October 25, 2000
Edgecliff Holdings, LLC
207 Grandview Drive
Fort Mitchell, Kentucky 41017
Attention: Mr. William Yung, President
CONFIDENTIALITY AGREEMENT
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Ladies and Gentlemen:
In connection with your possible interest in an acquisition, investment, or
merger (the "Transaction") involving Lodgian, Inc. (the "Company"), you have
requested that we or our representatives furnish you or your representatives
with certain information relating to the Company or the Transaction. All such
information (whether written or oral) furnished (whether before or after the
date hereof) by us or our directors, officers, employees, affiliates,
representatives (including, without limitation, financial advisors, attorneys
and accountants) or agents (collectively, "our Representatives") to you or your
directors, officers, employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys and accountants) or agents or your
potential sources of financing for the Transaction (collectively, "your
Representatives") and all analyses, compilations, forecasts, studies or other
documents prepared by you or your Representatives in connection with your or
their review of, or your interest in, the Transaction which contain or reflect
any such information is hereinafter referred to as the "Information". The term
Information will not, however, include information which (i) is or becomes
publicly available other than as a result of a disclosure by you or your
Representatives in violation of the terms of this Agreement, or (ii) is or
becomes available to you or your Representatives on a nonconfidential basis from
a source (other than us or our Representatives) which, to the best of your or
their knowledge after due inquiry, is not prohibited from disclosing such
information to you by a legal, contractual or fiduciary obligation to us.
Accordingly, you hereby agree that:
1. You and your Representatives (i) will keep the Information confidential
and will not (except as required by applicable law, regulation
(including, as required under Regulation 13D ("Regulation 13D")
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or Regulation 14D promulgated under the Exchange Act
("Regulation 14D") as a result of your or your affiliates' commencement
of, or your announcement of your or your affiliates intention to
commence, an all-cash tender offer for all shares of the Company's
common stock, PROVIDED such action is permitted to be taken by you or
your affiliates under Section 7 hereof (a "Permitted Tender Offer")) or
legal process (including in connection with a judicial, regulatory or
administrative proceeding in which you or a partner, officer, director,
employee or affiliate of yours is involved), and only after compliance
with paragraph 3 below), without our prior written consent, disclose
any Information in any manner whatsoever, and (ii) will not use any
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Information other than in connection with the Transaction; PROVIDED,
HOWEVER, that you may reveal the Information to your Representatives
(a) who need to know the Information for the purpose of evaluating the
Transaction, (b) who are informed by you of the confidential nature of
the Information and (c) who agree to act in accordance with the terms
of this letter agreement. You will cause your Representatives to
observe the terms of this letter agreement, and you will be responsible
for any breach of this letter agreement by any of your Representatives.
2. You and your Representatives will not (except as required by applicable
law, regulation (including as required under Regulation 13D, or under
Regulation 14D as a result of your or your affiliates' commencement of,
or your announcement of your or your affiliates' intention to commence,
a Permitted Tender Offer) or legal process (including in connection
with a judicial, regulatory or administrative proceeding in which you
or a partner, officer, director, employee or affiliate of yours is
involved), and only after compliance with paragraph 3 below), without
our prior written consent, disclose to any person the fact that the
Information exists or has been made available, that you are considering
the Transaction or any other transaction involving the Company, or that
discussions or negotiations are taking or have taken place concerning
the Transaction or involving the Company or any term, condition or
other fact relating to the Transaction or such discussions or
negotiations, including, without limitation, the existence and status
thereof.
3. In the event that you or any of your Representatives are requested
pursuant to, or required by, applicable law, regulation or legal
process to disclose any of the Information, you will notify us promptly
in writing so that we may seek a protective order or other appropriate
remedy or, in our sole discretion, waive compliance with the terms of
this letter agreement. In the event that no such protective order or
other remedy is obtained, or that the Company does not waive compliance
with the terms of this letter agreement, you will furnish only that
portion of the Information which you are advised by counsel is legally
required and will exercise all reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded the Information.
This Section 3 shall not apply to disclosures made by you or your
affiliates if your outside counsel provides you with written advice
that such disclosures are required by either (a) Regulation 13D or (b)
Regulation 14D as the same shall apply to your or your affiliates'
commencement of, or your announcement of your or your affiliates'
intention to commence, a Permitted Tender Offer.
4. If you determine not to proceed with the Transaction, you will promptly
inform our Representative, Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), of that decision and, in that case, and at any time upon the
request of the Company or any of our Representatives, you will either
(i) promptly destroy all copies of the written Information including,
without limitation, any materials prepared by you in connection with
the Information or the Transaction, in your or your Representatives'
possession and confirm such destruction to us in writing, or (ii)
promptly deliver to the Company at your own expense all copies of the
written Information in your or your Representatives' possession. Any
oral Information will continue to be subject to the terms of this
letter agreement.
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5. You acknowledge that neither we, nor Morgan Stanley or its affiliates,
nor our other Representatives, nor any of our or their respective
officers, directors, employees, agents or controlling persons within
the meaning of Section 20 of the Securities Exchange Act of 1934, as
amended, makes any express or implied representation or warranty as to
the accuracy or completeness of the Information, and you agree that no
such person will have any liability relating to the Information or for
any errors therein or omissions therefrom. You further agree that you
are not entitled to rely on the accuracy or completeness of the
Information and that you will be entitled to rely solely on such
representations and warranties as may be included in any definitive
agreement with respect to the Transaction, subject to such limitations
and restrictions as may be contained therein.
6. You are aware, and you will advise your Representatives who are
informed of the matters that are the subject of this letter agreement,
of the restrictions imposed by the United States securities laws on the
purchase or sale of securities by any person who has received material,
non-public information from the issuer of such securities and on the
communication of such information to any other person when it is
reasonably foreseeable that such other person is likely to purchase or
sell such securities in reliance upon such information.
7. You agree that, for a period of ninety (90) days from the date of this
letter agreement, neither you nor any of your affiliates will, without
the prior written consent of the Company or its Board of Directors: (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, or
in any way participate in, directly or indirectly, any "solicitation"
of "proxies" (as such terms are used in the rules of the Securities
Exchange Commission) to vote, or seek to advise or influence any person
or entity with respect to the voting of, any voting securities of the
Company after October 20, 2000; (iii) 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; or (iv) 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) in connection with any of the foregoing. You will
promptly advise the Company of any inquiry or proposal made to you with
respect to any of the foregoing.
8. You agree that, for a period of two years from the date of this letter
agreement, you will not, directly or indirectly, solicit for employment
or hire any employee of the Company or any subsidiary thereof with whom
you have had contact or who became known to you in connection with your
consideration of the Transaction; provided, however, that this
restriction shall not apply to hirings or communications during the
course or as a result of any general advertisement or general
solicitation that is not exclusively directed at such persons, or
communications with or hirings of persons who initiate discussions with
you without any direct or indirect solicitation by you.
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9. You agree that all (i) communications regarding the Transaction, (ii)
requests for additional information, facility tours or management
meetings, and (iii) discussions or questions regarding procedures with
respect to the Transaction, will be first submitted or directed to
Morgan Stanley and not to the Company. You acknowledge and agree that
(a) we and our Representatives are free to conduct the process leading
up to a possible Transaction as we and our Representatives, in our sole
discretion, determine (including, without limitation, by negotiating
with any prospective buyer and entering into a preliminary or
definitive agreement without prior notice to you or any other person),
(b) we reserve the right, in our sole discretion, to change the
procedures relating to our consideration of the Transaction at any time
without prior notice to you or any other person, to reject any and all
proposals made by you or any of your Representatives with regard to the
Transaction, and to terminate discussions and negotiations with you at
any time and for any reason, and (c) unless and until a written
definitive agreement concerning the Transaction has been executed,
neither we nor any of our Representatives will have any liability to
you with respect to the Transaction, whether by virtue of this letter
agreement, any other written or oral expression with respect to the
Transaction or otherwise.
10. This letter agreement has been duly authorized by all necessary
corporate action by the Company. Each party acknowledges that remedies
at law may be inadequate to protect the other party (the "non-breaching
party") against any actual or threatened breach of this letter
agreement by either party or its Representatives, and, without
prejudice to any other rights and remedies otherwise available to the
non-breaching party, each party agrees to the granting of injunctive
relief to the non-breaching party without proof of actual damages and
without any requirement to post a bond. In the event of litigation
relating to this letter agreement, if a court of competent jurisdiction
determines in a final, nonappealable order that this letter agreement
has been breached by either party or by its Representatives, then the
party in breach will reimburse the non-breaching party for the
non-breaching party's reasonable costs and expenses (including, without
limitation, reasonable legal fees and expenses) incurred in connection
with all such litigation.
11. You agree that no failure or delay by us in exercising any right, power
or privilege hereunder will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege
hereunder.
12. This letter agreement will be governed by and construed in accordance
with the laws of the State of New York applicable to contracts between
residents of that State and executed in and to be performed in that
State.
13. This letter agreement contains the entire agreement between you and us
concerning the confidentiality of the Information, and no modifications
of this letter agreement or waiver of the terms and conditions hereof
will be binding upon you or us, unless approved in writing by each of
you and us.
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14. The provisions of this agreement shall remain in effect with respect to
any or all Information until the earliest of (i) the date such
Information is no longer Information within the meaning of this
agreement, (ii) the date that a transaction is closed between you and
the Company involving the Transaction to which such Information relates
and (iii) one (1) year from the date of execution of this agreement.
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Please confirm your agreement with the foregoing by signing and returning this
document.
Very truly yours,
LODGIAN, INC.
By: /s/ Robert S. Cole
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Name: Robert S. Cole
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Title: President
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Date: October 25, 2000
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Accepted and Agreed as of the date
first written above:
EDGECLIFF HOLDINGS, LLC
By: /s/ William J. Yung
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Name: William J. Yung
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Title: President
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Date: October 25, 2000
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