<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1998
REGISTRATION NO. 333-_____
REGISTRATION NO. 333-_____-01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
<TABLE>
<CAPTION>
SERVICO, INC. LODGIAN CAPITAL TRUST I
------------- -----------------------
<S> <C>
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
FLORIDA DELAWARE
------- --------
(State or other jurisdiction of incorporation or organization (State or other jurisdiction of incorporation or organization)
65-0350241 NONE
---------- ----
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
</TABLE>
1601 BELVEDERE ROAD
WEST PALM BEACH, FLORIDA 33406
(561) 689-9970
-------------------------------------------------------------------------
(ADDRESS OF REGISTRANT'S AND CO-REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES,
INCLUDING ZIP CODE)
---------------------------
<TABLE>
<CAPTION>
<S> <C>
DAVID BUDDEMEYER WITH A COPY TO:
CHIEF EXECUTIVE OFFICER - SERVICO, INC. ALISON W. MILLER, ESQ.
1601 BELVEDERE ROAD STEVEN D. RUBIN, ESQ.
WEST PALM BEACH, FLORIDA 33406 STEARNS WEAVER MILLER WEISSLER
(561) 689-9970 ALHADEFF & SITTERSON, P.A.
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING 150 WEST FLAGLER STREET, SUITE 2200
AREA CODE, OF AGENT FOR SERVICE) MIAMI, FLORIDA 33130
(305) 789-3200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC: From time to time after the
effective date of the Registration Statement.
---------------------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. | |
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.| |_________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. | |_________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. | |
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Convertible Redeemable Equity Structured Trust Securities 3,500,000 $21.50(1) $75,250,000(1)(2) $22,200
(CRESTS) of Lodgian Capital Trust I
- --------------------------------------------------------------------------------------------------------------------------------
7% Convertible Junior Subordinated Debentures of Servico --(3) --(3) --(3) --
- --------------------------------------------------------------------------------------------------------------------------------
Guarantee of CRESTS of Lodgian Capital Trust I by Servico, Inc. --(4) --(4) --(4) --
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value, of Servico, Inc. 8,170,050(5) --(5) --(5) --
================================================================================================================================
</TABLE>
<PAGE> 2
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act based upon the average of the
bid and ask price on October 13, 1998.
(2) Exclusive of accrued interest and distributions, if any.
(3) $175,000,000 in aggregate principal amount of 7% Convertible Junior
Subordinated Debentures due 2010 (the "Convertible Debentures") of Servico, Inc.
(the "Company") were issued and sold to Lodgian Capital Trust I (the "Trust") in
connection with the issuance by the Trust of 3,500,000 of its 7% Convertible
Redeemable Equity Structured Trust Securities (the "CRESTS"). The Convertible
Debentures may be distributed, under certain circumstances, to the holders of
the CRESTS for no additional consideration.
(4) Includes the rights of holders of the CRESTS under the CRESTS Guarantee. No
separate consideration will be received for the CRESTS Guarantee.
(5) Such number of shares of common stock ("Common Stock") of the Company are
issuable upon conversion of the CRESTS or the Convertible Debentures registered
hereunder. This Registration Statement also covers such shares as may be
issuable pursuant to anti-dilution adjustments.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MIGHT DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1998
PROSPECTUS
3,500,000 SHARES
LODGIAN CAPITAL TRUST I
7% CONVERTIBLE REDEEMABLE EQUITY STRUCTURED TRUST SECURITIESSM ("CRESTS(SM)")
(LIQUIDATION AMOUNT $50 PER CRESTS)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
AND CONVERTIBLE INTO THE COMMON STOCK OF
SERVICO, INC.
This Prospectus relates to the offer and sale from time to time by
certain holders named herein or by their transferees, pledgees, donees or their
successors (collectively, the "Selling Shareholders") of 7% Convertible
Redeemable Equity Structured Securities (the "CRESTS") of Lodgian Capital Trust
I, a statutory business trust formed under the laws of the State of Delaware
(the "Issuer" or the "Trust"), and the shares of the common stock, par value
$.01 per share ("Common Stock"), of Servico, Inc., a Florida corporation
("Servico" or the "Company"), issuable upon conversion of the CRESTS. The CRESTS
represent undivided beneficial ownership interests in the Trust and the assets
of the Trust. The CRESTS were issued and sold (the "Original Offering") on June
15, 1998 to the Initial Purchaser (as defined herein) and were simultaneously
sold by the Initial Purchaser in transactions exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
in the United States to persons reasonably believed by the Initial Purchaser to
be qualified institutional buyers in reliance on Rule 144A under the Securities
Act. The Company directly or indirectly owns all of the common securities issued
by the Issuer (the "Common Securities" and together with the CRESTS, the "Trust
Securities"). The Issuer was formed for the sole purpose of issuing the Trust
Securities and using the proceeds thereof to purchase from the Company its 7%
Convertible Debentures due 2010 (the "Convertible Debentures") having the terms
described herein. The holders of CRESTS will have a preference with respect to
cash distributions and amounts payable upon liquidation, redemption or otherwise
over the holders of the Common Securities of the Issuer. The CRESTS are
designated for trading in the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") market. The Common Stock is listed under the
symbol "SER" on the New York Stock Exchange ("NYSE"). On October 14, 1998, the
last reported sale price of the Common Stock on the NYSE was $3.80078125 per
share.
The Selling Shareholders may from time to time offer and sell all or a
portion of the CRESTS, the Convertible Debentures and the Common Stock issuable
upon conversion of the CRESTS (the "Offered Securities") pursuant to this
Prospectus. The Selling Shareholders may sell the Offered Securities from time
to time directly to purchasers or, alternatively, through underwriters,
broker-dealers or agents, in one or more transactions, at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. See "Plan of Distribution" and
"Selling Shareholders." If required, the names of any other Selling
Shareholders, agents or underwriters involved in the sale of the Offered
Securities and the applicable agent's commission, dealer's purchase price or
underwriter's discount, if any, will be set forth in an accompanying supplement
to this Prospectus (a "Prospectus Supplement"). The Selling Shareholders will
receive all of the proceeds from the sale of the Offered Securities and will pay
all underwriting discounts and selling commissions, if any, applicable to any
such sale. The Company is responsible for payment of all other expenses incident
to the offer and sale of the Offered Securities. The Selling Shareholders and
any broker-dealers, agents or underwriters which participate in the distribution
of the Offered Securities may be deemed to be "underwriters" within the meaning
of the Securities Act, and any commission received by them and any profit on the
resale of the Offered Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR TO AN INVESTMENT IN THE CRESTS.
- ----------------
"CONVERTIBLE REDEEMABLE EQUITY STRUCTURED TRUST SECURITIESSM" AND "CRESTSSM" ARE
SERVICE MARKS OWNED BY NATIONSBANC MONTGOMERY SECURITIES LLC.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE OFFERED SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is October ___, 1998.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "SEC") under the Exchange Act.
Such reports, proxy and information statements and other information filed by
the Company with the SEC can be inspected and copied at the Public Reference
Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained at prescribed rates by writing to the SEC, Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains a Web site that contains reports, proxy and information statements and
other materials regarding issuers that file electronically with the SEC. This
Web site can be accessed at http://www.sec.gov. Such reports, proxy and
information statements and other information can also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
The Company has filed with the SEC a Registration Statement on Form S-3
(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 further
information with respect to the Company 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC by the Company pursuant to
the Exchange Act (File No. 1-11342) are incorporated herein by reference and
made a part of this Prospectus:
1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, filed with the SEC on March 31, 1998, as
amended on Form 10-K/A filed with the SEC on June 8, 1998;
2) the Definitive Joint Proxy Statement/Prospectus of the Company
and Impac dated July 23, 1998, filed with the SEC on July 24,
1998;
3) the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998, filed with the SEC on May 15,
1998;
4) the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998, filed with the SEC on August 14,
1998;
5) the Company's Current Report on Form 8-K dated March 20, 1998,
filed with the SEC on June 9, 1998;
6) the Company's Current Report on Form 8-K dated September 16,
1998, filed with the SEC on September 17, 1998; and
7) the description of the Company's Common Stock contained in the
Company's Form 8-A dated June 12, 1997, filed with the SEC on
June 12. 1997.
All documents filed by the Company pursuant to Section 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 Warren M. Knight, Vice President-Finance, Servico, Inc., 1601
Belvedere Road, West Palm Beach, Florida 33406, telephone: (561) 689-9970.
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
-i-
<PAGE> 5
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.
-ii-
<PAGE> 6
SUMMARY
THE COMPANY AND THE TRUST PREPARED THIS SUMMARY TO COMPLY WITH THE
"PLAIN ENGLISH" REQUIREMENTS OF THE SEC. IT HIGHLIGHTS SELECTED INFORMATION TO
ASSIST YOU IN GETTING AN INITIAL OVERVIEW BUT DOES NOT CONTAIN ALL THE
INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO
UNDERSTAND ALL THE TERMS OF THE OFFERED SECURITIES, READ CAREFULLY THE ENTIRE
PROSPECTUS. THE FOLLOWING TERMS ARE USED IN THIS PROSPECTUS WHICH WE WOULD LIKE
TO DEFINE: (I) THE "INDENTURE" MEANS THE INDENTURE, DATED AS OF JUNE 17, 1998,
BETWEEN THE COMPANY AND WILMINGTON TRUST COMPANY, AS TRUSTEE (THE "DEBENTURE
TRUSTEE"), AS AMENDED AND SUPPLEMENTED BY THE SUPPLEMENTAL INDENTURE DATED AS OF
JUNE 17, 1998 AND (II) THE "DECLARATION" MEANS THE AMENDED AND RESTATED
DECLARATION OF TRUST RELATING TO THE TRUST AMONG THE COMPANY, AS SPONSOR,
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE (THE "PROPERTY TRUSTEE") AND AS
DELAWARE TRUSTEE (THE "DELAWARE TRUSTEE"), AND THE REGULAR TRUSTEES NAMED
THEREIN (COLLECTIVELY WITH THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE, THE
"TRUSTEES"). 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.
THE COMPANY
Servico is one of the largest owners and operators of full-service
hotels in the United States. Servico currently owns or manages 89 hotels
containing approximately 17,937 rooms located in 24 states and Canada. Servico's
hotels are primarily mid-sized properties, with an average of approximately 202
rooms per hotel, and are primarily located in secondary metropolitan markets.
Servico's full-service hotels offer food and beverage services and meeting and
banquet facilities. Servico's hotels include 76 wholly owned hotels, 11
partially owned hotels and two managed hotels. Fourteen of the hotels are
subject to long-term ground or building leases. Substantially all of Servico's
hotels are affiliated with nationally recognized hospitality franchises,
including Holiday Inn, Crowne Plaza, Hilton, Omni, Radisson, Sheraton and
Westin. Servico operates 59 hotels under franchise agreements with Holiday Inn,
making Servico the second largest Holiday Inn franchisee in the United States.
On July 22, 1998, Servico entered into an Amended and Restated Merger
Agreement relating to a merger with Impac (the "Merger"), which was further
amended on September 16, 1998. Impac is a private hotel ownership, management
and development company which owns, manages or has under development, 55 hotels
with approximately 9,287 rooms in 24 states. In connection with the proposed
Merger, Servico shareholders, the unitholders of Impac and the shareholders of
certain companies affiliated with Impac will become the owners of a combined
company to be called Lodgian, Inc. ("Lodgian"). Upon completion of the Merger,
Lodgian will own or manage approximately 140 hotels, including six hotels under
development, with approximately 26,698 rooms in 35 states and Canada. Lodgian
will be one of the largest independent, multi-brand owners and operators of
hotels in the United States. The proposed Merger is expected to close in the
fourth quarter of 1998, subject to customary conditions. The shareholders of
Servico and the unitholders of Impac have approved the Merger. The Merger will
be accounted for using the purchase method of accounting. See "The Impac/Servico
Merger."
THE TRUST
The Trust is a statutory business trust formed under the Delaware
Business Trust Act, as amended (the "Trust Act"). The Trust used the proceeds
derived from the issuance of the CRESTS to purchase the Convertible Debentures.
The assets of the Trust consist solely of the Convertible Debentures; thus,
payments under the Convertible Debentures will be the sole revenue of the Trust.
The Trust was formed for the exclusive purpose of (i) issuing and selling the
Trust Securities representing a beneficial ownership in the Trust, (ii)
investing the gross proceeds from such sales in the Convertible Debentures and
(iii) engaging in only those other activities necessary or incidental thereto.
The principal executive office of the Company and the Trust is located
at 1601 Belvedere Road, West Palm Beach, Florida 33406, telephone: (561)
689-9970.
-1-
<PAGE> 7
SUMMARY TERMS OF THE OFFERED SECURITIES
CRESTS and Common
Securities Generally........... The CRESTS represent undivided beneficial
ownership interests in the Trust. The Company
owns all of the Common Securities of the
Trust. The Common Securities and the CRESTS
rank equally and payments are made on each
pro rata; however, in certain circumstances
(e.g., a default with respect to the
Convertible Debentures), the holders of the
CRESTS are entitled to be paid distributions
on the CRESTS and other payments in the event
the CRESTS are redeemed or the Trust is
liquidated prior to any similar payments on
the Common Securities of the Trust. See
"Description of the CRESTS -- Subordination
of Common Securities."
Distributions on CRESTS......... The holders of the CRESTS receive
distributions on the CRESTS at a fixed annual
rate of $3.50 per CRESTS, subject to increase
if certain events occur. Distributions are
paid quarterly on each March 31, June 30,
September 30 and December 31 of each year.
Payment of distributions began on September
30, 1998. The distribution rate and payment
dates for the CRESTS correspond to the
interest rate and payment dates on the
Convertible Debentures, which are the sole
assets of the Trust. See "Description of the
CRESTS -- Distributions."
Convertible Debentures.......... The Trust invested the proceeds from the sale
of the CRESTS into an equivalent amount of
Convertible Debentures of the Company. The
Convertible Debentures will mature on June
30, 2010, unless previously redeemed. In the
event the Merger is completed, Lodgian will
guarantee the payments of the principal and
interest on the Convertible Debentures.
The Convertible Debentures are subordinate
and junior in right of payment to all Senior
Indebtedness of the Company. See "Risk
Factors - Risks Relating to the CRESTS -
Ranking of Subordinated Obligations Under the
Guarantee and the Convertible Debentures" and
"Description of the Convertible Debentures -
Subordination."
Conversion into Common Stock.... The CRESTS are convertible, at the option of
the holders, into shares of Common Stock at a
price equal to $21.42 per share of Common
Stock (or 2.3343 shares of Common Stock per
CRESTS). The conversion price and ratio are
subject to adjustment upon certain events. A
holder's right to convert the CRESTS
terminates on June 28, 2010 or two days prior
to the date the Trust redeems the CRESTS
(unless the Property Trustee defaults in
making such redemption payments). If the
Merger is completed, each CRESTS will become
convertible into shares of Lodgian common
stock at the same price, on the same terms
and subject to the same adjustments described
herein. On October 14, 1998, the last
reported sale price of Common Stock on the
NYSE was $3.80078125 per share. See
"Description of the CRESTS - Conversion
Rights."
Redemption...................... 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 such
Convertible Debentures plus accumulated and
unpaid distributions to the date of
redemption. The Company has the option to
redeem the Convertible Debentures in whole or
in part for cash on and after 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 and
declining annually to 100% on June 30, 2008,
plus accrued and unpaid interest to the
redemption date. The Company may only
exercise this option if the redemption price
(excluding any accrued and unpaid interest)
is paid solely out of the sale proceeds from
equity securities of the Company.
-2-
<PAGE> 8
The Company has the option to redeem the
Convertible Debentures in whole or in part
for cash on and after July 3, 2002 at a price
equal to 100% of the aggregate principal
amount of the Convertible Debentures to be
redeemed (together with accrued and unpaid
interest). The Company may exercise this
option by notice given on any date only if
(1) for any 20 trading days within any 30
consecutive trading days ending on such
notice date, the closing price of the Common
Stock on the NYSE exceeds $25.71 per share
(subject to adjustments in certain
circumstances) and (2) on or prior to the
date the notice of redemption is given, the
Company has entered into an agreement with a
nationally recognized investment banking firm
to issue and sell at least the same number of
shares of Common Stock as are issuable upon
conversion of the unconverted Convertible
Debentures. See "Description of the CRESTS --
Redemption" and "Description of the
Convertible Debentures -- Optional
Redemption."
Repurchase Upon Non-Completion
of Merger.................... If the Merger Agreement is terminated or the
Merger is not completed by December 31, 1998,
holders of the CRESTS may require the Company
to repurchase the Convertible Debentures for
cash in an aggregate principal amount equal
to the aggregate liquidation amount of the
CRESTS that a holder elects to cause the
Trust to repurchase, at a price equal to 101%
of the aggregate principal amount of such
repurchased Convertible Debentures (plus
accrued and unpaid interest to the date of
repurchase). See "Description of CRESTS -
Repurchase at the Option of Holders Upon
Non-Completion of Merger."
Guarantee....................... The Company has guaranteed, to the extent the
Trust has available funds, payments of
distributions on the CRESTS and payments upon
liquidation of the Trust or the redemption of
the CRESTS. If the Company does not make
principal or interest payments on the
Convertible Debentures, the Trust will have
insufficient funds to pay distributions due
on the CRESTS, in which event the Guarantee
will not apply to such distributions until
the Trust has sufficient available funds. The
Company's obligations under the Guarantee,
taken together with its obligations under the
Declaration, the Convertible Debentures and
the Indenture are a full and unconditional
guarantee of the Trust's obligations under
the CRESTS. See "Relationship Among the
CRESTS, the Convertible Debentures and the
Guarantee - Full and Unconditional
Guarantee." The Company's obligations to
perform its obligations under the Guarantee
are subordinate to all liabilities of the
Company and rank equally with the most senior
preferred stock which the Company may issue
and with any guarantee which the Company may
issue in respect of any preferred stock of
any of its affiliates. See "Risk Factors
-Risk Factors Relating to the CRESTS -
Ranking of Subordinated Obligations Under the
Guarantee and the Convertible Debentures" and
"Descriptions of the Guarantee."
Right to Defer Interest......... The Company may defer payments of interest on
the Convertible Debentures by extending the
interest payment period on the Convertible
Debentures. 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 such extended period; however, such
distributions would continue to accumulate at
the applicable annual rate, compounded
quarterly. Prior to such extension period
terminating, the Company may further defer
payments of interest by extending the
interest payment period. However, the total
extension period (together with all
extensions) may not exceed 20 consecutive
quarterly periods or extend beyond June 30,
2010. Upon any extension period terminating
and
-3-
<PAGE> 9
the Company paying all amounts due, the
Company may select a new extension period,
subject to the above requirements. If the
Company defers its interest payments, then,
subject to limited exceptions, it may not,
and will not permit its subsidiaries to, (i)
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 (ii) 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. During any extension period,
holders of the CRESTS will be required to
continue to include their pro rata share of
the stated interest in their gross income as
original issue discount ("OID") for United
States federal income tax purposes, prior to
receiving cash payments attributable to such
deferred interest. See "Description of the
Convertible Debentures -- Option to Extend
Interest Payment Period" and "Certain United
States Federal Income Tax Consequences --
Original Issue Discount."
Special Event................... Current U.S. tax laws provide that the Trust
is not subject to United States federal
income tax with respect to income received or
accrued on the Convertible Debentures, the
Company can deduct the interest it pays on
the Convertible Debentures and the Trust is
not subject to more than a de minimis amount
of other taxes or other governmental charges.
Additionally, the Trust is not considered an
"investment company" that is required to
register under the Investment Company Act of
1940. Upon an unfavorable change in any of
these laws (collectively, a "Special Event"),
then the Company may, if certain conditions
are met, dissolve the Trust and cause the
Trust to distribute the Convertible
Debentures in exchange for the CRESTS.
Alternatively, the Company may redeem all the
Convertible Debentures within 90 days
following the occurrence of such Special
Event for cash at a redemption price equal to
100% of the aggregate principal amount of the
Convertible Debentures to be redeemed
(together with accrued and unpaid interest to
the redemption date), and cause a mandatory
redemption of the CRESTS. See "Description of
the CRESTS -- Redemption -- Special Event
Distribution or Redemption of Convertible
Debentures."
Liquidation of the Trust....... If the Trust liquidates, after satisfaction
of the claims of the Trust's creditors, if
any, the holders of the CRESTS will receive a
liquidation amount of $50 per CRESTS (plus
accumulated and unpaid distributions on such
CRESTS to the date of payment). The Trust may
elect to pay this $50 liquidation amount by
distributing an equivalent amount of
Convertible Debentures in exchange for the
CRESTS as described above. If the Trust has
insufficient assets available to pay the full
liquidation amount, then the Trust will pay
any available amounts on a pro rata basis to
all the holders of the CRESTS. The holders of
the Common Securities are entitled to receive
distributions upon any such liquidation pro
rata with the holders of the CRESTS, unless a
default with respect to the Convertible
Debentures occurs and is continuing. In that
event, the CRESTS will have a priority over
the Common Securities. See "Description of
the CRESTS -- Liquidation Distribution Upon
Dissolution."
Voting Rights................... The holders of the CRESTS have limited voting
rights and are not entitled to vote to
appoint, remove or replace, or to increase or
decrease the number of, the Trustees who
conduct the Trust's business and affairs.
Such voting rights are vested exclusively in
the Company, as holder of the Common
Securities of the Trust. See "Description of
the CRESTS -- Voting Rights; Amendment of
Declaration."
ERISA Matters................... Generally, employee benefit plans that are
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
-4-
<PAGE> 10
or section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"), as well as
individual retirement accounts and Keogh
plans subject to Section 4975 of the Code
("Plans"), may purchase CRESTS, subject to
the investing fiduciary's determination that
the investment in CRESTS satisfies ERISA's
fiduciary standards and other requirements
applicable to investments by the Plans. See
"ERISA Considerations."
Use of Proceeds................. The Selling Shareholders will receive all of
the proceeds from the sale of the Offered
Securities. Neither the Company nor the
Issuer will receive any proceeds from the
sale of the Offered Securities. See "Use of
Proceeds."
RISK FACTORS
An investment in the CRESTS involves various risks, and investors
should carefully consider the matters discussed under "Risk Factors" prior to
making an investment in the CRESTS.
-5-
<PAGE> 11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included and incorporated by reference in this
Prospectus may include "forward-looking" information, as defined in the Private
Securities Litigation Reform Act of 1995 (the "Act"), which is subject to risks
and uncertainties. Forward-looking information is information other than
historical information or statements of current condition. Some forward-looking
statements may be identified by use of terms such as "believes", "anticipates",
"intends", or "expects". These forward-looking statements generally relate to
the plans and objectives of the Company for future operations and are based upon
management's reasonable estimate of future results or trends. Prospective
purchasers of the CRESTS should note that many factors, some of which are
discussed elsewhere in this document and in the documents that are incorporated
by reference, could cause the actual results of the Company to differ materially
from the anticipated results set forth in or contemplated by such
forward-looking statements. You are cautioned that such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors may affect
the Company's operations, markets and services. Such factors include, among
others, the following: general economic and business conditions, including
changes in local real estate markets; changes in interest rates and in the
availability, cost and terms of financing; rates of inflation and the
performance of financial markets; changes in domestic and foreign laws,
regulations and taxes; the significant levels of indebtedness of the Company and
the Company's ability to service such indebtedness or to refinance such
indebtedness and to satisfy the financial covenants required by outstanding
indebtedness; integration of the operations of the Company and Impac in the
proposed Merger, including the failure to realize synergies or the benefits from
the transaction; competition; the loss of any franchises; availability of
additional capital to support growth; construction and renovation cost overruns
and delays; seasonal fluctuations; overbuilding in the hotel industry; a change
in the level of tourism or business related travel; changes in business strategy
or development plans; and other factors discussed under "Risk Factors" or
elsewhere herein or in the documents incorporated by reference in this
Prospectus. The Company does not undertake, and the Act specifically relieves
the Company from, any obligation to update any forward-looking statements.
-6-
<PAGE> 12
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET
FORTH BELOW, IN ADDITION TO THE OTHER INFORMATION APPEARING IN OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS. IN ADDITION, BECAUSE HOLDERS OF THE CRESTS MAY
RECEIVE CONVERTIBLE DEBENTURES IN EXCHANGE FOR THEIR CRESTS UPON LIQUIDATION OF
THE TRUST, PROSPECTIVE PURCHASERS OF THE CRESTS ARE ALSO MAKING AN INVESTMENT
DECISION WITH REGARD TO THE CONVERTIBLE DEBENTURES AND SHOULD CAREFULLY REVIEW
ALL THE INFORMATION REGARDING THE CONVERTIBLE DEBENTURES CONTAINED HEREIN.
RISK FACTORS RELATING TO THE COMPANY
SIGNIFICANT AMOUNT OF DEBT
A significant number of the Company's hotels and properties are
subject to mortgage financing, which at June 30, 1998, totaled approximately
$281.4 million. At June 30, 1998, the Company's ratio of earnings to fixed
charges was 1.97:1. The Company's leverage poses certain risks to future
operations, including the risk that sufficient cash flow will not be generated
to service the indebtedness; that additional financing or refinancing may be
unavailable in the future; that, to the extent the Company is significantly more
leveraged than its competitors, the Company may be placed at a competitive
disadvantage; and that the ability to respond to market conditions and other
factors may be adversely affected by such high level of debt. The Company's
ability to service its debt will depend on its future performance, which, in
turn, will largely depend on prevailing economic and competitive conditions and
other specific factors, many of which are beyond its control.
TERMS OF INDEBTEDNESS WHICH INCLUDE VARIABLE RATES AND PREPAYMENT PENALTIES
The Company's indebtedness bears interest at both fixed and variable
rates. To the extent that the Company has or incurs additional debt bearing
interest at variable rates, economic conditions could result in increased debt
service requirements and could reduce the amount of cash available for other
corporate purposes.
CROSS DEFAULTS AND CORPORATE GUARANTEES
Approximately $125.8 million of the outstanding financing of the
Company's subsidiaries is guaranteed by the Company, excluding amounts
guaranteed from time to time in connection with the construction or renovation
of hotels. Each of the Company's guarantees of mortgage financing generally
provides for direct recourse by the lender without requiring the lender to seek
recourse against either the applicable subsidiary or the hotel property securing
the mortgage financing. As a consequence, if payments under mortgage financing
guaranteed by the Company are not timely made, the Company may be required to
make payments in accordance with its guarantees.
Additionally, certain of the mortgages and related loan documents
evidencing the indebtedness of the Company contain provisions which, among other
things, cross-collateralize and cross-default each of the mortgages granted by
the same borrower, prohibit or limit prepayment during certain early years,
impose prepayment penalties during certain later years, restrict the ability to
utilize the cash generated by the hotels if the hotels fail to meet certain
financial covenants, and in certain events may accelerate the payment of each of
the loans.
NO LIMIT ON ADDITIONAL DEBT
Neither the Company's Articles of Incorporation nor its Bylaws limits
the amount of indebtedness that the Company may incur. Subject to limitations in
its debt instruments, the Company may incur additional indebtedness in the
future, including secured indebtedness and indebtedness for acquisitions,
capital expenditures, renovations and other corporate purposes. Substantial
indebtedness could increase the Company's vulnerability to general economic and
lodging industry conditions (including increases in interest rates) and could
limit the Company's ability to obtain additional financing in the future and to
take advantage of significant business opportunities that may arise. All of the
indebtedness is, and will likely continue to be, secured by mortgages on all, or
substantially all, of the hotels, and by the equity of subsidiaries. The Company
may not in the future be able to meet its debt service obligations and if it
cannot, there is a risk of loss of some or all of its assets, including hotels,
to foreclosure. Further, adverse economic conditions could cause the terms on
which borrowings become available to be unfavorable. In such circumstances, if
additional capital is required to repay indebtedness in accordance with its
terms or otherwise, it may be necessary to liquidate one or more investments in
hotels at times which may not permit realization of the maximum return on such
investments.
RISKS ASSOCIATED WITH EXPANSION
UNAVAILABILITY OF ADDITIONAL CAPITAL TO SUPPORT GROWTH. As part of the
Company's business strategy, the Company intends to pursue continued growth
through the identification, acquisition, repositioning and renovation of
additional hotel properties. In order to pursue this strategy, the Company will
be required to obtain additional capital in the future to meet its expansion
plans. Capital may be raised by the issuance of additional equity or the
incurrence of indebtedness. In addition, in appropriate situations, the Company
may seek financing from other sources or enter into joint ventures and other
collaborative arrangements in connection with the acquisition of hotel
properties. The Company may not be successful in
-7-
<PAGE> 13
obtaining additional capital in a timely manner, on favorable terms or at all.
Insufficient capital may cause the Company to delay, scale back or abandon some
or all of its property acquisition plans or opportunities.
COMPETITION FOR ACQUISITIONS. The Company will compete for the
acquisition of hotels with numerous entities, some of which have greater
financial resources or are less leveraged than the Company. The recent economic
recovery in the lodging industry and the resulting increase in funds available
for hotel acquisitions has attracted additional investors to enter the hotel
acquisition market, which in turn has caused the cost of hotel acquisitions to
increase and the number of attractive hotel acquisition opportunities to
decrease. To successfully implement its growth strategy, the Company must be
able to continue to successfully acquire hotels on attractive terms and to
integrate the acquired hotels into its existing operations. The failure of the
Company to consolidate the management and operations and integrate the systems
and procedures of the acquired hotels into its operations in a timely and
profitable manner could have a material adverse effect on the Company's
business, financial condition or results of operations. There can be no
assurance that the Company will be able to achieve operating results in its
newly acquired hotels comparable to the historical performance of its hotels.
DELAYS IN COMPLETION OR UNANTICIPATED COSTS ASSOCIATED WITH DEVELOPMENT AND
RENOVATION OF PROPERTIES
The Company is involved in the renovation and development of hotels as
contemplated by its business plan or as may be required by its franchisors. The
development and renovation of hotels involves all of the risks associated with
the construction and renovation of real property, cost overruns and delays
caused by required regulatory compliance, inclement weather, labor or material
shortages and the unavailability of construction and permanent financing. Such
risks also include delays or the inability to obtain necessary zoning,
accessibility of utilities necessary to develop the property or expand
operations, availability of permits, approvals, or licenses necessary to develop
or renovate the property, as well as risks related to the expenses and delays
associated with the abatement or removal of environmental wastes or hazards. Any
unanticipated delays or expenses in connection with the development or
renovation of hotels could have a material adverse effect on the Company's
business, financial condition or results of operations.
ILLIQUIDITY AND POSSIBLE DECLINES IN VALUE OF REAL ESTATE
The Company is subject to varying degrees of risk generally incident to
the ownership of real estate. These risks include, among other things, changes
in national, regional and local economic conditions, changes in local real
estate market conditions, changes in interest rates and in the availability,
cost and terms of financing, the potential for uninsured casualty and other
losses, the impact of present or future environmental legislation and adverse
changes in zoning laws and other regulations. Many of these risks are beyond the
control of the Company. In addition, real estate investments are relatively
illiquid, resulting in a limited ability of such companies to vary their
portfolio of hotels or motels in response to changes in economic and other
conditions. The market value of any one of, or all of, the properties owned by
the Company may decrease in the future. Moreover, there can be no assurance that
the Company will be able to dispose of an investment when it finds dispositions
advantageous or necessary or that the sales price of any disposition will recoup
or exceed the amount of the Company's investment in its properties.
LOSS OF FLEXIBILITY OF OWNERSHIP OF REAL ESTATE WITH OTHERS
Ten of the hotels owned by the Company are owned in partnerships with
other parties. The Company does not have sole control over decisions regarding
sale and refinancing of these hotels. In addition, the Company's investments in
these joint ventures may, under certain circumstances, involve risks not
otherwise present in property ownership, including (i) the Company's partner in
a joint venture may become bankrupt, (ii) buy/sell rights that exist with
respect to certain of such hotels may result in the disposition of the property
and (iii) the Company's partner may have economic or other business interests or
goals that are inconsistent with the business interests or goals of the Company,
and that such partner(s) may be in a position to veto actions in a manner which
may be inconsistent with the Company's objectives or policies.
LODGING INDUSTRY RISKS
Risks generally inherent in investments in hotel facilities may cause
operating results for hotels to vary more than for investments in other types of
properties. These factors include the following:
NO ASSURANCE OF PROFITABILITY. The Company is subject to risks
generally incident to the lodging industry. Cash flow will vary based on
seasonal fluctuations and individual property performance which in turn is
impacted by changes in both general and local economic conditions. Further,
periodic over-building in the hotel industry or over-building in a specific
market; and competition from existing hotels, motels and recreational properties
has and may in the future make it difficult to maintain hotel occupancy levels
and room rates. Additionally, changes in levels of tourism or business-related
travel and changes in travel patterns will impact hotel performance. Labor
unavailability and disruptions could increase costs if significant in scope and
could make it impossible to operate a hotel, which could result in a loss of a
property's customer base. There is also a recurring need for renovation,
refurbishment and improvement of hotel properties (including furniture, fixtures
and equipment so as to attract customers and maintain franchises) and this
results in a continuing need for funds available for this purpose. The operation
of hotels also involves required compliance with governmental regulations which
influence or determine wages, prices, interest rates, construction procedures
and costs. Hotel operations could also be negatively impacted
-8-
<PAGE> 14
by losses due to personal injuries, fire, earthquake, collapse or structural
defects and the application of health and beverage laws and other factors. Many
of the factors which could impact operations are beyond the control of the
Company. In addition, due to the level of fixed costs required to operate
full-service hotels, certain significant expenditures necessary for the
operation of hotels generally cannot be reduced when circumstances cause a
reduction in revenue.
COMPETITION FOR CUSTOMERS. The hotel industry is highly competitive in
nature. While there is no single competitor or small group of competitors that
are dominant in the industry, competition within the industry has recently
resulted in consolidations and other ownership changes among major hotel
companies. The Company's hotels generally operate in areas that contain numerous
other competitive lodging facilities, some of which have greater financial
resources or are less leveraged than the Company. The Company competes with such
facilities on various bases, including room rates and quality, brand name
recognition, location and other services and amenities offered. New or existing
competitors could significantly lower rates or offer greater conveniences,
services or amenities or significantly expand, improve or introduce new
facilities in markets in which the Company's hotels compete, thereby adversely
affecting the Company's operations.
MAINTENANCE AND REFURBISHMENT EXPENSES. For hotels to remain
competitive, they must be maintained and refurbished on an ongoing basis and
these renovations and refurbishments increase the need for funds for capital
improvements (whether from reserves, current cash flow or financing). Moreover,
operating revenues may decrease as facilities are removed from service from time
to time during such renovations. See "Risk Factors--Risk Factors Relating to the
Company -- Delays in Completion or Unanticipated Costs Associated with
Development and Renovation of Properties" above.
LIABILITY AND UNAVAILABILITY OR INCREASED COSTS OF INSURANCE. Hotels
have extensive assets, require more employees, rely more on suppliers and serve
more customers than many other types of real estate properties. Hotels are also
subject in certain states to dram shop statutes which may give an injured person
the right to recover damages from any establishment which wrongfully served
alcoholic beverages to the person who, while intoxicated, caused the injury. As
a result, hotels may have greater exposure to liability for, among other things,
theft of property and other casualty and property loss, labor difficulties and
personal injuries. In this respect, many businesses, including those in the
lodging industry, have experienced recent increases in the cost of, and
contraction in the availability of, insurance, resulting in cost escalation and
reductions in amounts of coverage available. The continuation of this trend
could render certain types of desired coverage unavailable with the attendant
possibility that certain claims may exceed coverage.
SEASONAL FLUCTUATIONS IN OPERATING RESULTS. The hotel industry is
seasonal in nature. Generally, hotel revenues are greater in the second and
third quarters than in the first and fourth quarters. This seasonality can be
expected to cause quarterly fluctuations in the revenues of the Company.
Quarterly earnings also may be adversely affected by events beyond the Company's
control, such as extreme weather conditions, economic factors and other
considerations affecting travel. Poor weather conditions will generally result
in decreased revenues at the affected hotel.
INCREASING COSTS AND DECREASED PROFITABILITY ASSOCIATED WITH INFLATION.
Inflationary pressures could have the effect of increasing operating expenses,
including labor and energy costs (and, indirectly, property taxes) above
expected levels at a time when it may not be possible to increase room rates to
offset such higher operating expenses. In addition, inflation could have a
secondary effect upon occupancy rates by increasing the expense or decreasing
the availability of travel by potential guests. Although the inflation rate has
been low recently, there is no assurance that it will not increase in the
future.
LIMITATIONS AND RESTRICTIONS OF FRANCHISE AGREEMENTS
The Company's hotels are operated pursuant to franchise agreements with
major hotel chains. Each of the franchise agreements generally contain specific
standards for, and restrictions and limitations on, the operation and
maintenance of a hotel. The requirements may be contrary to the planned
expenditures and priorities set by the Company. Further, such requirements are
often subject to change over time, in some cases at the discretion of the
franchisor, and may restrict the Company's ability to make improvements or
modifications to a hotel without the consent of the franchisor. In addition,
compliance with such requirements could require the Company to incur significant
expenses or capital expenditures. Additionally, in connection with changing the
franchise affiliation of a hotel in the future, the Company may be required to
incur additional expenses or capital expenditures. Franchise agreements are
typically terminable by the franchisor upon the failure to maintain specified
operating standards or to make payments due under the applicable agreements in a
timely fashion or at the end of its term. If the Company loses a franchise, this
may have an adverse impact on the operations and underlying value of the
affected hotel because of the loss of name recognition, marketing support and
centralized reservation systems provided by the franchisor. Franchise agreements
often define certain transactions as a "change of control" that require the
franchisor's approval and in some cases the payment of certain fees. The time
required to obtain such approvals and the potential cost of doing so could
materially adversely affect a franchisee's business, financial condition and
results of operations. A majority of the hotels owned by the Company are
affiliated with Holiday Inn and any deterioration in the relationship with or
the benefits associated with being a franchisee of Holiday Inn could have a
material adverse effect on the Company's business, financial condition and
results of operations.
-9-
<PAGE> 15
COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
Under federal, state, and local environmental laws, ordinances and
regulations, the Company as a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws often impose liability
whether or not the Company knew of, or was responsible for, the presence of such
hazardous or toxic substances. The costs of such remediation or removal of
hazardous or toxic substances discovered by the Company may be substantial, and
the presence of any such substance, or the failure promptly to remediate any
such substance, may adversely affect the Company's ability to sell or lease the
property, to use the property for its intended purpose, or to borrow using the
property as collateral. Other federal, state and local laws, ordinances and
regulations require abatement or removal of certain asbestos-containing
materials in connection with demolition or certain renovations or remodeling,
impose certain worker protection and notification requirements, and govern
emissions of and exposure to asbestos fibers in the air. Additionally, federal,
state and local laws, ordinances and regulations and the common law impose on
the Company requirements regarding conditions and activities that may affect
human health or the environment, such as the presence of lead in drinking water
or lead-containing paint in occupied structures and the ownership or operation
of underground storage tanks. Failure to comply with applicable requirements
could, in addition to making it difficult for the Company to lease, sell or
finance any affected property, result in the imposition of monetary penalties,
expenditures necessary to bring the property into compliance and potential
liability to third parties. Hotels acquired by the Company have in the past
contained asbestos which was handled as required by applicable regulations and
additional hotels may be acquired in the future which contain asbestos requiring
removal or remediation. While there are currently no material environmental
issues known to the Company, any liability resulting from non-compliance or
other claims relating to environmental matters could have a material adverse
effect on the Company's business, financial condition and results of operations.
COST OF COMPLIANCE WITH GOVERNMENTAL REGULATION
A number of states regulate the licensing of hotels and restaurants,
including liquor license grants, by requiring registration, disclosure
statements and compliance with specific standards of conduct. The Company
believes that it is substantially in compliance with these requirements in all
states in which it operates. Managers of hotels are also subject to laws
governing their relationships with hotel employees, including minimum wage
requirements, overtime, working conditions and work permit requirements.
Compliance with, or changes in, these laws could reduce the revenue and
profitability of the hotels and could otherwise adversely affect the Company's
business, financial condition and results of operations.
Under the Americans with Disabilities Act (the "ADA"), all public
accommodations are required to meet certain requirements related to access and
use by disabled persons. These requirements became effective in 1992. Although
significant amounts have been and continue to be invested in ADA-required
upgrades to the Company's hotels, a determination that the Company is not in
compliance with the ADA could result in a judicial order requiring compliance,
imposition of fines or an award of damages to private litigants which could
increase expenses and reduce earnings.
SUBSTANTIAL RELIANCE ON KEY PERSONNEL
The Company places substantial reliance on the hotel industry knowledge
and experience and the continued services of its senior management, led by Mr.
David Buddemeyer, the Company's Chairman, President and Chief Executive Officer.
The Company's future success and its ability to manage future growth depends in
large part upon the efforts of these persons and on its ability to attract and
retain other highly qualified personnel. Competition for such personnel is
intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. The loss of the services of Mr.
Buddemeyer or the inability to attract and retain other highly qualified
personnel may adversely affect the Company's business, financial condition or
results of operations.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation provide that certain
transactions must be approved by the holders of at least 80% of the outstanding
Common Stock, unless approved by the Company's Board of Directors. The Company's
Bylaws divide the Company's Board of Directors into three classes of directors
serving staggered three-year terms, with one class of directors to be elected at
each annual meeting of shareholders. Additionally, as a Florida corporation, the
Company is also governed by the provisions of Florida corporate law regarding
affiliated transactions and control share acquisitions, which impose
restrictions and require specific procedures to be followed with respect to
certain takeover offers and business combinations, including, but not limited
to, combinations with interested shareholders and affiliates of the Company. The
provisions in the Company's Articles of Incorporation, the classification of the
Company's Board of Directors and the anti-takeover provisions of the Florida
corporate law will tend to assist the Board of Directors and management of the
Company in retaining their existing positions and will render more difficult or
discourage unsolicited takeover attempts, even if such actions were desired by
all shareholders of the Company other than directors and management
shareholders. In the event the Merger is approved, the Certificate of
Incorporation and Bylaws of Lodgian will control. It is anticipated that such
Certificate and Bylaws will continue to contain anti-takeover provisions similar
to that in place for Servico, except that the provisions requiring the approval
of the holders of 80% of the outstanding Common Stock for certain transactions
will not be included.
-10-
<PAGE> 16
RISK FACTORS RELATING TO THE PROPOSED MERGER
NO ASSURANCE OF COMPLETION
On July 22, 1998, Servico entered into an Amended and Restated
Agreement and Plan of Merger, which was amended on September 16, 1998 (the
"Amended Merger Agreement"), relating to a business combination with Impac, a
private hotel ownership, management and development company. Under the terms of
such Amended Merger Agreement, the Company, Impac and certain affiliated
companies of Impac will each simultaneously become separate, wholly-owned
subsidiaries of Lodgian, a newly formed Delaware corporation. Servico's existing
shareholders will receive one share of Lodgian's common stock for each share of
Servico Common Stock owned (an aggregate of approximately 20 million shares).
The holders of Impac units ("Impac Units") will receive an aggregate of 8
million shares of Lodgian common stock and a one-time cash payment of $15
million. Additionally, as five of Impac's hotels that are currently under
development are opened, holders of Impac Units will receive up to an aggregate
of 1.4 million additional shares of Lodgian common stock. Although the Company
expects to complete the Merger during the fourth quarter of 1998, there can be
no assurance that the Merger will be consummated at that or any other time.
Consummation of the Merger remains subject to a number of conditions. No
assurance can be given that the Company will realize the benefits it anticipates
from the Merger or that the Merger will not adversely affect the Company's
business, financial condition or results of operations. See "The Servico/Impac
Merger."
In the event the Amended Merger Agreement is terminated or the Merger
has not been consummated by December 31, 1998, holders of CRESTS will have the
right to require the Company to repurchase Convertible Debentures for cash and
thereby cause the Trust to repurchase a like liquidation amount of CRESTS. See
"Description of the CRESTS -- Repurchase Upon Non-Completion of Merger."
INABILITY TO SUCCESSFULLY INTEGRATE OPERATIONS
The Merger involves the integration of two separate companies that
previously operated independently. The combined company, Lodgian, may encounter
difficulties in integrating the operations of the Company and Impac and the
benefits and operating synergies anticipated from the combination may not be
realized. Lodgian's growth and profitability will be affected by its ability to
consolidate the business, operations and personnel of the companies, including
its ability to eliminate duplicate functions and to achieve anticipated cost
savings. Any delays or unexpected costs incurred in connection with such
integration could have a material adverse effect on the combined business,
financial condition and results of operations. No assurance can be given that
Lodgian will be able to accomplish the consolidation and cost savings in a
timely or profitable manner or that any savings will be realized. Additional
costs will be incurred in connection with the move of the Company's headquarters
to Atlanta, Georgia, including not only the cost and disruption associated with
the move but also any severance costs associated with the Company's employees
who do not move to Atlanta.
PAYMENT OF TERMINATION FEE
The Amended Merger Agreement provides that in the event the Amended
Merger Agreement is terminated pursuant to certain circumstances specified
therein, Servico may be obligated to pay Impac a termination fee, ranging from
$10 million to $15 million, as liquidated damages. Additionally, in certain
circumstances, Servico may be obligated to reimburse Impac for up to $2.5
million for costs and expenses incurred in connection with the transaction. See
"The Servico/Impac Merger -- Termination Fee". The payment of any termination
fee by Servico would have an adverse impact on Servico's liquidity and capital
resources.
ADDITIONAL RISKS RELATING TO IMPAC
Impac, like the Company, is involved in the ownership and management of
hotel properties and, also, in the business of developing new hotel properties.
As such, Impac is subject to the same risks and uncertainties described above
with respect to the Company. Additionally, substantially all of Impac's hotels
and properties are also subject to mortgage financing, which at June 30, 1998,
totaled approximately $400 million. The terms and amount of Impac's outstanding
indebtedness, when combined with the Company's outstanding indebtedness, will
increase the risks described above under the caption "Risk Factors Relating to
the Company -- Significant Amount of Debt," including the ability to generate
sufficient cash flows from operations to service the debt, the ability to obtain
additional financing or refinancing in the future and the increased
vulnerability to adverse changes in general economic conditions.
Certain of the mortgages and related loan documents evidencing Impac's
indebtedness contain provisions that would require the borrower to prepay such
financing within the near future if certain conditions are not met. There can be
no assurance that such conditions will be met, that any such prepayments will
not be required, or that any such prepayment will not have an adverse effect on
Impac's or Lodgian's business, financial condition and results of operations.
Further, Impac's indebtedness with Nomura Asset Capital Corporation ("NACC"),
provides that in the event the debt is to be repaid in connection with a merger,
reorganization or sale of Impac, NACC will negotiate in good faith an
appropriate prepayment premium, making due allowance for among other things the
expected profits that NACC could reasonably have been expected to have received
if the loans had not been prepaid, including profits associated with the
securitization of the indebtedness.
-11-
<PAGE> 17
Finally, Impac has certain other third-party indebtedness in the
approximate principal amount of $74.5 million which is subordinated to the NACC
indebtedness. The terms of such indebtedness require that Impac either obtain
the consent of the holder thereof to the Merger or that Impac prepay such
indebtedness in full on the effective date of the Merger. Depending upon certain
factors, including whether the source of proceeds used to make such prepayment
is treated as equity or debt at the Impac level (and if debt, whether it is to
be subordinated to the NACC loans), Impac may need to obtain NACC's consent to
the prepayment of such subordinated debt prior to satisfaction in full of
Impac's obligations to NACC. No assurance can be given that NACC's consent, if
required, could be obtained. If NACC's consent is required but cannot be
obtained, Impac will be unable to prepay such indebtedness and will be required
to obtain the consent of the holder of the subordinated indebtedness to the
Merger. No request for any such consents have yet been made, and no assurance
can be given as to the likelihood of receiving such consents or the terms or
conditions upon which any such consents could be obtained.
RISK FACTORS RELATING TO THE CRESTS
SPECIAL EVENT DISTRIBUTION OR REDEMPTION
Upon the occurrence of a Special Event, including a Tax Event, the
Trust could be dissolved (with the consent of the Company), except in the
limited circumstance described below, with the result that, after the
satisfaction of liabilities to creditors, the Convertible Debentures would be
distributed to the holders of the Trust Securities in connection with the
liquidation of the Trust. In certain circumstances, the Company would have the
right to redeem the Convertible Debentures, in whole or in part, without
premium, in lieu of a distribution of the Convertible Debentures by the Trust,
in which event the Trust would redeem the Trust Securities on a pro rata basis
to the same extent as the Convertible Debentures are redeemed by the Company.
Redemption of the Convertible Debentures would be a taxable event to holders of
the CRESTS. See "Description of the CRESTS -- Redemption -- Special Event
Distribution or Redemption of Convertible Debentures" and "Certain United States
Federal Income Tax Considerations -- Distribution of Convertible Debentures or
Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the CRESTS or the
Convertible Debentures that may be distributed in exchange for CRESTS if a
dissolution and liquidation of the Trust were to occur. Accordingly, the
Convertible Debentures that a holder of CRESTS may receive upon dissolution and
liquidation of the Trust may trade at a discount to the value of the CRESTS.
Because holders of CRESTS may receive Convertible Debentures upon the occurrence
of a Special Event, prospective purchasers of CRESTS are also making an
investment decision with regard to the Convertible Debentures and should
carefully review all the information regarding the Convertible Debentures
contained herein. See "Description of the CRESTS -- Redemption -- Special Event
Distribution or Redemption of Convertible Debentures" and "Description of the
Convertible Debentures."
ABILITY TO REPURCHASE CRESTS UPON NON-COMPLETION OF MERGER
In the event that the Amended Merger Agreement is terminated or the
Merger has not been consummated by December 31, 1998, holders of CRESTS will
have the right to require the Company to repurchase Convertible Debentures for
cash in an aggregate principal amount equal to the aggregate liquidation amount
of all or a portion of such holder's CRESTS at a price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon to
the date of repurchase. In such event, the Company may not have sufficient
financial resources, or may not be able to arrange financing, to repay the
required repurchase price for all Convertible Debentures. If the Company were to
default on its obligation to repurchase Convertible Debentures, the Trust would
lack sufficient funds to repurchase the CRESTS tendered by holders thereof.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company is not in default in the payment of interest on
the Convertible Debentures, the Company will have the right at any time, and
from time to time, under the Indenture (as such term is defined under
"Description of the Convertible Debentures") to defer payments of interest on
the Convertible Debentures by extending the interest payment period at any time,
for a period not exceeding 20 consecutive quarters and not extending beyond June
30, 2010, the maturity date of the Convertible Debentures (the "Stated
Maturity"). As a consequence of such an extension, distributions
("Distributions") on the CRESTS would be deferred (but despite such deferral
would continue to accumulate at the rate specified by the Convertible
Debentures, compounded quarterly) by the Trust during any such extended interest
payment period (an "Extension Period"). Prior to the termination of any such
Extension Period, the Company may further extend the interest payment period;
provided that such Extension Period, together with all such previous and further
extensions thereof, may not exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the Convertible Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. If the
Company exercises this right to defer interest payments, then, subject to
limited exceptions, it may not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock. See "Description
of the CRESTS -- Distributions" and "Description of the Convertible Debentures
- -- Option to Extend Interest Payment Period."
-12-
<PAGE> 18
Because the Company has the right to defer the payment of stated
interest on the Convertible Debentures, the stated interest on the Convertible
Debentures will be considered to give rise to OID and holders of CRESTS will be
required to include such OID in gross income on a daily economic accrual basis
regardless of their regular method of tax accounting. Should the Company
exercise its right to defer payments of interest by extending the interest
payment period, each holder of CRESTS will be required to continue to accrue
income (in the form of OID), in respect of the deferred and compounded interest
allocable to its CRESTS for United States federal income tax purposes, which
will be allocated but not distributed, to holders of record of CRESTS. As a
result, each such holder of CRESTS will recognize income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive the cash from the Trust related to such income if such holder disposes
of its CRESTS prior to the record date for the date on which distributions of
such amounts are made. The Company has no current intention of exercising its
right to defer payments of interest by extending the interest payment period on
the Convertible Debentures. See "Certain United States Federal Income Tax
Considerations -- Original Issue Discount."
Should the Company determine to exercise such right in the future, the
market price of the CRESTS is likely to be affected. A holder that disposes of
its CRESTS during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its CRESTS. In
addition, as a result of the existence of the Company's right to defer interest
payments, the market price of the CRESTS (which represent an undivided
beneficial ownership interest in the Convertible Debentures) may be more
volatile than other securities that do not grant the issuer such rights.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE CONVERTIBLE
DEBENTURES
The Company's obligations under the Guarantee will be unsecured and
will rank subordinate and junior in right of payment to all other liabilities of
the Company and on a parity with the most senior preferred or preference stock
now or hereafter issued by the Company and with any guarantee previously, now or
hereafter entered into by the Company in respect of any preferred or preference
stock of any affiliate of the Company. The obligations of the Company under the
Convertible Debentures will be subordinate and junior in right of payment to all
present and future Senior Indebtedness of the Company. Senior Indebtedness
includes (i) all indebtedness of the Company for money borrowed or in connection
with the acquisition of properties or assets (other than trade accounts payable
in the ordinary course of business) and (ii) any indebtedness of others of the
kinds described in clause (i) for which the Company is liable as guarantor or
otherwise. Both the Guarantee and the Convertible Debentures will be
structurally subordinated to all obligations of the Company's subsidiaries. No
payment of principal of (including redemption), premium, if any, or interest on
the Convertible Debentures may be made (i) if any Senior Indebtedness of the
Company is not paid when due and any applicable grace period with respect to
such default has ended with such default not having been cured or waived or
ceasing to exist or (ii) if the maturity of any Senior Indebtedness has been
accelerated because of a default.
As of June 30, 1998, the Company's Senior Indebtedness aggregated
$287.9 million (including indebtedness of consolidated subsidiaries guaranteed
by the Company). There are no terms in the CRESTS, the Convertible Debentures,
or the Guarantee that limit the Company's or its subsidiaries' ability to incur
additional indebtedness, including indebtedness that ranks senior to the
Convertible Debentures and the Guarantee. See "Description of the Guarantee" and
"Description of the Convertible Debentures -- Subordination."
RIGHTS UNDER THE GUARANTEE
When the CRESTS are registered under the Securities Act pursuant to
this Prospectus, the Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the Trust Indenture Act"). The Property
Trustee will act as indenture trustee under the Guarantee for the purposes of
compliance with the provisions of the Trust Indenture Act (the "Guarantee
Trustee"). The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Trust Securities.
The Guarantee guarantees to the holders of the CRESTS the payment of
(i) any accumulated and unpaid Distributions required to be paid on the CRESTS,
to the extent the Trust has funds available therefor, (ii) the redemption price
and all accumulated and unpaid Distributions with respect to CRESTS called for
redemption by the Trust, to the extent the Trust has funds available therefor
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Trust (other than in connection with the conversion of all of the CRESTS
into Common Stock or distribution of Convertible Debentures to the holders of
CRESTS or a redemption of all the CRESTS), the lesser of (a) the aggregate of
the liquidation amount and all accumulated and unpaid Distributions on the
CRESTS to the date of the payment to the extent the Trust has funds available
therefor or (b) the amount of assets of the Trust remaining available for
distribution to holders of the CRESTS in liquidation of the Trust.
The holders of not less than a majority in liquidation amount of the
CRESTS will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee or to exercise
any trust or power conferred upon the Guarantee Trustee under the Guarantee. If
the Guarantee Trustee fails to enforce such Guarantee, any holder of CRESTS may
institute a legal proceeding directly against the Company to enforce such
holder's right to receive payment under the Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity. If the Company were to default on its obligation to pay amounts
payable on the Convertible Debentures, the Trust would lack available funds for
the payment of distributions or amounts payable on redemption of the CRESTS or
-13-
<PAGE> 19
otherwise, and, in such event, holders of the CRESTS would not be able to rely
upon the Guarantee for payment of such amounts. See "Description of the
Guarantee." However, a holder of the CRESTS could instead rely on the
enforcement (i) by the Property Trustee of its rights as registered holder of
the Convertible Debentures against the Company pursuant to the terms of the
Convertible Debentures or (ii) by such holder of its right of direct action
against the Company to enforce payments on Convertible Debentures. See
"Description of the Convertible Debentures -- Indenture Events of Default." The
Declaration provides that each holder of CRESTS, by acceptance thereof, agrees
to the provisions of the Guarantee, including the subordination provisions
thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CRESTS
If (i) the Trust fails to pay Distributions in full on the CRESTS
(other than pursuant to a deferral of interest during an Extension Period) or
(ii) a default under the Declaration (a "Trust Enforcement Event") occurs and is
continuing, then the holders of CRESTS could rely upon, and under certain
circumstances, could cause, the enforcement by the Property Trustee of its
rights as a holder of the Convertible Debentures against the Company. In
addition, the holders of a majority in liquidation amount of the CRESTS will
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee to exercise the
remedies available to it as a holder of the Convertible Debentures. If the
Property Trustee fails to enforce its rights under the Convertible Debentures, a
holder of CRESTS may institute a legal proceeding directly against the Company
to enforce the Property Trustee's rights under the Convertible Debentures
without first instituting any legal proceeding against the Property Trustee or
any other person or entity. Notwithstanding the foregoing, if a Trust
Enforcement Event has occurred and is continuing and such event is attributable
to the failure of the Company to pay interest, principal or premium on the
Convertible Debentures on the date such interest, principal or premium is
otherwise payable (or in the case of redemption, on the redemption date), then
the registered holder of CRESTS may directly institute a proceeding for
enforcement of payment to such holder of the principal of or premium, if any, or
interest on the Convertible Debentures having a principal amount equal to the
aggregate liquidation amount of the CRESTS of such holder (a "Direct Action") on
or after the respective due date specified in the Convertible Debentures. In
connection with such Direct Action, the Company, as the holder of the Common
Securities, will be subrogated to the rights of such holder of CRESTS under the
Declaration to the extent of any payment made by the Company to such holder of
CRESTS in such Direct Action. The holders of CRESTS will not be able to exercise
directly any other remedy available to the holders of the Convertible
Debentures. See "Description of the CRESTS -- Trust Enforcement Events" and
"Description of the Convertible Debentures -- Indenture Events of Default."
LIMITED VOTING RIGHTS
Holders of CRESTS will have limited voting rights and will not be
entitled to vote to appoint, remove or replace, or to increase or decrease the
number of, the Trustees, which voting rights are vested exclusively in the
holder of the Common Securities. See "Description of the CRESTS -- Voting
Rights; Amendment of Declaration."
TRADING PRICE
The CRESTS may trade at a price that does not fully reflect the value
of accrued and unpaid interest with respect to the underlying Convertible
Debentures. A holder who disposes of his CRESTS between record dates for
payments of distributions thereon will be required to include accrued and unpaid
interest on the Convertible Debentures through the date of disposition in income
as ordinary income (i.e., OID), and to add such amount to such holder's adjusted
tax basis in such CRESTS. To the extent the selling price of the CRESTS is less
than the holder's adjusted tax basis in such CRESTS, a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "Certain United States Federal Income Tax Considerations -- Original Issue
Discount" and "--Sales of CRESTS."
LACK OF ESTABLISHED TRADING MARKET FOR CRESTS
There is no existing public trading market for the CRESTS and there can
be no assurance regarding the future development of a market for the CRESTS, or
the ability of holders of such securities to sell their CRESTS or the price at
which such holders may be able to sell their CRESTS. If such a market were to
develop, the CRESTS could trade at prices that may be higher or lower than their
initial offering price depending on many factors, including the market for
similar securities, general economic conditions and the financial conditions and
performance of, and prospects for, the Company. The Initial Purchaser currently
makes a market in the CRESTS. The Initial Purchaser is not obligated to do so,
however, and any market making with respect to the CRESTS may be discontinued at
any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Exchange Act. Therefore, there can be no
assurance as to the liquidity of any trading market for the CRESTS or that an
active public market for the CRESTS will develop. The Company does not intend to
apply for listing or quotation of the CRESTS on any securities exchange or stock
market; however, the CRESTS are eligible for trading in The Portal Market, a
subsidiary of the Nasdaq Stock Market, Inc.
-14-
<PAGE> 20
LODGIAN CAPITAL TRUST I
The Trust is a statutory business trust formed under the Delaware
Business Trust Act, as amended (the "Trust Act") pursuant to (i) a declaration
of trust, dated as of May 15, 1998, executed by the Company, as Sponsor, and the
Trustees and (ii) a certificate of trust, dated as of May 15, 1998, filed with
the Secretary of State of the State of Delaware. The Trust's business and
affairs are conducted by the Trustees: Wilmington Trust Company, as Property
Trustee and as Delaware Trustee, and three individual Regular Trustees who are
employees or officers of or affiliated with the Company. The Trust was formed
for the exclusive purpose of (i) issuing and selling the Trust Securities, (ii)
investing the gross proceeds from such sales in the Convertible Debentures and
(iii) engaging in only those other activities necessary or incidental thereto.
Accordingly, the Convertible Debentures are the sole assets of the Trust, and
payments under the Convertible Debentures are the sole revenue of the Trust. All
of the Common Securities are owned by the Company. The Common Securities rank on
a parity, and payments will be made thereon pro rata, with the CRESTS, except
that upon the occurrence and continuance of an event of default under the
Declaration resulting from an event of default under the Indenture (an
"Indenture Event of Default"), the rights of the Company as holder of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption or otherwise will be subordinate to the rights of the holders of the
CRESTS. See "Description of the CRESTS -- Subordination of Common Securities."
The Company acquired Common Securities in an aggregate liquidation amount at
least equal to 3% of the total capital of the Trust.
The Property Trustee holds title to the Convertible Debentures for the
benefit of the holders of the Trust Securities and, as the holder of the
Convertible Debentures, the Property Trustee has the power to exercise all
rights, powers and privileges of a holder of Convertible Debentures under the
Indenture. In addition, the Property Trustee maintains exclusive control of a
segregated non-interest bearing bank account (the "Property Account") to hold
all payments made in respect of the Convertible Debentures for the benefit of
the holders of the Trust Securities. The Guarantee Trustee holds the Guarantee
for the benefit of the holders of the Trust Securities. The Company, as the
holder of all the Common Securities, has the right to appoint, remove or replace
any of the Trustees and to increase or decrease the number of Trustees, provided
that the number of Trustees will be at least three; provided further that at
least one Trustee will be a Delaware Trustee, at least one Trustee will be the
Property Trustee and at least one Trustee will be a Regular Trustee. Under the
Indenture, the Company, as issuer of the Convertible Debentures, agreed to pay
all fees and expenses related to the organization and operations of the Trust
(including any taxes, duties, assessments or governmental charges of whatever
nature (other than United States withholding taxes) imposed by the United States
or any other domestic taxing authority upon the Trust) and the Original Offering
of the CRESTS and be responsible for all debts and obligations of the Trust
(other than with respect to the CRESTS).
For so long as the CRESTS remain outstanding, the Company covenants (i)
to maintain directly or indirectly ownership of all of the Common Securities,
(ii) to cause the Trust to remain a statutory business trust and not to
voluntarily dissolve, wind-up, liquidate or be terminated, except as permitted
by the Declaration, (iii) to use its commercially reasonable efforts to ensure
that the Trust will not be an "investment company" for purposes of the
Investment Company Act of 1940, as amended from time to time, or any successor
legislation (the "1940 Act") and (iv) to take no action that would be reasonably
likely to cause the Trust to be classified as an association or a publicly
traded partnership taxable as a corporation for United States federal income tax
purposes.
The rights of the holders of the CRESTS, including economic rights,
rights to information and voting rights, are set forth in the Declaration, the
Trust Act and the Trust Indenture Act. See "Description of the CRESTS." The
Declaration and the Guarantee also incorporate by reference the terms of the
Trust Indenture Act.
The office of the Delaware Trustee is Rodney Square North, 1100 North
Market Street, Wilmington, Delaware, 19890. The principal executive offices of
the Company and the Trust are located at 1601 Belvedere Road, West Palm Beach,
Florida, 33406, telephone number (561) 689-9970.
It is anticipated that the Trust will not be subject to the reporting
requirements under the Exchange Act.
-15-
<PAGE> 21
THE SERVICO/IMPAC MERGER
SET FORTH BELOW IS CERTAIN INFORMATION REGARDING THE PROPOSED MERGER
BETWEEN THE COMPANY AND IMPAC. THE STATEMENTS MADE UNDER THIS HEADING RELATING
TO THE MERGER ARE SUMMARIES OF THE MATERIAL TERMS OF AGREEMENTS DESCRIBED
HEREIN, DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO SUCH AGREEMENTS.
ALL OF THE NET PROCEEDS FROM THE SALE OF THE CRESTS WERE INVESTED BY
THE TRUST IN CONVERTIBLE DEBENTURES OF THE COMPANY ISSUED PURSUANT TO THE
INDENTURE. IF THE AMENDED MERGER AGREEMENT IS TERMINATED OR THE MERGER HAS NOT
BEEN CONSUMMATED BY DECEMBER 31, 1998, HOLDERS OF CRESTS WILL HAVE THE RIGHT TO
REQUIRE THE COMPANY TO REPURCHASE CONVERTIBLE DEBENTURES FOR CASH AND THEREBY
CAUSE THE TRUST TO REPURCHASE A LIKE LIQUIDATION AMOUNT OF CRESTS. SEE
"DESCRIPTION OF THE CRESTS -- REPURCHASE UPON NON-COMPLETION OF MERGER."
GENERAL
On July 22, 1998, Servico entered into an Amended and Restated
Agreement and Plan of Merger, as amended on September 16, 1998, with Impac
pursuant to which the businesses of Servico and Impac would be combined. As a
result of the Merger, Servico shareholders, Impac unitholders and the
shareholders of certain Impac affiliated companies (collectively, the "Impac
Affiliated Companies" and individually, an "Impac Affiliated Company") will
become the owners of a combined company to be called Lodgian. Upon the
effectiveness of the Merger (the "Effective Time"), Lodgian will acquire all of
the issued and outstanding Common Stock of Servico (the "Servico Common Stock"),
all of the issued and outstanding units of Impac (the "Impac Units") and all of
the issued and outstanding capital stock of each Impac Affiliated Company
through the merger of SHG-S Sub, Inc., Lodgian's wholly-owned subsidiary, with
and into Servico, the merger of SHG-I Sub, L.L.C., Lodgian's wholly-owned
subsidiary, with and into Impac and the merger of all of the respective Impac
Affiliated Companies with and into newly-formed acquisition subsidiaries of
Lodgian (collectively, the "Affiliated Company Merger Subs") (except Impac Hotel
Development, Inc. ("IHD"), where a newly-formed acquisition subsidiary of
Lodgian ("IHD Merger Sub") will merge with and into it). Therefore, as a result
of the Merger, Servico, Impac, the Affiliated Company Merger Subs (except for
IHD Merger Sub) and IHD (collectively, the "Surviving Entities") will be
wholly-owned subsidiaries of Lodgian.
TERMS OF THE MERGER
At the Effective Time, Lodgian will acquire all of the issued and
outstanding shares of Servico Common Stock, Impac Units and Impac Affiliated
Company common stock. Pursuant to the Merger, each share of Servico Common Stock
issued and outstanding immediately prior to the Effective Time will be converted
into the right to receive one share of Lodgian common stock, par value $.01 per
share (the "Lodgian Common Stock") (an aggregate of approximately 20 million
shares). The holders of Impac Units will receive an aggregate of 8 million
shares of Lodgian Common Stock (or 0.692 shares of Lodgian Common Stock for each
Impac Unit owned) and a one-time cash payment of $15 million. Additionally, as
five of Impac's hotels that are currently under development are opened, holders
of Impac Units will receive up to an aggregate of 1.4 million additional shares
of Lodgian Common Stock (representing an additional 0.121 shares of Lodgian
Common Stock for each Impac Unit owned) (the "Impac Additional Shares"). The
incremental portions of the Impac Additional Shares will be issued following the
opening of each of the following development hotels: (i) Marriott (Portland,
Oregon) - 490,000 shares; (ii) Marriott (Denver, Colorado) - 350,000 shares;
(iii) Hilton Garden Inn (Lake Oswego, Oregon) - 238,000 shares; (iv) Courtyard
by Marriott (Livermore, California) - 168,000 shares; and (v) Hilton Garden Inn
(Rio Rancho, New Mexico) - 154,000 shares. Impac anticipates opening each of the
development hotels in 1999. As a result, Servico shareholders and Impac
unitholders will own approximately 67% and 33%, respectively, of Lodgian's
outstanding Common Stock. The Merger will be accounted for as an acquisition of
Impac by Servico using the purchase method of accounting.
In connection with the Original Offering of CRESTS, the Indenture, the
Guarantee and the Declaration relating to such Offering provided that, upon the
consummation of the Merger, Lodgian, the successor corporation in the Merger,
will assume Servico's obligations under the Guarantee, the Declaration, the
Convertible Debentures and the Indenture. Therefore, upon the consummation of
the Merger, each share of Servico Common Stock will be converted into the right
to receive one share of Lodgian Common Stock. Accordingly, each Convertible
Debenture (and thus each CRESTS) outstanding after consummation of the Merger
will be convertible into shares of Lodgian Common Stock at the same conversion
price, on the same terms, in the same manner and subject to the same future
adjustments as set forth herein.
LODGIAN FOLLOWING THE MERGER
BOARD OF DIRECTORS. The Amended Merger Agreement provides that, at the
Effective Time, the Lodgian Board will consist of eight members (unless
otherwise agreed to in writing by Servico and Impac), five of whom will be
"Servico Directors," two of whom will be "Impac Directors," and one of whom will
be selected by both Impac and Servico. The term "Servico Director" means any
person who is designated by Servico to become a director of Lodgian at the
Effective Time in accordance with the terms of the Amended Merger Agreement, and
the term "Impac Director" means any person who is designated by Impac to become
a director of Lodgian at the Effective Time. The Lodgian Board will be divided
into three classes, designated as Class I, Class II and Class III. The initial
directors of Lodgian and initial allocations of the directors among the three
classes is as follows: (a) Class I will consist of two directors, comprised of a
Servico Director (Peter R.
-16-
<PAGE> 22
Tyson) and one director selected by both Servico and Impac; (b) Class II will
consist of three directors, comprised of two Servico Directors (Joseph C.
Calabro and Michael Leven) and one Impac Director (John Lang); and (c) Class III
will consist of three directors, comprised of two Servico Directors (David A.
Buddemeyer and Richard H. Weiner) and an Impac Director (Robert S. Cole). Such
directors will serve as the directors of Lodgian from and after the Effective
Time in accordance with the Restated Certificate of Incorporation and Bylaws of
Lodgian until their successors are elected or appointed and qualified or until
their resignation or removal. In the event that, prior to the Effective Time,
any person so selected to serve on the Board of Directors of Lodgian is unable
or unwilling to serve in such position, the company that selected such person
shall designate another person to serve in such person's stead. From and after
the Effective Time, the composition of the Board of Directors shall be
determined in accordance with the Restated Certificate of Incorporation and
Bylaws of Lodgian.
EXECUTIVE OFFICERS. At the Effective Time, subject to the Restated
Bylaws of Lodgian and each of the Surviving Entities, (i) David A. Buddemeyer
will hold the position of Chief Executive Officer of Lodgian and each of the
Surviving Entities, (ii) Robert S. Cole will hold the position of President of
Lodgian and each of the Surviving Entities, and (iii) David Buddemeyer and
Robert Cole will hold the positions of Co-Chairmen of the Board of Directors of
Lodgian and each of the Surviving Entities. If any of such persons is unable or
unwilling to hold such offices as set forth above, his successor shall be
selected by the Board of Directors of Lodgian or the Surviving Entities in
accordance with their respective Bylaws.
TERMINATION FEE
The Amended Merger Agreement provides that in the event the Amended
Merger Agreement is terminated pursuant to certain circumstances specified
therein, either Servico or Impac, depending upon the circumstances giving rise
to the termination, may be obligated to pay the other a termination fee as
liquidated damages. The termination fees for both parties are subject to several
conditions and restrictions. Depending on the date and circumstances of the
termination, Servico may be obligated to pay Impac a termination fee ranging
from $10 million to $15 million and Impac may be obligated to pay Servico a
termination fee of $10 million. Additionally, in certain circumstances, one
party may become obligated to reimburse the other party for up to $2.5 million
for costs and expenses incurred in connection with the transaction.
CONDITIONS TO CLOSING THE MERGER
The obligation of each party to consummate the Merger remains subject
to a variety of conditions, including, among others: (1) the continued
effectiveness of the registration statement relating to the Lodgian Common Stock
to be issued in the transaction; (2) the approval of Lodgian Common Stock for
listing on the NYSE; and (3) receipt of a refinancing commitment with respect to
Impac's outstanding debt. The shareholders of Servico and the members of Impac
have each approved the Merger, which was also a condition to the consummation of
the Merger.
-17-
<PAGE> 23
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges on a historical basis for each of the five years in the period ended
December 31, 1997 and for the six months ended June 30, 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------- -------------------------
(Unaudited)
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges 1.17 1.32 1.34 1.43 1.72 1.97
</TABLE>
The computation of the ratio of earnings to fixed charges is based on
Earnings of the Company and its consolidated subsidiaries divided by Fixed
Charges. "Earnings" consist of income before income tax and extraordinary items
and minority interests -- other. "Fixed charges" represent interest and (whether
expensed or capitalized), rent expense representative of interest, and
amortization of deferred loan costs and dividends on the CRESTS.
USE OF PROCEEDS
The Selling Shareholders will receive all of the proceeds from the sale
of the Offered Securities. Neither the Company nor the Issuer will receive any
proceeds from the sale of the Offered Securities.
-18-
<PAGE> 24
DESCRIPTION OF THE CRESTS
The following summary of the material terms and provisions of the
CRESTS is subject to, and qualified in its entirety by reference to, the
Declaration. The CRESTS were issued pursuant to the terms of the Declaration.
The Declaration incorporates by reference terms of the Trust Indenture Act. The
Declaration will be qualified under the Trust Indenture Act. The Wilmington
Trust Company, as Trustee, acts as indenture trustee for the Declaration for
purposes of compliance with the Trust Indenture Act. Capitalized terms not
otherwise defined herein have the meanings assigned to them in the Declaration.
DISTRIBUTIONS
Distributions on the CRESTS are fixed at a rate per annum of 7% of the
stated liquidation amount of $50 per CRESTS, subject to increase if certain
events described under "Description of the Convertible Debentures -- Interest"
occur, payable quarterly, in arrears, on March 31, June 30, September 30 and
December 31 of each year, commencing September 30, 1998 (each, a "Distribution
Date"), when, as and if available for payment, by the Property Trustee.
Distributions not paid on the scheduled payment date will accumulate and
compound quarterly, to the extent permitted by law, at the applicable
distribution rate ("Compounded Distributions").
The term "Distribution" as used herein includes any ordinary cumulative
Distributions, together with any Compounded Distribution, unless otherwise
stated. The amount of Distributions payable for any period will be computed (i)
for any full 90-day quarterly distribution period, on the basis of a 360-day
year of twelve 30-day months, (ii) for any period shorter than a full 90-day
distribution period for which Distributions are computed, on the basis of a
30-day month and (iii) for periods of less than a month, on the basis of the
actual number of days elapsed. In the event that any date on which Distributions
are payable on the CRESTS is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any additional Distributions or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment will be made on the immediately preceding
Business Day, with the same force and effect as if made on the date such payment
was originally payable. A "Business Day" means any day, other than a Saturday or
Sunday, that is not a day on which banking institutions in the Borough of
Manhattan, the City of New York or Wilmington, Delaware are authorized or
required by law, regulation or executive order to close.
Distributions on the CRESTS (other than Distributions on a redemption
date) will be payable to the holders thereof as they appear on the register of
the Trust as of the close of business on the relevant record dates, which, as
long as the CRESTS are represented by one or more global certificated securities
(each, a "Global Certificate"), will be the close of business on the Business
Day prior to the relevant Distribution Dates, unless otherwise provided in the
Declaration or unless a different regular record date is established or provided
for the corresponding interest payment date on the Convertible Debentures. If
the CRESTS are no longer represented by one or more Global Certificates, the
Regular Trustees will have the right to select record dates, which will be at
least one Business Day prior to the relevant Distribution Dates. Distributions
payable on any CRESTS that are not punctually paid on any Distribution Date will
cease to be payable to the person in whose name such CRESTS are registered on
the relevant record date, and such defaulted Distribution will instead be
payable to the person in whose name such CRESTS are registered on the special
record date or other specified date determined in accordance with the
Declaration.
At all times, the Distribution rate, the Distribution Dates and other
payment dates for the CRESTS will correspond to the interest rate, interest
payment dates and other payment dates on the Convertible Debentures, which are
the sole assets of the Trust.
Distributions on the CRESTS will be paid on the dates payable to the
extent that the Trust has funds available for the payment of such Distributions.
Such Distributions are payable only to the extent that payments are made in
respect of the Convertible Debentures held by the Property Trustee and to the
extent that the Trust has funds available for the payment of such Distributions.
See "Description of the Convertible Debentures." If the Company does not make
interest payments on the Convertible Debentures, the Property Trustee will not
have funds available to pay Distributions on the CRESTS.
The Company has the right under the Indenture to defer payments of
interest on the Convertible Debentures by extending the interest payment period
at any time, and from time to time, on the Convertible Debentures. As a
consequence of such Extension Period, Distributions on the CRESTS would be also
deferred (but despite such deferral would continue to accumulate at the then
applicable distribution rate per annum compounded quarterly) by the Trust during
any such Extension Period. Such right to extend the interest payment period for
the Convertible Debentures is limited to a period not exceeding 20 consecutive
quarterly periods and such Extension Period may not extend beyond the Stated
Maturity of the Convertible Debentures. In the event that the Company exercises
this right to defer payments of interest, then the Company will not, and will
not permit any subsidiary to, (x) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock or (y) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank on a parity with or junior in interest to
the Convertible Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks on a parity with or junior in interest to the
Convertible Debentures (other than (a) dividends or distributions in common
stock of the Company, (b) payments under the
-19-
<PAGE> 25
Guarantee, (c) any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or issuance of stock under any
such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, and (d) purchases of common stock related to the issuance of
common stock or rights under any of the Company's benefit plans). Prior to the
termination of any such Extension Period, the Company may further defer payments
of interest by extending the interest payment period, provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Convertible Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the above requirements. See "Risk Factors -- Risk
Factors Relating to the CRESTS -- Option to Extend Interest Payment Period",
"Description of the Convertible Debentures -- Option to Extend Interest Payment
Period" and "Certain United States Federal Income Tax Consequences -- Original
Issue Discount." The Company has no current intention of exercising its right to
defer payments of interest by extending the interest payment period of the
Convertible Debentures.
CONVERSION RIGHTS
GENERAL
The CRESTS will be convertible, in whole or in part (but only in whole
CRESTS), at any time beginning 90 days following the last date of original
issuance of any CRESTS, at the option of the holders thereof, into shares of
Servico Common Stock in the manner described below at an initial conversion
price equal to $21.42 per share of Servico Common Stock (equivalent to a
conversion ratio of 2.3343 shares of Servico Common Stock for each CRESTS),
subject to adjustment as described below (the "Conversion Price").
The right to convert CRESTS will terminate prior to the close of
business (i) on June 28, 2010 or (ii) in the case of CRESTS called for
redemption, on the second Business Day prior to the related redemption date,
unless the Property Trustee shall default in making payment of any moneys
payable upon such redemption. For information as to notices of redemption, see
"-- Redemption Procedures."
The terms of the CRESTS provide that a holder of CRESTS wishing to
exercise its conversion right shall deliver an irrevocable conversion request
(and, if such CRESTS is represented by a definitive certificate, the CRESTS
certificate(s), duly endorsed or assigned to the Trust in blank) to the Property
Trustee, as conversion agent (the "Conversion Agent"), directing the Conversion
Agent, on behalf of such holder, to exchange such CRESTS for a portion of the
Convertible Debentures and immediately convert such Convertible Debentures into
Servico Common Stock at the Conversion Price. Holders may obtain copies of the
required form of the conversion request from the Conversion Agent. So long as a
book-entry system for the CRESTS is in effect, however, procedures for
converting the CRESTS into shares of Servico Common Stock will differ, as
described under "Book-Entry Issuance -- Depositary Procedures." Each conversion
will be deemed to have been effected immediately prior to the close of business
on the date on which the conversion request is received by the Trust and the
conversion shall be at the Conversion Price in effect at such time and on such
date.
Fractional shares of Servico Common Stock or other common stock of the
Company are not to be issued upon conversion, but, in lieu thereof, the Company
will pay a cash adjustment based on the closing sale price thereof on the NYSE
Composite Tape on the trading day prior to the conversion date.
RIGHT TO RECEIVE DISTRIBUTIONS; DIVIDENDS ON SERVICO COMMON STOCK
Except as provided below, accumulated but unpaid Distributions will not
be paid in cash on the CRESTS that are converted nor will such accumulated
Distributions be converted into additional shares of Servico Common Stock.
Holders of CRESTS at the close of business on a Distribution record date will be
entitled to receive the Distribution payable on such CRESTS (except that holders
of CRESTS called for redemption on a redemption date between such record date
and the Distribution Date shall not be entitled to receive such Distribution on
such Distribution Date) on the corresponding Distribution Date notwithstanding
the conversion of such CRESTS following such Distribution record date and prior
to such Distribution Date. However, CRESTS surrendered for exchange for
Convertible Debentures for conversion during the period between the close of
business on any Distribution record date and the opening of business on the
corresponding Distribution Date (except CRESTS called for redemption on a
redemption date during such period) must be accompanied by payment of an amount
equal to the Distribution payable on such CRESTS on such Distribution Date. A
holder of CRESTS on a Distribution record date who (or whose transferee) tenders
any such CRESTS for exchange for Convertible Debentures for conversion into
shares of Servico Common Stock on the corresponding Distribution Date will
receive the Distribution payable on such CRESTS on such date, and the converting
holder need not include payment of the amount of such Distribution upon
surrender of CRESTS for exchange for Convertible Debentures for conversion. The
Company will make no payment or allowance for dividends on the shares of Servico
Common Stock issued on conversion.
The Company will not redeem any Convertible Debentures (and thus the
CRESTS will not be redeemed) unless all accrued and unpaid interest has been
paid on all outstanding Convertible Debentures for all quarterly interest
payment periods terminating on or prior to the last interest payment date before
the date of redemption. Since the Company is required to pay all accrued and
unpaid interest, other than for the current quarter, prior to redeeming the
CRESTS, holders choosing to convert
-20-
<PAGE> 26
their CRESTS in order to avoid such redemption will, at most, forego actual
receipt of a cash Distribution payment only for the current quarter.
CONVERSION PRICE ADJUSTMENTS
The Conversion Price for the Convertible Debentures (and thus the
Conversion Price of the CRESTS) will be subject to adjustment upon certain
events, including:
(i) dividends and other distributions payable in Servico Common
Stock on any class of capital stock of the Company and combinations and
subdivisions of Servico Common Stock;
(ii) the issuance of certain rights, options or warrants entitling
the holder thereof to subscribe for or purchase Servico Common Stock at
less than the Current Market Price per share of Servico Common Stock
(calculated as set forth in the Indenture); provided that if such rights,
options or warrants are only exercisable upon the occurrence of certain
triggering events, then the Conversion Price of the Convertible Debentures
(and thus the Conversion Price of the CRESTS) will not be adjusted until
such triggering events occur;
(iii) distributions to all holders of Servico Common Stock of any
shares of capital stock (other than any common stock of the Company),
evidences of indebtedness or cash or other assets of the Company (including
securities, but excluding, among other things, those dividends,
distributions, rights, options and warrants referred to above and dividends
consisting exclusively of cash and securities received pursuant to a merger
or consolidation described below);
(iv) distributions consisting exclusively of cash (excluding any
cash distributions referred to in (iii) above and any cash distributed in a
merger or consolidation referred to below) to all holders of Servico Common
Stock, if the aggregate amount of all such cash distributions, together
with (A) all other all-cash distributions (to which such Conversion Price
adjustment would otherwise apply) made within the preceding 12 months not
triggering a Conversion Price adjustment and (B) all Excess Purchase
Payments (as defined below) in respect of each tender offer or exchange
offer for Servico Common Stock concluded by the Company or any of its
subsidiaries within the preceding 12 months not triggering a Conversion
Price adjustment, exceeds an amount equal to 10% of the product of the
Current Market Price per share of Servico Common Stock (calculated as set
forth in the Indenture) times the number of shares of Servico Common Stock
outstanding on the date fixed for determination of holders of Servico
Common Stock entitled to receive such distribution; and
(v) payment of an Excess Purchase Payment, if the aggregate amount
of such Excess Purchase Payment, together with (A) the aggregate amount of
any all-cash distributions (excluding any cash distributions referred to in
(iii) above and any cash distributed in a merger or consolidation referred
to below) made within the preceding 12 months not triggering a Conversion
Price adjustment and (B) all Excess Purchase Payments in respect of each
tender or exchange offer for Servico Common Stock concluded by the Company
or any of its subsidiaries within the preceding 12 months not triggering a
Conversion Price adjustment, exceeds an amount equal to 10% of the product
of the Current Market Price per share of Servico Common Stock (calculated
as set forth in the Indenture) times the number of shares of Servico Common
Stock outstanding on the expiration date of such tender offer or exchange
offer.
For purposes of these Conversion Price adjustments, the term "Excess Purchase
Payment" means the excess, if any, of (A) the aggregate of the cash and the
value of all other consideration paid by the Company or any of its subsidiaries
with respect to the shares of Servico Common Stock acquired in a tender or
exchange offer by the Company over (B) the Current Market Price per share of
common stock (calculated as set forth in the Indentures) times the number of
shares of Servico Common Stock acquired in the tender or exchange offer.
A reclassification of Servico Common Stock into which Convertible
Debentures are then convertible into securities which include securities other
than such Servico Common Stock (other than any reclassification upon a
consolidation or merger to which the second paragraph below applies) shall be
deemed to involve (i) a distribution of such securities other than such Servico
Common Stock to all holders of such Servico Common Stock and (ii) a subdivision
or combination, as the case may be, of the number of shares of such Servico
Common Stock outstanding immediately prior to such reclassification into the
number of shares of such Servico Common Stock outstanding immediately
thereafter.
The Company from time to time may reduce the Conversion Price of the
Convertible Debentures (and thus the Conversion Price of the CRESTS) by any
amount for any period of at least 20 Business Days (or such other period as may
then be required by applicable law), in which case the Company shall give at
least 15 days' notice of such reduction to each holder of CRESTS and each holder
of Convertible Debentures, if the Company's Board of Directors (the "Board") has
made a determination that such reduction would be in the best interests of the
Company. The Company may, at its option, make such reductions in the Conversion
Price, in addition to those set forth above, as the Board determines to be
necessary in order that any event treated for federal income tax purposes as a
dividend of stock or stock rights will not be taxable to recipients thereof. The
Company will comply with applicable law, including Rule 13e-4 under the Exchange
Act, in connection with any such adjustment to the conversion price. See
"Certain United States Federal Income Tax Consequences -- Conversion Price
Adjustment."
-21-
<PAGE> 27
In case the Company shall be a party to any Fundamental Change (as
defined below), each Convertible Debenture (and thus each CRESTS), if
outstanding after the consummation of the transaction, will be convertible
thereafter into:
(x) in the case of any such transaction that does not
constitute a Common Stock Fundamental Change (as defined below) and
subject to funds being legally available for such purpose under
applicable law at the time of such conversion, the kind and amount of
the securities, cash or other property that would have been receivable
upon such recapitalization, reclassification, consolidation, merger,
sale, transfer or share exchange by a holder of the number of shares of
Servico Common Stock issuable upon conversion of such CRESTS
immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange, after giving
effect, in the case of any Non-Stock Fundamental Change (as defined
below), to any adjustment in the Conversion Price in accordance with
clause (i) of the following paragraph, and
(y) in the case of any such transaction that constitutes a
Common Stock Fundamental Change, common stock of the kind received by
holders of Servico Common Stock as a result of such Common Stock
Fundamental Change in an amount determined in accordance with clause
(ii) of the following paragraph.
The Company formed by such consolidation or resulting from such merger or that
acquires assets or that acquires the Company's shares, as the case may be, shall
enter into a supplemental indenture with the Indenture Trustee, satisfactory in
form to the Indenture Trustee and executed and delivered to the Indenture
Trustee, the provisions of which shall establish such right. Such supplemental
indenture shall provide for adjustments that, for events subsequent to the
effective date of such supplemental indenture, shall be as nearly equivalent as
may be practicable to the relevant adjustments provided for in the preceding
paragraphs and in this paragraph.
Notwithstanding any other provision in the preceding paragraphs to the
contrary, if any Fundamental Change occurs, then the Conversion Price in effect
will be adjusted immediately after such Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the
Conversion Price immediately following such Non- Stock Fundamental
Change shall be the lower of (A) the Conversion Price in effect
immediately prior to such Non- Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to the
preceding paragraphs, and (B) the product of (1) the greater of the
Applicable Price (as defined below) and the then applicable Reference
Market Price (as defined below) and (2) a fraction, the numerator of
which is $50 and the denominator of which is (x) the amount of the
Redemption Price for one CRESTS if the optional redemption date were
the date of such Non-Stock Fundamental Change (or, for the period
commencing June 17, 1998 and ending June 29, 1999, the twelve month
periods commencing June 30, 1999 and 2000 and the period beginning June
30, 2001 and ending July 2, 2002, the product of 107%, 106.3%, 105.6%
and 104.9%, respectively), times $50 plus (y) any then accumulated and
unpaid Distributions on one CRESTS; and
(ii) in the case of a Common Stock Fundamental Change, the
Conversion Price immediately following such Common Stock Fundamental
Change shall be the Conversion Price in effect immediately prior to
such Common Stock Fundamental Change, but after giving effect to any
other prior adjustments effected pursuant to the preceding paragraphs,
multiplied by a fraction, the numerator of which is the Purchaser Stock
Price (as defined below) and the denominator of which is the Applicable
Price; PROVIDED, that in the event of a Common Stock Fundamental Change
in which (A) 100% of the value of the consideration received by a
holder of Servico Common Stock is common stock of the successor,
acquirer or other third party (and cash, if any, paid with respect to
any fractional interests in such common stock resulting from such
Common Stock Fundamental Change) and (B) all of the Servico Common
Stock (other than treasury shares and shares held by subsidiaries of
Servico) shall have been exchanged for, converted into or acquired for,
common stock of the successor acquirer or other third party (and cash,
if any, paid with respect to any fractional interests in such common
stock resulting from such Common Stock Fundamental Change), the
Conversion Price immediately following such Common Stock Fundamental
Change shall be the Conversion Price in effect immediately prior to
such Common Stock Fundamental Change multiplied by a fraction, the
numerator of which is one (1) and the denominator of which is the
number of shares of common stock of the successor, acquirer or other
third party received by a holder of one share of Servico Common Stock
as a result of such Common Stock Fundamental Change.
Depending upon whether a Fundamental Change is a Non-Stock Fundamental
Change or a Common Stock Fundamental Change, a holder may receive significantly
different consideration upon conversion. In the event of a Non-Stock Fundamental
Change, the holder has the right to convert CRESTS into the kind and amount of
the shares of stock and other securities or property or assets (including cash),
except as otherwise provided above, that would have been receivable upon such
Non-Stock Fundamental Change by a holder of the number of shares of Servico
Common Stock issuable upon conversion of such CRESTS immediately prior to such
Non-Stock Fundamental Change, after giving effect to any adjustment in the
Conversion Price in accordance with clause (i) of the preceding paragraph.
However, in the event of a Common Stock Fundamental Change in which less than
100% of the value of the consideration received by a holder of Servico Common
Stock is common stock of the successor, acquirer or other third party, a holder
of a CRESTS who converts such CRESTS following the Common Stock Fundamental
Change will receive consideration in the form of such common stock only, whereas
a holder who converted such CRESTS prior to the Common Stock Fundamental Change
would have received consideration in the form
-22-
<PAGE> 28
of such common stock as well as any other securities or assets (which may
include cash) issuable upon conversion of such CRESTS immediately prior to such
Common Stock Fundamental Change.
The term "Applicable Price" means (i) in the event of a Non-Stock
Fundamental Change in which the holders of Servico Common Stock receive only
cash, the amount of cash received by a holder of one share of Servico Common
Stock and (ii) in the event of any other Fundamental Change, the average of the
daily Closing Prices (as defined in the Indenture) of the Servico Common Stock
during the 10 Trading Days (as defined in the Indenture) immediately prior to
the record date for the determination of the holders of Servico Common Stock
entitled to receive cash, securities, property or other assets in connection
with such Fundamental Change or, if there is no such record date, prior to the
date upon which the holders of Servico Common Stock shall have the right to
receive such cash, securities, property or other assets, but the adjustment
shall be based upon the consideration that the holders of Servico Common Stock
received in the transaction or event as a result of which more than 50% of the
Servico Common Stock shall have been exchanged for, converted into or acquired
for, or shall constitute solely the right to receive such cash, securities,
property or other assets.
The term "Common Stock Fundamental Change" means any Fundamental Change
in which more than 50% of the value (as determined in good faith by the
Company's Board of Directors) of the consideration received by holders of
Servico Common Stock consists of common stock that, for the 10 Trading Days
immediately prior to such Fundamental Change, has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on The Nasdaq National Market System; PROVIDED, that a
Fundamental Change shall not be a Common Stock Fundamental Change unless either
(i) the Company continues to exist after the occurrence of such Fundamental
Change and the outstanding CRESTS continue to exist as outstanding CRESTS or
(ii) the outstanding CRESTS continue to exist as CRESTS and are convertible into
shares of the common stock of the corporation succeeding to the business of the
Company. The Merger will be deemed a Common Stock Fundamental Change.
The term "Fundamental Change" means the occurrence of any transaction
or event or series of transactions or events pursuant to which all or
substantially all of the Servico Common Stock shall be exchanged for, converted
into, acquired for or shall constitute solely the right to receive cash,
securities, property or other assets (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise); PROVIDED, in the case of any such series of
transactions or events, for purposes of adjustment of the Conversion Price, such
Fundamental Change shall be deemed to have occurred when substantially all of
the Servico Common Stock shall have been exchanged for, converted into or
acquired for, or shall constitute solely the right to receive, such cash,
securities, property or other assets.
The term "Non-Stock Fundamental Change" means any Fundamental Change
other than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common
Stock Fundamental Change, the average of the daily Closing Price for one share
of the common stock received by holders of Servico Common Stock in such Common
Stock Fundamental Change during the 10 Trading Days immediately prior to the
date fixed for the determination of the holders of Servico Common Stock entitled
to receive such common stock or, if there is no such date, prior to the date
upon which the holders of Servico Common Stock shall have the right to receive
such common stock.
The term "Reference Market Price" shall initially mean $11.22 (which is
an amount equal to 66% of the reported last sale price for Servico Common Stock
on the New York Stock Exchange on June 8, 1998) and, in the event of any
adjustment to the Conversion Price other than as a result of a Fundamental
Change, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of the initial Reference
Market Price to the initial Conversion Price of $21.42 per share.
If the Merger is consummated, each share of Servico Common Stock issued
and outstanding immediately prior to the Effective Time of the Merger will be
converted into the right to receive one share of Lodgian Common Stock.
Accordingly, each Convertible Debenture (and thus each CRESTS) outstanding after
consummation of the Merger will be convertible into shares of Lodgian Common
Stock at the same conversion price, on the same terms, in the same manner and
subject to the same future adjustments as set forth under "-- Conversion
Rights."
No adjustment of the Conversion Price in respect of the Servico Common
Stock or any other conversion price in respect of any other common stock of the
Company will be required to be made in any case until cumulative adjustments
amount to 1% or more thereof. Any adjustments not so required to be made will be
carried forward and taken into account in subsequent adjustments.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the
Convertible Debentures held by the Trust, whether at Stated Maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption will be applied by the Property Trustee to redeem a like
aggregate amount of the Trust Securities. If less than all of the Convertible
Debentures held by the Trust are to be repaid or redeemed on a redemption date,
then, except as described under "--Subordination of Common Securities," the
proceeds from such repayment or redemption will be allocated pro rata to the
-23-
<PAGE> 29
redemption of the Trust Securities. See "--Redemption Procedures." See
"Description of the Convertible Debentures--Optional Redemption" for a
description of the Company's options to redeem the Convertible Debentures.
SPECIAL EVENT DISTRIBUTION OR REDEMPTION OF CONVERTIBLE DEBENTURES
If, at any time, either a Tax Event or an Investment Company Event
(each, a "Special Event") shall occur, the Regular Trustees may, except in
certain limited circumstances described below, dissolve the Trust and, after
satisfaction of liabilities to creditors, cause Convertible Debentures held by
the Property Trustee, having an aggregate principal amount equal to the
aggregate liquidation amount of the CRESTS, with an interest rate identical to
the interest rate of the CRESTS, and accrued and unpaid interest equal to
accumulated and unpaid Distributions on the CRESTS, and having the same record
date for payment as the CRESTS, to be distributed to the holders of the Trust
Securities in liquidation of such holders' interests in the Trust on a pro rata
basis, within 90 days following the occurrence of such Special Event; provided,
however, that, in the case of a Tax Event, such dissolution and distribution
shall be conditioned on (i) the Regular Trustees' receipt of an opinion of
independent tax counsel experienced in such matters (which opinion may rely on
published revenue rulings of the Internal Revenue Service ("IRS")) to the effect
that the holders of the CRESTS will not recognize any gain or loss for United
States federal income tax purposes as a result of the dissolution of the Trust
and the distribution of Convertible Debentures (a "No Recognition Opinion"),
(ii) the Company or the Trust being unable to eliminate, which elimination shall
be complete within such 90-day period, such Special Event by taking some
ministerial action (such as filing a form or making an election, or pursuing
some other reasonable measure) that has no adverse effect on the Trust, the
Company or the holders of the CRESTS or does not subject any of them to more
than de minimis regulatory requirements and (iii) the Company's prior written
consent to such dissolution and distribution.
Furthermore, if a Special Event occurs (i) that is a Tax Event and the
Company has received an opinion of independent tax counsel experienced in such
matters that, as a result of such Tax Event, there is more than an insubstantial
risk that the Company would be precluded from deducting the interest on the
Convertible Debentures for United States federal income tax purposes even after
the Convertible Debentures were distributed to the holders of Trust Securities
in liquidation of such holders' interests in the Trust as described in the
Declaration or (ii) that is a Tax Event or an Investment Company Event and such
Regular Trustees shall have been informed by independent tax counsel experienced
in such matters that it, for substantive reasons, cannot deliver a No
Recognition Opinion to the Trust, the Company shall have the right to redeem the
Convertible Debentures, in whole or in part, for cash at 100% of the principal
amount thereof, plus accrued and unpaid interest thereon to but excluding the
date of redemption (the "Special Redemption Price"), within 90 days following
the occurrence of such Special Event. Following such redemption, Trust
Securities with an aggregate initial liquidation amount equal to the aggregate
principal amount of the Convertible Debentures so redeemed shall be redeemed by
the Trust at a redemption price equal to 100% of the liquidation amount to be
redeemed on a pro rata basis, plus accumulated but unpaid Distributions thereon
to but excluding such redemption date; provided, however, that if at the time
there is available to the Company or the Trust the opportunity to eliminate,
which elimination shall be complete within the 90-day period, such Special Event
by taking some ministerial action, the Trust or the Company will pursue such
ministerial action in lieu of redemption. Under current United States federal
income tax law and interpretations thereof and assuming that, as expected, the
Trust is treated as a grantor trust, a distribution of the Convertible
Debentures will not be a taxable event to the Trust and/or to holders of the
CRESTS. Should there be a change in law, a change in legal interpretation,
certain Tax Events or other circumstances, however, the distribution of
Convertible Debentures could be a taxable event to holders of the CRESTS in
which event the Company could, at its option, redeem the Convertible Debentures
for cash. See "Certain United States Federal Income Tax
Consequences--Distribution of Convertible Debentures or Cash Upon Liquidation of
the Trust." The Trust will issue a press release announcing any such redemption.
If the Company does not elect any of the options described above, the
CRESTS will remain outstanding until the repayment of the Convertible
Debentures, whether at maturity or redemption, and in the event a Tax Event has
occurred and is continuing, under the Indenture, the Company, as borrower, will
be obligated to pay any taxes, duties, assessments and other governmental
charges (other than United States withholding taxes) to which the Trust has
become subject as a result of a Tax Event. See "Description of the Convertible
Debentures--Payment of Expenses of the Trust."
"Investment Company Event" as used herein means the receipt by the
Trust of an opinion of counsel, rendered by a law firm having a recognized
national securities practice, to the effect that, as a result of the occurrence
of a change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" that is required to be registered under the 1940 Act, which Change in
1940 Act Law becomes effective on or after the date on which the CRESTS were
initially issued and sold.
"Tax Event" as used herein means the receipt by the Trust of an opinion
of independent tax counsel experienced in such matters, to the effect that, as a
result of (a) any amendment to, change in or announced proposed change in the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or (b) any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or proposed change,
pronouncement or decision is announced on or after the date on which the CRESTS
were initially issued and sold, there is more than an insubstantial risk that
(i) the Trust is, or will be within 90 days of the date of such opinion, subject
to United States federal income tax with respect to income received or accrued
on the Convertible
-24-
<PAGE> 30
Debentures, (ii) interest payable by the Company on the Convertible Debentures
is not, or within 90 days of the date of such opinion, will not be, deductible
by the Company, in whole or in part, for United States federal income tax
purposes, or (iii) the Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges; provided, however, that a Tax Event shall not be
deemed to occur under (ii) above if the Company is merely required to defer
taking a deduction for any interest or OID that accrues with respect to the
Convertible Debentures until such interest payment or OID is paid by the Company
in cash.
Recently, the IRS asserted that the interest payable on a security with
terms that are similar to the terms of the Convertible Debentures (but with a
longer maturity than the Convertible Debentures) was not deductible for United
States federal income tax purposes. The taxpayer in that case has filed a
petition in the United States Tax Court challenging the IRS's position on this
matter. If this matter is in fact litigated and the Tax Court were to sustain
the IRS's position on this matter, such judicial decision could constitute a Tax
Event which could result in an early mandatory redemption of the CRESTS.
REDEMPTION PROCEDURES
CRESTS redeemed on each redemption date will be redeemed at the
redemption price in respect of the Convertible Debentures plus an amount equal
to accrued and unpaid Distributions thereon through the date of redemption (the
"Redemption Price") with the applicable proceeds from the contemporaneous
redemption or payment of the Convertible Debentures. Redemptions of the CRESTS
will be made and the Redemption Price will be payable on each redemption date
only to the extent that the Trust has sufficient funds available for the payment
of such Redemption Price. See "-- Subordination of Common Securities."
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of CRESTS to be redeemed
at its registered address and be published in a newspaper of general circulation
in New York City made once a week for two successive weeks commencing not less
than 30 nor more than 60 days before the redemption date. If the Trust gives a
notice of redemption in respect of the CRESTS, then, by 12:00 noon, New York
City time, on the redemption date, to the extent funds are available, the
Property Trustee will deposit irrevocably with The Depository Trust Company
("DTC") funds sufficient to pay the applicable Redemption Price for all
securities held at DTC and will give DTC irrevocable instructions and authority
to pay the Redemption Price to the holders of the CRESTS. See "Book-Entry
Issuance." If any CRESTS are not represented by one or more Global Certificates,
the Trust, to the extent funds are available, will irrevocably deposit with the
Paying Agent (as defined herein) for such CRESTS funds sufficient to pay the
applicable Redemption Price and will give the Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing the CRESTS. Notwithstanding the
foregoing, Distributions payable on or prior to the redemption date for any
CRESTS called for redemption will be payable to the holders of such CRESTS on
the relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited or paid as required, then
immediately prior to the close of business on the date of such deposit or
payment, all rights of the holders of such CRESTS so called for redemption will
cease, except the right of the holders of such CRESTS to receive the Redemption
Price, but without interest on such Redemption Price, and such CRESTS will cease
to be outstanding. In the event that any date fixed for redemption of CRESTS is
not a Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable.
In the event that payment of the Redemption Price in respect of CRESTS
called for redemption is improperly withheld or refused and not paid either by
the Trust or by the Company pursuant to the Guarantee as described under
"Description of the Guarantee," Distributions on such CRESTS will continue to
accumulate at the applicable rate per annum, from the redemption date originally
established by the Trust for the CRESTS to the date such Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price. See
"-- Distributions."
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding CRESTS by tender, in the open market or
by private agreement.
If fewer than all of the Trust Securities issued by the Trust are to be
redeemed on a redemption date, then the aggregate amount of such Trust
Securities to be redeemed will be allocated pro rata among the CRESTS and the
Common Securities and the CRESTS to be redeemed will be redeemed pro rata from
each holder of CRESTS, it being understood that, in respect of CRESTS registered
in the name of and held of record by DTC or its nominee, the distribution of the
proceeds of such redemption will be made to each member of, or participant in,
DTC (or person on whose behalf such nominee holds such securities) in accordance
with the procedures applied by DTC or its nominee. If CRESTS are represented by
one or more Global Certificates, they will be redeemed as described below under
"Book-Entry Issuance." For all purposes of the Declaration, unless the context
otherwise requires, all provisions relating to the redemption of CRESTS shall
relate, in the case of any CRESTS redeemed or to be redeemed only in part, to
the portion of the aggregate liquidation amount of CRESTS which has been or is
to be redeemed.
-25-
<PAGE> 31
REPURCHASE AT THE OPTION OF HOLDERS UPON NON-COMPLETION OF MERGER
In the event that the Amended Merger Agreement is terminated or the
Merger has not been consummated by December 31, 1998, each holder of CRESTS will
have the right to require the Company to repurchase Convertible Debentures in an
aggregate principal amount equal to the aggregate liquidation amount of CRESTS
that a holder elects to cause the Trust to repurchase pursuant to the offer
described below (the "Non-Completion Offer") at an offer price in cash (the
"Non- Completion Payment") equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest thereon, to the date of repurchase.
Within 20 days after the date (the "Date of Non-Completion") that is the earlier
of (i) the date of termination of the Amended Merger Agreement and (ii) December
31, 1998 if the Merger has not been consummated by such date, the Trust will
issue a press release and mail a notice (the "Non-Completion Notice") to each
holder offering to repurchase the CRESTS, on the date specified in the
Non-Completion Notice (the "Non-Completion Payment Date"), which date shall be
no earlier than 30 days and not later than 60 days from the date such
Non-Completion Notice is mailed, pursuant to the procedures required by the
Indenture and described in such notice. The Company and the Trust will comply
with the requirements of Rule 13e-4 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Convertible
Debentures and the CRESTS.
On the Non-Completion Payment Date, the Company will, to the extent
lawful, (i) deposit with the Property Trustee an amount equal to the
Non-Completion Payment in respect of the aggregate principal amount of
Convertible Debentures tendered by the Property Trustee and (ii) deliver or
cause to be delivered to the Debenture Trustee the Convertible Debentures so
tendered together with a certification setting forth the aggregate principal
amount of Convertible Debentures or portions thereof being purchased by the
Company. On the Non-Completion Payment Date, the Property Trustee will, to the
extent lawful and to the extent that funds are available, (i) tender to the
Company an aggregate principal amount of Convertible Debentures equal to the
aggregate liquidation amount of CRESTS properly tendered by holders pursuant to
the Non-Completion Offer, (ii) accept for payment all CRESTS or portions thereof
properly tendered pursuant to the Non-Completion Offer, (iii) deposit
irrevocably with DTC an amount equal to the Non-Completion Payment in respect of
all CRESTS or portions thereof so tendered which were represented by one or more
Global Certificates and give DTC irrevocable instructions and authority to pay
the Non-Completion Payment to the relevant accounts at DTC or, if any CRESTS so
tendered are not represented by one or more Global Certificates, deposit
irrevocably with the Paying Agent (as defined herein) for such CRESTS an amount
equal to the Non-Completion Payment in respect of such CRESTS and give such
Paying Agent irrevocable instructions and authority to pay the Non-Completion
Payment to the holders thereof. The Debenture Trustee will promptly authenticate
and deliver to the Property Trustee a new Convertible Debenture equal in
principal amount to any unpurchased portion of the Convertible Debentures
surrendered, if any. The Trust will promptly authenticate and deliver (or cause
to be transferred by book entry) to each holder a new CRESTS equal in
liquidation amount to any unpurchased portion of the CRESTS surrendered, if any.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Trust
Securities, as applicable, shall be made pro rata based on the liquidation
amount of such Trust Securities; provided, however, that if on any Distribution
Date or redemption date an Indenture Event of Default shall have occurred and be
continuing, no payment of any Distribution on, or Redemption Price of, any of
the Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the outstanding CRESTS for all Distribution periods terminating on or prior
thereto, or in the case of payment of the Redemption Price the full amount of
such Redemption Price on all of the outstanding CRESTS then called for
redemption, shall have been made or provided for, and all funds available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the CRESTS then due and payable.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Declaration, the Trust shall automatically dissolve on
the first to occur of: (i) certain events of bankruptcy, dissolution or
liquidation of the Company; (ii) the distribution of the Convertible Debentures
to the holders of the Trust Securities; (iii) the redemption of all of the
CRESTS in connection with the maturity or redemption of all of the Convertible
Debentures; (iv) the entry by a court of competent jurisdiction of an order for
the dissolution of the Trust; and (v) June 30, 2020.
In the event of any voluntary or involuntary liquidation, dissolution,
or winding-up of the Trust (each a "Liquidation"), the holders of the CRESTS on
the date of the Liquidation will be entitled to receive, out of the assets of
the Trust available for distribution to holders of Trust Securities after
satisfaction of the Trusts' liabilities to creditors, if any, distributions in
cash or other immediately available funds in an amount equal to the aggregate of
the stated liquidation amount of $50 per CRESTS plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"), unless, in connection with such Liquidation, Convertible
Debentures in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the Distribution rate
of, and accrued and unpaid interest equal to accumulated and unpaid
Distributions on, the Trust Securities shall be distributed on a pro rata basis
to the holders of the Trust Securities in exchange for such Trust Securities. If
such Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly
-26-
<PAGE> 32
by the Trust on the CRESTS shall be paid on a pro rata basis. The holders of the
Common Securities will be entitled to receive distributions upon any such
liquidation pro rata with the holders of the CRESTS, except that if an Indenture
Event of Default has occurred and is continuing, the CRESTS shall have a
preference over the Common Securities with regard to such distributions.
After the liquidation date is fixed for any distribution of Convertible
Debentures to holders of the CRESTS (i) the CRESTS will no longer be deemed to
be outstanding, (ii) if the CRESTS are represented by one or more Global
Certificates, DTC or its nominee, as a record holder of CRESTS, will receive a
registered Global Certificate or Certificates representing the Convertible
Debentures to be delivered upon such distribution and (iii) any certificates
representing CRESTS not held by DTC or its nominee will be deemed to represent
Convertible Debentures having a principal amount equal to the liquidation amount
of such CRESTS, and bearing accrued and unpaid interest in an amount equal to
the accrued and unpaid Distributions on such CRESTS until such certificates are
presented for cancellation whereupon the Company will issue to such holder, and
the Indenture Trustee will authenticate, a certificate representing such
Convertible Debentures.
TRUST ENFORCEMENT EVENTS
An Indenture Event of Default constitutes an event of default under the
Declaration with respect to the Trust Securities (a "Trust Enforcement Event").
See "Description of the Convertible Debentures -- Indenture Events of Default."
Upon the occurrence and continuance of a Trust Enforcement Event, the
Property Trustee as the sole holder of the Convertible Debentures will have the
right under the Indenture to declare the principal amount of the Convertible
Debentures due and payable. The Company and the Trust are each required to file
annually with the Property Trustee an officer's certificate as to its compliance
with all conditions and covenants under the Declaration.
If the Property Trustee fails to enforce its rights under the
Convertible Debentures, any holder of CRESTS may institute a legal proceeding
against the Company to enforce the Property Trustee's rights under the
Convertible Debentures without first instituting a legal proceeding against the
Property Trustee or any other person or entity. In addition, if a Trust
Enforcement Event has occurred and is continuing and such event is attributable
to the failure of the Company to pay interest, principal, or premium on the
Convertible Debentures on the date such interest, principal, or premium is
otherwise payable (or in the case of redemption, the redemption date), then the
registered holder of CRESTS may directly institute a proceeding for enforcement
of payment to such holder of the principal of, premium, if any, or interest on
the Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the CRESTS of such holder on or after the respective due
date specified in the Convertible Debentures. In connection with such Direct
Action, the rights of the Company, as holder of the Common Securities, will be
subrogated to the rights of such holder of CRESTS under the Declaration to the
extent of any payment requested to be made by the Company to such holder of
CRESTS in such Direct Action.
Pursuant to the Declaration, the holder of the Common Securities will
be deemed to have waived any Trust Enforcement Event with respect to the Common
Securities until all Trust Enforcement Events with respect to the CRESTS have
been cured, waived or otherwise eliminated. Until such Trust Enforcement Events
with respect to the CRESTS have been so cured, waived or otherwise eliminated,
the Property Trustee will be deemed to be acting solely on behalf of the holders
of the CRESTS and only the holders of the CRESTS will have the right to direct
the Property Trustee in accordance with the terms of the CRESTS.
VOTING RIGHTS; AMENDMENT OF DECLARATION
Except as provided below and as otherwise required by law and the
Declaration, the holders of the CRESTS will have no voting rights.
So long as any Convertible Debentures are held by the Property Trustee,
the holders of a majority in liquidation amount of the CRESTS shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or to direct the exercise of any trust
or power conferred upon the Property Trustee under the Declaration, including
the right to direct the Property Trustee, as holder of the Convertible
Debentures, to (i) exercise the remedies available to it under the Indenture as
a holder of the Convertible Debentures, (ii) consent to any amendment or
modification of the Indenture or the Convertible Debentures where such consent
shall be required or (iii) waive any past default and its consequences that is
waivable under the Indenture; provided, however, that if an Indenture Event of
Default has occurred and is continuing, then the holders of 25% of the aggregate
liquidation amount of the CRESTS may direct the Property Trustee to declare the
principal of and premium, if any, and interest on the Convertible Debentures due
and payable; provided, further, that where a consent or action under the
Indenture would require the consent or act of the holders of more than a
majority of the aggregate principal amount of Convertible Debentures affected
thereby, only the holders of the percentage of the aggregate stated liquidation
amount of the CRESTS which is at least equal to the percentage required under
the Indenture may direct the Property Trustee to give such consent or to take
such action. The Property Trustee shall notify each holder of the CRESTS of any
notice of any Indenture Event of Default which it receives from the Company with
respect to the Convertible Debentures. Except with respect to directing the
time, method, and place of conducting a proceeding for a remedy, the Property
Trustee shall be under no obligation to take any of the actions described in
clauses (i) and (ii) above unless the Property Trustee has obtained an opinion
of independent tax counsel to the effect that the Trust will not fail to be
-27-
<PAGE> 33
classified as a grantor trust for United States federal income tax purposes, as
a result of such action, and each holder will be treated as owning an undivided
beneficial ownership interest in the Convertible Debentures.
The Declaration may be amended from time to time by the Company and a
majority of the Regular Trustees (and in certain circumstances the Property
Trustee and the Delaware Trustee), without the consent of the holders of the
CRESTS, (i) to cure any ambiguity or correct or supplement any provisions in the
Declaration that may be defective or inconsistent with any other provision, or
to make any other provisions with respect to matters or questions arising under
the Declaration that shall not be inconsistent with the other provisions of the
Declaration, (ii) to add to the covenants, restrictions or obligations of the
Company in its capacity as sponsor of the Trust, (iii) to conform to any change
in Rule 3a-5 under the 1940 Act or written change in interpretation or
application of Rule 3a-5 under the 1940 Act by any legislative body, court,
government agency or regulatory authority which amendment does not have a
material adverse effect on the rights, preferences or privileges of the holders
of the Trust Securities or (iv) to modify, eliminate or add to any provisions of
the Declaration to such extent as shall be necessary to ensure that the Trust
will be classified for United States federal income tax purposes as a grantor
trust at all times that any Trust Securities are outstanding or to ensure that
the Trust will not be required to register as an "investment company" under the
1940 Act; provided, however, that such action shall not adversely affect in any
material respect the interests of any holder of Trust Securities, and any
amendments of the Declaration shall become effective when notice thereof is
given to the holders of Trust Securities. The Declaration may be amended by the
Company and a majority of the Regular Trustees with (i) the consent of holders
representing not less than 66-2/3% in liquidation amount of the outstanding
CRESTS and (ii) receipt by the Regular Trustees of an opinion of counsel to the
effect that such amendment or the exercise of any power granted to the Regular
Trustees in accordance with such amendment will not affect the Trust's status
for United States federal income tax purposes as a grantor trust or the Trust's
exemption from status as an "investment company" under the 1940 Act; provided
that, if any amendment or proposal that would adversely affect the powers,
preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise, would adversely affect only the
CRESTS or the Common Securities, then only the affected class will be entitled
to vote on such amendment or proposal and such amendment or proposal shall not
be effective except with the approval of 66-2/3% in liquidation amount of such
class of Trust Securities affected thereby, provided, further that without the
consent of each holder of Trust Securities affected thereby, the Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Trust Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date or
(ii) restrict the right of a holder of Trust Securities to institute suit for
the enforcement of any such payment on or after such date.
Any required approval or direction of holders of CRESTS may be given at
a meeting of holders of CRESTS convened for such purpose or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at which
holders of CRESTS are entitled to vote, or of any matter upon which action by
written consent of such holders is to be taken, to be given to each holder of
record of CRESTS in the manner set forth in the Declaration.
No vote or consent of the holders of CRESTS will be required for the
Trust to redeem and cancel the CRESTS in accordance with the Declaration.
Notwithstanding that holders of CRESTS are entitled to vote or consent
under any of the circumstances described above, any of the CRESTS that are owned
by the Company, the Trustees or any affiliate of the Company or any Trustees,
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
CRESTS.
Registration of transfers or exchanges of CRESTS will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange, the Trust may charge a sum sufficient to cover any such payment. If
the CRESTS are to be redeemed in part, the Trust will not be required (i) to
issue, register the transfer of or exchange any CRESTS during a period beginning
at the opening of business 15 days before the day of the mailing of the relevant
notice of redemption and ending at the close of business on the day of such
mailing or (ii) to register the transfer or exchange of any CRESTS so selected
for redemption, except in the case of any CRESTS being redeemed in part, any
portion thereof not to be redeemed or returned.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance
of a Trust Enforcement Event, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such Trust Enforcement
Event (which has not been cured or waived), must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at the
request of any holder of CRESTS unless it is offered reasonable security and
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
-28-
<PAGE> 34
PAYMENT AND PAYING AGENCY
Payments in respect of the Global Certificates shall be made to DTC,
which shall credit the relevant accounts at DTC on the applicable Distribution
payment dates or, if the CRESTS are not represented by one or more Global
Certificates, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the register in respect
of the registrar. The paying agent (the "Paying Agent") shall initially be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Regular Trustees and the Company. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Property
Trustee and the Company. In the event that the Property Trustee shall no longer
be the Paying Agent, the Regular Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Company) to act as Paying Agent.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below. The Trust may, at the request of the Company, with the consent
of the Regular Trustees and without the consent of the holders of the CRESTS,
the Delaware Trustee or the Property Trustee merge with or into, consolidate,
amalgamate, be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any State; provided that (i) such successor entity (if not the Trust) either
(a) expressly assumes all of the obligations of the Trust with respect to the
CRESTS or (b) substitutes for the CRESTS other securities having substantially
the same terms as the CRESTS (the "Successor Securities") so long as the
Successor Securities rank the same as the CRESTS rank in priority with respect
to distributions and payments upon liquidation, redemption and otherwise, (ii)
if the Trust is not the successor entity, the Company expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Convertible Debentures, (iii) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
cause the CRESTS (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the holders of the CRESTS (including any Successor Securities)
in any material respect, (v) such successor entity has a purpose identical to
that of the Trust, (vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer, or lease, the Company has received an opinion
from independent counsel to the Trust experienced in such matters to the effect
that (a) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the CRESTS (including any Successor Securities) in
any material respect and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, (1) neither the Trust nor such
successor entity will be required to register as an investment company under the
1940 Act and (2) the Trust or the successor entity will continue to be
classified as a grantor trust for United States federal income tax purposes,
(vii) the Company or any permitted successor or assignee owns all of the Common
Securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee and (viii) such successor entity expressly assumes all of the
obligations of the Trust with respect to the Trustees. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
aggregate liquidation amount of the CRESTS, consolidate, amalgamate, merge with
or into, be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes and each holder of
the CRESTS not to be treated as owning an undivided interest in the Convertible
Debentures.
MERGER OR CONSOLIDATION OF TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee
or any Regular Trustee that is not a natural person may be merged or converted
or with which such Trustee may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of such Trustee, shall be the successor of such Trustee under the
Declaration, provided such corporation shall be otherwise qualified and
eligible.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs
of and to operate the Trust in such a way that the Trust will not be deemed to
be an "investment company" required to be registered under the 1940 Act or
classified as other than a grantor trust for United States federal income tax
purposes and so that the Convertible Debentures will be treated as indebtedness
of the Company for United States federal income tax purposes. The Company and
the Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the Certificate of Trust or the Declaration, that the Company
and the Regular Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the CRESTS.
The Trust may not borrow money, issue debt, reinvest proceeds derived
from investments, mortgage or pledge any of its assets. In addition the Trust
may not undertake any activity that would cause the Trust not to be classified
as a grantor trust for United States federal income tax purposes.
-29-
<PAGE> 35
DESCRIPTION OF THE CONVERTIBLE DEBENTURES
The following description is subject to, and is qualified in its
entirety by reference to, the Indenture. Certain capitalized terms used herein
are defined in the Indenture.
Under certain circumstances involving the dissolution of the Trust,
including following the occurrence of a Special Event, Convertible Debentures
may be distributed to the holders of the Trust Securities in liquidation of the
Trust. See "Description the CRESTS -- Redemption -- Special Event Distribution
or Redemption of Convertible Debentures."
GENERAL
The Convertible Debentures were issued as an unsecured series of debt
under the Indenture. The Convertible Debentures are limited in aggregate
principal amount to the aggregate liquidation amount of all Trust Securities.
Additional series of debt may be issued under the Indenture.
The Convertible Debentures are not subject to a sinking fund provision.
The entire principal amount of the Convertible Debentures will mature and become
due and payable, together with any accrued and unpaid interest thereon,
including Compounded Interest (as defined herein), if any, on June 30, 2010.
If Convertible Debentures are distributed to holders of CRESTS in
liquidation of such holders' interests in the Trust, such Convertible Debentures
will initially be issued as a Global Security (as defined herein). See
"--Book-Entry Issuance." As described herein, under certain limited
circumstances, Convertible Debentures may be issued in certificated form in
exchange for a Global Security. See "Book-Entry Issuance--Depositary
Procedures." In the event that Convertible Debentures are issued in certificated
form, such Convertible Debentures will be in denominations of $50 and integral
multiples thereof and may be transferred or exchanged at the offices described
below. Payments on Convertible Debentures issued as a Global Security will be
made to DTC, a successor depositary or, in the event that no depositary is used,
to a Paying Agent for the Convertible Debentures. In the event Convertible
Debentures are issued in certificated form, principal, premium, if any, and
interest will be payable, the transfer of the Convertible Debentures will be
registrable and Convertible Debentures will be exchangeable for Convertible
Debentures of other denominations of a like aggregate principal amount at the
corporate trust office of the Debenture Trustee in New York, New York; provided
that payment of interest may be made at the option of the Company by check
mailed to the address of the holder entitled thereto. Notwithstanding the
foregoing, so long as the holder of the Convertible Debentures is the Property
Trustee, the payment of principal of, premium, if any, and interest on the
Convertible Debentures held by the Property Trustee will be made at such place
and to such account as may be designated by the Property Trustee.
SUBORDINATION
The Convertible Debentures are subordinated and junior in right of
payment to all present and future Senior Indebtedness (as defined herein) of the
Company but senior to all capital stock of the Company now outstanding or
hereafter issued by the Company, to the extent set forth in the Indenture.
In the event that (i) the Company shall default in the payment of any
principal, or premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise or (ii) an event of default occurs with
respect to any Senior Indebtedness permitting the holders thereof to accelerate
the maturity thereof and written notice describing such event of default is
given to the Company by the holders of Senior Indebtedness, then unless and
until such default in payment and event of default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash,
property, securities, by set-off or otherwise) shall be made or agreed to be
made on account of the Convertible Debentures or any interest thereon or in
respect of any repayment, redemption, retirement, purchase or other acquisition
of the Convertible Debentures.
In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceeding relating to the Company, its creditors or its property, (ii) any
proceeding for the liquidation, dissolution or other winding up of the Company,
voluntary or involuntary, whether or not involving insolvency or bankruptcy
proceedings, (iii) any assignment by the Company for the benefit of its
creditors or (iv) any other marshalling of the assets of the Company, all Senior
Indebtedness shall first be paid in full before any payment or distribution,
whether in cash, securities or other property, shall be made by the Company on
account of the Convertible Debentures. Any payment or distribution, whether in
cash, securities or other property (other than securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinate, at least to the extent provided in the
subordination provisions of the Indenture with respect to the indebtedness
evidenced by the Convertible Debentures, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for such subordination provisions) be payable or deliverable in
respect of the Convertible Debentures shall be paid or delivered directly to the
holders of Senior Indebtedness in accordance with the priorities then existing
among such holders until all Senior Indebtedness shall have been paid in full.
No present or future holder of any Senior Indebtedness shall be prejudiced in
the right to enforce subordination of the Convertible Debentures by any act or
failure to act on the part of the Company.
-30-
<PAGE> 36
Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash, securities or other
property equal to the amount of such Senior Indebtedness then outstanding. Upon
the payment in full of all Senior Indebtedness, the rights of the holders of the
Convertible Debentures shall be subrogated to all the rights of any holders of
Senior Indebtedness to receive any further payments or distributions applicable
to the Senior Indebtedness until the Convertible Debentures shall have been paid
in full, and such payments or distributions received by the holders of the
Convertible Debentures, by reason of such subrogation, of cash, securities or
other property which otherwise would be paid or distributed to the holders of
Senior Indebtedness, shall, as between the Company and its creditors (other than
the holders of Senior Indebtedness), on the one hand, and the holders of the
Convertible Debentures, on the other, be deemed to be a payment by the Company
on account of Senior Indebtedness, and not on account of the Convertible
Debentures.
The term "Senior Indebtedness" means, with respect to the Company, the
principal, premium, if any, and interest on (i) all indebtedness of the Company,
whether outstanding on the date hereof or hereafter created, incurred or
assumed, which is for money borrowed, or evidenced by a note or similar
instrument given in connection with the acquisition of any business, properties
or assets, including securities (other than trade accounts payable in the
ordinary course of business), (ii) any indebtedness of others of the kinds
described in the preceding clause (i) for the payment of which the Company is
responsible or liable (directly or indirectly, contingently or otherwise) as
guarantor or otherwise and (iii) amendments, renewals, extensions and refundings
of any such indebtedness, unless in any instrument or instruments evidencing or
securing such indebtedness or pursuant to which the same is outstanding, or in
any such amendment, renewal, extension or refunding, it is expressly provided
that such indebtedness is not superior in right of payment to the Convertible
Debentures. The Senior Indebtedness shall continue to be Senior Indebtedness and
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of the Senior Indebtedness or
extension or renewal of the Senior Indebtedness. At June 30, 1998, the Senior
Indebtedness of the Company aggregated approximately $287.9 million (including
indebtedness of the consolidated subsidiaries of the Company.
The terms of the Convertible Debentures place no limit on the aggregate
amount of Senior Indebtedness that may be issued or incurred by the Company and
do not limit obligations of subsidiaries of the Company which obligations are
structurally senior to the Convertible Debentures.
CERTAIN COVENANTS OF THE COMPANY
Except as otherwise provided in the Indenture, for so long as the
Convertible Debentures are held by the Property Trustee, the Company will
covenant (i) to maintain directly or indirectly ownership of all of the Common
Securities; provided, however, that any permitted successor of the Company under
the Indenture may succeed to the Company's ownership of the Common Securities,
(ii) to cause the Trust to remain a statutory business trust, except in
connection with a distribution of the Convertible Debentures, the redemption of
all Trust Securities, or certain mergers, consolidations or amalgamations to
holders of Trust Securities, each as permitted by the Declaration, and not to
voluntarily dissolve, wind-up, liquidate or to be terminated, except as
permitted by the Declaration, (iii) to use its commercially reasonable efforts
to ensure that the Trust will not be an "investment company" for purposes of the
1940 Act, as amended and (iv) take no action that would be reasonably likely to
cause the Trust to be classified as an association or a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes.
OPTIONAL REDEMPTION
The Company will have the right to redeem the Convertible Debentures
for cash on and after July 3, 2002, in whole at any time or in part from time to
time upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount of the
Convertible Debentures), together with accrued and unpaid interest thereon,
including Compounded Interest, if any, to, but excluding, the redemption date.
If the Convertible Debentures are redeemed during the period beginning July 3,
2002 and ending on June 27, 2003, the Redemption Price shall be 104.2%, and if
redeemed thereafter during the 12-month period beginning on June 30 of the
following years, the Redemption Prices shall be as set forth below:
YEAR REDEMPTION PRICE
---- ----------------
2003 103.5%
2004 102.8%
2005 102.1%
2006 101.4%
2007 100.7%
2008 and thereafter 100.0%
The Company may exercise its right to redeem the Convertible Debentures
for cash as set forth above provided that the redemption price (other than the
portion thereof consisting of accrued and unpaid interest (including Compounded
Interest, if any)) is payable solely out of the sale proceeds of other equity
securities of the Company, and from no other source. For purposes of the
preceding sentence, "equity securities" means (i) any equity securities,
including common stock and preferred stock, of the Company, (ii) any securities,
which by their terms, are mandatorily convertible or exchangeable for, or
require the purchase of, such common stock or preferred stock and (iii)
preferred securities issued by a business trust, partnership or
-31-
<PAGE> 37
limited liability company, all of the common equity of which is owned, directly
or indirectly, by the Company and the sole assets of which are subordinated debt
securities with interest payments deferrable at the Company's option.
The Company shall also have the right to redeem the Convertible
Debentures, in whole or in part, for cash from time to time after July 3, 2002,
upon not less than 30 days' nor more than 60 days' notice to the holders, at a
redemption price equal to 100% of the aggregate principal amount of the
Convertible Debentures to be redeemed, together with accrued and unpaid interest
(including Compounded Interest, if any) thereon to, but excluding, the date of
such redemption. The Company may exercise such right to redeem the Convertible
Debentures by notice given on any date only if (i) for 20 trading days within
any period of 30 consecutive trading days ending on such date, including the
last day of such period, the Closing Price (as defined in the Indenture) of the
shares of Servico Common Stock exceeds $25.71 per share (subject to adjustment
upon the occurrence of the events described under "Description of the CRESTS --
Conversion Rights -- Conversion Price Adjustments") with respect to the
Conversion Price and (ii) on or prior to the date of the notice of redemption is
given, the Company shall have entered into an agreement, subject to customary
terms and conditions, with a nationally recognized investment banking firm
pursuant to which such firm shall have agreed to purchase from the Company such
number of whole shares of Servico Common Stock as would have been issuable upon
conversion of Convertible Debentures that are not surrendered for conversion
prior to the close of business on the redemption date.
To exercise its right to redeem the Convertible Debentures, the Company
shall issue a press release announcing the redemption prior to the opening of
business on the second trading day after the conditions described in the
preceding sentences have, from time to time, been met. Such press release shall
announce the redemption and set forth the aggregate principal amount of
Convertible Debentures that the Company intends to redeem and, if the Property
Trustee is the holder of the Convertible Debentures, that such redemption will
result in the redemption of an equal liquidation amount of Trust Securities.
Notice of any redemption of the Convertible Debentures shall be given by the
Company by mail to each holder of Convertible Debentures to be redeemed not
fewer than 30 nor more than 60 days before the date fixed for redemption of the
Convertible Debentures. If the Convertible Debentures have been distributed to
Holders in liquidation of the Trust, notice of any redemption shall also be
given by publication made once a week for two successive weeks commencing not
less than 30 nor more than 60 days prior to the redemption date in a newspaper
of general circulation in New York City.
Notwithstanding the foregoing, the Company may not redeem any
Convertible Debentures unless all accrued and unpaid interest (including
Compounded Interest, if any) has been paid on all outstanding Convertible
Debentures for all quarterly interest payment periods terminating on or prior to
the last interest payment date before the date of redemption. If Convertible
Debentures are redeemed on March 31, June 30, September 30, or December 31,
accrued and unpaid interest (including Compounded Interest, if any) shall be
payable to holders of record on the record date for such interest payment.
The Company shall also have the right to redeem the Convertible
Debentures at any time in certain circumstances upon the occurrence of a Special
Event as described under "Description of the CRESTS -- Redemption -- Special
Event Distribution or Redemption of Convertible Debentures" for cash at a
redemption price equal to 100% of the principal amount thereof, together with
any accrued and unpaid interest thereon (including Compounded Interest, if any),
to, but excluding, the redemption date.
If the Convertible Debentures are only partially redeemed, the
Convertible Debentures will be redeemed pro rata by the Debenture Trustee.
So long as the CRESTS are outstanding, the proceeds from the redemption
of any of the Convertible Debentures will be used to redeem CRESTS.
OBLIGATION TO REPURCHASE UPON NON-COMPLETION OF MERGER
In the event that the Amended Merger Agreement is terminated or the
Merger has not been consummated by December 31, 1998, the Company will be
required to offer to repurchase the Convertible Debentures. If the CRESTS are
outstanding on the Date of Non-Completion, the Company will be required to
repurchase Convertible Debentures in an aggregate principal amount equal to the
aggregate liquidation amount of CRESTS that a holder elects to cause the Trust
to repurchase pursuant to the offer described under "Description of the CRESTS
- -- Repurchase at the Option of Holders Upon Non-Completion of the Merger." If at
the time of mailing any Non-Completion Offer, the Convertible Debentures have
been distributed to holders in liquidation of the Trust, then the Non-Completion
Notice will be mailed by the Company to each holder of the Convertible
Debentures and the Company will be required to repurchase Convertible Debentures
from the holders thereof who properly tender Convertible Debentures pursuant to
the Non-Completion Offer. See "Description of the CRESTS -- Repurchase at the
Option of Holders Upon Non-Completion of the Merger."
INTEREST
Each Convertible Debenture will bear interest at the rate of 7% per
annum, subject to increase as described below, from and including the first date
of original issuance. Interest is payable quarterly in arrears on March 31, June
30, September 30 and December 31, of each year (each, an "Interest Payment
Date"), commencing September 30, 1998, to the person in whose name such
Convertible Debenture is registered, subject to certain exceptions, at the close
of business on the Business
-32-
<PAGE> 38
Day next preceding such Interest Payment Date. In the event the CRESTS shall not
continue to remain in book-entry only form and the Convertible Debentures are
not in the form of a Global Security, the Company shall have the right to select
record dates, which shall be at least one Business Day before an Interest
Payment Date.
The amount of interest payable for any full quarterly interest period
will be computed on the basis of a 360-day year of twelve 30-day months. The
amount of interest payable for any period shorter than a full quarterly interest
period for which interest is computed, will be computed on the basis of 30-day
months and, for periods of less than a month, on the basis of the actual number
of days elapsed. In the event that any date on which interest is payable on the
Convertible Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding business day, in each
case with the same force and effect as if made on such date.
If a Reset Transaction (as defined herein) occurs, the interest rate on
the Convertible Debentures will be adjusted to equal the Adjusted Interest Rate
(as defined herein) from the effective date of such Reset Transaction to but not
including the earlier of (x) the effective date of any succeeding Reset
Transaction or (y) the Stated Maturity. "Reset Transaction" means (i) a merger,
consolidation or statutory share exchange to which the Person that is the issuer
of the common stock into which the Convertible Debentures are then convertible
is a party, (ii) a sale of all or substantially all assets of such Person, (iii)
a recapitalization of such common stock or a distribution described in clause
(iii) of the first paragraph under "Description of the CRESTS -- Conversion
Rights -- Conversion Price Adjustments," or (iv) the election by the Person that
is the issuer of the common stock into which the Convertible Debentures are then
convertible to be a real estate investment trust (as defined in Section 856 of
the Internal Revenue Code of 1986, as amended), after the effective date of
which transaction, distribution or election described in clauses (i) through
(iv) above, Convertible Debentures are convertible into shares of an entity (x)
the common stock of which had a Dividend Yield for the four fiscal quarters of
such entity immediately preceding the public announcement of such transaction or
distribution which was, or (y) that announces a dividend policy prior to the
effective date of such transaction or distribution which policy, if implemented,
would result in a Dividend Yield on such common stock for the next four fiscal
quarters of such entity which would be more than 250 basis points higher than
the Dividend Yield on the common stock into which the Convertible Debentures are
convertible prior to such transaction, distribution or election for the four
fiscal quarters immediately preceding the public announcement of such
transaction, distribution or election. The Merger is not anticipated to be a
Reset Transaction.
The "Adjusted Interest Rate," with respect to any Reset Transaction,
will be the rate per annum that is the arithmetic average of the rates quoted by
two Reference Dealers selected by the Company or its successor as the rate that
the Convertible Debentures should bear so that the fair market value, expressed
in dollars, of a Convertible Debenture immediately after the later of (i) public
announcement of such Reset Transaction and (ii) public announcement of a change
in dividend policy in connection with such Reset Transaction but without giving
effect to any anti-dilution provisions applicable to such Reset Transaction will
equal the greater of (i) the average Trading Price of CRESTS or, if the
Convertible Debentures have been distributed in liquidation of the Trust, a
Convertible Debenture for the 20 Trading Days immediately preceding the date of
public announcement of such Reset Transaction and (ii) the sum of (A) the fair
market value of a Convertible Debenture immediately after such public
announcement and (B) the amount of the decrease, if any, in the fair market
value of a Convertible Debenture solely attributable to the increase in the
Dividend Yield (excluding the effect of any change in the Trading Price of the
common stock into which the Convertible Debentures are convertible that is
attributable solely to the increase in the Dividend Yield); provided that the
Adjusted Interest Rate shall not be less than 7% per annum.
As used in the two preceding paragraphs, (i) "Dividend Yield," on any
security for any period, means the dividends paid or proposed to be paid
pursuant to an announced dividend policy on such security for such period
divided by, if with respect to dividends paid on such security, the average
Closing Price of such security during such period and, if with respect to
dividends so proposed to be paid on such security, the Closing Price of such
security on the effective date of the related Reset Transaction, (ii) "Reference
Dealer" means a dealer engaged in the trading of convertible securities and
(iii) "Trading Price" of a security on any date of determination means (a) the
closing sale price (or, if no closing price is reported, the last reported sale
price) of a security (regular way) on the NYSE on such date, (b) if such
security is not listed for trading on the NYSE on any such date, as reported in
the composite transactions for the principal United States securities exchange
on which such security is so listed, (c) if such security is not so listed on a
United States national or regional securities exchange, as reported by the
Nasdaq Stock Market, (iv) if such security is not so reported, the price quoted
by Interactive Data Corporation ("IDC") for such security or, if IDC is not
quoting such price, a similar quotation service selected by the Company, (v) if
such security is not so quoted, the average of the mid-point of the last bid and
ask prices for such security from at least two dealers recognized as
market-makers for such security or (vi) if such security is not so quoted, the
average of the last bid and ask prices for such security from a Reference
Dealer.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company is not in default in the payment of interest on
the Convertible Debentures, the Company will have the right, at any time, and
from time to time, during the term of the Convertible Debentures, to defer
payments of interest by extending the interest payment period for a period not
exceeding 20 consecutive quarterly periods nor extending beyond the Stated
Maturity of the Convertible Debentures, during which Extension Period no
interest will be due and payable. At the end
-33-
<PAGE> 39
of the Extension Period, the Company shall pay all interest then accrued and
unpaid, together with interest thereon compounded quarterly at the then
applicable rate for the Convertible Debentures to the extent permitted by
applicable law ("Compounded Interest"). Prior to the termination of any such
Extension Period, the Company may further extend such Extension Period; provided
that such Extension Period, together with all such previous and further
extensions, may not exceed 20 consecutive quarterly periods or extend beyond the
Stated Maturity of the Convertible Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. No interest
during an Extension Period, except at the end thereof, shall be due and payable.
The Company has no present intention of exercising its right to defer payments
of interest by extending the interest payment period on the Convertible
Debentures.
During any such Extension Period, the Company shall not, and shall not
permit any subsidiary to, (x) declare or pay any dividends or distributions on,
or redeem, purchase, acquire or make a liquidation payment with respect to, any
of the Company's capital stock or (y) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank on a parity with or junior in interest to the Convertible
Debentures or make any guarantee payments with respect to any guarantee by the
Company of the debt securities of any subsidiary of the Company if such
guarantee ranks on a parity with or junior in interest to the Convertible
Debentures (other than (a) dividends or distributions in common stock of the
Company, (b) payments under the Guarantee, (c) any declaration of a dividend in
connection with the implementation of a shareholders' rights plan, or issuance
of stock under any such plan in the future, or the redemption or repurchase of
any such rights pursuant thereto, and (d) purchases of common stock related to
the issuance of common stock or rights under any of the Company's benefit
plans).
If the Property Trustee shall be the only holder of the Convertible
Debentures, the Company shall give the Regular Trustees, the Property Trustee
and the Debenture Trustee notice of its election of such Extension Period one
Business Day prior to the earlier of (i) the next date on which Distributions on
the CRESTS are payable or (ii) the date the Regular Trustees are required to
give notice to any national stock exchange or other organization on which the
CRESTS are listed or quoted, if any, or to holders of the CRESTS as of the
record date or the Distribution Date. If the Trustee shall not be the holder of
the Convertible Debentures, the Company shall give the holders of the
Convertible Debentures notice of its election of such Extension Period at least
ten Business Days prior to the earlier of (i) the Interest Payment Date for the
first quarter of such Extension Period or (ii) the date upon which the Company
is required to give notice of the record or payment date of such related
interest payment to holders of the Convertible Debentures.
CONVERSION
The Convertible Debentures will be convertible into Servico Common
Stock at the option of the holders of the Convertible Debentures at the initial
conversion price of $21.42 per share of Servico Common Stock, subject to the
conversion price adjustments described under "Description of the CRESTS --
Conversion Rights -- Conversion Price Adjustments." The right to convert
Convertible Debentures will terminate prior to the close of business (i) on June
28, 2010 or (ii) in the case of Convertible Debentures called for redemption, on
the second Business Day prior to the related redemption date, unless the Company
shall default in making payment of any moneys or shares of Servico Common Stock
payable upon such redemption.
Except as provided below, accrued but unpaid interest will not be paid
in cash on Convertible Debentures that are converted nor will such accrued
interest be converted into additional shares of Servico Common Stock. Holders of
Convertible Debentures at the close of business on an interest record date will
be entitled to receive the interest payable on such Convertible Debentures
(except that holders of Convertible Debentures called for redemption on a
redemption date between such record date and the Interest Payment Date shall not
be entitled to receive such interest on such Interest Payment Date) on the
corresponding Interest Payment Date notwithstanding the conversion of such
Convertible Debentures following such interest record date and prior to such
Interest Payment Date. However, Convertible Debentures surrendered for
conversion during the period between the close of business on any interest
record date and the opening of business on the corresponding Interest Payment
Date (except Convertible Debentures called for redemption on a redemption date
during such period) must be accompanied by payment of an amount equal to the
interest payable on such Convertible Debentures on such Interest Payment Date. A
holder of Convertible Debentures on an interest record date who (or whose
transferee) tenders any such Convertible Debentures for conversion into shares
of Servico Common Stock on the corresponding Interest Payment Date will receive
the interest payable by the Company on such Convertible Debentures on such date,
and the converting holder need not include payment of the amount of such
interest upon surrender of Convertible Debentures for conversion. The Company
will make no payment or allowance for dividends on the shares of Servico Common
Stock issued upon conversion.
The Convertible Debentures held by the Trust will not be converted
except pursuant to a notice of conversion delivered to the Conversion Agent by a
holder of CRESTS. Upon surrender of CRESTS to the Conversion Agent for
conversion, the Trust will distribute Convertible Debentures to the Conversion
Agent on behalf of the holder of the CRESTS so converted, whereupon the
Conversion Agent will convert such Convertible Debentures to the Servico Common
Stock on behalf of such holder. The Company's delivery to the holders of the
Convertible Debentures (through the Conversion Agent) of the fixed number of
shares of Servico Common Stock into which the Convertible Debentures are
convertible (together with the cash payment, if any, in lieu of fractional
shares) will be deemed to satisfy the Company's obligation to pay the principal
amount of the Convertible Debentures so converted, and the accrued and unpaid
interest thereon attributable to the period from the last date to which interest
has been paid or duly provided for.
-34-
<PAGE> 40
PAYMENT OF EXPENSES OF THE TRUST
Under the terms of the Indenture, the Company, as borrower, has agreed
to pay all fees and expenses related to the organization and operations of the
Trust (including any taxes, duties, assessments or other governmental charges of
whatever nature (other than United States withholding taxes) imposed on the
Trust by the United States or any other domestic taxing authority) and the
offering of the Trust Securities and be responsible for all debts and
obligations of the Trust (other than with respect to the Trust Securities), so
that the net amounts received and retained by the Trust after paying such fees,
expenses, debts and obligations will be equal to the amounts the Trust would
have received had no such fees, expenses, debts and obligations been incurred by
or imposed on the Trust. The foregoing obligations of the Company are for the
benefit of, and shall be enforceable by, any person to whom such fees, expenses,
debts and obligations are owed (each a "Creditor") whether or not such Creditor
has received notice thereof. Any such Creditor may enforce such obligations of
the Company directly against the Company, and the Company irrevocably waives any
right or remedy to require that any such Creditor take any action against the
Trust or any other person before proceeding against the Company. The Company
shall execute such additional agreements as may be necessary to give full effect
to the foregoing.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Except as otherwise provided in the Indenture, the Company may not
merge or consolidate or sell or convey all or substantially all of its assets
unless the successor corporation (if other than the Company) is a domestic
corporation and assumes the Company's obligations under the Convertible
Debentures and the Indenture.
INDENTURE EVENTS OF DEFAULT
Any one of the following events will constitute an Indenture Event of
Default with respect to the Convertible Debentures:
(a) default in the payment of any interest on the Convertible
Debentures when due and payable, if continued for 30 days after written
notice has been given as provided in the Indenture, whether or not such
payment is prohibited by the subordination provisions of the Indenture
and the Convertible Debentures, provided, however, that a valid
extension of the interest payment period does not constitute a default
in the payment of interest;
(b) default in the payment of Liquidated Damages (under the
Registration Rights Agreement), if any, or of principal of (or premium,
if any, on) the Convertible Debentures when due and payable whether or
not such payment is prohibited by the subordination provisions of the
Indenture and the Convertible Debentures;
(c) failure to perform any other covenant of the Company in
the Indenture or the Convertible Debentures (other than a covenant
included in the Indenture solely for the benefit of any series of debt
securities other than the Convertible Debentures), if continued for 90
days after written notice has been given as provided in the Indenture;
(d) failure of the Company to deliver the Servico Common Stock
or shares of another class of common stock of the Company upon a valid
conversion election by the holder or holders of the Convertible
Debentures to convert such Convertible Debentures into shares of
Servico Common Stock or shares of such other class of common stock
(whether or not such conversion is prohibited by the subordination
provisions of the Indenture and the Convertible Debentures);
(e) the occurrence of an event of default under any mortgage,
indenture, loan agreement or other instrument under which the Company
has or shall hereafter have outstanding indebtedness for borrowed money
in excess of $10,000,000 which has become due and payable by its terms
and has not been paid or whose maturity has been accelerated and such
payment default has not been cured or such acceleration has not been
annulled within 30 days after written notice as provided in the
Indenture;
(f) certain events in bankruptcy, insolvency or reorganization
involving the Company; or
(g) the voluntary or involuntary dissolution, winding-up, or
termination of the Trust, except in connection with (i) the
distribution of Convertible Debentures to the holders of Trust
Securities in liquidation of the Trust or of their interest in the
Trust, (ii) the redemption of the CRESTS and (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.
If any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Convertible Debentures, will have the
right under the Indenture to declare the principal of the Convertible Debentures
(including any Compounded Interest, if any) and any other amounts payable under
the Indenture to be forthwith due and payable and to enforce its other rights as
a creditor with respect to the Convertible Debentures. An Indenture Event of
Default also constitutes a Trust Enforcement Event. The holders of CRESTS in
certain circumstances have the right to direct the Property Trustee to exercise
its rights as the holder of the Convertible Debentures. In addition, if the
Property Trustee fails to enforce its rights under the Convertible Debentures
any holder of CRESTS may institute a legal proceeding against the Company to
enforce the
-35-
<PAGE> 41
Property Trustee's rights under the Convertible Debentures. See "Description of
the CRESTS -- Trust Enforcement Events" and "--Voting Rights; Amendment of
Declaration." Notwithstanding the foregoing, if an Indenture Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Company to pay interest or principal on the Convertible Debentures on the
date such interest or principal is otherwise payable (or in the case of
redemption, the redemption date), the Company acknowledges that a holder of
CRESTS may then institute a Direct Action for payment on or after the respective
due date specified in the Convertible Debentures. Notwithstanding any payments
made to such holder of CRESTS by the Company in connection with a Direct Action,
the Company shall remain obligated to pay the principal of or interest on the
Convertible Debentures held by the Trust or the Property Trustee of the Trust,
and the Company shall be subrogated to the rights of the holder of such CRESTS
with respect to payments on the CRESTS to the extent of any payments made by the
Company to such holder in any Direct Action. The holders of CRESTS will not be
able to exercise directly any other remedy available to the holders of the
Convertible Debentures.
If any Indenture Event of Default shall occur and be continuing and the
Convertible Debentures have been distributed to the holders of the Trust
Securities upon a liquidation of the Trust, the holders of not less than 25% in
aggregate principal amount of the Convertible Debentures will have the right to
declare the principal of the Convertible Debentures (including any Compounded
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce their other rights as a creditor with
respect to the Convertible Debentures.
DEFEASANCE
The obligations of the Company with respect to the payment of the
principal, Liquidated Damages, if any, premium, if any, and interest on, the
Convertible Debentures will terminate if the Company irrevocably deposits or
causes to be deposited with the Debenture Trustee, under the terms of an escrow
trust agreement satisfactory to the Debenture Trustee, as a trust fund
specifically pledged as security for, and dedicated solely to, the benefit of
the holders of the Convertible Debentures, (i) money, (ii) U.S. government
obligations, which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money at such time or times
as payments are due and payable on the Convertible Debentures, or (iii) a
combination of (i) and (ii), sufficient to pay and discharge each installment of
principal, premium, if any, and interest on the Convertible Debentures. The
discharge of the Convertible Debentures is subject to certain other conditions,
including, without limitation, (a) no Indenture Event of Default or event
(including such deposit) which with notice or lapse of time would become an
Indenture Event of Default shall have occurred and be continuing on the date of
such deposit, (b) such deposit and the related intended consequence will not
result in any default or event of default under any material indenture,
agreement or other instrument binding upon the Company or its subsidiaries or
any of their properties and (c) the Company shall have delivered to the
Debenture Trustee an opinion of counsel or a private letter ruling by the IRS
satisfactory to the Trustee to the effect that holders of the Convertible
Debentures will not recognize income, gain or loss for federal income tax
purposes if the Company makes such deposit. The conversion rights under the
Indenture will survive until the Convertible Debentures are no longer
outstanding.
MODIFICATION, WAIVER, MEETINGS AND VOTING
MODIFICATION OF INDENTURE
The Indenture will provide that the Company and the Debenture Trustee
may, without the consent of any holders of Convertible Debentures, enter into
supplemental indentures for the purposes, among other things, of adding to the
Company's covenants, adding additional Indenture Events of Default, or curing
ambiguities or inconsistencies in such Indenture, or making other changes to the
Indenture or form or terms of the Convertible Debentures, provided such action
does not have a material adverse effect on the interests of the holders of the
Convertible Debentures. In addition, modifications and amendments of the
Indenture may be made by the Company and the Debenture Trustee with the consent
of the holders of not less than a majority in aggregate principal amount of the
Convertible Debentures and all other series of debt securities issued under the
Indenture then outstanding affected, acting as one class, by such modification
or amendment; provided, however, that no such modification or amendment may,
without the consent of each holder of Convertible Debentures outstanding that is
affected thereby, (a) change the stated maturity of the principal of, or any
installment of principal of or rate of interest on the Convertible Debentures,
(b) reduce the principal, premium, if any, or interest on any Convertible
Debentures, (c) change the place of payment or the currency or currency unit in
which the Convertible Debentures or interest thereon is payable, (d) impair the
right to institute suit for the enforcement of any payment on or with respect to
the Convertible Debentures, (e) reduce the percentage in principal amount of the
Convertible Debentures then outstanding required for modification or amendment
of the Indenture or for any waiver of compliance with certain provisions of the
Indenture or for waiver of certain defaults, (f) change any obligation of the
Company to maintain an office or agency in the places and for the purposes
required by the Indenture, (g) make any change that would materially adversely
affect the right to convert the Convertible Debentures or (h) modify any of the
above provisions; provided, further, no such modification or amendment shall be
effective until the holders of not less than 66 2/3% of the aggregate
liquidation amount of the Trust Securities shall have consented to such
modification or amendment; provided, further, that where a consent under the
Indenture would require the consent of the holders of more than 66 2/3% of the
principal amount of the Convertible Debentures, such modification or amendment
shall not be effective until the holders of at least the same proportion in
aggregate stated liquidation amount of the Trust Securities shall have consented
to such modification or amendment.
-36-
<PAGE> 42
WAIVER OF DEFAULT
The holders of a majority in aggregate principal amount of the
Convertible Debentures then outstanding may, on behalf of the holders of all
Convertible Debentures, waive any past default under the Indenture with respect
to the Convertible Debentures except a default (a) in the payment of principal,
premium, if any, or any interest on the Convertible Debentures and (b) in
respect of a covenant or provision of the Indenture which cannot be modified or
amended without the consent of each holder of the Convertible Debentures then
outstanding. Such waiver shall not be effective until the holders of a majority
in aggregate liquidation amount of Trust Securities shall have consented to such
waiver; provided, further, that where a consent under the Indenture would
require the consent of the holders of more than a majority in principal amount
of the Convertible Debentures, such waiver shall not be effective until the
holders of at least the same proportion in aggregate stated liquidation amount
of the Trust Securities shall have consented to such waiver.
MEETINGS AND VOTING
A meeting may be called at any time by the Debenture Trustee, and upon
request, by the Company pursuant to a resolution of the Board or the holders of
at least 25% in aggregate principal amount of the Convertible Debentures then
outstanding. Except as described above under "-- Modification of Indenture" and
"-- Waiver of Default," a resolution presented at a meeting or reconvened
meeting at which a quorum of the holders of Convertible Debentures then
outstanding is present may be adopted by the affirmative vote of the lesser of
(i) the holders of a majority in principal amount of the Convertible Debentures
then outstanding, and (ii) the holders of 66 2/3% in principal amount of the
Convertible Debentures then outstanding represented and voting at the meeting;
provided, however, that if any consent, waiver or other action which the
Indenture expressly provides may be made, given or taken by the holders of a
specified percentage, which is less than a majority of the principal amount of
the Convertible Debentures then outstanding, such action may be adopted at a
meeting or reconvened meeting at which a quorum is present by the affirmative
vote of the lesser of (a) the holders of such specified percentage in principal
amount of the Convertible Debentures then outstanding and (b) a majority in
principal amount of Convertible Debentures then outstanding of such series
represented and voting at the meeting. Any resolution passed or decision taken
at any meeting of holders of Convertible Debentures duly held in accordance with
the Indenture will be binding on all holders of Convertible Debentures whether
or not present or represented at the meeting.
Except with respect to certain reconvened meetings, the quorum at a
meeting of the holders of Convertible Debentures will be persons holding or
representing a majority in principal amount of the Convertible Debentures then
outstanding.
LODGIAN ASSUMPTION
The Indenture, the Guarantee and the Declaration provide that, in the
event the Merger is consummated, Lodgian will assume the Company's obligations
under the Guarantee, the Declaration, the Convertible Debentures and the
Indenture. Additionally, the Amended Merger Agreement provides that each share
of Servico Common Stock will be converted in the Merger into the right to
receive one share of Lodgian Common Stock. Accordingly, each Convertible
Debenture (and thus each CRESTS) outstanding after consummation of the Merger
will be convertible into shares of Lodgian Common Stock at the same conversion
price, on the same terms, in the same manner and subject to the same future
adjustments as set forth under "Description of the CRESTS -- Conversion Rights."
BOOK-ENTRY ISSUANCE
If distributed to holders of CRESTS in connection with the involuntary
or voluntary dissolution, winding-up, or liquidation of the Trust as a result of
the occurrence of a Special Event, the Convertible Debentures will be issued in
the form of one or more global certificates registered in the name of DTC or its
nominee. If the Convertible Debentures are so distributed to holders of CRESTS
in liquidation of such holders' interests in the Trust, DTC will act as
securities depositary for the Convertible Debentures. For further information,
see "Book-Entry Issuance--Depositary Procedures."
None of the Company, the Trust, the Property Trustee, any Paying Agent
and any other agent of the Company or the Debenture Trustee 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 Security
for such Convertible Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Convertible Debentures
registered in the names of persons other than DTC or its nominee under the
circumstances set forth under "Book-Entry Issuance."
GOVERNING LAW
The Indenture and the Convertible Debentures will be governed by and
construed in accordance with the laws of the State of New York.
-37-
<PAGE> 43
MISCELLANEOUS
The Indenture will provide that the Company, as borrower, will pay all
fees and expenses related to (i) the issuance and exchange of the Trust
Securities and the Convertible Debentures, (ii) the organization, maintenance
and dissolution of the Trust, (iii) the retention of the Trustees and (iv) the
enforcement by the Property Trustee of the rights of the holders of the CRESTS.
The Company will have the right at all times to assign any of its
respective rights or obligations under the Indenture to a direct or indirect
wholly owned subsidiary of the Company; provided that, in the event of any such
assignment, the Company will remain liable for all of their respective
obligations. Subject to the foregoing, the Indenture will be binding upon and
inure to the benefit of the parties thereto and their respective successors and
assigns. The Indenture provides that it may not otherwise be assigned by the
parties thereto.
-38-
<PAGE> 44
DESCRIPTION OF THE GUARANTEE
GENERAL
This summary of certain provisions of the Guarantee does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the form of Guarantee, including the definitions therein of certain terms, and
the Trust Indenture Act. At the time the Registration Statement of which this
Prospectus forms a part becomes effective, the Guarantee will be qualified as an
indenture under the Trust Indenture Act. Wilmington Trust Company will act as
Guarantee Trustee for purposes of compliance with the Trust Indenture Act and
will hold the Guarantee for the benefit of the holders of the CRESTS.
The following payments or distributions with respect to the CRESTS, to
the extent not paid by or on behalf of the Trust (the "Guarantee Payments"),
will be subject to the Guarantee: (i) any accumulated and unpaid Distributions
required to be paid on the CRESTS, to the extent that the Trust has sufficient
funds available therefor at the time, (ii) the Redemption Price and all
accumulated and unpaid Distributions with respect to any CRESTS called for
redemption, to the extent that the Trust has sufficient funds available therefor
at such time, and (iii) upon a voluntary or involuntary dissolution, winding up
or liquidation of the Trust (other than in connection with the exchange of all
of the CRESTS for Convertible Debentures and the conversion thereof into Servico
Common Stock or any other class of common stock of the Company or the
distribution of the Convertible Debentures to holders of the CRESTS), the lesser
of (a) the aggregate liquidation amount of the CRESTS and all accumulated and
unpaid Distributions thereon to the date of payment and (b) the amount of assets
of the Trust remaining available for distribution to holders of CRESTS. The
Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of the applicable
CRESTS or by causing the Trust to pay such amounts to such holders.
The holders of not less than a majority in aggregate liquidation amount
of the CRESTS have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee in respect of
the Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce
the Guarantee, then any holder of the CRESTS may institute a legal proceeding
directly against the Company to enforce the Guarantee Trustee's rights under
such Guarantee without first instituting a legal proceeding against the Trust,
the Guarantee Trustee or any other person or entity. If the Company were to
default on its obligation to pay amounts payable under the Convertible
Debentures, the Trust would lack sufficient funds for the payment of
Distributions or amounts payable on redemption of the CRESTS or otherwise, and,
in such event, holders of the CRESTS would not be able to rely upon the
Guarantee for payment of such amounts. Instead, if an Indenture Event of Default
shall have occurred and be continuing and such event is attributable to the
failure of the Company to pay interest on or principal of the Convertible
Debentures on the applicable payment date, then a holder of CRESTS may institute
a Direct Action against the Company. Except as described herein, holders of
CRESTS will not be able to exercise directly any other remedy available to the
holders of Convertible Debentures or assert directly any other rights in respect
of the Convertible Debentures. See "Risk Factors -- Risk Factors Relating to the
CRESTS -- Enforcement of Certain Rights by Holders of CRESTS."
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company has covenanted that, so long as any
CRESTS remain outstanding if (i) the Company has exercised its option to defer
payments on the Convertible Debentures by extending the interest payment period
and such extension shall be continuing, (ii) the Company shall be in default
with respect to its payment or other obligations under the Guarantee or (iii)
there shall have occurred and be continuing any event that, with the giving of
notice, would constitute an Indenture Event of Default, then the Company will
not, and will not permit any subsidiary to, (x) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock or (y) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank on a parity with or junior in interest
to the Convertible Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks on a parity with or junior in interest to the
Convertible Debentures (other than (a) dividends or distributions in common
stock of the Company, (b) payments under the Guarantee, (c) any declaration of a
dividend in connection with the implementation of a shareholders' rights plan,
or issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, and (d) purchases of common
stock related to the issuance of common stock or rights under any of the
Company's benefit plans).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely
affect the rights of holders of CRESTS (in which case no vote will be required),
the Guarantee may be amended only with the prior approval of the holders of at
least a majority in liquidation amount of all the outstanding CRESTS. The manner
of obtaining any such approval of holders of the CRESTS will be as set forth
under "Description of the CRESTS -- Voting Rights; Amendment of Declaration."
All guarantees and agreements contained in the Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company and
shall inure to the benefit of the holders of the CRESTS then outstanding.
-39-
<PAGE> 45
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to each holder of CRESTS upon (i) full
payment of the Redemption Price and accumulated and unpaid distributions with
respect to all CRESTS, (ii) upon distribution of the Convertible Debentures held
by the Trust to the holders of the CRESTS, (iii) upon liquidation of the Trust
or (iv) upon the distribution of Servico Common Stock to such holder in respect
of the conversion of such holder's CRESTS into Servico Common Stock and will
terminate completely upon full payment of the amounts payable in accordance with
the Declaration.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, (ii) PARI PASSU with the most senior preferred or
preference stock now or hereafter issued by the Company and with any guarantee
previously, now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company, and (iii) senior
to Servico Common Stock. The terms of the CRESTS provide that each holder of
CRESTS issued by the Trust by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee relating thereto.
The Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the guarantee without
instituting a legal proceeding against any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with
respect to the Guarantee and after the curing of all defaults with respect to
the Guarantee that may have occurred, undertakes to perform only such duties as
are specifically set forth in the Guarantee and, during the occurrence of a
default with respect to the Guarantee, shall exercise the same degree of care as
a prudent person would exercise in the conduct of his own affairs. Subject to
such provision, the Guarantee Trustee is under no obligation to exercise any of
the powers vested in it by the Guarantee at the request of any holder of CRESTS
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with the
laws of the State of New York.
-40-
<PAGE> 46
RELATIONSHIP AMONG THE CRESTS,
THE CONVERTIBLE DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the CRESTS (to the
extent the Trust has funds available for the payment of such Distributions) are
irrevocably guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee." If and to the extent that the Company does not
make payments under the Convertible Debentures, the Trust will not have
sufficient funds to pay Distributions or other amounts due on the CRESTS. The
Guarantee does not cover payment of Distributions when the Trust does not have
sufficient funds to pay such Distributions. In such event, a holder of CRESTS
may institute a legal proceeding directly against the Company to enforce payment
of such Distributions to such holder after the respective due dates. Taken
together, the Company' obligations under the Declaration, the Convertible
Debentures, the Indenture and the Guarantee constitute a full and unconditional
guarantee of payments of Distributions and other amounts due on the CRESTS. No
single document standing alone or operating in conjunction with fewer than all
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full and unconditional guarantee of the
Trust's obligations under the CRESTS. The obligations of the Company under the
Guarantee are subordinate and junior in right of payment to all liabilities of
the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest, principal and other payments are made
when due on the Convertible Debentures, such payments will be sufficient to
cover Distributions and other payments due on the CRESTS, because of the
following factors (i) the aggregate principal amount of the Convertible
Debentures will be equal to the sum of the aggregate stated liquidation amount
of the Trust Securities; (ii) the interest rate and interest and other payment
dates on the Convertible Debentures will match the Distribution rate and
Distribution and other payment dates for the CRESTS; (iii) the Company, as
borrower, will pay, and the Trust will not be obligated to pay, all costs,
expenses and liabilities of the Trust except the Trust's obligations under the
Trust Securities; and (iv) the Declaration further provides that the Trust will
not engage in any activity that is not consistent with the limited purposes of
the Trust.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a related payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CRESTS
If a Trust Enforcement Event occurs and is continuing, the holders of
CRESTS would rely on the enforcement by the Property Trustee of its rights as
registered holder of the Convertible Debentures against the Company. In
addition, the holders of a majority in liquidation amount of the CRESTS will
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee to exercise the
remedies available to it as the holder of the Convertible Debentures. The
Indenture provides that the Debenture Trustee shall give holders of Convertible
Debentures notice of all defaults or events of default within 30 days after
occurrence.
If the Property Trustee fails to enforce its rights under the
Convertible Debentures in respect of an Indenture Event of Default after a
holder of record of CRESTS has made a written request, such holder of record of
CRESTS may, to the extent permitted by applicable law, institute a legal
proceeding against the Company to enforce the Property Trustee's rights under
the Convertible Debentures. In addition, if the Company fails to pay interest or
principal on the Convertible Debentures on the date such interest or principal
is otherwise payable, and such failure to pay is continuing, a holder of CRESTS
may institute a Direct Action after the respective due date specified in the
Convertible Debentures. In connection with such a Direct Action, the Company
will have the right under the Indenture to set off any payment made to such
holder by the Company. The holders of CRESTS will not be able to exercise
directly any other remedy available to the holders of the Convertible
Debentures.
LIMITED PURPOSE OF TRUST
The CRESTS evidence a beneficial ownership interest in the Trust, and
the Trust exists for the sole purpose of issuing the Trust Securities and
investing the proceeds thereof in Convertible Debentures. A principal difference
between the rights of a holder of CRESTS and a holder of Convertible Debentures
is that a holder of Convertible Debentures is entitled to receive from the
Company the principal amount of and interest accrued on Convertible Debentures
held, while a holder of CRESTS is entitled to receive Distributions from the
Trust (or from the Company under the Guarantee) if and to the extent the Trust
has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary dissolution, winding-up or
liquidation of the Trust involving the liquidation of the Convertible
Debentures, the holders of the CRESTS will be entitled to receive, out of assets
held by the Trust, subject to the rights of creditors of the Trust, if any, the
liquidation distribution in cash. See "Description of the CRESTS -- Liquidation
-41-
<PAGE> 47
Distribution Upon Dissolution." Upon any voluntary or involuntary liquidation or
bankruptcy of the Company, the Property Trustee, as holder of the Convertible
Debentures, would be a subordinated creditor of the Company, subordinated in
right of payment to all Senior Indebtedness as set forth in the Indenture, but
entitled to receive payment in full of principal and interest before any
stockholders of the Company receive payments or distributions. Because the
Company is the guarantor under the Guarantee, and pursuant to the Indenture, has
agreed to pay for all costs, expenses and liabilities of the Trust (other than
the Trust's obligations to the holders of the CRESTS), the positions of a holder
of CRESTS and a holder of the Convertible Debentures relative to other creditors
and to stockholders of the Company in the event of liquidation or bankruptcy of
the Company would be substantially the same.
-42-
<PAGE> 48
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson,
P.A., tax counsel to the Company and the Trust ("Tax Counsel"), the following is
a summary of the material United States federal income tax consequences of the
purchase, ownership, disposition and conversion of the CRESTS and the ownership
and disposition of the Servico Common Stock that would be received upon a
conversion of the CRESTS. This summary deals only with CRESTS held as capital
assets by United States Persons (defined below). As used herein, a "United
States Person" means (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate
the income of which is subject to United States federal income taxation
regardless of its source or (iv) any trust if a court within the United States
is able to exercise primary supervision over the administration of such trust
and one or more United States Persons as described in section 7701(a)(30) of the
Code have the authority to control all the substantial decisions of such trust.
The tax treatment of a holder may vary depending on his, her or its particular
situation. This summary does not address all the tax consequences that may be
relevant to a particular holder or to holders who may be subject to special tax
treatment, such as banks, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors or foreign investors. In addition, this summary does not include any
description of any alternative minimum tax consequences or the tax laws of any
state, local or foreign government that may be applicable to a holder of CRESTS.
This summary is based on the Code, the Treasury regulations promulgated
thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CRESTS,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE CRESTS UPON THE OCCURRENCE OF
CERTAIN TAX EVENTS SEE "DESCRIPTION OF THE CRESTS -- REDEMPTION -- SPECIAL EVENT
DISTRIBUTION OR REDEMPTION OF CONVERTIBLE DEBENTURES."
CLASSIFICATION OF THE TRUST
In connection with the issuance of the CRESTS, Tax Counsel is of the
opinion that under current law and assuming full compliance with the terms of
the Declaration, the Trust will be classified as a grantor trust for United
States federal income tax purposes and not as an association or publicly traded
partnership taxable as a corporation. Accordingly, for United States federal
income tax purposes, each beneficial owner (a "holder") of CRESTS generally will
be treated as owning an undivided beneficial interest in the Convertible
Debentures and each holder will be required to include in its gross income its
pro rata share of original issue discount (OID") that accrues on the Convertible
Debentures. See "-- Original Issue Discount."
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
The Company, the Trust and the holders of the CRESTS (by acceptance of
a beneficial interest in a CRESTS) will agree to treat the Convertible
Debentures as indebtedness for all United States tax purposes. In connection
with the issuance of the Convertible Debentures, Tax Counsel is of the opinion
that, under current law, and based on certain representations, facts and
assumptions set forth in such opinion, the Convertible Debentures will be
classified as indebtedness for United States federal income tax purposes.
ORIGINAL ISSUE DISCOUNT
Because the Company has the right to defer the payment of stated
interest on the Convertible Debentures, the stated interest on the Convertible
Debentures will be considered to give rise to OID within the meaning of section
1273(a) of the Code. Holders of CRESTS must include OID in gross income on a
daily economic accrual basis (using the constant-yield-to- maturity method of
accrual described in section 1272 of the Code), regardless of their regular
method of tax accounting and in advance of the receipt of cash attributable to
such income. The application of these OID accrual rules may accelerate the
timing of a holder's recognition of such income in certain situations. Actual
cash payments of interest on the Convertible Debentures, however, will not be
reported separately as taxable income. During an Extension Period, holders will
be required to continue to include their pro rata share of the stated interest
in their gross income as OID for United States federal income tax purposes, in
advance of the receipt of cash payments attributable to such deferred interest.
Any amount of OID included in a holder's gross income with respect to a CRESTS
will increase such holder's tax basis in such CRESTS, and the amount of
distributions received by a holder in respect of such accrued OID will reduce
the tax basis of such CRESTS.
As described under the caption "Description of the Convertible
Debentures -- Interest," the interest rate on the Convertible Debentures will be
adjusted upon the occurrence of a Reset Transaction. If a Reset Transaction
occurs, the calculation of OID would have to be redetermined at such time.
Corporate holders of CRESTS will not be entitled to a
dividends-received deduction with respect to any income recognized by such
holders with respect to the CRESTS.
-43-
<PAGE> 49
MARKET DISCOUNT AND BOND PREMIUM
Holders of CRESTS other than a holder who purchased the CRESTS upon
original issuance may be considered to have acquired their undivided interests
in the Convertible Debentures with market discount or acquisition premium as
such phrases are defined for United States federal income tax purposes. Such
holders are advised to consult their tax advisors as to the income tax
consequences of the acquisition, ownership and disposition of the CRESTS.
DISTRIBUTION OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
As described under the caption "Description of the CRESTS --
Redemption" and "-- Liquidation Distribution Upon Dissolution," Convertible
Debentures may be distributed to holders in exchange for the CRESTS and in
liquidation of the Trust. Under current law, such a distribution would not be
taxable, and would result in the holder receiving directly its pro rata share of
the Convertible Debentures previously held indirectly through the Trust, with a
holding period and aggregate tax basis equal to the holding period and aggregate
tax basis such holder had in its CRESTS before such distribution. If, however,
the Special Event is a Tax Event which results in the Trust being treated as an
association taxable as a corporation, the distribution of Convertible Debentures
would likely constitute a taxable event to holders of the CRESTS, in which event
the Company could, at its option, redeem the Convertible Debentures, which would
be taxable to the Trust and distribute the resulting cash in liquidation of the
Trust which would be taxable to holders as described below in "-- Sales of
CRESTS."
A holder would accrue OID in respect of the Convertible Debentures
received from the Trust in the manner described above under "-- Original Issue
Discount."
Under certain other circumstances described herein (see "Description of
the CRESTS"), the Convertible Debentures may be redeemed for cash, with the
proceeds of such redemption distributed to holders in redemption of their
CRESTS. Under current law, such a redemption would constitute a taxable
disposition of the redeemed CRESTS for United States federal income tax
purposes, and a holder would recognize gain or loss as if it sold such redeemed
CRESTS for cash. See "-- Sales of CRESTS."
SALES OF CRESTS
A holder that sells or redeems CRESTS will recognize gain or loss equal
to the difference between the amount realized by the holder on the sale or
redemption of the CRESTS and the holder's adjusted tax basis in the CRESTS sold
or redeemed. Such gain or loss generally will be a capital gain or loss and
generally will be a long-term capital gain or loss if the CRESTS have been held
for more than one year. Capital gains of individuals derived with respect to
capital assets held for more than one year are eligible for reduced rates of
taxation depending upon the holding period of such capital assets. Holders
should consult their own tax advisors regarding the capital gains rates
applicable to them. Subject to certain limited exceptions, capital losses cannot
be applied to offset ordinary income for United States federal income tax
purposes.
A holder will be required to add any accrued and unpaid OID to its
adjusted basis for its CRESTS. To the extent the selling price of such holder's
CRESTS is less than the adjusted tax basis (which will include any accrued and
unpaid OID), a holder will recognize a capital loss.
CONVERSION OF CRESTS INTO SERVICO COMMON STOCK; CONSEQUENCES OF THE MERGER
A holder of CRESTS will not recognize income, gain or loss upon either
the distribution of the Convertible Debentures or the subsequent conversion,
through the Conversion Agent, of Convertible Debentures into Servico Common
Stock. A holder of CRESTS will recognize gain upon the receipt of cash in lieu
of a fractional share of Servico Common Stock equal to the amount of the cash
received less such holder's tax basis in such fractional share. Such a holder's
tax basis in the Servico Common Stock received upon conversion should generally
be equal to such holder's tax basis in the CRESTS delivered to the Conversion
Agent for exchange, minus the basis allocated to any fractional share in respect
of which cash is received, and such holder's holding period in the Servico
Common Stock received upon conversion will begin on the day after the day the
holder acquired the CRESTS delivered to the Conversion Agent for exchange.
If the Merger occurs and as a result Convertible Debentures are assumed
by Lodgian and become convertible into Lodgian Common Stock instead of Servico
Common Stock, the assumption of the Convertible Debentures by Lodgian should not
be a taxable event and, furthermore, the conversion by a holder of CRESTS,
through the Conversion Agent, of the Convertible Debenture into Lodgian Common
Stock should not be a taxable event, except with respect to cash received in
lieu of fractional shares as discussed above.
CONVERSION PRICE ADJUSTMENT
Treasury regulations promulgated under section 305 of the Code would
treat holders of CRESTS as having received a constructive distribution from the
Company in the event the Conversion Price of the Convertible Debentures were
adjusted if (i) as a result of such adjustment, the proportionate interest of
such holder in the assets or earnings and profits of the Company were increased
and (ii) the adjustment was not made pursuant to a bona fide, reasonable
anti-dilution formula. An adjustment to the Conversion Price would not be
considered made pursuant to such formula if the adjustment was made to
-44-
<PAGE> 50
compensate for certain taxable distributions with respect to the Servico Common
Stock. Thus, under certain circumstances, a reduction in the Conversion Price
for the holders may result in deemed dividend income to holders to the extent of
the current or accumulated earnings and profits ("E&P") of the Company. Holders
of the Convertible Debentures would be required to include their allocable share
of such deemed dividend in gross income but will not receive any cash related
thereto.
-45-
<PAGE> 51
OWNERSHIP OF SERVICO COMMON STOCK
Distributions received by holders of Servico Common Stock
("Stockholders") in respect of such Servico Common Stock (other than certain
distributions of additional shares of Servico Common Stock or rights to acquire
additional shares of Servico Common Stock) will be treated as ordinary dividend
income ("Dividends") to such Stockholders to the extent such distributions are
considered to be paid by the Company out of its E&P, as determined under United
States federal income tax principles. Corporate Stockholders may be entitled to
a "dividends-received deduction" with respect to such Dividends.
To the extent that any such distribution exceeds the Company's E&P for
a taxable year, such distribution will be treated, first, as a tax-free return
of capital to a Stockholder to the extent of such Stockholder's adjusted tax
basis in the Servico Common Stock and, thereafter, as capital gain.
Distributions of additional shares of Servico Common Stock, or rights
to acquire additional shares of Servico Common Stock, that are received as part
of a pro rata distribution of such shares, or rights to acquire such shares, to
all Stockholders of the Company generally should not be subject to United States
federal income tax. The tax basis of such new shares or rights generally will be
determined by allocating the Stockholder's adjusted tax basis in the "old"
shares of Servico Common Stock between such "old" shares and the new shares or
rights received by such Stockholder, based upon their relative fair market
values on the date of the distribution.
A Stockholder generally will recognize gain or loss on a sale or other
taxable disposition of Servico Common Stock equal to the difference between the
amount realized by the Stockholder on such sale or disposition and the
Stockholder's adjusted tax basis in such Servico Common Stock. Such gain or loss
generally will be capital gain or loss and generally will be considered
long-term capital gain or loss if the Stockholder had held such Servico Common
Stock for more than one year immediately prior to such sale or disposition.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Income on the CRESTS held of record by United States Persons (other
than corporations and other exempt holders) will be reported annually to such
holders and to the IRS. Such income will be reported to holders on Forms 1099,
which should be mailed to the holders of record prior by January 31 following
each calendar year.
"Backup withholding" at a rate of 31% will apply to payments of
interest to non-exempt United States Persons unless the holder furnishes its
taxpayer identification number in the manner prescribed in applicable Treasury
regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from disposition of CRESTS (or Convertible
Debentures) or Servico Common Stock to or through a United States office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner establishes an exemption from information reporting
and backup withholding.
Any amounts withheld from a holder of the CRESTS under the backup
withholding rules generally will be allowed as a refund or a credit against such
holder's United States federal income tax liability, provided the required
information is furnished to the IRS.
-46-
<PAGE> 52
BOOK-ENTRY ISSUANCE
DTC acts as securities depositary for the CRESTS and, if distributed to
holders of CRESTS in connection with the liquidation of the Trust as a result of
the occurrence of a Special Event, the Convertible Debentures. The CRESTS and
the Convertible Debentures are issued only as fully-registered securities
registered in the name of DTC or its nominee (each, a "Global Security"), in
each case for credit to an account of a direct or indirect participant in DTC as
described below.
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Trust and the Company that purchases of CRESTS
or Convertible Debentures within the DTC system must be made by or through
Participants, which will receive a credit for the CRESTS or Convertible
Debentures on DTC's records. The ownership interest of each actual purchaser of
each CRESTS and each Convertible Debenture is in turn to be recorded on the
Participants' and Indirect Participants' records, including Euroclear and CEDEL.
Owners of interest will not receive written confirmation from DTC of their
purchases, but owners of interest are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Participants or Indirect Participants through which the
owners of interest purchased CRESTS or Convertible Debentures. Transfers of
ownership interests in the CRESTS or Convertible Debentures are to be
accomplished by entries made on the books of Participants or Indirect
Participants acting on behalf of owners of interest. Except as described below,
owners of interests do not receive physical delivery of certificates
representing their ownership interests in the CRESTS or Convertible Debentures
and are not be considered the registered owners or holders thereof for any
purpose.
The laws of some states may require that certain persons take physical
delivery in certificated form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Certificate to such persons
are limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Global Certificate to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests. For certain
other restrictions on the transferability of the CRESTS, see "-- Exchange of
Book-Entry CRESTS for Certificated CRESTS."
Payments in respect of the CRESTS and the Convertible Debentures are
payable by the Property Trustee and the Debenture Trustee, respectively, to DTC
in its capacity as the registered holder. The Property Trustee and the Debenture
Trustee will treat the persons in whose names the CRESTS and the Convertible
Debentures, respectively, including the Global Certificates, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Certificates, or for maintaining, supervising or reviewing any of DTC's
records or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Certificates or (ii) any other
matter relating to the actions and practices of DTC or any of its Participants
or Indirect Participants. DTC has advised the Trust and the Company that its
current practice, upon receipt of any payment in respect of securities such as
the CRESTS or the Convertible Debentures, is to credit the accounts of the
relevant Participants with the payment on the payment date unless DTC has reason
to believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of CRESTS or
Convertible Debentures are governed by standing instructions and customary
practices and are the responsibility of the Participants or the Indirect
Participants and are not be the responsibility of DTC, the Property Trustee, the
Debenture Trustee or the Trust. None of the Trust, the Property Trustee or the
Debenture Trustee are liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the CRESTS or the Convertible Debentures,
and the Trust, the Property Trustee and the Indenture Trustee may conclusively
rely on and are protected in relying on instructions from DTC or its nominee for
all purposes.
Except for trades involving only Euroclear or CEDEL participants,
interests in the Global Certificates will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants. Transfers between Participants
in DTC are effected in accordance with DTC's procedures, and are settled in
same-day funds. Transfers between participants in Euroclear or CEDEL are
effected in the ordinary way in accordance with their respective rules and
operating procedures.
-47-
<PAGE> 53
Cross-market transfers between the Participants in DTC, on the one
hand, and Euroclear or CEDEL participants, on the other hand, are effected
through DTC in accordance with DTC's rules on behalf of Euroclear or CEDEL, as
the case may be, by its respective depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or CEDEL, as the
case may be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such system.
Euroclear or CEDEL, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depositary to
take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Certificates in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Euroclear participants and CEDEL participants may not deliver
instructions directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear
or CEDEL participant purchasing an interest in a Global Certificate from a
Participant in DTC are credited, and any such crediting are reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the settlement date of DTC. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Certificate by or through a
Euroclear or CEDEL participant to a Participant in DTC are received with value
on the settlement date of DTC but are available in the relevant Euroclear or
CEDEL cash account only as of the business day for Euroclear or CEDEL following
DTC's settlement date.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of CRESTS only at the direction of one or more
Participants to whose account with DTC interests in the Global Certificates are
credited. However, if there is an Indenture Event of Default, DTC reserves the
right to exchange the Global Certificates for CRESTS or Convertible Debentures,
as applicable, in certificated form and to distribute such CRESTS or Convertible
Debentures to its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Trust and the
Company believe to be reliable, but neither the Trust nor the Company takes
responsibility for the accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing
procedures to facilitate transfers of interests in the CRESTS or the Convertible
Debentures among participants in DTC, Euroclear and CEDEL, they are under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Trust nor the Property
Trustee will have any responsibility for the performance by DTC, Euroclear or
CEDEL or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY CRESTS FOR CERTIFICATED CRESTS
A Global Certificate is exchangeable for CRESTS or Convertible
Debentures, as applicable, in registered certificated form if (i) DTC (x)
notifies the Trust (in the case of CRESTS) or the Company (in the case of
Convertible Debentures) that it is unwilling or unable to continue as depositary
for the Global Certificate and the Trust or the Company, as applicable,
thereupon fails to appoint a successor depositary or (y) has ceased to be a
clearing agency registered under the Exchange Act, (ii) the Company in its sole
discretion elects to cause the issuance of the CRESTS in certificated form or
(iii) there shall have occurred and be continuing an Indenture Event of Default
or, in the case of CRESTS, any event which after notice or lapse of time or both
would be a Trust Enforcement Event. In all cases, certificated CRESTS or
Convertible Debentures delivered in exchange for any Global Certificate or
beneficial interests therein are registered in the names, and issued in any
approved denominations, requested by or on behalf of the depositary in
accordance with its customary procedures.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to ERISA and
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code ("Plans"), as well as entities whose assets include "plan assets" by reason
of any Plan's investment in such entities (a "Plan Investor"), may purchase
CRESTS, subject to the investing fiduciary's determination that the investment
in CRESTS satisfies ERISA's fiduciary standards and other requirements
applicable to investments by the Plan Investor.
The Department of Labor ("DOL") has issued a regulation (29 C.F.R.
Section 2510.3-101) (the "DOL Regulation") concerning the definition of what
constitutes the assets of a Plan. The DOL Regulation provides that as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a plan makes an "equity" investment are
deemed for purposes of ERISA to be assets of the investing plan unless certain
exceptions apply. There can be no assurance that any of the exceptions set forth
in the DOL regulation will apply to the purchase of CRESTS offered hereby and,
as a result, the assets of a Plan or other Plan Investor could be considered to
include an undivided interest in the Convertible Debentures held by the Trust.
The Company and/or any of its affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Code) with respect to certain Plans and other
Plan Investors. The acquisition and ownership of CRESTS by a Plan or other Plan
Investor and the conversion of the CRESTS into Servico Common Stock may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such
-48-
<PAGE> 54
CRESTS are acquired pursuant to and in accordance with an applicable exemption.
As a result, Plans and other Plan Investors with respect to which the Company or
any of its affiliates is a party in interest or a disqualified person should not
acquire CRESTS unless such CRESTS are acquired pursuant to and in accordance
with an applicable prohibited transaction exemption.
ANY PURCHASER OR HOLDER OF THE CRESTS OR ANY INTEREST THEREIN WILL BE
DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (I)
THE PURCHASER AND HOLDER IS NOT A PLAN OR ANY ENTITY WHOSE UNDERLYING ASSETS
INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND IS
NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR
(II) BY REASON OF THE APPLICATION OF ONE OR MORE STATUTORY OR ADMINISTRATIVE
EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES OF SECTION 406 OF ERISA AND
SECTION 4975 OF THE CODE, ITS PURCHASE AND HOLDING OF CRESTS WILL NOT
CONSTITUTE, CAUSE OR RESULT IN THE OCCURRENCE OF A NON-EXEMPT PROHIBITED
TRANSACTION WITHIN THE MEANING OF SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE. ANY PLANS OR OTHER ENTITIES WHOSE ASSETS INCLUDE PLAN ASSETS SUBJECT TO
ERISA OR SECTION 4975 OF THE CODE PROPOSING TO ACQUIRE CRESTS SHOULD CONSULT
WITH THEIR OWN COUNSEL.
-49-
<PAGE> 55
SELLING SHAREHOLDERS
The CRESTS were originally issued by the Trust and sold by NationsBanc
Montgomery Securities LLC (the "Initial Purchaser"), in a transaction exempt
from the registration requirements of the Securities Act, to persons reasonably
believed by such Initial Purchaser to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act). The Selling Shareholders may
from time to time offer and sell pursuant to this Prospectus any or all of the
CRESTS, any Convertible Debentures and Servico Common Stock issued upon
conversion of the CRESTS. The term Selling Shareholder includes, without
duplication, the holders listed below and the beneficial owners of the CRESTS
and their transferees, pledgees, donees or other successors.
The following table sets forth information with respect to the Selling
Shareholders of the CRESTS as of October 14, 1998, and has been provided to the
Trust and the Company by such Selling Shareholders.
NAME OF NUMBER OF
SELLING SHAREHOLDERS CRESTS
- -------------------- ---------
AFTRA Health Fund....................................... 17,000
AIM Balanced Fund....................................... 70,000
Brown & Williamson Tobacco Corp.
Master Retirement Trust............................... 10,000
Deutsche Bank Securities................................ 90,000
Equi Select-SER Growth & Income Fund.................... 50,000
J.P. Morgan & Co. Incorporated(1)....................... 195,000
Mainstay Convertible Fund............................... 228,000
Mainstay Strategic Income Fund.......................... 20,000
NationsBanc Montgomery Securities LLC................... 181,500
Ohio National Growth & Income Fund...................... 7,500
Robertson Stephens Growth & Income Fund................. 50,000
Other Holders........................................... 2,581,000
---------
Total....................................... 3,500,000
- ------------
(1) J.P. Morgan Investment Management, Inc. and Morgan Guaranty Trust Company
of New York may be deemed beneficial owners of these CRESTS.
None of the Selling Shareholders has, or within the past three years
has had, any position, office or other material relationship with the Trust or
the Company or any of their predecessors or affiliates, except that NationsBanc
Montgomery Securities LLC acted as an Initial Purchaser in the Original Offering
and it or its affiliates have provided, and may continue to provide, investment
banking or financial advisory services to the Company. Because the Selling
Shareholders may, pursuant to this Prospectus, offer all or some portion of the
CRESTS, the Convertible Debentures or the Servico Common Stock issuable upon
conversion of the CRESTS, no estimate can be given as to the amount of the
CRESTS, the Convertible Debentures or the Servico Common Stock issuable upon
conversion of the CRESTS that will be held by the Selling Shareholders upon
termination of any such sales. In addition, the Selling Shareholders identified
above may have sold, transferred or otherwise disposed of all or a portion of
their CRESTS since the date on which they provided the information regarding
their CRESTS pursuant to transactions exempt from the registration requirements
of the Securities Act.
-50-
<PAGE> 56
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers
directly by the Selling Shareholders. Alternatively, the Selling Shareholders
may from time to time offer the Offered Securities to or through underwriters,
broker-dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholders
or the purchasers of such securities for whom they may act as agents. The
Selling Shareholders and any underwriters, broker-dealers or agents that
participate in the distribution of Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on the
sale of such securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker/dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or services or in the over-the-counter market
or (iv) through the writing of options. In connection with sales of the Offered
Securities or otherwise, the Selling Shareholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the
Offered Securities in the course of hedging the positions they assume. The
Selling Shareholders may also sell Offered Securities short and deliver Offered
Securities to close out such short positions, or loan or pledge Offered
Securities to broker-dealers that in turn may sell such Offered Securities. At
the time a particular offering of the Offered Securities is made, a Prospectus
Supplement, if required, will be distributed which will set forth the aggregate
amount and type of Offered Securities being offered and the terms of the
offering, including the name or names of any underwriters, broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Shareholders and any discounts, commissions or concessions
allowed or reallowed or paid to broker-dealers.
Pursuant to the Registration Rights Agreement, the Company is required
to use its reasonable best efforts to keep the Registration Statement to which
this Prospectus forms a part continuously effective for a period of two years
from its effective date or such shorter period that will terminate upon the
earlier of the date on which the Offered Securities shall have been sold
pursuant to the Registration Statement or the date on which the Offered
Securities are permitted to be freely sold or distributed to the public pursuant
to any exemption from the registration requirements of the Securities Act
(including in reliance on Rule 144(k) but excluding in reliance on Rule 144A
under the Securities Act). Notwithstanding the foregoing obligations, the
Company may, under certain circumstances, postpone or suspend the filing or the
effectiveness of the Registration Statement (or any amendments or supplements
thereto) or the sale of Offered Securities.
To comply with the securities laws of certain jurisdictions, if
applicable, the Offered Securities will be offered or sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the Offered Securities may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or any
exemption from registration or qualification is available and is complied with.
The Selling Shareholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Securities by the
Selling Shareholders. The foregoing may affect the marketability of such
securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, SEC filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Shareholders
will pay all underwriting discounts and selling commissions, if any. The Selling
Shareholders will be indemnified by the Company and the Trust, jointly and
severally against certain civil liabilities, including certain liabilities under
the Securities Act, or will be entitled to contribution in connection therewith.
The Company and the Trust will be indemnified by the Selling Shareholders
severally against certain civil liabilities, including certain liabilities under
the Securities Act, or will be entitled to contribution in connection therewith.
-51-
<PAGE> 57
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the CRESTS
will be passed upon for the Issuer by Richards, Layton & Finger, P.A.,
Wilmington, Delaware, special Delaware counsel to the Company and the Trust. The
validity of the Convertible Debentures, the Guarantee and the Servico Common
Stock issuable upon conversion of the Debentures will be passed upon for the
Company and the Issuer by Stearns Weaver Miller Weissler Alhadeff & Sitterson,
P.A. Certain United States federal income taxation matters described in this
Prospectus will be passed upon for the Company and the Issuer by Stearns Weaver
Miller Weissler Alhadeff & Sitterson, P.A.
INDEPENDENT AUDITORS
The consolidated financial statements of Servico, Inc. appearing in
Servico, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1997,
have been audited by Ernst & Young LLP, independent certified public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
Additionally, the balance sheet of Lodgian, Inc. at April 17, 1998,
included in the Company's definitive Proxy Statement for its 1998 Annual Meeting
of Shareholders, dated July 23, 1998 and filed with the SEC on July 24, 1998,
has been audited by Ernst & Young LLP, independent certified public accountants,
as set forth in their report thereon included therein and incorporated herein by
reference. Such balance sheet is incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The consolidated and combined financial statements of Impac Hotel
Group, L.L.C. and its predecessors and Impac Hotel Development, Inc. as of
December 31, 1997 and 1996 and for the three years ended December 31, 1997
included in the Company's definitive Proxy Statement for its 1998 Annual Meeting
of Shareholders, dated April 10, 1998, except for Note 9 for which the date is
July 7, 1998, and filed with the SEC on July 24, 1998, incorporated by
reference in this Prospectus, have been audited by PricewaterhouseCoopers
L.L.P., independent accountants as stated in their report thereon included
therein and incorporated herein by reference. Such consolidated and combined
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
-52-
<PAGE> 58
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE ISSUER OR ANY OF THEIR
AGENTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE ISSUER SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Page
Available Information.....................................................i
Incorporation of Certain Documents
by Reference............................................................i
Summary...................................................................1
Special Note Regarding Forward-Looking
Statements...............................................................6
Risk Factors..............................................................7
Lodgian Capital Trust I .................................................15
The Servico/Impac Merger.................................................16
Ratio of Earnings to Fixed Charges.......................................18
Use of Proceeds..........................................................18
Description of the CRESTS................................................19
Description of the Convertible Debentures................................30
Description of the Guarantee.............................................39
Relationship Among the CRESTS, the
Convertible Debentures and the Guarantee...............................41
Certain United States Federal Income
Tax Consequences.......................................................43
Book-Entry Issuance......................................................47
ERISA Considerations.....................................................48
Selling Shareholders.....................................................50
Plan of Distribution.....................................................51
Legal Matters............................................................52
Independent Auditors.....................................................52
3,500,000 SHARES
LODGIAN CAPITAL TRUST I
7% CONVERTIBLE REDEEMABLE
EQUITY STRUCTURED TRUST
SECURITIESSM ("CRESTSSM")
(LIQUIDATION AMOUNT $50 PER
CRESTS)
GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY AND CONVERTIBLE INTO THE
COMMON STOCK OF
SERVICO, INC.
---------------------------
PROSPECTUS
---------------------------
October __, 1998
<PAGE> 59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the offering are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee....................................................................$22,200
Legal Fees and Expenses*................................................................$
Accounting Fees and Expenses*...........................................................$
Printing Expenses*......................................................................$
Blue Sky Qualification Fees and Expenses................................................$
Transfer Agent, Registrar and Trustee Fees and Expenses.................................$
Miscellaneous Expenses..................................................................$
-------
Total*.................................................................................$
=======
</TABLE>
- -----------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0831 of the Florida Business Corporation Act (the "Florida
Act") provides that a director is not personally liable for monetary damages to
the corporation or any person for any statement, vote, decision or failure to
act regarding corporate management or policy, by a director, unless: (a) the
director breached or failed to perform his duties as a director; and (b) the
director's breach of, or failure to perform, those duties constitutes: (i) a
violation of criminal law unless the director had reasonable cause to believe
his conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (ii) a transaction from which the director derived an improper
personal benefit, either directly or indirectly; (iii) a circumstance under
which the director is liable for an improper distribution; (iv) in a proceeding
by, or in the right of the corporation to procure a judgment in its favor or by
or in the right of a shareholder, conscious disregard for the best interests of
the corporation, or willful misconduct; or (v) in a proceeding by or in the
right of someone other than the corporation or a shareholder, recklessness or an
act or omission which was committed in bad faith or with malicious purpose or in
a manner exhibiting wanton and willful disregard of human rights, safety or
property.
Section 607.0850 of the Florida Act provides that a corporation shall
have the power to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the corporation), by reason of the
fact that he is or was a director, officer or employee or agent of the
corporation against liability incurred in connection with such proceeding if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Section 607.0850 also provides that a corporation shall have the
power to indemnify any person, who was or is a party to any proceeding by, or in
the right of, the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, against expenses and amounts paid in settlement not exceeding, in
the judgment of the board of directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof.
Under Section 607.0850, indemnification is authorized if such person acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification may be
made in respect of any claim, issue, or matter as to which such person is
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability, but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court deems proper. To the
extent that a director, officer, employee or agent has been successful on the
merits or otherwise in defense of any of the foregoing proceedings, or in
defense of any claim, issue or matter therein Section 607.0850 provides that, he
shall be indemnified against expenses actually and reasonably incurred by him in
connection therewith. Under Section 607.0850, any indemnification, unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that the indemnification of
the director, officer, employee or agent is proper under the circumstances
because he has met the applicable standard of conduct. Notwithstanding the
failure of a corporation to provide indemnification, and despite any contrary
determination by the corporation in a specific case, Section 607.0850 permits a
director, officer, employee or agent of the corporation who is or was a party to
a proceeding to apply for indemnification to the appropriate court and such
court may order indemnification if it determines that such person is entitled to
indemnification under the applicable standard.
Section 607.0850 also provides that a corporation has the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation against any liability
asserted against him and incurred by him
II-1
<PAGE> 60
in any such capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of Section 607.0850.
Servico's bylaws provide that it shall indemnify its officers and
directors and former officers and directors to the full extent permitted by law.
Servico's directors and officers are covered by insurance policies
indemnifying them against certain liabilities, including liabilities under the
federal securities laws (other than liability under Section 16(b) of the
Exchange Act), which might be incurred by them in such capacities.
Pursuant to the Delaware Business Trust Act, a Delaware business trust
has the power to indemnify and hold harmless any trustee or beneficial owner or
other person from and against any and all claims and demands whatsoever, subject
to such standards and restrictions, if any, as are set forth in the governing
instrument of the business trust. Under the Declaration, Servico agreed to
indemnify each of the Regular Trustees of the Trust, their affiliates, any of
their respective officers, directors, shareholders, members, partners,
employees, representatives or agents and any officer, employee or agent of the
Trust or its affiliates (each an "Indemnified 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 Trust) against expenses
(including attorney fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Additionally, Servico shall indemnify, to the full extent
permitted by law, any Indemnified Person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Trust to procure a judgment in its favor against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust and except that no such indemnification shall be
made in respect of any claim issue or matter as to which such person shall have
been adjudged to be liable to the Trust unless and only to the extent that the
Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such Court
of Chancery or such other court shall deem proper.
Additionally, the Declaration provides that no Indemnified Person shall
be liable, responsible or accountable in damages or otherwise to the Trust or
any officer, director, shareholder, partner, member, representative, employee or
agent of the Trust or the Trust's affiliates or the holder of any CRESTS or
common securities of the Trust (each a "Covered Person") for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by the Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.
Pursuant to the Declaration, Servico agreed to indemnify the (i)
Property Trustee, (ii) the Delaware Trustee, (iii) any affiliate of the Property
Trustee and the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Property Trustee and the Delaware Trustee (each of the
Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
theTrust thereunder, including the cost and expenses (including reasonable legal
fees and expenses) of defending itself against or investigating any claim or
liability in connection with the exercise or performance of any of its powers or
duties thereunder.
ITEM 16. EXHIBITS
The following exhibits are either filed herewith or incorporated by
reference to documents previously filed as indicated below:
EXHIBITS DESCRIPTION
- -------- -----------
4.1 Certificate of Trust of Lodgian Capital Trust I
4.2 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 Registration
Statement on Form S-4 filed on July 17, 1998 (Registration
Number 333-59315))
4.3 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 Registration Statement on Form S-4 filed on July 17,
1998 (Registration Number 333-59315))
II-2
<PAGE> 61
4.4 Guarantee Agreement, dated as of June 17, 1998, between the
Servico, Inc., Lodgian, Inc. and Wilmington Trust Company, as
Guarantee Trustee (incorporated by reference to Exhibit 10.3
to the Registration Statement on Form S-4 filed on July 17,
1998 (Registration Number 333-59315))
4.5 Amended and Restated Declaration of Trust of Lodgian Capital
Trust I, dated as of June 17, 1998, between Servico, Inc., as
Sponsor, David A. Buddemeyer, Charles M. Diaz and Phillip R.
Hale, as Regular Trustees, and Wilmington Trust Company, as
Delaware Trustee and Property Trustee (incorporated by
reference to Exhibit 10.5 to the Registration Statement on
Form S-4 filed on July 17, 1998 (Registration Number
333-59315))
4.6 Specimen CRESTS (included as an exhibit to Exhibit 4.5)
4.7 Specimen Convertible Debenture (included as an exhibit to
Exhibit 4.3)
5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A. regarding the validity of the issuance of the
Convertible Debentures, the Guarantee and the Common Stock of
Servico, Inc. being registered hereby
5.2 Opinion of Richards Layton & Finger, special Delaware counsel,
as to the validity of the issuance of the CRESTS being
registered hereby
8 Tax Opinion of Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A.
12 Statement Regarding Computation of Earnings to Fixed Charges
23.1 Consent of Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A. (included in Exhibit 5.1 and 8)
23.2 Consent of Richards Layton & Finger (included in Exhibit 5.2)
23.3 Consent of Ernst & Young, L.L.P.*
23.4 Consent of PricewaterhouseCoopers, L.L.P.
24 Power of Attorney (included with signature pages to this
Registration Statement)
25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company
to act as trustee under the Indenture
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company
to act as trustee under the Amended and Restated Declaration
of Trust
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company
to act as trustee under the Guarantee
- ------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(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;
PROVIDED, HOWEVER, That paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission (the "SEC") by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act")that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, 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.
II-3
<PAGE> 62
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Servico,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and had duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of West Palm Beach, State of Florida, on the 15th day of
October, 1998.
SERVICO, INC.
By: \s\ DAVID A. BUDDEMEYER
-------------------------------------
David A. Buddemeyer,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, Lodgian
Capital Trust I certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and had duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of West Palm Beach, State of Florida, on the 15th
day of October, 1998.
LODGIAN CAPITAL TRUST I
By: \s\ DAVID A. BUDDEMEYER
-------------------------------------
David A. Buddemeyer,
Regular Trustee
By: \s\ PHILLIP R. HALE
-------------------------------------
Phillip R. Hale
Regular Trustee
By: \s\ CHARLES M. DIAZ
-------------------------------------
Charles M. Diaz
Regular Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David A. Buddemeyer and Warren M. Knight,
and each of them acting alone, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments,
including post-effective amendments, to this Registration Statement or any
registration statement relating to this offering to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that each said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
\s\ DAVID A. BUDDEMEYER Director, President and October 15, 1998
- ------------------------------------ Chief Executive Officer
David A. Buddemeyer
</TABLE>
II-5
<PAGE> 64
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
\s\ WARREN M. KNIGHT Vice President - Finance October 15, 1998
- ----------------------------------- and Chief Financial and
Warren M. Knight Principal Accounting Officer
\s\ JOSEPH C. CALABRO Director October 15, 1998
- -----------------------------------
Joseph C. Calabro
\s\ MICHAEL A. LEVEN Director October 15, 1998
- -----------------------------------
Michael A. Leven
\s\ PETER R. TYSON Director October 15, 1998
- -----------------------------------
Peter R. Tyson
\s\ RICHARD H. WEINER Director October 15, 1998
- -----------------------------------
Richard H. Weiner
</TABLE>
II-6
<PAGE> 1
Exhibit 4.1
CERTIFICATE OF TRUST
OF
LODGIAN CAPITAL TRUST I
THIS CERTIFICATE OF TRUST of Lodgian Capital Trust I (the "Trust"),
dated as of May 15, 1998, is being duly executed and filed by the undersigned,
as trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. ((S)) 3801 et seq.).
1. Name. The name of the business trust being formed hereby is "Lodgian
Capital Trust I".
2. Delaware Trustee. The name and business address of the trustee of
the Trust with the principal place of business in the State of Delaware is
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective upon
filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Trustee
By: /s/ W. Chris Sponenberg
--------------------------------------
Name: W. Chris Sponenberg
Title: Senior Financial Services Officer
/s/ David Buddemeyer
-----------------------------------------
David Buddemeyer, not in his individual
capacity but solely as Regular Trustee
/s/ Phillip R. Hale
-----------------------------------------
Phillip R. Hale, not in his individual
capacity but solely as Regular Trustee
/s/ Charles M. Diaz
-----------------------------------------
Charles M. Diaz, not in his individual
capacity but solely as Regular Trustee
<PAGE> 1
Exhibit 5.1
LAW OFFICES
STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, P.A.
MUSEUM TOWER
150 WEST FLAGLER STREET
MIAMI, FLORIDA 33130
---------
MIAMI (305) 789-3200 o BROWARD (954) 463-5440
FAX (305) 789-3395
<TABLE>
<CAPTION>
<S> <C> <C> <C>
E. RICHARD ALHADEFF THEODORE A. JEWELL DAVID A. ROTHSTEIN OWEN S. FREED
LOUISE JACOWITZ ALLEN MICHAEL I. KEYES BETTY CHANG ROWE SENIOR COUNSEL
STUART D. AMES TEDDY D. KLINGHOFFER STEVEN D. RUBIN
LAWRENCE J. BAILIN ROBERT T. KOFMAN MIMI L. SALL DAVID M. SMITH
PATRICK A. BARRY PAUL TAGER LEHR NICOLE S. SAYFIE LAND USE CONSULTANT
AMANDA C. BARRY VERNON L. LEWIS RICHARD E. SCHATZ
SHAWN BAYNE WENDELL T. LOCKE LESTER E. SEGAL
LISA K. BENNETT KEVIN B. LOVE JAY B. SHAPIRO TAMPA OFFICE
SUSAN FLEMING BENNETT JOY SPILLIS LUNDEEN MARTIN S. SIMKOVIC SUITE 2200
LISA K. BERG GEOFFREY MacDONALD CURTIS H. SITTERSON SUNTRUST FINANCIAL CENTRE
MARK J. BERNET MICHAEL C. MARSH RONNI D. SOLOMON 401 EAST JACKSON STREET
HANS C. BEYER BRIAN J. McDONOUGH MARK D. SOLOV TAMPA, FLORIDA 33602
MARTIN G. BURKETT ANTONIO R. MENENDEZ EUGENE E. STEARNS
ELLEN I. CHO FRANCISCO J. MENENDEZ JENNIFER D. STEARNS (813) 223-4800
SETH THOMAS CRAINE ALISON W. MILLER BRADFORD SWING
PETER L. DESIDERIO VICKI LYNN MONROE SUSAN J. TOEPFER
MARK P. DIKEMAN HAROLD D. MOOREFIELD, JR. ANNETTE TORRES FORT LAUDERDALE OFFICE
SHARON QUINN DIXON JOHN N. MURATIDES DENNIS R. TURNER SUITE 1900
ALAN H. FEIN JOHN K. OLSON RONALD L. WEAVER 200 EAST BROWARD BOULEVARD
ANGELO M. FILIPPI ROBERT C. OWENS ROBERT I. WEISSLER FORT LAUDERDALE, FLORIDA 33301
ANDREA F. FISHER JAY P. W. PHILP PATRICIA G. WELLES
ROBERT E. GALLAGHER, JR. NOAH C. POLLACK THOMAS H. WILLIAMS, JR. (954) 462-9500
CHAVA E. GENET DARRIN J. QUAM MARTIN B. WOODS
LATASHA A. GETHERS JOHN M. RAWICZ
PATRICIA K. GREEN PATRICIA A. REDMOND
JOSEPH K. HALL ELIZABETH G. RICE
ALICE R. HUNEYCUTT GLENN M. RISSMAN
RICHARD B. JACKSON CARL D. ROSTON
</TABLE>
October 15, 1998
Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Attention: Board of Directors
Lodgian Capital Trust I
c/o Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Attention: Regular Trustees
Gentlemen:
Re: LODGIAN CAPITAL TRUST I
We have acted as counsel to Servico, Inc., a Florida corporation (the
"Company"), and Lodgian Capital Trust I, a Delaware statutory business trust
(the "Trust"), in connection with the preparation of a Registration Statement on
Form S-3 (the "Registration Statement") to be filed by the Company and the Trust
with the Securities and Exchange Commission (the "SEC") for the purpose of
registering under the Securities Act of 1933, as amended, the Convertible
Redeemable Equity Structured Trust Securities (the "CRESTS") of the Trust, the
7% Convertible Junior Subordinated Debentures (the "Debentures") of the Company,
the guarantee of the Company with respect to the CRESTS (the "Guarantee") and
the shares of the common stock, par value $.01 per share, of the Company (the
"Common Stock") issuable upon the conversion of the CRESTS and the Debentures.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Articles of
Incorporation and Bylaws of the Company (ii) the Certificate of Trust (the
"Certificate of Trust") filed by the Trust with the Secretary of State of the
State of Delaware on May 15, 1998 (iii) the Amended and Restated Declaration of
Trust, dated as of June 17, 1998, with respect to the Trust (the "Declaration");
(iv) the form of the CRESTS; (v) the form of the Guarantee among the Company,
Lodgian, Inc., a Delaware corporation ("Lodgian"), and Wilmington Trust
<PAGE> 2
Servico, Inc.
Lodgian Capital Trust I
October 15, 1998
Page 2
Company, as trustee (the "Trustee"), (vi) the form of the Debentures; (vii) the
Indenture, dated as of June 17, 1998, among the Company, Lodgian, and the
Trustee, as supplemented by the First Supplemental Indenture, dated as of June
17, 1998 among the Company, Lodgian and the Trustee with respect to the
Debentures (the "Indenture") and (viii) the Registration Statement. We have also
examined originals or copies, certified, or otherwise identified to our
satisfaction, of such other documents, certificates, and records as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as copies and the authenticity of the originals of
such copies. We have also assumed the absence of any undisclosed amendments or
supplements to or modifications or terminations of any such documents and the
absence of any undisclosed waiver of any right or remedy contained in any such
documents. In examining documents executed by parties other than the Company or
the Trust, we have assumed that such parties had the power, corporate or
otherwise, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or otherwise,
and execution and delivery by such parties of such documents and that, except as
set forth in paragraphs (1) and (2) below, such documents constitute valid and
binding obligations of such parties. As to any facts material to the opinions
express herein which were not independently established or verified, we have
relied upon oral or written statements and representations of officers,
trustees, and other representatives of the Company, the Trust and others.
We are qualified to practice law only in the State of Florida and we do
not purport to be experts on, or to express any opinion herein concerning, any
law other than the law of the State of Florida and the federal law of the United
States. Accordingly, the opinions contained herein are expressly limited to the
matters of the law of the State of Florida and the federal law of the United
States.
Based upon and subject to the foregoing and other qualifications and
limitations set forth herein, we are of the opinion that:
1. The Debentures, when duly executed, delivered, authenticated and
issued in accordance with the Indenture and delivered and paid for as
contemplated by the Registration Statement, will be valid and binding
obligations of the Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except to the
extent that enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
regardless of whether enforceability is considered in a proceeding at law or in
equity.
2. The Guarantee is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
regardless of whether enforceability is considered in a proceeding at law or in
equity.
STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, P.A.
<PAGE> 3
Servico, Inc.
Lodgian Capital Trust I
October 15, 1998
Page 3
3. The Common Stock, when issued and delivered by the Company upon
conversion of the CRESTS or the Debentures in accordance with their respective
terms, will be validly issued, fully paid and non-assessable.
We consent to the filing of this opinion with the SEC as an exhibit to
the Registration Statement and to the use of our name under the heading "Legal
Matters" in the Registration Statement.
Very truly yours,
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, P.A.
<PAGE> 1
Exhibit 5.2
RICHARDS, LAYTON & FINGER
A PROFESSIONAL ASSOCIATION
ONE RODNEY SQUARE
P.O. BOX 551
WILMINGTON, DELAWARE 19899
TELEPHONE (302) 658-6541
TELECOPIER: (302) 658-6548
WEBSITE; WWW.RLF.COM
(LETTERHEAD)
October 13, 1998
Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Re: LODGIAN CAPITAL TRUST I
-----------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Servico, Inc., a
Florida corporation (the "Company") and Lodgian Capital Trust I, a Delaware
business trust (the "Trust") in connection with the matters set forth herein. At
your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, as filed with the
office of the Secretary of State of the State of Delaware (the "Secretary of
State") on May 15, 1998;
(b) The Declaration of Trust of the Trust, dated as of May 15,
1998, among the Company and the trustees named therein;
(c) The Registration Statement (the "Registration Statement")
on Form S-3, including a preliminary prospectus with respect to the Trust (the
"Prospectus"), relating to the 7% Convertible Redeemable Equity Structured Trust
Securities(sm) of the Trust representing preferred undivided beneficial
interests in the assets of the Trust (each, a "Preferred Security" and
collectively, the "Preferred Securities"), to be filed by the Company and the
Trust with the Securities and Exchange Commission on or about October 13, 1998;
(d) The Amended and Restated Declaration of Trust of the
Trust, dated as of June 17, 1998 (including Exhibits A and B thereto) (the
"Declaration"), among the Company, the
<PAGE> 2
Servico, Inc.
October 13, 1998
Page 2
trustees of the Trust named therein, and the holders, from time to time, of the
undivided beneficial interests in the assets of the Trust; and
(e) A Certificate of Good Standing for the Trust, dated
October 13, 1998, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise
defined are used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (e) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (e) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
Declaration constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of the Trust, and that the Declaration and the
Certificate of Trust are in full force and effect and have not be amended, (ii)
except to the extent provided in paragraph 1 below, the due organization or due
formation, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its organization or formation, (iii) the legal capacity of natural
persons who are parties to the documents examined by us, (iv) that each of the
parties to the documents examined by us has the power and authority to execute
and deliver, and to perform its obligations under, such documents, (v) the due
authorization, execution and delivery by all parties thereto of all documents
examined by us, (vi) the receipt by each Person to whom a Preferred Security was
issued by the Trust (collectively, the "Preferred Security Holders") of a
Preferred Security Certificate for such Preferred Security and the payment for
such Preferred Security, in accordance with the Declaration and (vii) that the
Preferred Securities have been issued and sold to the Preferred Security Holders
in accordance with the Declaration. We have not participated in the preparation
of the Registration Statement or the Prospectus and assume no responsibility for
their contents.
<PAGE> 3
Servico, Inc.
October 13, 1998
Page 3
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Business Trust Act.
2. The Preferred Securities of the Trust represent valid and,
subject to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, are entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Declaration.
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
RICHARDS, LAYTON & FINGER
EAM
<PAGE> 1
Exhibit 8
LAW OFFICES
STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, P.A.
MUSEUM TOWER
150 WEST FLAGLER STREET
MIAMI, FLORIDA 33130
---------
MIAMI (305) 789-3200 o BROWARD (954) 463-5440
FAX (305) 789-3395
<TABLE>
<CAPTION>
<S> <C> <C> <C>
E. RICHARD ALHADEFF THEODORE A. JEWELL DAVID A. ROTHSTEIN OWEN S. FREED
LOUISE JACOWITZ ALLEN MICHAEL I. KEYES BETTY CHANG ROWE SENIOR COUNSEL
STUART D. AMES TEDDY D. KLINGHOFFER STEVEN D. RUBIN
LAWRENCE J. BAILIN ROBERT T. KOFMAN MIMI L. SALL DAVID M. SMITH
PATRICK A. BARRY PAUL TAGER LEHR NICOLE S. SAYFIE LAND USE CONSULTANT
AMANDA C. BARRY VERNON L. LEWIS RICHARD E. SCHATZ
SHAWN BAYNE WENDELL T. LOCKE LESTER E. SEGAL
LISA K. BENNETT KEVIN B. LOVE JAY B. SHAPIRO TAMPA OFFICE
SUSAN FLEMING BENNETT JOY SPILLIS LUNDEEN MARTIN S. SIMKOVIC SUITE 2200
LISA K. BERG GEOFFREY MacDONALD CURTIS H. SITTERSON SUNTRUST FINANCIAL CENTRE
MARK J. BERNET MICHAEL C. MARSH RONNI D. SOLOMON 401 EAST JACKSON STREET
HANS C. BEYER BRIAN J. McDONOUGH MARK D. SOLOV TAMPA, FLORIDA 33602
MARTIN G. BURKETT ANTONIO R. MENENDEZ EUGENE E. STEARNS
ELLEN I. CHO FRANCISCO J. MENENDEZ JENNIFER D. STEARNS (813) 223-4800
SETH THOMAS CRAINE ALISON W. MILLER BRADFORD SWING
PETER L. DESIDERIO VICKI LYNN MONROE SUSAN J. TOEPFER
MARK P. DIKEMAN HAROLD D. MOOREFIELD, JR. ANNETTE TORRES FORT LAUDERDALE OFFICE
SHARON QUINN DIXON JOHN N. MURATIDES DENNIS R. TURNER SUITE 1900
ALAN H. FEIN JOHN K. OLSON RONALD L. WEAVER 200 EAST BROWARD BOULEVARD
ANGELO M. FILIPPI ROBERT C. OWENS ROBERT I. WEISSLER FORT LAUDERDALE, FLORIDA 33301
ANDREA F. FISHER JAY P. W. PHILP PATRICIA G. WELLES
ROBERT E. GALLAGHER, JR. NOAH C. POLLACK THOMAS H. WILLIAMS, JR. (954) 462-9500
CHAVA E. GENET DARRIN J. QUAM MARTIN B. WOODS
LATASHA A. GETHERS JOHN M. RAWICZ
PATRICIA K. GREEN PATRICIA A. REDMOND
JOSEPH K. HALL ELIZABETH G. RICE
ALICE R. HUNEYCUTT GLENN M. RISSMAN
RICHARD B. JACKSON CARL D. ROSTON
</TABLE>
October 15, 1998
Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Attention: Board of Directors
Lodgian Capital Trust I
c/o Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Attention: Regular Trustees
Gentlemen:
We have acted as counsel to Servico, Inc., a Florida corporation (the
"Company"), and Lodgian Capital Trust I, a Delaware statutory business trust
("the Trust"), in connection with the registration statement of the Company and
the Trust on Form S-3 (the "Registration Statement") of which a prospectus
("Prospectus") is a part, to be filed by the Company and the Trust with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended, for the purpose of registering Convertible Redeemable Equity
Structured Trust Securities of the Trust (the "CRESTS"), 7% Convertible Junior
Subordinated Debentures of the Company, the guarantee of the Company with
respect to such CRESTS and shares of the Common Stock, par value $.01 per share,
of the Company. This opinion is furnished pursuant to the requirements of Item
601(b)(8) of Regulation S-K.
For purposes of rendering this opinion, we have reviewed and relied
upon the Registration Statement and such other documents and instruments as we
deemed necessary for the rendering of this opinion. In our examination of
relevant documents, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies, the authenticity
of such copies and the accuracy and completeness of all corporate records made
available to us by the Company and the Trust. We have also assumed the absence
of any undisclosed amendments or supplements to or modifications or terminations
of any such
<PAGE> 2
Servico, Inc.
Lodgian Capital Trust I
October 15, 1998
Page 2
documents and the absence of any undisclosed waiver of any right or remedy
contained in any such documents.
Based solely on our review of such documents, and upon such information
as the Company has provided to us (which we have not attempted to verify in any
respect), and reliance upon such documents and information, we hereby adopt and
incorporate by reference the opinion set forth in the Prospectus under the
caption "Certain United States Federal Income Tax Consequences."
Our opinion is limited to the federal income tax matters described
above and does not address any other federal income tax considerations or any
state, local, foreign, or other tax considerations. If any of the information on
which we have relied is incorrect, or if changes in the relevant facts occur
after the date hereof, our opinion could be affected thereby. Moreover, our
opinion is based on the Internal Revenue Code of 1986, as amended, applicable
Treasury regulations promulgated thereunder, and Internal Revenue Service
rulings, procedures, and other pronouncements published by the United States
Internal Revenue Service. These authorities are all subject to change, and such
change may be made with retroactive effect. We can give no assurance that, after
such change, our opinion would not be different. We undertake no responsibility
to update or supplement our opinion. This opinion is not binding on the Internal
Revenue Service, and there can be no assurance, and none is hereby given, that
the Internal Revenue Service will not take a position contrary to one or more of
the positions reflected in the foregoing opinion, or that our opinion will be
upheld by the courts if challenged by the Internal Revenue Service.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use of our name in the Prospectus
under the caption "Certain United States Federal Income Tax Consequences."
Very truly yours,
STEARNS, WEAVER, MILLER, WEISSLER
ALHADEFF & SITTERSON, P.A.
STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, P.A.
<PAGE> 1
EXHIBIT 12
Servico, Inc.
Statements re computation of ratio of earnings to fixed charges
<TABLE>
<CAPTION>
Year ended December 31, Six months ended June 30,
--------------------------------------------------------- ---------------------------
Pro Forma Pro Forma
1997 1997 1996 1995 1994 1993 1998 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest Expense $15,006 $25,909 $29,443 $17,903 $12,554 $11,330 $ 8,898 $16,132 $16,202
Dividend On Convertible 12,794 0 0 0 0 0 6,384 311 0
Interest Capitalized
During the Period 1,650 1,650 644 632 506 439 928 928 545
Portion Of Rent Expense
Representative of Interest 1,741 960 817 757 627 612 871 480 408
Total Fixed Charges 31,191 28,519 30,904 19,292 13,687 12,381 17,081 17,851 17,155
</TABLE>
<TABLE>
<CAPTION>
Proforma 10K 10K 10K 10K 10K
Earnings 1997 1997 1996 1995 1994 1993 1998 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Before Income Tax
and Extraordinary Item 42,707 20,949 11,773 6,514 4,636 2,961 21,312 17,200 7,420
Add Back Minority Interest 779 960 2,060 572 171 (446) 823 823 656
Income Before Income Tax,
Extraordinary Item & M.I. 43,486 21,909 13,833 7,086 4,807 2,515 22,135 18,023 8,076
Fixed Charges Per Above 31,191 28,519 30,904 19,292 13,687 12,381 17,081 17,851 17,155
Less Interest Capitalized (1,650) (1,650) (644) (632) (506) (439) (928) (928) (545)
Add Current Period
Amortization Of Interest 279 279 205 132 73 23 140 140 102
Total Earnings 73,306 49,057 44,298 25,878 18,061 14,480 38,428 35,086 24,788
Ratio Of Earnings To Fixed
Charges 2.35 1.72 1.43 1.34 1.32 1.17 2.25 1.97 1.44
Lease Expense
</TABLE>
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 (File No. 333-_________) of our report dated April 10, 1998, except
for Note 9 as to which the date is July 7, 1998, of our audit of the
consolidated and combined financial statements of Impac Hotel Group, L.L.C.
and Predecessors. We also consent to the reference to our firm under the
caption "Independent Auditors".
/s/ PriceWaterhouse Coopers LLP
Atlanta, Georgia
October 14, 1998
<PAGE> 1
EXHIBIT 25.1
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SERVICO, INC.
(Exact name of obligor as specified in its charter)
Florida 65-0350241
(State of incorporation) (I.R.S. employer identification no.)
1601 Belvedere Road
West Palm Beach, Florida 33406
(Address of principal executive offices) (Zip Code)
7% Convertible Junior Subordinated Debentures of Servico
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 14th day
of October, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Emmett R. Harmon
----------------------------- ----------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of
5
<PAGE> 9
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
11
<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
12
<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, 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, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 14, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- -------------------
Name of Bank City
in the State of DELAWARE, at the close of business on June 30, 1998.
ASSETS
Thousands of dollars
<TABLE>
<CAPTION>
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................232,976
Interest-bearing balances........................................................................... 0
Held-to-maturity securities................................................................................ 195,579
Available-for-sale securities.............................................................................1,416,957
Federal funds sold and securities purchased under agreements to resell......................................150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 3,978,706
LESS: Allowance for loan and lease losses........... 63,164
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,915,542
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................135,596
Other real estate owned...................................................................................... 1,696
Investments in unconsolidated subsidiaries and associated companies...........................................1,066
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets............................................................................................55,759
Other assets................................................................................................103,586
Total assets..............................................................................................6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
LIABILITIES
Deposits:
<S> <C> <C>
In domestic offices.......................................................................................4,568,934
Noninterest-bearing ............... 838,655
Interest-bearing................... 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase................................. 418,382
Demand notes issued to the U.S. Treasury.....................................................................99,350
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................524,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 91,728
Total liabilities.........................................................................................5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................394,325
Net unrealized holding gains (losses) on available-for-sale securities........................................6,520
Total equity capital........................................................................................463,463
Total liabilities, limited-life preferred stock, and equity capital.......................................6,208,857
</TABLE>
2
<PAGE> 1
EXHIBIT 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SERVICO, INC.
LODGIAN CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Florida 65-0350241
Delaware None
(State of incorporation) (I.R.S. employer identification no.)
1601 Belvedere Road
West Palm Beach, Florida 33406
(Address of principal executive offices) (Zip Code)
Convertible Redeemable Equity Structured Trust Securities
(CRESTS) of Lodgian Capital Trust I
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 14th day
of October, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Emmett R. Harmon
--------------------------- ----------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of
5
<PAGE> 9
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
11
<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
12
<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, 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, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 14, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- -------------------
Name of Bank City
in the State of DELAWARE, at the close of business on June 30, 1998.
ASSETS
Thousands of dollars
<TABLE>
<CAPTION>
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................232,976
Interest-bearing balances........................................................................... 0
Held-to-maturity securities................................................................................ 195,579
Available-for-sale securities.............................................................................1,416,957
Federal funds sold and securities purchased under agreements to resell......................................150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 3,978,706
LESS: Allowance for loan and lease losses........... 63,164
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,915,542
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................135,596
Other real estate owned...................................................................................... 1,696
Investments in unconsolidated subsidiaries and associated companies...........................................1,066
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets............................................................................................55,759
Other assets................................................................................................103,586
Total assets..............................................................................................6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
LIABILITIES
Deposits:
<S> <C> <C>
In domestic offices.......................................................................................4,568,934
Noninterest-bearing ............... 838,655
Interest-bearing................... 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase................................. 418,382
Demand notes issued to the U.S. Treasury.....................................................................99,350
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................524,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 91,728
Total liabilities.........................................................................................5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................394,325
Net unrealized holding gains (losses) on available-for-sale securities........................................6,520
Total equity capital........................................................................................463,463
Total liabilities, limited-life preferred stock, and equity capital.......................................6,208,857
</TABLE>
2
<PAGE> 1
EXHIBIT 25.3
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SERVICO, INC.
(Exact name of obligor as specified in its charter)
Florida 65-0350241
(State of incorporation) (I.R.S. employer identification no.)
1601 Belvedere Road
West Palm Beach, Florida 33406
(Address of principal executive offices) (Zip Code)
Guarantee of CRESTS of Lodgian Capital Trust I by Servico, Inc.
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 14th day
of October, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Emmett R. Harmon
------------------------- ------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of
5
<PAGE> 9
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
11
<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
12
<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
2
<PAGE> 20
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, 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, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE> 27
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 14, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- -------------------
Name of Bank City
in the State of DELAWARE, at the close of business on June 30, 1998.
ASSETS
Thousands of dollars
<TABLE>
<CAPTION>
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................232,976
Interest-bearing balances........................................................................... 0
Held-to-maturity securities................................................................................ 195,579
Available-for-sale securities.............................................................................1,416,957
Federal funds sold and securities purchased under agreements to resell......................................150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 3,978,706
LESS: Allowance for loan and lease losses........... 63,164
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,915,542
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................135,596
Other real estate owned...................................................................................... 1,696
Investments in unconsolidated subsidiaries and associated companies...........................................1,066
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets............................................................................................55,759
Other assets................................................................................................103,586
Total assets..............................................................................................6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
LIABILITIES
Deposits:
<S> <C> <C>
In domestic offices.......................................................................................4,568,934
Noninterest-bearing ............... 838,655
Interest-bearing................... 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase................................. 418,382
Demand notes issued to the U.S. Treasury.....................................................................99,350
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................524,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 91,728
Total liabilities.........................................................................................5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................394,325
Net unrealized holding gains (losses) on available-for-sale securities........................................6,520
Total equity capital........................................................................................463,463
Total liabilities, limited-life preferred stock, and equity capital.......................................6,208,857
</TABLE>
2
