EXHIBIT 10.42
CADWALADER, WICKERSHAM & TAFT
Attorneys for the Debtors and Debtors in Possession
100 Maiden Lane
New York, New York 10038
(212) 504-6000
Gregory M. Petrick (GP-2175)
Adam C. Rogoff (AR-0820)
Barry N. Seidel (BS-1945)
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re: Chapter 11
IN RE LODGIAN, INC., et al., Case Nos. 01-16345 et seq.
Jointly Administered
Debtors. Judge Burton R. Lifland
AGREED ORDER REGARDING DEBTORS' MOTION FOR ENTRY OF ORDERS (1)
AUTHORIZING THE DEBTORS-IN-POSSESSION TO (A) OBTAIN POST- PETITION
FINANCING, (B) GRANT LIENS AND PRIORITY ADMINISTRATIVE EXPENSE
CLAIMS STATUS, (C) MODIFY THE AUTOMATIC STAY, AND (D) ENTER INTO
FINANCING AGREEMENT; AND (2) APPROVING THE USE OF CASH COLLATERAL
AND GRANTING ADEQUATE PROTECTION REGARDING NATIONWIDE LOANS
This matter came before the Court upon the motion (the "Motion") of
Lodgian, Inc. ("Lodgian") and the other above-captioned Debtors and
Debtors-in-Possession (the "Guarantors," collectively with the Borrower, the
"Debtors"), pursuant to Sections 105, 361, 362, 363, 364, 503(b) and 507 of
Title 11 of the United States Code (the "Bankruptcy Code") and Rule 4001 of the
Federal Rules of Bankruptcy Procedure ("the "Bankruptcy Rules"), (I) authorizing
the Debtors to (a) obtain post-petition financing; (b) grant liens and priority
administrative expense claim status; (c) modify the automatic stay; and (d)
enter into the Revolving Credit and Guaranty Agreement, the form of which was
annexed to the Motion as Exhibit A (the "DIP Credit Agreement"); (II) approving
the use of cash collateral and granting
adequate protection therefor; and (III) scheduling a final hearing on the
post-petition financing and use of cash collateral.
The Motion sought, among other things: (a) Authorization for the
Borrower to obtain post-petition financing (the "Financing") and for the
Guarantors to guaranty the payment by the Borrower of its obligations thereunder
up to a maximum aggregate principal amount of $25,000,000 (the actual available
principal amount at any time being subject to conditions precedent as set forth
in the DIP Credit Agreement), from Morgan Stanley Senior Funding, Inc. ("MSSF"),
as acting administrative agent and collateral agent (the "Agent") for itself and
a syndicate of financial institutions (together with the Agent, the "DIP
Lenders") to be arranged by MSSF and Lehman Brothers Inc.; (b) The granting of
adequate protection to the lenders and administrative agent under the Credit
Agreement dated July 23, 1999 (as amended, the "Pre-Petition Agreement") among
Lodgian Financing Corp., Lodgian, Inc., Impac Hotel Group, LLC, Servico, Inc.,
the Other Affiliate Guarantors party thereto, the lenders party thereto (the
"Pre-Petition Lenders"), MSSF, as Administrative Agent (the "Pre-Petition
Agent"), Collateral Agent, Co-Lead Arranger, Joint Book Manager and Syndication
Agent, Lehman Brothers Inc., as Co-Lead Arranger and Joint-Book Manager and
Lehman Commercial Paper Inc., as Documentation Agent; whose liens and security
interests are being primed by the Financing; and (c) Authorization for the use
by the Debtors of cash collateral (as such term is defined in the Bankruptcy
Code) in which the Pre-Petition Lenders have an interest, and the granting of
adequate protection to the Pre-Petition Lenders with respect to such use of
their cash collateral.
Nationwide Life Insurance Company ("Nationwide") filed an Objection
to the Motion. Nationwide and the Debtors have reached agreement on the terms of
the Debtors' proposed use of Nationwide's cash collateral and the Financing
related to Nationwide's secured claims.
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Upon the record made by the parties at the hearing on the Motion,
the Motion and Nationwide's objection, and after due deliberation and
consideration and sufficient cause appearing therefor, IT IS HEREBY FOUND,
DETERMINED, ORDERED AND ADJUDGED, THAT:
1. This Order supplements and amends this Court's earlier Orders
regarding Debtor's use of cash collateral and entering into Financing, as those
Orders relate to Nationwide's secured claims. Terms not defined in this Order
shall have the meaning set forth in the Debtors' Motion.
2. Nationwide is the lender with respect to six (6) loans to one or
more Debtors (the "Nationwide Loans"). Five of the Nationwide Loans were made in
December, 1998, and have maturity dates of November 30, 2002. Those loans are
secured by leasehold mortgages on: the Holiday Inn, Jekyll Island, Georgia (the
"Jekyll Island Loan"); the Holiday Inn - Inner Harbor, Baltimore, Maryland (the
"Inner Harbor Loan"); Holiday Inn - BWI, Linthicum Heights, Maryland (the "BWI
Loan"); the Holiday Inn, Glen Burnie, Maryland (the "Glen Burnie Loan"); and the
Holiday Inn, Lancaster, Pennsylvania (the "Lancaster Loan"). These five loans
are collectively referred to hereinafter as the "December 1998 Loans." The
hotels securing those loans are collectively referred to hereinafter as the
"December 1998 Properties". The December 1998 Loans are cross-collateralized,
cross-defaulted and cross-guaranteed. The borrowers under the Nationwide Loans
are hereinafter referred to as the "Nationwide Borrowers."
3. Nationwide is also lender with respect to a sixth loan, dated
April 26, 1999, and secured by a mortgage on the Residence Inn, Dedham,
Massachusetts (the "Dedham
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Loan"). The Dedham Loan matures on April 30, 2002. The property securing the
Dedham Loan is referred to hereinafter as the "Dedham Property."
4. Without prejudice to the rights of any other party (but subject
to the limitations thereon contained in paragraph 13 below), the Debtors
stipulate and agree that the liens and security interests granted to Nationwide
pursuant to the Nationwide Loans, and pursuant to all leasehold mortgages,
mortgages and security documents executed by any of the Debtors in favor of
Nationwide in connection with the Nationwide Loans are (i) valid, perfected,
enforceable, first priority liens and security interests in the personal and
real property described in such documents, (ii) not subject to avoidance or
subordination pursuant to the Bankruptcy Code or applicable non-bankruptcy law,
and (iii) are subject only to (x) the priming liens and security interests
granted to the Agent and the DIP Lenders pursuant to the DIP Financing Order and
the DIP Credit Agreement (the "DIP Priming Liens"), (y) the Carve-Out (as
defined in the Motion) to which the DIP Priming Liens are subject, and (z) the
Qualified Pre-Petition Liens (if any) related to the Nationwide Hotels. Debtors
further stipulate that the aggregate value of the collateral securing the
Nationwide Loans, as of December 20, 2002 (the "Petition Date"), exceeds the
aggregate amount of the pre-petition debt outstanding under the Nationwide
Loans.
5. Consistent with the terms of the DIP Financing Order, the DIP
Credit Agreement and the Cash Collateral Order, the Debtors are hereby
authorized to use all cash collateral of Nationwide (in amounts consistent with
the terms of the Budget), provided that Nationwide is granted adequate
protection as hereinafter set forth. The unsecured creditors' committee may use
up to $20,000 (plus reasonable disbursements and out-of-pocket expenses,
including UCC searches and real estate title reports) of Nationwide's cash
collateral to review Nationwide's liens as contemplated by paragraph 13 of this
Order.
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6. Nationwide is entitled, pursuant to Sections 361, 363(e) and
364(d)(1) of the Bankruptcy Code, to adequate protection of its interest in the
collateral securing the Nationwide Loans (the "Nationwide Collateral"),
including the cash collateral, for any diminution in value of Nationwide's
interests in the Nationwide Collateral as of the Petition Date, including,
without limitation, any such diminution resulting from the use by the Debtors of
cash collateral, and any other Nationwide Collateral, the priming of
Nationwide's security interests and liens in the Nationwide Collateral by the
Agent and the DIP Lenders pursuant to the DIP Credit Agreement and the DIP
Financing Order and the imposition of the automatic stay pursuant to Section 362
of the Bankruptcy Code. As adequate protection, Nationwide is hereby granted the
following (in addition to any adequate protection granted to Nationwide or any
Primed Lender in other Orders regarding Debtors' use of cash collateral and/or
Financing and subject to the subordination provisions set forth below)
(collectively, the "Nationwide Adequate Protection"):
(a) Adequate Protection Liens. Nationwide is hereby granted
(effective upon the date of this Order, and without the
necessity of execution by the Debtors of mortgages,
security agreements, pledge agreements, financing
statements or other agreements) a replacement security
interest in and lien upon the Nationwide Collateral,
subject and subordinate only to (i) the security
interest and liens granted to the Agent for the benefit
of the DIP Lenders under the DIP Financing Order and
pursuant to the DIP Financing Documents, and (ii) the
provisions of the Carve-Out, as applicable, provided
that the property subject to the security interests and
replacement liens granted to Nationwide as set forth
herein 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) Primed Lender AP Lien. Pursuant to section 363(c) and
(e) and 361 of the Bankruptcy Code, all of the Debtors
hereby grant to Nationwide a perfected security interest
in and lien upon all pre- and post-petition property of
the Debtors (including, without limitation, cash
collateral, inventory, accounts receivable, other rights
to payment, contracts, property, plant, equipment,
general intangibles, documents, instruments, interests
in leaseholds, real
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property, patents, copyrights, trademarks, trade names,
other intellectual property capital stock of
subsidiaries, and the proceeds of all the foregoing),
whether now existing or hereafter acquired, that is pari
passu with the other Primed Lender AP liens, except as
with respect to the Subordinated Lien Amount (as defined
below) subject only to (i) the DIP Priming Lien (but
only to the extent of the Attributable DIP Amount); (ii)
Qualified Prepetition Liens; (iii) a Specific AP Lien
with respect to any of the Debtors' properties; and (iv)
the Carve-Out (but only to the extent of the
Attributable DIP Amount); provided, however, that
Nationwide shall subordinate the Subordinated Lien
Amount of its Primed Lender AP Lien to payment in full
of all unsubordinated Primed Lender AP Liens of each
other Primed Lender. For purposes of this order, the
Subordinated Lien Amount shall mean an amount equal to
twenty-five percent (25%) of the total claim of
Nationwide at the relevant time as it relates to the
December 1998 Loans. The Subordinated Lien Amount of
Nationwide shall rank pari passu with the Subordinated
Primed Lender AP Lien of any other Primed Lender that
has also agreed to subordinate its Primed Lender AP
Lien. Notwithstanding any provision herein to the
contrary, if (but only to the extent that and for so
long as) a 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 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 6(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;
and further, the property subject to the liens granted
to Nationwide as set forth in this 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;
(c) Payment of Expenses. The Debtors shall use cash
collateral securing the Nationwide Loans (or the
proceeds of DIP Financing or Limited Intercompany
Advances to the extent necessary) to pay monthly the
following expenses in the following priority: (i) the
operating expenses (including as applicable real estate
taxes, property and casualty insurance, equipment lease
payments and ground rent payment) of each hotel securing
the Nationwide Loans (the "Nationwide Hotels"); (ii)
funding of a capital expenditure reserve for each
Nationwide Hotel equal to four (4%) percent of total
revenues for the immediately preceding month; (iii) the
prorata share of each Nationwide Hotel's management cost
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allocation (net of management fee revenue) plus the
applicable restructuring cost allocation as referenced
in paragraph 49(b)(iii) and (iv) of the Motion, and as
used in the 2002 Budget attached, computed as follows:
budgeted total revenues for each Nationwide Hotel
divided by the budgeted total revenues for all Lodgian
hotels, for the 12-month period ended December 31, 2002.
For the December 1998 Properties, this percentage equals
8.06%. For the Dedham Property this percentage equals
0.75%; (iv) capital expenditures, to the extent actual
capital expenditures exceed the amount of pre-petition
capital reserve escrows plus the additional reserves set
forth in (ii) above; (v) payment of monthly interest at
the non-default rate set forth in the Nationwide Loan
documents ($438,791.29 for the December 1998 Properties,
and $42,417.42 for the Dedham Property); including
immediate payment of accrued but unpaid post-petition
interest.
(d) After payment of such expenses, the Debtors may use any
excess cash collateral from the Nationwide Hotels
consistent with the budget attached to the Motion and
the terms of the Cash Collateral Order. Nationwide shall
also receive current cash payments of all fees and
expenses payable to Nationwide under the Nationwide
Loans, including but not limited to, the reasonable fees
and disbursements of Nationwide's counsel in connection
with these bankruptcy proceedings to the extent provided
in the Nationwide Loan documents.
7. To secure the DIP Financing, Nationwide consents to a priming
lien on the Nationwide Collateral, prorata with the other Primed Lenders and the
General AP Liens (as defined in the Motion) provided that the General AP Liens
on the Nationwide Collateral shall be junior to the liens granted to Nationwide
under the Nationwide Loans. To the extent Nationwide's consent is required to
permit the Nationwide Borrowers to incur the obligations or grant the liens
contemplated hereunder or in connection with the DIP Financing (whether under
the terms of their respective certificates of incorporation, other constituent
documents or other instruments or agreements), such consent is hereby given. The
prorata percentage shall be computed by dividing the EBITDA on each primed hotel
by the total EBITDA for all hotels receiving a priming lien, for the 12-month
period ended September 30, 2001. As set forth in Schedule 3.15 attached to the
DIP Financing Order, the Priming Liens shall not exceed
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$3,182,000 on the December 1998 Properties, and $471,000 on the Dedham Property.
This prorata treatment shall be consistently applied to all Primed Lenders.
8. All existing reserves with respect to the Nationwide Hotels shall
remain in place and held by Nationwide for the benefit of the Nationwide Hotels
and the Nationwide Loans. At Lodgian's direction, payments out of the reserves
(to the extent otherwise permitted by the Nationwide loan documents and this
Agreement) shall be made directly to the payee rather than paid by Lodgian and
reimbursed by Nationwide.
9. On or before April 30, 2002, Nationwide will extend the maturity
date of the Dedham Loan through November 30, 2002, under the same terms and
conditions as the existing Dedham Loan. Such extension is not intended to alter
in any material respect the rights of the respective parties regarding
Nationwide's secured claims. In the event the extension of the maturity date of
the Dedham Loan as set forth herein is determined by a further Order of this
Court to have such an effect, Debtors shall have the right to revoke such
extension and restore the Dedham Loan to its original April 30, 2002, maturity
date. Nationwide will grant the Debtors with the option to extend all of the
Nationwide Loans from November 30, 2002, through December 31, 2003, under the
same terms and conditions as the existing loan documents (the "Extension
Option"). The Extension Option will expire on the earlier of (a) November 30,
2002 or (b) confirmation of a plan of reorganization under the Bankruptcy Code
in these proceedings. Upon exercise of the Extension Option, Debtors will
continue to be bound (including in any plan of reorganization) by the terms and
conditions of the existing Nationwide loan documents without modification
(except as otherwise expressly provided in this paragraph 9 and paragraph 10
below with respect to the extended maturity date and the prepayment option).
Within thirty (30) days after confirmation of the bankruptcy plan, the Debtors
will pay all outstanding
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principal and interest, together with any fees and expenses, necessary to bring
the Nationwide Loans current.
10. Nationwide's agreement to extend the maturity of the Nationwide
Loans is subject to the following conditions:
(a) The Nationwide Loans will continue to bear interest at
their current rate through the term of any extension;
(b) The December 1998 Loans will remain cross-collateralized
and cross-defaulted;
(c) The Nationwide Loans shall be prepayable at par at any
time;
(d) All existing capital and maintenance reserves will
remain in place for each of the Nationwide Hotels;
(e) All other terms and conditions of the Nationwide loan
documents will remain in effect, except to the extent
that the Bankruptcy Code may limit the enforceability of
certain provisions of those documents;
(f) Nationwide may terminate the Extension Option and
rescind any extension of the maturity dates, and the
original maturity dates shall be reinstated if any of
the following events occur prior to confirmation of a
plan of reorganization:
(i) Debtors fail to timely pay the monthly interest
payments due on the Nationwide Loans pursuant to
paragraph 6(c) above;
(ii) Except to the extent otherwise agreed by
Nationwide, the Debtors shall fail to observe the
terms of the use of cash collateral as set forth
in paragraph 6 above;
(iii) Debtors increase the amount of priming liens
allocated to the Nationwide Hotels or otherwise
change the use of Nationwide's cash collateral as
agreed herein, without Nationwide's consent; or
(iv) Debtors' trailing 12-month EBITDA, as that term is
consistently defined by the Debtors, is less than
$8.2 million for the December 1998 Properties, and
less than $1,000,000 for the Dedham Property.
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11. Nationwide shall not be required to file or record financing
statements, mortgages, notices of lien or similar instruments in any
jurisdiction or take any other action in order to validate and perfect the
security interests and liens granted to Nationwide pursuant to this Order.
12. If any or all of the provisions of this Order are hereafter
reversed, modified, vacated or stayed, such reversal, stay, modification or
vacation shall not affect the validity and enforceability of any lien or
priority authorized or created hereby in favor of Nationwide.
13. The findings and admissions contained in this Order, including
without limitation, the findings and admissions contained in paragraph 4 of this
Order, shall be binding upon all parties in interest, including any creditors'
committee appointed in this case, unless (a) such committee has timely filed an
adversary proceeding or contested matter no later than April 15, 2002, (i)
challenging the validity, enforceability, priority or extent of Nationwide's
liens on the Nationwide Collateral, or (ii) otherwise asserting any claims or
causes of action against Nationwide in connection with the Nationwide Loans; and
(b) the Court rules in favor of the plaintiff in any such timely-filed adversary
proceeding or contested matter. If no such adversary proceeding or contested
matter is timely filed as of such date, Nationwide's liens on the Nationwide
Collateral shall be deemed to have been, as of the petition date, legal, valid,
binding, perfected, not subject to recharacterization, subordination or
avoidance. If any such adversary proceeding or contested matter is timely filed
as of such date, the findings and admissions contained in paragraph 4 shall
nonetheless remain binding and preclusive, except to the extent that such
findings and admissions are expressly challenged in such adversary proceeding or
contested matter.
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14. Subject to satisfaction of the requirements under the Nationwide
Loan documents and the provisions of paragraph 6(c) of this Order, Nationwide
will reimburse the Debtors (from existing capital expenditure reserves) for
those capital expenditures made with respect to the Nationwide Hotels.
15. The provisions of this Order shall be binding upon Nationwide
and the Debtors and their respective successors and assigns (including any
Chapter 7 or Chapter 11 trustee hereinafter appointed or elected for the estate
of any of the Debtors) and inure to the benefit of Nationwide and the Debtors
and (except with respect to any trustee hereinafter appointed or elected for the
estate of any of the Debtors) their respective successors and assigns.
Dated: FEBRUARY 14, 2002
New York, New York
/S/ JUDGE BURTON R. LIFLAND
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Burton R. Lifland, U.S. Bankruptcy Judge
Agreed to:
/s/ Jeffrey Baddeley
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Jeffrey Baddeley
Baker & Hostetler LLP 3200
National City Center
3200 National City Center
1900 E. Ninth St.
Cleveland, OH 44114
(216) 861-7869
Counsel for Nationwide Life Insurance Company
/s/ Barry N. Seidel
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Adam C. Rogoff
Barry N. Seidel
Gregory M. Petrick
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
(212) 504-6000
Counsel for Debtors
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