EXHIBIT 10.39
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re
Case No. 01-16345 (BRL)
LODGIAN, INC. et al.,
(Jointly Administered)
Chapter 11
STIPULATION AND ORDER AMONG THE DEBTORS AND JPMORGAN CHASE BANK, AS SUCCESSOR
INDENTURE TRUSTEE, PROVIDING FOR (I) LIMITED USE OF CASH COLLATERAL AND ADEQUATE
PROTECTION AND (II) RELATED RELIEF
RECITALS
FACTUAL BACKGROUND
A. On December 20, 2001 (the "Filing Date"), Lodgian, Inc.
("Lodgian") and the other above-captioned debtors and debtors-in-possession
(collectively, the "Debtors") filed with this Court voluntary petitions for
relief commencing cases (the "Cases") under Chapter 11 of Title 11, United
States Code (the "Bankruptcy Code").(1)
B. Since the Filing Date, the Debtors have remained in possession of
their businesses and properties pursuant to sections 1107 and 1108 of the
Bankruptcy Code.
C. On January 8, 2002, the Office of the United States Trustee
appointed a seven (7) member official committee of unsecured creditors (the
"Committee").
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(1) All of the Debtors filed their Chapter 11 petitions on the Filing Date,
except Worcester Hospitality, L.P., Lodgian Hotels, Inc., Brecksville
Hospitality, L.P. and Sioux City Hospitality, L.P. These four entities filed
their Chapter 11 petitions on December 21, 2001.
D. On the Filing Date, the Debtors filed several motions including a
motion pursuant to Sections 105, 362, 363, 364, 503(b) and 507 of the Bankruptcy
Code for orders, inter alia, authorizing the Debtors to (A) obtain postpetition
financing on a super-priority secured basis, and (B) use cash collateral and
providing adequate protection in connection therewith (the "DIP/Cash Collateral
Motion"). (2)
E. On December 21, 2001, the Court entered an interim order
authorizing the Debtors to use cash collateral of the Pre Petition Mortgage
Lenders pending a final hearing (the "Interim Cash Collateral Order"), which
hearing is scheduled to occur on February 14, 2002 (the "Final Hearing").
F. On December 21, 2001, the Court also entered an interim order
authorizing Lodgian to borrow up to a maximum aggregate principal amount of
$10,000,000 in accordance with the terms of the DIP Credit Agreement pending the
Final Hearing (the "Interim DIP Order").
G. It is anticipated that following the Final Hearing the Court will
enter a final cash collateral order (the "Final Cash Collateral Order") and a
final order authorizing Lodgian to borrow up to a maximum aggregate principal
amount of $25,000,000 in accordance with the terms of the DIP Credit Agreement
pending the Final Hearing (the "Final DIP Order").
H. In accordance with the Final DIP Order, among other things, (i)
all of the Debtors other than Lodgian will be authorized to guarantee the
amounts borrowed by Lodgian under the DIP Credit Agreement upon the conditions
set forth therein; (ii) pursuant to section 364(c)(1) of the Bankruptcy Code,
all of the Debtors' obligations under the DIP Credit
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(2) Unless otherwise defined herein, all capitalized terms used herein shall
have the same meanings assigned to them in the Final DIP Order or the Final Cash
Collateral Order, as applicable.
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Agreement shall be authorized to constitute obligations with priority over any
and all administrative expenses of the kind specified in sections 503(b) and
507(b) of the Bankruptcy Code, and over any and all administrative expenses or
other claims under sections 105, 326, 328, 506(c) or 507 of the Bankruptcy Code,
subject in limited circumstances to the Carveout; (iii) pursuant to section
364(c)(2) of the Bankruptcy Code, the Agent and the DIP Lenders were granted a
perfected first priority security interest in and lien upon all cash and cash
equivalents in the Letter of Credit Account under the DIP Credit Agreement and
any investment of the funds therein to the Agent and the DIP Lenders; (iv)
pursuant to section 364(d)(1) of the Bankruptcy Code, the Debtors will be
authorized to grant a perfected priming security interest in and lien to the
Agent and the DIP Lenders on all prepetition and postpetition property of the
Debtors that is subject to the existing liens presently securing the Debtors'
indebtedness to the Pre-Petition Lenders, but not senior to the interests of any
of the liens existing immediately prior to the Filing Date, or to interests in
such property arising out of liens to which the liens of the Pre-Petition
Lenders become subject subsequent to the Filing Date as permitted by section
546(b) of the Bankruptcy Code; and (v) pursuant to section 364(c)(2) of the
Bankruptcy Code, the Debtors will be authorized to grant a perfected security
interest in and lien to the Agent and the DIP Lenders on all other pre- and
post-petition property of the Debtors that, on or as of the Filing Date, was not
subject to valid, perfected and non-avoidable liens.
THE INDENTURES
I. Prior to the Filing Date, certain of the Debtors entered into
certain transactions pursuant to which JPMorgan Chase Bank serves as Successor
Indenture Trustee ("JPMC" or the "Trustee").
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J. A Trust Indenture, dated as of January 1, 1997, was entered into
between the City of Manhattan, Kansas, a municipal corporation organized under
the laws of the State of Kansas (the "City of Manhattan"), and Texas Commerce
Bank National Association, a national banking association organized under the
laws of the United States, as Indenture Trustee (the "Manhattan Indenture").
K. The City of Manhattan issued Commercial Development Revenue
Refunding Bonds (Holiday Inn Project) Senior Series 1997A (the "Manhattan Senior
Bonds") and Commercial Development Revenue Refunding Bonds (Holiday Inn Project)
Subordinate Series 1997B (the "Manhattan Subordinate Bonds," and together with
the Manhattan Senior Bonds, the "Manhattan Bonds") for the purpose of providing
funds to refinance the purchase and improvement of a certain hotel facility (the
"Manhattan Project") owned by Manhattan Hospitality Associates, L.P. ("Manhattan
Hospitality").
L. Pursuant to the Manhattan Indenture, the City of Manhattan
entered into an Amended and Restated Lease Agreement, dated as of January 1,
1997 (the "Manhattan Lease Agreement") with Manhattan Hospitality pursuant to
which a prior Lease by and between the City of Manhattan and Kan/Del Hotel
Investment Partners, L.P. dated as of August 1, 1986 was amended and restated
and pursuant to which the City of Manhattan leased the Manhattan hotel facility
to Manhattan Hospitality (the "Manhattan Property").
M. Pursuant to the Manhattan Indenture, the City of Manhattan became
obligated to make rental payments sufficient to pay the principal and interest
on the Manhattan Bonds.
N. A Trust Indenture, dated as of January 1, 1997 was entered into
between the City of Lawrence, Kansas, a municipal corporation organized under
the laws of the State of
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Kansas (the "City of Lawrence"), and Texas Commerce Bank National Association, a
national banking association organized under the laws of the United States, as
Indenture Trustee (the "Lawrence Indenture").
O. The City of Lawrence issued Commercial Development Revenue
Refunding Bonds (Holiday Inn Project) Senior Series 1997A (the "Lawrence Senior
Bonds") and Commercial Development Revenue Refunding Bonds (Holiday Inn Project)
Subordinate Series 1997B (the "Lawrence Subordinate Bonds" and, together with
the Lawrence Senior Bonds, the "Lawrence Bonds") for the purpose of providing
funds to refinance the purchase and improvement of a certain hotel facility (the
"Lawrence Project"). Hereinafter, the individual holders of the Manhattan Bonds
and the Lawrence Bonds will be referred to collectively as the "Bondholders".
P. Pursuant to the Lawrence Indenture, the City of Lawrence entered
into an Amended and Restated Lease Agreement, dated as of January 1, 1997 (the
"Lawrence Lease Agreement") with Lawrence Hospitality Associates, L.P.
("Lawrence Hospitality" and together with Manhattan Hospitality, the "Specified
Debtors") pursuant to which a prior Lease by and between the City of Lawrence
and Kan/Del Hotel Investment Partners, L.P. dated as of August 1, 1986 was
amended and restated and pursuant to which the City of Lawrence leased a certain
hotel facility to Lawrence Hospitality (the "Lawrence Property" and, together
with the Manhattan Property, the "Hotel Properties"). Hereinafter, the documents
referred to in paragraphs J-P will be referred to collectively as the "Loan
Documents".
Q. Pursuant to the Lawrence Indenture, the City of Lawrence became
obligated to make rental payments sufficient to pay the principal and interest
on the Lawrence Bonds.
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R. The general partners of Lawrence Hospitality and Manhattan
Hospitality are related parties and, as such, pledged and assigned to the
Trustee the revenues of the Manhattan Project and the Lawrence Project on a pari
passu basis for the equal and ratable security of both the Manhattan Bonds and
the Lawrence Bonds.
S. The Manhattan Bonds are further secured by i) a pledge and
assignment to the Trustee of certain rights of the City of Manhattan under the
Manhattan Lease Agreement; ii) that certain Amended and Restated Leasehold
Mortgage Security Agreement and Assignment of Rents dated as of September 27,
1995, as assigned to the Trustee pursuant to the Assignment of Loan Documents
executed by Column Financial, Inc. in favor of the Trustee for the Manhattan
Bonds which granted a lien on and a security interest in all of Manhattan
Hospitality's right, title and interest in and to the Manhattan Project to the
Trustee; iii) an Amended and Restated Promissory Note Fund (as defined in the
Manhattan Indenture); iv) the Second Promissory Note Fund (as defined in the
Manhattan Indenture); v) the Second Leasehold Mortgage Fund (as defined in the
Manhattan Indenture); vi) the Manhattan Project Fund (as defined in the
Manhattan Indenture); and vii) the Manhattan Reserve Fund (as defined in the
Manhattan Indenture).
T. The Lawrence Bonds are further secured by a pledge and assignment
to the Trustee of certain rights of the City of Lawrence under the Lawrence
Lease Agreement i) a pledge and assignment to the Trustee of certain rights of
the City of Lawrence under the Lawrence Lease Agreement; ii) that certain
Amended and Restated Leasehold Mortgage Security Agreement and Assignment of
Rents dated as of September 27, 1995, as assigned to the Trustee pursuant to the
Assignment of Loan Documents executed by Column Financial, Inc. in favor of the
Trustee for the Lawrence Bonds which granted a lien on and a security interest
in all of
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Lawrence Hospitality's right, title and interest in and to the Lawrence Project
to the Trustee; iii) an Amended and Restated Promissory Note Fund (as defined in
the Lawrence Indenture); iv) the Second Promissory Note Fund (as defined in the
Lawrence Indenture); v) the Second Leasehold Mortgage Fund (as defined in the
Lawrence Indenture); vi) the Lawrence Project Fund (as defined in the Lawrence
Indenture); vii) the Lawrence Reserve Fund (as defined in the Lawrence
Indenture); and viii) all funds, money and securities held by the Lawrence
Trustee pursuant to the Lawrence Indenture and all after-acquired tangible and
intangible property.
U. The Debtors have informed JPMC that the Hotel Properties require
substantial capital expenditures (the "Capital Expenditures") in order to
preserve the value of the Hotel Properties, which Capital Expenditures must be
undertaken during the calendar year 2002. Such Capital Expenditures include
expenditures necessary to maintain its existing Franchise Flags (as defined in
Paragraph 5(e)).
V. The Specified Debtors' repayment of the Manhattan Bonds and the
Lawrence Bonds is secured by, among other things, a first priority lien in and
to the Specified Debtors' Hotel Properties, as well as all of the rents,
profits, proceeds and revenues derived from such hotels (the "Specified Debtors'
Cash Collateral" and, collectively, with the Specified Debtors' Hotel
Properties, the "Specified Debtors' Collateral").
W. Prior to the Filing Date, the Specified Debtors had not defaulted
in the payment of any amounts due to the respective Indenture Trustees under the
Indentures.
X. On January 2, 2002, the Specified Debtors failed to pay
respective interest payments in the amounts of i) $33,089.96 which was then due
and payable with respect to the Manhattan Indenture and ii) $32,791.96 which was
then due and payable with respect to the Lawrence Indenture.
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Y. The Specified Debtors were, as of the Filing Date, and still are
indebted, under the Manhattan Indenture, in the aggregate principal amount of
approximately $5,925,000, together with unpaid interest, and costs and expenses
including, without limitation, attorneys' fees and costs, which, subject to
Bankruptcy Code section 506(b), continue to accrue (collectively, the "Manhattan
Debt").
Z. The Specified Debtors were, as of the Filing Date, and still are
indebted, under the Lawrence Indenture, in the aggregate principal amount of
approximately $5,925,000, together with unpaid interest, and costs and expenses
including, without limitation, attorneys' fees and costs, which, subject to
Bankruptcy Code section 506(b), continue to accrue (collectively, the "Lawrence
Debt" and together with the Manhattan Debt, the "Bond Debt").
AA. A need exists for the Specified Debtors to use cash collateral
in order to assure the continued operation of their businesses. Without such
funds, the Specified Debtors will be unable to pay, among other things, their
operating and payroll expenses, capital expenditures and general overhead.
BB. JPMC is willing to consent to the Debtors' limited use of the
Specified Debtors' Collateral including, but not limited to, the Specified
Debtors' Cash Collateral, and to the imposition of certain liens on the
Specified Debtors' Collateral but only upon the specific terms and conditions
set forth herein and to the extent of and for necessary expenses.
CC. In view of JPMC's reliance upon the provisions of this
Stipulation and Order in consenting to the DIP Priming Liens and the use of the
Specified Debtors' Cash Collateral on the terms set forth herein and the loaning
of such Specified Debtors' Cash Collateral to certain of the Debtors, all as
more particularly set forth in the Final Cash Collateral
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Order, the Final DIP Order and this Stipulation and Order, JPMC is a party that
has "extended credit in good faith" with the meaning of section 364(e) of the
Bankruptcy Code.
STIPULATION
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and other good and valuable consideration, the adequacy of which is
acknowledged, the Debtors and JPMC hereby stipulate and agree as follows:
1. Incorporation of Recitals: It is hereby represented by the
parties that the Recitals of this Stipulation and Order are incorporated herein
by reference and shall be deemed to be true and correct representations of the
parties with respect to the statements herein as such statements apply to each
or all of the parties. Each of the parties to this Stipulation and Order
represent that they have the sole right and authority to execute this
Stipulation and act in accordance with its terms. JPMC is authorized to act on
behalf of the Bondholders in connection with this Stipulation. The Specified
Debtors expressly represent that, to the extent their constituent documents
required the affirmative vote or consent of an independent director or manager
or similar person as a prerequisite to seeking voluntary relief under the
Bankruptcy Code, that such vote or consent was duly obtained prior to the filing
of the voluntary petitions by such Specified Debtors.
2. Value of Specified Debtors' Collateral: As of the Filing Date,
the value of the Specified Debtors' Collateral exceeded the amount of the Bond
Debt; thus, the Bondholders are oversecured for all purposes in these chapter 11
cases.
3. Use of Cash Collateral: Except as set forth herein, the Debtors
are authorized to use the Specified Debtors' Cash Collateral through December
21, 2002 for the limited purposes specifically set forth in the Final Cash
Collateral Order. Notwithstanding the
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foregoing, no Specified Debtors' Cash Collateral held or deposited in any
reserve or escrow accounts for taxes, capital expenditures, furniture, fixtures
and equipment or similar items shall be used for any purpose other than the
purpose for which such accounts (collectively, the "Reserves") are dedicated
with respect to the Specified Debtors' Hotel Properties in accordance with
paragraph 5(e) of this Stipulation and Order. Except as expressly permitted by
this Stipulation and Order, the Debtors are prohibited from use of any of the
Specified Debtors' Cash Collateral for any other purpose whatsoever. Without
limiting the generality of the foregoing, JPMC does not consent to the use of
any of the Specified Debtors' Collateral (including, but not limited to the
Specified Debtors' Cash Collateral) to (i) prepare, prosecute or seek approval
of any motion, application or plan of reorganization or liquidation that would,
if so approved, substantively consolidate any of the Specified Debtors with any
of the other Debtors; (ii) investigate, assert, commence, prosecute or otherwise
take any action with respect to any claim or alleged claim against JPMC
including but not limited to, claims arising under sections 542 through and
including 553 of the Bankruptcy Code, provided however, that the Committee may
utilize up to $10,000.00 (ten thousand dollars) of the Specified Debtors' Cash
Collateral to investigate the Bond Debt, the liens and security interests of
JPMC for the benefit of the Bondholders securing the Bond Debt, and any
potential claim for relief or cause of action with respect to the Bond Debt;
(iii) challenge the amount, validity, priority or enforceability of the Bond
Debt or the security interests and liens of JPMC for the benefit of the
Bondholders in the Specified Debtors' Collateral or assert any defense, claim,
counterclaim or offset with respect to the Bond Debt or the security interests
and liens of JPMC for the benefit of the Bondholders; (iv) challenge in any
manner whatsoever the Bond Debt and any other rights, claims and entitlements of
JPMC for the benefit of the Bondholders under any of the Loan Documents; (v)
change,
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amend or modify in any manner whatsoever any of the Loan Documents; or (vi) seek
the modification, amendment or vacature of this Stipulation.
4. Consent to DIP Priming Lien on Specified Debtors' Hotel
Properties: Subject to and in accordance with the terms of this Stipulation,
JPMC, on behalf of the Bondholders, consents to a limited DIP Priming Lien (the
"DIP Priming Lien") to be imposed upon the Specified Debtors' Collateral. The
amount of the DIP Priming Lien shall be limited to the extent of the Specified
Debtors' Attributable DIP Amount (as defined in the DIP Credit Agreement) that
is actually advanced to Lodgian under the DIP Credit Agreement prior to a
Termination Event (as hereinafter defined), and, in no such event, shall the DIP
Priming Lien exceed the aggregate amount of $302,000 with respect to the
Manhattan Property and $317,000 with respect to the Lawrence Property, which
shall be allocated to the Specified Debtors' Collateral in accordance with
schedule 3.15 to the DIP Credit Agreement. To the extent that the consent of the
Bondholders is required for the Specified Debtors to incur the obligations or
grant the liens contemplated hereunder or in connection with the DIP Financing
or the Final Cash Collateral Order (whether under the terms of their respective
certificates of incorporation, other constituent documents or other instruments
or agreements), such consent is hereby given, and to the extent the consent of
the City of Lawrence or the City of Manhattan is required for the Specified
Debtors to modify or amend their corporate charters, by-laws or other
constituent documents so as to permit the incurrence of obligations or granting
of liens contemplated hereunder or in connection with the DIP Financing, JPMC
shall use its best efforts promptly to obtain such consents; provided however,
that nothing herein shall limit the right or ability of JPMC or the Debtors to
challenge any prohibition upon the incurrence of obligations or the granting of
liens pursuant to such documents.
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5. Adequate Protection: Notwithstanding anything to the contrary
contained in section 552(a) of the Bankruptcy Code, in addition to any other
grant of adequate protection to JPMC for the benefit of the Bondholders under
any other Order of this Court, as adequate protection for, and to secure payment
of, the aggregate diminution in the value of the Specified Debtors' Collateral
(including without limitation, the Specified Debtors' Cash Collateral) from the
Filing Date and as security for and an inducement to JPMC for the benefit of the
Bondholders to permit the Debtors' use of the Specified Debtors' Cash Collateral
and to consent to the imposition of the DIP Priming Lien, the Debtors hereby
grant to JPMC for the benefit of the Bondholders the following additional
adequate protection.(3)
(a) a replacement lien (the "Specific AP Lien") on all of the
prepetition and postpetition property of the Specified Debtors (including
without limitation, all postpetition hotel revenue and other charges),
which lien shall be junior only to (i) the DIP Priming Lien, (ii)
Qualified Prepetition Liens, and (iii) the Carveout; provided however, in
the case of (i) and (iii) together, only to the maximum total extent of
the Attributable DIP Percentage, as limited to $302,000 with respect to
the Manhattan Property and $317,000 with respect to the Lawrence Property;
(b)(1) pursuant to sections 363(c) and (e) and 361 of the Bankruptcy
Code, all of the Debtors hereby grant to JPMC for the benefit of the
Bondholders a perfected security interest in and lien upon (the "Primed
Lender AP Lien") all prepetition and postpetition property of the Debtors
(including, without limitation, cash collateral, inventory, accounts
receivable, other rights to payment, contracts, property, plant,
equipment, general
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(3) To the extent that any grant of adequate protection provided herein is
inconsistent with a grant of adequate protection to JPMC pursuant to a separate
order of this Court, the terms of this Stipulation and Order shall control the
grant of adequate protection to JPMC.
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intangibles, documents, instruments, interests in leaseholds, real
property, patents, copyrights, trademarks, trade names, other intellectual
property capital stock of subsidiaries, and the proceeds of all the
foregoing (other than the Utility Reserve Account (as defined in the Final
Cash Collateral Order)), whether now existing or hereafter acquired, which
lien and security interest is pari passu with all other Primed Lender AP
Liens, except as with respect to the Subordinated Lien Amount (as defined
below) and subject only to (i) the DIP Priming Lien (but only to the
extent of the Attributable DIP Percentage); (ii) Qualified Prepetition
Liens; (iii) a Specific AP Lien with respect to any of the Debtors'
properties; and (iv) the Carveout (but only to the extent of the
Attributable DIP Percentage); provided however, that JPMC shall
subordinate the Subordinated Lien Amount of JPMC's Primed Lender AP Lien
to payment in full of all Primed Lender AP Liens not subordinated of each
other Primed Lender; provided further that, if (but only to the extent
that and for so long as) a holder of any Prepetition Mortgage has the
benefit of an express restriction or prohibition contained in the
certification of incorporation or similar constitutive document of the
Debtor owning such property that prevents the creation of the security
interest and lien provided by this paragraph 5(b) (including without
limitation Impac Hotels II, LLC and Impac Hotels III, LLC), then such
Primed Lender AP Lien shall become effective and enforceable only (i) with
consent of such creditor or (ii) upon the payment in full of the claim
secured by such Prepetition Mortgage; provided however, that (a) the
property subject to the liens granted to JPMC for the benefit of the
Bondholders as set forth in this Stipulation and Order shall exclude the
Debtors' claims and causes of action under sections 502(d), 544, 545, 547,
548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance
actions under the Bankruptcy Code and (b) nothing herein shall limit the
right or ability of JPMC
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or the Debtors to challenge the legal effectiveness of any restriction or
prohibition upon the creation or effectiveness of any liens or security
interests granted for the benefit of JPMC contained in any document. For
purposes of this order, the Subordinated Lien Amount shall mean an amount
equal to thirty percent (30%) of the total claim of JPMC at the relevant
time. The Subordinated Lien Amount of JPMC shall rank pari passu with the
Subordinated Lien Amount of any other Primed Lender that has also agreed
to subordinate its Primed Lender AP Lien;
(b)(2) a replacement lien (the "General AP Lien") on all of the
prepetition and postpetition property (including without limitation, all
postpetition hotel revenue and other charges) (other than the Utility
Reserve Account) owned by the Debtors, which lien shall be pari-passu with
other General AP Liens granted to other lenders of such property, but
subject to the Carveout, but only if a DIP Priming Lien has been granted
with respect to such property (and, in any event, only to the extent of
the Attributable DIP Percentage (as defined in the DIP Credit Agreement))
and the following liens: (i) any DIP Priming Lien on such property, but
only to the extent of the Specified Debtors' Attributable DIP Amount (as
defined in the DIP Credit Agreement) that is actually advanced and, in no
such event, to exceed $302,000 with respect to the Manhattan Property and
$317,000 with respect to the Lawrence Property, (ii) any Qualified
Prepetition Liens on such property and any section 506(c) charges assessed
against such liens, (iii) any Specific AP Lien on such property, (iv) any
Primed Lender AP Lien (as defined in the Motion), (v) any Specific I/C
Lien on such property, and (vi) any liens granted to the DIP Lenders under
section 364(c) of the Bankruptcy Code on such property, but only if such
property is owned by a Low Leverage Debtor; provided, however, if (but
only to the extent that and for so long as) the holder of any Prepetition
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Mortgage (as defined in the Final Cash Collateral Order) has the benefit
of an express restriction or prohibition contained in the certificate of
incorporation or similar constitutive document of the Debtor owning such
property that prevents the creation of the security interest and lien
provided by this paragraph 5(b) (including without limitation Impac Hotels
II, LLC and Impac Hotels III, LLC), then, such General AP Lien shall
become effective and enforceable only (i) with the consent of such
creditor or (ii) upon the payment in full of the claim secured by such
Prepetition Mortgage; provided however, that nothing herein shall limit
the right or ability of JPMC or the Debtors to challenge the legal
effectiveness of any restriction or prohibition upon the creation or
effectiveness of any liens or security interests granted for the benefit
of JPMC.
(c) Except as otherwise provided in paragraph 5(b), the security
interests and replacement liens granted to JPMC for the benefit of the
Bondholders as set forth herein, shall be deemed validly and properly
perfected and enforceable against all other persons or entities upon the
entry of this Stipulation by the Court without the necessity of filing,
recording or serving any financing statements, deeds, mortgages, or other
documents which may otherwise be required under federal or state law in
any jurisdiction or the taking of any other action to validate or perfect
the security interests and liens granted to JPMC herein;
(d) the Debtors shall make all (i) monthly interest payments to JPMC
due under the Loan Documents (which payments shall include any interest
payable from and after the Filing Date and constitute a permitted use of
the Specified Debtors' Collateral) at the non-default rates specified in
the Loan Documents during the term of this Stipulation and (ii) payments
necessary to timely and fully fund all escrows and other reserves required
under the Loan Documents;
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(e) the Debtors shall timely perform and complete all actions
necessary or appropriate to protect the Specified Debtors' Collateral
against diminution in value, including but not limited to Capital
Expenditures necessary to maintain the Specified Debtors' right to use
franchise names and trademarks ("Franchise Flags") under existing
franchise or operating agreements ("Franchise Agreements") for the
applicable hotels, to comply with the Specified Debtors' obligations under
the existing Franchise Agreements and any rules or regulations imposed
upon the Specified Debtors thereunder and to comply with any Property
Improvement Programs ("PIPs") as may be agreed to by the franchisor (the
"Franchisor"), or (ii) replace, without interruption, the Specified
Debtors' right to use Franchise Flags under existing Franchise Agreements
for the applicable hotels with comparable replacement Franchise Agreements
and Franchise Flags, with the prior written consent of JPMC or consistent
with the provisions of paragraph 5(i) of this Stipulation and Order and
shall comply with the Specified Debtors' obligations with respect to such
matters under the Loan Documents;
(f) the Debtors shall (i) provide to JPMC in a timely fashion a
detailed budget or budgets with respect to such Capital Expenditures,
which budget or budgets shall be subject to JPMC's reasonable approval;
(ii) remove or bond any postpetition lien or claim based upon the
furnishing of labor or materials in connection with such Capital
Expenditures; (iii) obtain all necessary licenses, permits and approvals
in connection with such Capital Expenditures; (iv) comply with any law,
ordinance, rule or regulation, or building line or restriction applicable
to the Specified Debtors' Hotel Properties; (v) provide JPMC with written
reports, on or before the fifth day of each month, describing the status
of the Capital Expenditures; and (vi) permit JPMC or any consultant
retained
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by or on behalf of JPMC to inspect the Specified Debtors' Hotel Properties
during normal business hours; and
(g) the Debtors shall timely furnish to JPMC (i) all such reports
and other information required to be provided to JPMC under the Loan
Documents and (ii) a monthly statement of operating results and sources
and uses of cash with respect to the Specified Debtors' Hotel Properties,
no later than thirty (30) days after the end of each calendar month.
(h) the Specified Debtors shall comply with all postpetition
obligations under the Franchise Agreements and all rules and regulations
imposed upon the Specified Debtors by the Franchisors in connection
therewith;
(i) the Specified Debtors shall comply with their obligations in
respect of the Franchise Agreements and the Franchise Flags under the Loan
Documents;
(j) other than in connection with the entry by the Specified Debtors
into a new Franchise Agreement in accordance with the terms of this
Stipulation and Order, the Specified Debtors will not reject any Franchise
Agreement pursuant to section 365(a) of the Bankruptcy Code;
(k) the Specified Debtors shall use their best efforts to obtain
with respect to existing Franchise Agreements, and will obtain, with
respect to any renewal or extension of an existing Franchise Agreement or
the entry into any new Franchise Agreement, comfort letters or tripartite
agreements acknowledging the liens and the right of JPMC to continue such
Franchise Agreements in the event that JPMC or their nominee or designee
takes title to any Hotel Property; and
(l) the Debtors shall pay the reasonable attorneys' fees and
disbursements incurred by JPMC in connection with the Cases on and after
the Filing Date within ten
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business days after presentment by JPMC of an invoice to the Debtors,
which invoice may be redacted to preserve any privilege associated
therewith.
6. Termination of Use of Cash Collateral and of Consent to Further
DIP Priming Lien: Notwithstanding anything to the contrary contained herein, the
Debtors' right to use the Specified Debtors' Cash Collateral, and the
Bondholders' consent to imposition of the DIP Priming Lien with respect to any
advances made by the DIP Lenders after the occurrence of any Termination Event
(as hereinafter defined), shall expire on the earliest to occur of (the first
such occurrence being hereinafter referred to as the "Termination Event"): (i)
December 21, 2002; (ii) the entry by this Court or any other court of an order
reversing, amending, supplementing, staying, vacating or otherwise modifying the
terms of this Stipulation; (iii) the dismissal of any of the Debtors' bankruptcy
cases or the conversion of any of the Debtors' bankruptcy cases to a case under
Chapter 7 of the Bankruptcy Code; (iv) the entry by this Court of an order
granting relief from the automatic stay imposed by section 362 of the Bankruptcy
Code to any entity other than JPMC, with respect to the Specified Debtors (other
than relief from the stay in favor of a lessor of, or a secured creditor with a
lien against, personal property having a value not exceeding $25,000
(twenty-five thousand dollars)); (v) the filing by the Debtors of any motion,
application or plan of reorganization or liquidation that would, if so approved,
substantively consolidate the Specified Debtors with any of the other Debtors;
(vi) the filing by the Debtors of any motion, application, adversary proceeding
or plan of reorganization or liquidation seeking to (a) challenge in any manner
whatsoever the Bond Debt and any other rights, claims and entitlements under any
of the Loan Documents or under this Stipulation, (b) change, amend or modify in
any manner whatsoever any of the Loan Documents, or (c) seek the modification,
amendment or vacature of this Stipulation without JPMC's express written prior
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consent; (vii) the appointment of a trustee or examiner or other representative
with expanded powers for any of the Debtors; (viii) the occurrence of the
effective date or consummation of a plan of reorganization for any of the
Debtors; (ix) the termination or rejection of any Franchise Agreement for any of
the Specified Debtors' Hotel Properties except as permitted in paragraph 5(i);
(x) the existence of any material postpetition default under any Franchise
Agreement for any of the Specified Debtors' Hotel Properties and, with respect
thereto, the expiration of (a) any applicable cure period under the Loan
Documents or (b) five calendar days, whichever is longer, from notice to the
Debtors of the occurrence of a Termination Event ; (xi) the breach of any of the
Debtors' obligations under the Stipulation and, in the case of obligations under
paragraph 5(d), (e), (f) & (g), the failure to cure such breach within five
business days of notice thereof; (xii) an Event of Default under the DIP Credit
Agreement (as defined in the DIP Credit Agreement); (xiii) a sale of any of the
Specified Debtors' Collateral pursuant to section 363(b) of the Bankruptcy Code
and (xiv) the Debtors' exclusive right to file a plan or solicit acceptances
thereof is terminated. On and after the Termination Event, the Debtors shall
immediately cease using any of the Specified Debtors' Cash Collateral; provided
however, that the Debtors reserve the right to seek authorization to use such
Specified Debtors' Cash Collateral pursuant to section 363(c) of the Bankruptcy
Code, and JPMC reserves the right to oppose such relief.
7. Acknowledgment of Bond Debt and Prepetition Liens: The Debtors
acknowledge and agree that the Bond Debt is valid and due and owing and that the
separate liens and security interests encumbering the Specified Debtors'
Collateral securing the Bond Debt are each valid, enforceable and perfected
senior liens. This paragraph 7 shall be binding and effective upon all persons
and entities, including but not limited to, the Debtors and the Committee;
provided however, that the Committee shall have until April 15, 2002 (the
19
"Challenging Period") to commence an adversary proceeding (a) against JPMC with
respect to the Bond Debt or the liens and security interests of the Bondholders
securing the Bond Debt or (b) otherwise asserting any claims for relief or
causes of action against either of JPMC or any released party, with respect to
the Bond Debt or otherwise. In the event no such adversary proceeding is
commenced by the Committee within the Challenge Period, the Committee shall be
deemed to have acknowledged and agreed that the Bond Debt is valid and that the
liens and security interests securing the Bond Debt are valid, enforceable and
perfected senior liens.
8. Release of Bondholders and JPMC: The Debtors acknowledge and
agree that they do not possess and may not assert any claim, counterclaim,
setoff or defense of any kind or nature which would in any way affect the
enforceability, priority, amount and validity, of the claims and liens granted
to JPMC, under this Stipulation or under the Loan Documents, including but not
limited to the Bond Debt, and (ii) the Debtors hereby release, discharge, and
acquit the Bondholders, JPMC and each of JPMC's officers, directors,
shareholders, agents, professionals, representatives, employees, subsidiaries,
and affiliates, and each of the successors, assigns, heirs, and representatives
of each (collectively with the Bondholders and JPMC, the "Released Parties")
from any and all claims, rights, demands, injuries, debts, damages, liabilities,
omissions, contracts, agreements, actions, and causes of action, whether at law
or in equity, and whether based on contract, tort, or otherwise, known or
unknown, suspected or unsuspected, of every kind and nature, which the Debtors
or their successors, assigns, heirs, and representatives at any time had, now
have, or hereafter can or may have against any of the Released Parties arising
prior to the entry of this Stipulation.
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9. Information to Lender: In addition to the information required to
be provided to JPMC in paragraph 5(e) & (g) of this Stipulation, the Debtors are
authorized and directed to provide to JPMC any and all documentation, reports,
schedules, assignments, financial statements, insurance policies and
endorsements, access, inspection, audit, inquiry and other rights which JPMC may
reasonably request with respect to the Specified Debtors.
10. Modification of Automatic Stay: The Debtors are hereby
authorized and directed to perform all acts, and execute and comply with the
terms of such other documents, instruments, and agreements as JPMC may
reasonably require as evidence of and for the protection of the Bondholders, or
which may be otherwise deemed necessary by JPMC, to effectuate the terms and
conditions of this Stipulation. The automatic stay imposed by section 362 of the
Bankruptcy Code is hereby modified and vacated in all respects necessary in
order to enable the Debtors to perform all of its obligations hereunder.
11. Priority of Liens and Claims: Except as specifically set forth
in this Stipulation and Order, the liens granted to JPMC for the benefit of the
Bondholders and the claims hereby allowed under this Stipulation to JPMC for the
benefit of the Bondholders for any diminution in the value of the Specified
Debtors' Collateral (including, but not limited to the Specified Debtors' Cash
Collateral) shall have priority in right of payment over any and all other
claims, debts, obligations, liabilities and indebtedness of the Debtors of any
kind, now in existence or hereinafter incurred by the Debtors and over all
administrative expenses or priority claims of the kind specified in, or ordered
pursuant to, sections 105, 326, 330, 331, 503(b), 506(c) (except as otherwise
expressly permitted by paragraph 12 of the Stipulation), or 507(b) of the
Bankruptcy Code. No other claim or lien having a priority superior or pari passu
with the
21
claims and liens granted to JPMC, pursuant to the terms of this Stipulation
shall be granted in any of the Debtors' cases while any portion of JPMC's
claims, including the Bond Debt and all other claims arising after the Filing
Date, remain outstanding. Notwithstanding the foregoing, the superpriority claim
of JPMC allowed pursuant to this paragraph shall be pari passu with like
superpriority claims granted to other Primed Lenders and shall be junior and
subordinate to the Carveout, but only to the extent of the Attributable DIP
Amount with respect to each of the Debtors.
12. No Surcharge: Except with respect to the Carveout (and, in any
event, only to the extent of the Attributable DIP Percentage) and except as
otherwise expressly provided in the last two sentences of this paragraph 12, no
costs or expenses of administration which have been or may be incurred in any of
these cases, any conversion of any of the Debtors' cases pursuant to section
1112 of the Bankruptcy Code, or in any future proceedings or cases related
hereto (i) shall be charged against JPMC its claims, or the Specified Debtors'
Collateral under section 506(c) of the Bankruptcy Code or otherwise, without the
prior written consent of JPMC and no such consent shall be implied from any
other action, inaction or acquiescence; or (ii) shall be senior to or on a
parity with the liens and security interests granted pursuant to this
Stipulation. Notwithstanding the foregoing, the Debtors may file an application
or motion seeking to surcharge the Specified Debtors' Collateral pursuant to
section 506(c) of the Bankruptcy Code for the reasonable, necessary costs and
expenses of preserving, or disposing of, the Specified Debtors' Collateral, to
the extent of any benefit to JPMC, (or any other subsequent holder of the Loan
Documents) and to the extent of (a) the aggregate net cash funding provided to
the Specified Debtors from and after the Filing Date less the sum of (b) (i) the
outstanding amount of the DIP Priming Lien and (ii) the aggregate reorganization
costs and expenses paid by
22
the Specified Debtors (except to the extent that such reorganization costs and
expenses directly benefited the estates of the Specified Debtors). JPMC fully
reserves the right to object to any such application or motion under section
506(c) of the Bankruptcy Code, and no action or inaction shall be deemed to
constitute consent to such relief or a waiver of any rights of JPMC with respect
thereto.
13. Section 364(e) Protection: In view of JPMC's, reliance upon the
provisions of the Stipulation in consenting to the DIP Priming Liens and the use
of the Specified Debtors' Cash Collateral on the terms set forth herein and the
loaning of such Cash Collateral to certain of the Debtors, all as more
particularly set forth in the Final Cash Collateral Order, the Final DIP Order
and the Stipulation, the protections afforded to JPMC by the Stipulation and the
liens and security interests granted thereby to JPMC shall be subject to section
364(e) of the Bankruptcy Code.
14. Binding Effect: The provisions of this Stipulation shall inure
to the benefit of the Debtors, JPMC, and the Bondholders and shall be binding
upon the Debtors and their successors and assigns, including any trustee or
other fiduciary hereafter appointed as a legal representative of any of the
Debtors or with respect to property of the estate of any such Debtor, whether
under Chapter 11 of the Bankruptcy Code or in any subsequent Chapter 7 case, and
upon the United States Trustee and all creditors and parties in interest in
these bankruptcy cases.
15. No Waiver: Nothing in this Stipulation shall prejudice the
rights of JPMC or the Bondholders under the Bankruptcy Code and applicable
non-bankruptcy law, including, without limitation, their rights to (i) seek
further adequate protection, (ii) request conversion or
23
dismissal of any of the Debtors' bankruptcy cases; (iii) seek relief from the
automatic stay under section 362(d) of the Bankruptcy Code; (iii) request
appointment of a trustee or examiner in any of the Debtors' bankruptcy cases;
(iv) propose or solicit acceptances of a plan of reorganization or liquidation
for any of the Debtors; (v) object to or otherwise oppose any relief sought by
any entity or party in these cases, including without limitation, to object to
any application filed by any professional in these cases seeking compensation
and reimbursement of expenses under sections 330 or 331 of the Bankruptcy Code;
(vi) object to or otherwise oppose any motion, application or plan of
reorganization or liquidation that would, if so approved, substantively
consolidate the Specified Debtors with any of the other Debtors; or (vii) assert
that the Debtors are obligated to pay to JPMC the default rate of interest and
any other charges, penalties and costs required to be paid under the Loan
Documents for the period commencing on the Filing Date and continuing until all
such amounts due under the Loan Documents and hereunder are paid in full. This
Stipulation and the transactions contemplated hereby shall be without prejudice
to any and all rights, remedies, claims and causes of action which JPMC has or
may have against any party who may be liable with any of the Debtors for the
Bond Debt and otherwise under the Loan Documents or any part thereof. Except
with respect to paragraph 2 of this Stipulation and Order, the execution of this
Stipulation, and nothing contained herein, shall be deemed to be an admission,
or constitute evidence, in connection with any matter or proceeding other than
the enforcement of the terms of this Stipulation, including but not limited to
(i) any subsequent motion or application for use of cash collateral or for
approval of debtor in possession financing; (ii) any motion, application or plan
of reorganization or liquidation seeking to substantively consolidate one or
more of the Specified Debtors with any other person; and (iii) any motion or
application filed by or on behalf of JPMC seeking to modify the automatic stay,
dismissal of the Cases or termination of exclusivity. Except as otherwise
expressly provided in the Stipulation,
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the parties hereto expressly reserve all of their rights and remedies under the
Bankruptcy Code and applicable non-bankruptcy law.
16. Waiver by the Debtors: Each of the parties hereto hereby
irrevocably waives any right to seek any modifications or extensions of this
Stipulation without the prior written consent of the other party thereto.
17. No Construction Against Draftsman: The provisions of this
Stipulation shall be deemed to have been jointly drafted by the Debtors and JPMC
and shall not be construed against a party because of its role in drafting this
Stipulation.
18. Execution in Counterparts: This Stipulation may be executed in
one or more counterparts, all of which shall be deemed to be a single original.
19. No Waiver of Rights: In the event that any of the Debtors' cases
are dismissed, neither the entry of this Stipulation nor the dismissal of such
case(s) shall affect the rights of JPMC, the Bondholders, or the Debtors under
this Stipulation, and all the rights and remedies of JPMC and the Bondholders
hereunder or at law or in equity shall remain in full force and effect as if
such case had not been filed.
20. Most Favored Nation: In the event that any creditor is granted
adequate protection of its interests in a manner that is in addition to or is
superior in any respect to the adequate protection set forth in paragraph 5 of
the Stipulation, JPMC for the benefit of the Bondholders shall be entitled to
such additional adequate protection, which shall be evidenced by an order
jointly presented to the Court by the Debtors and JPMC (the "Supplemental
Order") for consideration after notice and a hearing. In the event the Debtors
and JPMC are unable to
25
promptly agree on the terms of such Supplemental Order, either party shall be
entitled to file a motion seeking the entry of an order granting to JPMC for the
benefit of the Bondholders such additional adequate protection.
21. Notices: Any notice required or permitted under this Stipulation
and Order or the Loan Documents shall be delivered by facsimile, overnight mail
or certified or registered mail as follows:
If to the Debtors:
Lodgian, Inc.
3445 Peachtree Road
Suite 700
Atlanta, GA 30326
Phone: (404) 365-3823
Fax: (404) 364-6144
Attention: Chief Financial Officer
26
With a copy to:
Gregory M. Petrick, Esq.
Barry N. Seidel, Esq.
Cadwalader, Wickersham & Taft
Attorneys for the Debtors
100 Maiden Lane
New York, New York 10038
Phone: 212-504-6000
Fax: 212-504-6666
If to JPMC:
J. Chris Matthews
Vice President, JPMorgan Chase Bank
600 Travis, 53 Floor
Houston, Texas 77002
Phone: 713-216-4728
Fax: 713-216-7447
With a copy to:
Mark R. Somerstein, Esq.
Sheila E. Carson, Esq.
Attorneys for JPMorgan Chase Bank, as Successor Indenture Trustee
Kelley Drye & Warren LLP
101 Park Avenue
New York, New York 10178
Phone: 212-7800
Fax: 212-808-7897
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All notices shall be deemed given upon transmission, if sent by
facsimile; upon the first business day after mailing, if sent by overnight mail;
and upon the third business day after mailing, if sent by certified or
registered mail.
Dated: New York, New York
February 14, 2002
CADWALADER, WICKERSHAM & TAFT KELLEY, DRYE & WARREN LLP
By: /s/ Gregory M. Petrick By: /s/ Mark R. Somerstein
------------------------------ ------------------------------
Gregory M. Petrick (GP-2175) Mark R. Somerstein (MS-9721)
100 Maiden Lane 101 Park Avenue
New York, NY 10038 New York, NY 10178
(212) 504-6000 (212) 808-7800
SO ORDERED THIS 14th DAY
OF FEBRUARY, 2002
/s/ Burton R. Lifland
------------------------------
United States Bankruptcy Judge
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