EXCLUSIVITY AGREEMENT
This Exclusivity Agreement, dated as of December 26, 2000 (this
"Agreement"), is made by and between Lodgian, Inc., a Delaware corporation (the
"Company"), and Edgecliff Holdings, LLC, a Delaware limited liability company
("Edgecliff").
WHEREAS, the Company and Edgecliff desire to consider further the
possibility of entering into a transaction (the "Transaction") pursuant to which
a subsidiary of Edgecliff (the "Purchaser") will merge with and acquire the
Company in a reverse merger as described in that certain letter dated December
10, 2000 from Edgecliff to the Company (the "Letter");
WHEREAS, as a condition to pursuing the Transaction, Edgecliff has
requested that the Company enter into this Agreement, and the Company is willing
to do so; and
WHEREAS, capitalized terms used herein but not otherwise defined
shall have the meaning ascribed thereto in the Letter.
NOW, THEREFORE, in order to carry out their intent as expressed
above and in consideration of the mutual agreements hereinafter contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby covenant and agree as follows:
1. Exclusivity.
(a) Except as provided in Section 1(b) below, for sixty (60) days after the
date of this Agreement (the "Termination Date"), the Company, its subsidiaries
and affiliates and their respective directors, officers, advisors,
representatives and other agents shall not directly or indirectly (i) solicit,
initiate, encourage, facilitate the submission of or entertain any proposals or
offers relating to, (ii) provide any information to any third party in response
to any submissions, proposals or offers relating to, (iii) engage in any
negotiations or discussions with any person or entity relating to, or (iv)
otherwise cooperate in any way with any person in connection with (such actions
being individually and collectively referred to herein as "Marketing") any
acquisition, merger, recapitalization, liquidation, dissolution or any similar
transaction involving all or any material portion of the Company, its business
or assets or all or any material portion of the Company's capital stock or other
equity interests, other than the Transaction. The Company shall promptly notify
Edgecliff of any such proposals or offers made on or prior to the Termination
Date. From and after the date of this letter until the Termination Date, the
Company, its subsidiaries and affiliates and their respective directors,
officers, advisors, representatives and other agents shall not directly or
indirectly take any other action (or fail to take any required action) or permit
any person on its behalf to take any other action (or fail to take any required
action) that would be inconsistent with, delay or adversely affect the
consummation of the Transaction. Nothing contained in this paragraph, however,
shall prevent the Company's Board of Directors (the "Board"), if they determine
in good faith that their fiduciary duty so requires, from (A) considering a
Superior Offer (as defined below) which had not been directly or indirectly
solicited, initiated or encouraged by the Company, its subsidiaries or
affiliates, or their respective directors, officers, advisors, representatives
and other agents on or after the date of this Agreement; provided, however that
the Company shall promptly notify Edgecliff (and continuously update such
notification upon Edgecliff's request) of the receipt of any such offer, of the
status of the Board's consideration thereof and of any actions taken in
connection therewith; provided, further, that the Purchaser does not make,
within five (5) days of receipt of the Company's written notification of the
intention of the Board to consider such a Superior Offer, an offer that the
Board determines, in good faith after consultation with its financial advisors,
is at least as favorable to the stockholders of the Company as the Superior
Offer or (B) providing information to a third party in response to a Superior
Offer or an indication of interest from a third party (but not taking any other
action proscribed by this Section 1); provided, however that (x) the Board
determines that such third party is capable of providing a Superior Offer
following receipt of such information, (y) such third party executes a
confidentiality agreement in favor of the Company containing substantially the
same terms, including the "standstill" provisions, as the confidentiality
agreement previously executed by Edgecliff in favor of the Company and (z) the
Company shall promptly notify Edgecliff of the request to receive such
information and of any action taken in connection with such request including
confirmation that the confidentiality agreement has been executed by such third
party pursuant to clause (y) of this sentence. For purposes of this Agreement,
the term "Superior Offer" shall mean an offer (xx) to purchase the Company or
its business or assets or all or substantially all of the Company's capital
stock or other equity that the Board determines in good faith to be more
favorable to the Company and its stockholders than that provided in the
Transaction and (yy) that the Board determines is likely to result in a
transaction that will actually be consummated.
(b) Notwithstanding the provisions of clause (a) of this Section 1, the
Company may engage, at any time during the period in which the restrictions
contained in clause (a) of this Section 1 apply, in Marketing with respect to
the following:
(i) the assets listed under the heading "Tier I" on Schedule I to
this Agreement (the "Tier I Assets"); provided, however, that in
no event may the Company sell or otherwise dispose of, or enter
into a letter of intent, definitive sale contract or similar
agreement with respect to any Tier I Asset for less than the
minimum price set forth opposite such Tier I Asset on Schedule I;
(ii) the assets listed under the heading "Tier II" on Schedule I to
this Agreement (the "Tier II Assets"); provided, however, that in
no event may the Company sell, transfer or otherwise dispose of
any Tier II Asset unless:
(A) The Company has received an offer from a bona fide third
party purchaser (a "Third Party Purchaser") to purchase a
Tier II Asset solely for cash and, upon receipt of such
offer the Company has delivered written notice of such offer
(the "Offering Notice") to Edgecliff, which Offering Notice
shall state: (x) the name of the Tier II Asset proposed to
be sold (the "Offered Asset"), (y) the proposed purchase
price offered by the Third Party Purchaser for the Offered
Asset (the "Offer Price") and (z) the terms and conditions
of such sale. Upon delivery of the Offering Notice, such
offer shall not be amended until the rights of first refusal
provided for herein shall have been waived or shall have
expired.
(B) For a period of five (5) business days after delivery of the
Offering Notice (the "Edgecliff Option Period"), Edgecliff
shall have the right (the "Edgecliff Option") but not the
obligation to purchase the Offered Asset at a purchase price
equal to the Offer Price and upon the terms and conditions
set forth on the Offering Notice. The right of Edgecliff to
purchase the Offered Asset under this Section 1(b)(ii) shall
be exercisable by delivering written notice of the exercise
thereof, prior to the expiration of the Edgecliff Option
Period, to the Company, which notice shall set forth
Edgecliff's desire to purchase the Offered Asset from the
Company. The failure of Edgecliff to respond within the
Edgecliff Option Period shall be deemed to be a waiver of
the Edgecliff Option.
(C) Edgecliff shall have forty-five (45) days from the date of
the Offering Notice to conclude diligence and remove all
transaction contingencies and conditions. The closing of the
purchase of the Offered Asset by Edgecliff shall be held at
the executive office of the Company at 11:00 a.m., local
time, no later than the thirtieth (30th) day (or the next
following business day) after such diligence is concluded
and such contingencies and conditions are removed.
(D) Unless Edgecliff elects to purchase the Offered Asset, the
Company may sell the Offered Asset to the Third Party
Purchaser on the terms and conditions set forth in the
Offering Notice; provided, -------- however, that such sale
is concluded within ninety (90) days after the expiration of
the Edgecliff Option Period. If such sale is not concluded
within such ninety (90) day period for any reason, then the
restrictions provided for herein shall again become
effective, and no transfer of such Offered Asset may be made
thereafter by the Company without again offering the same to
Edgecliff in accordance with this Section 1(b)(ii); and
(iii) the assets listed under the heading "Tier III" on Schedule I to
this Agreement (the "Tier III Assets"); provided, however, that
in no event may the Company sell, transfer or otherwise dispose
of any Tier III Asset except where such Tier III Asset is sold to
a Third Party Purchaser (which Third Party Purchaser shall not be
an affiliate of the Company or an officer, director, or employee
(or relative of any of the foregoing) of the Company or any
affiliate thereof) at not less than fair market value and on
terms and conditions that have been negotiated with such Third
Party Purchaser on an arm's length basis.
The Company agrees that, except as otherwise provided in this Section 1(b), the
Company, its subsidiaries and affiliates and their respective directors,
officers, advisors, representatives and other agents shall not directly or
indirectly engage in any Marketing with respect to any of its assets. The
Company shall promptly notify Edgecliff of any such proposals or offers made on
or prior to the Termination Date.
(c) In consideration for the Company's agreement to abide by the
exclusivity provisions of this Agreement, Edgecliff, on its own behalf and on
behalf of each of its affiliates, agrees that it shall not and shall not permit
its representatives, advisors and other agents to, without the prior written
consent of the Company's Board of Directors, take any of the following actions
for a period of one year from the date of this Agreement, unless the total
consideration to be offered to the stockholders of the Company in any of the
following transactions is not less than $4.75 per share in cash:
(i) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or
direct or indirect rights to acquire any voting securities of the
Company or any subsidiary thereof, or of any successor to or
person in control of the Company, or any assets of the Company or
any subsidiary or division thereof or of any such successor or
controlling person;
(ii) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Company or its securities
or assets;
(iii) otherwise act, whether alone or in concert with others, to seek
to propose to the company or any of its stockholders, any merger,
business combination, restructuring, recapitalization or similar
transaction to or with the Company;
(iv) announce an intention to, or enter into any discussion,
negotiations, arrangements or understandings with any third party
with respect to, any of the foregoing matters;
(v) disclose any intention, plan or arrangement inconsistent with any
of the foregoing provisions;
(vi) advise, assist, encourage or participate with any other person or
entity in connection with action inconsistent with any of the
foregoing provisions;
(vii) make any proposal to be considered and/or voted upon at any
meeting of the stockholders of the Company with respect to any of
the foregoing matters; or
(viii)form, join or in any way participate in a "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) with respect to any of the foregoing matters.
2. Access; Brokers.
(a) Upon reasonable advance notice to the Company, the Company shall allow
Edgecliff and its representatives full and complete access to the assets and the
books, records and documents of the Company during normal business hours or such
other hours as the Company and Edgecliff shall agree and subject to the
reasonable rules of the Company, and the Company shall make available (subject
to the same conditions) the officers, employees, attorneys, independent
accountants and other agents of the Company to discuss the business, condition
(financial or otherwise) or prospects of the assets. Edgecliff agrees that the
confidentiality agreement executed with the Company will apply to all
information received pursuant to this section.
(b) The Company represents and warrants to Edgecliff that other than the
engagement by the Company of Morgan Stanley & Co. Incorporated, the fees, costs
and expenses of which will be borne by the Company (i) there shall be no
brokers' or finders' fees due in connection with the Transaction for which the
Company may be liable, (ii) no broker or finder has been engaged by the Company
or on the Company's behalf in connection with the Transaction and (iii) the
Company shall not authorize any person to act in a manner so as to give rise to
any valid claim for any brokers' or finders' fee or similar compensation.
3. Publicity. This Agreement is intended to be confidential and its
existence shall not be publicly disclosed by the Company unless required by law
or the rules or regulations of a national securities exchange or the National
Association of Securities Dealers, Inc. In the event the Company determines that
any public announcement of this Agreement is so required, any public
announcement shall be subject to the review and reasonable approval of Edgecliff
prior to its release which shall not be unreasonably withheld or delayed.
4. Legal Effect. This Agreement shall be governed by the laws of the State
of New York without regard to the conflicts of laws principles thereof. This
Agreement shall remain in full force and effect and shall survive the
termination or withdrawal of the Letter; provided, however, that the Company's
obligations under Section 1 of this Agreement shall terminate in the event the
Letter is withdrawn by Edgecliff or the Purchaser.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement on the date first above written.
LODGIAN, INC.
By:/s/ Joseph C. Calabro
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Name: Joseph C. Calabro
Title: Chairman
EDGECLIFF HOLDINGS, LLC
By:/s/ Joseph E. Marquet
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Name: Joseph E. Marquet
Title: Vice President - Finance
