iii)(B) at any time outstanding;
(v) Liens arising in connection with Capitalized Leases
permitted under Section 5.02(b)(iii)(C); provided that no such Lien
shall extend to or cover any Hotel Collateral or assets other than
the assets subject to such Capitalized Leases;
(vi) other Liens securing Debt outstanding in an
aggregate principal amount not to exceed $35,000,000, provided that
no such Lien shall extend to or cover any Hotel Collateral; and
(vii) the replacement, extension or renewal of any Lien
permitted by clause (iii) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or
contingent obligor) of the Debt secured thereby.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt,
except:
(i) in the case of the Parent and its Subsidiaries
(other than the Subsidiary Guarantors), Debt in respect of Hedge
Agreements designed to hedge against fluctuations in interest rates
incurred in the ordinary course of business and consistent with
prudent business practice;
(ii) in the case of any Subsidiary of the Parent, Debt
owed to the Parent or to a wholly owned Subsidiary of the Parent,
provided that, in each case, such Debt (x) shall, in the case of
Debt owed to a Loan Party, constitute Pledged Debt and (y) shall be
evidenced by promissory notes in form and substance satisfactory to
the Administrative Agent and such promissory notes shall, in the
case of Debt owed to a Loan Party, be pledged as security for the
Obligations of the holder thereof under the Loan Documents to which
such holder is a party and delivered to the Collateral Agent
pursuant to the terms of the Security Agreement; and
(iii) in the case of the Parent and its Subsidiaries,
(A) Debt under the Loan Documents,
(B) Debt secured by Liens permitted by
Section 5.02(a)(iv) not to exceed in the aggregate $25,000,000
at any time outstanding,
<PAGE>
(C) in addition to Debt referred to in clause (B), (x)
Capitalized Leases not to exceed in the aggregate $15,000,000
at any time outstanding, and (y) in the case of Capitalized
Leases to which any Subsidiary of the Parent is a party, Debt
of the Parent of the type described in clause (i) of the
definition of "Debt" guaranteeing the Obligations of such
Subsidiary under such Capitalized Leases,
(D) the Surviving Debt, and any Debt
extending the maturity of, or refunding or refinancing, in
whole or in part, any Surviving Debt, provided that the terms
of any such extending, refunding or refinancing Debt, and of
any agreement entered into and of any instrument issued in
connection therewith, are otherwise permitted by the Loan
Documents, provided further that the principal amount of such
Surviving Debt shall not be increased above the greater of (1)
the original principal amount thereof and (2) the principal
amount thereof outstanding immediately prior to such
extension, refunding or refinancing, and the direct obligors
therefor shall not be changed, as a result of or in connection
with such extension, refunding or refinancing, provided still
further that the terms relating to subordination (if any) of
any such extending, refunding or refinancing Debt, are no less
favorable in any material respect to the Loan Parties or the
Lender Parties than such terms of the Surviving Debt being
extended, refunded or refinanced and the interest rate
applicable to any such extending, refunding or refinancing
Debt does not exceed the then applicable market interest rate,
provided still further that any extending refunding or
refinancing Debt shall not have the benefit of any Debt of the
Parent or any of its subsidiaries of the type described in
clause (i) of the definition of "Debt" guaranteeing the
Obligations of the direct obligor of such extending, refunding
or refinancing Debt,
(E) Subordinated Debt in respect of the
Subordinated Notes not to exceed in the aggregate $200,000,000
at any time outstanding, and
(F) other Subordinated Debt, on terms and conditions
substantially similar to the terms and conditions of the
Subordinated Notes, not to exceed in the aggregate
$100,000,000 at any time outstanding.
(c) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries to
do so, except that:
<PAGE>
(i) any Subsidiary of the Borrower may merge into or
consolidate with any other Subsidiary of the Borrower, provided
that, in the case of any such merger or consolidation, the Person
formed by such merger or consolidation shall be a wholly owned
Subsidiary of the Borrower, provided further that, in the case of
any such merger or consolidation to which a Subsidiary Guarantor is
a party, the Person formed by such merger or consolidation shall be
a Subsidiary Guarantor;
(ii) in connection with any acquisition permitted under
Section 5.02(f), any Subsidiary of the Borrower may merge into or
consolidate with any other Person or permit any other Person to
merge into or consolidate with it; provided that the Person
surviving such merger shall be a wholly owned Subsidiary of the
Borrower; and
(iii) in connection with any sale or other disposition
permitted under Section 5.02(e) (other than clause (ii) thereof),
any Subsidiary of the Borrower may merge into or consolidate with
any other Person or permit any other Person to merge into or
consolidate with it;
provided, however, that in each case, immediately after giving effect
thereto, no event shall occur and be continuing that constitutes a Default
and, in the case of any such merger to which the Borrower is a party, the
Borrower is the surviving corporation.
(e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer or
otherwise dispose of, any assets, or grant any option or other right to
purchase, lease or otherwise acquire any assets other than Inventory to be
sold in the ordinary course of its business, except:
(i) sales of Inventory in the ordinary course of its
business;
(ii) in a transaction authorized by Section 5.02(d);
(iii) sales of Non-Core Assets for cash;
(iv) the sale of any asset by the Parent or any Subsidiary
(other than a bulk sale of inventory and a sale of receivables other
than delinquent accounts for collection purposes only) so long as
(A) at least 75% of the purchase price paid to the Parent or such
Subsidiary for such asset shall be no less than the fair market
value of such asset at the time of such sale, (B) the purchase price
for such asset shall be paid to the Parent or such Subsidiary solely
in cash and (C) (i) the aggregate book value of all Hotel Collateral
sold by the Parent and its Subsidiaries during the same Fiscal Year
pursuant to this clause (iv) shall not exceed $25,000,000 and (ii)
the aggregate book value of all assets not constituting Hotel
Collateral sold by the Parent and its Subsidiaries during the same
Fiscal Year pursuant to this clause (iv) (together with the
aggregate book value of all such
<PAGE>
assets transferred pursuant to clause (v) below) shall not exceed
10% of the aggregate book value of all of the assets of the Parent
and its Subsidiaries (other than the Hotel Collateral); and
(v) transfers of assets (other than Hotel Collateral not
consisting of parcels of undeveloped real property ("Developed Hotel
Collateral") to Permitted Joint Ventures in an aggregate amount
(together with the aggregate book value of all such assets sold
pursuant to clause (iv) above) not to exceed 10% of the aggregate
book value of all of the assets of the Parent and its Subsidiaries
(other than Developed Hotel Collateral);
provided that in the case of sales of assets pursuant to clause (iv)
above, the Borrower shall, on the date of receipt by the Parent or any of
its Subsidiaries of the Net Cash Proceeds from such sale, prepay the
Advances pursuant to, and in the amount and order of priority set forth
in, Section 2.06(b)(ii), as specified therein.
(f) Investments in Other Persons. Make or hold, or permit any of its
Subsidiaries to make or hold, any Investment in any Person, except:
(i) equity Investments by the Parent and its
Subsidiaries in their Subsidiaries outstanding on the date hereof
and additional investments in Loan Parties or other persons that as
a result of such investment become Loan Parties;
(ii) loans and advances to employees in the ordinary
course of the business of the Parent and its Subsidiaries as
presently conducted in an aggregate principal amount not to exceed
$2,000,000 at any time outstanding;
(iii) Investments by the Parent and its Subsidiaries in
cash or Cash Equivalents;
(iv) Investments existing on the date hereof and
described on Schedule 4.01(x) hereto;
(v) Investments by the Borrower in Hedge Agreements
permitted under Section 5.02(b)(i)(A);
(vi) Investments consisting of intercompany Debt
permitted under Section 5.02(b)(i)(B) or 5.02(b)(ii);
(vii) Investments in Permitted Joint Ventures, provided
that (1) the aggregate amount of all such Investments does not
exceed the sum of (A) 10% of the aggregate book value of all of the
assets of the Parent and its Subsidiaries plus (B) the portion of
Excess Cash Flow not required to be applied to the prepayment of the
Advances pursuant to Section 2.06(b)(i) plus (C) the portion of
<PAGE>
the proceeds of an offering of Equity Interests of the Parent not
required to be applied to the prepayment of the Advances pursuant to
Section 2.06(b)(ii) to the extent that such portion shall not have
been otherwise applied as permitted hereunder and (2) any such
Investment is made with either cash generated by properties of the
Parent and its Subsidiaries other than the Hotel Collateral or
assets that do not constitute Hotel Collateral; and
(viii) other Investments in an aggregate amount invested
not to exceed $10,000,000; provided that with respect to Investments
made under this clause (viii): (1) immediately before and after
giving effect thereto, no Default shall have occurred and be
continuing or would result therefrom; (2) any company or business
acquired or invested in pursuant to this clause (vii) shall be in
the same line of business as the business of the Borrower or any of
its Subsidiaries; and (3) immediately after giving effect to the
acquisition of a company or business pursuant to this clause (vii),
the Borrower shall be in pro forma compliance with the covenants
contained in Section 5.04, calculated based on the financial
statements most recently delivered to the Lender Parties pursuant to
Section 5.03 and as though such acquisition had occurred at the
beginning of the four-quarter period covered thereby, as evidenced
by a certificate of the Chief Financial Officer of the Parent
delivered to the Lender Parties demonstrating such compliance.
(g) Restricted Payments. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its Equity
Interests now or hereafter outstanding, return any capital to its
stockholders, partners or members (or the equivalent Persons thereof) as
such, make any distribution of assets, Equity Interests, obligations or
securities to its stockholders, partners or members (or the equivalent
Persons thereof) as such or issue or sell any Equity Interests or accept
any capital contributions, or permit any of its Subsidiaries to do any of
the foregoing, or permit any of its Subsidiaries to purchase, redeem,
retire, defease or otherwise acquire for value any Equity Interests in the
Borrower or to issue or sell any Equity Interests therein, except that, so
long as no Default shall have occurred and be continuing at the time of
any action described in clause (i) or (ii) below or would result
therefrom:
(i) the Borrower may (A) declare and pay dividends and
distributions payable only in common stock of the Borrower, (B)
issue and sell shares of its capital stock to the Parent and (C)
accept capital contributions from the Parent,
(ii) Lodgian Capital Trust I may pay required dividends on the
CRESTS if, at the time of any such payment, no Default under Section
5.04(b) shall have occurred and be continuing or would result
therefrom;
(iii) any Subsidiary of the Borrower may (A) declare and
pay cash dividends to the Borrower, (B) declare and pay cash
dividends to any other
<PAGE>
Loan Party of which it is a Subsidiary and (C) accept capital
contributions from its parent to the extent permitted under Section
5.01(f)(i);
(iv) the Parent may declare and pay cash dividends to its
stockholders in an aggregate amount (together with any amounts paid
pursuant to Section 5.02(j)(iii)(A)) not to exceed the sum of
$25,000,000 plus the aggregate amount of cash consideration from the
sale of the Non-Core Assets plus the portion of the proceeds of an
offering of Equity Interests of the Parent not required to be
applied to the prepayment of the Advances pursuant to Section
2.06(b)(ii) to the extent that such portion shall not have been
otherwise applied as permitted hereunder; and
(v) payments may be made by each of the Borrower and the
Affiliate Guarantors pursuant to the Tax Sharing Agreement, provided
that upon the occurrence and during the continuance of an Event of
Default, the amount of payments made by the Borrower or an Affiliate
Guarantor pursuant to the Tax Sharing Agreement shall not exceed the
lesser of (x) the aggregate amount payable at such time by such
Persons under the Tax Sharing Agreement and (y) the amount of
federal and state income taxes payable to taxing authorities during
the period of such continuance by the affiliated group for income
tax purposes of which the Company is the common parent.
(h) Amendments of Constitutive Documents. Amend, or permit any of
its Subsidiaries to amend, its certificate of incorporation or bylaws or
other constitutive documents.
(i) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies or
reporting practices, except as permitted or required by generally accepted
accounting principles, or (ii) Fiscal Year.
(j) Prepayments, Etc., of Debt. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner,
or make any payment in violation of any subordination terms of, any Debt,
except (i) the prepayment of the Advances in accordance with the terms of
this Agreement, (ii) regularly scheduled or required repayments or
redemptions of Surviving Debt, (iii) the redemption in full of the CRESTS
(A) in an amount (together with any amounts paid pursuant to Section
5.02(g)(iv)) not to exceed the sum of $25,000,000 plus the aggregate
amount of cash consideration from the sale of Non-Core Assets or (B) with
the proceeds (to the extent such proceeds are not required to be applied
to the prepayment of the Advances pursuant to Section 2.06(b)) from the
issuance of Equity Interests and (iv) the refinancing in full of any Debt
otherwise permitted hereunder, or amend, modify or change in any manner
materially adverse to the Lender Parties any term or condition of any
Surviving Debt or Subordinated Debt (it being understood that it shall be
materially adverse to the Lenders to amend, modify or change any surviving
Debt in order to reinstate any Debt of the type described in clause (i) of
the definition thereof in respect of such Surviving Debt), or
<PAGE>
permit any of its Subsidiaries to do any of the foregoing other than to
prepay any Debt payable to the Borrower.
(k) Amendment, Etc., of Related Documents. Cancel or terminate any
Related Document or consent to or accept any cancellation or termination
thereof, amend, modify or change in any manner any term or condition of
any Related Document or give any consent, waiver or approval thereunder,
waive any default under or any breach of any term or condition of any
Related Document, agree in any manner to any other amendment, modification
or change of any term or condition of any Related Document or take any
other action in connection with any Related Document that would impair the
value of the interest or rights of any Loan Party thereunder or that would
impair the rights or interests of any Agent or any Lender Party, or permit
any of its Subsidiaries to do any of the foregoing.
(l) Negative Pledge. Enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon
any of its property or assets except (i) in favor of the Secured Parties
or (ii) in connection with (A) any Surviving Debt, (B) any purchase money
Debt permitted by Section 5.02(b)(iii)(B) solely to the extent that the
agreement or instrument governing such Debt prohibits a Lien on the
property acquired with the proceeds of such Debt, or (C) any Capitalized
Lease permitted by Section 5.02(b)(iii)(C) solely to the extent that such
Capitalized Lease prohibits a Lien on the property subject thereto, or (D)
any Debt outstanding on the date any Subsidiary of the Borrower becomes
such a Subsidiary (so long as such agreement was not entered into solely
in contemplation of such Subsidiary becoming a Subsidiary of the
Borrower).
(m) Partnerships, Etc. Become a general partner in any general or
limited partnership or joint venture, or permit any of its Subsidiaries to
do so, other than any Subsidiary the sole assets of which consist of its
interest in such partnership or joint venture.
(n) Speculative Transactions. Engage, or permit any of its
Subsidiaries to engage, in any transaction involving commodity options or
futures contracts or any similar speculative transactions.
(o) Capital Expenditures. Make, or permit any of its Subsidiaries to
make, any Capital Expenditures that would cause the aggregate of all such
Capital Expenditures made by the Parent and its Subsidiaries in any Fiscal
Year exceed the sum of (i) $5,000,000 and (ii) 5% of the gross revenue
generated on properties of the Parent and its Subsidiaries to the extent
such Capital Expenditures (other than $5,000,000 of such Capital
Expenditures) are expended on furniture, fixtures and equipment for such
properties; provided that the Parent and its Subsidiaries may make
additional Capital Expenditures in any Fiscal Year with respect to the
acquisition, construction or renovation of hotel properties so long as at
the time of making any such Capital Expenditure (i) the Collateral Agent
has or is granted a perfected first priority security
<PAGE>
interest in such property pursuant to Section 5.01(j), (ii) no Default has
then occurred and is continuing or would result therefrom and (iii) both
before and after such Capital Expenditure, the Parent and its Subsidiaries
are and will be in compliance with the covenants set forth in Section
5.04.
(p) Formation of Subsidiaries. Organize or invest, or permit any
Subsidiary to organize or invest, in any new Subsidiary except as
permitted under Section 5.02(f)(i) or (vii)
(q) Payment Restrictions Affecting Subsidiaries. Directly or
indirectly, enter into or suffer to exist, or permit any of its
Subsidiaries to enter into or suffer to exist, any agreement or
arrangement limiting the ability of any of its Subsidiaries to declare or
pay dividends or other distributions in respect of its Equity Interests or
repay or prepay any Debt owed to, make loans or advances to, or otherwise
transfer assets to or invest in, the Borrower or any Subsidiary of the
Borrower (whether through a covenant restricting dividends, loans, asset
transfers or investments, a financial covenant or otherwise), except (i)
the Loan Documents, (ii) any agreement or instrument evidencing Surviving
Debt and (iii) any agreement in effect at the time such Subsidiary becomes
a Subsidiary of the Borrower, so long as such agreement was not entered
into solely in contemplation of such Person becoming a Subsidiary of the
Borrower.
(r) Amendment, Etc., of Material Contracts. Cancel or terminate any
Material Contract or consent to or accept any cancellation or termination
thereof, amend or otherwise modify any Material Contract or give any
consent, waiver or approval thereunder, waive any default under or breach
of any Material Contract, agree in any manner to any other amendment,
modification or change of any term or condition of any Material Contract
or take any other action in connection with any Material Contract, in each
case, that would impair the value of the interest or rights of any Loan
Party thereunder or that would reasonably be expected to have a Material
Adverse Effect.
SECTION 5.03. Reporting Requirements. So long as any Advance or any
other Obligation of any Loan Party under any Loan Document shall remain unpaid,
any Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Parent will furnish to the Agents and the Lender
Parties:
(a) Default Notice. As soon as possible and in any event within two
days after the occurrence of each Default or any event, development or
occurrence reasonably likely to have a Material Adverse Effect continuing
on the date of such statement, a statement of the chief financial officer
of the Parent setting forth details of such Default and the action that
the Parent and the Borrower have taken and proposes to take with respect
thereto.
(b) Annual Financials. As soon as available and in any event within
90 days after the end of each Fiscal Year, (i) a copy of the annual audit
report for such year for the Parent and its Subsidiaries, including
therein a Consolidated balance sheet of the Parent and its Subsidiaries as
of the end of such Fiscal Year and a Consolidated statement of income and
a Consolidated statement of
<PAGE>
cash flows of the Parent and its Subsidiaries for such Fiscal Year and
(ii) a copy of the annual audit report for such year for the Borrower and
its Subsidiaries including therein a Consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and a
Consolidated statement of income and a Consolidated statement of cash
flows of the Borrower and its Subsidiaries for such Fiscal Year, in each
case accompanied by an opinion acceptable to the Required Lenders of
independent public accountants of nationally recognized standing
acceptable to the Required Lenders, together with (i) a certificate of
such accounting firm to the Lender Parties stating that in the course of
the regular audit of the business of the Parent and its Subsidiaries,
which audit was conducted by such accounting firm in accordance with
generally accepted auditing standards, such accounting firm has obtained
no knowledge that a Default has occurred and is continuing, or if, in the
opinion of such accounting firm, a Default has occurred and is continuing,
a statement as to the nature thereof, (ii) a schedule in form satisfactory
to the Administrative Agent of the computations used by such accountants
in determining, as of the end of such Fiscal Year, compliance with the
covenants contained in Section 5.04, provided that in the event of any
change in GAAP used in the preparation of such financial statements, the
Parent shall also provide, if necessary for the determination of
compliance with Section 5.04, a statement of reconciliation conforming
such financial statements to GAAP and (iii) a certificate of the Chief
Financial Officer of the Parent stating that no Default has occurred and
is continuing or, if a default has occurred and is continuing, a statement
as to the nature thereof and the action that the Parent and the Borrower
have taken and proposes to take with respect thereto.
(c) Quarterly Financials. 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, (i) a Consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such quarter and a Consolidated statement of
income and a Consolidated statement of cash flows of the Parent and its
Subsidiaries for the period commencing at the end of the previous fiscal
quarter and ending with the end of such fiscal quarter and a Consolidated
statements of income and a Consolidated statement of cash flows of the
Parent and its Subsidiaries for the period commencing at the end of the
previous Fiscal Year and ending with the end of such quarter and (ii) a
Consolidated balance sheet of the Borrower and its Subsidiaries as of the
end of such quarter and a Consolidated statement of income and a
Consolidated statement of cash flows of the Borrower and its Subsidiaries
for the period commencing at the end of the previous fiscal quarter and
ending with the end of such fiscal quarter and a Consolidated statements
of income and a Consolidated statement of cash flows of the Borrower and
its Subsidiaries for the period commencing at the end of the previous
Fiscal Year and ending with the end of such quarter, setting forth in each
case in comparative form the corresponding figures for the corresponding
date or period of the preceding Fiscal Year, all in reasonable detail and
duly certified (subject to normal year-end audit adjustments) by the Chief
Financial Officer of the Parent as having been prepared in accordance with
GAAP, together with (i) a certificate of said officer stating that no
Default has occurred and is continuing or, if a Default has occurred and
is continuing, a statement as to the nature thereof and the action that
the Parent and the Borrower have
<PAGE>
taken and proposes to take with respect thereto and (ii) a schedule in
form satisfactory to the Administrative Agent of the computations used by
the Parent in determining compliance with the covenants contained in
Section 5.04, provided that in the event of any change in GAAP used in the
preparation of such financial statements, the Parent shall also provide,
if necessary for the determination of compliance with Section 5.04, a
statement of reconciliation conforming such financial statements to GAAP.
(d) Annual Forecasts. As soon as available and in any event no later
than 15 days before the end of each Fiscal Year, forecasts prepared by
management of the Parent, in form satisfactory to the Administrative
Agent, of balance sheets, income statements and cash flow statements on a
quarterly basis for the Fiscal Year following such Fiscal Year and on an
annual basis for each Fiscal Year thereafter until the Termination Date.
(e) Litigation. Promptly after the commencement thereof, notice of
all actions, suits, investigations, litigation and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any Loan Party or any of
its Subsidiaries of the type described in Section 4.01(f), and promptly
after the occurrence thereof, notice of any adverse change in the status
or the financial effect on any Loan Party or any of its Subsidiaries of
the Disclosed Litigation from that described on Schedule 4.01(e) hereto.
(f) Securities Reports. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports
that any Loan Party or any of its Subsidiaries sends to its stockholders,
and copies of all regular, periodic and special reports, and all
registration statements, that any Loan Party or any of its Subsidiaries
files with the Securities and Exchange Commission or any governmental
authority that may be substituted therefor, or with any national
securities exchange.
(g) Agreement Notices. Promptly upon receipt thereof, copies of all
notices, requests and other documents received by any Loan Party or any of
its Subsidiaries under or pursuant to any Related Document or Material
Contract or instrument, indenture, loan or credit or similar agreement
regarding or related to any breach or default by any party thereto or any
other event that could materially impair the value of the interests or the
rights of any Loan Party or otherwise have a Material Adverse Effect and
copies of any amendment, modification or waiver of any provision of any
Related Document or Material Contract or instrument, indenture, loan or
credit or similar agreement and, from time to time upon request by the
Administrative Agent, such information and reports regarding the Related
Documents, the Material Contracts and such instruments, indentures and
loan and credit and similar agreements as the Administrative Agent may
reasonably request.
(h) Revenue Agent Reports. Within 10 days after receipt, copies of
all Revenue Agent Reports (Internal Revenue Service Form 886), or other
written proposals of the Internal Revenue Service, that propose, determine
or otherwise set forth positive adjustments to the Federal income tax
liability of the affiliated group (within the meaning
<PAGE>
of Section 1504(a)(1) of the Internal Revenue Code) of which the Borrower
is a member aggregating $10,000,000 or more.
(i) ERISA. (i) ERISA Events and ERISA Reports. (A) Promptly and in
any event within 10 days after any Loan Party or any ERISA Affiliate knows
or has reason to know that any ERISA Event has occurred, a statement of
the Chief Financial Officer of the Parent describing such ERISA Event and
the action, if any, that such Loan Party or such ERISA Affiliate has taken
and proposes to take with respect thereto and (B) on the date any records,
documents or other information must be furnished to the PBGC with respect
to any Plan pursuant to Section 4010 of ERISA, a copy of such records,
documents and information.
(ii) Plan Terminations. Promptly and in any event within two
Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate, copies of each notice from the PBGC stating its intention to
terminate any Plan or to have a trustee appointed to administer any Plan.
(iii) Plan Annual Reports. Promptly and in any event within 30 days
after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan.
(iv) Multiemployer Plan Notices. Promptly and in any event within
five Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (A) the imposition of Withdrawal Liability by any such
Multiemployer Plan, (B) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the
amount of liability incurred, or that may be incurred, by such Loan Party
or any ERISA Affiliate in connection with any event described in clause
(A) or (B).
(j) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of any
receipt of notice from any governmental authority alleging noncompliance
by any Loan Party or any of its Subsidiaries with any Environmental Law or
Environmental Permit that could (i) reasonably be expected to have a
Material Adverse Effect or (ii) cause any property described in the
Mortgages to be subject to any restrictions on ownership, occupancy, use
or transferability under any Environmental Law.
(k) Real Property. As soon as available and in any event within 30
days after the end of each Fiscal Year, a report supplementing Schedules
4.01(w) and 4.01(x) hereto, including an identification of all owned and
leased real property disposed of by the Parent or any of its Subsidiaries
during such Fiscal Year, a list and description (including the street
address, county or other relevant jurisdiction, state, record owner, book
value thereof and, in the case of leases of property, lessor, lessee,
expiration date and annual rental cost thereof) of all real property
acquired or leased during such Fiscal
<PAGE>
Year and a description of such other changes in the information included
in such Schedules as may be necessary for such Schedules to be accurate
and complete.
(l) Insurance. As soon as available and in any event within 30 days
after the end of each Fiscal Year, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for each Loan
Party and its Subsidiaries and containing such additional information as
any Agent, or any Lender Party through the Administrative Agent, may
reasonably specify.
(m) Year 2000 Compliance. Promptly after the Parent's discovery or
determination thereof, notice (in reasonable detail) that any computer
application (including those of its suppliers, vendors and customers) that
is material to its or any of its Subsidiaries' business and operations
will not be Year 2000 Compliant (as defined in Section 4.01(bb)), except
to the extent that such failure could not reasonably be expected to have a
Material Adverse Effect.
(n) Management Letters. Promptly, and in any event within five days
or receipt thereof, copies of any "management letter" or similar letter
received by the Parent or any of its Subsidiaries (or the board or
directors or any committee thereof of any of the foregoing) from its
auditors.
(o) Other Information. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as
any Agent, or any Lender Party through the Administrative Agent, may from
time to time reasonably request.
SECTION 5.04. Financial Covenants. So long as any Advance or any
other Obligation of any Loan Party under any Loan Document shall remain unpaid,
any Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Parent and it Subsidiaries will:
<PAGE>
(a) Debt to EBITDA Ratio. Maintain at all times a Debt/EBITDA Ratio
(calculated on any day of determination using EBITDA for the most recently
ended fiscal quarter for which financial statements have been delivered
pursuant to Section 5.03) of not more than the amount set forth below for
each period set forth below:
===========================================
Quarter Ending Ratio
===========================================
September 30, 1999 6.25:1
===========================================
December 31, 1999 6.25:1
===========================================
March 31, 2000 6.25:1
===========================================
June 30, 2000 6.25:1
===========================================
September 30, 2000 6.25:1
===========================================
December 31, 2000 6.00:1
===========================================
March 31, 2001 6.00:1
===========================================
June 30, 2001 6.00:1
===========================================
September 30, 2001 6.00:1
===========================================
December 31, 2001 5.50:1
===========================================
March 31, 2002 5.50:1
===========================================
June 30, 2002 5.50:1
===========================================
September 30, 2002 5.50:1
===========================================
December 31, 2002 5.50:1
===========================================
March 31, 2003 5.50:1
===========================================
June 30, 2003 5.50:1
===========================================
September 30, 2003 5.50:1
===========================================
December 31, 2003 5.00:1
===========================================
March 31, 2004 5.00:1
===========================================
June 30, 2004 5.00:1
===========================================
September 30, 2004 5.00:1
===========================================
December 31, 2004 4.75:1
===========================================
March 31, 2005 4.75:1
===========================================
June 30, 2005 4.75:1
===========================================
September 30, 2005 4.75:1
===========================================
December 31, 2005 4.50:1
and thereafter
===========================================
<PAGE>
(b) Fixed Charge Coverage Ratio. Maintain at the end of each fiscal
quarter of the Parent a Fixed Charge Coverage Ratio of not less than the
amount set forth below for each period set forth below:
===========================================
Quarter Ending Ratio
===========================================
December 31, 1999 1.00:1
===========================================
March 31, 2000 1.00:1
===========================================
June 30, 2000 1.00:1
===========================================
September 30, 2000 1.00:1
===========================================
December 31, 2000 1.05:1
and thereafter
===========================================
(c) Interest Coverage Ratio. Maintain at the end of each fiscal
quarter of the Parent an Interest Coverage Ratio of not less than the
amount set forth below for each period set forth below:
===========================================
Quarter Ending Ratio
===========================================
September 30, 1999 1.75:1
===========================================
December 31, 1999 1.75:1
===========================================
March 31, 2000 1.75:1
===========================================
June 30, 2000 1.75:1
===========================================
September 30, 2000 1.75:1
===========================================
December 31, 2000 1.85:1
===========================================
March 31, 2001 1.85:1
===========================================
June 30, 2001 1.85:1
===========================================
September 30, 2001 1.85:1
===========================================
December 31, 2001 1.95:1
===========================================
March 31, 2002 1.95:1
===========================================
June 30, 2002 1.95:1
===========================================
September 30, 2002 1.95:1
===========================================
December 31, 2002 2.05:1
===========================================
March 31, 2003 2.05:1
===========================================
June 30, 2003 2.05:1
===========================================
September 30, 2003 2.05:1
===========================================
December 31, 2003 2.15:1
===========================================
March 31, 2004 2.15:1
===========================================
June 30, 2004 2.15:1
===========================================
September 30, 2004 2.15:1
===========================================
<PAGE>
December 31, 2004 2.25:1
===========================================
March 31, 2005 2.25:1
===========================================
June 30, 2005 2.25:1
===========================================
September 30, 2005 2.25:1
===========================================
December 31, 2005 2.50:1
and thereafter
===========================================
(d) Consolidated Senior Debt to Hotel Collateral EBITDA Ratio.
Maintain at all times a Senior Debt/to Hotel Collateral EBITDA Ratio
(calculated on any day of determination using Hotel Collateral EBITDA for
the most recently ended fiscal quarter for which financial statements have
been delivered pursuant to Section 5.03) of not more than the amount set
forth below for each period set forth below:
===========================================
Quarter Ending Ratio
===========================================
September 30, 1999 4.00:1
===========================================
December 31, 1999 4.00:1
===========================================
March 31, 2000 4.00:1
===========================================
June 30, 2000 4.00:1
===========================================
September 30, 2000 4.00:1
===========================================
December 31, 2000 4.50:1
===========================================
March 31, 2001 4.50:1
===========================================
June 30, 2001 4.50:1
===========================================
September 30, 2001 4.50:1
===========================================
December 31, 2001 4.00:1
===========================================
March 31, 2002 4.00:1
===========================================
June 30, 2002 4.00:1
===========================================
September 30, 2002 4.00:1
===========================================
December 31, 2002 4.00:1
===========================================
March 31, 2003 4.00:1
===========================================
June 30, 2003 4.00:1
===========================================
September 30, 2003 4.00:1
===========================================
December 31, 2003 3.50:1
===========================================
March 31, 2004 3.50:1
===========================================
June 30, 2004 3.50:1
===========================================
September 30, 2004 3.50:1
===========================================
December 31, 2004 3.25:1
===========================================
March 31, 2005 3.25:1
===========================================
June 30, 2005 3.25:1
===========================================
September 30, 2005 3.25:1
===========================================
<PAGE>
December 31, 2005 3.00:1
===========================================
March 31, 2006 3.00:1
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June 30, 2006 3.00:1
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September 30, 2006 3.00:1
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December 31, 2006 2.75:1
and thereafter
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of any Advance
when the same shall become due and payable or (ii) the Borrower shall fail
to pay any interest on any Advance, or any Loan Party shall fail to make
any other payment under any Loan Document, in each case under this clause
(ii) within three Business Days after the same becomes due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) the Borrower or the Parent, as applicable, shall fail to perform
or observe any term, covenant or agreement contained in Section 2.14,
5.01(e) (solely as to existence), (j), (m) or (p), 5.02, 5.03(a) or 5.04;
or
(d) any Loan Party shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed if such failure shall remain unremedied for 30 days
after the earlier of the date on which (i) a Responsible Officer becomes
aware of such failure or (ii) written notice thereof shall have been given
to the Borrower by any Agent or any Lender Party; or
(e) any Loan Party or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in
respect of any Debt of such Loan Party or such Subsidiary (as the case may
be) that is outstanding in a principal amount (or, in the case of any
Hedge Agreement, an Agreement Value) of at least $10,000,000 either
individually or in the aggregate (but excluding Debt outstanding
hereunder), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any
other event shall occur or condition shall exist under any agreement or
instrument relating
<PAGE>
to any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
event or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature; or any such Debt shall be declared
to be due and payable or required to be prepaid or redeemed (other than by
a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(f) any Loan Party or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against any Loan Party or any of its Subsidiaries seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee or other
similar official for it or for any substantial part of its property and,
in the case of any such proceeding instituted against it (but not
instituted by it) that is being diligently contested by it in good faith,
either such proceeding shall remain undismissed or unstayed for a period
of 60 days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or any substantial part of its property) shall occur; or any Loan
Party or any of its Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (f); or
(g) any judgments or orders, either individually or in the
aggregate, for the payment of money in excess of $10,000,000 shall be
rendered against any Loan Party or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon
such judgment or order and shall have been pending for a period of 10 days
without being stayed or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered against any
Loan Party or any of its Subsidiaries that could be reasonably likely to
have a Material Adverse Effect, and there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(i) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01 or 5.01(j) shall for any reason cease to be valid
and binding on or enforceable against any Loan Party party to it, or any
such Loan Party shall so state in writing; or
<PAGE>
(j) any Collateral Document or financing statement after delivery
thereof pursuant to Section 3.01 or 5.01(j) shall for any reason (other
than pursuant to the terms thereof) cease to create a valid and perfected
first priority lien on and security interest in the Hotel Collateral
purported to be covered thereby; or
(k) a Change of Control shall occur; or
(l) any ERISA Event shall have occurred with respect to a Plan and
the sum (determined as of the date of occurrence of such ERISA Event) of
the Insufficiency of such Plan and the Insufficiency of any and all other
Plans with respect to which an ERISA Event shall have occurred and then
exist (or the liability of the Loan Parties and the ERISA Affiliates
related to such ERISA Event) exceeds $10,000,000; or
(m) any Loan Party or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated
with all other amounts required to be paid to Multiemployer Plans by the
Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined
as of the date of such notification), exceeds $10,000,000 or requires
payments exceeding $2,500,000 per annum; or
(n) any Loan Party or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, and as a result of such reorganization or termination the aggregate
annual contributions of the Loan Parties and the ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $2,500,000; or
(o) an "Event of Default" (as defined in any Mortgage or in Annex A)
shall have occurred and be continuing;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Commitments of each Lender Party and the obligation of each Lender
Party to make Advances (other than Letter of Credit Advances by an Issuing Bank
or a Working Capital Lender pursuant to Section 2.03(c)) and of each Bank to
issue Letters of Credit to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Required Lenders, (A) by notice to the Borrower, declare the Notes, all interest
thereon and all other amounts payable under this Agreement and the other Loan
Documents to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower, and (B) by notice to each party
required under the terms of any agreement in support of which a Standby Letter
of Credit is issued, request that all
<PAGE>
Obligations under such agreement be declared to be due and payable; provided,
however, that in the event of an actual or deemed entry of an order for relief
with respect to the Borrower under the Federal Bankruptcy Code, (x) the
Commitments of each Lender Party and the obligation of each Lender Party to make
Advances (other than Letter of Credit Advances by the Issuing Bank or a Working
Capital Lender pursuant to Section 2.03(c) and Swing Line Advances by a Working
Capital Lender pursuant to Section 2.02(b)) and of the Issuing Bank to issue
Letters of Credit shall automatically be terminated and (y) the Notes, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower. Notwithstanding anything to be contrary
in the Loan Documents, the Term B Advances comprising the initial Term B
Borrowing shall be deemed the last to be repaid.
SECTION 6.02. Actions in Respect of the Letters of Credit upon
Default. If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Collateral Agent on behalf of the Lender
Parties in same day funds at the Collateral Agent's office designated in such
demand, for deposit in the L/C Cash Collateral Account, an amount equal to the
aggregate Available Amount of all Letters of Credit then outstanding. If at any
time the Administrative Agent or the Collateral Agent determines that any funds
held in the L/C Cash Collateral Account are subject to any right or claim of any
Person other than the Agents and the Lender Parties or that the total amount of
such funds is less than the aggregate Available Amount of all Letters of Credit,
the Borrower will, forthwith upon demand by the Administrative Agent or the
Collateral Agent, pay to the Collateral Agent, as additional funds to be
deposited and held in the L/C Cash Collateral Account, an amount equal to the
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Collateral Account that the
Administrative Agent or the Collateral Agent, as the case may be, determines to
be free and clear of any such right and claim. Upon the drawing of any Letter of
Credit for which funds are on deposit in the L/C Cash Collateral Account, such
funds shall be applied to reimburse the relevant Issuing Bank or Working Capital
Lenders, as applicable, to the extent permitted by applicable law.
<PAGE>
ARTICLE VII
AFFILIATE GUARANTY
SECTION 7.01. Guaranty. (a) Each Affiliate Guarantor hereby
unconditionally and irrevocably guarantees the punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all Obligations of
each other Loan Party now or hereafter existing under the Loan Documents,
whether for principal, interest, fees, expenses or otherwise (such Obligations
being the "Guaranteed Obligations"), and agrees to pay any and all expenses
(including reasonable counsel fees and expenses) incurred by the Administrative
Agent or the Lender Parties in enforcing any rights under this Guaranty. Without
limiting the generality of the foregoing, each Affiliate Guarantor s liability
shall extend to all amounts that constitute part of the Guaranteed Obligations
and would be owed by each such Loan Party to the Agent or any Lender Party under
the Loan Documents but for the fact that they are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar proceeding
involving any Loan Party.
(b) (i) Each Affiliate Guarantor, the Administrative Agent and each
other Secured Party, hereby confirms that it is the intention of all such
parties that this Affiliate Guaranty not constitute a fraudulent transfer or
conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to
the extent applicable to this Affiliate Guaranty. To effectuate the foregoing
intention, the Administrative Agent, the other Secured Parties and the Affiliate
Guarantors hereby irrevocably agree that the Obligations of each Affiliate
Guarantor under this Affiliate Guaranty shall not exceed the greater of (A) the
net benefit realized by such Affiliate Guarantor from the proceeds of the
Advances made from time to time by the Borrower to such Affiliate Guarantor or
any Subsidiary of such Affiliate Guarantor and (B) the maximum amount that will,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Affiliate Guarantor that are relevant under such laws, and
after giving effect to any collections from, rights to receive contribution from
or payments made by or on behalf of any other Affiliate Guarantor in respect of
the Obligations of such other Affiliate Guarantor under this Affiliate Guaranty,
result in the Obligations of such Affiliate Guarantor under this Affiliate
Guaranty not constituting a fraudulent transfer or conveyance. For purposes
hereof, "Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal or
state law for the relief of debtors.
(ii) Each Affiliate Guarantor agrees that in the event any payment
shall be required to be made to the Secured Parties under this Affiliate
Guaranty or any other guaranty, such Affiliate Guarantor will contribute, to the
maximum extent permitted by law, such amounts to each other Affiliate Guarantor
and each other guarantor so as to maximize the aggregate amount paid to the
Secured Parties under the Loan Documents.
(c) Notwithstanding anything else in the Loan Documents to the
contrary, on or prior to September 13, 1999, the obligations of Impac Hotel
Group, LLC under this Affiliate Guaranty shall not exceed $88,500,000.
<PAGE>
SECTION 7.02. Guaranty Absolute. Each Affiliate Guarantor guarantees
that the Guaranteed Obligations will be paid strictly in accordance with the
terms of the Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agents or the Lenders with respect thereto. The Obligations of
each Affiliate Guarantor under this Guaranty are independent of the Guaranteed
Obligations or any other Obligations of any other Loan Party under the Loan
Documents, and a separate action or actions may be brought and prosecuted
against each Affiliate Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against any other Loan Party or whether any other
Loan Party is joined in any such action or actions. The liability of each
Affiliate Guarantor under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and each Affiliate Guarantor hereby irrevocably
waives any defenses it may now or hereinafter have in any way relating to, any
or all of the following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Loan Party under the Loan Documents, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrower or
otherwise;
(c) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Guaranteed Obligations
or any other Obligations of any other Loan Party under the Loan Documents
or any other assets of any Loan Party or any of their Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party or any of their Subsidiaries; or
(f) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Administrative Agent or any Lender Party that might
otherwise constitute a defense available to, or a discharge of, the
Borrower, any Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Guaranteed Obligations
is rescinded or must otherwise be returned by the Administrative Agent or any
Lender Party upon the insolvency, bankruptcy or
<PAGE>
reorganization of any Loan Party or any of their Subsidiaries or otherwise, all
as though such payment had not been made.
SECTION 7.03. Waiver. Each Affiliate Guarantor hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Guaranteed Obligations and this Guaranty and any requirement that the
Administrative Agent or any Lender Party protect, secure, perfect or insure any
Lien or any property subject thereto or exhaust any right or take any action
against any Loan Party or any other Person or any collateral. Each Affiliate
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Loan Documents and that the
waiver set forth in this Section 7.03 is knowingly made in contemplation of such
benefits.
SECTION 7.04. Subrogation. Each Affiliate Guarantor agrees it will
not exercise any rights that it may now or hereafter acquire against any the
Borrower, any Guarantor or any other guarantor that arise from the existence,
payment, performance or enforcement of such Affiliate Guarantor s Obligations
under this Agreement or any other Loan Document, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the
Administrative Agent or any Lender Party against the Borrower, any Guarantor or
any other guarantor or any collateral, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law, including,
without limitation, the right to take or receive from the Borrower, any
Guarantor or any other guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim, remedy or right, unless and until all of the Obligations and all
other amounts payable under this Guaranty shall have been paid in full in cash
and the Commitments shall have expired or terminated. If any amount shall be
paid to such Affiliate Guarantor in violation of the preceding sentence at any
time prior to the later of the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Guaranty and the
Termination Date, such amount shall be held in trust for the benefit of the
Administrative Agent and the Lender Parties and shall forthwith be paid to the
Administrative Agent to be credited and applied to the Guaranteed Obligations
and all other amounts payable under this Guaranty, whether matured or unmatured,
in accordance with the terms of the Loan Documents, or to be held as collateral
for any Guaranteed Obligations or other amounts payable under this Guaranty
thereafter arising. If (i) an Affiliate Guarantor shall make payment to the
Administrative Agent or any Lender Party of all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty shall be paid in full in cash and (iii) the Final
Maturity Date shall have occurred, the Administrative Agent and the Lender
Parties will, at such Affiliate Guarantor s request and expense, execute and
deliver to such Affiliate Guarantor appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer by
subrogation to such Affiliate Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such Affiliate Guarantor.
SECTION 7.05. Affiliate Guaranty Supplements. Upon the execution and
delivery by any Person of a guaranty supplement in substantially the form of
Exhibit H hereto (each, an "Affiliate Guaranty Supplement"), (a) such Person
shall be referred to as an "Additional Affiliate Guarantor" and shall become and
be a "Affiliate Guarantor" hereunder,
<PAGE>
and each reference in this Affiliate Guaranty to an "Affiliate Guarantor" shall
also mean and be a reference to such Additional Affiliate Guarantor, and each
reference in any other Loan Document to an "Affiliate Guarantor" shall also mean
and be a reference to such Additional Affiliate Guarantor, and (b) each
reference herein to "this Affiliate Guaranty", "hereunder", "hereof" or words of
like import referring to this Affiliate Guaranty, and each reference in any
other Loan Document to the "Affiliate Guaranty", "thereunder", "thereof" or
words of like import referring to this Affiliate Guaranty, shall mean and be a
reference to this Affiliate Guaranty as supplemented by suvh Affiliate Guaranty
Supplement.
SECTION 7.06. Continuing Guaranty; Assignments. This Affiliate
Guaranty is a continuing guaranty and shall (a) remain in full force and effect
until the latest of (i) the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Affiliate Guaranty, (ii)
the Termination Date and (iii) the latest date of expiration or termination of
all Letters of Credit, (b) be binding upon each Affiliate Guarantor, its
successors and assigns and (c) inure to the benefit of and be enforceable by the
Secured Parties and their successors, transferees and assigns. Without limiting
the generality of clause (c) of the immediately preceding sentence, any Secured
Party may assign or otherwise transfer all or any portion of its rights and
obligations under this Agreement (including, without limitation, all or any
portion of its Commitments, the Advances owing to it and the Note or Notes held
by it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to such Secured Party herein or
otherwise, in each case as and to the extent provided in Section 9.07. No
Affiliate Guarantor shall have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Secured Parties.
ARTICLE VIII
THE AGENTS
SECTION 8.01. Authorization and Action. Each Lender Party (in its
capacities as a Lender, the Swing Line Bank (if applicable), the Issuing Bank
(if applicable) and on behalf of itself and its Affiliates as potential Hedge
Banks) hereby appoints and authorizes each Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement and
the other Loan Documents as are delegated to such Agent by the terms hereof and
thereof, together with such powers and discretion as are reasonably incidental
thereto. As to any matters not expressly provided for by the Loan Documents
(including, without limitation, enforcement or collection of the Notes), no
Agent shall be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding upon all Lender Parties and all holders
of Notes; provided, however, that no Agent shall be required to take any action
that exposes such Agent to personal liability or that is contrary to this
Agreement or applicable law. Each Agent agrees to give to each Lender Party
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
<PAGE>
SECTION 8.02. Agents' Reliance, Etc. Neither any Agent nor any of
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with the Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, each Agent:
(a) may treat the payee of any Note as the holder thereof until, in the case of
the Administrative Agent, the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any
other Agent, such Agent has received notice from the Administrative Agent that
it has received and accepted such Assignment and Acceptance, in each case as
provided in Section 9.07; (b) may consult with legal counsel (including counsel
for any Loan Party), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Lender Party and shall
not be responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 8.03. Morgan Stanley, Lehman Brothers and Affiliates. With
respect to its Commitments, the Advances made by it and the Notes issued to it,
Morgan Stanley Senior Fundings, Inc., Lehman Brothers, and their respective
Affiliates shall have the same rights and powers under the Loan Documents as any
other Lender Party and may exercise the same as though it were not an Agent; and
the term "Lender Party" or "Lender Parties" shall, unless otherwise expressly
indicated, include Morgan Stanley Senior Fundings, Inc. and Lehman Brothers in
their respective individual capacities. Morgan Stanley Senior Fundings, Inc.,
Lehman Brothers and their respective Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, any Loan
Party, any of its Subsidiaries and any Person that may do business with or own
securities of any Loan Party or any such Subsidiary, all as if Morgan Stanley
Senior Fundings, Inc., and Lehman Brothers were not Agents and without any duty
to account therefor to the Lender Parties.
SECTION 8.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon any Agent or
any other Lender Party and based on the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender Party also acknowledges that it will, independently and
without
<PAGE>
reliance upon any Agent or any other Lender Party and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement.
SECTION 8.05. Indemnification. (a) Each Lender Party severally
agrees to indemnify each Agent (to the extent not promptly reimbursed by the
Borrower) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against such Agent in any way relating to or arising out of the Loan Documents
or any action taken or omitted by such Agent under the Loan Documents; provided,
however, that no Lender Party shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct as found in a final, non-appealable judgment by a court of
competent jurisdiction. Without limitation of the foregoing, each Lender Party
agrees to reimburse each Agent promptly upon demand for its ratable share of any
costs and expenses (including, without limitation, fees and expenses of counsel)
payable by the Borrower under Section 9.04, to the extent that such Agent is not
promptly reimbursed for such costs and expenses by the Borrower.
(b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrower) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Issuing Bank under the Loan Documents; provided, however, that no Lender
Party shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Issuing Bank's gross negligence or willful misconduct as
found in a final, non-appealable judgment by a court of competent jurisdiction.
Without limitation of the foregoing, each Lender Party agrees to reimburse such
Issuing Bank promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by the Borrower under Section 9.04, to the extent that the Issuing Bank is not
promptly reimbursed for such costs and expenses by the Borrower.
(c) For purposes of this Section 8.05, the Lender Parties'
respective ratable shares of any amount shall be determined, at any time,
according to the sum of (i) the aggregate principal amount of the Advances
outstanding at such time and owing to the respective Lender Parties, (ii) their
respective Pro Rata Shares of the aggregate Available Amount of all Letters of
Credit outstanding at such time, (iii) the aggregate unused portion of their
respective Term B Commitments and Term C Commitments (if any) at such time and
their respective Unused Term A Commitments at such time and (iv) their
respective Unused Working Capital Commitments at such time; provided that the
aggregate principal amount of Swing Line Advances owing to the Swing Line Bank
and of Letter of Credit Advances owing to the Issuing Bank shall be considered
to be owed to the Working Capital Lenders ratably in accordance with their
respective Working
<PAGE>
Capital Commitments. The failure of any Lender Party to reimburse any Agent or
the Issuing Bank, as the case may be, promptly upon demand for its ratable share
of any amount required to be paid by the Lender Parties to such Agent or the
Issuing Bank, as the case may be, as provided herein shall not relieve any other
Lender Party of its obligation hereunder to reimburse such Agent or the Issuing
Bank, as the case may be, for its ratable share of such amount, but no Lender
Party shall be responsible for the failure of any other Lender Party to
reimburse such Agent or the Issuing Bank, as the case may be, for such other
Lender Party's ratable share of such amount. Without prejudice to the survival
of any other agreement of any Lender Party hereunder, the agreement and
obligations of each Lender Party contained in this Section 8.05 shall survive
the payment in full of principal, interest and all other amounts payable
hereunder and under the other Loan Documents.
SECTION 8.06. Successor Agents. Any Agent may resign at any time by
giving written notice thereof to the Lender Parties and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lender Parties, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States or of any State thereof and having
a combined capital and surplus of at least $250,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent and, in the case of a
successor Collateral Agent, upon the execution and filing or recording of such
financing statements, or amendments thereto, and such amendments or supplements
to the Mortgages, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Agent shall succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under the
Loan Documents. If within 45 days after written notice is given of the retiring
Agent's resignation or removal under this Section 8.06 no successor Agent shall
have been appointed and shall have accepted such appointment, then on such 45th
day (a) the retiring Agent's resignation or removal shall become effective, (b)
the retiring Agent shall thereupon be discharged from its duties and obligations
under the Loan Documents and (c) the Required Lenders shall thereafter perform
all duties of the retiring Agent under the Loan Documents until such time, if
any, as the Required Lenders appoint a successor Agent as provided above. After
any retiring Agent's resignation or removal hereunder as Agent shall have become
effective, the provisions of this Article VIII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes or any other Loan Document, nor consent
to any departure by any Loan Party therefrom, shall in any event be effective
unless the same shall be in writing and signed (or, in the case of the
Collateral Documents, consented to) by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that (a) no amendment,
waiver or consent shall, unless in writing and signed by all of the Lenders
(other than any Lender Party that is, at such time, a Defaulting Lender), do any
of the following at any time: (i) waive any of the conditions specified in
Section 3.01 or, in the case of the Initial Extension of Credit, Section 3.02,
(ii) change the number of Lenders or the percentage of (x) the Commitments, (y)
the aggregate unpaid principal amount of the Advances or (z) the aggregate
Available Amount of outstanding Letters of Credit that, in each case, shall be
required for the Lenders or any of them to take any action hereunder, (iii)
reduce or limit the obligations of any Guarantor under Section 1 of the Guaranty
issued by it, in the case of a Subsidiary Guarantor or 7.01, in the case of the
Parent Guarantor or release such Guarantor or otherwise limit such Guarantor's
liability with respect to the Obligations owing to the Agents and the Lender
Parties (other than, in the case of any Subsidiary Guarantor, to the extent
permitted under the Subsidiary Guaranty), (iv) release all or substantially all
of the Hotel Collateral in any transaction or series of related transactions or
permit the creation, incurrence, assumption or existence of any Lien on all or
substantially all of the Hotel Collateral in any transaction or series of
related transactions to secure any Obligations other than Obligations owing to
the Secured Parties under the Loan Documents, (v) amend Section 2.13 or this
Section 9.01 and (b) no amendment, waiver or consent shall, unless in writing
and signed by the Required Lenders and each Lender (other than any Lender that
is, at such time, a Defaulting Lender) that has a Commitment under the Term A
Facility, Term B Facility, Term C Facility or Working Capital Facility if such
Lender is directly affected by such amendment, waiver or consent, (i) increase
the Commitments of such Lender, (ii) reduce the principal of, or interest on,
the Notes held by such Lender or any fees or other amounts payable hereunder to
such Lender, (iii) postpone any date fixed for any payment of principal of, or
interest on, the Notes held by such Lender or any fees or other amounts payable
hereunder to such Lender, (iv) change the order of application of any prepayment
set forth in Section 2.06 in any manner that materially affects such Lender;
provided further that no amendment, waiver or consent shall, unless in writing
and signed by the Swing Line Bank or the Issuing Bank, as the case may be, in
addition to the Lenders required above to take such action, affect the rights or
obligations of the Swing Line Bank or the Issuing Bank, as the case may be,
under this Agreement; and provided further that no amendment, waiver or consent
shall, unless in writing and signed by an Agent in addition to the Lenders
required above to take such action, affect the rights or duties of such Agent
under this Agreement or the other Loan Documents.
SECTION 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and
<PAGE>
mailed, telegraphed, telecopied, telexed or delivered, if to the Parent, at its
address at 3445 Peachtree Road, Suite 700, Atlanta, GA 30326, Attention: Kenneth
Posner; if to the Borrower, at its address at 3445 Peachtree Road, Suite 700,
Atlanta, GA 30326, Attention: Kenneth Posner; if to any Initial Lender Party, at
its Domestic Lending Office specified opposite its name on Schedule I hereto; if
to any other Lender Party, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender Party; if to the
Collateral Agent, at its address at 1285 Broadway, 10th Floor, New York, NY
10036, Attention: James Morgan, with a copy to it at 1221 Avenue of the
Americas, 35th Floor, New York, NY 10020, Attention: Morgan Edwards; and if to
the Administrative Agent, at its address at 1285 Broadway, 10th Floor, New York,
NY 10036, Attention: James Morgan, with a copy to it at 1221 Avenue of the
Americas, 35th Floor, New York, NY 10020, Attention: Morgan Edwards; or, as to
the Borrower or the Administrative Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Administrative Agent. All such notices
and other communications shall, when mailed, telegraphed, telecopied or telexed,
be effective when deposited in the mails, delivered to the telegraph company,
transmitted by telecopier or confirmed by telex answerback, respectively, except
that notices and communications to any Agent pursuant to Article II, III or VIII
shall not be effective until received by such Agent. Delivery by telecopier of
an executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of an original executed counterpart
thereof.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any
Lender Party or any Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all costs and expenses of each Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents (including, without limitation, (A) all due diligence,
collateral review, syndication, transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and recording fees and
expenses and (B) the reasonable fees and expenses of counsel for each Agent with
respect thereto, with respect to advising such Agent as to its rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with any Loan
Party or with other creditors of any Loan Party or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto) and (ii) all
costs and expenses of each Agent and each Lender Party in connection with the
enforcement of the Loan Documents, whether in any action, suit or litigation, or
any bankruptcy, insolvency or other similar proceeding affecting creditors'
rights generally (including, without limitation, the reasonable fees and
expenses of counsel for the Administrative Agent and each Lender Party with
respect thereto).
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(b) The Borrower agrees to indemnify, defend and save and hold
harmless each Agent, each Lender Party and each of their Affiliates and their
respective officers, directors, employees, agents and advisors (each, an
"Indemnified Party") from and against, and shall pay on demand, any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation or proceeding or preparation of a
defense in connection therewith) (i) the Facilities, the actual or proposed use
of the proceeds of the Advances or the Letters of Credit, the Transaction
Documents or any of the transactions contemplated thereby or (ii) the actual or
alleged presence of Hazardous Materials on any property of any Loan Party or any
of its Subsidiaries or any Environmental Action relating in any way to any Loan
Party or any of its Subsidiaries, except to the extent such claim, damage, loss,
liability or expense is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct. In the case of an investigation, litigation or
other proceeding to which the indemnity in this Section 9.04(b) applies, such
indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by any Loan Party, its directors, shareholders or
creditors or an Indemnified Party, whether or not any Indemnified Party is
otherwise a party thereto and whether or not the Transaction is consummated.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d),
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, or by an Eligible Assignee to a Lender Party other than on the
last day of the Interest Period for such Advance upon an assignment of rights
and obligations under this Agreement pursuant to Section 9.07 as a result of a
demand by the Borrower pursuant to Section 9.07(a), or if the Borrower fails to
make any payment or prepayment of an Advance for which a notice of prepayment
has been given or that is otherwise required to be made, whether pursuant to
Section 2.04, 2.06 or 6.01 or otherwise, the Borrower shall, upon demand by such
Lender Party (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Lender Party any amounts
required to compensate such Lender Party for any additional losses, costs or
expenses that it may reasonably incur as a result of such payment or Conversion
or such failure to pay or prepay, as the case may be, including, without
limitation, any loss (excluding loss of anticipated profits or margin), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender Party to fund or maintain such Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Administrative Agent or any Lender
Party, in its sole discretion.
<PAGE>
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
9.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Agent and each Lender Party and each of their
respective Affiliates is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Agent, such Lender Party
or such Affiliate to or for the credit or the account of the Borrower against
any and all of the Obligations of the Borrower now or hereafter existing under
the Loan Documents, irrespective of whether such Agent or such Lender Party
shall have made any demand under this Agreement or such Note or Notes and
although such Obligations may be unmatured. Each Agent and each Lender Party
agrees promptly to notify the Borrower after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Agent and each
Lender Party and their respective Affiliates under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Agent, such Lender Party and their respective Affiliates may
have.
SECTION 9.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and each Agent and the
Administrative Agent shall have been notified by each Initial Lender Party that
such Initial Lender Party has executed it and thereafter shall be binding upon
and inure to the benefit of the Borrower, each Agent and each Lender Party and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender Parties.
SECTION 9.07. Assignments and Participations. (a) Each Lender may
and, so long as no Event of Default shall have occurred and be continuing, if
demanded by the Borrower pursuant to Section 2.12(h), upon at least five
Business Days' notice to such Lender and the Administrative Agent, will assign
to one or more Eligible Assignees all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment or Commitments, the Advances owing to it and the Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a uniform,
and not a varying, percentage of all rights and obligations under and in respect
of one or more Facilities, (ii) except in the case of an assignment to a Person
that, immediately prior to such assignment, was a Lender, an Affiliate of any
Lender or an Approved Fund of any Lender, or an assignment of all of a Lender's
rights and obligations under this Agreement, the aggregate amount of the
Commitments being assigned to such Eligible Assignee pursuant to such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no
<PAGE>
event be less than $5,000,000 (or such lesser amount as shall be approved by the
Administrative Agent and, so long as no Default shall have occurred and be
continuing at the time of effectiveness of such assignment, the Borrower) under
each Facility for which a Commitment is being assigned, (iii) each such
assignment shall be to an Eligible Assignee, (iv) no such assignments shall be
permitted without the consent of the Administrative Agent and the Syndication
Agent (such consent not to be unreasonably withheld or delayed) and (v) the
parties to each such assignment shall execute and deliver to the Administrative
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with any Note or Notes subject to such assignment and a
processing and recordation fee of (x) $3,000, in the case of any assignment
other than an assignment described in clause (y) or (z) below, (y) $1,500, in
the case of an assignment to an existing Lender and (z) $0 in the case of an
assignment by an existing Lender to its Affiliates, of $3,000.
(b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in such Assignment and Acceptance, (i)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as
the case may be, hereunder and (ii) the Lender or Issuing Bank assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(other than its rights under Sections 2.10, 2.12 and 9.04 to the extent any
claim thereunder relates to an event arising prior to such assignment) and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the remaining portion of an assigning
Lender's or Issuing Bank's rights and obligations under this Agreement, such
Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, each
Lender Party assignor thereunder and each assignee thereunder confirm to and
agree with each other and the other parties thereto and hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such assigning Lender
Party makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with any Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; (ii) such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Loan Party or the performance or observance by any
Loan Party of any of its obligations under any Loan Document or any other
instrument or document furnished pursuant thereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon any Agent, such assigning Lender Party
or any other Lender Party and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it
<PAGE>
is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent
to take such action as agent on its behalf and to exercise such powers and
discretion under the Loan Documents as are delegated to such Agent by the terms
hereof and thereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender or Issuing Bank, as the
case may be.
(d) The Administrative Agent, acting for this purpose (but only for
this purpose) as the agent of the Borrower, shall maintain at its address
referred to in Section 9.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lender Parties and the Commitment under each Facility of, and
principal amount of the Advances owing under each Facility to, each Lender Party
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agents and the Lender Parties may treat each Person whose name is
recorded in the Register as a Lender Party hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Agent or any Lender Party at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower and each other Agent. In the case of any assignment by a Lender, within
five Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Administrative Agent in exchange for
the surrendered Note or Notes a new Note to the order of such Eligible Assignee
in an amount equal to the Commitment assumed by it under each Facility pursuant
to such Assignment and Acceptance and, if any assigning Lender has retained a
Commitment hereunder under such Facility, a new Note to the order of such
assigning Lender in an amount equal to the Commitment retained by it hereunder.
Such new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A-1, A-2 or A-3 hereto, as the case may be.
(f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under its Letter of Credit Commitment at any time;
provided, however, that the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing and
recordation fee of $3,000.
(g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the
<PAGE>
Advances owing to it and the Note or Notes (if any) held by it); provided,
however, that (i) such Lender Party's obligations under this Agreement
(including, without limitation, its Commitments) shall remain unchanged, (ii)
such Lender Party shall remain solely responsible to the other parties hereto
for the performance of such obligations, (iii) such Lender Party shall remain
the holder of any such Note for all purposes of this Agreement, (iv) the
Borrower, the Agents and the other Lender Parties shall continue to deal solely
and directly with such Lender Party in connection with such Lender Party's
rights and obligations under this Agreement and (v) no participant under any
such participation shall have any right to approve any amendment or waiver of
any provision of any Loan Document, or any consent to any departure by any Loan
Party therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, or release all or
substantially all of the Hotel Collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 9.08. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.
SECTION 9.09. No Liability of the Issuing Bank. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the
<PAGE>
Letter of Credit; or (d) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit, except that the Borrower shall have
a claim against the Issuing Bank, and the Issuing Bank shall be liable to the
Borrower, to the extent of any direct, but not consequential, damages suffered
by the Borrower that the Borrower proves were caused by (i) the Issuing Bank's
willful misconduct or gross negligence as determined in a final, non-appealable
judgment by a court of competent jurisdiction in determining whether documents
presented under any Letter of Credit comply with the terms of the Letter of
Credit or (ii) the Issuing Bank's willful failure to make lawful payment under a
Letter of Credit after the presentation to it of a draft and certificates
strictly complying with the terms and conditions of the Letter of Credit. In
furtherance and not in limitation of the foregoing, such Issuing Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
SECTION 9.10. Confidentiality. Neither any Agent nor any Lender
Party shall disclose any Confidential Information to any Person without the
consent of the Borrower, other than (a) to such Agent's or such Lender Party's
Affiliates and their officers, directors, employees, agents and advisors and to
actual or prospective Eligible Assignees and participants, and then only on a
confidential basis, (b) as required by any law, rule or regulation or judicial
process, (c) as requested or required by any state, Federal or foreign authority
or examiner regulating such Lender Party and (d) to any rating agency when
required by it, provided that, prior to any such disclosure, such rating agency
shall undertake to preserve the confidentiality of any Confidential Information
relating to the Loan Parties received by it from such Lender Party.
SECTION 9.11. Release of Hotel Collateral. Upon the sale, lease,
transfer or other disposition of any item of Hotel Collateral of any Loan Party
(including, without limitation, as a result of the sale, in accordance with the
terms of the Loan Documents, of the Loan Party that owns such Hotel Collateral)
in accordance with the terms of the Loan Documents, the Collateral Agent or the
Administrative Agent will, at the Borrower's expense, execute and deliver to
such Loan Party such documents as such Loan Party may reasonably request to
evidence the release of such item of Hotel Collateral from the assignment and
security interest granted under the Collateral Documents in accordance with the
terms of the Loan Documents.
SECTION 9.12. Jurisdiction, Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the fullest extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in the
courts of any jurisdiction.
<PAGE>
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it 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 of the
other Loan Documents to which it is a party in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
SECTION 9.13. Co-Obligors. Each of the Affiliate Guarantors (other
than Impac and Servico) shall be co-obligors with the Borrower in connection
with the Advances. Each of such Affiliate Guarantor, the Administrative Agent
and each other Secured Party hereby confirms that it is the intention of all
such parties that the Obligations of such Affiliate Guarantors under the Loan
Documents shall not constitute a fraudulent transfer or conveyance for purposes
of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar Federal or state law to the extent applicable to
such Obligations. To effectuate the foregoing intention, the Administrative
Agent, the other Secured Parties and such Affiliate Guarantors hereby
irrevocably agree that the Obligations of each such Affiliate Guarantor under
the Loan Documents shall not exceed the greater of (A) the net benefit realized
by such Affiliate Guarantor from the proceeds of the Advances made from time to
time by the Borrower to such Affiliate Guarantor or any Subsidiary of such
Affiliate Guarantor and (B) the maximum amount that will, after giving effect to
such maximum amount and all other contingent and fixed liabilities of such
Affiliate Guarantor that are relevant under such laws, and after giving effect
to any collections from, rights to receive contribution from or payments made by
or on behalf of any other Affiliate Guarantor in respect of the Obligations of
such other Affiliate Guarantor under the Loan Documents, result in the
Obligations of such Affiliate Guarantor under this Affiliate Guaranty not
constituting a fraudulent transfer or conveyance.
SECTION 9.14 Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 9.15. Waiver of Jury Trial. Each of the Parent, the
Borrower, the Agents and the Lender Parties irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, the Advances, the Letters of Credit or the actions of any Agent or
any Lender Party in the negotiation, administration, performance or enforcement
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
LODGIAN FINANCING CORP.
By /s/ Robert M. Flanders
Title:
LODGIAN, INC.
By /s/ Robert M. Flanders
Title:
<PAGE>
MORGAN STANLEY SENIOR
FUNDING, INC., as Administrative
Agent
By /s/ Michael T. McLaughlin
-----------------------------------
Title: MICHAEL T. McLAUGHLIN
Principal
MORGAN STANLEY SENIOR FUNDING, INC.,
as Co-Lead Arranger and Joint-Book
Manager and Syndication Agent
By /s/ Michael T. McLaughlin
-----------------------------------
Title: MICHAEL T. McLAUGHLIN
Principal
LEHMAN BROTHERS INC.,
as Co-Lead Arranger and Joint-Book
Manager
By /s/ Francis Gilhool
-----------------------------------
Title: Authorized Signatory
LEHMAN COMMERCIAL PAPER INC.,
as Documentation Agent
By /s/ Francis Gilhool
-----------------------------------
Title: Authorized Signatory
<PAGE>
Initial Lenders
MORGAN STANLEY SENIOR FUNDING, INC.
By /s/ Michael T. McLaughlin
-----------------------------------
Title: MICHAEL T. McLAUGHLIN
Principal
LEHMAN COMMERCIAL PAPER INC.
By /s/ Francis Gilhool
-----------------------------------
Title: Authorized Signatory
Initial Issuing Bank
MORGAN STANLEY SENIOR FUNDING, INC.
By /s/ Michael T. McLaughlin
-----------------------------------
Title: MICHAEL T. McLAUGHLIN
Principal
<PAGE>
AFFILIATE GUARANTORS
SERVICO, INC.
By /s/ Robert M. Flanders
-----------------------------------
Title:
IMPAC HOTEL GROUP, LLC
By /s/ Robert M. Flanders
-----------------------------------
Title:
SHEFFIELD MOTEL ENTERPRISES, INC.
DOTHAN HOSPITALITY 3053, INC.
DOTHAN HOSPITALITY 3071, INC.
GADSDEN HOSPITALITY, INC.
LODGIAN ANAHEIM INC.
LODGIAN ONTARIO INC.
SERVICO PENSACOLA, INC.
SERVICO PENSACOLA 7200, INC.
SERVICO PENSACOLA 7330, INC.
SERVICO FT. PIERCE, INC.
AMI OPERATING PARTNERS, L.P.
SERVICO CENTRE ASSOCIATES, LTD.
SERVICO WEST PALM BEACH, INC.
SERVICO WINTER HAVEN, INC.
ALBANY HOTEL, INC.
SERVICO NORTHWOODS, INC.
BRUNSWICK MOTEL ENTERPRISES, INC.
LITTLE ROCK LODGING ASSOCIATES I, L.P.
ATLANTA HILLSBORO LODGING, LLC
LODGIAN RICHMOND, L.L.C.
SERVICO ROLLING MEADOWS, INC.
SERVICO CEDAR RAPIDS, INC.
SERVICO METAIRIE, INC.
SERVICO COLUMBIA, INC.
SERVICO COLESVILLE, INC.
SERVICO MARYLAND, INC.
<PAGE>
NH MOTEL ENTERPRISES, INC.
MINNEAPOLIS MOTEL ENTERPRISES, INC.
SERVICO ROSEVILLE, INC.
LODGIAN MOUNT LAUREL, INC.
SERVICO JAMESTOWN, INC.
SERVICO NEW YORK, INC.
SERVICO NIAGARA FALLS, INC.
SERVICO GRAND ISLAND, INC.
FAYETTEVILLE MOTEL
ENTERPRISES, INC.
APICO INNS OF GREEN TREE, INC.
APICO HILLS, INC.
SERVICO HILTON HEAD, INC.
SERVICO AUSTIN, INC.
SERVICO MARKET CENTER, INC.
SERVICO HOUSTON, INC.
By: /s/ Robert M. Flanders
----------------------------------
Title:
<PAGE>
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
=============================================================================================================
Working Letter of Domestic Eurodollar
Term A Term B Capital Credit Lending Lending
Name of Initial Lender Commitment Commitment Commitment Commitment Office Office
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Morgan Stanley Senior $17,500,000 $75,250,000 $35,000,000 $10,000,000
Funding, Inc.
- -------------------------------------------------------------------------------------------------------------
Lehman Commercial Paper $7,500,000 $32,250,000 $15,000,000
Inc.
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
=============================================================================================================
</TABLE>
<PAGE>
SCHEDULE 4.01(b)
Subsidiaries
See Attached.
<PAGE>
CW&T Draft 7/16/99
Schedule 4.01(b)
LODGIAN SUBSIDIARIES AND STATES OF INCORPORATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Name of Subsidiary State of Shares Issued & Outstanding % Owned by
Organization Authorized Loan Party
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHEFFIELD MOTEL ENTERPRISES, INC. Alabama 50 50 (Certificate No. 4 issued to 100%
Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
DOTHAN HOSPITALITY 3053, INC. Alabama 1000 1000 (Certificate No. 3 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
DOTHAN HOSPITALITY 3071, INC. Alabama 1000 1000 (Certificate No. 3 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
GADSDEN HOSPITALITY, INC. Alabama 1000 1000 (Certificate No. 3 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
LODGIAN ANAHEIM INC California 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
LODGIAN ONTARIO INC. California 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
AMIOP ACQUISITION CORP. Delaware 1,000 100 (Certificate No. 3 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
AMI OPERATING PARTNERS, L.P. Delaware
- -------------------------------------------------------------------------------------------------------------------------
SERVICO PENSACOLA, INC. Delaware 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO PENSACOLA 7200, INC. Delaware 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO PENSACOLA 7330, INC. Delaware 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO FT. PIERCE, INC. Delaware 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO, INC. Florida
- -------------------------------------------------------------------------------------------------------------------------
PALM BEACH MOTEL ENTERPRISES, INC., Florida 60 60 (Certificate No. 7 issued to 100%
as sole general partner of Servico Centre Lodgian Financing Corp.)
Associates, Ltd., a Florida limited partnership.
- -------------------------------------------------------------------------------------------------------------------------
SERVICO CENTRE ASSOCIATES, LTD. Florida
- -------------------------------------------------------------------------------------------------------------------------
SERVICO WEST PALM BEACH, INC. Florida 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO WINTER HAVEN, INC. Florida 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
ALBANY HOTEL, INC. Florida 1,000 1,000 (Certificate No. 2 issued 100%
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name of Subsidiary Class (CS or PS) Shares Validly Issued,
and % of Class Covered by Fully Paid,
Owned Options, Non-assessable
Warrants and Free and
Clear of all
Liens
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHEFFIELD MOTEL ENTERPRISES, INC. Common None Y
- -----------------------------------------------------------------------------------------------
DOTHAN HOSPITALITY 3053, INC. Common None Y
- -----------------------------------------------------------------------------------------------
DOTHAN HOSPITALITY 3071, INC. Common None Y
- -----------------------------------------------------------------------------------------------
GADSDEN HOSPITALITY, INC. Common None Y
- -----------------------------------------------------------------------------------------------
LODGIAN ANAHEIM INC Common None Y
- -----------------------------------------------------------------------------------------------
LODGIAN ONTARIO INC. Common None Y
- -----------------------------------------------------------------------------------------------
AMIOP ACQUISITION CORP. Common None Y
- -----------------------------------------------------------------------------------------------
AMI OPERATING PARTNERS, L.P.
- -----------------------------------------------------------------------------------------------
SERVICO PENSACOLA, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO PENSACOLA 7200, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO PENSACOLA 7330, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO FT. PIERCE, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO, INC.
- -----------------------------------------------------------------------------------------------
PALM BEACH MOTEL ENTERPRISES, INC., Common Y
as sole general partner of Servico Centre
Associates, Ltd., a Florida limited partnership.
- -----------------------------------------------------------------------------------------------
SERVICO CENTRE ASSOCIATES, LTD.
- -----------------------------------------------------------------------------------------------
SERVICO WEST PALM BEACH, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO WINTER HAVEN, INC. Common None Y
- -----------------------------------------------------------------------------------------------
ALBANY HOTEL, INC. Common None Y
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Name of Subsidiary State of Shares Issued & Outstanding % Owned by
Organization Authorized Loan Party
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO NORTHWOODS, INC. Florida 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO WINDSOR, INC. Florida 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
BRUNSWICK MOTEL ENTERPRISES, INC. Georgia 200 200 (Certificate No. 5 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
IMPAC HOTEL GROUP, LLC Georgia
- -------------------------------------------------------------------------------------------------------------------------
IMPAC HOTELS I, LLC Georgia
- -------------------------------------------------------------------------------------------------------------------------
IMPAC SPE #3, INC., as sole general partner of Georgia 100 100 (Certificate No. 2 issued 100%
Little Rock Lodging Associates I, L.P., a to Lodgian Financing Corp.)
Georgia limited partnership.
- -------------------------------------------------------------------------------------------------------------------------
LITTLE ROCK LODGING ASSOCIATES I, L.P.
- -------------------------------------------------------------------------------------------------------------------------
ATLANTA HILLSBORO LODGING, LLC Georgia
- -------------------------------------------------------------------------------------------------------------------------
LODGIAN RICHMOND SPE, INC., as sole Georgia 1,000 1,000 (Certificate No. 2 issued 100%
general partner of Lodgian Richmond, L.L.C., a to Lodgian Financing Corp.)
Georgia limited liability company.
- -------------------------------------------------------------------------------------------------------------------------
LODGIAN RICHMOND, L.L.C. Georgia
- -------------------------------------------------------------------------------------------------------------------------
SERVICO ROLLING MEADOWS, INC. Illinois 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO CEDAR RAPIDS, INC. Iowa 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO METAIRIE, INC. Louisiana 1,000 1,000 (Certificate No. 3 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO COLUMBIA, INC. Maryland 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO COLESVILLE, INC. Maryland 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO MARYLAND, INC. Maryland 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
NH MOTEL ENTERPRISES, INC. Michigan 50,000 1,000 (Certificate No. 6 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
MINNEAPOLIS MOTEL ENTERPRISES, INC. Minnesota 1,000 1,000 (Certificate No. 4 issued 100%
to Sharon Motel Enterprises, Inc.
- -------------------------------------------------------------------------------------------------------------------------
SERVICO ROSEVILLE, INC. Minnesota 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
LODGIAN MOUNT LAUREL, INC. New Jersey 1,000 1,000 (Certificate No. 2 issued 100%
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name of Subsidiary Class (CS or PS) Shares Validly Issued,
and % of Class Covered by Fully Paid,
Owned Options, Non-assessable
Warrants and Free and
Clear of all
Liens
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SERVICO NORTHWOODS, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO WINDSOR, INC. Common None Y
- -----------------------------------------------------------------------------------------------
BRUNSWICK MOTEL ENTERPRISES, INC. Common None Y
- -----------------------------------------------------------------------------------------------
IMPAC HOTEL GROUP, LLC
- -----------------------------------------------------------------------------------------------
IMPAC HOTELS I, LLC
- -----------------------------------------------------------------------------------------------
IMPAC SPE #3, INC., as sole general partner of Common None Y
Little Rock Lodging Associates I, L.P., a
Georgia limited partnership.
- -----------------------------------------------------------------------------------------------
LITTLE ROCK LODGING ASSOCIATES I, L.P.
- -----------------------------------------------------------------------------------------------
ATLANTA HILLSBORO LODGING, LLC
- -----------------------------------------------------------------------------------------------
LODGIAN RICHMOND SPE, INC., as sole Common None Y
general partner of Lodgian Richmond, L.L.C., a
Georgia limited liability company.
- -----------------------------------------------------------------------------------------------
LODGIAN RICHMOND, L.L.C.
- -----------------------------------------------------------------------------------------------
SERVICO ROLLING MEADOWS, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO CEDAR RAPIDS, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO METAIRIE, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO COLUMBIA, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO COLESVILLE, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO MARYLAND, INC. Common None Y
- -----------------------------------------------------------------------------------------------
NH MOTEL ENTERPRISES, INC. Common None Y
Stock
- -----------------------------------------------------------------------------------------------
MINNEAPOLIS MOTEL ENTERPRISES, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO ROSEVILLE, INC. Common None Y
- -----------------------------------------------------------------------------------------------
LODGIAN MOUNT LAUREL, INC. Common None Y
- -----------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Name of Subsidiary State of Shares Issued & Outstanding % Owned by
Organization Authorized Loan Party
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO JAMESTOWN, INC. New York 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO NEW YORK, INC. New York 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO NIAGARA FALLS, INC. New York 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO GRAND ISLAND, INC. New York 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
FAYETTEVILLE MOTEL ENTERPRISES, INC. North Carolina 100,000 100 (Certificate No. 4 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
APICO INNS OF GREEN TREE, INC. Pennsylvania 100,000 1,000 (Certificate No. 7 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
APICO HILLS, INC. Pennsylvania 100,000 1,000 (Certificate No. 4 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO HILTON HEAD, INC. South Carolina 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO AUSTIN, INC. Texas 1,000 1,000 (Certificate No. 3 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO MARKET CENTER, INC. Texas 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
SERVICO HOUSTON, INC. Texas 1,000 1,000 (Certificate No. 2 issued 100%
to Lodgian Financing Corp.)
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name of Subsidiary Class (CS or PS) Shares Validly Issued,
and % of Class Covered by Fully Paid,
Owned Options, Non-assessable
Warrants and Free and
Clear of all
Liens
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SERVICO JAMESTOWN, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO NEW YORK, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO NIAGARA FALLS, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO GRAND ISLAND, INC. Common None Y
- -----------------------------------------------------------------------------------------------
FAYETTEVILLE MOTEL ENTERPRISES, INC. Common None Y
- -----------------------------------------------------------------------------------------------
APICO INNS OF GREEN TREE, INC. Common None Y
- -----------------------------------------------------------------------------------------------
APICO HILLS, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO HILTON HEAD, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO AUSTIN, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO MARKET CENTER, INC. Common None Y
- -----------------------------------------------------------------------------------------------
SERVICO HOUSTON, INC. Common None Y
- -----------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
SCHEDULE 4.01(d)
Authorizations, Notices & Consents
1) Consent of Nomura Capital Assets Corporation of IMPAC I loan.
2) Capital Company of America L.L.C. Consent to Transaction.
<PAGE>
SCHEDULE 4.01 (o)
Plan, Multi Employee Plans & Welfare Plans
See attached.
<PAGE>
Lodgian Inc., Multi-Employer Health and Welfare Plans
Double Tree Club, Philadelphia
Health Plan: Local 274 Health and Welfare Trust Fund
Pension Plan: Local 274 Pension Trust Fund
Hilton Hotel, Northfield
Engineers
Health Plan: Local 547, I.U.O.E. and Participating Employers Health and Welfare
Trust Fund
Pension Plan: Central Pension Fund of the International Union of Operating
Engineers and Participating Employers
H.E.R.E.
Health Plan: Hotel Employees and Restaurant Employees International Union
Welfare Fund
Pension Plan: Hotel Employees and Restaurant Employees International Union
Pension Fund
Holiday Inn, Arden Hills
Health Plan: Minneapolis Culinary, Beverage and On-Sale Liquor Trust Fund
Pension Plan: St. Paul Bar and Restaurant Employer -- Employees Pension Fund
Holiday Inn, Anchorage
Health Plan: Hotel Employers, Restaurant Employers Health and Welfare Trust Fund
Pension Plan: Alaska Hotel and Restaurant Employees Pension Trust
<PAGE>
Holiday Inn, Jamestown
Health Plan: Local 4 Insurance Fund
Pension Plan: None
Holiday Inn, Rolling Meadows
Health Plan: Hotel employees and Restaurant Employees International Union
Welfare Fund
Pension Plan: None
Holiday Inn Select Windsor, Ontario
Health Plan: N/A
Pension Plan: Canadian Pension Plan
Omni Albany
Health Plan: Local 471 Insurance Fund
Pension Plan: Local 471 Pension Fund
Sheraton, Concord
Health Plan: Hotel and Welfare Fund
Pension Plan: Southern Alameda Pension Fund
The Westin William Penn
Carpenters
Health Plan: Carpenters Medical Fund of Western Pennsylvania
Pension Plan: Pension Fund of Western Pennsylvania
Engineers
Health Plan: Pittsburgh Builders Owners Health and Welfare Fund
Pension Plan: Central Pension Fund of the International Union of Operating
Engineers
<PAGE>
H.E.R.E.
Health Plan: Hotel Employees Restaurant Employees International Union Welfare
Fund
Pension Plan: Hotel Employees Restaurant Employees International Union Pension
Fund
Painters
Health Plan: Painters Insurance and Welfare Fund
Pension Plan: IBPAT Union and Industry Pension Fund
<PAGE>
SCHEDULE 4.01(p)
Environmental Liabilities
Part I. Compliance With Environmental Laws
Incorporated by reference herein are the Environmental Reports provided to
Shearman & Sterling:
1. Courtyard by Marriott,
Ridgemont Drive,
Abilene (TX)
Environmental Assessment
dated March 21, 1995
2. Courtyard by Marriott,
Ridgemont Drive,
Abilene (TX)
Environmental Assessment
update May 6, 1996
3. Courtyard by Marriott,
Cavalier Boulevard,
Florence (KY)
Phase I Environmental Assessment
dated November 21, 1996
4. Comfort Suites,
Dry Pocket Road,
Greenville (SC)
Phase I Environmental Assessment
dated April 17, 1995
5. Super 8 Motel,
Village Lane,
Hazard (KY)
Phase I Environmental Assessment
dated February 7, 1997
6. Holiday Inn,
Kingston Court,
Marietta (GA)
Phase I Environmental Assessment
dated November 20, 1996
7. French Quarter,
Madison Avenue,
<PAGE>
Memphis (TN)
Limited Subsurface Investigation
dated February 3, 1997
8. French Quarter,
Madison Avenue,
Memphis (TN)
Draft of
Phase I Environmental Assessment
dated November 18, 1996
9. Holiday Inn Express,
Murfreesboro Road,
Nashville (TN)
Draft of
Phase I Environmental Assessment
dated February 12, 1997
10. Courtyard by Marriott,
Lot 5 CBI Development,
Paducah (KY)
Phase I Environmental Assessment
dated October 26, 1995
11. Super 8 Motel,
U.S. 23 South,
Prestonsburg (KY)
Phase I Environmental Assessment
dated February 7, 1997
12. Comfort Inn,
North East Loop 410,
San Antonio (TX)
Draft of Phase I Environmental Assessment
dated November 20, 1996
13. Holiday Inn Airport North,
North Lindbergh Boulevard,
Bridgeton (MO)
Phase I Environmental Assessment
dated February 24, 1997
14. Holiday Inn,
Royalton Road,
Strongsville (OH)
Phase I Environmental Assessment
dated September 8, 1995
-2-
<PAGE>
15. Holiday Inn,
N. Ocean Blvd,
Surfside Beach (SC)
Phase I Environmental Assessment
dated February 3, 1997
16. Holiday Inn -- Valdosta,
St. Augustine Road,
Valdosta (GA)
Phase I Environmental Assessment and Asbestos Survey
dated July 29, 1996
17. Fairfield Inn,
Valdosta (GA)
[See Prior]
18. Residence Inn,
1401 Shackleford Road,
Little Rock (AR)
Phase I Environmental Assessment
dated April 29, 1996
19. Residence Inn,
1401 Shackleford Road,
Little Rock (AR)
Asbestos Abatement and Disposal
dated October 23, 1996
20. Residence Inn,
1401 Shackleford Road,
Little Rock (AR)
Industrial Hygiene Air Monitoring Report,
dated November 7, 1996
21. Holiday Inn,
108 First Street,
Macon (GA),
Phase I Environmental Assessment
dated September 27, 1996.
22. Omni Hotel,
State and Lodge Streets,
Albany (NY)
Phase II Environmental Assessment
dated November 18, 1994
23. Omni Hotel,
State and Lodge Streets,
-3-
<PAGE>
Albany (NY)
Asbestos Operations and Management Program
dated November 17, 1994
24. Ramada Inn,
12801 Northwest Freeway,
Houston (TX)
Phase I Environmental Assessment
dated January 26, 1990
25. Holiday Inn,
1955 Market Center Blvd.,
Dallas (TX)
Guidance Document for an Asbestos Operations and Maintenance Program
dated June 27, 1997
26. Holiday Inn,
1955 Market Center Blvd.,
Dallas (TX)
Architectural Engineering and Environmental Phase I Assessment
dated May 27, 1997
27. Holiday Inn,
915 Brinton Road,
Pittsburgh (PA),
1955 Market Center Blvd.,
Dallas (TX)
Guidance Document for an Asbestos Operations and Maintenance Program
dated August 27, 1997
28. Holiday Inn,
2750 Mosside Blvd.,
Monroeville (PA),
1955 Market Center Blvd.,
Dallas (TX)
Asbestos Operations and Maintenance Program
dated September 18, 1995
29. Holiday Inn,
401 Holiday Drive,
Pittsburgh (PA)
Asbestos Operations and Maintenance Manual
dated October 1, 1996
30. Holiday Inn,
1075 Stevens Creek Road,
Augusta (GA)
-4-
<PAGE>
Asbestos Operations and Maintenance Program
dated October, 1996
31. Clarion Niagara Falls
Third Street and Old Falls Street,
Niagara Falls (NY)
Architectural, Engineering and Environmental Phase I Assessment
dated September 19, 1997
32. Holiday Inn Express,
6501 Plantation Road,
Pensacola (FL)
Phase I Environmental Assessment
dated May 10, 1996
33. Holiday Inn.
150 West 4th Street,
Jamestown (NY)
Architectural Engineering and Phase I Environmental Assessment
dated October 3, 1997.
34. Holiday Inn,
150 West 4th Street,
Jamestown (NY)
Phase II Environmental Assessment
dated September 28, 1994.
35. Holiday Inn -- Fayetteville (#15),
1944 Cedar Creek Road,
Fayetteville (NC)
Architectural, Engineering and Environmental Phase I Assessment.
36. Hilton -- Northfield (#17)
5500 Crooks Road,
Troy (MI)
Architectural, Engineering and Phase I Environmental Assessment
dated May 21, 1996.
37. Northfield Hilton Hotel,
5500 Crooks Road,
Troy (MI)
Asbestos Operations and Maintenance Plan,
dated October, 1996.
38 Holiday Inn -- St. Paul,
1201 West County Road East,
St. Paul (MN)
-5-
<PAGE>
Guidance Document for an Asbestos Operations and Maintenance Program
dated November 14, 1996.
39. Wyndham Five Seasons Hotel,
350 1st Avenue, NE,
Cedar Rapids (IA)
Phase I Environmental Assessment (1 of 2, 2 of 2)
40. Hampton Inn--Pensacola,
7330 Plantation Road,
Pensacola (FL)
Guide Document for an Asbestos Operations and Maintenance Program,
dated September 23, 1996
41. Holiday Inn Express,
Fort Pierce (FL)
Limited Groundwater and Soil Survey,
dated April 20, 1995
42. Holiday Inn Express,
7151 Okeechobee Road,
Fort Pierce (FL)
Guidance Document For an Asbestos Operations and Maintenance Program,
dated November 13, 1996
43. Holiday Inn Express-Pensacola,
6501 Plantation Road,
Pensacola (FL)
Limited Subsurface Investigation,
dated June 5, 1995
44. Holiday Inn Express-North,
6501 Plantation Road,
Pensacola (FL)
Guidance Document For an Asbestos Operations and Maintenance Program,
dated August 27, 1996
45. Omni Hotel West Palm Beach,
Inc.,
1601 Belvedere Rd.,
West Palm Beach (FL)
Asbestos Operations and Maintenance Program,
dated November 22, 1994
46. Holiday Inn-Sheffield,
4900 Hatch Blvd.,
Sheffield (AL)
-6-
<PAGE>
Guidance Document for an Asbestos Operations and Maintenance Program,
dated June 27, 1997
47. Holiday Inn-Sheffield,
4900 Hatch Blvd.,
Sheffield (AL)
Architectural, Engineering & Environmental Phase I Assessment,
dated May 30, 1997
48. Holiday Inn-Dothan,
3053 Ross Clark Circle, SW,
Dothan (AL)
Guidance Document for an Asbestos Operations and Maintenance Program,
dated November 7, 1996
49. Holiday Inn-Dothan,
3053 Ross Clark Circle, SW,
Dothan (AL)
Guidance Document for an Asbestos Operations and Maintenance Program,
dated November 4, 1996
50. Hampton Inn,
Dothan (AL)
Supplemental Asbestos Testing for Servico Hotels & Resorts,
dated April 24, 1996
51. Hampton Inn,
3071 Ross Clark Circle,
Dothan (AL)
Limited Subsurface Investigation,
dated June 5, 1995
52. Holiday Inn Express,
Gasden (AL)
Limited Groundwater and Soil Survey,
dated April 20, 1995
53. Holiday Inn Express-Attalla,
801 Cleveland Avenue,
Attalla (AL)
Limited Subsurface Investigation Phase II,
dated July 25, 1995
54. Holiday Inn Rolling Meadows,
3405 Algonquin Road,
Rolling Meadows (IL)
Guidance Document for an Asbestos Operations and Maintenance Program,
dated January 8,1998
-7-
<PAGE>
55. Holiday Inn Rolling Meadows,
3405 Algonquin Road,
Rolling Meadows (IL)
Architectural, Engineering & Environmental Phase I Assessment,
dated October 17, 1997
56. Holiday Inn Express-Fort Pierce,
7151 Okeechobee Road,
Fort Pierce (FL)
Architectural, Engineering & Environmental Phase I Assessment,
dated May 10, 1996
57. Hampton Inn-Pensacola,
7330 Plantation Road,
Pensacola (FL)
Architectural, Engineering & Environmental Phase I Assessment,
dated May 8, 1996
58. Holiday Inn-Brunswick,
5252 New Jessup Highway,
Brunswick (GA)
Architectural, Engineering & Environmental Phase I Assessment,
dated May 21, 1996
59. Sheraton Hotel,
630 Clearwater Park Road,
West Palm Beach (FL)
Architectural, Engineering & Environmental Phase I Assessment,
dated October 16, 1997
60. Sheraton Hotel,
630 Clearwater Park Road,
West Palm Beach (FL)
Guidance Document for an Asbestos Operations and Maintenance Program,
dated January 8, 1998
61. Holiday Inn Winter Haven,
1150 3rd Street, SW,
Winter Haven (FL)
Guidance Document for an Asbestos Operations and Maintenance Program,
dated January 8, 1998
62. Holiday Inn Winter Haven,
1150 3rd Street, SW,
Winter Haven (FL)
Architectural, Engineering & Environmental Phase I Assessment,
dated October 17, 1997
-8-
<PAGE>
63. Four Points Hotel Hilton Head Island,
36 South Forest Beach Drive,
Hilton Head (SC)
Architectural, Engineering & Environmental Phase I Assessment
dated July 31, 1997
64. Holiday Inn Parkway East,
915 Brinton Road,
Pittsburgh (PA)
Architectural, Engineering & Environmental Phase I Assessment
dated August 1, 1997
65. Ramada Plaza NW,
12801 NW Freeway,
Houston (TX)
Architectural, Engineering & Environmental Phase I Assessment
dated October 16, 1997
66. Quality Inn -- Metairie (#11),
2261 North Causeway Boulevard,
Metairie (LA)
Architectural, Engineering & Environmental Phase I Assessment
dated July 31, 1997
67. Town Center Silver Spring Hotel,
8727 Colesville Road,
Silver Spring (MD)
Architectural, Engineering & Environmental Phase I Assessment
dated January 6, 1998
68. Columbia Hilton,
5485 Twin Knolls Road,
Columbia (MD)
Architectural, Engineering & Environmental Phase I Assessment
dated September 10, 1997
69. Holiday Inn Silver Spring,
8777 Georgia Avenue,
Silver Spring (MD)
Architectural, Engineering & Environmental Phase I Assessment
dated October 16, 1997
70. Hilton -- Northfield (#17),
550O Crooks Road,
Troy (MI)
Architectural, Engineering & Environmental Phase I Assessment
dated August 1, 1997
-9-
<PAGE>
71. Comfort Inn,
2715 Long Lake Road,
Roseville (MN)
Architectural, Engineering & Environmental Phase I Assessment
dated April 21, 1997
72. Holiday Inn -- St. Paul (#14),
1201 West County Road East,
St. Paul (MN)
Architectural, Engineering & Environmental Phase I Assessment
dated August 1, 1997
73. Holiday Inn Grand Island,
100 Whitehaven Road,
Grand Island (NY)
Architectural, Engineering & Environmental Phase I Assessment
dated September 19, 1997
74. Omni Hotel -- Albany (#13),
Ten Eyck Plaza,
Albany (NY)
Architectural, Engineering & Environmental Phase I Assessment
dated July 31, 1997
75. Holiday Inn Downtown Niagara Falls,
114 Buffalo Avenue,
Niagara Falls (NY)
Architectural, Engineering & Environmental Phase I Assessment
dated September 22, 1997
76. Holiday Inn -- Greentree (#20),
401 Holiday Drive,
Pittsburgh (PA)
Architectural, Engineering & Environmental Phase I Assessment
dated July 31, 1997
77. Holiday Inn -- Greentree (#20),
401 Holiday Drive,
Pittsburgh (PA)
Architectural, Engineering & Environmental Phase I Assessment
dated July 31, 1997
78. Servico Center II Project,
1601 Belvadere Road,
West Palm Beach (FL)
Subsurface Exploration and Foundation Recommendations
dated March 11, 1985
-10-
<PAGE>
79. Holiday Inn Express-Attalla,
801 Cleveland Avenue,
Attalla (AL)
Architectural, Engineering & Environmental Phase I Assessment
dated July 31, 1997
80. Hampton Inn,
3071 Ross Clark Circle,
Dothan (AL)
Architectural, Engineering & Environmental Phase I Assessment
dated August 1, 1997
81. Holiday Inn,
7200 Plantation Road,
Pensacola (FL)
Architectural, Engineering & Environmental Phase I Assessment
dated July 31, 1997
82. Town Center Silver Spring Hotel,
8727 Colesville Road,
Silver Spring (MD)
Guidance Document for an Asbestos Operations and Maintenance Program
dated February 18, 1998
83. Holiday Inn West,
Pennridge Drive,
Bridgeton (MO)
Asbestos Operations & Maintenance Program
dated February 5, 1997
84. Holiday Inn West,
Pennridge Drive,
Bridgeton (MO)
Phase I Environmental Assessment
dated February 3, 1997
85. Marriott,
Atrium Way and Arbor Way,
Mt. Laurel (NJ),
Phase 1 Environmental Assessment
dated January 22, 1998
86. Holiday Inn - Belmont #7,
1800 Belmont Avenue,
Baltimore (MD)
Architectural, Engineering & Environmental Phase I Assessment
dated January 16, 1998
-11-
<PAGE>
87. Holiday Inn -- Frederick (Fort Detrick) #8,
999 West Patrick Street,
Frederick (MD)
Architectural, Engineering & Environmental Phase I Assessment
dated January 16,1998
88. Holiday Inn -- Cromwell Bridge #5,
1100 Cromwell Bridge Road,
Towson (MD)
Architectural, Engineering & Environmental Phase I Assessment
dated January 16, 1998
89. Holiday Inn -- York Arsenal #11,
334 Arsenal Road,
York (PA)
Architectural, Engineering & Environmental Phase I Assessment
dated January 16, 1998
90. Holiday Inn,
363 Roberts Street,
East Hartford (CT)
Architectural, Engineering & Environmental Phase I Assessment
dated January 16, 1998
91. Holiday Inn,
30 Whalley Avenue,
New Haven (CT)
Architectural, Engineering & Environmental Phase I Assessment
dated January 16, 1997
Part II. Properties Listed on NPL or CERCLIS
None.
Part III. Environmental Investigations.
Incorporated by reference herein are the Environmental Reports provided to
Shearman & Sterling:
-12-
<PAGE>
SCHEDULE OF DEBT
(Other than Surviving Debt)
<TABLE>
<CAPTION>
Lender Borrower Amount Outstanding
- ------ -------- ------------------
<S> <C> <C>
Secore Albany Hotel, Inc. $ 275,000,000
Apico Hills, Inc
Apico Hills of Green Tree, Inc
Apico Inns of Pittsburgh, Inc.
Brunswick Motel Enterprises, Inc.
Dolhan Hospitality 3053, Inc
Dolhan Hospitality 3071, Inc
Fayetteville Motel Enterprises, Inc.
Gadsden Hospitality, Inc.
Servico Center Associates, Ltd.
Minneapolis Motel Enterprises, Inc.
NH Motel Enterprises, Inc.
Servico Austin, Inc.
Servico Cedar Rapids, Inc.
Servico Colesville, Inc.
Servico Columbia, Inc.
Servico Flagstaff, Inc.
Servico Ft. Pierce, Inc.
Servico Grand Island, Inc.
Servico Hilton Head, Inc.
Servico Houston, Inc.
Servico Jamestown, Inc.
Servico Windsor, Inc.
Servico Market Center, Inc.
Servico Maryland, Inc.
Servico Metairie, Inc.
Servico New York, Inc.
Servico Niagra Falls, Inc.
Servico Northwoods, Inc.
Servico Pensacola, Inc.
Servico Pensacola 7200, Inc.
Servico Pensacola 7330, Inc.
Servico Rolling Meadows, Inc.
Servico Roseville, Inc.
Servico West Palm Beach, Inc.
Servico Winter Haven, Inc.
Sheffield Motel Enterprises, Inc.
Servico Silver Springs, Inc.
AMI Operating Partners, L.P.
Lodgian Mount Laurel, Inc.
Lodgian Richmond, L.L.C.
Bank One, Louisiana, N A Little Rock Lodging Associates I, L.P. $ 5,680,405
</TABLE>
<PAGE>
SCHEDULE 4.01(t)
Surviving Debt
See attached.
<PAGE>
SCHEDULE OF SURVIVNG DEBT
<TABLE>
<CAPTION>
Lender Borrower Amount Outstanding Maturity
- ------ -------- ------------------ --------
<S> <C> <C> <C>
Capital Company of America Impac Hotels I, L.L.C. $ 132,459,000 3/11/19
Capital Company of America Impac Hotels II, L.L.C. $ 159,062,071 10/31/20
Capital Company of America Impac Hotels III, L.L.C. $ 45,895,527 10/31/21
Banc One Servico Concord, Inc. $ 62,000,000 11/30/00
AMI Operating Partners, L.P.
Island Motel Enterprises, Inc.
Penmoco, Inc.
First Union National Bank Atlanta-Boston Lodging, L.L.C. $ 3,521,542 4/1/07
CRESTS Lodgian, Inc. $ 175,000,000 6/30/10
IBM Retirement Macon Hotel Associates, L.L.C. $ 1,682,500 5/20/01
Fidelity Real Estate Macon Hotel Associates, L.L.C. $ 2,712,500 5/20/01
Hospitality Corp of Macon Macon Hotel Associates, L.L.C. $ 7,908,602 9/1/03
Nationwide Life Insurance Co. Dedham Lodging Associates I, L.P. $ 6,200,000 1/1/04
Column Financial, Inc. Servico Hotels I, Inc. $ 4,323,907 3/1/10
Column Financial, Inc. Servico Hotels II, Inc. $ 2,391,949 3/1/10
Column Financial, Inc. East Washington Associates, L.P. $ 10,097,166 7/1/10
</TABLE>
<PAGE>
SCHEDULE OF SURVIVNG DEBT
<TABLE>
<CAPTION>
Lender Borrower Amount Outstanding Maturity
- ------ -------- ------------------ --------
<S> <C> <C> <C>
Column Financial, Inc. Service Hotels III, Inc. $ 1,747,166 3/1/10
Lehman Brothers Service Frisco, Inc. $ 5,026,682 5/1/04
Lehman Brothers Melbourne Hospitality Associates, L.P. $ 5,467,167 7/1/04
GMAC Commercial Mortgage 1075 Hospitality, L.P. $ 3,757,802 2/1/03
Local Federal Bank Kinser Motel Enterprises, Inc. $ 3,012,959 8/5/01
Column Financial, Inc. Service Ft. Wayne, Inc. $ 5,335,886 3/1/10
Lehman Brothers Ft. Wayne Hospitality Associates II, L.P. $ 1,854,931 5/1/04
Column Financial, Inc. New Orleans Airport Motel Associates, L.P. $ 4,875,895 3/1/10
GMAC Commercial Mortgage Sioux City Hospitality, L.P. $ 5,575,177 1/17/96
GMAC Commercial Mortgage Servico Council Bluffs, Inc. $ 1,516,360 8/1/03
GMAC Commercial Mortgage Servico West Des Moines, Inc. $ 2,961,956 8/1/03
City Of Manhattan Manhattan Hospitality, L.P. $ 6,425,000 7/1/16
City of Lawrence Lawrence Hospitality, L.P. $ 6,425,000 7/1/16
GMAC Commercial Mortgage Servico Wichita, Inc. $ 4,723,485 8/1/03
GMAC Commercial Mortgage Servico Omaha Central, Inc. $ 4,752,553 8/1/03
</TABLE>
<PAGE>
SCHEDULE OF SURVIVNG DEBT
<TABLE>
<CAPTION>
Lender Borrower Amount Outstanding Maturity
- ------ -------- ------------------ --------
<S> <C> <C> <C>
GMAC Commercial Mortgage Servico Omaha, Inc. $ 2,369,320 8/1/03
Lehman Brothers Worcester Hospitality Associates, L.P. $ 7,515,622 11/1/03
Column Financial, Inc. Servico Hotel IV, Inc. $ 5,335,886 3/1/10
GMAC Commercial Mortgage Brecksville Hospitality, L.P. $ 2,895,907 2/1/03
Lehman Brothers Apico Inns of Pittsburgh, Inc. $ 4,949,425 11/1/03
Column Financial, Inc. Moon Airport Motel, Inc. $ 3,311,929 3/1/10
Column Financial, Inc McKnight Motel, Inc. $ 3,592,970 3/1/05
Column Financial, Inc. Wilpen, Inc. $ 17,329,371 3/1/10
Column Financial, Inc. Washington Motel Enterprises, Inc. $ 3,863,918 3/1/10
Saginaw Hotel Investors Saginaw Hospitality, L.P. $ 1,989,210 10/31/05
GMAC Commercial Mortgage Servico Lansing, Inc. $ 5,492,981 6/1/03
Column Financial, Inc. Hilton Head Motel Enterprises, Inc. $ 7,175,847 3/1/10
Crest Motel Raleigh-Downtown Enterprises, Inc. $ 2,045,135 1/10/15
Charter Financial, Inc. Servico, Inc. $ 501,577 Cap Lease
Servico Management Corp.
Lyon Credit Servico Inc. $ 2,658,238 1/1/04
</TABLE>
<PAGE>
SCHEDULE OF SURVIVNG DEBT
<TABLE>
<CAPTION>
Lender Borrower Amount Outstanding Maturity
- ------ -------- ------------------ --------
<S> <C> <C> <C>
Lyon Credit Servico Inc. $ 3,796,620 Cap Lease
Financial Marketing Services, Inc. Servico Management Corp $ 225,311 Cap Lease
GE Capital Fleet Services Servico Inc. $ 96,840 Cap Lease
Servico Management Corp
Telerent Leasing Corporation Brunswick Motel Enterprises $ 21,531 Cap Lease
Servico, Inc.
Telerent Leasing Corporation KDS Corporation $ 36,104 Cap Lease
Telerent Leasing Corporation KDS Corporation $ 37,750 Cap Lease
Servico, Inc.
Telerent Leasing Corporation Sheffield Motel Enterprises, Inc. $ 32,063 Cap Lease
Telerent Leasing Corporation Servico Management Corp as agent $ 50,508 Cap Lease
Telerent Leasing Corporation Servico Management Corp as agent $ 76,061 Cap Lease
Telerent Leasing Corporation Servico Management Corp as agent $ 43,869 Cap Lease
Telerent Leasing Corporation Apico Inns of Pittsburgh, Inc. $ 68,495 Cap Lease
Telerent Leasing Corporation Apico Hills, Inc. $ 4,578 Cap Lease
Telerent Leasing Corporation Servico Management Corp as agent $ 39,747 Cap Lease
</TABLE>
<PAGE>
SCHEDULE OF SURVIVNG DEBT
<TABLE>
<CAPTION>
Lender Borrower Amount Outstanding Maturity
- ------ -------- ------------------ --------
<S> <C> <C> <C>
Telerent Leasing Corporation Best Western Charleston $ 2,458 Cap Lease
</TABLE>
<PAGE>
SCHEDULE 4.01(u)
Liens of Record on Property or Assets of an Loan Party
<PAGE>
Schedule 4.01 (U)
Liens of Record
(All Schedule B items of all Commonwealth Title Insurance
Policies listed below and liens of record listed below)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Albany Hotel, Inc. Omni Albany Hotel 135-02-750779 None
State & Lodge Streets (Lawyers)
Ten Eyck Plaza
Albany, NY 12207
- ------------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, Limited Holiday Inn East Hartford 9841-00012
Partnership a/k/a 363 Roberts Street (Chicago)
AMI Operating Partners, L.P. East Hanford, CT 08106
- ------------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, Limited Holiday Inn New Haven 984200063
Partnership a/k/a 30 Whalley Avenue (Chicago)
AMI Operating Partners, L.P. New Haven, CT 06511
- ------------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. Fredrick Holiday Inn 4106-0G
999 West Patrick Street (Chicago)
Fredrick, MD 21702
- ------------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. Cromwell Bridge Holiday Inn 4106-0A
1300 Cromwell Bridge Road (Chicago)
Towson, MD 21286
- ------------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. Belmont Holiday Inn 4106-0C
1800 Belmont Avenue (Chicago)
Baltimore, MD 21244
- ------------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. Holiday Inn York Arsenal Road 9881-00005
334 Arsenal Road (Chicago)
York, PA
- ------------------------------------------------------------------------------------------------------------------------------------
Apico Hills, Inc. Holiday Inn Parkway East 135-02-543910 None
915 Brinton Road (Lawyers)
Pittsburgh, PA 15221
- ------------------------------------------------------------------------------------------------------------------------------------
Apico Inns of Green Tree, Inc. Holiday Inn Green Tree 135-02-543910 None
401 Holiday Drive (Lawyers)
Pittsqburgh, PA 15220
- ------------------------------------------------------------------------------------------------------------------------------------
Brunswick Motel Enterprises, Inc. Holiday Inn Brunswick 135-02-691726 Engineering & Equipment Co. ($11,685.00)
U.S. 341 at I-95 (Lawyers) Amerail Systems, Inc. ($15,634.00)
Brunswick, GA 31520
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dothan Hospitality 3053, Inc. Holiday Inn Dothan 135-00-839357
3053 Ross Clark Circle, SW (Lawyers) None
Dothan, AL 38301
- ------------------------------------------------------------------------------------------------------------------------------------
Dothan Hospitality 3071, Inc. Hampton Inn Dothan 135-00-839357 None
3071 Ross Clark Circle, SW (Lawyers)
Dothan, AL 38301
- ------------------------------------------------------------------------------------------------------------------------------------
Fayetteville Model Enterprises, Inc. Holiday Inn Fayetteville 82-03-148331 Amerail Systems ($282,659.00)
1844 Cedar Creek Road (Lawyers) Twin Towers, Inc. ($80,178.00)
Fayetteville, NC 28303
- ------------------------------------------------------------------------------------------------------------------------------------
Gadsen Hospitality, Inc. Holiday Inn Express Gadsen 135-00-839357 None
801 Cleveland Avenue (Lawyers)
Attalia, AL 35954
- ------------------------------------------------------------------------------------------------------------------------------------
Little Rock Lodging Associates Residence Inn by Marriott Commitment No.
I, L.P. 1401 S. Shackleford Road 99-7166
Little Rock, AR 72211 (Chicago)
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Anaheim, Inc. 2045 South Harbor Boulevard
Anaheim, CA 92802
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Atlanta Hillsboro, LLC 18000 Block of NW Tanasbourne
Drive
Hillsboro, OR 97124
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Mount Laurel, Inc. Marriott Inn None
Atrium Way
Mount Laurel, NJ
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Ontario, Inc. 2200 Block of East Holt Boulevard
Ontario, CA 91761
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Richmond, L.L.C. Marriott Inn None
Dominion Blvd.
Richmond, VA
- ------------------------------------------------------------------------------------------------------------------------------------
Minneapolis Motel Enterprises, Inc. Holiday Inn St. Paul 135-03-230255 None
1201 West Country Road (Lawyers)
East St. Paul, MN 55112
- ------------------------------------------------------------------------------------------------------------------------------------
NH Motel Enterprises, Inc. Northfield Hilton 135-02-075477 Amerail ($103,091.00)
5500 Crooks Road (Lawyers)
Troy, MI 48098
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Servico Austin, Inc. Holiday Inn Austin South 535-368368 Double L. Insulation Co. Inc.
3401 South IH-35 (Commonwealth) ($13,486.88)
Austin, TX Spot Coolers, Inc. ($8,876.50)
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Cedar Rapids, Inc. Five Seasons Hotel 135-02-384649 None
350 1st Ave, NE (Lawyers)
Cedar Rapids, IA 53401
- ------------------------------------------------------------------------------------------------------------------------------------
Palm Beach Hotel Enterprises, Inc., Omni Hotel West Palm Beach 82-03-153809 A-1 Enterprises ($43,618.60)
a Florida Corporation, as the sole 1601 Belevedere Road (Lawyers) Coast to Coast Construction
general partner of Servico Centre West Palm Beach FL 33406 ($171,688.17)
Associates, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Colesville, Inc. Town Center MC981789AA None
8727 Colesville Road (Commonwealth)
Silver Springs, MD 20910
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Columbia, Inc. Columbia Hilton MC981787AA
5485 Twin Knolls Road (Commonwealth)
Columbia, MD 21045
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Ft. Pierce, Inc. Holiday Inn Express Ft. Pierce 82-03-153809 Maintenance Warehouse/America Corp
7151 Okeechobee Road (Lawyers) ($451.39)
Fort Pierce, FL 34945
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTINUED ON NEXT PAGE
-3-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Servico Grand Island, Inc. Holiday Inn Grand Island 135-03-001311 Brian McKee d/b/a AMF Contracting
100 Whitehaven Road (Lawyers) (HRB) ($8,820.00))
Grand Island, NY _________
Modern Disposal Services, Inc. (HRB)
($6,966.04)
Centimark Corporation (HRB)
($265,634.00)
P. R. Contracting Services (HRB)
($13,075.00)
Buffalo Plastering, Inc. (HRB)
($6,000.00)
Commercial Interior Supply (HRB)
($5,024.91)
Twin City Glass Corp. (HRB)
($10,427.80)
Sadlo Lumber Wood Products, Inc.
(HRB) ($3,185.73)
Matthew Jaworski d/b/a Olympic Homes
(HRB) ($17,710.13)
Forest Materials, Inc. (HRB)
($13,059.10)
Italian Marble and Granite (HRB)
($3,404.00)
Anderson Electric Supply, Inc. (HRB)
($4,530.85)
R. B. U'ren Equipment, Inc. (HRB)
($13,004.96)
Schindler Elevator Corp. d/b/a Millar
Elevator Service Co. (HRB)
($42,009.00)
Sherwin-Williams Co. (HRB)
($16,963.93)
Ackerman Mechanical Service, Inc.
(HRB) ($_____________)
Dan Pedlow d/b/a DP Wallcovering
(HRB) ($477.00)
Hospitality Restoration and Builders
(HRB) ($1,906,562.00)
Jim Gardner & Sons, Inc. (HRB)
($12,500.00)
Hospitality Restoration and Builders,
Inc. ($45,000.00)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Servico Hilton Head, Inc. Four Points Hotel Hilton Head 507-007286 None
35 South Forest Beach Drive (Commonwealth)
Hilton Head, SC ___________
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Houston, Inc. Ramada Plaza Houston 535-368368 Hospitality Restoration and Builders,
12801 N.W. Freeway US 290 (Commonwealth) Inc. ($45,000.00)
Houston, TX
- ------------------------------------------------------------------------------------------------------------------------------------
Service Jamestown, Inc. Holiday Inn Jamestown 135-02-999324 Rowan's Taylor Rental, Inc. (HRB)
150 West 4th Street (Lawyers) ($5,903.96)
Jamestown, NY 14701
Hospitality & Builders, Inc. (HRB)
($1,137,006.00)
Sherwin Williams Co. (HRB)
($2,485.08)
Imperial Door Controls, Inc. (HRB)
($8,414.00)
Schindler Elevator Corp. d/b/a Miller
Elevator (HRB) Service Co. (HRB)
($20,733.00)
Allied Fire Protection Services, Inc.
($10,070.25)
Hospitality Restoration and Builders,
Inc. ($45,000.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Market Center, Inc. Holiday Inn Market Center Dallas 535-368368 None
1955 Market Center Blvd. (Commonwealth)
Dallas, TX
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Maryland, Inc. Holiday Inn Washington, D.C. MC981788AA 8757 Georgia Ave., LLC ($__________)
8777 Georgia Avenue (Commonwealth)
Silver Spring, MD 20920
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Metairie, Inc. Quality Hotel Metairie 135-00-950863 None
2261 North Causeway Blvd. (Lawyers)
Metairie, LA 70001
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Servico New York, Inc. Clarion Niagara Falls 135-03-001313 Hilti, Inc. (HRB) ($2,415.85)
Third & Old Falls Streets, (Lawyers)
P.O. Box 845 Modem Disposal Services, Inc. (HRB)
Niagara Falls, NY 14303 ($11,576.12)
Matthew Jawarski d/b/a Olympic Homes
(HRB) ($65,257.57)
Forest Materials, Inc. (HRB)
($5,427.35)
Sadlo Lumber & Wood Products, Inc.
(HRB) ($21,484.71)
Great Northern Assoc. (HRB)
($5,974.88)
Twin City Glass Corp. (HRB)
($35,546.64)
William H. Prentice, Inc. (HRB)
($26,946.17)
Italian Marble & Granite, Inc. (HRB)
($4,414.50)
Despirt Mosaic & Marble Co., Inc.
(HRB) ($17,192.34)
Schindler Elevator Corp. d/b/a Millar
Elevator Service (HRB) ($34,496.00)
RB U'ren Equipment, Inc. (HRB)
($401.25)
Anderson Electric Supply, Inc. (HRB)
($1,274.35)
Sherwin-Williams Co. (HRB)
($15,670.75)
Imperial Door Controls, Inc. (HRB)
($2,916.84)
Atlantic Poles, Inc. (HRB)
($6,352.32)
Commercial Interior Supply (HRB)
($2,118.87)
Ackerman Mechanical Service, Inc.
(HRB) ($33,292.76)
Hospitality & Restoration Builders,
Inc. (HRB) ($2,053,059.00)
Hospitality & Restoration Builders,
Inc. (HRB) ($1,641,038.00)
Hospitality Restoration and Builders,
Inc. ($45,000.00)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Servico Niagara Falls, Inc. Holiday Inn Niagara Falls 135-03-001312 Jim Gardner & Sons, Inc. (HRB)
114 Buffalo Avenue (Lawyers) ($12,500.00)
Niagara Falls, NY 14303
Hilti, Inc. (HRB) ($__________)
Modern Disposal Services, Inc. (HRB)
($11,576.12)
Brian McKee d/b/a AMF Contracting
(HRB) ($21,380.00)
Matthew Jaworski d/b/a Olympic Homes
(HRB) ($61,266.80)
Forest Materials, Inc. (HRB)
($3,149.43)
DeSpirit Mosaic & Marble Co., Inc.
(HRB) ($5,375.00)
Amerail Systems, Inc. (HRB)
($31,132.000)
Albany Ladder Co., Inc. (HRB)
($24,179.48)
Sadlo Lumber Wood Products, Inc.
(HRB) ($7,356.70)
Construction Systems of W. New York,
Inc. d/b/a Advanced Building Systems
(HRB) $7,200.20)
Thermal Foams, Inc. (HRB)
($20,028.53)
Ackerman Mechanical Services, Inc.
(HRB) ($17,534.48)
Hospitality Restoration & Builders,
Inc. (HRB) ($2,022,060.66)
Twin City Glass Corp. (HRB)
(10,427.80)
Schindler Elevator Corp. d/b/a Millar
Elevator Service Co. (HRB)
($23,634.55)
Beau Enterprises, Inc. (HRB)
($10,650.00)
R. B. U'ren Equipment, Inc. (HRB)
($40,768.38)
Sherwin-Williams Co. (HRB)
($12,321.45)
Michael Hooper (HRB) ($5,964.00)
Hospitality Restoration & Builders,
Inc. ($45,000.00)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Servico Northwoods, Inc. Best Western Charleston 507-007286 None
International Airport (Commonwealth)
7401 Northwoods Blvd.
North Charleston, SC 29418
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola 7200, Inc. Holiday Inn University Mall 82-03-153809
Pensacola (Lawyers)
7200 Plantation Road
Pensacola, FL 32504
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola 7330, Inc. Hampton Inn Pensacola 82-03-153809 None
7330 Plantation Road (Lawyers)
Pensacola,, FL 32504
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola, Inc. Holiday Inn Express Pensacola 82-03-153809 None
6501 Plantation Road (Lawyers)
Pensacola, FL 32505
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Rolling Meadows, Inc. Holiday Inn Rolling Meadows 135-02-919286 HRB ($970,903.00)
3405 Algonquin Road (Lawyers)
Rolling Meadows, IL 60008 J.E.C. Inc. d/b/a Johnson Electric
Co. (HRB) ($18,244.98)
North Park Plumbing, Inc. (HRB)
($13,504.30)
HRB ($1,731.22)
Hospitality Restoration and Builders,
Inc. ($45,000.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Roseville, Inc. Comfort Inn Roseville 135-03-230256
2715 Long Lake Road (Lawyers) None
Roseville, MN 55113
- ------------------------------------------------------------------------------------------------------------------------------------
Servico West Palm Beach, Inc. Sheraton West Palm Beach 82-03-153809 A-1 Enterprises ($__________)
630 Clearwater Park Road (Lawyers)
West Palm Beach, FL 33406 Laser Lighting ($1,719.28)
Acoustical Associates ($10,564.80)
Sherwin Williams ($12,332.68)
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Windsor, Inc. Holiday Inn Select Windsor Twin Towers, Inc. ($111,533.00)
1855 Huron Church Road
Windsor, Ontario Canada Twin Towers, Inc. ($________)
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Winter Haven, Inc. Holiday Inn Winter Haven 82-03-153809 Maintenance Warehouse/America Corp.
1150 3rd Street, SW (Lawyers) ($3,250.81)
Winter Haven, FL 33880
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sheffield Motel Enterprises, Inc. Holiday Inn Sheffield 137-00-012852 None
4900 Hatch Blvd. (Lawyers)
Sheffield, AL 35660
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC DoubleTree Club Louisville
9700 Bluegrass Parkway
Louisville, KY 40299
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC DoubleTree Club Philadelphia
9461 Roosevelt Blvd.
Philadelphia, PA 19114
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Fairfield Inn Valdosta
1311 St. Augustine Road
Valdosta, GA 31601
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC French Quarter Inn Memphis
2144 Madison Avenue
Memphis, TN 38104
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn South Birmingham
1548 Montgomery Highway
Birmingham, AL 35216
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn Marietta
2265 Kingston Court
Marietta, GA 30067
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn Select DFW
4441 Highway 114 at Esters
Dallas, TX 75063
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn Select Strongville
15471 Royalton Drive
Cleveland, OH 44136
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn St. Louis North
4545 N. Lindbergh Blvd.
St. Louis, MO 63044
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn St. Louis West
3551 Pennridge Drive
Bridgeton, MO 63044
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn Valdosta
1309 St. Augustine Road
Valdosta, GA 31601
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lawyers/Commonwealth/
Property Name and Chicago Title
Owner of Record Street Address Insurance Policy No. Liens of Record
--------------- -------------- -------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IMPAC Hotels 1, LLC Super 8 Hazard
125 Village Lane
Hazard, KY 41701
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Super 8 Prestonburg
550 South U.S. 23
Prestonburg, KY 41653
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn Express Nashville
981 Murfreesboro Road
Nashville, TN 37217
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Courtyard by Marriott
4350 Ridgemont Drive
Abilene, TX 79606
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Courtyard by Marriott
1001 McClain Road
Bentonville, AR 72712
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Courtyard by Marriott (Buckhead)
3332 Peachtree Road, N.E.
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Courtyard by Marriott
46 Cavalier Blvd.
Florence, KY 41042
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Comfort Suites
2681 Dry Pocket Road
Greer, SC 29650
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Holiday Inn SunSpree
1601 N. Ocean Blvd.
Surfside Beach, SC 29575
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Courtyard by Marriott
3835 Technology Drive
Paducah, KY 42001
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels 1, LLC Comfort Inn
2635 N.E. Loop #410
San Antonio, TX 78217
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
SCHEDULE 4.01(v)
Real Property
See attached.
<PAGE>
Schedule 4.01 (V)
List of all Real Property
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albany Hotel, Inc. Omni Albany Hotel FL 135-02-750779 $ 26,100,000
State & Lodge Streets (Lawyers)
Ten Eyck Plaza
Albany, NY 12207
Albany County
- --------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, Holiday Inn East Hartford DE 9841-00012 $ 4,900,000
Limited Partnership a/k/a 363 Roberts Street (Chicago)
AMI Operating Partners, L.P. East Hartford, CT 08106
Hartford County
- --------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, Holiday Inn New Haven DE 984200063 $ 5,200,000
Limited Partnership a/k/a/ 30 Whalley Avenue (Chicago)
AMI Operating Partners, L.P. New Haven, CT 06511
New Haven County
- --------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. Fredrick Holiday Inn DE 4106-0G $ 3,800,000
999 West Patrick Street (Chicago)
Fredrick, MD 21702
Fredrick County
- --------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. Cromwell Bridge Holiday Inn DE 4106-0A $ 7,300,000
1300 Cromwell Bridge Road (Chicago)
Towson, MD 21286
Baltimore County
- --------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. Belmont Holiday Inn DE 4106-0C $ 3,300,000
1800 Belmont Avenue (Chicago)
Baltimore, MD 21244
Baltimore County
- --------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. Holiday Inn York Arsenal Road DE 9881-00005 $ 2,400,000
334 Arsenal Road (Chicago)
York, PA
York County
- --------------------------------------------------------------------------------------------------------------------------------
Apico Hills, Inc. Holiday Inn Parkway East PA 135-02-543910 $ 7,800,000
915 Brinton Road (Lawyers)
Pittsburgh, PA 15221
Alleghany County
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apico Inns of Green Tree, Inc. Holiday Inn Green Tree PA 135-02-543910 $ 15,100,000
401 Holiday Drive (Lawyers)
Pittsburgh, PA 15220
Alleghany County
- --------------------------------------------------------------------------------------------------------------------------------
Brunswick Motel Enterprises, Inc. Holiday Inn Brunswick GA 135-02-691726 $ 5,200,000
U.S. 341 at I-95 (Lawyers)
Brunswick, GA 31520
Glynn County
- --------------------------------------------------------------------------------------------------------------------------------
Dothan Hospitality 3053, Inc. Holiday Inn Dothan AL 135-00-839357 $ 5,700,000
3053 Ross Clark Circle, SW (Lawyers)
Dothan, AL 38301
Houston County
- --------------------------------------------------------------------------------------------------------------------------------
Dothan Hospitality 3071, Inc. Hampton Inn Dothan AL 135-00-839357 $ 3,100,000
3071 Ross Clark Circle, SW (Lawyers)
Dothan, AL 38301
Houston County
- --------------------------------------------------------------------------------------------------------------------------------
Fayetteville Motel Enterprises, Inc. Holiday Inn Fayetteville NC 82-03-148331 $ 6,300,000
1844 Cedar Creek Road (Lawyers)
Fayetteville, NC 28303
Cumberland County
- --------------------------------------------------------------------------------------------------------------------------------
Gadsen Hospitality, Inc. Holiday Inn Express Gadsen AL 135-00-839357 $ 5,800,000
801 Cleveland Avenue (Lawyers)
Attalia, AL 35954
Etowah County
- --------------------------------------------------------------------------------------------------------------------------------
Little Rock Lodging Associates Residence Inn by Marriott GA Commitment $ 8,900,000
I, L.P. 1401 S. Shackleford Road 99-7166
Little Rock, AR 72211 (Chicago)
Pulaski County
- --------------------------------------------------------------------------------------------------------------------------------
Lodgian Amaheim, Inc. 2045 South Harbor Boulevard CA
Anaheim, CA 92802
_____________ County
- --------------------------------------------------------------------------------------------------------------------------------
Lodgian Atlanta Hillsboro, LLC 18000 Block of NW Tanasbourne
Drive GA
Hillsboro, OR 97124
_____________ County
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lodgian Mount Laurel, Inc. Marriott Inn NJ
Atrium Way
Mount Laurel, NJ
____________ County
- --------------------------------------------------------------------------------------------------------------------------------
Lodgian Ontario, Inc. 2200 Block of East Holt Boulevard CA
Ontario, CA 91761
____________ County
- --------------------------------------------------------------------------------------------------------------------------------
Lodgian Richmond, L.L.C. Marriott Inn GA
Dominion Blvd.
Richmond, VA
____________ County
- --------------------------------------------------------------------------------------------------------------------------------
Minneapolis Motel Enterprises, Inc. Holiday Inn St. Paul MN 135-03-230255 $ 7,700,000
1201 West County Road (Lawyers)
East St. Paul, MN 55112
Ramsey County
- --------------------------------------------------------------------------------------------------------------------------------
NH Motel Enterprises, Inc. Northfield Hilton MI 135-02-075477 $ 19,400,000
5500 Crooks Road (Lawyers)
Troy, MI 48098
Oakland County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Austin, Inc. Holiday Inn Austin South TX 535-368368 $ 13,700,000
3401 South IH-35 (Commonwealth)
Austin, TX 78741
Travis County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Cedar Rapids, Inc. Five Seasons Hotel IA 135-02-384649 $ 11,800,000
350 1st Ave. NE (Lawyers)
Cedar Rapids, IA 53401
Linn County
- --------------------------------------------------------------------------------------------------------------------------------
Palm Beach Hotel Enterprises, Inc., a Omni Hotel West Palm Beach FL 82-03-153809 N/A
Florida Corporation, as the sole general 1601 Belevedere Road (Lawyers)
partner of Servico Centre Associates, West Palm Beach, FL 33406
Ltd. Palm Beach County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Colesville, Inc. Town Center MD MC981789AA $ 10,400,000
8727 Colesville Road (Commonwealth)
Silver Springs, MD 20910
Montgomery County
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Servico Columbia, Inc. Columbia Hilton MD MC981787AA $ 14,600,000
5485 Twin Knolls Road (Commonwealth)
Columbia, MD 21045
Howard County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Ft. Pierce, Inc. Holiday Inn Express Ft. Pierce DE 82-03-153809 $ 3,400,000
7151 Okeechobee Road (Lawyers)
Fort Pierce, FL 34945
St. Lucie County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Grand Island, Inc. Holiday Inn Grand Island NY 135-03-001311 $ 8,800,000
100 Whitehaven Road (Lawyers)
Grand Island, NY
Erie County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Hilton Head, Inc. Four Points Hotel Hilton Head SC 507-007286 $ 6,800,000
35 South Forest Beach Drive (Commonwealth)
Hilton Head, SC
Beaufort County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Houston, Inc. Ramada Plaza Houston TX 535-368368 $ 15,200,000
12801 N.W. Freeway US 290 (Commonwealth)
Houston, TX
Harris County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Jamestown, Inc. Holiday Inn Jamestown NY 135-02-999324 $ 5,100,000
150 West 4th Street (Lawyers)
Jamestown, NY 14701
Chautaugua County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Market Center, Inc. Holiday Inn Market Cotter Dallas TX 535-368368 $ 10,700,000
1955 Market Center Blvd. (Commonwealth)
Dallas, TX 75207
Dallas County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Maryland, Inc. Holiday Inn Washington, DC. MD MC981788AA
8777 Georgia Avenue (Commonwealth)
Silver Spring, MD 20920
Montgomery County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Metairie, Inc. Quality Hotel Metairie LA 135-00-950863 $ 8,900,000
2261 North Causeway Blvd. (Lawyers)
Metairie, LA 70001
Jefferson Parish
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Servico New York, Inc. Clarion Niagara Falls NY 135-03-001313 $ 16,100,000
Third & Old Falls Streets, (Lawyers)
P.O. Box 845
Niagara Falls, NY 14303
Niagara County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Niagara Falls, Inc. Holiday Inn Niagara Falls NY 135-03-001312 $ 5,900,000
114 Buffalo Avenue (Lawyers)
Niagara Falls, NY 14303
Niagara County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Northwoods, Inc. Best Western Charleston FL 507-007286 $ 8,000,000
International Airport (Commonwealth)
7401 Northwoods Blvd.
North Charleston, SC 29418
Charleston County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola 7200, Inc. Holiday Inn University Mall DE 82-03-153809 $ 9,600,000
Pensacola (Lawyers)
7200 Plantation Road
Pensacola, FL 32504
Escambia County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola 7330, Inc. Hampton Inn Pensacola DE 82-03-153809 $ 9,400,000
7330 Plantation Road (Lawyers)
Pensacola, FL 32504
Escambia County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola, Inc. Holiday Inn Express Pensacola DE 82-03-153809 $ 9,500,000
6501 Plantation Road (Lawyers)
Pensacola, FL 32505
Escambia County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Rolling Meadows, Inc. Holiday Inn Rolling Meadows IL 135-02-919286 $ 23,600,000
3405 Algonquin Road (Lawyers)
Rolling Meadows, IL 60008
Cook County
- --------------------------------------------------------------------------------------------------------------------------------
Servico Roseville, Inc. Comfort Inn Roseville MN 135-03-230256 $ 5,100,000
2715 Long Lake Road (Lawyers)
Roseville, MN 55113
Ramsey County
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Servico West Palm Beach, Inc. Sheraton West Palm Beach FL 82-03-15809 $15,700,000
630 Clearwater Park Road (Lawyers)
West Palm Beach, FL 33406
Palm Beach County
- --------------------------------------------------------------------------------------------------------------------
Service Windsor, Inc. Holiday Inn Select Windsor FL
1855 Huron Church Road
Windsor, Ontario Canada
- --------------------------------------------------------------------------------------------------------------------
Servico Winter Haven, Inc. Holiday Inn Winter Haven FL 82-03-15809 $6,900,000
1150 3rd Street, SW (Lawyers)
Winter Haven, FL 33880
Polk County
- --------------------------------------------------------------------------------------------------------------------
Sheffield Motel Enterprises, Holiday Inn Sheffield AL 137-00-012852 $6,700,000
Inc. 4900 Hatch Blvd. (Lawyers)
Sheffield, AL 35660
Colbert County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Double Tree Club Louisville GA $16,900,000
9700 Bluegrass Parkway
Louisville, KY 40299
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Double Tree Club Philadelphia GA $10,700,000
9461 Roosevelt Blvd.
Philadelphia, PA 19114
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Fairfield Inn Valdosta GA
1311 St. Augustine Road
Valdosta, GA 31601
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC French Quarter Inn Memphis GA $7,600,000
2144 Madison Avenue
Memphis, TN 38104
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Holiday Inn South Birmingham GA $8,000,000
1548 Montgomery Highway
Birmingham, AL 35216
__________ County
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IMPAC Hotels I, LLC Holiday Inn Marietta GA $13,500,000
2265 Kingston Court
Marietta, GA 30067
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Holiday Inn Select DFW GA N/A
4441 Highway 114 at Esters
Dallas, TX 75063
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Holiday Inn Select Strongville GA $21,000,000
15471 Royalton Drive
Cleveland, OH 44136
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Holiday Inn St. Louis North GA $16,500,000
4545 N. Lindbergh Blvd.
St. Louis, MO 63044
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Holiday Inn St. Louis West GA $10,100,000
3551 Pennridge Drive
Bridgeton, MO 63044
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Holiday Inn Valdosta GA $11,400,000
1309 St. Augustine Road
Valdosta, GA 31601
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Super 8 Hazard GA $2,800,000
125 Village Lane
Hazard, KY 41701
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Super 8 Prestonburg GA $3,800,000
550 South U.S. 23
Prestonburg, KY 41653
__________ County
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IMPAC Hotels I, LLC Holiday Inn Express Nashville GA $7,700,000
981 Murfreesboro Road
Nashville, TN 37217
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Courtyard by Marriott - GA $4,500,000
Abilene
4350 Ridgemont Drive
Abilene, TX 79606
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Courtyard by Marriott GA $6,000,000
1001 McClain Road
Bentonville, AR 72712
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Courtyard by Marriott GA $17,600,000
(Buckhead)
3332 Peachtree Road, N.E.
Atlanta, GA 30326
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Courtyard by Marriott - GA $3,800,000
Florence
46 Cavalier Blvd.
Florence, KY 41402
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Comfort Suites GA
2681 Dry Pocket Road
Greer, SC 29650
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Holiday Inn SunSpree GA
1601 N. Ocean Blvd.
Surfside Beach, SC 29575
__________ County
- --------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Courtyard by Marriott - GA $8,500,000
Paducah
3835 Technology Drive
Paducah, KY 42001
__________ County
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
State of Lawyers/Commonwealth/
Property Name and Inc. of Chicago Title
Owner of Record Street Address Owner Insurance Policy No. Appraisal Value
--------------- -------------- ----- -------------------- ---------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IMPAC Hotels I, LLC Comfort Inn GA $6,700,000
2635 N.E. Loop #410
San Antonio, TX 78217
__________ County
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE>
SCHEDULE 4.01(w)
Leases of Real Property
See attached.
<PAGE>
Schedule 4.01 (W)
Ground Lease Spreadsheet
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Property Name and
Owner of Record Street Address Ground Leases Amendments
--------------- -------------- ------------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Albany Hotel, Inc. Omni Albany Hotel o Restatement of Agreement of
State & Lodge Streets Lease dated December 20,
Ten Eyck Plaza 1979 recorded in Liber
Albany, NY 12207 2216, page 1 (Hotel Lease).
o Restatement of Agreement of
Lease dated December 20,
1979 recorded in Liber 2216
page 135 (Garage Lease).
- ------------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, Limited Holiday Inn East Hartford o Agreement of Lease dated Amendatory Agreement dated
Partnership a/k/a 363 Roberts Street March 11, 1970 recorded in September 27, 1971.
AMI Operating Partners, L.P. East Hartford, CT 08106 Vol. 626, page 107. Second Amendatory Agreement
o Agreement dated May 4, 1973 dated July 5, 1972.
recorded in Vol. 511, page Third Amendatory Agreement
238. dated March 15, 1973.
o Agreement dated September Fourth Amendatory Agreement
10, 1974 as amended by dated May 4, 1973.
Letter Agreement dated Fifth Amendatory Agreement
April 18, 1979. dated September 11, 1978.
Amendment to Agreement of
Lease dated May 3, 1985
recorded in Vol. 911, page 96.
Amendment to Lease dated
December 20, 1986 recorded in
Vol. 1019, page 59.
Amendment to Lease and
Indemnification Agreement
dated December 23, 1986
recorded in Vol. 1019, page 69.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Property Name and
Owner of Record Street Address Ground Leases Amendments
--------------- -------------- ------------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Cedar Rapids Five Seasons Hotel o Lease of Air Rights dated o Agreement to correct legal
350 1st Ave. NE October 14, 1976 recorded description dated January
Cedar Rapids, IA 53401 in Vol. 1733, page 1 and in 4, 1978 recorded in Book
Book 3494, page 631. 3494, page 655.
Assignment of Lease of Air
Rights dated September 7,
1977 recorded in Vol. 1733,
page 26.
Assignment of Assignment of
Air Rights dated February
13, 1979 recorded in Vol.
1772, page 3.
Proposed Amendment to Air
Rights Lease dated June 28,
1995.
Assignment and Assumption
of Lease of Air Rights
dated _______ recorded in
Liber 2877, page 344.
o Lease dated May 23, 1979 o Amendment to Lease dated
recorded in Book 3494, page January 3, 1984 recorded in
657 (Pedestrian Passage Book 3494, page 677.
Lease). Amendment to Lease dated
May 22, 1985 recorded in
Book 3494, page 676.
Assignment and Assumption
of Lease dated ______
recorded in Liber _____,
page ____.
o Ballroom Rental Agreement o Proposed Amendment to
dated October 26, 1977 Ballroom Rental Agreement
recorded in Vol. 1733, page dated October 26, 1977
32. recorded in Book 3494, page
680.
Memorandum of Understanding
dated June 30, 1995.
o Parking Space Agreement o Assignment and Assumption
dated May 12, 1977 recorded of Leases dated April 23,
in Book 3494, page 682. 1997 recorded in Book 3494,
page 684.
o Skyway Agreement dated
April 11, 1979.
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Colesville, Inc. Town Center Agreement of Lease dated June First Amendment to Agreement
8727 Colesville Road 15, 1962. dated February 23, 1967.
Silver Springs, MD 20910 Second Amendment to Lease
dated February 18, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
Sheffield Motel Enterprises, Holiday Inn Sheffield Lease dated February 6, 1981 Amendment of Lease dated
Inc. 4900 Hatch Blvd. recorded in Book 391, page 79. January 24, 1995.
Sheffield, AL 35660 Second Amendment of Lease
dated June 16, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Property Name and
Owner of Record Street Address Ground Leases Amendments
--------------- -------------- ------------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IMPAC Hotels I, LLC Holiday Inn St. Louis North Lease dated January 1, 1994.
4545 N. Lindbergh Blvd.
St. Louis, MO 63044
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Courtyard by Marriott - Lease Agreement dated April
Abilene 18, 1996.
4350 Ridgemont Drive
Abilene, TX 79606
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Courtyard by Marriott - Lease Agreement dated January
Paducah 27, 1997.
3835 Technology Drive
Paducah, KY 42001
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC Comfort Inn Lease Agreement dated February
2635 N.E. Loop #410 18, 1993.
San Antonio, TX 78217
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
SCHEDULE 4.01(x)
Investments
- -------------------------------------------------------------------------
Location Ownership %
- -------------------------------------------------------------------------
Crowne Plaza Saginaw 51
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Crowne Plaza Worcester 51
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Holiday Inn Sioux City 51
- -------------------------------------------------------------------------
Holiday Inn Ft. Wayne 51
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Holiday Inn McKnight Road (*) 50
- -------------------------------------------------------------------------
Holiday Inn Melbourne 50
- -------------------------------------------------------------------------
Omni West Palm Beach 50
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Radisson New Orleans 50
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Crowne Plaza Macon 60
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Holiday Inn Augusta 51
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Holiday Inn Richfield 51
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Holiday Inn Columbus 30
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(*) we have effective 100% ownership in this hotel
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<PAGE>
SCHEDULE 4.01(y)
Patents, Trademarks, Tradenames, Servicemarks and Copyrights
See attached.
<PAGE>
Page 1 of 1
[LOGO] US PATENT & TRADEMARK OFFICE
TRADEMARK TEXT AND IMAGE DATABASE
---- ---- ----- ------- ------ ------ ---------- -----------
Help Home Marks Boolean Manual Number Index Copy [ILLEGIBLE]
---- ---- ----- ------- ------ ------ ---------- -----------
[GRAPHIC]
(1 of 1)
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Check Status
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Word Mark LODGIAN
Owner Name (APPLICANT) Impac Hotel Group, L.L.C.
Owner Address Two Live Oak Center 3445 Peachtree Road, Suite 700
Atlanta GEORGIA
30326 LIMITED LIABILITY COMPANY GEORGIA
Owner Name (LAST LISTED OWNER) Impac Hotel Group, L.L.C.
Owner Address Two Live Oak Center 3445 Peachtree Road, Suite 700
Atlanta GEORGIA
30326 LIMITED LIABILITY COMPANY GEORGIA
Attorney of Record EDMUND B (PETER) BURKE
Serial Number 75-455508
Filing Date 03/24/1998
Section 1(B) SECTION 1(B)
indicator
Mark Drawing (1) TYPED DRAWING
Code
Register PRINCIPAL
Published for 02/09/1999
Opposition
Type of Mark SERVICE MARK
---------------------------
International Class 042
Goods and Services HOTELS
---------------------------
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[GRAPHIC]
(1 of 1)
http://[ILLEGIBLE]
<PAGE>
Page 01 of 01
U.S. Patent and Trademark Office (PTO)
NOTICE OF ALLOWANCE
(NOTE: If any data on this notice is incorrect, please submit a written request
for correction of the NOA to: Assistant Commissioner for Trademarks, Box ITU,
2900 Crystal Drive, Arlington, VA 22202-3513. Please include the serial number
of your application on ALL correspondence with the PTO. 15 U.S.C. 1063(b)(2))
ISSUE DATE OF NOA: May 4, 1999
EDMUND B (PETER) BURKE
POWELL GOLDSTEIN FRAZER & MURPHY LLP
191 PEACHTREE ST
ATLANTA GA 30303
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** IMPORTANT INFORMATION: 6 MONTH DEADLINE **
To avoid ABANDONMENT of this application, either a "Statement of Use"
(a.k.a. "Allegation of Use") or a "Request for Extension of Time to File a
Statement of Use" (a.k.a. "Extension Request") and the appropriate fee(s) must
be received in the PTO within six months of the issue date of this Notice Of
Allowance (NOA). Failure to do so will result in the ABANDONMENT of this
application.
Please note that both the "Statement of Use" and "Extension Request" have
many legal requirements, including fees. These requirements are explained in the
PTO booklet "Basic Facts about Trademarks", which can be obtained upon request
at (703) 308-9000. In addition, there are printed forms contained in this
booklet (for "Statements of Use" and "Extension Requests") for your use.
- --------------------------------------------------------------------------------
The following information should be reviewed for accuracy:
SERIAL NUMBER: 75/455508
MARK: LODGIAN
OWNER: Impac Hotel Group, L.L.C.
Two Live Oak Center
3445 Peachtree Road, Suite 700
Atlanta, GEORGIA 30326
GOODS/SERVICES BY INTERNATIONAL CLASS
042-HOTELS
ALL OF THE GOODS/SERVICES IN EACH CLASS ARE LISTED
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ADDITIONAL INFORMATION MAY BE PRESENT IN THE PTO RECORDS
<PAGE>
SCHEDULE 4.01(z)
Material Contracts
1. Comfort Franchise Agreement between Choice Hotels/Servico Roseville-MN,
10/17/97
2. Franchise Agreement and related documents between ITT Sheraton Corp. and
Servico Properties, Hilton Head, SC, October 31, 1996
3. Franchise Agreement and related documents for Ramada Plaza (Servico
Properties) Houston, TX (1998)
4. Franchise Agreement and related documents for Holiday Inn, Jamestown, NY
dated November 7, 1997
5. Franchise Agreement and related documents for Quality Hotels and
Conference Center, between Choice Hotels and KDS Corporation, Metarie, LA,
dated June 22, 1994
6. Franchise Agreement and related documents for Four Points Hotel, between
ITT Sheraton Corp. and Servico Niagara Falls, Inc., Niagara Falls, NY
7. Franchise Agreement and related documents for Hampton Inn, between Promus
Hotels and Servico Pensacola 7330, Inc., Pensacola, FL, dated August 16,
1995
8. Franchise Agreement and related documents for Holiday Inn University Mall,
Pensacola, FL, between Holiday Inns Franchising, Inc., and Servico
Pensacola 7200, Inc., dated August 14, 1995
9. Franchise Agreement and related documents for Holiday Inn (Greentree),
Pittsburgh, PA, between Holiday Inns Franchising, Inc. and APICO Inns of
Greentree, Inc., dated September 24, 1991
10. Franchise Agreement and related documents for Holiday Inn (Parkway East),
Pittsburgh, PA, between Holiday Inns Franchising, Inc. and APICO Hills,
Inc., dated December 4,1991
11. Franchise Agreement and related documents for Omni Hotel, Albany, NY,
between Omni Hotels Franchising Corp. and Albany Hotel, Inc., dated
October 29, 1992
12. Franchise Agreement and related documents for Crowne Plaza Five Seasons,
Cedar Rapids, IA; Servico Properties
13. Holiday Inns Franchising Agreement between Holiday Inn/Minneapolis Motel,
6/21/94
14. Holiday Inns Franchising Agreement between Holiday Inn/Fayetteville Motel,
12/4/91
15. Holiday Inns Franchising Agreement between Holiday Inn/Apico Hills,
12/4/91
16. Holiday Inns Franchising Agreement between Holiday Inn/Apico Inns of
Greentree, 9/24/91
<PAGE>
17. Holiday Inns Franchising Agreement between Crowne Plaza/Servico Houston,
3/27/98
18. Holiday Inn Franchising Agreement between Holiday Inn/Select Hotel/Servico
Windsor, 9/24/97
19. Holiday Inn Franchising Agreement between Holiday Inn/Servico Pensacola
8/14/95
20. Holiday Inns Franchising Agreement between Holiday Inn/Servico Ft. Pierce,
8/14/95
21. Holiday Inns Franchising Agreement between Holiday Inn/Servico Winter
Haven, 11/17/97
22. Holiday Inns Franchising Agreement between Holiday Inn/Brunswick Motel,
9/24/92
23. Holiday Inns Franchising Agreement between Holiday Inn/Servico Rolling
Meadows, 11/20/97
24. Holiday Inns Franchising Agreement between Holiday Inn/Servico Cedar
Rapids, 6/6/97
25. Holiday inns Franchising Agreement between Holiday Inn/Servico Maryland,
11/17/97
26. Holiday Inns Franchising Agreement between Holiday Inn Express/Servico
Pensacola, 8/14/95
27. Holiday Inns Franchising Agreement between Holiday Inn/Dothan Hospitality,
8/14/95
28. Holiday Inns Franchising Agreement between Holiday Inn/Sheffield Motel
Enterprises, 9/24/91
29. Holiday Inns Franchising Agreement between Holiday Inn/Servico Pensacola
7200, 8/14/95
30. Holiday Inns Franchising Agreement between Holiday Inn/Servico Market
Center, 6/14/97
31. Holiday Inns Franchising Agreement between Crowne Plaza/Servico, 5/1/7/95
32. Holiday Inns Franchising Agreement between Holiday Inn/Apico Inns of
Greentree, 4/18/90
33. Holiday Inns Franchising Agreement between Holiday Inn Express/Gaden
Hospitality, 8/14/95
34. Holiday Inns Franchising Agreement between Holiday Inn Express/Servico
Pensacola (6501 Pensacola Blvd.) 8/14/95
35. Holiday Inn Franchising Agreement between Holiday Inn/Brunswick Motel
Enterprises, Inc., dated September 24, 1991
36. Holiday Inn Franchising Agreement Between Holiday Inn/Gadsden Hospitality,
Inc., dated August 14, 1995
-2-
<PAGE>
37. Holiday Inn Franchising Agreement between Holiday Inn/Servico Grand
Island, Inc., for Holiday Inn, Grand Island, NY, dated January 16, 1998
38. Sheraton W. Palm Beach Agreement between ITT Sheraton/Servico W. Palm
Beach, 11/20/97
39. Hampton Inn Agreement between Promus Hotels/Servico Pensacola 7330,
8/16/95
40. That certain Franchise Agreement, dated January 15, 1996 between Marriott
International, Inc. and Bentonville Lodging Associates I, Limited
Partnership ("Franchisee"), as amended by that certain Assignment and
Assumption Agreement, dated March 3, 1997 between Franchisee and Impac
Hotels I, L.L.C.
41. That certain Franchise Agreement, dated September 18, 1995 between
Marriott International, Inc. and Buckhead Lodging Associates I, Limited
Partnership ("Franchisee"), as amended by that certain Assignment and
Assumption Agreement, dated March 3, 1997 between Franchisee and Impac
Hotels I, L.L.C.
42. That certain Franchise Agreement dated November 1, 1996, between Marriott
International, Inc. and South Georgia Lodging Associates I, Limited
Partnership ("Franchisee"),as amended by that certain Assignment and
Assumption Agreement, dated March 3, 1997, between Franchisee and Impac
Hotels I, L.L.C.
43. That certain Franchise Agreement, dated September 22, 1995 between
Marriott International, Inc. and Florence Lodging Associates I, Ltd.
("Franchisee"), as amended by that certain Assignment and Assumption
Agreement, dated March 3,1997 between Franchisee and Impac Hotels I,
L.L.C.
44. That certain Franchise Agreement, dated August 4, 1989, between Super 8
Motels, Inc. ("Franchisor") and Hazard Lodging Associates, Inc.
("Franchisee"), as amended by that certain Assignment and Assumption
Agreement, dated March 3, 1997, between Franchisor, Franchisee and Impac
Hotels I, L.L.C.
45. That certain Franchise Agreement, dated October 10, 1995 between Marriott
International, Inc. and Paducah Lodging Associates I, Limited Partnership
("Franchisee"), as amended by that certain Assignment and Assumption
Agreement, dated March 3, 1997 between Franchise and Impac Hotels I,
L.L.C.
46. That certain Franchise Agreement, dated March 27, 1989 between Super 8
Motels, Inc. ("Franchisor") and P-Burg Lodging Associates, Inc.
("Franchisee"), as amended by that certain Assignment and Assumption
Agreement dated March 3, 1997, between Franchisor, Franchisee and Impac
Hotels, I, L.L.C.
47. That certain Franchise Agreement and Addendum dated February 16, 1995,
between Choice Hotels International, Inc. and Greenville Lodging
Associates I, Ltd., as amended by that certain Assumption Agreement, dated
March 3, between Impac Hotels I, L.L.C. and Choice Hotels Franchising,
Inc.
-3-
<PAGE>
48. That certain Franchise Agreement, dated January 16,1993, between Choice
Hotels International, Inc. and Southern Texas Lodging Associates, I, Ltd.,
Southern Texas Lodging Associates, Inc. and Robert Cole, Robert Flanders,
Charles Cole and Albert Jevremovic, Individually, as amended by that
certain Assumption Agreement, dated February 4, 1997, between Impac Hotels
I, L.L.C. and Choice Hotels Franchising, Inc.
49. Franchise agreement and related documents for Holiday Inn, between Holiday
Hospitality Franchising, Inc. and AMI Operating Partners, L.P., New Haven,
CT, dated May 28, 1998
50. Holiday Inns Franchising Agreement btwn Holiday Inn/AMI, 5/28/98
51. Holiday Inns Franchising Agreement btwn Holiday Inn/AMI(Fred.), 5/28/98
52. Holiday Inns Franchising Agreement btwn Holiday Inn/AMI (Balt., Cromwell
Bridge Road), 5/28/98
53. Holiday Inns Franchising Agreement btwn Holiday Inn/Servico MD, 11/17/97
54. Holiday Inns Franchising Agreement btwn Holiday Inn/AMI (Balt., Belmont
Ave), 5/28/98
55. Holiday Inns Franchising Agreement btwn Holiday Inn/AMI (New Haven),
5/28/98
56. Holiday Inns Franchising Agreement btwn Holiday Inn/AMI (E. Hartford),
5/28/98
57. Holiday Inns Franchising Agreement btwn Holiday Inn/Servico Market Center,
6/14/97
58. Holiday Inns Franchising Agreement between Holiday Inns/Servico, 1/17/96
59. Holiday Inn Franchising Agreement between Holiday Inn/AMI Operating
Partners, dated May 28, 1998
60. Holiday Inn Franchising Agreement between Holiday Inn/AMI Operating
Partners, L.P., for Holiday Inn (East), dated May 28, 1998
61. Omni Hotels Franchising Agreement btwn Omni Hotels/Service Centre
Associates, 1/7/92
62. Four Points Hotel Niagara Falls Agreement btwn ITT Sheraton/Servico
Niagara Falls 5/20/98
63. Marriott International Inc. Amendment to Franchise Agreement with Impac
Hotels I., Florence, KY, 12/23/98
64. Marriott International Inc. Amendment to Franchise Agreement with Impac
Hotels III, Richmond, VA 12/23/98
-4-
<PAGE>
Exhibit 10.2
EXHIBIT D TO THE
CREDIT AGREEMENT
AS EXECUTED
SECURITY AGREEMENT
Dated July 23, 1999
From
LODGIAN FINANCING CORP.,
SERVICO, INC.,
IMPAC HOTEL GROUP, LLC,
and
THE OTHER GRANTORS REFERRED TO HEREIN
as Grantors,
to
MORGAN STANLEY SENIOR FUNDING, INC.
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
Section Page
1. Grant of Security 2
2. Security for Obligations 6
3. Grantors Remain Liable 6
4. Delivery and Control of Security Collateral, Account Collateral or
Agreement Collateral 6
5. Maintaining the Pledged Accounts 7
6. Maintaining the Collateral Account and the L/C Collateral Account 7
7. Investing of Amounts in the Collateral Account and the L/C Collateral
Account 8
8. Release of Amounts 8
9. Representations and Warranties 8
10. Further Assurances 10
11. As to Equipment and Inventory 11
12. Insurance 12
13. Place of Perfection; Records; Collection of Receivables 13
14. Voting Rights; Dividends; Etc. 14
15. As to the Assigned Agreements 15
16. Payments Under the Assigned Agreements 16
17. Transfers and Other Liens; Additional Shares 16
18. Collateral Agent Appointed Attorney-in-Fact 17
19. Collateral Agent May Perform 17
20. The Collateral Agent's Duties 17
21. Remedies 18
22. Indemnity and Expenses 19
23. Amendments; Waivers; Additional Grantors; Etc 20
24. Notices; Etc 20
25. Continuing Security Interest; Assignments under the Credit Agreement 21
26. Release; Termination 21
27. Security Interest Absolute 21
28. Execution in Counterparts 23
29. The Mortgages 23
30. Governing Law 23
Schedules
Schedule I - Pledged Shares and Pledged Debt
Schedule II - Assigned Agreements
Schedule III - Locations of Equipment and Inventory
Schedule IV - Chief Place of Business, Chief Executive Office and Federal
Tax Identification Number
Schedule V - Trade Names
Schedule VI - Pledged Accounts
<PAGE>
Exhibits
Exhibit A - Form of Security Agreement Supplement
Exhibit B - Form of Pledged Account Letter
Exhibit C - Form of Consent and Agreement
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT dated July 23, 1999 made by LODGIAN FINANCE
CORP., a Delaware corporation (the "Borrower"), SERVICO, INC., a Florida
corporation ("Servico"), IMPAC HOTEL GROUP, LLC, a Georgia limited liability
company ("Impac" and, together with Servico, the "Affiliate Guarantors"), the
other persons listed on the signature pages hereof and the Additional Grantors
(as defined in Section 23) (the Borrower, the Affiliate Guarantors, the persons
so listed and the Additional Grantors being, collectively, the "Grantors"), to
Morgan Stanley Senior Funding, Inc., as collateral agent (together with any
successor collateral agent appointed pursuant to Article VII of the Credit
Agreement (as hereinafter defined), the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement).
PRELIMINARY STATEMENTS.
(1) The Borrower and the Affiliate Guarantors have entered into a
Credit Agreement dated as of July 23, 1999 (said Agreement, as it may hereafter
be amended, amended and restated, supplemented or otherwise modified from time
to time, being the "Credit Agreement") with the Lender Parties and the Agents
(each as defined therein).
(2) Pursuant to the Credit Agreement, the Grantors are entering into
this Agreement in order to grant to the Collateral Agent for the ratable benefit
of the Secured Parties a security interest in all of its personal property and
fixtures and other assets of the Grantors now owned or hereafter acquired.
(3) Each Grantor is the owner of the shares (the "Initial Pledged
Shares") of stock set forth opposite such Grantor's name on and as otherwise
described in Part I of Schedule I hereto and issued by the corporations named
therein and of the indebtedness (the "Initial Pledged Debt") set forth opposite
such Grantor's name on and as otherwise described in Part II of Schedule I
hereto and issued by the obligors named therein.
(4) The Grantors shall open a collateral securities account in the
name of the Collateral Agent and under the sole control and dominion of the
Collateral Agent and subject to the terms of this Agreement.
(5) The Borrower shall open a collateral securities account (the
"L/C Collateral Account"), in the name of the Collateral Agent and under the
sole control and dominion of the Collateral Agent and subject to the terms of
this Agreement.
(6) It is a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
from time to time that the Grantors shall have granted the assignment and
security interest and made the pledge and assignment contemplated by this
Agreement.
<PAGE>
(7) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Loan Documents.
(8) Terms defined in the Credit Agreement and not otherwise defined
in this Agreement are used in this Agreement as defined in the Credit Agreement.
Further, unless otherwise defined in this Agreement or in the Credit Agreement,
terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the
State of New York ("N.Y. Uniform Commercial Code") are used in this Agreement as
such terms are defined in such Article 8 or 9.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and issue Letters of Credit under the
Credit Agreement from time to time, each Grantor hereby agrees with the
Collateral Agent for the ratable benefit of the Secured Parties as follows:
Section 1. Grant of Security. Each Grantor hereby assigns and
pledges to the Collateral Agent for the ratable benefit of the Secured Parties,
and hereby grants to the Collateral Agent for the ratable benefit of the Secured
Parties a security interest in, the following, in each case, as to each type of
property described below, whether now owned or hereafter acquired by such
Grantor, wherever located, and whether now or hereafter existing or arising
(collectively, the "Collateral"):
(a) all of such Grantor's right, title and interest in and to all
equipment in all of its forms (including, without limitation, all (i)
bureaus, bookcases, chiffonniers, chests, sofas, divans, couches, chairs,
stools, tables, desks, lamps, mirrors, rugs, carpeting, drapes, draperies,
curtains, venetian blinds, screens, paintings, hangings, sculptures,
pictures and other decorative works, beds, linens, pillows, blankets,
foodcarts, chinaware, glassware, cookware, stoves, ranges, refrigerators,
dishwashers, garbage disposals, incinerators, washers and dryers, laundry
machines, dry cleaning facilities, bars, bar fixtures, liquor and other
drink dispensers, icemakers, vacuum cleaning systems, floor cleaning,
waxing and polishing equipment, brackets, electrical signs, bulbs, cells,
cabinets, lockers, shelving, luggage carts, luggage racks, keys or other
entry systems, radios, television sets, intercom and paging equipment,
switchboards, private telephone systems, conduits, compressors, call
systems, tools, machinery, engines, dynamos, motors, boats, boilers,
spotlighting equipment, golf carts, buggies, motor vehicles, bicycles),
(ii) production, manufacturing, distribution, selling, data processing,
computer and office equipment and tools, (iii) notebooks, drawings,
diagrams, plans, manuals, computer peripherals, hardware, firmware,
software, data storage tapes, disks, diskettes and other computerized
information), and (iv) other customary hotel or similar equipment and
other tangible property of every kind and nature whatsoever and other
property of every kind and description which may be construed to be
personal property of every kind and description, whether now existing or
hereafter attached to, erected upon, situated in or upon, forming a part
of, appurtenant to, used or useful in the construction of or in connection
with, or arising from the use or enjoyment of all or any portion of the
hotels, all fixtures and all parts thereof and all accessions thereto
including, without limitation,
<PAGE>
all docks, piers, jetties, and pontoons (any and all such equipment,
fixtures, parts and accessions being the "Equipment");
(b) all of such Grantor's right, title and interest in and to all
inventory in all of its forms, (including, but not limited to all, (i)
provisions in storerooms, refrigerators, pantries and kitchens, beverages
in wine cellars and bars, other merchandise intended for sale, fuel,
mechanical supplies, stationary and other expensed supplies and similar
items and raw materials and work in process therefor, finished goods
thereof and materials used or consumed in the manufacture, production,
preparation or shipping thereof, (ii) goods in which such Grantor has an
interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which such Grantor has an
interest or right as consignee) and (iii) goods that are returned to or
repossessed or stopped in transit by such Grantor), and all accessions
thereto and products thereof and documents therefor (any and all such
inventory, accessions, products and documents being the "Inventory");
(c) all of such Grantor's right, title and interest in and to all
accounts, contract rights, chattel paper, instruments, deposit accounts,
general intangibles, and to the extent assignable, all licenses
(including, but not limited to, any operating licenses, alcoholic beverage
licenses or similar licenses), license agreements, contracts, management
contracts or agreements, guaranties, warranties, franchise agreements,
permits, authorities or certificates, and other obligations of any kind,
whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services and whether or not earned by
performance, and all rights now or hereafter existing in and to all
security agreements, leases and other contracts securing or otherwise
relating to any such accounts, contract rights, chattel paper,
instruments, deposit accounts, general intangibles or obligations, (any
and all such accounts, contract rights, chattel paper, instruments,
deposit accounts, instruments, general intangibles and obligations, to the
extent not referred to in clause (d), (e) or (f) below, being the
"Receivables", and any and all such leases, security agreements and other
contracts being the "Related Contracts");
(d) all of such Grantor's right, title and interest in and to the
following (the "Security Collateral"):
(i) the Initial Pledged Shares and the certificates, if
any, representing the Initial Pledged Shares, and all dividends,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the Initial Pledged Shares;
(ii) the Initial Pledged Debt and the instruments, if
any, evidencing the Initial Pledged Debt, and all interest, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the Initial Pledged Debt;
(iii) all additional shares of stock from time to time
issued by any subsidiary of such Grantor (such shares, together with
the Initial Pledged Shares, being the "Pledged Shares"), and the
certificates, if any, representing such
<PAGE>
additional shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
shares;
(iv) all additional indebtedness from time to time owed to
such Grantor (such indebtedness, together with the Initial Pledged
Debt, being the "Pledged Debt") and the instruments, if any,
evidencing such indebtedness, and all interest, cash, instruments
and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
such indebtedness;
(v) all other investment property (including, without
limitation, all (A) securities, whether certificated or
uncertificated, (B) security entitlements, and (C) securities
accounts) in which such Grantor has now, or acquires from time to
time hereafter, any right, title or interest in any manner, and the
certificates or instruments, if any, representing or evidencing such
investment property, and all dividends, interest, distributions,
value, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such investment property;
(e) all of such Grantor's right, title and interest in and to each
of the agreements listed on Schedule II hereto, and each Hedge Agreement
to which such Grantor is now or may hereafter become a party, in each case
as such agreements may be amended, amended and restated, supplemented or
otherwise modified from time to time (collectively, the "Assigned
Agreements"), including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due under or pursuant to the
Assigned Agreements, (ii) all rights of such Grantor to receive proceeds
of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreements, (iii) claims of such Grantor for damages arising out
of or for breach of or default under the Assigned Agreements and (iv) the
right of such Grantor to terminate the Assigned Agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder (all such Collateral being the "Agreement Collateral");
(f) all of such Grantor's right, title and interest in and to the
following (collectively, the "Account Collateral"):
(i) the Collateral Account, all financial assets from time to
time credited to the Collateral Account (including, without
limitation, all Cash Equivalents from time to time credited to the
Collateral Account), and all dividends, interest, cash, instruments
and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
such financial assets;
<PAGE>
(ii) the L/C Collateral Account, all financial assets from
time to time credited to the L/C Collateral Account (including,
without limitation, all Cash Equivalents from time to time credited
to the L/C Collateral Account), and all dividends, interest, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such financial assets;
(iii) the Concentration Account (as hereinafter defined), all
funds held therein and all certificates and instruments, if any,
from time to time representing or evidencing the Concentration
Account;
(iv) all other deposit accounts of such Grantor, all funds
held therein and all certificates and instruments, if any, from time
to time representing or evidencing such deposit accounts;
(v) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time delivered to or
otherwise possessed by the Collateral Agent for or on behalf of such
Grantor, including, without limitation, those delivered or possessed
in substitution for or in addition to any or all of the then
existing Account Collateral; and
(vi) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral; and
(g) all proceeds of any and all of the Collateral (including,
without limitation, proceeds that constitute property of the types
described in clauses (a) through (f) of this Section 1 and this clause
(g)) and, to the extent not otherwise included, all (i) payments under
insurance (whether or not the Collateral Agent is the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral and
(ii) cash.
Section 2. Security for Obligations. This Agreement secures, in the
case of each Grantor, the payment of all Obligations of such Grantor now or
hereafter existing under the Loan Documents, whether direct or indirect,
absolute or contingent, and including, without limitation, any amendments,
amendment and restatements, supplements, modifications, extensions,
substitutions and renewals thereof, and whether for principal, reimbursement
obligations, interest, fees, premiums, penalties, indemnifications, contract
causes of action, costs, expenses or otherwise (all such Obligations being the
"Secured Obligations"). Without limiting the generality of the foregoing, this
Agreement secures, as to each Grantor, the payment of all amounts that
constitute part of the Secured Obligations and would be owed by such Grantor to
any Secured Party under the Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving a Loan Party.
<PAGE>
Section 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor's Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent
of any of the rights hereunder shall not release any Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) no Secured Party shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement or any other Loan Document, nor shall any Secured Party be obligated
to perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
Section 4. Delivery and Control of Security Collateral, Account
Collateral or Agreement Collateral. (a) All certificates or instruments
representing or evidencing Security Collateral, Account Collateral or Agreement
Collateral (and, to the extent requested by the Collateral Agent, any other
Collateral) shall be delivered to and held by or on behalf of the Collateral
Agent pursuant hereto and shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to the Collateral Agent. The
Collateral Agent shall have the right, at any time when an Event of Default has
occurred and is continuing, upon prior notice to the Grantors, to transfer to or
to register in the name of the Collateral Agent or any of its nominees any or
all of the Security Collateral, subject only to the revocable rights specified
in Section 14(a). In addition, the Collateral Agent shall have the right at any
time to exchange certificates or instruments held by it representing or
evidencing Security Collateral for certificates or instruments of smaller or
larger denominations.
(b) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes an uncertificated security,
such Grantor will cause the issuer thereof either (i) to register the Collateral
Agent as the registered owner of such security or (ii) to agree in writing with
such Grantor and the Collateral Agent that such issuer will comply with
instructions with respect to such security originated by the Collateral Agent
without further consent of such Grantor, such agreement to be in form and
substance satisfactory to the Collateral Agent, any such action to be taken by
the Collateral Agent only when an Event of Default has occurred and is
continuing.
(c) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes a security entitlement, such
Grantor will cause the securities intermediary with respect to such security
entitlement either (i) to identify in its records the Collateral Agent as the
entitlement holder of such security entitlement against such securities
intermediary or (ii) to agree in writing with such Grantor and the Collateral
Agent that such securities intermediary will comply with entitlement orders
(that is, notifications communicated to such securities intermediary directing
transfer or redemption of the financial asset to which such Grantor has a
security entitlement) originated by the Collateral Agent without further consent
of such Grantor, such agreement to be in form and substance reasonably
satisfactory to the Collateral Agent (such agreement being a "Securities Account
Control Agreement"), any
<PAGE>
such action to be taken by the Collateral Agent only when an Event of Default
has occurred and is continuing.
(d) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes a securities account, such
Grantor will, comply with subsection (c) of this Section 4 with respect to all
security entitlements credited to such securities account.
Section 5. Maintaining the Pledged Accounts. So long as any Advance
or any other Obligation of any Loan Party under any Loan Document shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment under the Credit Agreement, the Borrower will maintain its cash
management concentration account (the "Concentration Account") only with a bank
that has entered into a letter agreement in substantially the form of Exhibit B
hereto or otherwise in form and substance satisfactory to the Collateral Agent
with the Borrower and the Collateral Agent (the "Pledged Account Letter").
Section 6. Maintaining the Collateral Account and the L/C Collateral
Account. So long as any Advance or any other Obligation of any Loan Party under
any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding
or any Lender shall have any Commitment under the Credit Agreement:
(a) The Borrower will maintain the Collateral Account and the L/C
Collateral Account with the Collateral Agent or another commercial bank
acceptable to the Collateral Agent that has entered into a Pledged Account
Letter (the Collateral Agent or bank with which the Collateral Account and
the L/C Collateral Account are maintained being the "Collateral Bank").
(b) It shall be a term and condition of each of the Collateral
Account and the L/C Collateral Account, notwithstanding any term or
condition to the contrary in any other agreement relating to the
Collateral Account or the L/C Collateral Account, as the case may be, and
except as otherwise provided by the provisions of Section 8 and Section
21, that no amount (including interest on Cash Equivalents credited
thereto) will be paid or released to or for the account of, or withdrawn
by or for the account of, the Borrower or any other Person from the
Collateral Account or the L/C Collateral Account, as the case may be.
Section 7. Investing of Amounts in the Collateral Account and the
L/C Collateral Account. The Collateral Agent will, subject to the provisions of
Section 8 and Section 21, from time to time direct the Collateral Bank to (a)
invest amounts received with respect to the Collateral Account and the L/C
Collateral Account in such Cash Equivalents credited to the Collateral Account
and the L/C Collateral Account, respectively, as the Borrower may select and (b)
invest interest paid on the Cash Equivalents referred to in clause (a) above,
and reinvest other proceeds of any such Cash Equivalents that may mature or be
sold, in each case in such Cash Equivalents credited to the Collateral Account
and the L/C Collateral Account, respectively, as the Borrower may select.
Interest and proceeds that are not invested or reinvested in Cash
<PAGE>
Equivalents as provided above shall be deposited and held in a deposit account
with the Collateral Bank in the name of the Collateral Agent and under the sole
control and dominion of the Collateral Agent, such deposit account to be deemed
to constitute part of the Collateral Account or the L/C Collateral Account, as
the case may be. In addition, the Collateral Agent shall have the right at any
time to direct the Collateral Bank to exchange such Cash Equivalents for similar
Cash Equivalents of smaller or larger determinations, or for other Cash
Equivalents, credited to the Collateral Account or the L/C Collateral Account,
as the case may be.
Section 8. Release of Amounts. So long as no Event of Default shall
have occurred and be continuing, the Collateral Agent will direct the Collateral
Bank to pay and release to the Borrower or at its order or, at the request of
the Borrower, to the Administrative Agent to be applied to the Obligations of
the Borrower under the Loan Documents, such amount, if any, as is then on
deposit in the Collateral Account or the L/C Collateral Account, as the case may
be, provided, however, that with respect to amounts deposited in the L/C
Collateral Account pursuant to Section 2.06(b), 5.01(j) or 6.02 of the Credit
Agreement, such amounts will be released only to the extent permitted by the
terms of the Credit Agreement.
Section 9. Representations and Warranties. Each Grantor represents
and warrants as follows:
(a) All of the Equipment and Inventory of such Grantor are located
at the places specified therefor in Schedule III hereto, as such Schedule
III may be amended, amended and restated, supplemented or otherwise
modified from time to time pursuant to Section 11(a). The chief place of
business and chief executive office of such Grantor are located at the
address specified therefor in Schedule IV hereto, as such Schedule IV may
be amended, amended and restated, supplemented or otherwise modified from
time to time pursuant to Section 13(a). Such Grantor's federal tax
identification number is set forth opposite such Grantor's name in IV
hereto. All Security Collateral consisting of certificated securities and
instruments have been delivered to the Collateral Agent. None of the
Receivables or Agreement Collateral is evidenced by a promissory note or
other instrument that has not been delivered to the Collateral Agent.
(b) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor free and clear of any Lien, claim, option or right of
others, except for the security interest created under this Agreement or
Liens permitted by the Credit Agreement. Such Grantor has the trade names
listed on Schedule V hereto.
(c) Such Grantor has exclusive possession and control of
substantially all of the Equipment and Inventory owned by it.
(d) The Pledged Shares pledged by such Grantor hereunder have been
duly authorized and validly issued and are fully paid and non-assessable.
The Pledged Debt pledged by such Grantor hereunder has been duly
authorized, authenticated or issued and delivered, to the best knowledge
of the Grantor is the legal, valid and binding obligation
<PAGE>
of the issuers thereof, is evidenced by one or more promissary notes
(which notes have been delivered to the Collateral Agent) and is not in
default.
(e) The Initial Pledged Shares constitute the percentage of the
issued and outstanding shares of stock of the issuers thereof indicated on
Schedule I hereto as of the date hereof. The Initial Pledged Debt
constitutes all of the outstanding indebtedness owed to such Grantor by
the issuers thereof and is outstanding, as of the date hereof, in the
principal amount indicated on Schedule I hereto as of the date hereof.
(f) The Assigned Agreements to which such Grantor is a party, true
and complete copies of which (other than the Hedge Agreements) have been
furnished to each Secured Party, have been duly authorized, executed and
delivered by all parties thereto, have not been amended, amended and
restated, supplemented or otherwise modified, are in full force and effect
and are binding upon and enforceable against all parties thereto in
accordance with their terms. There exists no default under any Assigned
Agreement to which such Grantor is a party by any party thereto. Each
party to the Assigned Agreements listed on Schedule II hereto to which
such Grantor is a party other than the Grantors has executed and delivered
to such Grantor a consent, in substantially the form of Exhibit C hereto
or otherwise in form and substance satisfactory to the Collateral Agent,
to the assignment of the Agreement Collateral to the Collateral Agent
pursuant to this Agreement.
(g) As of the date hereof, such Grantor has no deposit accounts
other than the deposit accounts listed on Schedule VI hereto. In
accordance with its normal business practice, each Grantor deposits or
causes to be deposited all payments received by it to a deposit account,
amounts deposited to which are transferred to the concentration account
(the "Concentration Account") in accordance with the Borrower's normal
business practice.
(h) All filings and other actions necessary or desirable to perfect
and protect the security interest in the Collateral created under this
Agreement have been duly made or taken, and this Agreement creates in
favor of the Collateral Agent for the benefit of the Secured Parties a
valid and, together with such filings and other actions, perfected first
priority security interest in the Collateral of such Grantor, securing the
payment of the Secured Obligations.
(i) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the grant by such Grantor of the
assignment, pledge and security interest granted hereunder or for the
execution, delivery or performance of this Agreement by such Grantor, (ii)
the perfection or maintenance of the assignment, pledge and security
interest created hereunder (including the first priority nature of such
assignment, pledge or security interest), except for the filing of
financing and continuation statements under the Uniform Commercial Code,
which financing statements have been duly filed and are in full force and
effect, and the actions described in Section 4 with respect to Security
<PAGE>
Collateral, which actions have been taken and are in full force and
effect, or (iii) for the exercise by the Collateral Agent of its voting or
other rights provided for in this Agreement or the remedies in respect of
the Collateral pursuant to this Agreement, except as may be required in
connection with the disposition of any portion of the Security Collateral
by laws affecting the offering and sale of securities generally.
Section 10. Further Assurances. (a) Each Grantor agrees that from
time to time, at the expense of such Grantor, such Grantor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Collateral Agent may request, in
order to perfect and protect any pledge, assignment or security interest granted
or purported to be granted hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, each Grantor will promptly:
(i) at the request of the Collateral Agent, mark conspicuously each document
included in the Inventory, each chattel paper included in the Receivables, each
Related Contract, each Assigned Agreement and each of its records pertaining to
the Collateral with a legend, in form and substance satisfactory to the
Collateral Agent, indicating that such document, chattel paper, Related
Contract, Assigned Agreement or Collateral is subject to the security interest
granted hereby; (ii) if any Collateral shall be evidenced by a promissory note
or other instrument or chattel paper in repsect of an amount of $100,000 or
more, deliver and pledge to the Collateral Agent hereunder such note or
instrument or chattel paper duly indorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent; (iii) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Collateral Agent may request, in order to
perfect and preserve the security interest granted or purported to be granted
hereunder ; (iv) deliver and pledge to the Collateral Agent for benefit of the
Secured Parties certificates representing the Pledged Shares accompanied by
undated stock powers executed in blank; and (v) deliver to the Collateral Agent
evidence that all other action that the Collateral Agent may deem reasonably
necessary or desirable in order to perfect and protect the security interest
created under this Agreement has been taken.
(b) Each Grantor hereby authorizes the Collateral Agent to file one
or more financing or continuation statements, and amendments thereto, relating
to all or any part of the Collateral without the signature of such Grantor where
permitted by law. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) Each Grantor will furnish to the Collateral Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Collateral Agent
may reasonably request, all in reasonable detail.
Section 11. As to Equipment and Inventory. (a) Each Grantor will
keep the Equipment and Inventory of such Grantor (other than Inventory sold in
the ordinary course of business) at the places therefor specified in Section
9(a) or, upon 30 days' prior written notice to
<PAGE>
the Collateral Agent, at such other places in a jurisdiction where all action
required by Section 10 shall have been taken with respect to such Equipment and
Inventory (and, upon the taking of such action in such jurisdiction, Schedule
III hereto shall be automatically amended to include such other places).
(b) Each Grantor will cause the Equipment of such Grantor to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and will forthwith, or in the case of any loss or damage to any of such
Equipment as soon as practicable after the occurrence thereof, make or cause to
be made all repairs, replacements and other improvements in connection therewith
that are necessary or desirable to such end. Each Grantor will promptly furnish
to the Collateral Agent a statement respecting any loss or damage exceeding
$500,000 to any of the Equipment or Inventory of such Grantor.
(c) Each Grantor will pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including, without limitation, claims for labor, materials and supplies)
against, the Equipment and Inventory of such Grantor. In producing the
Inventory, each Grantor will comply in all material respects with all
requirements of applicable law, including, without limitation, the Fair Labor
Standards Act.
Section 12. Insurance. (a) Each Grantor will, at its own expense,
maintain insurance with respect to the Equipment and Inventory of such Grantor
in such amounts, against such risks, in such form and with such insurers, as
shall be in accordance with industry practice and reasonably satisfactory to the
Collateral Agent from time to time. Each policy for liability insurance shall
provide for all losses to be paid on behalf of the Collateral Agent and such
Grantor as their interests may appear, and each policy for property damage
insurance shall provide for all losses (except for losses of less than $500,000
per occurrence) to be paid directly to the Collateral Agent. Each such policy
shall in addition, to the extent reasonably available (i) name such Grantor and
the Collateral Agent as insured parties thereunder (without any representation
or warranty by or obligation upon the Collateral Agent) as their interests may
appear, (ii) contain the agreement by the insurer that any loss thereunder in
excess of $500,000 shall be payable to the Collateral Agent notwithstanding any
action, inaction or breach of representation or warranty by such Grantor, (iii)
provide that there shall be no recourse against the Collateral Agent for payment
of premiums or other amounts with respect thereto and (iv) provide that at least
10 days' prior written notice of cancellation or of lapse shall be given to the
Collateral Agent by the insurer. Each Grantor will, if so requested by the
Collateral Agent, deliver to the Collateral Agent original or duplicate policies
of such insurance and, as requested by the Collateral Agent (but not more than
once a year), a report of a reputable insurance broker with respect to such
insurance. Further, each Grantor will, at the request of the Collateral Agent,
duly execute and deliver instruments of assignment of such insurance policies to
comply with the requirements of Section 10 and cause the insurers to acknowledge
notice of such assignment.
(b) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 12 may be paid directly to the Person who shall
have incurred liability
<PAGE>
covered by such insurance. In case of any loss involving damage to Equipment or
Inventory when subsection (c) of this Section 12 is not applicable, the
applicable Grantor will make or cause to be made the necessary repairs to or
replacements of such Equipment or Inventory, and any proceeds of insurance
properly received by or released to such Grantor shall be used by such Grantor,
except as otherwise required hereunder or by the Credit Agreement, to pay or as
reimbursement for the costs of such repairs or replacements.
(c) So long as no Event of Default shall have occurred and be
continuing, all insurance payments received by the Collateral Agent in
connection with any loss, damage or destruction of any Inventory or Equipment
will be released by the Collateral Agent to the applicable Grantor for the
repair, replacement or restoration thereof, subject to such terms and conditions
with respect to the release thereof as the Collateral Agent may reasonably
require.
Section 13. Place of Perfection; Records; Collection of Receivables.
(a) Each Grantor will keep its chief place of business and chief executive
office at the location therefor specified in Section 9(a) or, upon 30 days'
prior written notice to the Collateral Agent, at such other location in a
jurisdiction where all actions required by Section 10 shall have been taken with
respect to the Collateral (and, upon the taking of such action in such
jurisdiction, Schedule IV hereto shall be automatically amended to include such
other location). Each Grantor will hold and preserve its records relating to the
Collateral, the Assigned Agreements, the Related Contracts and chattel paper and
will permit representatives of the Collateral Agent at any time during normal
business hours to inspect and make abstracts from such records and other
documents. No Grantor will change or add any securities intermediary that
maintains any securities account in which any of the Collateral is credited or
carried, or change or add any such securities account, in each case without
first complying with the provisions of Section 4 in order to perfect the
security interest granted hereunder in such Collateral.
(b) Except as otherwise provided in this subsection (b), each
Grantor will continue to collect, at its own expense, all amounts due or to
become due such Grantor under the Receivables and the Related Contracts. In
connection with such collections, such Grantor may take (and, at the Collateral
Agent's direction, will take) such action as such Grantor or the Collateral
Agent may deem necessary or advisable to enforce collection of the Receivables
and the Related Contracts; provided, however, that the Collateral Agent shall
have the right at any time, upon the occurrence and during the continuance of an
Event of Default and upon written notice to such Grantor of its intention to do
so, to notify the Obligors under any Receivables or Related Contracts of the
assignment of such Receivables or Related Contracts to the Collateral Agent and
to direct such Obligors to make payment of all amounts due or to become due to
such Grantor thereunder directly to the Collateral Agent and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Receivables or Related Contracts, and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as such
Grantor might have done. After receipt by any Grantor of the notice from the
Collateral Agent referred to in the proviso to the preceding sentence, (i) all
amounts and proceeds (including instruments) received by such Grantor in respect
of the Receivables and the Related Contracts shall be received in trust for the
benefit of the Collateral Agent hereunder, shall be segregated from other funds
of such Grantor and shall be forthwith paid over to the Collateral
<PAGE>
Agent in the same form as so received (with any necessary indorsement) to be
deposited in the Collateral Account and either (A) released to such Grantor on
the terms set forth in Section 8 so long as no Event of Default shall have
occurred and be continuing or (B) if any Event of Default shall have occurred
and be continuing, applied as provided in Section 21(b) and (ii) such Grantor
will not adjust, settle or compromise the amount or payment of any Receivable,
release wholly or partly any Obligor thereof, or allow any credit or discount
thereon. No Grantor will permit or consent to the subordination of its right to
payment under any of the Receivables or the Related Contracts to any other
indebtedness or obligations of the Obligor thereof.
Section 14. Voting Rights; Dividends; Etc. (a) So long as no Event
of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Security Collateral of such
Grantor or any part thereof for any purpose; provided however, that such
Grantor will not exercise or refrain from exercising any such right if
such action would have a material adverse effect on the value of the
Security Collateral or any part thereof.
(ii) Each Grantor shall be entitled to receive and retain any and
all dividends, interest and other distributions paid in respect of the
Security Collateral of such Grantor if and to the extent that the payment
thereof is not otherwise prohibited by the terms of the Loan Documents;
provided, however, that any and all
(A) dividends, interest and other distributions paid or
payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect
of, or in exchange for, any Security Collateral,
(B) dividends and other distributions paid or payable in
cash in respect of any Security Collateral in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus and
(C) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange for,
any Security Collateral
shall be, and shall be forthwith delivered to the Collateral Agent to hold
as, Security Collateral and shall, if received by such Grantor, be
received in trust for the benefit of the Collateral Agent, be segregated
from the other property or funds of such Grantor and be forthwith
delivered to the Collateral Agent as Security Collateral in the same form
as so received (with any necessary indorsement).
(iii) The Collateral Agent will execute and deliver (or cause to be
executed and delivered) to each Grantor all such proxies and other
instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and
<PAGE>
other rights that it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends or interest payments that it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default]:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 14(a)(i) shall, upon notice to
such Grantor by the Collateral Agent, cease and (y) to receive the
dividends, interest and other distributions that it would otherwise be
authorized to receive and retain pursuant to Section 14(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested in
the Collateral Agent, which shall thereupon have the sole right to
exercise or refrain from exercising such voting and other consensual
rights and to receive and hold as Security Collateral such dividends,
interest and other distributions.
(ii) All dividends, interest and other distributions that are
received by any Grantor contrary to the provisions of paragraph (i) of
this Section 14(b) shall be received in trust for the benefit of the
Collateral Agent, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Collateral Agent as Security
Collateral in the same form as so received (with any necessary
indorsement).
(iii) The Collateral Agent shall be authorized to send to each
Securities Intermediary as defined in and under any Control Agreement a
Notice of Exclusive Control as defined in and under such Control
Agreement.
Section 15. As to the Assigned Agreements. (a) Each Grantor will at
its expense:
(i) perform and observe all terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain the Assigned
Agreements to which it is a party in full force and effect, enforce the
Assigned Agreements to which it is a party in accordance with the terms
thereof and take all such action to such end as may be requested from time
to time by the Collateral Agent; and
(ii) furnish to the Collateral Agent promptly upon receipt thereof
copies of all notices, requests and other documents received by such
Grantor under or pursuant to the Assigned Agreements to which it is a
party, and from time to time (A) furnish to the Collateral Agent such
information and reports regarding the Assigned Agreements and such other
Collateral of such Grantor as the Collateral Agent may reasonably request
and (B) upon request of the Collateral Agent make to each other party to
any Assigned Agreement to which it is a party such demands and requests
for information and reports or for action as such Grantor is entitled to
make thereunder.
<PAGE>
(b) Each Grantor agrees that it will not, except to the extent
otherwise permitted under the Credit Agreement:
(i) cancel or terminate any Assigned Agreement to which it is a
party or consent to or accept any cancellation or termination thereof;
(ii) amend, amend and restate, supplement or otherwise modify any
such Assigned Agreement or give any consent, waiver or approval
thereunder;
(iii) waive any default under or breach of any such Assigned
Agreement;
(iv) consent to or permit or accept any prepayment of amounts to
become due under or in connection with any Assigned Agreement, except as
expressly provided therein; or
(v) take any other action in connection with any such Assigned
Agreement that would impair the value of the interests or rights of such
Grantor thereunder or that would impair the interests or rights of any
Secured Party.
(c) Each Grantor hereby consents on its behalf and on behalf of its
Subsidiaries to the assignment and pledge to the Collateral Agent for benefit of
the Secured Parties of each Assigned Agreement to which it is a party by any
other Grantor hereunder.
Section 16. Payments Under the Assigned Agreements. (a) Each Grantor
agrees, and has effectively so instructed each other party to each Assigned
Agreement to which it is a party, that all payments due or to become due under
or in connection with such Assigned Agreement will be made directly to the
Collateral Account.
(b) All moneys received or collected pursuant to subsection (a)
above shall be (i) released to the applicable Grantor on the terms set forth in
Section 8 so long as no Event of Default shall have occurred and be continuing
or (ii) if any Event of Default shall have occurred and be continuing, applied
as provided in Section 21(b).
Section 17. Transfers and Other Liens; Additional Shares. (a) Each
Grantor agrees that it will not (i) sell, assign or otherwise dispose of, or
grant any option with respect to, any of the Collateral, other than sales,
assignments and other dispositions of Collateral, and options relating to
Collateral, permitted under the terms of the Credit Agreement, or (ii) create or
suffer to exist any Lien upon or with respect to any of the Collateral of such
Grantor except for the pledge, assignment and security interest created under
this Agreement.
(b) Each Grantor agrees that it will (i) cause each issuer of the
Pledged Shares pledged by such Grantor not to issue any stock or other
securities in addition to or in substitution for the Pledged Shares issued by
such issuer, except to such Grantor, and (ii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all additional shares
of stock or other securities.
<PAGE>
Section 18. Collateral Agent Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints the Collateral Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time in the Collateral
Agent's discretion, to take any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Collateral Agent pursuant to Section 12,
(b) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) or (b) above,
and
(d) to file any claims or take any action or institute any
proceedings that the Collateral Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce compliance
with the terms and conditions of any Assigned Agreement or the rights of
the Collateral Agent with respect to any of the Collateral.
Section 19. Collateral Agent May Perform. If any Grantor fails to
perform any agreement contained herein, the Collateral Agent may, but without
any obligation to do so and without notice, itself perform, or cause performance
of, such agreement, and the expenses of the Collateral Agent incurred in
connection therewith shall be payable by such Grantor under Section 22(b).
Section 20. The Collateral Agent's Duties. The powers conferred on
the Collateral Agent hereunder are solely to protect the Secured Parties'
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Collateral
Agent shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Collateral, whether or not any Secured Party has
or is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which it accords its own property. Anything contained herein to the
contrary notwithstanding, the Collateral Agent may from time to time when the
Collateral Agent deems it to be necessary appoint one or more subagents (each a
"Subagent") for the Collateral Agent hereunder with respect to all or any part
of the Collateral. In the event that the Collateral Agent so appoints any
Subagent with respect to any Collateral, (1) the assignment and pledge of such
Collateral and the security interest granted in such Collateral
<PAGE>
by each Grantor hereunder shall be deemed for purposes of this Security
Agreement to have been made to such Subagent for the ratable benefit of the
Secured Parties, as security for the Secured Obligations of such Grantor, (2)
such Subagent shall automatically be vested with all rights, powers, privileges,
interests and remedies of the Collateral Agent hereunder with respect to such
Collateral, and (3) the term "Collateral Agent," when used herein in relation to
any rights, powers, privileges, interests and remedies of the Collateral Agent
with respect to such Collateral, shall include such Subagent; provided, however,
that no such Subagent shall be authorized to take any action with respect to any
such Collateral unless and except to the extent expressly authorized in writing
by the Collateral Agent.
Section 21. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party upon
default under the N.Y. Uniform Commercial Code (whether or not the N.Y.
Uniform Commercial Code applies to the affected Collateral) and also may:
(i) require each Grantor to, and each Grantor hereby agrees that it will
at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of the Collateral as directed by the Collateral Agent
and make it available to the Collateral Agent at a place and time to be
designated by the Collateral Agent that is reasonably convenient to both
parties; (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any of the Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Collateral
Agent may deem commercially reasonable; (iii) occupy any premises owned or
leased by any of the Grantors where the Collateral or any part thereof is
assembled or located for a reasonable period in order to effectuate its
rights and remedies hereunder or under law, without obligation to such
Grantor in respect of such occupation; and (iv) exercise any and all
rights and remedies of any of the Grantors under or in connection with the
Assigned Agreements, the Receivables and the Related Contracts or
otherwise in respect of the Collateral, including, without limitation, any
and all rights of such Grantor to demand or otherwise require payment of
any amount under, or performance of any provision of, the Assigned
Agreements, the Receivables and the Related Contracts. Each Grantor agrees
that, to the extent notice of sale shall be required by law, at least ten
days' notice to such Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) Any cash held by or on behalf of the Collateral Agent and all
cash proceeds received by or on behalf of the Collateral Agent in respect
of any sale of, collection from, or other realization upon all or any part
of the Collateral may, in the
<PAGE>
discretion of the Collateral Agent, be held by the Collateral Agent as
collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Collateral Agent pursuant to Section
22) in whole or in part by the Collateral Agent for the ratable benefit of
the Secured Parties against, all or any part of the Secured Obligations in
such order as the Collateral Agent shall elect or as otherwise permitted
or required by the Credit Agreement. Any surplus of such cash or cash
proceeds held by or on the behalf of the Collateral Agent and remaining
after payment in full of all the Secured Obligations shall be paid over to
the applicable Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
(c) All payments received by any Grantor under or in connection with
any Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of such Grantor and shall be forthwith paid
over to the Collateral Agent in the same form as so received (with any
necessary indorsement).
(d) The Collateral Agent may, without notice to any Grantor except
as required by law and at any time or from time to time, charge, set-off
and otherwise apply all or any part of the Secured Obligations against any
funds held in any deposit account that constitutes part of, or is
otherwise related to, the Collateral Account or the L/C Collateral
Account.
Section 22. Indemnity and Expenses. (a) Each Grantor agrees to
indemnify, defend and save and hold harmless each Secured Party and each of
their Affiliates and their respective officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.
(b) Each Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and expenses of its counsel and of any experts and agents, that
the Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the Collateral of such
Grantor, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the other Secured Parties hereunder or (iv) the failure by
such Grantor to perform or observe any of the provisions hereof.
Section 23. Amendments; Waivers; Additional Grantors; Etc. (a) No
amendment or waiver of any provision of this Agreement, and no consent to any
departure by any Grantor herefrom, shall in any event be effective unless the
same shall be in writing and signed
<PAGE>
by the Collateral Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No
failure on the part of the Collateral Agent or any other Secured Party to
exercise, and no delay in exercising any right hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right.
(b) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit A hereto (each a
"Security Agreement Supplement"), (i) such Person shall be referred to as an
"Additional Grantor" and shall be and become a Grantor and each reference in
this Agreement and the other Loan Documents to "Grantor" shall also mean and be
a reference to such Additional Grantor, and (ii) the annexes attached to each
Security Agreement Supplement shall be incorporated into and become a part of
and supplement Schedules I, II, III, IV, V, and VI hereto, and the Collateral
Agent may attach such annexes as supplements to such Schedules; and each
reference to such Schedules shall mean and be a reference to such Schedules as
supplemented pursuant hereto.
Section 24. Notices; Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopier or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to, in the case of the Borrower or the Collateral Agent, addressed to it at its
address specified in the Credit Agreement and, in the case of each Grantor other
than the Borrower, addressed to it at its address set forth opposite such
Grantor's name on Schedule III or on the signature page to the Security
Agreement Supplement pursuant to which it became a party hereto; or, as to any
party, at such other address as shall be designated by such party in a written
notice to the other parties. All such notices and other communications shall,
when mailed, telegraphed, telecopied or telexed, be effective when deposited in
the mails, delivered to the telegraph company, telecopied or confirmed by telex
answerback, respectively, addressed as aforesaid; except that notices and other
communications to the Collateral Agent shall not be effective until received by
the Collateral Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or of any Security
Agreement Supplement or Schedule hereto shall be effective as delivery of an
original executed counterpart thereof.
Section 25. Continuing Security Interest; Assignments under the
Credit Agreement. This Agreement shall create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until the latest of
(i) the payment in full in cash of the Secured Obligations, (ii) the Termination
Date and (iii) the termination or expiration of all Secured Hedge Agreements,
(b) be binding upon each Grantor, its successors and assigns and (c) inure,
together with the rights and remedies of the Collateral Agent hereunder, to the
benefit of the Secured Parties and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), any Lender
Party may assign or otherwise transfer all or any portion of its rights and
obligations under the Credit Agreement (including, without limitation, all or
any portion of its Commitments, the Advances owing to it and the Note or Notes,
if any, held by it) to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Lender
Party herein or otherwise, in each case as provided in Section 9.07 of the
Credit Agreement.
<PAGE>
Section 26. Release; Termination. (a) Upon any sale, lease, transfer
or other disposition of any item of Collateral of any Grantor in accordance with
the terms of the Loan Documents (other than sales of Inventory in the ordinary
course of business), the Collateral Agent will, at such Grantor's expense,
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence the release of such item of Collateral from the
assignment and security interest granted hereby; provided, however, that (i) at
the time of such request and such release no Event of Default shall have
occurred and be continuing, (ii) such Grantor shall have delivered to the
Collateral Agent, at least five Business Days prior to the date of the proposed
release, a written request for release describing the item of Collateral and the
terms of the sale, lease, transfer or other disposition in reasonable detail,
including, without limitation, the price thereof and any expenses in connection
therewith, together with a form of release for execution by the Collateral Agent
and a certificate of such Grantor to the effect that the transaction is in
compliance with the Loan Documents and as to such other matters as the
Collateral Agent may request and (iii) the proceeds of any such sale, lease,
transfer or other disposition required to be applied, or any payment to be made
in connection therewith, in accordance with Section 2.06 of the Credit Agreement
shall, to the extent so required, be paid or made to, or in accordance with the
instructions of, the Collateral Agent when and as required under Section 2.06 of
the Credit Agreement.
(b) Upon the latest of (i) the payment in full in cash of the
Secured Obligations and (ii) the Termination Date, the pledge, assignment and
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the applicable Grantor. Upon any such termination,
the Collateral Agent will, at the applicable Grantor's expense, execute and
deliver to such Grantor such documents as such Grantor shall reasonably request
to evidence such termination.
Section 27. Security Interest Absolute. The obligations of each
Grantor under this Agreement are independent of the Secured Obligations or any
other Obligations of any other Loan Party under or in respect of the Loan
Documents, and a separate action or actions may be brought and prosecuted
against each Grantor to enforce this Agreement, irrespective of whether any
action is brought against such Grantor or any other Loan Party or whether such
Grantor or any other Loan Party is joined in any such action or actions. All
rights of the Collateral Agent and the other Secured Parties and the pledge,
assignment and security interest hereunder, and all obligations of each Grantor
hereunder, shall be irrevocable, absolute and unconditional irrespective of, and
each Grantor hereby irrevocably waives (to the maximum extent permitted by
applicable law) any defenses it may now have or may hereafter acquire in any way
relating to, any or all of the following:
(a) any lack of validity or enforceability of any Loan Document or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
Obligations of any other Loan Party under or in respect of the Loan
Documents or any other amendment or waiver of or
<PAGE>
any consent to any departure from any Loan Document, including, without
limitation, any increase in the Secured Obligations resulting from the
extension of additional credit to any Loan Party or any of its
Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral or any other collateral, or any taking, release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Secured Obligations;
(d) any manner of application of Collateral or any other collateral,
or proceeds thereof, to all or any of the Secured Obligations, or any
manner of sale or other disposition of any Collateral or any other
collateral for all or any of the Secured Obligations or any other
Obligations of any other Loan Party under or in respect of the Loan
Documents or any other assets of any Loan Party or any of its
Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party or any of its Subsidiaries;
(f) any failure of any Secured Party to disclose to any Loan Party
any information relating to the business, condition (financial or
otherwise), operations, performance, assets, nature of assets, liabilities
or prospects of any other Loan Party now or hereafter known to such
Secured Party (each Grantor waiving any duty on the part of the Secured
Parties to disclose such information);
(g) the failure of any other Person to execute this Agreement or any
other Collateral Document, guaranty or agreement or the release or
reduction of liability of any Grantor or other grantor or surety with
respect to the Secured Obligations; or
(h) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by any Secured Party that might otherwise constitute a
defense available to, or a discharge of, such Grantor or any other Grantor
or a third party grantor of a security interest.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by any Secured Party or by any other Person upon the
insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as
though such payment had not been made.
Section 28. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of an original
executed counterpart of this Agreement.
Section 29. The Mortgages. In the event that any of the Collateral
hereunder is also subject to a valid and enforceable Lien under the terms of any
Mortgage and the terms of such Mortgage are inconsistent with the terms of this
Agreement, then with respect to such
<PAGE>
Collateral, the terms of such Mortgage shall be controlling in the case of
fixtures and real estate leases, letting and licenses of, and contracts and
agreements relating to the lease of, real property, and the terms of this
Agreement shall be controlling in the case of all other Collateral.
Section 30. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
LODGIAN FINANCING CORP.
By /s/ Robert M. Flanders
-------------------------------------
Title:
LODGIAN, INC.
By /s/ Robert M. Flanders
----------------------------
Title:
<PAGE>
SERVICO, INC.
By /s/ Robert M. Flanders
----------------------------
Title:
IMPAC HOTEL GROUP, LLC
By /s/ Robert M. Flanders
----------------------------
Title:
SHEFFIELD MOTEL ENTERPRISES,
INC.
DOTHAN HOSPITALITY 3053, INC.
DOTHAN HOSPITALITY 3071, INC.
GADSDEN HOSPITALITY, INC.
LODGIAN ANAHEIM INC.
LODGIAN ONTARIO INC.
SERVICO PENSACOLA, INC.
SERVICO PENSACOLA 7200, INC.
SERVICO PENSACOLA 7330, INC.
SERVICO FT. PIERCE, INC.
AMI OPERATING PARTNERS, L.P.
SERVICO CENTRE ASSOCIATES, LTD.
SERVICO WEST PALM BEACH, INC.
SERVICO WINTER HAVEN, INC.
ALBANY HOTEL, INC.
SERVICO NORTHWOODS, INC.
BRUNSWICK MOTEL ENTERPRISES,
INC.
LITTLE ROCK LODGING ASSOCIATES
I, L.P.
ATLANTA HILLSBORO LODGING, LLC
LODGIAN RICHMOND, L.L.C.
SERVICO ROLLING MEADOWS, INC.
SERVICO CEDAR RAPIDS, INC.
SERVICO METAIRIE, INC.
SERVICO COLUMBIA, INC.
SERVICO COLESVILLE, INC.
SERVICO MARYLAND, INC.
<PAGE>
NH MOTEL ENTERPRISES, INC.
MINNEAPOLIS MOTEL ENTERPRISES,
INC.
SERVICO ROSEVILLE, INC.
LODGIAN MOUNT LAUREL, INC.
SERVICO JAMESTOWN, INC.
SERVICO NEW YORK, INC.
SERVICO NIAGARA FALLS, INC.
SERVICO GRAND ISLAND, INC.
FAYETTEVILLE MOTEL
ENTERPRISES, INC.
APICO INNS OF GREEN TREE, INC.
APICO HILLS, INC.
SERVICO HILTON HEAD, INC.
SERVICO AUSTIN, INC.
SERVICO MARKET CENTER, INC.
SERVICO HOUSTON, INC.
By: /s/ Robert M. Flanders
----------------------------
Title:
<PAGE>
Schedule I to the
Security Agreement
PLEDGED SHARES AND PLEDGED DEBT
See Attached.
<PAGE>
Schedule 1 to Security Agreement
PLEDGED SHARES AND PLEDGED DEBT
PART I
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Grantor Name of Issuer State of Class of Par Shares
Organization Stock Value Authorized
- ----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Lodgian Financing Corp. SHEFFIELD MOTEL ENTERPRISES, INC. Alabama Common None 50
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. DOTHAN HOSPITALITY 3053, INC. Alabama Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. DOTHAN HOSPITALITY 3071, INC. Alabama Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. GADSDEN HOSPITALITY, INC. Alabama Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. LODGIAN ANAHEIM INC. California Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. LODGIAN ONTARIO INC. California Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. AMIOP ACQUISITION CORP., as general Delaware Common $0.01 1,000
partner of AMI Operating Partners,
L.P., a Delaware limited partnership.
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. AMI Operating Partners, L.P. Delaware
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO PENSACOLA, INC. Delaware Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO PENSACOLA 7200, INC. Delaware Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO PENSACOLA 7330, INC. Delaware Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO FT. PIERCE, INC. Delaware Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. PALM BEACH MOTEL ENTERPRISES, INC. Florida Common None 60
as general partner of Servico Centre
Associates, Ltd., a Florida limited
partnership.
- ----------------------------------------------------------------------------------------------------------------------------
SERVICO CENTRE ASSOCIATES, LTD. Florida
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO WEST PALM BEACH, INC. Florida Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO WINTER HAVEN, INC. Florida Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. ALBANY HOTEL, INC. Florida Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO NORTHWOODS, INC. Florida Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO WINDSOR, INC. Florida Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. BRUNSWICK MOTEL ENTERPRISES, INC. Georgia Common None 200
- ----------------------------------------------------------------------------------------------------------------------------
IMPAC HOTEL GROUP, LLC Georgia
- ----------------------------------------------------------------------------------------------------------------------------
IMPAC HOTELS I, LLC Georgia
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. IMPAC SPE #3, Inc., as sole general Georgia Common $0.01 100
partner of Little Rock Lodging
Associates I, L.P., a Georgia limited
partnership.
- ----------------------------------------------------------------------------------------------------------------------------
LITTLE ROCK LODGING ASSOCIATES I, L.P. Georgia
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. LODGIAN ATLANTA HILLSBORO Lodging, L.L.C. Georgia
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Grantor Name of Issuer Stock Certificate Number % of
Number of Shares Outstanding
Shares
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Lodgian Financing Corp. SHEFFIELD MOTEL ENTERPRISES, INC. Certificate No. 4 50 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. DOTHAN HOSPITALITY 3053, INC. Certificate No. 3 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. DOTHAN HOSPITALITY 3071, INC. Certificate No. 3 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. GADSDEN HOSPITALITY, INC. Certificate No. 3 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. LODGIAN ANAHEIM INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. LODGIAN ONTARIO INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. AMIOP ACQUISITION CORP., as general Certificate No. 3 1,000 100%
partner of AMI Operating Partners,
L.P., a Delaware limited partnership.
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. AMI Operating Partners, L.P.
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO PENSACOLA, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO PENSACOLA 7200, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO PENSACOLA 7330, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO FT. PIERCE, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. PALM BEACH MOTEL ENTERPRISES, INC. Certificate No. 7 60 100%
as general partner of Servico Centre
Associates, Ltd., a Florida limited
partnership.
- ---------------------------------------------------------------------------------------------------------------------
SERVICO CENTRE ASSOCIATES, LTD.
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO WEST PALM BEACH, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO WINTER HAVEN, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. ALBANY HOTEL, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO NORTHWOODS, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERVICO WINDSOR, INC. Certificate No. 2 1,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. BRUNSWICK MOTEL ENTERPRISES, INC. Certificate No. 5 200 100%
- ---------------------------------------------------------------------------------------------------------------------
IMPAC HOTEL GROUP, LLC
- ---------------------------------------------------------------------------------------------------------------------
IMPAC HOTELS I, LLC
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. IMPAC SPE #3, Inc., as sole general Certificate No. 2 100 100%
partner of Little Rock Lodging
Associates I, L.P., a Georgia limited
partnership.
- ---------------------------------------------------------------------------------------------------------------------
LITTLE ROCK LODGING ASSOCIATES I, L.P.
- ---------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. LODGIAN ATLANTA HILLSBORO Lodging, L.L.C.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Grantor Name of Issuer State of Class of Par Shares
Organization Stock Value Authorized
- ----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Lodgian Financing Corp. LODGIAN RICHMOND SPE. INC., as sole Georgia Common $0.01 1,000
general partner of Lodgian Richmond,
L.L.C., a Gorgian limited liability
company.
- ----------------------------------------------------------------------------------------------------------------------------
LODGIAN RICHMOND, L.L.C. Georgia
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO ROLLING MEADOWS, INC. Illinois Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO CEDAR RAPIDS, INC. Iowa Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO METAIRIE, INC. Louisiana Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO COLUMBIA, INC. Maryland Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO COLESVILLE, INC. Maryland Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO MARYLAND, INC. Maryland Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. NH MOTEL ENTERPRISES, INC. Michigan Common $1.00 50,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. MINNEAPOLIS MOTEL ENTERPRISES, INC. Minnesota Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO ROSEVILLE, INC. Minnesota Common $1.00 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. LODGIAN MOUNT LAUREL, INC. New Jersey Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO JAMESTOWN, INC. New York Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO NEW YORK, INC. New York Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO NIAGARA FALLS, INC. New York Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO GRAND ISLAND, INC. New York Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. FAYETTEVILLE MOTEL ENTERPRISES, INC. North Carolina Common $1.00 100,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. APICO INNS OF GREEN TREE, INC. Pennsylvania Common $1.00 100,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. APICO HILLS, INC. Pennsylvania Common $1.00 100,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO HILTON HEAD, INC. South Carolina Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO AUSTIN, INC. Texas Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO MARKET CENTER, INC. Texas Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO HOUSTON, INC. Texas Common $0.01 1,000
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Grantor Name of Issuer Stock Certificate Number % of
Number of Shares Outstanding
Shares
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Lodgian Financing Corp. LODGIAN RICHMOND SPE. INC., as sole Certificate No. 2 100 100%
general partner of Lodgian Richmond,
L.L.C., a Gorgian limited liability
company.
- --------------------------------------------------------------------------------------------------------------------
LODGIAN RICHMOND, L.L.C.
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO ROLLING MEADOWS, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO CEDAR RAPIDS, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO METAIRIE, INC. Certificate No. 3 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO COLUMBIA, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO COLESVILLE, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO MARYLAND, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. NH MOTEL ENTERPRISES, INC. Certificate No. 6 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. MINNEAPOLIS MOTEL ENTERPRISES, INC. Certificate No. 4 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO ROSEVILLE, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. LODGIAN MOUNT LAUREL, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO JAMESTOWN, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO NEW YORK, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO NIAGARA FALLS, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO GRAND ISLAND, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. FAYETTEVILLE MOTEL ENTERPRISES, INC. Certificate No. 4 100 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. APICO INNS OF GREEN TREE, INC. Certificate No. 7 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. APICO HILLS, INC. Certificate No. 5 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO HILTON HEAD, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO AUSTIN, INC. Certificate No. 3 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO MARKET CENTER, INC. Certificate No. 2 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
Lodgian Financing Corp. SERIVCO HOUSTON, INC. Certificate No. 3 1,000 100%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PART III
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Grantor Name of Issuer State of Description Debt Final
Organization of Debt Certificate Number Maturity
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
<CAPTION>
- ---------------------------------------------------------------------------------------
Grantor Name of Issuer Outstanding
Principal
Amount
- ---------------------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
-2-
<PAGE>
Schedule II to the
Security Agreement
ASSIGNED AGREEMENTS
Grantor Assigned Agreement
- ------- ------------------
None.
<PAGE>
Schedule III to the
Security Agreement
LOCATIONS OF EQUIPMENT AND INVENTORY
See attached.
<PAGE>
- --------------------------------------------------------------------------------
Grantor Location of Equipment
------- and Inventory
-------------
- --------------------------------------------------------------------------------
Albany Hotel, INC. Omni Albany Hotel
State & Lodge Streets
Ten Eyck Plaza
Albany, NY 12207
- --------------------------------------------------------------------------------
Apico Hills, INC. Holiday Inn Parkway East
915 Brinton Rd.
Pittsburgh, PA 15221
- --------------------------------------------------------------------------------
Apico Inns Of Green Tree, INC. Holiday Inn Green Tree
401 Holiday Dr.
Pittsburgh, PA 15220
- --------------------------------------------------------------------------------
Brunswick Motel Enterprises, INC. Holiday Inn Brunswick
U.S. 341 at I-95
Brunswick, GA 31520
- --------------------------------------------------------------------------------
Dothan Hospitality 3053, INC. Holiday Inn Dothan
3053 Ross Clark Circle, SW
Dothan, AL 38301
- --------------------------------------------------------------------------------
Dothan Hospitality 3071, INC. Holiday Inn Dothan
3071 Ross Clark Circle, SW
Dothan, AL 38301
- --------------------------------------------------------------------------------
Fayetteville Motel Enterprises, INC. Holiday Inn Fayetteville
1844 Cedar Creek Rd.
Fayetteville, NC 28303
- --------------------------------------------------------------------------------
Gadsen Hospitality, Inc. Holiday Inn Express Gadsen
801 Cleveland Av.
Attalia, AL 35954
- --------------------------------------------------------------------------------
Little Rock Lodging Associates I, Residence Inn by Marriot
L.P. 1401 S. Shackleford Road
Little Rock, AR 72211
- --------------------------------------------------------------------------------
Lodgian Anaheim Inc 2045 South Harbor Boulevard
Anaheim, CA 92802
- --------------------------------------------------------------------------------
Lodgian Atlanta Hillsboro LLC 1800 Block of NW Tanadoowine Drive
Hillsboro, OR 97124
- --------------------------------------------------------------------------------
Lodgian Mount Laurel, INC. Marriott Inn
Atrium Way
Mount Laurel, NJ
- --------------------------------------------------------------------------------
Lodgian Ontario, Inc. 2200 Block of East Holt Boulevard
Ontario, CA 91761
- --------------------------------------------------------------------------------
Lodgian Richmond, L.L.C Marriott Inn
Dominion Blvd.
Richmond, VA
- --------------------------------------------------------------------------------
Minneapolis Motel Enterprises. INC. Holiday Inn St. Paul
1201 West County Rd.
East St. Paul, MN 55112
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NH Motel Enterprises, INC. NorthField Hilton
5500 Crooks Rd.
Troy, Michigan 48098
- --------------------------------------------------------------------------------
Servico Austin, INC. Holiday Inn Austin South
3401 South IH-35
Austin, TX 78741
- --------------------------------------------------------------------------------
Servico Cedar Rapids, Inc. Five Seasons Hotel
350 1st Ave. NE
Cedar Rapids, IA 53401
- --------------------------------------------------------------------------------
Servico Colesville, INC. Town Center
8727 Colesville Rd.
Silver Springs, MD 20910
- --------------------------------------------------------------------------------
Servico Columbia, INC. Columbia Hilton
5485 Twin Knolls Rd.
Columbia, MO 70001
- --------------------------------------------------------------------------------
Servico Ft. Pierce, INC. Holiday Inn Express Ft. Pierce
7151 Okeechobee Rd.
Fort Pierce, FL 34945
- --------------------------------------------------------------------------------
Servico Grand Island, INC. Holiday Inn Grand Island
100 Whitehaven Rd.
Grand Island, NY
- --------------------------------------------------------------------------------
Servico Hilton Head, INC. Four Points Hotel Hilton Head
35 South Forest Beach Dr.
Hilton Head, SC
- --------------------------------------------------------------------------------
Servico Houston, INC. Ramada Plaza Houston
12801 N.W. Freeway, US 290
Houston, TX
- --------------------------------------------------------------------------------
Servico Jamestown, INC. Holiday Inn Jamestown
150 West 4th St.
Jamestown, NY 14701
- --------------------------------------------------------------------------------
Servico Market Center, INC. Holiday Inn market Center Dallas
1955 Market Center Blvd.
Dallas, TX 75207
- --------------------------------------------------------------------------------
Servico Maryland, INC. Holiday Inn Washington, D.C.
8777 Georgia Av.
Silver Spring, MD 20920
- --------------------------------------------------------------------------------
Servico Metairie, INC. Quality Hotel Metairie
2261 North Causeway Blvd.
Metairie, LA 70001
- --------------------------------------------------------------------------------
Servico New York, INC. Clarion Niagara Falls
Third 8018 Falls Street
P.O. Box 845
Niagara Falls, NY 14303
- --------------------------------------------------------------------------------
Servico Niagara Falls, INC. Holiday Inn Niagara Falls
114 Buffalo Av.
Niagara Falls, NY 14303
- --------------------------------------------------------------------------------
-2-
<PAGE>
- --------------------------------------------------------------------------------
Servico Northwoods, INC. Best Western Charleston International
Airport
7401 Northwoods Blvd.
North Charleston, SC 29418
- --------------------------------------------------------------------------------
Servico Pensacola 7200, INC. Holiday Inn University Mall Pensacola
7200 Plantation Rd.
Pensacola, Fl 32504
- --------------------------------------------------------------------------------
Servico Pensacola 7330, INC. Hampton Inn Pensacola
7330 Plantation Rd.
Pensacola, Fl 32504
- --------------------------------------------------------------------------------
Servico Pensacola, INC. Holiday Inn Express Pensacola
6501 Plantation Rd.
Pensacola, Fl 32505
- --------------------------------------------------------------------------------
Servico Rolling Meadows, Inc. Holiday Inn Rolling Meadows
3405 Algonquin Rd.
Rolling Meadows, IL 60008
- --------------------------------------------------------------------------------
Servico Roseville, INC. Comfort Inn Roseville
2715 Long Lake Rd.
Roseville, MN 55113
- --------------------------------------------------------------------------------
Servico West Palm Beach, INC. Sheraton West Palm Beach
630 Clearwater Park Rd
West Palm Beach, FL 33406
- --------------------------------------------------------------------------------
Servico Windsor, INC. Holiday Inn Select Windsor
1855 Huron Church Rd.
Windsor, Ontario Canada
- --------------------------------------------------------------------------------
Servico Winter Haven, INC. Holiday Inn Winter Haven
1150 3rd St. SW
Winter Haven, FL 33880
- --------------------------------------------------------------------------------
Sheffield Motel Enterprises, INC. Holiday Inn Sheffield
4900 Hatch Boulevard
Sheffield AL 35660
- --------------------------------------------------------------------------------
Palm Beach Motel Enterprises, Inc., Omni Hotel West Palm Beach
as the sole general partner 1601 Belevedere Road
of Servico Centre Associates, Ltd., West Palm Beach, FL, 33406
a Florida limited partnership.
- --------------------------------------------------------------------------------
AMI Operating Partners, L.P. Holiday Inn East Hartford
363 Roberts Road
East Hartford, CT 08106
Holiday Inn New Haven
30 Whalley Avenue
New Haven, CT 06511
Frederick Holiday Inn
999 West Patrick Street
Frederick, MD 21702
- --------------------------------------------------------------------------------
-3-
<PAGE>
- --------------------------------------------------------------------------------
Cromwell Bridge Holiday Inn
1100 Cromwell Bridge Road
Towson, MD 21286
Belmont Holiday Inn
1800 Belmont Avenue
Baltimore, MD 21244
Holiday Inn York Arsenal Road
334 Arsenal Road
York, PA 17402
- --------------------------------------------------------------------------------
IMPAC Hotels I, LLC. Double Tree Club Louisville
9700 Bluegrass Parkway
Louisville, KY 40299
Double Tree Club Philadelphia
9461 Roosevelt Boulevard
Philadelphia, PA 19114
Fairfield Inn Valdosta
1311 St. Augustine Road
Valdosta, GA 31601
French Quarter Inn Memphis
2144 Madison Avenue
Memphis, TN 38104
Holiday Inn South Birmingham
1548 Montgomery Highway
Birmingham, AL 35216
Holiday Inn Marietta
2265 Kingston Court
Marietta, GA 30067
Holiday Inn Select DFW
4441 Highway 114 at Esters
Dallas, TX 75063
Holiday Inn Select Strongsvilie
15471 Royalton Drive
Cleveland, OH 44136
Holiday Inn St. Louis North
4545 N. Lindbergh Boulevard
St. Louis, MO 63044
- --------------------------------------------------------------------------------
-4-
<PAGE>
- --------------------------------------------------------------------------------
Holiday Inn St. Louis West
3551 Pennridge Drive
Bridgeton, MO 63044
Holiday Inn Valdosta
1309 St. Augustine Road
Valdosta, GA 31601
Super 8 Hazard
125 Village Lane
Hazard, KY 41701
Super 8 Prestonburg
550 South U.S. 23
Prestonburg, KY 41653
Holiday Inn Express Nashville
981 Murfreesboro Road
Nashville, TN 37217
Courtyard by Marriott
4350 Ridgemont Drive
Abilene, TX 79606
Courtyard by Marriott
1001 McClain Road
Bentonville, AR 72712
Courtyard by Marriott (Buckhead)
3332 Peachtree Road, N.E.
Atlanta, GA 30326
Courtyard by Marriot
46 Cavalier Boulevard
Florence, KY 41042
Comfort Suites
2681 Dry Pocket Road
Greer, SC 29650
Holiday Inn SunSpree
1601 N. Ocean Boulevard
Surfside Beach, SC 29575
- --------------------------------------------------------------------------------
-5-
<PAGE>
- --------------------------------------------------------------------------------
Courtyard by Marriott
3835 Technology Drive
Paducah, KY 42001
Comfort Inn
2635 N.E. Loop #410
San Antonio, TX 78217
- --------------------------------------------------------------------------------
-6-
<PAGE>
Schedule IV to the
Security Agreement
CHIEF PLACE OF BUSINESS, CHIEF EXECUTIVE OFFICE
AND FEDERAL TAX IDENTIFICATION NUMBER
Chief Place of Business and Federal Tax
Grantor Chief Executive Office Identification Number
- ------- ---------------------- ---------------------
See Attached.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Grantor Chief Place of Business Chief Executive Federal
------- ----------------------- Office Taxpayer ID
------ Number
------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Albany Hotel, INC. Omni Albany Hotel c/o Lodgian, Inc. 65-0384279
State & Lodge Streets 3445 Peachtree Rd.
Ten Eyck Plaza Suite 700
Albany, NY 12207 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Apico Hills, INC. Holiday Inn Parkway East c/o Lodgian, Inc. 62-0962543
915 Brinron Rd. 3445 Peachtree Rd.
Pittsburgh, PA 15221 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Apico Inns Of Green Tree, INC. Holiday Inn Green Tree c/o Lodgian, Inc. 62-0788158
401 Holiday Dr. 3445 Peachtree Rd.
Pittsburgh, PA 15220 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Brunswick Motel Enterprises, INC. Holiday Inn Brunswick c/o Lodgian, Inc. 59-1693138
U.S. 341 at I-95 3445 Peachtree Rd.
Brunswick, GA 31520 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Dothan Hospitality 3053, INC. Holiday Inn Dothan c/o Lodgian, Inc. 63-1166288
3053 Ross Clark Circle, SW 3445 Peachtree Rd.
Dothan, AL 38301 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Dothan Hospitality 3071, INC. Holiday Inn Dothan c/o Lodgian, Inc. H.I. DOTHAN
3071 Ross Clark Circle, SW 3445 Peachtree Rd. 63-1166288
Dothan, AL 38301 Suite 700 Hampton:
Atlanta, GA 30326 63-1166287
- ------------------------------------------------------------------------------------------------------------------------------------
Fayetteville Motel Enterprises, INC. Holiday Inn Fayetteville c/o Lodgian, Inc. 59-2195645
1844 Cedar Creek Rd. 3445 Peachtree Rd.
Fayetteville, NC 28303 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Gadsen Hospitality, Inc. Holiday Inn Express Gadsen c/o Lodgian, Inc. 63-1166289
801 Cleveland Av. 3445 Peachtree Rd.
Attalia, AL 35954 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Little Rock Lodging Associates I, Residence Inn by Marriot c/o Lodgian, Inc. 58-2350788
L.P. 1401 S. Shackleford Road 3445 Peachtree Rd.
Little Rock, AR 72211 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Anaheim Inc 2045 South Harbor Boulevard c/o Lodgian, Inc. 65-0849714
Anaheim, CA 92802 3445 Peachtree Rd.
Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Atlanta Hillsboro LLC 18000 Block of NW c/o Lodgian, Inc. 58-2392166
Tanasbourne Drive 3445 Peachtree Rd.
Hillsboro, OR 97124 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Grantor Chief Place of Business Chief Executive Federal
------- ----------------------- Office Taxpayer ID
------ Number
------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lodgian Mount Laurel, INC. Marriott Inn c/o Lodgian, Inc. 58-2460123
Atrium Way 3445 Peachtree Rd.
Mount Laurel, NJ Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Ontario Inc. 2200 Block of c/o Lodgian, Inc. 65-0842533
East Holt Boulevard 3445 Peachtree Rd.
Ontario, CA 91761 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Lodgian Richmond, L.L.C Marriott Inn c/o Lodgian, Inc. 58-2460119
Dominion Blvd. 3445 Peachtree Rd.
Richmond, VA Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Minneapolis Motel Enterprises, Holiday Inn St. Paul c/o Lodgian, Inc.
INC. 1201 West County Rd. 3445 Peachtree Rd. 59-2722347
East St. Paul, MN 55112 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
NH Motel Enterprises, INC. NorthField Hilton c/o Lodgian, Inc. 59-2256713
5500 Crooks Rd. 3445 Peachtree Rd.
Troy, Michigan 48098 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Austin, INC. Holiday Inn Austin South c/o Lodgian, Inc. 65-0654220
3401 South IH-35 3445 Peachtree Rd.
Austin, TX 78741 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Cedar Rapids, Inc. Five Seasons Hotel c/o Lodgian, Inc. 39-1882535
350 1st Av. NE 3445 Peachtree Rd.
Cedar Rapids, IA 53401 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Colesville, INC. Town Center c/o Lodgian, Inc. 65-0432696
8727 Colesville Rd. 3445 Peachtree Rd.
Silver Springs, MD 20910 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Columbia, INC. Columbia Hilton c/o Lodgian, Inc. Colombia MD
5485 Twin Knolls Rd. 3445 Peachtree Rd. 58-2348775
Columbia, MD 70001 Suite 700 Quality-
Atlanta, GA 30326 Metairie LA
65-0654223
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Ft. Pierce, INC. Holiday Inn Express Ft. c/o Lodgian, Inc. 65-0592830
Pierce 3445 Peachtree Rd.
7151 Okeechobee Rd. Suite 700
Fort Pierce, FL 34945 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Grand Island, INC. Holiday Inn Grand Island c/o Lodgian, Inc. 16-1540702
100 Whitehaven Rd. 445 Peachtree Rd.
Grand Island, NY Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Grantor Chief Place of Business Chief Executive Federal
------- ----------------------- Office Taxpayer ID
------ Number
------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Servico Hilton Head, INC. Four Points Hotel Hilton c/o Lodgian, Inc. 62-1003086
Head 3445 Peachtree Rd.
35 South Forest Beach Dr. Suite 700
Hilton Head, SC Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Houston, INC. Ramada Plaza Houston c/o Lodgian, Inc. 58-2348780
12801 N.W. Freeway US 290 3445 Peachtree Rd.
Houston, TX Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Jamestown, INC. Holiday Inn Jamestown c/o Lodgian, Inc. 58-2348783
150 West 4th St. 3445 Peachtree Rd.
Jamestown, NY 14701 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Market Center, INC. Holiday Inn market Center c/o Lodgian, Inc. 75-2708406
Dallas 3445 Peachtree Rd.
1955 Market Center Blvd. Suite 700
Dallas, TX 75207 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Maryland, INC. Holiday Inn Washington, c/o Lodgian, Inc. 58-2348773
D.C. 3445 Peachtree Rd.
8777 Georgia Av. Suite 700
Silver Spring, MD 20920 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Metairie, INC. Quality Hotel Metairie c/o Lodgian, Inc. 65-0654223
2261 North Causeway Blvd. 3445 Peachtree Rd.
Metairie, LA 70001 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico New York, INC. Clarion Niagara Falls c/o Lodgian, Inc. 16-1540703
Third & Old Falls Streets 3445 Peachtree Rd.
P.O. Box 845 Suite 700
Niagara Falls, NY 14303 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Niagara Falls, INC. Holiday Inn Niagara Falls c/o Lodgian, Inc. 16-1540701
114 Buffalo Av. 3445 Peachtree Rd.
Niagara Falls, NY 14303 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Northwoods, INC. Best Western Charleston c/o Lodgian, Inc. 65-0503927
International Airport 3445 Peachtree Rd.
7401 Northwoods Blvd. Suite 700
North Charleston, SC 29418 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola 7200, INC. Holiday Inn University Mall c/o Lodgian, Inc. 65-0592816
Pensacola 3445 Peachtree Rd.
7200 Plantation Rd. Suite 700
Pensacola, Fl 32504 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola 7330, INC. Hampton Inn Pensacola c/o Lodgian, Inc. 65-0592815
7330 Plantation Rd. 3445 Peachtree Rd.
Pensacola, Fl 32504 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Pensacola, INC. Holiday Inn Express c/o Lodgian, Inc. 65-0592674
Pensacola 3445 Peachtree Rd.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Grantor Chief Place of Business Chief Executive Federal
------- ----------------------- Office Taxpayer ID
------ Number
------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6501 Plantation Rd. Suite 700
Pensacola, Fl 32505 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Rolling Meadows, Inc. Holiday Inn Rolling c/o Lodgian, Inc. 58-2348777
Meadows 3445 Peachtree Rd.
3405 Algonquin Rd. Suite 700
Rolling Meadows, IL 60008 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Roseville, INC. Comfort Inn Roseville c/o Lodgian, Inc. 41-1872737
2715 Long Lake Rd. 3445 Peachtree Rd.
Roseville, MN 55113 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico West Palm Reach, INC. Sheraton West Palm Beach c/o Lodgian, Inc. 59-3473157
630 Clearwater Park Rd. 3445 Peachtree Rd.
West Palm Beach, FL 33406 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Windsor, INC. Holiday Inn Select Windsor c/o Lodgian, Inc.
1855 Huron Church Rd. 3445 Peachtree Rd. 98-0175025
Windsor, Ontario Canada Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Servico Winter Haven, INC. Holiday Inn Winter Haven c/o Lodgian, Inc.
1150 3rd St. SW 3445 Peachtree Rd. 65-0787913
Winter Haven, FL 33880 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Sheffield Motel Enterprises, INC. Holiday Inn Sheffield c/o Lodgian, Inc. 59-2059817
4900 Hatch Boulevard 3445 Peachtree Rd.
Sheffield AL 35660 Suite 700
Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
IMPAC Hotels I, LLC. c/o Lodgian, Inc. c/o Lodgian, Inc. 58-2294245
3445 Peachtree Rd. 3445 Peachtree Rd.
Suite 700 Suite 700
Atlanta, GA 30326 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
AMI Operating Partners, L.P. c/o Lodgian, Inc. c/o Lodgian, Inc. 65-0798740
3445 Peachtree Rd. 3445 Peachtree Rd.
Suite 700 Suite 700
Atlanta, GA 30326 Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
Palm Beach Motel Enterprises, Inc., Omni Hotel West Palm Beach c/o Lodgian, Inc. 59-1978788
as the sole general partner of 1601 Belevedere Road 3445 Peachtree Rd.
Servico Centre Associates, Ltd., a West Palm Beach, FL 33406 Suite 700
Florida limited partnership. Atlanta, GA 30326
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
Schedule V to the
Security Agreement
TRADE NAMES
Grantor Trade Names
- ------- -----------
None.
<PAGE>
Schedule VI to the
Security Agreement
DEPOSIT ACCOUNTS
See Attached.
<PAGE>
<TABLE>
<CAPTION>
Property Name: Property Address: Bank Name: Account Number: Bank Address:
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Omni Albany Hotel State and Lodge Streets Key Bank NA 325760019167 80 State St.
Ten Eyck Plaza Albany, NY 12207
Albany, NY 12207
Holiday Inn 915 Brinton Rd. Mellon Bank 1718287 2020 Ardmore Blvd.
Parkway East Pittsburgh, PA 15221 Pittsburgh, PA 15221
Holiday Inn Green 401 Holiday Dr. Pittsburgh National Bank 0002011432 920 Poplar St.
Tree Pittsburgh, PA 15220 Pittsburgh, PA 15220
Holiday Inn U.S. 34-1 at I-98 NationsBank 001229466699 101 South Tryon Street
Brunswick Brunswick, GA 31620 Charolette, North Carolina 28255
Holiday Inn Dothan 3053 Ross Clark Circle, SW SouthTrust Bank 67877267 P.O. Box 809
Dothan, AL 38301 Dothan, AL 36302
Hampton Inn Dothan 3071 Ross Clark Circle, SW SouthTrust Bank 87877265 P.O. Box 809
Dothan, AL 38301 Dothan, AL 36302
Holiday Inn 1844 Cedar Creek Rd. First Union National 2072685231343 200 Green Street
Fayetteville Fayetteville, NC 28303 Fayetteville, NC 23601
Holiday Inn 801 Cleveland Avenue SouthTrust Bank 67877309 P.O. Box 809
Express Gadsen Attalia AL 35954 Dothan, AL 36302
Residence Inn by 1401 S. Shackleford Road NationsBank 5043070528 P.O. Box 418906
Marriott Little Rock, AR 72211 Kansas City, MO 84141-8906
Lodgian Anaheim
Inc.
Lodgian Atlanta
Hillsborough
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Marriott Inn Atrium Way
Mount Laurel, New Jersey
Lodgian Ontario
Inc.
Marriott Inn Dominion Blvd.
Richmond, Virginia
Holiday Inn St. 1201 West Country Rd. Norwest Bank of Minnesota 3522097408 1220 West Country Road.E
Paul East St. Paul, MN 55112 Arden Hills, MN 55112
Northfield Hilton 6500 Crooks Rd. Comerica Inc 2401005612 4999 Crooks Rd.
Troy, Michigan 48098 Troy, MI 46098
Holiday Inn Austin 3401 South HI-35 Wells Fargo Bank 4169739945 P.O. Box 63020
South Austin, TX 78741 San Francisco, CA 94163
Five Seasons Hotel 350 1st Ave., NE Norwest Bank 3000438578 665 South 50th St.
Cedar Rapids, IA 53401 West Des Moines, IA 50265
Town Center 8727 Colesville Rd. First Union National Bank 2030000812952 10300 Little Patuxent Pkwy
Silver Spring, MD 20910 of MD Columbia, MD 21044
Columbia Hilton 5485 Twin Knolls Road First Union National Bank 2030000812855 10300 Little Patuxent Pkwy
Columbia, MD 21045 of MD Columbia, MD 21044
Holiday Inn Express 7151 Okeechobee Rd. NationsBank 003300673024 101 South Tryon Street
Ft. Pierce Fort Pierce, FL 34945 Charolette, North Carolina 28255
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Holiday Inn Grand 100 Whitehaven Rd. Marine Midland Bank 22000020834168900 8301 Niagara Blvd.
Island Grand Island, NY Niagara Falls, NY 14304
Four Points Hilton 35 South Forest Beach Dr. Nations Bank 1611925382 101 South Tryon Street
Head Hilton Head SC Charolette, North Carolina 28255
Servico Houston, MO NationsBank [ILLEGIBLE] P.O. Box 418906
Kansas City, MO 84141-8906
Holiday Inn 160 West 4th St. Key Bank 327700021055 202 N Main St.
Jamestown Jamestown, NY 14701 Jamestown, NY 14701
Holiday Inn Market 1955 Market Center Blvd. Wells Fargo Bank 747862087 1445 Ross Ave.
Center Dallas Dallas, TX 75207 Dallas, TX 76202
Holiday Inn 8777 Georgia Ave. First Union National Bank [ILLEGIBLE] 10305 Little Patuxent Pkwy
Washington D.C. Silver Spring, MD 20920 of MD Columbia, MD 21044
Quality Hotel 2261 North Causeway Blvd. Hibernia National Bank 812393008 P.O. Box 81640
Metairie Metairie, LA 70001 New Orleans, LA 70161
Clarion Niagara Third & Old Falls Streets Marine Midland 834159981 2419 Military Rd.
Falls P.O. Box 645 Niagara Falls, NY 14304
Niagara Falls, NY 14303
Holiday Inn 114 Buffalo Ave. Marine Midland 834159988 2419 Military Rd.
Niagara Falls Niagara Falls, NY 14303 Niagara Falls, NY 14304
Best Western 7401 Northwoods Blvd. First Union National of SC 2010000292006 7804 Rivers Avenue
Charleston North Charleston, SC 29416 N. Charlestown, SC 29406
International
Airport
Holiday Inn 7200 Plantation Rd. NationsBank 1171987399 101 South Tryon Street
University Mall Pensacola, FL 32504 Charolette, North Carolina 28255
Pensacola
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Holiday Inn 6501 Plantation Rd. First Union National [ILLEGIBLE] 1801 Palm Beach Lakes Blvd
Express Pensacola Pensacola, FL 32605 West Palm Beach, FL 33401
Holiday Inn 3405 Algonquin Rd. Bank One 616201570 311 S. Arlington Heights Rd.
Rolling Meadows Rolling Meadows, IL Arlington Heights, IL [ILLEGIBLE]
60008
Comfort Inn 2715 Long Lake Rd. Norwest Bank of MN 1000039153 2015 Third Avenue North
Roseville Roseville, MN 55113 Anoka, MN 66305
Sheraton West Palm 630 Clearwater Park Rd. NationsBank [ILLEGIBLE] 101 South Tryon Street
Beach West Palm Beach, FL 33406 Charolette, North Carolina 28255
Holiday Inn Select 1865 Huron Church Road Royal Bank of Canada [ILLEGIBLE] 1600 Huron Church Rd
Windsor Windsor, Ontario Canada Windsor, Ontario Canada N9C-2K2
Royal Bank of Canada 4002325 1600 Huron Church Rd
Windsor, Ontario Canada N9C-2K2
Holiday Inn Winter 1160 3rd Street SW NationsBank [ILLEGIBLE] 101 South Tryon Street
Haven Winter Haven, FL 33660 Charolette, North Carolina 28255
Holiday Inn 4900 Hatch Blvd Colonial Bank of NWA [ILLEGIBLE] [ILLEGIBLE]
Sheffield Sheffield, AL 35660 [ILLEGIBLE]
IMPAC Hotels I, LLC 3445 Peachtree Rd NE
Suite 700
Atlanta, GA 30326
Comfort Inn San 2635 N.E. Loop, 410 International Bank of [ILLEGIBLE] 130 East Travis St.
Antonio San Antonio, TX 78217 Commerce San Antonio, TX 78205
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Comfort Inn 2681 Dry Pocket Road BB&T of South Carolina [ILLEGIBLE] 3841 Pelham Road
Greenville Greer, SC 29650 Greenville, SC 28615
Courtyard Buckhead 3332 Peachtree Road NE SunTrust [ILLEGIBLE] Mail Code 5099
Atlanta, GA 30326 P.O. Box 4416
Atlanta, GA 30302
Courtyard Abilene 4350 Ridgemont Drive First National Bank of [ILLEGIBLE] P.O. Box 701
Abilene, TX 79606 Abilene Abilene, TX 79604
Courtyard Florence 46 Cavelier Blvd. Star Bank [ILLEGIBLE] 426 Walnut Street
Florence, KY 41042 Cincinnati, OH 45264-0999
Courtyard 1001 McClain Road The Bank of Bentonville [ILLEGIBLE] P.O. Box 1220
Bentonville Bentonville, AR 72712 Bentonville, AR 72712
DoubleTree Club 9461 Roosevelt Blvd. First Union Bank [ILLEGIBLE] 9133 Roosevelt Blvd.
Philadelphia Philadelphia, PA 19114 Philadelphia, PA 19114
DoubleTree Club 9700 Bluegrass Parkway Bank One-Kentucky [ILLEGIBLE] 450 E. Washington St.
Louisville Louisville, KY 40299 Indianapolis, IN 46277-0224
French Quarter 2144 Madison Avenue First Tennessee Bank [ILLEGIBLE] P.O. Box 64
Suites
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Memphis Memphis, TN 30104 Memphis, TN [ILLEGIBLE]
Holiday Inn 1309 St. Augustine Rd. Citizens Community Bank [ILLEGIBLE] 400 N. Valdosta Rd.
Valdosta Valdosta, GA 31601 Valdosta, GA 31601
Fairfield Inn 1311 St. Augustine Rd. Citizens Community Bank [ILLEGIBLE] 400 N. Valdosta Rd.
Valdosta Valdosta, GA 31601 Valdosta, GA 31601
Holiday Inn Select 4441 Hwy. 114 @ Esters Blvd. Wells Fargo Bank [ILLEGIBLE] 1445 Rose Ave.
Dallas Fort Worth Irving (Dallas), TX 75083 Dallas, TX 75202
Holiday Inn 1649 Montgomery Highway Regions Bank 03-0087-6437 P.O. Box 10247
Birmingham Birmingham, AL 35216 Birmingham, AL 35202-0247
Holiday Inn Suites 2265 Kingston Court SunTrust Bank [ILLEGIBLE] Mail Code 5099
Marietta Marietta, GA 30067 P.O. Box 4416
Atlanta, GA 30302
Holiday Inn 1801 N. Ocean Blvd. Wachovia Bank [ILLEGIBLE] P.O. Box 3098
Sunspree Surfside Beach, SC 29575 Winston-Salem, NC 27150-0025
Myrtle Beach
Holiday Inn 951 Murfreesboro Road First American National [ILLEGIBLE] NA 7201
Express Nashville Nashville, TN 37217 Bank 560 Metroplex DR.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Nashville, TN 37271
Holiday Inn St. 3551 Pennridge Drive Mercantile Bank 10110649-5 721 Locust St.
Louis West Bridgeton, MO 63044 St. Louis, MO 63101
Holiday Inn St. 4545 N. Lindbergh Boulevard Mercantile Bank 169052079-4 721 Locust St.
Louis North St. Louis, MO 63044 St. Louis, MO 63101
Holiday Inn Select 15471 Royalton Road Star Bank [ILLEGIBLE] 426 Walnut Street
Strongsville Cleveland, OH 44136 Cincinnati, OH 45264-0999
Super 8 Hazard 125 Village Lane Peoples Bank and Trust [ILLEGIBLE] P.O. Box 989
Hazard, KY 41701 Hazard, KY 41702
Super 8 Prestonburg 550 South US23 First Commonwealth Bank 351003401 First Commonwealth Bank
Prestonburg, KY 45853 Prestonburg, KY 41653
Courtyard Paducah 3835 Technology Drive Union Planters Bank 100-0666-1 P.O. Box 387
Paducah, KY 42001 Memphis, TN 38147-0387
Holiday Inn East 363 Roberts Street Bank of South Windsor 3311913012 280 Roberts Street
Hartford E. Hartford, CT 08106 East Hartford, CT [ILLEGIBLE]
Holiday Inn New 30 Whalley Avenue Bank of South Windsor [ILLEGIBLE] 1695 Ellington Rd.
Haven New Haven, CT 06511 South Windsor, CT 06974-2716
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Frederick Holiday 993 W. Patrick Street NationsBank [ILLEGIBLE] 6400 Security Blvd.
Inn Frederick, MD 21702 Baltimore, MD 21207
Belmont Holiday Inn 1800 Belmont Avenue NationsBank [ILLEGIBLE] 6400 Security Blvd.
Baltimore, MD 21244 Baltimore, MD 21207
Holiday Inn 334 Arsenal Road Corestates-First Union [ILLEGIBLE] [ILLEGIBLE] N. George St.
Arsenal Rd. York, PA 17402-1908 York, PA 17404
Holiday Inn 2200 Cromwell Bridge Road NationsBank [ILLEGIBLE] 6400 Security Blvd.
Cromwell Bridge Towson, MD 21288-2218 Baltimore, MD 21207
</TABLE>
<PAGE>
Exhibit A to the
Security Agreement
FORM OF SECURITY AGREEMENT SUPPLEMENT
[Date of Security Agreement Supplement]
- ----------------------------------,
as the Collateral Agent for the
Secured Parties referred to in the
Credit Agreement referred to below
- ----------------------------------
- ----------------------------------
- ----------------------------------
Attn:
-----------------------------
Lodgian Financing Corp.
Ladies and Gentlemen:
Reference is made to (i) the Credit Agreement dated as of July 23, 1999
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among Lodgian Financing Corp., a Delaware
corporation, as the Borrower, the Lender Parties party thereto, Morgan Stanley
Senior Funding, Inc., as collateral agent (together with any successor
collateral agent appointed pursuant to Article VIII of the Credit Agreement, the
"Collateral Agent"), and Morgan Stanley Senior Funding, Inc., as administrative
agent for the Lender Parties, and (ii) the Security Agreement dated July __,
1999 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the "Security Agreement") made by the Grantors from time to time
party thereto in favor of the Collateral Agent for the Secured Parties.
Capitalized terms not otherwise defined herein shall have the same meanings as
specified therefor in the Credit Agreement or the Security Agreement.
Section 1. Grant of Security. The undersigned hereby assigns and
pledges to the Collateral Agent for the benefit of the Secured Parties, and
hereby grants to the Collateral Agent for the benefit of the Secured Parties, a
lien on, and security interest in, all of its right, title and interest in and
to all of the Collateral of the undersigned, whether now owned or hereafter
acquired by the undersigned, wherever located and whether now or hereafter
existing, including, without limitation, the property and assets of the
undersigned set forth on the attached supplements to the Schedules to the
Security Agreement.
<PAGE>
Section 2. Security for Obligations. The pledge and assignment of,
and the grant of a lien on and security interest in, the Collateral by the
undersigned under this Security Agreement Supplement and the Security Agreement
secures the payment of all Obligations of the undersigned now or hereafter
existing under or in respect of the Loan Documents (including, without
limitation, any extensions, modifications, substitutions, amendments or renewals
of any or all of the foregoing Obligations), whether direct or indirect,
absolute or contingent, and whether for principal, reimbursement obligations,
interest, premiums, penalties, fees, indemnifications, contract causes of
action, costs, expenses or otherwise. Without limiting the generality of the
foregoing, this Security Agreement Supplement and the Security Agreement secures
the payment of all amounts that constitute part of the Secured Obligations and
that would be owed by the undersigned to any Secured Party under the Loan
Documents but for the fact that such Secured Obligations are unenforceable or
not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the undersigned or any Grantor.
Section 3. Supplements to Security Agreement Schedules. The
undersigned has attached hereto supplements to each of the Schedules to the
Security Agreement, and the undersigned hereby certifies, as of the date first
above written, that such supplements have been prepared by the undersigned in
substantially the form of the Schedules to the Security Agreement and are
complete and correct in all material respects.
Section 4. Representations and Warranties. The undersigned hereby
makes each representation and warranty set forth in Section 9 of the Security
Agreement (as supplemented by the attached supplements) to the same extent as
each other Grantor.
Section 5. Obligations Under the Security Agreement. The undersigned
hereby agrees, as of the date first above written, to be bound as a Grantor by
all of the terms and provisions of the Security Agreement to the same extent as
each of the other Grantors. The undersigned further agrees, as of the date first
above written, that each reference in the Security Agreement to an "Additional
Grantor" or a "Grantor" shall also mean and be a reference to the undersigned,
and each reference in any of the other Loan Documents to a "Grantor" or a "Loan
Party" shall also mean and be a reference to the undersigned.
<PAGE>
Section 6. Governing Law; Jurisdiction; Etc. This Security
Agreement Supplement shall be governed by and construed in accordance with
the laws of the State of New York.
Very truly yours,
[NAME OF ADDITIONAL GRANTOR]
By_______________________________
Title:
Address of principal place of
business and chief executive office
and for notices:
-----------------------
<PAGE>
Exhibit B to the
Security Agreement
FORM OF PLEDGED ACCOUNT LETTER
_______________, ____
[Name and address
of Pledged Account Bank]
[Name of Grantor]
Gentlemen/women:
Reference is made to the concentration account listed on Schedule I
hereto (such concentration or account being the "Pledged Account") maintained
with you by (the "Grantor"). Pursuant to the Security Agreement dated July 23,
1999 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the "Security Agreement"), the Grantor has granted to Morgan
Stanley Senior Funding, Inc., as Collateral Agent (together with any successor
collateral agent appointed pursuant to Article VIII of the Credit Agreement, the
"Collateral Agent") for the Secured Parties referred to in the Credit Agreement
dated as of July 23, 1999, a security interest in certain property of the
Grantor, including, among other things, the following (the "Account
Collateral"): the Pledged Account, all funds held therein and all certificates
and instruments, if any, from time to time representing or evidencing the
Pledged Account, all interest, dividends, distributions, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then existing Account
Collateral and all proceeds of any and all of the foregoing Account Collateral
and, to the extent not otherwise included, all (i) payments under insurance
(whether or not the Collateral Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Account Collateral and (ii) cash.
It is a condition to the continued maintenance of the Pledged Account with you
that you agree to this letter agreement.
By executing this letter agreement, you acknowledge notice of, and
consent to the grant of the lien on, and security interest in, and the pledge
and assignment of, the Account Collateral to the Collateral Agent for the
benefit of the Secured Parties and you confirm to the Collateral Agent that the
description of the Pledged Account set forth on Schedule I hereto is correct and
that you have not received any notice of any other lien on, security interest
in, pledge or assignment of, or other claim (other than that of the Grantor) on
the Pledged Account. Further, you hereby agree with the Collateral Agent that:
<PAGE>
(a) Notwithstanding anything to the contrary in any other agreement
relating to the Pledged Account, the Pledged Account is and will be
subject to the security interest of the Secured Parties in the Pledged
Account, will have the title set forth opposite the account number
therefor on Schedule I hereto and will be subject to written instructions
from an officer of the Collateral Agent.
(b) Unless and until the Collateral Agent shall deliver notice to you (a
"Direction Notice") directing you to no longer permit the Grantor to withdraw
funds from the Pledged Account (which notice shall be delivered only if an Event
of Default has occurred and is continuing under the Credit Agreement (as defined
in the Security Agreement)), the Grantor is authorized by the Collateral Agent
to withdraw funds credited to the Pledged Account. Upon delivery of a Direction
Notice by the Collateral Agent to you and until the Direction Notice is
withdrawn, you shall no longer follow instructions from the Grantor or any
person acting on behalf of the Grantor with respect to the Pledged Account and
shall instead take instructions solely from the Collateral Agent (including
instructions to withdraw and transfer funds from the Pledged Account).
You hereby represent and warrant that the person executing this
letter agreement on your behalf is duly authorized to do so.
No amendment or waiver of any provision of this letter agreement,
nor consent to any departures by you or the Grantor herefrom, shall be effective
unless the same shall be in writing as signed by you, the Grantor and the
Collateral Agent.
This letter agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of the Secured Parties and their
successors, transferees and assigns. You may terminate this letter agreement
upon thirty days' prior written notice to the Grantor and the Collateral Agent.
This letter agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of a signature page to this letter agreement by telecopier shall be effective as
delivery of an original executed counterpart of this letter agreement.
Please indicate your acknowledgment of and agreement to the
provisions of this letter agreement by signing in the appropriate space provided
below and returning this letter agreement to ________________, _______________,
__________, ________ ______, Telecopier No.: (212) ___-____, Attention:
________________. If you elect to deliver this letter agreement by telecopier,
please arrange for the executed original to follow by next-day courier.
This letter agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Very truly yours,
<PAGE>
[NAME OF GRANTOR]
By
Title:
[NAME OF COLLATERAL AGENT], as
Collateral Agent
By
Title:
Acknowledged and agreed to as of the date first above written:
[NAME OF PLEDGED ACCOUNT BANK]
By _________________________________
Title:
<PAGE>
Schedule I to the
Pledged Account Letter
Concentration Account Number Concentration Account Name
- ---------------------------- --------------------------
<PAGE>
Exhibit C to the
Security Agreement
FORM OF CONSENT AND AGREEMENT
The undersigned hereby (a) acknowledges notice of, and consents to
the terms and provisions of, the Security Agreement dated July 23, 1999 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Security Agreement", the terms defined therein being used herein as
therein defined) from ____________________ (the "Grantor") and certain other
grantors from time to time party thereto to Morgan Stanley Senior Funding, Inc.,
as Collateral Agent (the "Collateral Agent") for the Secured Parties referred to
therein, (ii) consents in all respects to the pledge and assignment to the
Collateral Agent of all of the Grantor's right, title and interest in, to and
under the Assigned Agreement (as defined below) pursuant to the Security
Agreement, (iii) acknowledges that the Grantor has provided it with notice of
the right of the Collateral Agent in the exercise of its rights and remedies
under the Security Agreement to make all demands, give all notices, take all
actions and exercise all rights of the Grantor under the Assigned Agreement, and
(iv) agrees with the Collateral Agent that:
(i) The undersigned will make all payments to be made by it under or
in connection with the __________ Agreement dated _______________, ____
(the "Assigned Agreement") between the undersigned and the Grantor
directly to the Collateral Account or otherwise in accordance with the
instructions of the Collateral Agent.
(ii) All payments referred to in paragraph (i) above shall be made
by the undersigned irrespective of, and without deduction for, any
counterclaim, defense, recoupment or set-off and shall be final, and the
undersigned will not seek to recover from any Secured Party for any reason
any such payment once made.
(iii) The Collateral Agent or its designee shall be entitled to
exercise any and all rights and remedies of the Grantor under the Assigned
Agreement in accordance with the terms of the Security Agreement, and the
undersigned shall comply in all respects with such exercise.
(iv) The undersigned will not, without the prior written consent of
the Collateral Agent, (A) cancel or terminate the Assigned Agreement or
consent to or accept any cancellation or termination thereof, or (B)
amend, amend and restate, supplement or otherwise modify the Assigned
Agreement, except, in each case, to the extent otherwise permitted under
the Credit Agreement referred to in the Security Agreement.
(v) In the event of a default by the Grantor in the performance of
any of its obligations under the Assigned Agreement, or upon the
occurrence or non-occurrence of any event or condition under the Assigned
Agreement which would immediately or with the passage of any applicable
grace period or the giving of notice, or both, enable the
<PAGE>
undersigned to terminate or suspend its obligations under the Assigned
Agreement, the undersigned shall not terminate the Assigned Agreement
until it first gives written notice thereof to the Collateral Agent and
permits the Grantor and the Collateral Agent the period of time afforded
to the Grantor under the Assigned Agreement to cure such default.
(vi) The undersigned shall deliver to the Collateral Agent,
concurrently with the delivery thereof to the Grantor, a copy of each
notice, request or demand given by the undersigned pursuant to the
Assigned Agreement.
(vii) Except as specifically provided in this Consent and Agreement,
neither the Collateral Agent nor any other Secured Party shall have any
liability or obligation under the Assigned Agreement as a result of this
Consent and Agreement, the Security Agreement or otherwise.
In order to induce the Lender Parties to make Advances and issue
Letters of Credit under the Credit Agreement and the Hedge Banks to enter into
Secured Hedge Agreements from time to time, the undersigned repeats and
reaffirms for the benefit of the Secured Parties the representations and
warranties made by it in the Assigned Agreement.
This Consent and Agreement shall be binding upon the undersigned and
its successors and assigns, and shall inure, together with the rights and
remedies of the Collateral Agent hereunder, to the benefit of the Secured
Parties and their successors, transferees and assigns. This Consent and
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
IN WITNESS WHEREOF, the undersigned has duly executed this Consent
and Agreement as of the date set opposite its name below.
Dated: _______________, ____ [NAME OF OBLIGOR]
By
Title:
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Amendment No. 1
to Form S-4 of our reports dated April 10, 1998, except for Note 9 as to
which the date is December 11, 1998 related to the financial statements of
Impac Hotel Group, L.L.C. which appear in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
September 3, 1999
