EXHIBIT 1.1
===============================================================================
LODGIAN, INC.
(a Delaware corporation)
18,285,714 Shares of Common Stock
PURCHASE AGREEMENT
Dated: June 22, 2004
===============================================================================
LODGIAN, INC.
(a Delaware corporation)
18,285,714 Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
June 22, 2004
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CITIGROUP GLOBAL MARKETS INC.
BANC OF AMERICA SECURITIES LLC
LEGG MASON WOOD WALKER, INCORPORATED
RAYMOND JAMES & Associates, Inc.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Lodgian, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Citigroup Global Markets Inc. ("Citigroup") and
each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), with respect to the issue and sale
by the Company and the purchase by the Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $.01
per share, of the Company ("Common Stock") set forth in said Schedule A, and
with respect to the grant by the Company to the Underwriters, acting severally
and not jointly, of the option described in Section 2(b) hereof to purchase all
or any part of 2,742,857 additional shares of Common Stock to cover
overallotments, if any. The aforesaid 18,285,714 shares of Common Stock (the
"Initial Securities") to be purchased by the Underwriters and all or any part
of the 2,742,857 shares of Common Stock subject to the option described in
Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities."
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as they deem advisable after this Agreement
has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-113410), as
amended, including the related preliminary prospectus or prospectuses, covering
the registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"). Promptly after execution and delivery of this Agreement, the
Company will prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations. The information included in such
prospectus that
was omitted from such registration statement at the time it became effective
but that is deemed to be part of such registration statement at the time it
became effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information." Each prospectus used before such registration statement
became effective, and any prospectus that omitted the Rule 430A Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits and any schedules thereto, at
the time it became effective, and including the Rule 430A Information, is
herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as
the "Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final prospectus in the form first furnished to the Underwriters for use in
connection with the offering of the Securities is herein called the
"Prospectus." For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof (except as
otherwise specifically provided herein), as of the Closing Time referred to in
Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in
Section 2(b) hereof, and agrees with each Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of
the Registration Statement, any Rule 462(b) Registration Statement and
any post-effective amendment thereto has become effective under the
1933 Act and no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement or any
post-effective amendment thereto has been issued under the 1933 Act
and no proceedings for that purpose have been instituted or are
pending or, to the knowledge of the Company, are contemplated by the
Commission, and any request on the part of the Commission for
additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments
and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither the Prospectus nor any amendments or supplements thereto, at
the time the Prospectus or any such amendment or supplement was issued
and at the Closing Time (and, if any Option Securities are purchased,
at the Date of Delivery), included or will include an untrue statement
of a material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through
Merrill Lynch expressly for use in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement
thereto).
2
Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto complied when so filed in all material respects with
the 1933 Act Regulations and each preliminary prospectus and the
Prospectus delivered to the Underwriters for use in connection with
this offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(ii) Independent Accountants. To the Company's knowledge,
the accountants who certified the financial statements and supporting
schedules included in the Registration Statement are independent
public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iii) Financial Statements. The financial statements
included in the Registration Statement and the Prospectus, together
with the related schedules and notes, present fairly, in all material
respects, the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; and said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved, except as otherwise noted therein and
in the Registration Statement and Prospectus. The supporting schedules
included in the Registration Statement present fairly in accordance
with GAAP the information required to be stated therein. The selected
financial data and the summary financial information included in the
Prospectus present fairly, in all material respects, the information
shown therein and have been compiled on a basis consistent with that
of the audited financial statements included in the Registration
Statement. All historical financial statements and information and all
pro forma financial statements and information relating to the Company
or any entity acquired or to be acquired by the Company required by
the 1933 Act and the 1933 Act Regulations to be included in the
Registration Statement and Prospectus. The statistical and
market-related data included in the Registration Statement and the
Prospectus are based on or derived from sources which the Company
reasonably and in good faith believes are reliable and accurate, and
such data agrees with the sources from which they are derived.
(iv) Related-Party Transactions. No relationship, direct
or indirect, exists between or among any of the Company or any
affiliate of the Company, on the one hand, and any director, officer,
stockholder, customer or supplier of the Company or any affiliate of
the Company, on the other hand, which is required by the 1933 Act or
the 1933 Act Regulations to be described in the Registration Statement
or the Prospectus which is not so described or is not described as
required. There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any
of the officers or directors of the Company or any of their respective
family members, except as disclosed in the Registration Statement and
the Prospectus.
(v) Internal Controls. The Company and its subsidiaries
maintain a system of internal accounting and other controls sufficient
to provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorizations, (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets, (C) access to
assets is permitted only in accordance with management's general or
specific authorization and (D) the recorded accounting for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
3
(vi) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) no casualty loss or condemnation or
other adverse event with respect to any of the interests held directly
or indirectly in any of the real properties or real property
interests, including, without limitation, any interest or
participation, direct or indirect, in any mortgage obligation owned,
directly or indirectly, by the Company, any of its subsidiaries or any
Joint Venture (as defined below) (the "Properties") has occurred which
would be material with respect to the Company and its subsidiaries
considered as one enterprise, (C) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise and (D) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock since November 21, 2003, and there has been no increase in
long-term debt or decrease in the capital of the Company or any of its
subsidiaries.
(vii) Good Standing of the Company. The Company has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and to enter into
and perform its obligations under this Agreement; and the Company is
duly qualified as a foreign corporation to transact business and is in
good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(viii) Good Standing of Subsidiaries. As of the Closing
Time and as of the Date of Delivery, each "significant subsidiary" of
the Company (as such term is defined in Rule 1-02 of Regulation S-X)
(each a "Subsidiary" and, collectively, the "Subsidiaries") has been
duly organized and is validly existing as a corporation, partnership
or limited liability company in good standing under the laws of its
respective jurisdiction of organization, has power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and is duly qualified as a foreign
corporation, partnership or limited liability company to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, as of the Closing Time and as of the Date of
Delivery, all of the issued and outstanding capital stock of each such
Subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of
the preemptive or similar rights of any securityholder of such
Subsidiary. As of the Closing Time and as of the Date of Delivery, the
only subsidiaries of the Company are (a) the subsidiaries listed on
Exhibit 21.1 to the Registration Statement and (b) the subsidiaries
listed on Schedule F hereto.
(ix) Joint Ventures. All of the joint ventures in which
the Company or any subsidiary owns an interest of greater than five
percent and that are currently conducting business (the "Joint
Ventures") are listed on Schedule D hereto. The Company's (or
subsidiary's, as the case may be) ownership interest in such Joint
Venture is as set forth on Schedule D. To the knowledge of the
4
Company, each of the Joint Ventures possesses such certificates,
authorizations or permits issued by the appropriate state, federal or
foreign regulatory agencies or bodies necessary to conduct the
business now being conducted by it, as described in the Prospectus,
and none of the Joint Ventures has received notice of any proceedings
relating to the revocation or modification of any such certificate,
authority or permit which singly or in the aggregate, if the subject
of an unfavorable ruling or decision, would have a Material Adverse
Effect.
(x) Capitalization. The authorized, issued and
outstanding capital stock of the Company is as set forth in the
Prospectus in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to
this Agreement, pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the
exercise of convertible securities or options referred to in the
Prospectus). The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital
stock of the Company was issued in violation of the preemptive or
other similar rights of any securityholder of the Company.
(xi) Authorization of Agreement. This Agreement has been
duly authorized, executed and delivered by the Company.
(xii) Authorization and Description of Securities. The
Securities have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered
by the Company pursuant to this Agreement against payment of the
consideration set forth herein, will be validly issued and fully paid
and non-assessable; the Common Stock conforms to all statements
relating thereto contained in the Prospectus and such description
conforms to the rights set forth in the instruments defining the same;
the certificate evidencing the Securities will be in substantially the
form filed as an exhibit to the Registration Statement and the form of
stock certificate evidencing the Securities will comply with all
applicable legal requirements, with all applicable requirements of the
Company's charter and by-laws and with the requirements of the
American Stock Exchange, Inc.; no holder of the Securities will be
subject to personal liability by reason of being such a holder; and
the issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.
(xiii) Execution of Definitive Agreements with Merrill
Lynch Mortgage. The Company has executed definitive loan agreements
(the "Loan Agreements") as listed on Schedule E hereto, that have been
placed in escrow with Merrill Lynch Mortgage Lending, Inc. ("Merrill
Lynch Mortgage"), together with all related documentation necessary to
effect the closing of such agreements (the "Refinancing Debt").
(xiv) Absence of Defaults and Conflicts. Neither the
Company nor any of its subsidiaries is in violation of its charter,
by-laws or operating agreement or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, franchise agreement, management agreement, note,
lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any
subsidiary is subject (collectively, "Agreements and Instruments")
except for such violations or defaults as are described in the
Registration Statement and the Prospectus or that would not result in
a Material Adverse Effect; and the execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated herein and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the
5
Prospectus under the caption "Use of Proceeds") and compliance by the
Company with its obligations hereunder have been duly authorized by
all necessary corporate action and do not and will not, whether with
or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to, the Agreements and Instruments (except
for such conflicts, breaches, defaults or Repayment Events or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the
provisions of the charter, by-laws or operating agreement of the
Company or any subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Company
or any subsidiary.
(xv) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, would result in a Material Adverse
Effect.
(xvi) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might result in a Material Adverse Effect, or which might materially
and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement or the
performance by the Company of its obligations hereunder; the aggregate
of all pending legal or governmental proceedings to which the Company
or any subsidiary is a party or of which any of their respective
property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation
incidental to the business, could not result in a Material Adverse
Effect.
(xvii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xviii) Possession of Intellectual Property. The Company and
its subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, franchises, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, and neither
the Company nor any of its subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of
its subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
6
(xix) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance
or sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.
(xx) Other Fees. Except as disclosed in the Registration
Statement and the Prospectus, there are no contracts, agreements or
understandings between the Company and any person that would give rise
to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection
with the transactions contemplated by this Agreement, the Registration
Statement and the Prospectus or, to the knowledge of the Company, any
arrangements, agreements, understandings, payments or issuance with
respect to the Company or any of its officers, directors,
shareholders, partners, employees, Subsidiaries or affiliates that may
affect the Underwriters' compensation as determined by the NASD, Inc.
(the "NASD").
(xxi) Absence of Manipulation. Neither the Company nor any
affiliate of the Company has taken, nor will the Company or any
affiliate take, directly or indirectly, any action which is designed
to or which has constituted or which would be expected to cause or
result in stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities.
(xxii) Possession of Licenses and Permits. The Company and
its subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by
them, except where the failure so to possess would not, singly or in
the aggregate, result in a Material Adverse Effect; the Company and
its subsidiaries are in compliance with the terms and conditions of
all such Governmental Licenses, except where the failure so to comply
would not, singly or in the aggregate, result in a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force
and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and
effect would not, singly or in the aggregate, result in a Material
Adverse Effect; and neither the Company nor any of its subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xxiii) Title to Property. (A) The Company, each of its
subsidiaries and, to the knowledge of the Company, any joint ventures
in which the Company or any subsidiary owns an interest, as the case
may be, have good and marketable fee simple title or leasehold title,
as the case may be, to all real property owned or leased, as
applicable, by the Company or its subsidiaries or the applicable joint
venture, respectively, and good title to all other properties owned by
them, and any improvements thereon and all other assets that are
required for the operation of such operations in the manner in which
they currently are operated, free and clear of all liens,
encumbrances, claims, security interests and defects, except such as
are Permitted Encumbrances (as defined below); (B) all material liens,
charges, encumbrances, claims or restrictions on or affecting any of
the Properties and the assets of any of the Company or its
subsidiaries or any joint venture in which Company or any of its
subsidiaries owns an interest that are required to be disclosed in the
Prospectus are disclosed therein; (C) each of the Properties
7
complies with all applicable codes, laws and regulations (including,
without limitation, building and zoning codes, laws and regulations
and laws relating to access to the Properties), except if and to the
extent disclosed in the Prospectus and except for such failures to
comply that would not in the aggregate have a Material Adverse Effect;
(D) there are in effect for the assets of the Company and its
subsidiaries or, to the knowledge of the Company, any joint venture in
which the Company or any of its subsidiaries owns an interest,
insurance policies covering the risks and in amounts that are
commercially reasonable for the types of assets owned by them and that
are consistent with the types and amounts of insurance typically
maintained by prudent owners of properties similar to such assets in
the markets in which such assets are located, and neither the Company
nor any subsidiary or, to the knowledge of the Company, any joint
venture in which the Company or any subsidiary owns an interest has
received from any insurance company notice of any material defects or
deficiencies affecting the insurability of any such assets or any
notices of cancellation or intent to cancel any such policies; and (E)
the Company does not have any knowledge of any pending or threatened,
litigation, moratorium, condemnation proceedings, zoning change, or
other similar proceeding or action that could in any manner affect the
size of, use of, improvements on, construction on, access to or
availability of utilities or other necessary services to the
Properties, except such proceedings or actions that would not have a
Material Adverse Effect. All of the leases and subleases material to
the business of the Company and its subsidiaries considered as one
enterprise, and under which the Company or any subsidiary holds
Properties described in the Prospectus, are in full force and effect,
and neither the Company nor any subsidiary has received any notice of
any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any subsidiary under any of
the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or any subsidiary of the continued
possession of the leased or subleased premises under any such lease or
sublease. The Company and each of its subsidiaries, as the case may
be, have obtained title insurance on the fee interests and leasehold
interests in each of the Properties in an amount at least equal to the
greater of (A) the mortgage indebtedness on each such Property or (B)
the purchase price paid for each such Property. "Permitted
Encumbrance" shall mean (a) liens on Properties securing any of the
Company, any subsidiary or joint venture obligations, (b) other liens
which are expressly described in the Prospectus and (c) customary
easements and encumbrances and other exceptions to title which do not
materially impair the operation, development or use of the Properties
for the purposes intended therefor as contemplated in the Prospectus.
(xxiv) Investment Company Act. The Company is not required
to, and upon the issuance and sale of the Securities as herein
contemplated and the application of the net proceeds therefrom as
described in the Prospectus will not be required to, register as an
"investment company" under the Investment Company Act of 1940, as
amended (the "1940 Act").
(xxv) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any of its subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws
and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products,
asbestos-containing materials or mold (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B)
8
the Company and its subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, (C) there are no pending
or threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its subsidiaries and (D) there are
no events or circumstances that would reasonably be expected to form
the basis of an order for clean-up or remediation, or an action, suit
or proceeding by any private party or governmental body or agency,
against or affecting the Company or any of its subsidiaries relating
to Hazardous Materials or any Environmental Laws. None of the
environmental consultants which prepared environmental and asbestos
inspection reports with respect to the Properties was employed for
such purpose on a contingent basis or has any substantial interest in
the Company or any subsidiary and none of them nor any of their
directors, officers or employees is connected with the Company or any
subsidiary as a promoter, selling agent, trustee, director, officer or
employee.
(xxvi) Tax Returns. Except to the extent that a failure to
do so would not result in a Material Adverse Effect, the Company and
each of its subsidiaries, as the case may be, have filed all federal,
state, local and foreign income and franchise tax returns which have
been required to be filed (except in any case in which an extension
has been granted) and have paid all taxes required to be paid and any
other assessment, fine or penalty levied against it, to the extent
that any of the foregoing is due and payable, except, in all cases,
for any such tax, assessment, fine or penalty that is being contested
in good faith.
(xxvii) Absence of Regulation M Violation. Neither the
Company nor any subsidiary, nor any of their respective trustees,
directors, officers, affiliates, members or controlling persons, has
taken or will take, directly or indirectly, any action resulting in a
violation of Regulation M under the Securities Exchange Act of 1934
Act, as amended (the "1934 Act") or designed to cause or result in, or
that has constituted or that reasonably might be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities.
(xxviii) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act, except as disclosed in
the Prospectus under "Risk Factors -- Risks Related to this Offering
and Our Common Stock" and "Shares Eligible for Future Sale --
Registration Rights."
(xxix) Bankruptcy. With regard to the Joint Plan of
Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.
together with the Official Committee of Unsecured Creditors dated
March 3, 2003 Under Chapter 11 of the United States Bankruptcy Code
confirmed on April 24, 2003 (the "Impac Plan") and the Company's First
Amended Joint Reorganization Plan, dated as of November 1, 2002 under
Chapter 11 of the United States Bankruptcy Code confirmed on November
5, 2002 (the "Lodgian Plan" and collectively, the "Reorganization
Plans"), (A) the effective date of the Impac Plan and the Lodgian Plan
occurred on May 22, 2003 and November 25, 2002, respectively, and each
Reorganization Plan has been consummated; (B) neither the Company nor
any of its Subsidiaries is currently, or has in the past, been in
default in any respect, and no event has occurred which, with notice
or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained
in the Reorganization Plans; (C) there is no legal or governmental
proceeding relating to the Reorganization Plans to which the Company
or any of its Subsidiaries is a party or of which any property or
assets of the Company or any of its Subsidiaries is the subject; and
to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by any governmental
9
authorities or threatened by others; and (D) except for the Claims (as
defined in Section 101(5) of the United States Bankruptcy Code)
described in the Reorganization Plans, to the knowledge of the
Company, there are no Claims that exist relating to the Reorganization
Plans, including without limitation, any Claims relating to state or
federal securities laws.
(xxx) Franchise Agreements. Except as disclosed in or
contemplated by the Registration Statement and the Prospectus, neither
the Company nor any subsidiary that manages any Properties has
received any notice from any franchisor concerning any property any of
them own or manage in which such franchisor has : (A) threatened any
action adverse to the Company or any subsidiary; (B) notified the
Company or any subsidiary of their failure to perform under any
franchise agreement; or (C) notified the Company or any subsidiary of
its intention to terminate or modify the franchise agreement; nor, to
the knowledge of the Company, do there exist any events, conditions or
circumstances which are reasonably likely to result in any such
termination, except where any such action, failure to perform,
termination or modification would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
All franchise agreements are in full force and effect and are
enforceable in accordance with their terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors' rights
generally and general equitable principles and except where the
failure to be enforceable or to be in full force or effect would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except as described in the Registration
Statement and Prospectus, any prior notice received by the Company or
any subsidiary from any franchisor terminating, or threatening to
terminate, the current franchise agreement for any of the Properties
has been cured, is no longer effective or has been waived by the party
issuing such notice, except where any such termination would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. .
(xxxi) Compliance with Sarbanes-Oxley Act of 2002. The
Company, its officers and directors are in compliance with the
provisions of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated in connection therewith.
(b) Officer's Certificates. Any certificate signed by any officer
of the Company or any of its subsidiaries delivered to the Underwriters or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B hereto, the
number of Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional
2,742,857 shares of Common Stock at the price per share set forth in Schedule B
hereto, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not payable
on the Option Securities. The option hereby granted will expire 30 days after
the date hereof and may be exercised in whole or in part from time to time only
for the purpose of covering overallotments which
10
may be made in connection with the offering and distribution of the Initial
Securities upon notice by Merrill Lynch to the Company setting forth the number
of Option Securities as to which the several Underwriters are then exercising
the option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by Merrill Lynch, but shall not be later than seven full business
days after the exercise of said option, nor in any event prior to the Closing
Time, as hereinafter defined. If the option is exercised as to all or any
portion of the Option Securities, each of the Underwriters, acting severally
and not jointly, will purchase that proportion of the total number of Option
Securities then being purchased which the number of Initial Securities set
forth in Schedule A opposite the name of such Underwriter bears to the total
number of Initial Securities, subject in each case to such adjustments as
Merrill Lynch in its discretion shall make to eliminate any sales or purchases
of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Sidley
Austin Brown & Wood LLP, or at such other place as shall be agreed upon by the
Underwriters and the Company, at 9:00 A.M. (Eastern time) on the third business
day after the date hereof (unless postponed in accordance with the provisions
of Section 10), or such other time not later than ten business days after such
date as shall be agreed upon by the Underwriters and the Company (such time and
date of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Underwriters and the Company, on each Date of Delivery as specified in the
notice from the Underwriters to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery
to the respective accounts of the Underwriters of certificates for the
Securities to be purchased by them. It is understood that each Underwriter has
authorized Merrill Lynch, for its account, to accept delivery of, receipt for,
and make payment of the purchase price for, the Initial Securities and the
Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose
funds have not been received by the Closing Time or the relevant Date of
Delivery, as the case may be, but such payment shall not relieve such
Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations
and registered in such names as the Underwriters may request in writing at
least one full business day before the Closing Time or the relevant Date of
Delivery, as the case may be. The certificates for the Initial Securities and
the Option Securities, if any, will be made available for examination and
packaging by the Underwriters in The City of New York not later than 10:00 A.M.
(Eastern time) on the business day prior to the Closing Time or the relevant
Date of Delivery, as the case may be.
(e) Appointment of Qualified Independent Underwriter. The Company
hereby confirms its engagement of Citigroup as, and Citigroup hereby confirms
its agreement with the Company to render services as, a "qualified independent
underwriter" within the meaning of Rule 2720 of the Conduct Rules of the NASD
with respect to the offering and sale of the Securities. Citigroup, solely in
its capacity as qualified independent underwriter and not otherwise, is
referred to herein as the "Independent Underwriter."
11
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A and will notify the Underwriters immediately, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of
any proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus transmitted for
filing under Rule 424(b) was received for filing by the Commission and, in the
event that it was not, it will promptly file such prospectus. The Company will
make every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest
possible moment.
(b) Filing of Amendments. The Company will give the Underwriters
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)) or any amendment, supplement
or revision to either the prospectus included in the Registration Statement at
the time it became effective or to the Prospectus, will furnish the
Underwriters with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Underwriters or counsel for the Underwriters
shall object.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Underwriters and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Underwriters, without
charge, a conformed copy of the Registration Statement as originally filed and
of each amendment thereto (without exhibits) for each of the Underwriters. The
copies of the Registration Statement and each amendment thereto furnished to
the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required
by the 1933 Act to be delivered in connection with sales of the Securities, any
event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the Underwriters or for the Company,
to amend the Registration Statement or amend or supplement the Prospectus in
order that the
12
Prospectus will not include any untrue statements of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and the
Company will furnish to the Underwriters such number of copies of such
amendment or supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions as the Underwriters may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(g) Rule 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect the
listing of the Securities on the American Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 180
days from the date of the Prospectus, the Company will not, without the prior
written consent of Merrill Lynch and Citigroup, (i) directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Securities to be sold hereunder, (B) any
shares of Common Stock issued by the Company upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus or (C) any shares of Common Stock issued or
options to purchase Common Stock granted pursuant to existing employee benefit
plans of the Company referred to in the Prospectus.
(k) Reporting Requirements. The Company, during the period when
the Prospectus is required to be delivered under the 1933 Act, will file all
documents required to be filed with the Commission pursuant to the 1934 Act
within the time periods required by the 1934 Act and the rules and regulations
of the Commission thereunder.
13
(l) Refinancing Debt. The Company shall use its best efforts to
facilitate the consummation of the Refinancing Debt on or prior to the Closing
Time and, upon consummation, shall utilize the funds received therefrom to
retire the indebtedness specified in the Registration Statement and the
Prospectus.
SECTION 4. Payment of Expenses. Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits) as originally filed and
of each amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon
the sale, issuance or delivery of the Securities to the Underwriters, (iv) the
fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the blue sky
survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus and of the Prospectus and
any amendments or supplements thereto, (vii) the preparation, printing and
delivery to the Underwriters of copies of the blue sky survey and any
supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in connection
with the marketing of the Securities, including without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and the cost of aircraft and other transportation chartered in
connection with the road show and (x) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (xi)
the fees and expenses incurred in connection with the listing of the Securities
on the American Stock Exchange and (xii) the fees and expenses of the
Independent Underwriter.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
(b) Opinion of Counsel for Company. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of Closing
Time, of Morris, Manning & Martin LLP, counsel for the Company, in form and
substance reasonably satisfactory to counsel for the Underwriters, together
with signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the Underwriters may reasonably request.
14
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of Closing
Time, of Sidley Austin Brown & Wood LLP, counsel for the Underwriters, together
with signed or reproduced copies of such letter for each of the other
Underwriters with respect to the matters set forth in clauses (i), (ii), (v),
(vi) (solely as to preemptive or other similar rights arising by operation of
law or under the charter or by-laws of the Company), (viii) through (xi),
(xiii) (solely as to the information in the Prospectus under "Description of
Capital Stock--Common Stock") and the penultimate paragraph of Exhibit A
hereto. In giving such opinion such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of New
York and the federal law of the United States and the General Corporation Law
of the State of Delaware, upon the opinions of counsel satisfactory to the
Underwriters. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(d) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Underwriters shall have received a certificate of the President or an Executive
Vice President of the Company and of the chief financial or chief accounting
officer of the Company, dated as of Closing Time, to the effect that (i) there
has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the Company
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or, to
their knowledge, contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Underwriters shall have received from Deloitte & Touche LLP
a letter dated such date, in form and substance satisfactory to the
Underwriters, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At Closing Time, the Underwriters
shall have received from Deloitte & Touche LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(g) Approval of Listing. At Closing Time, the Securities shall
have been approved for listing on the American Stock Exchange, subject only to
official notice of issuance.
(h) No Objection. The NASD shall have confirmed that it has not
raised any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement, the
Underwriters shall have received (i) an agreement substantially in the form of
Exhibit B hereto signed by each director or officer of the Company listed on
Schedule C hereto; and (ii) an agreement from each of OCM Real Estate
Opportunities Fund II, L.P., Third Avenue Value Fund and BRE HY Funding LLC
substantially in the forms attached hereto as Exhibit C, Exhibit D, and Exhibit
E, respectively.
15
(j) Refinancing Debt. At the Closing Time, Merrill Lynch Mortgage
shall have funded to the Company $370 million of Refinancing Debt pursuant to
the Loan Agreements.
(k) Conditions to Purchase of Option Securities. In the event
that the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Underwriters shall have received:
(i) Officers' Certificate. A certificate, dated such
Date of Delivery, of the President or an Executive Vice President of
the Company and of the chief financial or chief accounting officer of
the Company confirming that the certificate delivered at the Closing
Time pursuant to Section 5(d) hereof remains true and correct as of
such Date of Delivery.
(ii) Opinion of Counsel for Company. The favorable
opinion of Morris, Manning & Martin LLP, counsel for the Company, in
form and substance reasonably satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for Underwriters. The favorable
opinion of Sidley Austin Brown & Wood LLP, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Deloitte &
Touche LLP, in form and substance satisfactory to the Underwriters and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the Underwriters pursuant to
Section 5(f) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than
five days prior to such Date of Delivery.
(l) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Underwriters and counsel for the Underwriters.
(m) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Underwriters by notice to the Company at
any time at or prior to Closing Time or such Date of Delivery, as the case may
be, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 6, 7, 8 and
14 shall survive any such termination and remain in full force and effect.
16
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. (1) The Company agrees to
indemnify and hold harmless each Underwriter, its affiliates, as such term is
defined in Rule 501(b) under the 1933 Act (each, an "Affiliate"), its selling
agents and each person, if any, who controls any Underwriter within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in
any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of
a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company;
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information or
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(2) In addition to, and without limitation of the Company's
obligation to indemnify Citigroup as an Underwriter under the other paragraphs
of this Section 6, the Company also agrees to indemnify and hold harmless the
Independent Underwriter, its Affiliates and selling agents and each person, if
any, who controls the Independent Underwriter within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, from and against any and all
loss, liability, claim, damage, joint or several, to which they or any of them
may become subject, insofar as such loss, liability, claim or damage (or action
in respect thereof) arise out of or are based upon Independent Underwriter's
acting as a "qualified independent underwriter" (within the meaning of NASD
Conduct Rule 2720) in connection with the offering contemplated by this
Agreement, and agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability results from the gross
negligence or willful misconduct of the Independent Underwriter.
17
(b) Indemnification of Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection
(a)(1) of this Section, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Merrill Lynch
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In the case of parties indemnified pursuant to
Section 6(a)(1) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances;
provided, that, if indemnity is sought pursuant to Section 6(a)(2), then, in
addition to the fees and expenses of such counsel for the indemnified parties,
the indemnifying party shall be liable for the reasonable fees and expenses of
not more than one counsel (in addition to any local counsel) separate from its
own counsel and that of the other indemnified parties for the Independent
Underwriter in its capacity as a "qualified independent underwriter" and all
persons, if any, who control the Independent Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of 1934 Act in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances if, in the
reasonable judgment of the Independent Underwriter, based upon advice of its
counsel, there may exist a conflict of interest between the Independent
Underwriter and the other indemnified parties. Any such separate counsel for
the Independent Underwriter and such control persons of the Independent
Underwriter shall be designated in writing by the Independent Underwriter. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
in respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from
all liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(1)(ii) effected without its written consent
if (i) such settlement is entered
18
into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement, (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and
of the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations or (iii) the
Independent Underwriter in its capacity as "qualified independent underwriter"
(within the meaning of NASD Conduct Rule 2720) be responsible for any amount in
excess of the compensation received by the Independent Underwriter for acting
in such capacity.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
in each case as set forth on the cover of the Prospectus, bear to the aggregate
initial public offering price of the Securities as set forth on the cover of
the Prospectus. Benefits received by the Independent Underwriter in its
capacity as "qualified independent underwriter" shall be deemed to be equal to
the compensation received by the Independent Underwriter for acting in such
capacity.
The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that Citigroup will not receive
any additional benefits hereunder for serving as the Independent Underwriter in
connection with the offering and sale of the Securities.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.
19
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act and each Underwriter's Affiliates and selling agents shall have
the same rights to contribution as such Underwriter, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the number
of Initial Securities set forth opposite their respective names in Schedule A
hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive. All
representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of any Underwriter or its
Affiliates or selling agents, any person controlling any Underwriter, its
officers or directors or any person controlling the Company and (ii) delivery
of and payment for the Securities.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Underwriters may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Underwriters, impracticable or inadvisable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the American Stock Exchange, or if trading generally on the
American Stock Exchange, the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required,
by any of said exchanges or by such system or by order of the Commission, the
NASD or any other governmental authority, or (iv) a material disruption has
occurred in commercial banking or securities settlement or clearance services
in the United States, or (v) if a banking moratorium has been declared by
either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party, provided further that Sections 1, 6, 7, 8 and 14 shall survive such
termination and remain in full force and effect. If this Agreement is
terminated by the Underwriters in accordance with the provisions of Section 5
or Section 9(a)(i) or (iii) (with respect to the
20
first clause only) hereof, the Company shall reimburse the Underwriters for all
of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Underwriters shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Underwriters shall
not have completed such arrangements within such 24-hour period, then:
(i) if the number of Defaulted Securities does not
exceed 10% of the number of Securities to be purchased on such date,
each of the non-defaulting Underwriters shall be obligated, severally
and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder
bear to the underwriting obligations of all non-defaulting
Underwriters, or
(ii) if the number of Defaulted Securities exceeds 10% of
the number of Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the
Closing Time, the obligation of the Underwriters to purchase and of
the Company to sell the Option Securities to be purchased and sold on
such Date of Delivery shall terminate without liability on the part of
any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the Underwriters to purchase and the Company to sell the relevant
Option Securities, as the case may be, either the Underwriters or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect
any required changes in the Registration Statement or Prospectus or in any
other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters at c/o Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center,
New York, New York 10080, attention of Jack J. Vissicchio; and notices to the
Company shall be directed to it at 3445 Peachtree Road, N.E., Suite 700,
Atlanta, Georgia 30326, attention of W. Thomas Parrington, President and Chief
Executive Officer.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters and the Company
and their respective successors, and said controlling persons
21
and officers and directors and their heirs and legal representatives, and for
the benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT.
EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK
CITY TIME.
SECTION 15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
SECTION 16. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
22
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its
terms.
Very truly yours,
LODGIAN, INC.
By: /s/ W. Thomas Parrington
-----------------------------------
Name: W. Thomas Parrington
Title: President and Chief
Executive Officer
CONFIRMED AND ACCEPTED,
as of the date first
above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CITIGROUP GLOBAL MARKETS INC.
BANC OF AMERICA SECURITIES LLC
LEGG MASON WOOD WALKER, INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Jack Vissiccho
-------------------------------------
Authorized Signatory
On behalf of itself and the other Underwriters named in Schedule A hereto.
23
SCHEDULE A
Number of
Name of Underwriter Initial Securities
------------------- ------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................................ 6,400,001
Citigroup Global Markets Inc............................................................ 6,400,000
Banc of America Securities LLC.......................................................... 1,828,571
Legg Mason Wood Walker, Incorporated.................................................... 1,828,571
Raymond James & Associates, Inc. ....................................................... 1,828,571
---------
Total................................................................................... 18,285,714
==========
Sch A-1
SCHEDULE B
LODGIAN, INC.
18,285,714 Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $10.50.
2. The purchase price per share for the Securities to be paid by
the several Underwriters shall be $9.8437, being an amount equal to the initial
public offering price set forth above less $.6563 per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the overallotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities.
Sch B-1
SCHEDULE C
Directors and Officers
W. Thomas Parrington
Sean F. Armstrong
Russel S. Bernard
Stewart J. Brown
Kenneth A. Caplan
Stephen P. Grathwohl
Jonathan D. Gray
Kevin C. McTavish
Michael W. Amaral
Manuel E. Artime
Samuel J. Davis
Daniel E. Ellis
Linda Borchert Philp
Daniel K. Abernethy
Deborah N. Ethridge
Mark T. DiPiazza
Paul J. Hitselberger
David T. Robinson
Sch C-1
SCHEDULE D
Joint Ventures
JOINT VENTURE OWNERSHIP INTEREST
------------- ------------------
Melbourne Hospitality Associates, Limited Partnership 50%
New Orleans Airport Motel Associates, Ltd. 82%
Servico Centre Associates, Ltd. 50%
Macon Hotel Associates, L.L.C. 60%
Columbus Hospitality Associates, LP 30%
Sch D-1
SCHEDULE E
Loan Agreements
Sch E-1
SCHEDULE F
Subsidiaries of the Company
(*Significant Subsidiaries)
Lodgian Financing Corp. *
Lodgian Financing Mezzanine, LLC *
Lodgian Mezzanine Fixed, LLC *
Lodgian Mezzanine Floating, LLC *
Servico, Inc. *
Servico Operations Corporation *
1075 Hospitality, LP
12801 NWF Beverage, Inc.
Albany Hotel, Inc.
AMI Operating Partners, L.P.
AMIOP Acquisition Corp.
AMIOP Acquisition General Partner SPE Corp.
Apico Hills. Inc.
Apico Inns of Green Tree, Inc.
Apico Inns of Pennsylvania, Inc.
Apico Inns of Pittsburgh, Inc.
Apico Management Corp.
Atlanta-Boston Holdings, LLC
Atlanta-Boston Lodging, LLC
Atlanta-Boston SPE, Inc.
Atlanta-Rio Rancho Beverage Management, Inc.
Brecksville Hospitality, Inc.
Brecksville Hospitality, LP
Brunswick Motel Enterprises, Inc.
Columbus Hospitality Associates, LP
The Courtyard Club, Inc.
Dedham Lodging Associates I, LP
Dedham Lodging SPE, Inc.
Dothan Hospitality 3053, Inc.
Dothan Hospitality 3071, Inc.
East Washington Hospitality, LP
Fayetteville Motel Enterprises, Inc.
Fort Wayne Hospitality Associates II, LP
Fourth Street Hospitality, Inc.
Gadsden Hospitality, Inc.
Harrisburg Motel Enterprises, Inc.
Hilton Head Motel Enterprises, Inc.
Impac Holdings III, LLC
Impac Hotel Group Mezzanine, LLC
Impac Hotel Group, L.L.C.
Impac Hotel Management, LLC
Impac Hotels I, L.L.C.
Impac Hotels II, L.L.C.
Impac Hotels III, LLC
Impac Hotels Member SPE, Inc.
Sch F-1
Impac SPE #2, Inc.
Impac SPE #4, Inc.
Impac SPE #6, Inc.
Island Motel Enterprises, Inc.
KDS Corporation
Kinser Motel Enterprises, Inc.
Lafayette Beverage Management, Inc.
Lawrence Hospitality Associates, LP
Little Rock Beverage Management, Inc.
Little Rock Lodging Associates I, LP
Lodgian Abeline Beverage Corp.
Lodgian Acquisition, LLC
Lodgian AMI, Inc.
Lodgian Augusta LLC
Lodgian Austin Beverage Corp.
Lodgian Bridgeport LLC
Lodgian Cincinnati LLC
Lodgian Coconut Grove, LLC
Lodgian Colchester LLC
Lodgian Dallas Beverage Corp.
Lodgian Denver LLC
Lodgian Fairmont LLC
Lodgian Florence LLC
Lodgian Fort Mitchell LLC
Lodgian Hamburg LLC
Lodgian Hotels, Inc.
Lodgian Hotels Fixed I, LLC
Lodgian Hotels Fixed II, Inc.
Lodgian Hotels Fixed III, LLC
Lodgian Hotels Fixed IV, L.P.
Lodgian Hotels Fixed IV GP, Inc.
Lodgian Hotels Floating, LLC
Lodgian Jackson LLC
Lodgian Lafayette LLC
Lodgian Lancaster North, Inc.
Lodgian Little Rock SPE, Inc.
Lodgian Management Corp.
Lodgian Market Center Beverage Corp.
Lodgian Memphis LLC
Lodgian Merrimack LLC
Lodgian Memphis Property Owner, LLC
Lodgian Mezzanine Springing Member, Inc.
Lodgian Morgantown LLC
Lodgian Mortgage Springing Member, Inc.
Lodgian Mount Laurel, Inc.
Lodgian North Miami LLC
Lodgian Ontario, Inc.
Lodgian Syracuse LLC
Lodgian Tulsa LLC
Lodgian York Market Street, Inc.
Macon Hotel Associates LLC
Sch F-2
Macon Hotel Associates Manager, Inc.
Manhattan Hospitality Associates, LP
McKnight Motel, Inc.
Melbourne Hospitality Associates, LP
Minneapolis Motel Enterprises, Inc.
Moon Airport Motel, Inc.
New Orleans Airport Motel Associates, LP
New Orleans Airport Motel Enterprises, Inc.
NH Motel Enterprises, Inc.
Penmoco, Inc.
Prime American Realty Corp.
Raleigh Downtown Enterprises, Inc.
REPL, Inc.
Royce Management Corp of Morristown
Saginaw Hospitality, LP
Second Fayetteville Motel Enterprises, Inc.
Servico Austin, Inc.
Servico Cedar Rapids, Inc.
Servico Centre Associates, Ltd.
Servico Colesville, Inc.
Servico Columbia II, Inc.
Servico Columbia, Inc.
Servico Columbus, Inc.
Servico Concord, Inc.
Servico Council Bluffs, Inc.
Servico East Washington, Inc.
Servico Flagstaff, Inc.
Servico Fort Wayne II, Inc.
Servico Fort Wayne, Inc.
Servico Frisco, Inc.
Servico Grand Island, Inc.
Servico Hilton Head, Inc.
Servico Hotels I, Inc.
Servico Hotels II, Inc.
Servico Hotels III, Inc.
Servico Hotels IV, Inc.
Servico Houston, Inc.
Servico Jamestown, Inc.
Servico Lansing, Inc.
Servico Lawrence II, Inc.
Servico Lawrence, Inc.
Servico Management Corporation (FL)
Servico Management Corporation (TX)
Servico Manhattan II, Inc.
Servico Manhattan, Inc.
Servico Market Center, Inc.
Servico Maryland, Inc.
Servico Melbourne, Inc.
Servico Metairie, Inc.
Servico New York, Inc.
Servico Niagara Falls, Inc.
Sch F-3
Servico Northwoods, Inc.
Servico Operations Mezzanine, LLC
Servico Palm Beach General Partner SPE, Inc.
Servico Pensacola 7200, Inc.
Servico Pensacola 7330, Inc.
Servico Pensacola, Inc.
Servico Rolling Meadows, Inc.
Servico Roseville, Inc.
Servico Silver Springs, Inc.
Servico Tucson, Inc.
Servico West Des Moines, Inc.
Servico Wichita, Inc.
Servico Windsor, Inc.
Servico Winter Haven, Inc.
Servico Worcester, Inc.
Sharon Motel Enterprises, Inc.
Sheffield Motel Enterprises, Inc.
Sioux City Hospitality, LP
Sixteen Hotels, Inc.
South Carolina Interstate Motel Enterprises
Southfield Hotel Group II, LP
W.V.B.M., Inc.
Washington Motel Enterprises, Inc.
Wilpen, Inc.
Worcester Hospitality Associates, LP
Sch F-4
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in the State of Georgia and in each
other jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column entitled "Actual" under
the caption "Capitalization" (except for subsequent issuances, if any, pursuant
to the Purchase Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities, warrants or options referred to in the Prospectus); the
shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; and none
of the outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any securityholder of
the Company.
(v) The Securities have been duly authorized for issuance and
sale to the Underwriters pursuant to the Purchase Agreement and, when issued
and delivered by the Company pursuant to the Purchase Agreement against payment
of the consideration set forth in the Purchase Agreement, will be validly
issued and fully paid and non-assessable and no holder of the Securities is or
will be subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to preemptive
or other similar rights of any securityholder of the Company.
(vii) Each Subsidiary has been duly organized and is validly
existing as a corporation, limited partnership or limited liability company, as
the case may be, in good standing under the laws of its respective jurisdiction
of organization, has corporate, limited partnership or limited liability
company, as the case may be, power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation, limited partnership or limited
liability company, as the case may be, to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully
A-1
paid and non-assessable and, to the best of our knowledge, is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, except such
security interests, mortgages, pledges, liens or encumbrances as are imposed in
accordance with the terms of the refinancing debt; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
(viii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are
pending or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b)
Registration Statement and the Rule 430A Information, the Prospectus and each
amendment or supplement to the Registration Statement and Prospectus as of
their respective effective or issue dates (other than the financial statements
and supporting schedules included therein or omitted therefrom, as to which we
need express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xi) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the American Stock Exchange.
(xii) To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company
or any subsidiary is subject, before or brought by any court or governmental
agency or body, domestic or foreign, which would reasonably be expected to
result in a Material Adverse Effect, or which would reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in the Purchase Agreement or the
performance by the Company of its obligations thereunder.
(xiii) The information in the Prospectus under "Description of
Capital Stock", "Shares Eligible for Future Sale -- Rule 144" and in the
Registration Statement under Item 14, to the extent that it constitutes matters
of law, summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in
all material respects.
(xiv) All descriptions in the Registration Statement of contracts
and other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits to the Registration Statement other than
those described or referred to therein or filed as exhibits thereto. To our
knowledge, (i) neither the Company nor any Subsidiary is in violation of its
charter, by-laws or operating agreement, as applicable and (ii) no default by
the Company or any Subsidiary exists in the due performance or observance of
any
A-2
material obligation, agreement, covenant or condition contained in any
agreement filed as an exhibit to the Registration Statement, except for such
defaults that would not result in a Material Adverse Effect.
(xv) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance,
sale or delivery of the Securities.
(xvi) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement (including the issuance and sale of
the Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and
will not, whether with or without the giving of notice or lapse of time or
both, conflict with or constitute a breach of, or default or Repayment Event
(as defined in Section 1(a)(xiv) of the Purchase Agreement) under or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, franchise agreement,
management agreement, note, lease or any other agreement or instrument, known
to us, to which the Company or any subsidiary is a party or by which it or any
of them may be bound, or to which any of the property or assets of the Company
or any subsidiary is subject (except for such conflicts, breaches, defaults or
Repayment Events or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any subsidiary, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or any of
their respective properties, assets or operations.
(xvii) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act, except as disclosed in the Prospectus under "Risks Related
to this Offering and Our Common Stock" and "Shares Eligible for Future Sale --
Registration Rights."
(xviii) The Company is not required, and upon the issuance and sale
of the Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus will not be required, to
register as an "investment company" under the 1940 Act.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information, (except for financial statements and schedules and other financial
data included therein or omitted therefrom, as to which we need make no
statement), at the time such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which we need make
no statement), at the time the Prospectus was issued, at the time any such
A-3
amended or supplemented prospectus was issued or at the Closing Time, included
or includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it
is otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).
A-4
FORM OF LOCK-UP FROM DIRECTORS AND OFFICERS
Exhibit B
____, 2004
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4 World Financial Center
New York, New York 10080
Re: Proposed Public Offering by Lodgian, Inc.
Dear Sirs:
The undersigned, a director and/or officer and a stockholder and/or
optionholder of Lodgian, Inc., a Delaware corporation (the "Company"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") as representative of the underwriters (the
"Underwriters") proposes to enter into a Purchase Agreement (the "Purchase
Agreement") with the Company providing for the public offering (the "Offering")
of shares (the "Securities") of the Company's common stock, par value $0.01 per
share (the "Common Stock"). In recognition of the benefit the Offering will
confer upon the undersigned as a director and/or officer and a stockholder
and/or optionholder of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the undersigned agrees with each underwriter to be named in the Purchase
Agreement (i) to maintain the confidentiality of the proposed Offering prior to
the filing of the related registration statement with the Securities and
Exchange Commission (the "Commission"), (ii) that from the date hereof until
the earlier of (1) 180 days after the date of effectiveness of the registration
statement on Form S-1 filed by the Company with the Commission for the purpose
of effectuating the Offering and (2) December 15, 2004 (the "Lock-up Period"),
the undersigned will not, without the prior written consent of Merrill Lynch,
directly or indirectly, (a) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of the Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock, whether now owned or hereafter
acquired by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition, or file, or cause to be filed, any
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to any of the foregoing (collectively, the
"Lock-Up Securities") or (b) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Lock-Up Securities, whether any such
swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise.
Very truly yours,
Signature:
----------------------------
Print Name:
---------------------------
B-1
Exhibit C
FORM OF LOCK-UP AGREEMENT FOR OCM REAL ESTATE OPPORTUNITIES FUND II, L.P.
February, 27 2004
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4 World Financial Center
New York, New York 10080
Re: Proposed Public Offering by Lodgian, Inc.
Dear Sirs:
The undersigned, a stockholder of Lodgian, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as representative
of the underwriters (the "Underwriters"), proposes to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company providing for the public
offering (the "Offering") of shares (the "Securities") of the Company's common
stock, par value $0.01 per share (the "Common Stock"). In recognition of the
benefit that the Offering will confer upon the undersigned as a stockholder of
the Company; and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
Underwriter to be named in the Purchase Agreement (i) to maintain the
confidentiality of the proposed Offering prior to the filing of the related
registration statement with the Securities and Exchange Commission (the
"Commission"), (ii) that, notwithstanding any provision contained in the
registration rights agreement among the Company, the undersigned and certain
other shareholders of the Company, dated as of November 25, 2002 (the
"Registration Rights Agreement"), or otherwise, from the date hereof until the
earlier of (l) 180 days after the date of effectiveness of the registration
statement on Form S-1 filed by the Company with the United States Securities
and Exchange Commission for the purpose of effectuating the Offering and (2)
December 15, 2004 (the "Lock-up Period"), the undersigned will not, without the
prior written consent of Merrill Lynch, directly or indirectly, (a) offer,
pledge, sell, contract to sell, sell any option or contract to purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
lend or otherwise dispose of or transfer any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file, or cause, to be filed, any registration statement under the Securities
Act of 1933, as amended (the "Securities Act") with respect to any of the
foregoing (collectively, the "Lock-Up Securities") or (b) enter into any swap
or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Lock-Up
Securities, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, (iii) that the
Company will not be required, under the Registration Rights Agreement or
otherwise, to use its reasonable best efforts to have declared effective as
promptly as practicable after filing with the Commission a registration
statement covering the resale of shares of Common Stock as contemplated, by
Section 2.1 of the Registration Rights Agreement until the expiration of the
Lock-Up Period, and (iv) to waive any and all rights, under the Registration
Rights Agreement or otherwise, that the undersigned may have to cause shares of
Common Stock to be registered for resale with the Commission along with shares
of Common Stock offered publicly by the Company in connection with the
Offering, including rights under Section 3.1 of the Registration Rights
Agreement.
C-1
Very truly yours,
OCM Real Estate Opportunities Fund
II, L.P.
By: Oaktree Capital Management, LLC,
its General Partner
By:
------------------------------------
By:
------------------------------------
C-2
Exhibit D
FORM OF LOCK-UP AGREEMENT FOR THIRD AVENUE VALUE FUND
March 4, 2004
MERRILL LYNCH & CO.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
4 World Financial Center
New York, New York 10080
Re: Proposed Public Offering by Lodgian, Inc.
The undersigned, a stockholder of Lodgian, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as representative
of the underwriters (the "Underwriters"), proposes to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company providing for the public
offering (the "Offering") of shares (the "Securities") of the Company's common
stock, par value $0.01 per share (the "Common Stock"). In recognition of the
benefit that the Offering will confer upon the undersigned as a stockholder of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
Underwriter to be named in the Purchase Agreement (i) to maintain the
confidentiality of the proposed Offering prior to the filing of the related
registration statement with the Securities and Exchange Commission (the
"Commission"), (ii) that, notwithstanding any provision contained in the
registration rights agreement among the Company, the undersigned and certain
other shareholders of the Company, dated as of November 25, 2002 (the
"Registration Rights Agreement"), or otherwise, from the date hereof until this
earlier of (1) 180 days after the date of effectiveness of the registration
statement on Form S-1 filed by the Company with the United States Securities
and Exchange Commission for the purpose of effectuating the Offering and (2)
December 15, 2004 (the "Lock-up Period"), the undersigned will not, without the
prior written consent of Merrill Lynch, directly or indirectly, (a) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, lend otherwise dispose of or transfer any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for Common
Stock, whether now owned or hereafter acquired by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of
disposition, or file, or cause to be filed, any registration statement under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
any of the foregoing (collectively, the "Lock-Up Securities") or (b) enter into
any swap or any other agreement or any transaction that transfers, in whole or
in part, directly or indirectly, the economic consequence of ownership of the
Lock-Up Securities, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, (iii) that
the Company will not be required, under the Registration Rights Agreement or
otherwise, to use its reasonable best efforts to have declared effective as
promptly as practicable after filing with the Commission a registration
statement covering the resale of shares of Common Stock as contemplated by
Section 2.1 of the Registration Rights Agreement until the expiration of the
Lock-Up Period, and (iv) to waive any and all rights, under the Registration
Rights Agreement or otherwise, that the undersigned may have to cause shares of
Common Stock to be registered for resale with the Commission along with shares
of Common Stock offered publicly by the Company in connection with the
Offering, including rights under Section 3.1 of the Registration Rights
Agreement.
D-1
Very truly yours,
Third Avenue Trust, on behalf of Third
Avenue Value Fund
By:
------------------------------------
Print Name:
----------------------------
Title:
---------------------------------
D-2
Exhibit E
FORM OF LOCK-UP AGREEMENT FOR BRE HY FUNDING LLC
March 2, 2004
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4 World Financial Center
New York, New York 10080
Re: Proposed Public Offering by Lodgian, Inc.
Dear Sirs:
The undersigned, a stockholder of Lodgian, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fencer & Smith Incorporated ("Merrill Lynch"), as representative
of the underwriters (the "Underwriters") proposes to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company providing for the public
offering (the "Offering") of shares (the "Securities") of the Company's common
stock, par value $0.01 per share (the "Common Stock"). In recognition of the
benefit that the Offering will confer upon the undersigned as a stockholder of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with. each
Underwriter to be named in the Purchase Agreement (i) that, notwithstanding any
provision contained in the registration rights agreement among the Company, the
undersigned and certain other shareholders of the Company, dated as of November
25, 2002 (the "Registration Rights Agreement"), or otherwise, from the date
hereof until the earliest of (1) 180 days after the date of effectiveness of
the registration statement on Form S-1 filed by the Company with the United
States Securities and Exchange Commission for the purpose of effectuating the
Offering, (2) December 15, 2004, and (3) the termination of the Purchase
Agreement (the "Lock-up Period"), the undersigned will not, without the prior
written consent of Merrill Lynch, directly or indirectly, (a) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
lend or otherwise dispose of or transfer any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file, or cause to be filed, any registration statement under the Securities Act
of 1933, as amended (the "Securities Act") with respect to any of the foregoing
(collectively, the "Lock-Up Securities") or (b) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Lock-Up
Securities, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, (ii) that, prior to
the expiration of the Lock-Up Period, the Company will not be required, under
the Registration Rights Agreement or otherwise, to use its reasonable best
efforts to have declared effective as promptly as practicable after filing with
the Commission a registration statement covering the resale of shares of Common
Stock as contemplated by Section 2.1 of the Registration Rights Agreement, and
(iii) to waive any and all rights, under the Registration Rights Agreement or
otherwise, that the undersigned may have to cause shares of Common Stock to be
registered for resale with the Commission along with shares of Common Stock
offered publicly by the Company in connection with the Offering, including
rights under Section 3.1 of the Registration Rights Agreement, until the
expiration of the Lock-up Period. Any Company Common Stock acquired by the
undersigned in the open market after the date hereof shall not be subject to
the terms of paragraph (i) of this Agreement.
E-1
Very truly yours,
BRE HY Funding LLC
By:
Signature:
----------------------------
Print Name:
---------------------------
Title:
--------------------------------
E-2