Exhibit 10.38
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re )
)
LODGIAN, INC., et al., ) Chapter 11
)
Debtors. ) Case No. 01-16345 (BRL)
)
) Jointly Administered
)
FINAL ORDER (I) AUTHORIZING DEBTORS (A) TO OBTAIN POST-PETITION FINANCING
PURSUANT TO 11 U.S.C. "105, 361, 362, 364(C)(1), 364(C)(2), 364(C)(3) AND
364(D)(1) AND (B) TO UTILIZE CASH COLLATERAL PURSUANT TO 11 U.S.C. '363 AND (II)
GRANTING ADEQUATE PROTECTION TO PRE-PETITION SECURED PARTIES PURSUANT TO 11
U.S.C. " 361, 362 AND 363
Upon the motion (the "MOTION"), dated December 20, 2001, of Lodgian, Inc.
("LODGIAN" or the "BORROWER") 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(c)(2), 364(c)(1), 364(c)(2),
364(c)(3) and 364(d)(1) of the United States Bankruptcy Code, 11 U.S.C. "101, et
seq. (the "BANKRUPTCY CODE"), and Rules 2002, 4001 and 9014 of the Federal Rules
of Bankruptcy Procedure (the "BANKRUPTCY Rules"), seeking, among other things:
(1) 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, as defined
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herein), 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.;
(2) 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;
(3) 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;
(4) pursuant to Bankruptcy Rule 4001, that an interim hearing (the
"INTERIM HEARING") on the Motion be held for this Court to consider entry
of the proposed interim order annexed to the Motion (the "INTERIM ORDER"):
(a) authorizing the Borrower, on an interim basis, to forthwith borrow or
obtain letters of credit from the DIP Lenders under the Documents (as
defined below) up to an aggregate principal amount of $10,000,000, (b)
authorizing the use by
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the Debtors of cash collateral, and (c) granting the adequate protection
hereinafter described; and
(5) that the Court schedule a final hearing (the "FINAL HEARING") to
be held within 30 days of the entry of the Interim Order to consider entry
of a final order authorizing the balance of the borrowings and letter of
credit issuances under the Documents on a final basis, as set forth in the
Motion and the Documents filed with this Court and as disclosed on the
record at the Interim hearing;
The Interim Hearing on the Motion having been held by this Court on
December 21, 2001 at which the Court (a) issued and entered an interim order (i)
authorizing the Borrower to borrow or obtain letters of credit, pursuant to the
Financing, and authorizing the Guarantors to guarantee such borrowings, up to an
aggregate of $10,000,000 of the Financing from the DIP Lenders as provided for
in the Interim Order, (ii) authorizing the use by the Debtors of cash collateral
and (iii) granting adequate protection to the Pre-Petition Lenders and (b)
scheduled the Final Hearing to consider entry of an order authorizing the
balance of the Financing, all as set forth in the Motion, the Interim Order and
the loan documentation filed with this Court.
Due and appropriate notice of the Motion, the relief requested therein and
the Final Hearing having been served by the Debtors upon the twenty largest
unsecured creditors of the Debtors, all mortgage lenders to the Debtors and the
United States Trustee for the Southern District of New York; and
Upon the record made by the Debtors at the Interim Hearing and the Final
Hearing, and after due deliberation and consideration and sufficient cause
appearing therefor;
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IT IS HEREBY FOUND, DETERMINED, ORDERED AND ADJUDGED,
that:
1. Jurisdiction. This Court has core jurisdiction over the cases of the
Debtors (the "CASES") and the parties and property affected hereby pursuant to
28 U.S.C. "157(b) and 1334.
2. Notice. Under the circumstances, the notice given by the Debtors of the
Motion, the Interim Hearing and the Final Hearing constitutes due and sufficient
notice thereof.
3. Debtors' Stipulations. Without prejudice to the rights of any other
party (but subject to the limitations thereon contained in paragraph 15 below),
the Debtors stipulate and agree that:
(a) (i) in accordance with the terms of the Pre-Petition Agreement
and as of the date hereof and as of the filing of the Debtors' chapter 11
petitions herein (the "PETITION DATE"), the Borrower was truly and justly
indebted and liable to the Pre-Petition Lenders, without defense, counterclaim
or offset of any kind, in the approximate principal amount of $195,625,000,
together with interest thereon and fees, expenses and other obligations incurred
in connection therewith as provided in the Pre-Petition Agreement (collectively,
the "PRE-PETITION DEBT") and (ii) no portion of the Pre-Petition Debt is subject
to avoidance or subordination pursuant to the Bankruptcy Code or applicable
nonbankruptcy law and (iii) the Debtors do not have, and hereby forever release,
any claims, counterclaims, causes of action, defenses or offset rights, whether
arising under the Bankruptcy Code or otherwise, against the Pre-Petition
Lenders, the Pre-Petition Agent and their respective affiliates, Agent,
officers, directors, employees and attorneys with respect to the Pre-Petition
Agreement;
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(b) the liens and security interests granted to the Pre-Petition
Agent pursuant to the Pre-Petition Agreement and pursuant to all mortgages,
deeds of trust and other security documents executed by any of the Debtors in
favor of the Pre-Petition Lenders in connection with the Pre-Petition Agreement,
are (i) valid, perfected, enforceable, first-priority liens and security
interests in the personal and real property described in such agreement,
mortgages, deeds of trust and security documents (the "PRE-PETITION
COLLATERAL"), (ii) not subject to avoidance or subordination pursuant to the
Bankruptcy Code or applicable nonbankruptcy law, and (iii) subject only to (x)
the priming liens and security interests granted to the Agent and the DIP
Lenders pursuant to this Order and the DIP Credit Agreement (the "DIP PRIMING
LIENS"), (y) the Carve-Out (as defined below) to which the DIP Priming Liens are
subject, and (z) liens permitted under the Pre-Petition Agreement to the extent
such permitted liens are permitted thereunder to be senior to or pari passu with
the liens of the Pre-Petition Lenders on the Pre-Petition Collateral; and
(c) the aggregate value of the Pre-Petition Collateral for the loans
and other amounts outstanding under the Pre-Petition Agreement substantially
exceeds the aggregate amount of the pre-petition debt outstanding under such
agreement.
4. Findings Regarding the Financing. Good cause has been shown for entry
of this Order.
(a) The Debtors have a need to obtain post-petition financing as
provided for in the Documents (the "FINANCING") in order to permit, among other
things, the orderly continuation of the operation of their businesses, to
maintain business relationships with vendors and suppliers, to make capital
expenditures and to satisfy other working capital needs. The ability of the
Debtors to obtain sufficient
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working capital and liquidity through the use of the cash collateral, incurrence
of new indebtedness for borrowed money and other financial accommodations is
vital to the preservation and maintenance of the going concern values of the
Debtors and a successful reorganization of the Debtors.
(b) The Debtors are unable to obtain adequate unsecured credit
allowable under section 503(b)(1) of the Bankruptcy Code as an administrative
expense, and a credit facility in the amount and on the terms provided by the
Financing is unavailable to the Debtors without the Debtors granting to the
Agent and the DIP Lenders (subject to the Carve-Out, as defined below) the
Superpriority Claims and the DIP Liens (each as defined below).
(c) The terms of the Financing are fair and reasonable, reflect the
Debtors' exercise of prudent business judgment consistent with their fiduciary
duty and are supported by reasonably equivalent value and fair consideration.
(d) The Financing has been negotiated in good faith and at
arm's-length between the Debtors and the Agent, and any credit extended, letters
of credit issued for the account of and loans made to the Debtors by the DIP
Lenders pursuant to the Revolving Credit and Guaranty Agreement in substantially
the form attached as Exhibit A to the Motion (the "DIP CREDIT AGREEMENT"), and
any credit extended in respect of overdrafts referred to in the DIP Credit
Agreement, shall be deemed to have been extended by the DIP Lenders in good
faith, as that term is used in section 364(e) of the Bankruptcy Code.
(e) The Debtors have requested entry of this Order pursuant to
Bankruptcy Rules 4001(b)(2) and 4001(c)(2). Absent entry of this Order, the
Debtors' estates will be immediately and irreparably harmed. Consummation of the
Financing in
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accordance with this Order and the Documents is therefore in the best interest
of the Debtors' estates.
5. Authorization of the Financing and the Documents.
(a) The Borrower is hereby authorized to borrow or obtain letters of
credit pursuant to the DIP Credit Agreement, and the Guarantors are hereby
authorized to guaranty such borrowings, up to a maximum aggregate principal
amount of $25,000,000 (inclusive of amounts authorized under the Interim Order),
in accordance with the terms of the DIP Credit Agreement which shall be used,
among other things, for the purpose of providing working capital for the
Borrower and certain of the Guarantors. In addition, the Debtors are hereby
authorized to incur overdrafts and related liabilities arising from treasury,
depository and cash management services or in connection with any automated
clearing house fund transfers provided to or for the benefit of the Debtors by
MSSF or any of its affiliates (in addition to the amount of borrowings and
letters of credit obtained pursuant to the DIP Credit Agreement).
(b) In furtherance of the foregoing, each Debtor is authorized and
directed to do and perform all acts, to make, execute and deliver all
instruments and documents (including, without limitation, the execution of
security agreements, mortgages and financing statements), and to pay all fees,
that may be reasonably required or necessary for the Debtors' performance of the
Financing, including, without limitation:
(i) the execution, delivery and performance of the Loan Documents
(as defined in the DIP Credit Agreement) and any exhibits attached
thereto, including, without limitation, the DIP Credit Agreement, the
Security and Pledge Agreement (as defined in the DIP Credit Agreement)
substantially in the
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forms attached to the Motion, and the mortgages contemplated thereby
(collectively, and together with the letter agreement referred to in
clause (iv) below, the "DOCUMENTS"),
(ii) causing the Guarantors to execute, deliver and perform the
Documents,
(iii) the execution and delivery of one or more amendments to the
DIP Credit Agreement for, among other things, the purpose of adding
additional financial institutions as DIP Lenders and reallocating the
commitments for the Financing among the DIP Lenders in each case in such
form as the Debtors, the Agent and the DIP Lenders may agree (it being
understood that no further approval of the Court shall be required for
amendments to the DIP Credit Agreement that do not shorten the maturity of
the extensions of credit thereunder, increase either the commitments or
the rate of interest payable thereunder or materially adversely affect the
interests of the Debtors or their creditors), provided that prior to
entering into any such amendment the Debtors shall notify the Official
Committee of Unsecured Creditors of its intent to do so (which notice
shall include the form of such proposed amendment),
(iv) the non-refundable payment to the Agent or the DIP Lenders, as
the case may be, of the fees referred to in the DIP Credit Agreement (and
in the separate letter agreement dated December 20, 2001 between the
Borrower and the Agent referred to in the DIP Credit Agreement) and such
Letter of Credit Fees, Commitment Fees and reasonable costs and expenses
as may be due from time to time, including, without limitation, fees and
disbursements of the
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professionals retained as provided for in the Documents, all as such terms
are defined in the Documents, and
(v) performance of all other acts required under or in connection
with the Documents.
(c) Upon execution and delivery of the Documents, the Documents
shall constitute valid and binding obligations of the Debtors, enforceable
against each Debtor party thereto in accordance with their terms. No obligation,
payment or transfer under the Documents shall be stayed, restrained, voidable,
or recoverable under the Bankruptcy Code or under any applicable law, or subject
to any defense, reduction, offset or counterclaim.
6. Superpriority Claims.
(a) Pursuant to section 364(c)(1) of the Bankruptcy Code, all of the
Debtors' obligations, indebtedness and liabilities arising under or in respect
of the Financing and the Documents (including, without limitation, in respect of
overdrafts referred to in Section 6.03(iv) of the DIP Credit Agreement) (the
"DIP OBLIGATIONS") shall constitute obligations of the Debtors 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(a) of the
Bankruptcy Code (the "SUPERPRIORITY CLAIMS"), subject only upon the occurrence
and during the continuance of an Event of Default (as defined in the DIP Credit
Agreement) (an "EVENT OF DEFAULT") or event which, upon notice or lapse of time
or both, would constitute an Event of Default (a "DEFAULT") to the payment of
the Carve Out (as hereinafter defined). Nothing herein is intended to affect the
priority set forth under section 726(b) of the Bankruptcy Code.
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(b) For purposes hereof, the "CARVE OUT" means, (i) all fees
required to be paid to the Clerk of the Bankruptcy Court and to the Office of
the United States Trustee under Section 1930(a) of title 28 of the United States
Code and (ii) an amount not exceeding $1,500,000 in the aggregate, which amount
may be used after the occurrence of an Event of Default (as defined in the DIP
Credit Agreement) or Default and for so long as such Default or Event of Default
continues uncured and unwaived, to pay fees or expenses incurred by the Debtors
and any statutory committees appointed in the Cases (each, a "COMMITTEE") in
respect of (A) allowances of compensation for services rendered or reimbursement
or expenses awarded by the Bankruptcy Court to the Debtors' or any Committee's
professionals and (B) the reimbursement of expenses allowed by the Bankruptcy
Court incurred by Committee members in the performance of their duties (but
excluding fees and expenses of third-party professionals employed by such
members); provided, however, that such dollar limitation on fees and
disbursements shall not be reduced by the amount of any compensation and
reimbursement of expenses paid prior to the occurrence of an Event of Default in
respect of which the Carve-Out is invoked or any fees, expenses, indemnities or
other amounts paid to the Agent, the DIP Lenders and their respective attorneys
and Agent under the DIP Credit Agreement or otherwise; and provided, further,
that nothing herein shall be construed to impair the ability of any party to
object to any of the fees, expenses, reimbursement or compensation described in
clauses (A) and (B) above.
7. DIP Liens. As security for the DIP Obligations, effective upon the date
of this Order and without the necessity of the execution by the Debtors, the
Agent or the DIP Lenders, of mortgages, security agreements or otherwise, the
following security interests and liens are hereby granted to the Agent and the
DIP Lenders (all property
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identified in clauses (a), (b), (c) and (d) below being collectively referred to
as the "COLLATERAL," and such security interests and liens being collectively
referred to as the "DIP LIENS"), subject (i) to the rights of certain utilities
with respect to up to $1,000,000 in cash set aside for the benefit such
utilities pursuant to an order of this Court (the "UTILITY RESERVE") and (ii)
only in the event of the occurrence of a Default or an Event of Default to the
payment of the Carve-Out (except in the case of amounts identified in clause (a)
below), which shall not be subject to the Carve-Out or the Utility Reserve):
(a) First Priority Lien on Cash Balances. Pursuant to section
364(c)(2) of the Bankruptcy Code, the Agent and the DIP Lenders are hereby
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 of the Debtors (whether maintained with the Agent or otherwise) and
any investment of the funds contained therein.
(b) Lien Priming Pre-Petition Lenders' Liens. Pursuant to section
364(d)(1) of the Bankruptcy Code, the Agent and the DIP Lenders are hereby
granted a perfected first priority senior priming 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 property, patents, copyrights,
trademarks, trade names, other intellectual property, capital stock of
subsidiaries, and the proceeds of all the foregoing, but subject, in the case of
a debtor's interest in a hotel franchise or hotel franchise agreement, to the
provisions of any agreement between the applicable franchisor and the Agent),
whether now existing or hereafter acquired, that is subject to (a) the existing
liens presently
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securing the Debtors' indebtedness (including in respect of issued but undrawn
letters of credit) to the Pre-Petition Lenders and (b) the liens securing the
Debtors' indebtedness to other pre-petition lenders which, pursuant to a
separate order of this Court, are to be primed by the DIP Liens (with respect to
such indebtedness only, the "OTHER PRIMED LENDERS" and, together with the
Pre-Petition Lenders, the "PRIMED LENDERS"). Such security interests and liens
shall be senior in all respects to the interests in such property of the Primed
Lenders arising from present and future liens of the Primed Lenders (including,
without limitation, adequate protection liens granted hereunder) but shall not
be senior to the interests of other parties arising out of liens, if any, in
such property existing immediately prior to the Petition Date, or to interests
in such property arising out of liens to which the liens of the Primed Lenders
become subject subsequent to the Petition Date as permitted by section 546(b) of
the Bankruptcy Code (collectively "QUALIFIED PRE-PETITION LIENS") provided that
the lien of the Agent and the DIP Lenders shall be senior to the existing liens
of any Other Primed Lender only to the extent of the Attributable Debt Amount
(as defined in the DIP Credit Agreement) of such Other Primed Lender and
otherwise (i) in the case of Low Leverage Debtors, immediately senior to the
General AP Liens (as defined in the Motion) and (ii) in the case of High
Leverage Debtors, immediately junior to the General AP Liens.
(c) Junior Lien on Unencumbered Properties. Pursuant to section
364(c)(2) of the Bankruptcy Code, the Agent and the DIP Lenders are hereby
granted a perfected security interest in and lien and upon all other pre- and
post-petition property of the Debtors, whether existing on the Petition Date or
thereafter acquired, that, on or as of the Petition Date is not subject to
valid, perfected and non-avoidable liens (collectively, "UNENCUMBERED
PROPERTY"), including, without limitation, cash,
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inventory, accounts receivable, other rights to payment whether arising before
or after the Petition Date, contracts, property, plant, equipment, general
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, but
subject, in the case of a Debtor's interest in a hotel franchise or hotel
franchise agreement, to the provisions of any agreement between the applicable
franchisor and the Agent. Unencumbered Property 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 (collectively, "AVOIDANCE ACTIONS"). Such security interests and
liens shall be junior only to (i) security interests and liens granted as
adequate protection to the Pre-Petition Agent and Pre-Petition Lenders under
paragraph 11(a) of this Order and to the Other Primed Lenders in a separate
order of this court entered as of the same date as this order (the "PRIMED
LENDER AP LIENS"), (ii) the Specific IC Liens, as defined in the Motion (the
"SPECIFIC IC LIENS"), and (iii) the General AP Liens, as defined in the Motion
(the "GENERAL AP LIENS").
(d) Lien Junior to Certain Other Liens. Pursuant to section
364(c)(3) of the Bankruptcy Code, the Agent and the DIP Lenders are hereby
granted a perfected security interest in and lien upon all pre- and
post-petition property of the Debtors (other than the property described in
clause (b) of this paragraph 7, as to which the liens and security interests in
favor of the Agent will be as described in such clause), whether now existing or
hereafter acquired, that is subject to Qualified Pre-Petition Liens, Primed
Lender AP Liens, Specific IC Liens (in the case of Low Leverage Debtors)
Specific AP Liens and General AP Liens.
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(e) Liens Senior to Certain Other Liens. The DIP Liens and the
Adequate Protection Liens (as defined below) shall not be subject or subordinate
to (i) any lien or security interest that is avoided and preserved for the
benefit of the Debtors and their estates under section 551 of the Bankruptcy
Code or (ii) any liens arising after the Petition Date including, without
limitation, any liens or security interests granted in favor of any federal,
state, municipal, or other governmental unit, commission, board or court for any
liability of the Debtors.
8. Protection of DIP Lenders' Rights.
(a) So long as there are any borrowings or letters of credit
outstanding, or the DIP Lenders have any Commitment (as defined in the DIP
Credit Agreement) under the DIP Credit Agreement, the Pre-Petition Lenders shall
take no action to foreclose upon the liens granted to the Pre-Petition Lenders
pursuant to the Pre-Petition Agreements and this Order or otherwise exercise
remedies against the Collateral, in each case to the extent not authorized by an
order of this Court.
(b) Automatic Stay and Certain Remedies. Subject only to the
provisions of the DIP Credit Agreement, the automatic stay provisions of section
362 of the Bankruptcy Code are vacated and modified to the extent necessary to
permit the Agent and the DIP Lenders to exercise, upon the occurrence and during
the continuance of an Event of Default and the giving of the five business days'
prior written notice provided for in the DIP Credit Agreement, all rights and
remedies against the Collateral provided for in the Documents (including,
without limitation, the right to setoff monies of the Debtors in accounts
maintained with the Agent or any DIP Lender) and, in connection with the
exercise of remedies with respect to a hotel property that is subject to a
franchise agreement, to permit the applicable franchisor to terminate such
franchise
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agreement at the request of the Agent. The Debtors hereby waive their right to
seek relief, including, without limitation, under section 105 of the Bankruptcy
Code, to the extent such relief would in any way impair or restrict the rights
and remedies of the Agent set forth in this Order or the Documents. In no event
shall the Agent or the Pre-Petition Agent be subject to the equitable doctrine
of "marshaling" or any similar doctrine with respect to the Collateral.
(c) In connection with the pursuit of its remedies against the
Collateral as provided for in the Documents and in paragraph 8(b) of this Order,
the DIP Agent is hereby authorized, in the name of and as attorney-in-fact for
the mortgagee thereunder, to foreclose any mortgage on any real property
securing the Borrower's and Guarantors' obligations under the Pre-Petition
Agreement.
(d) Except as otherwise provided in the DIP Credit Agreement, the
Debtors' right to use Cash Collateral, as provided in paragraph 10 below, shall
terminate automatically on the Termination Date (as defined in the DIP Credit
Agreement); provided that the foregoing shall not limit the Debtors' rights to
seek an order of this Court further authorizing the Debtors' use of cash
collateral.
9. The Cash Collateral. To the extent that, as of the Petition Date, any
funds were on deposit with the Pre-Petition Lenders, such funds were subject to
rights of set-off. By virtue of such set-off rights, such funds are subject to a
lien in favor of such Pre-Petition Lenders pursuant to sections 506(a) and 553
of the Bankruptcy Code. The Pre-Petition Lenders are obligated, to the extent
provided for in the Pre-Petition Agreements, to share the benefit of such liens
with the other Pre-Petition Lenders party to such Pre-Petition Agreements based
upon their respective pro rata shares of the obligations under such Pre-Petition
Agreements. Any proceeds of the Pre-Petition
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Collateral (including any fees, charges, accounts or other payments for the use
of occupancy of rooms and other public facilities in hotels, motels or other
lodging facilities and including funds on deposit at the Pre-Petition Lenders or
at any other institution as of the Petition Date) are cash collateral of the
Pre-Petition Lenders within the meaning of section 363(a) of the Bankruptcy
Code. All funds subject to such setoff rights and all such proceeds of
Pre-Petition Collateral are referred to herein as "CASH COLLATERAL."
10. Use of Cash Collateral. Except as otherwise set forth herein and in
the DIP Credit Agreement, the Debtors are hereby authorized to use all Cash
Collateral of the Pre-Petition Lenders, provided that the Pre-Petition Lenders
are granted adequate protection as hereinafter set forth. In furtherance of and
subject to the foregoing, the Pre-Petition Lenders are directed promptly to turn
over to the Debtors all Cash Collateral within the meaning of section 363(a) of
the Bankruptcy Code received or held by them.
11. Adequate Protection for Pre-Petition Lenders. The Pre-Petition Lenders
are entitled, pursuant to sections 361, 363(e) and 364(d)(1) of the Bankruptcy
Code, to adequate protection of their interest in the Pre-Petition Collateral,
including the Cash Collateral, for any diminution in value of the Pre-Petition
Lenders' interests in the Pre-Petition Collateral, including, without
limitation, any such diminution resulting from the use by the Debtors of Cash
Collateral and any other Pre-Petition Collateral, the priming of the
Pre-Petition Agent's security interests and liens in the Pre-Petition Collateral
by the Agent and the DIP Lenders pursuant to the Documents and this Order and
the imposition of the automatic stay pursuant to section 362 of the Bankruptcy
Code. As
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adequate protection, the Pre-Petition Agent and the Pre-Petition Lenders are
hereby granted the following (collectively, the "PRE-PETITION LENDERS ADEQUATE
PROTECTION"):
(a) Adequate Protection Liens. The Pre-Petition Agent and the
Pre-Petition Lenders are hereby granted (effective upon the date of this Order
and without the necessity of the execution by the Debtors of mortgages, security
agreements, pledge agreements, financing statements or other agreements) a
replacement security interest in and lien upon all the Collateral, subject and
subordinate only to (i) the security interests and liens granted to the Agent
for the benefit of the DIP Lenders under paragraph 7(b) of this Order and
pursuant to the Documents and any liens (other than the lien granted pursuant to
this paragraph 11(a)) on the Collateral to which such liens so granted to the
Agent are junior, (ii) the Specific AP Liens, (iii) the applicable provisions of
the Carve-Out and (iv) the Utility Reserve (the "PRE-PETITION LENDERS ADEQUATE
PROTECTION LIENS").
(b) Section 507(b) Claim. The Pre-Petition Agent and the
Pre-Petition Lenders are hereby granted, subject, in the event of the occurrence
of a Default or an Event of Default, to the payment of the Carve-Out, a
superpriority claim as provided for in section 507(b) of the Bankruptcy Code,
immediately junior to the claims under section 364(c)(1) of the Bankruptcy Code
held by the Agent and the DIP Lenders.
(c) Interest, Fees and Expenses. The Pre-Petition Agent and the
Pre-Petition Lenders shall receive from the Debtors (i) immediate cash payment
of all accrued and unpaid letter of credit fees and interest on the Pre-Petition
Debt at the non-default rate provided for in the Pre-Petition Agreement, and all
other accrued and unpaid fees and disbursements (including, but not limited to,
fees owed to the Pre-Petition Agent) incurred prior to the Petition Date owing
under the Pre-Petition
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Agreement, (ii) current cash payments of all fees and expenses payable to the
Pre-Petition Agent and otherwise under the Pre-Petition Agreement, including but
not limited to, the reasonable fees and disbursements of counsel, financial and
other consultants for the Pre-Petition Agent and (iii) on the first business day
of each month, all accrued but unpaid letter of credit and other fees, and
interest on the Pre-Petition Debt at the contract rate (including LIBOR pricing
options) under the Pre-Petition Agreement. The foregoing shall not limit the
right of the Pre-Petition Agent and the Pre-Petition Lenders to seek allowance
of claims in respect of interest at the default rate to the extent provided in
the Pre-Petition Credit Agreement.
(d) Preservation and Monitoring of Collateral. Subject to the
provisions of the DIP Credit Agreement, the Debtors are hereby authorized and
directed to take all steps reasonably necessary to protect and maintain the
value of the Collateral (other than the High Leverage Hotel Properties),
including, without limitation, making such capital expenditures and performing
such maintenance as may be necessary for purposes of maintaining such value. The
Pre-Petition Lenders shall be permitted to continue to retain expert consultants
and financial advisors at the expense of the Debtors, which consultants and
advisors shall be given reasonable access for purposes of monitoring the value
of the Collateral and the compliance by the Debtors with the provisions of this
paragraph.
(e) Payment from Proceeds of Collateral. The Debtors are authorized
and directed to pay to the Pre-Petition Agent, for the benefit of the
Pre-Petition Lenders, the portion of the Net Proceeds (as defined in the DIP
Credit Agreement as in effect on the Closing Date) resulting from any sale or
other disposition of other property outside the ordinary course of business as
permitted by the DIP Credit Agreement, in each case
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limited to the Net Proceeds that are not required to be paid in respect of
Obligations as defined in the DIP Credit Agreement (such payments to the
Pre-Petition Agent, for the benefit of the Pre-Petition Lenders, to be made each
time that cumulative Net Cash Proceeds that are so payable, but have not yet
been paid, reach $100,000).
(f) Limitation of Charging Expenses Against Collateral. Except to
the extent of the Carve-Out, no fees, expenses, reimbursement or compensation
described in clauses (A) or (B) of paragraph 6(b) (including any that may result
from liquidation in bankruptcy or other proceedings under the Bankruptcy Code),
to the extent such expenses are incurred prior to repayment in full of all DIP
Obligations, shall be charged against or recovered from the Collateral, pursuant
to section 506(c) of the Bankruptcy Code or any similar principal of law,
without prior written consent of the Agent, and no such consent shall be implied
from any other action, inaction, or acquiescence by the Agent.
12. Reservation of Certain Rights of Pre-Petition Lenders and Other
Parties. (a) Under the circumstances and given that the above-described adequate
protection is consistent with the Bankruptcy Code (including section 5.06(b)
thereof), the Court finds that, notwithstanding any other provision hereof, the
adequate protection provided herein is reasonable and sufficient to protect the
interests of the Pre-Petition Lenders. However, the Pre-Petition Agent and the
Pre-Petition Lenders may request further or different adequate protection, and
the Debtors or any other party may contest any such request.
(b) The provisions of paragraph 11(c) are without prejudice to the
rights of parties other than the Debtors to seek an order causing cash payments
made pursuant to paragraph 11(c) to be applied to the principal of the
Pre-Petition Debt rather than as set
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forth in paragraph 11(c) on the basis that interest on the Pre-Petition Debt
would not be allowable under Section 506(b) of the Bankruptcy Code.
13. Perfection of DIP Liens and Adequate Protection Liens. The Agent, the
DIP Lenders and the Pre-Petition Lenders that have been granted security
interests and liens hereunder 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 them pursuant to this Order. If the
Agent on behalf of the DIP Lenders or the Pre-Petition Agent on behalf of the
Pre-Petition Lenders shall, in its sole discretion, choose to file such
financing statements, mortgages, notices of lien or similar instruments or
otherwise confirm perfection of such security interests and liens, the liens and
security interests granted herein shall be deemed perfected at the time and on
the date of entry of this Order. The Pre-Petition Lenders shall not file such
financing statements, mortgages, notices of lien or similar instruments, or
otherwise confirm perfection of such security interests and liens, unless the
Agent on behalf of the DIP Lenders shall theretofore have done so. Upon the
request of the Agent, each of the Pre-Petition Lenders and the Pre-Petition
Agent, without any further consent of any party, is authorized to take, execute
and deliver such instruments (in each case without representation or warranty of
any kind) to enable the Agent to further perfect, preserve and enforce the
security interests and liens granted to the Agent for the benefit of the DIP
Lenders by the Documents and this Order.
14. Preservation of Rights Granted Under the Order.
(a) No claim having a priority superior to or pari passu with that
granted by this Order to the Agent and the DIP Lenders or, except as provided by
the cash
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collateral orders being issued on the date hereof and other cash collateral
orders that are approved by the Agent, to the Pre-Petition Agent and the
Pre-Petition Lenders, respectively, shall be granted while any portion of the
Financing (or any refinancing thereof) or the commitment thereunder, or any
adequate protection obligation granted hereunder remains outstanding, and the
security interests and liens granted to the Agent on behalf of the DIP Lenders
hereunder and to the Pre-Petition Agent on behalf of the Pre-Petition Lenders
shall not be (i) subject or junior to any lien or security interest that is
avoided and preserved for the benefit of the Debtors' estates under section 551
of the Bankruptcy Code or (ii) subordinated to or made pari passu with any other
lien or security interest under section 364(d) of the Bankruptcy Code or
otherwise; provided that the Primed Lender AP Liens granted to the Other Primed
Lenders may rank pari passu with the Pre-Petition Lenders' Adequate Protection
Liens.
(b) Unless all obligations and indebtedness owing to the Agent and
the DIP Lenders under the DIP Credit Agreement shall theretofore have been paid
in full (and, with respect to outstanding Letters of Credit issued pursuant to
the DIP Credit Agreement, cash collateralized in accordance with the provisions
of the DIP Credit Agreement), the Debtors shall not seek, and it shall
constitute an Event of Default if any of the Debtors seek, or if there is
entered, an order dismissing any of the Cases. If an order dismissing any of the
Cases under section 1112 of the Bankruptcy Code or otherwise is at any time
entered, such order shall provide (in accordance with sections 105 and 349 of
the Bankruptcy Code) that (i) the superpriority claims, priming liens and
security interests and replacement security interests granted to the Agent and
the DIP Lenders and the Pre-Petition Lenders, as the case may be, pursuant to
this Order shall continue in full force and effect and shall maintain their
priorities as provided in this
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Order until all DIP Obligations shall have been paid and satisfied in full (and
that such superpriority claims, priming liens and replacement liens, shall,
notwithstanding such dismissal, remain binding on all parties in interest) and
(ii) this Court shall retain jurisdiction, notwithstanding such dismissal, for
the purposes of enforcing the claims, liens and security interests referred to
in (i) above.
(c) 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 (i) the validity of any DIP Obligations prior to
written notice to the Agent of the effective date of such reversal, stay,
modification or vacation or (ii) the validity and enforceability of any lien or
priority authorized or created hereby or pursuant to the DIP Credit Agreement
with respect to any such DIP Obligation. Notwithstanding any such reversal,
stay, modification or vacation, any use of Cash Collateral or any DIP Obligation
incurred by the Debtors to the Agent or DIP Lenders prior to the actual receipt
of written notice by Pre-Petition Agent and the Agent of the effective date of
such reversal, stay, modification or vacation shall be governed in all respects
by the original provisions of this Order, and the Agent and the DIP Lenders and
the Pre-Petition Lenders shall be entitled to all the rights, remedies,
privileges and benefits granted in this Order and/or pursuant to the DIP Credit
Agreement with respect to all uses of Cash Collateral and DIP Obligations.
(d) The obligations of the Debtors under this Order and the
Documents shall not be discharged by the entry of an order confirming a plan of
reorganization in any of the Cases and, pursuant to section 1141(d)(4) of the
Bankruptcy Code, the Debtors have waived such discharge.
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15. Effect of Stipulations on Third Parties. The findings and admissions
contained in this Order, including, without limitation, the findings and
admissions contained in paragraph 3 of this Order, shall be binding upon all
parties in interest, including any Committee, unless (a) a party in interest has
timely filed an adversary proceeding or contested matter (subject to the
limitations contained herein, including, inter alia, in paragraph 16) by no
later than April 15, 2002 (or such later date as has been agreed to, in writing,
by the relevant Pre-Petition Agent in its sole discretion or ordered by this
Court after notice and a hearing), (i) challenging the validity, enforceability,
priority or extent of the Pre-Petition Debt or the Pre-Petition Agent's or the
Pre-Petition Lenders' liens on the Pre-Petition Collateral, or (ii) otherwise
asserting any claims or causes of action against the Pre-Petition Agent or the
Pre-Petition Lenders, 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, (x) the
Pre-Petition Debt and all related obligations of the Debtors (the "PRE-PETITION
OBLIGATIONS") shall constitute allowed claims, not subject to counterclaim,
offset, subordination, defense or avoidance, for all purposes in the Cases and
any subsequent chapter 7 cases, (y) the Pre-Petition Agent's and the
Pre-Petition Lenders' liens on the Pre-Petition Collateral shall be deemed to
have been, as of the Petition Date, legal, valid, binding, perfected, not
subject to recharacterization, subordination or avoidance and (z) the
Pre-Petition Obligations, the Pre-Petition Agent's and the Pre-Petition Lenders'
liens on the Pre-Petition Collateral and the Pre-Petition Agent and the
Pre-Petition Lenders shall not be subject to any other or further challenge by
any party in interest seeking to exercise the rights of the Debtors' estate,
including, without limitation, any successor thereto. If any such
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adversary proceeding or contested matter is timely filed as of such date, the
findings and admissions contained in paragraph 3 shall nonetheless remain
binding and preclusive (as provided in the second sentence of this paragraph)
except to the extent that such findings and admissions were expressly challenged
in such adversary proceeding or contested matter.
If (but only to the extent that and for so long as) the holder of any
Pre-Petition Indebtedness (as defined in the DIP Credit Agreement) of any
Guarantor has the benefit of an express restriction or prohibition contained in
the certificate of incorporation or similar constitutive document of the
Guarantor that prevents the creation of any obligation or the security interest
or lien provided for herein (including without limitation Impac Hotels II, LLC
and Impac Hotels III, LLC), then, such obligation or security interest and lien
shall become effective and enforceable (and the assets of such Guarantor shall
become part of the Collateral) only (i) with the consent of such creditor or
(ii) upon the payment in full of such Pre-Petition Indebtedness. Nothing herein
shall limit the right or ability of the DIP Lenders or the Debtors to challenge
the legal effectiveness of any such restriction or prohibition.
16. Limitation on Use of Financing Proceeds and Collateral.
Notwithstanding anything herein to the contrary, no borrowings, letters of
credit, Cash Collateral, Collateral or the Carve-Out (collectively, the
"DESIGNATED ASSETS") may be used to (a) object, contest or raise any defense to
or investigate, the validity, perfection, priority, extent or enforceability of
any amount due under the Documents, the liens granted under this Order, the
Pre-Petition Debt or the liens securing the Pre-Petition Debt, (b) assert any
claims, counterclaims, defenses or causes of action against the Agent, the DIP
Lenders, the Pre-Petition Lenders or the Pre-Petition Agent or any of
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their respective affiliates, (c) prevent, hinder or otherwise delay the Agent's
or the Pre-Petition Agent's assertion, enforcement or realization on the Cash
Collateral or the Collateral in accordance with the Documents or this Order or
(d) seek to modify any of the rights granted to the Agent, the DIP Lenders, the
Pre-Petition Lenders or the Pre-Petition Agent hereunder or under the Documents,
in each of the foregoing cases without such parties' prior written consent;
provided that up to $150,000 (plus reasonable disbursements and out-of-pocket
expenses, including UCC searches and real estate title reports) of the
Designated Assets may be used by an official committee of creditors appointed in
the Cases to analyze the matters referred to in clause (a) of the first sentence
of paragraph 15 (subject to Court approval of any related professional fees and
the rights of the Pre-Petition Lenders to object to such fees) and to analyze
and respond to any proposed exercise of remedies under the DIP Credit Agreement
as to which notice is given pursuant to paragraph 8(b).
17. Order Governs. In the event of any inconsistency between the
provisions of this Order and of the Documents, the provisions of this Order
shall govern.
18. Successors and Assigns. The Documents and the provisions of this Order
shall be binding upon the Agent, the DIP Lenders, the Pre-Petition Agent, the
Pre-Petition Lenders 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 the Agent, the
DIP Lenders, the Pre-Petition Agent, the Pre-Petition Lenders 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.
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DATED: FEBRUARY 14, 2002
New York, New York
/s/ JUDGE BURTON R. LIFLAND
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UNITED STATES BANKRUPTCY JUDGE