EXHIBIT 10.40
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re : Case No. 01-16345 (BRL)
LODGIAN, INC., et al., : (Jointly Administered)
Debtors. : Chapter 11
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STIPULATION AND ORDER AMONG THE DEBTORS AND CRIIMI MAE SERVICES L.P.
AS SPECIAL SERVICER, PROVIDING FOR (i) LIMITED USE OF CASH
COLLATERAL AND ADEQUATE PROTECTION AND (ii) RELATED RELIEF (LOW
LEVERAGE DEBTORS)
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").
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
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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.
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 13, 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 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,
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(2) Unless otherwise defined herein, all capitalized terms used herein shall
have the same meanings assigned to them in the DIP/Cash Collateral Motion.
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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 pre- 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 postpetition property of the Debtors that, on or as of the
Filing Date, was not subject to valid, perfected and non-avoidable liens.
THE TRUSTS' LOANS
I. Prior to the Filing Date, Lehman Brothers Holdings Inc., First
Union National Bank of North Carolina, Loan Services, Inc. and GMAC Commercial
Mortgage Corporation (collectively, the "Originating Lenders") entered into a
series of loan transactions (collectively, the "Loans") with certain of the
Debtors which are summarized as follows:
(i) An agreement, dated as of June 30, 1997, among Lehman
Brothers Holdings Inc. ("Lehman Brothers"), as lender, and Melbourne Hospitality
Associates Limited
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Partnership, as borrower, pursuant to which Lehman Brothers loaned the borrower
the principal sum of $5,600,000 (the "Melbourne Loan Agreement");
(ii) An agreement, dated as of June 30, 1997, among Lehman
Brothers, as lender, and Fort Wayne Hospitality Associates II, Limited
Partnership, as borrower, pursuant to which Lehman Brothers loaned the borrower
the principal sum of $1,900,000 (the "Fort Wayne Loan Agreement");
(iii) (c) An agreement, dated as of October 21, 1996, among
Lehman Brothers, as lender, and Worcester Hospitality Associates Limited
Partnership, as borrower, pursuant to which Lehman Brothers loaned the borrower
the principal sum of $7,700,000 (the "Worcester Loan Agreement");
(iv) An agreement, dated as of April 11, 1997, among Lehman
Brothers, as lender, and Servico Frisco, Inc., as borrower, pursuant to which
Lehman Brothers loaned the borrower the principal sum of $5,150,000 (the
"Servico Frisco Loan Agreement");
(v) An agreement, dated as of October 21, 1996, among Lehman
Brothers, as lender, and Apico Inns of Pittsburgh, Inc., as borrower, pursuant
to which Lehman Brothers loaned the borrower the principal sum of $5,100,000
(the "Apico Loan Agreement");
(vi) An agreement, dated as of March 18, 1997, among First
Union National Bank of North Carolina ("First Union") as lender, and Atlanta
Boston Lodging LLC, as borrower, pursuant to which First Union loaned the
borrower the principal sum of $3,600,000 (the "Atlanta Boston Loan Agreement");
(vii) An agreement, dated as of January 17, 1996, between Loan
Services, Inc. ("Loan Services"), as lender, and 1075 Hospitality, L.P.;
Brecksville Hospitality, L.P.; and Sioux City Hospitality, L.P., as borrowers,
pursuant to which Loan Services loaned the borrower the principal sum of
$12,910,000 (the "1075 Loan Agreement");
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(viii) An agreement, dated as of May 7, 1996, between GMAC
Commercial Mortgage Corporation ("GMAC"), as lender, and Servico Lansing, Inc.,
as borrower, pursuant to which GMAC loaned the borrower the principal sum of
$5,687,000 (the "Servico Lansing Loan Agreement"); and
(ix) An agreement, dated as of July 18, 1996, between GMAC, as
lender, and Servico Omaha Central, Inc.; Servico Omaha, Inc.; Servico Wichita,
Inc.; Servico Council Bluffs, Inc.; and Servico West Des Moines, Inc., as
borrowers, pursuant to which GMAC loaned the borrowers the principal sum of
$16,840,000 (the "Omaha Loan Agreement", and together with the Melbourne Loan
Agreement, Fort Wayne Loan Agreement, Worcester Loan Agreement, Servico Frisco
Loan Agreement, Apico Loan Agreement, Atlanta Boston Loan Agreement, 1075 Loan
Agreement, and Servico Lansing Loan Agreement, the "Loan Agreements"). Borrowers
Melbourne Hospitality Associates, L.P., Fort Wayne Hospitality Associates L.P.,
Servico Lansing, Inc., Worcestor Hospitality Associates, Servico Frisco, Inc.,
Aprico Inns of Pittsburgh, Inc. and Atlanta Boston Lodging LLC are hereinafter
collectively referred to as the "Specified Debtors".
J. In addition to the Loan Agreements, all of the Loans to the
Specified Debtors (the "Specified Loans") are further evidenced by, among other
things, duly executed promissory notes (collectively, the "Notes"), first
priority mortgages, security agreements and assignment of leases and rents
(collectively, the "Mortgages and Assignments of Rents", and together with the
Notes, Loan Agreements with the Specified Debtors and all other documents
executed in connection therewith, the "Loan Documents") in and to each Hotel
Property owned by the Specified Debtors (collectively, the "Specified Debtors'
Hotel Properties").
K. The Debtors have informed CMSLP that the Specified Debtors' Hotel
Properties require substantial capital expenditures (the "Capital Expenditures")
in order to
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preserve the value of the Hotel Properties, which Capital Expenditures must be
completed during the calendar year 2002. Such Capital Expenditures include, but
are not limited to, property improvement programs ("PIPs") agreed to by the
Debtors and one or more of the Specified Debtors' franchisors.
L. The Specified Debtors' repayment of the Specified Loans 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";
collectively, with the Specified Debtors' Hotel Properties, the "Specified
Debtors' Collateral").
M. Subsequent to, or simultaneously with, the closing of the Loans,
the Loan Documents were deposited into three (3) separate trusts as part of
securitization transactions for the benefit of the Registered Holders of the
First Union-Lehman Brothers Commercial Mortgage Trust II, Commercial Mortgage
Pass-Through Certificates, Series 1997-C2 ("Trust I"), the Registered Holders of
the LB Commercial Conduit Mortgage Trust II, Multiclass Pass-Through
Certificates, Series 1996-C2 ("Trust II"), the Registered Holders of First
Union-Lehman Brothers Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 1997-C1 ("Trust III", and together with Trust
I and Trust II, the "Trusts"). CRIIMI MAE Services L.P. ("CMSLP") is the special
servicer to LaSalle Bank National Association, a National Banking Association
formerly known as LaSalle National Bank, as Trustee of Trusts 1 and 2, and to
State Street Bank and Trust Company, as Trustee for Trust 3.
N. The Trusts currently hold the mortgage debt encumbering the
Specified Debtors' Hotel Properties and are, therefore, required to be repaid
the Specified Loans from the Specified Debtors in accordance with the terms and
conditions of the Loan Documents, as well as the other documents executed in
connection with the securitization of the Loans.
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O. Prior to the Filing Date, the Specified Debtors had not defaulted
in the payment of any amounts due to the Trusts under the Loan Documents.
P. The Specified Debtors were, as of the Filing Date, and still are
indebted to Trust 1 pursuant to the terms and conditions of the Loan Documents,
in the aggregate principal amount of approximately $7,060,340 (seven million,
sixty thousand, three hundred and forty dollars), together with accrued unpaid
interest, which continues to accrue, and costs and expenses including, without
limitation, attorneys' fees and costs, which continue to accrue (collectively,
the "Trust 1 Debt").
Q. The Specified Debtors were, as of the Filing Date, and still are
indebted to Trust 2 pursuant to the terms and conditions of the Loan Documents,
in the aggregate principal amount of approximately $5,305,229 (five million,
three hundred and five thousand, two hundred and twenty nine dollars), together
with accrued and unpaid interest, which continues to accrue, and costs and
expenses including, without limitation, attorneys' fees and costs, which
continue to accrue (collectively, the "Trust 2 Debt").
R. The Specified Debtors were, as of the Filing Date, and still are
indebted to Trust 3 pursuant to the terms and conditions of the Loan Documents,
in the aggregate principal amount of approximately $20,275,424 (twenty million,
two hundred seventy five thousand, four hundred and twenty four dollars),
together with accrued and unpaid interest, which continues to accrue, and costs
and expenses including, without limitation, attorneys' fees and costs, which
continue to accrue (collectively, the "Trust 3 Debt", and together with the
Trust 1 Debt and Trust 2 Debt, the "Trust Debt").
S. A need exists for the Specified Debtors to use cash collateral in
order to assure the continued operation of their businesses. Without such use of
cash collateral, the
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Specified Debtors will be unable to pay, among other things, their operating and
payroll expenses, capital expenditures and general overhead.
T. The Trusts are 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.
U. In view of the Trusts' 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
Specified Debtors' 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 Trusts are parties that have "extended credit in good
faith" within 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 CMSLP, as special servicer and on behalf of the
Trusts as their attorney in fact, hereby stipulate and agree as follows:
1. Incorporation of Recitals: It is hereby represented by the
parties that the Recitals in Paragraph A through U of this Stipulation are
incorporated herein by reference and shall be deemed to be true and correct
representations of the parties with respect to the statements therein as such
statements apply to each or all of the parties. Each of the parties to this
Stipulation represent that they have the sole right and authority to execute
this Stipulation and act in accordance with its terms. CMSLP expressly
represents that it is authorized to act on
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behalf of the Trusts. 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 exceeds the amount of the Trust
Debt.
3. Use of Cash Collateral: Except as set forth herein, the Debtors
are authorized to use the Cash Collateral of the Trusts through December 21,
2002 for the limited purposes specifically set forth in the Final Cash
Collateral Order. Notwithstanding the 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 the Stipulation.
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, the
Trusts do 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 the Trusts, 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
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$21,000.00 (twenty one thousand dollars) of the Specified Debtors' Cash
Collateral to investigate the Trusts' Debt, the liens and security interests of
the Trusts securing the Trust Debt and any potential claim for relief or cause
of action with respect to the Trust Debt; (iii) challenge the amount, validity,
priority or enforceability of the Trust Debt or the security interests and liens
of the Trusts in the Specified Debtors' Collateral or assert any defense, claim,
counterclaim or offset with respect to the Trust Debt or the security interests
and liens of the Trusts; (iv) challenge in any manner whatsoever the Trusts'
Debt and any other rights, claims and entitlements of the Trusts under any of
the Loan Documents; (v) change, 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,
CMSLP, on behalf of the Trusts, 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 on the Specified Debtors' Collateral shall be limited to
the extent of the Specified Debtors' Attributed 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 on the Specified Debtors' Collateral exceed
the aggregate amount of $2,892,800 (two million, eight hundred ninety two
thousand and eight hundred dollars), 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 Trusts 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
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certificates of incorporation, other constituent documents or other instruments
or agreements), such consent is hereby given.
5. Adequate Protection: Notwithstanding anything to the contrary
contained in section 552(a) of the Bankruptcy Code, as adequate protection for,
and to secure payment of, in an amount equal to the aggregate diminution in the
value of the Specified Debtors' Collateral (including, the Specified Debtors'
Cash Collateral) from the Filing Date, as security for and an inducement to the
Trusts 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 the Trusts the following adequate protection:
(a) a replacement lien (the "Specific AP Lien") on all of the
prepetition and postpetition property (including without limitation, all
postpetition hotel revenue and other charges) of the Specified Debtors,
which lien shall be junior only to (i) the DIP Priming Lien, and (ii) the
Carveout, but only to the extent of the Attributable DIP Percentage (as
defined in the DIP Credit Agreement) (as so limited, $173,568.22 (one
hundred seventy three thousand, five hundred sixty eight dollars and
twenty two cents));
(b) (1) a replacement lien (the "Primed Lender AP Lien") on all of
the prepetition and postpetition property (including without limitation,
all postpetition hotel revenue and other charges) owned by the Debtors
(other than the Utility Reserve Account (as defined in the Final Cash
Collateral Order)), which lien shall be pari-passu with other Primed
Lender 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: (w) any DIP Priming Lien on such property, but only
to the extent of the such Debtors' Attributed DIP Amount (as defined
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in the DIP Credit Agreement) that is actually advanced, (x) any Qualified
Prepetition Liens on such property and any section 506(c) charges assessed
against such liens and (y) any Specific AP Lien on such property;
provided, however, if (but only to the extent that and for so long as) the
holder of any Prepetition 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 Qualified Prepetition Lien; provided, however, the
property subject to the liens granted to the Trusts as set forth in the
Stipulation 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;
(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) owned by the Debtors (other
than the Utility Reserve Account), 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 such Debtors' Attributed DIP Amount (as defined
in the DIP Credit Agreement) that is actually advanced, and (ii) any
Qualified Prepetition Liens on such property and any section 506(c)
charges assessed against such
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liens, (iii) any Specific AP Lien on such property, (iv), any Primed
Lender AP Lien (as defined in the Motion) on such property, (v) any
Specific I/C Lien on such property, and (vi) any liens granted to the DIP
Lenders under 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 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 Qualified Prepetition Lien; provided, however, the
property subject to the liens granted to the Trusts as set forth in the
Stipulation 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;
(c) except as other provided in paragraph 5(b), the security
interests and replacement liens granted to the Trusts 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 Trusts herein;
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(d) the Debtors shall make all (i) monthly interest payments to the
Trusts due under the Specified Loans (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 Reserves required
under the Loan Documents;
(e) the Debtors shall timely perform and complete all actions
necessary or appropriate to protect the Specified Trust Debtors'
Collateral against diminution in value, including but not limited to
Capital Expenditures necessary to (i) maintain the Trust 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 Trust Debtors' obligations under the
existing Franchise Agreements and any rules or regulations imposed upon
the Trust Debtors thereunder and to comply with any PIPs as may be agreed
to by the franchisor (the "Franchisor"), or (ii) replace, without
interruption, the Trust Debtors' right to use Franchise Flags under
existing Franchise Agreements for the applicable hotels with comparable
replacement Franchise Agreements and Franchise Flags, consistent with the
provisions of paragraph 5(i) of the Stipulation and comply with the
Specified Debtors' obligations with respect to such matters under the Loan
Documents;
(f) the Debtors shall (i) provide CMSLP in a timely fashion with a
detailed budget or budgets with respect to such Capital Expenditures,
which budget or budgets shall be subject to CMSLP'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
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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 CMSLP with written
reports, on or before the fifth day of each month, describing the status
of the Capital Expenditures; and (vi) permit CMSLP or any consultant
retained by or on behalf of CMSLP to inspect the Specified Debtors' Hotel
Properties during normal business hours; and
(g) the Debtors shall timely furnish to CMSLP, on behalf of the
Trusts, (i) all such reports and other information required to be provided
to the Trusts 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, 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 Trusts' liens and the right of
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the Trusts to continue such Franchise Agreements in the event that the
Trusts or their nominee or designee takes title to any Hotel Property;
(l) the Debtors shall pay the reasonable attorneys' fees and
disbursements incurred by CMSLP in connection with the Cases on and after
the Filing Date within ten business days after presentment by CMSLP of an
invoice to the Debtors; and
(m) CMSLP may, but shall not be required to, utilize the appropriate
Reserves to pay prepetition real estate taxes in respect of the Specified
Debtors' Collateral to the extent that there are sufficient Reserves to do
so.
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 and the use of the Specified Debtors' Cash Collateral and
the Trusts' 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 the Trusts 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
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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 Trusts' 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 the Trusts'
express written prior 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
Collateral pursuant to section 363(b) of the Bankruptcy Code; (xiv) the Debtors'
exclusive right to file a plan or solicit acceptances thereof is terminated;
(xv) an Event of Default (as defined in the Loan Documents) with respect to any
borrower that is not a Specified Debtor under the applicable Loan Documents; and
(xvi) if, after the date of this Stipulation, any Specified Debtor shall
commence or become the subject of a bankruptcy case, and such Debtor shall not
agree to be bound by the terms of this Stipulation within ten days of the entry
of an order for relief in its case. On and after the Termination Event, the
Debtors shall immediately cease using any of the Specified Debtors' Cash
Collateral; provided, however, that
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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
CMSLP reserves the right to oppose such relief.
7. Acknowledgment of Trust Debt and Prepetition Liens: The Debtors
acknowledge and agree that the Trust Debt is valid and due and owing and that
the separate liens and security interests encumbering the Specified Debtors'
Collateral securing the Trust 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, to
commence an adversary proceeding (a) against the Trusts with respect to the
Trusts' Debt or the liens and security interests of the Trusts securing the
Trust Debt or (b) otherwise asserting any claims for relief or causes of action
against the Trusts or any Released Party with respect to the Trust Debt (the
"Challenge Period"). 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 Trusts' Debt is valid and that the liens and
security interest of the Trusts securing the Trusts' Debt are valid, enforceable
and perfected senior liens.
8. Release of Trusts: 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 Trusts under this
Stipulation or under the Loan Documents, including but not limited to the
Trusts' Debt, and (ii) the Debtors hereby release, discharge, and acquit CMSLP
and the Trusts, and each of CMSLP's and the Trusts' officers, directors,
shareholders, agents, professionals, representatives, employees, subsidiaries,
and affiliates, and each of the successors, assigns, heirs, and representatives
of each (collectively with the Trusts and CMSLP, the
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"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 with respect to the
Trusts' Debt.
9. Information to Lender: In addition to the information required to
be provided to CMSLP in paragraph 5(e) & (g) of this Stipulation, the Debtors
are authorized and directed to provide to CMSLP any and all documentation,
reports, schedules, assignments, financial statements, insurance policies and
endorsements, access, inspection, audit, inquiry and other rights which CMSLP
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 the Trusts may
reasonably require as evidence of and for the protection of the Trusts, or which
may be otherwise deemed necessary by the Trusts 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 the Trusts Liens and Claims: Except as specifically
set forth in this Stipulation, the Trusts' liens and claims granted under this
Stipulation 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
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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 claims and liens
granted to the Trusts pursuant to the terms of this Stipulation shall be granted
in any of the Debtors' cases while any portion of the Trusts claims, including
the Trusts' Debt and all other claims arising after the Filing Date, remain
outstanding.
12. No Surcharge: Except with respect to the Carveout (and, in any
event, only to the extent of the Attributable DIP Percentage (as defined in the
DIP Credit Agreement)) 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 the Trusts,
their claims, or the Specified Debtors' Collateral under section 506(c) of the
Bankruptcy Code or otherwise, without the prior written consent of the Trusts,
and no such consent shall be implied from any other action, inaction or
acquiescence by the Trusts; or (ii) shall be senior to or on a parity with the
liens and security interests granted to the Trusts 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 the Trusts (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 the Specified Debtors (except to the extent that such
reorganization costs and expenses directly benefited the estates of the
Specified Debtors. CMSLP, on behalf of the Trusts, fully reserves
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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 CMSLP or the Trusts with
respect thereto.
13. Section 364(e) Protection: In view of the Trusts' reliance upon
the provisions of the Stipulation in consenting to the DIP Priming Liens and the
use of the Trusts' 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 the Trusts by the Stipulation and the
liens and security interests granted thereby to the Trusts 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 Debtors and the Trusts 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
Trusts' rights under the Bankruptcy Code and applicable non-bankruptcy law,
including, without limitation, the Trusts' rights to (i) seek further adequate
protection, (ii) request conversion or 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
21
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 the Trusts 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 to the
Trusts 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 the Trusts have or may
have against any party who may be liable with any of the Debtors for the Trusts'
Debt and otherwise under the Loan Documents or any part thereof. The execution
of this Stipulation, and nothing contained therein, 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 the Trusts seeking to modify the
automatic stay, dismissal of the Cases or termination of exclusivity. Except as
otherwise expressly provided in the Stipulation, 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.
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17. No Construction Against Draftsman: The provisions of this
Stipulation shall be deemed to have been jointly drafted by the Debtors and the
Trusts 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 the Trusts or the Debtors under this
Stipulation, and all the rights and remedies of the Trusts 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, the Trusts shall be entitled to such additional adequate
protection, which shall be evidenced by an order jointly presented to the Court
by the Debtors and CMSLP (the "Supplemental Order") for consideration after
notice and a hearing. In the event the Debtors and CMSLP are unable to 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 the Trusts such
additional adequate protection.
21. Notices: Any notice required or permitted under the Stipulation
or the Loan Documents shall be delivered by facsimile, overnight mail or
certified or registered mail as follows:
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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
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 CMSLP:
David Goozman
Amy Hoffman, Esq.
CRIIMI MAE SERVICES L.P.
11200 Rockville Pike
Rockville, MD 20852
Phone: (301) 468-3133
Fax: (301) 231-0325
With a copy to:
Lawrence P. Gottesman, Esq.
Brown Raysman Millstein Felder & Steiner, LLP
900 Third Avenue
New York, NY 10022
Phone: (212) 895-2060
Fax: (212) 895-2900
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.
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Dated: New York, New York
February 23, 2002
CADWALADER, WICKERSHAM & BROWN RAYSMAN MILLSTEIN
TAFT FELDER & STEINER LLP
By: s/ By:s/
- ---------------------------------- --------------------------------------
Gregory M. Petrick (GP-2175) Lawrience P. Gottesman, Esq. (LG-7061)
100 Maiden Lane Gerard S. Catalanello, Esq. (GC-0945)
New York, New York 10038 Arianna Frankl (AF-7764)
(212) 504-6000 900 Third Avenue
New York, New York 10022
CURTIS, MALLET-PREVOST, COLT & (212) 895-2000
MOSLE LLP
Steven J. Reisman, Esq. ( )
101 Park Avenue
New York, New York 10178-0061
(212) 696-6065
Attorneys for the Debtors and Attorneys for Criimi Mae Services
Debtors-in-Possession Limited Partnership, as special
servicer for LaSalle Bank N.A.,
f/k/a LaSalle National Bank, as
Trustee for the Registered Holders
of the First Union-Lehman Brothers
Commercial Mortgage Trust II,
Commercial Mortgage Pass-Through
Certificates, Series 1997-C2,
LaSalle Bank, N.A., as Trustee for
the Registered Holders of the LB
Commercial Conduit Mortgage Trust
II, Multiclass Pass-Through
Certificates, Series 1996-C2, and
State Street Bank and Trust
Company, as Trustee for the
Registered Holders of First
Union-Lehman Brothers Commercial
Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series
1997-C1
SO ORDERED THIS _14th_ DAY OF
FEBRUARY, 2002
/s/Burton R. Lifland
------------------------------
United States Bankruptcy Judge
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