EXCLUSIVITY AND EXPENSE
REIMBURSEMENT AGREEMENT
This Exclusivity and Expense Reimbursement Agreement, dated as of
October 11, 2000 (this "Agreement"), is made by and between Lodgian, Inc. (the
"Company"), Whitehall Street Real Estate Limited Partnership XIII ("Whitehall
Street XIII"), a Delaware limited partnership, and Whitehall Parallel Real
Estate Limited Partnership XIII ("Whitehall Parallel XIII" and together with
Whitehall Street XIII, "Parent"), a Delaware limited partnership.
W I T N E S S E T H :
WHEREAS, Company and Parent desire to consider further the possibility
of entering into a Transaction pursuant to which a subsidiary of Parent (the
"Purchaser") will merge with and acquire the Company in a forward merger as
described in that certain letter dated October 11, 2000 from Whitehall Street
XIII and Whitehall Parallel XIII to the Company (the "Letter");
WHEREAS, as a condition to pursuing the Transaction and commencing a
due diligence investigation of the Company, Parent 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, from and after the
date of this letter until the Termination Date (as such term is defined in the
Letter), 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 the Parent 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 could 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, if they determine in
good faith that their fiduciary duty so requires, from (i) 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 that the
Company shall promptly notify the Parent (and continuously update such
notification upon Parent's request) of the receipt of any such offer, of the
status of the Company's Board of Directors' consideration thereof and of any
actions taken in connection therewith and provided, further, that the Purchaser
does not make, within five days of receipt of the Company's written notification
of the intention of the Board of Directors to consider such a Superior Offer, an
offer that the Board of Directors of the Company 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 (ii) 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 that (a) the Company's Board of Directors determines that such
third party is capable of providing a Superior Offer following receipt of such
information, (b) such third party executes a confidentiality agreement in favor
of the Company containing substantially the same terms, including the
"standstill" provi-sions, as the confidentiality agreement previously executed
by Parent or its affiliates in favor of the Company and (c) the Company shall
promptly notify the Parent 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 (b) of this sentence. For purposes of this Agreement, the term "Superior
Offer" shall mean an offer (i) 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 of Directors of the Company determines in good faith to be more
favorable to the Company and its stockholders than that provided in the
Transaction proposed in the Letter and (ii) that the Company's Board of
Directors determines is likely to result in a transaction that will actually be
consummated.
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(b) Notwithstanding the provisions of clause (a) of this Section
1, (i) 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 assets listed on Schedule A to this Agreement (the "Category One
Assets") and with respect to the hotel known as the Xxxxxx Xxxxxxx Penn listed
on Schedule B to this Agreement (the "Xxxxxxx Penn") and (ii) the Company may
continue, at any time during the period beginning on November 1, 2000, Marketing
with respect to the assets listed on Schedule B to this Agreement (the "Category
Two Assets") other than the Xxxxxxx Penn (it being understood that the Xxxxxxx
Penn shall be a Category Two Asset); 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 (collectively
"Sell") assets having a proposed sale price in excess of $75,000,000 (provided
that in the event the Company Sells the Xxxxxxx Penn, the Company may not Sell
assets having a proposed sale price in excess of the sum of $75,000,000 and the
proposed sale price for the Xxxxxxx Penn). The Company agrees that, except as
provided in the preceding sentence, 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 and that, except as provided in the preceding sentence or in
clause (a) of this Section 1, during the period beginning on the date hereof and
ending on November 1, 2000, the Company, its subsidiaries and affiliates and
their respective directors, officers, advisors, representatives and other agents
shall not directly or indirectly engage in Marketing with respect to any of the
assets of the Company. The Company shall promptly notify the Parent of any such
proposals or offers made on or prior to the Termination Date.
In the event that the Company desires to Sell any of the Category Two
Assets (a "Subject Asset"), the Company will, prior to any such transaction or
the entry into any such agreement, deliver to the Parent a written notice (a
"Notice of Sale"), which Notice of Sale shall state the Company's price and such
other terms on which the Company proposes to dispose of the Subject Asset to a
third party (a "Third Party Offeror") pursuant to an offer received by the
Company from such Third Party Offeror (collectively, the "Offer Terms"). Each
Notice of Sale shall constitute an irrevocable offer by the Company to sell to
the Parent (or its designated affiliate) the Subject Asset on the Offer Terms.
No Offer Terms in respect of a Subject Asset may include any form of
consideration other than cash (which may be paid at closing, in installments or
after any period of time (as set forth in the Offer Terms). The Parent may
elect, within ten (10) Business Days following the date the Notice of Sale is
received by the Parent, to purchase (or cause an affiliate designated by the
Parent to purchase) the Subject Asset on the Offer Terms by delivering to the
Company notice of such election (a "Notice of Purchase") (and such Notice of
Purchase shall constitute an irrevocable agreement by the Parent to purchase (or
to cause an affiliate designated by the Parent to purchase) the Subject Asset on
the Offer Terms). If the Parent elects to purchase the Subject Asset
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pursuant to the preceding sentence, the Parent shall purchase, and the Seller
shall sell, the Subject Asset to the Parent on the Offer Terms within thirty
(30) days of the delivery by the Parent of the Notice of Purchase. If the Parent
does not elect to purchase the Subject Asset, the Company may elect to sell the
Subject Asset to the Third Party Offeror on the Offer Terms.
2. Expense Reimbursement; Fees. The parties hereto agree that if the
Company and the Purchaser shall not have executed the Definitive Agreements for
any reason whatsoever by the Termination Date, the Company shall pay immediately
upon demand all of the third party expenses incurred by Parent (including its
advisors or representatives) in connection with evaluating and pursuing the
Transaction (up to a maximum of $3,500,000), such expenses to be conclusively
established by Parent's submission of a statement describing such expenses and
the amount thereof. For the avoidance of doubt, the reimbursable out-of-pocket
costs will include only third party expenses (including fees and expenses owing
to or incurred by legal and financial advisors to the Parent) and Parent's or
Purchaser's out-of-pocket expenses but will not include charges for the time
spent by principals of the Purchaser or Parent.
3. Indemnification. The Company will indemnify and hold the Parent and
the Purchaser (and their directors, officers, employees, agents and direct or
indirect shareholders, members or partners) harmless against any shareholder
lawsuits and other litigation and any claims, losses, damages, actions,
proceedings or expenses arising or resulting either directly or indirectly from
the Transaction, the Letter or this Agreement.
4. Access; Brokers. Upon reasonable advance notice to the Company, the
Company shall allow the Parent 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 the Parent 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. The Parent agrees
that the Confidentiality Agreement will apply to all information received
pursuant to this section.
The Company represents and warrants to Parent that other than the
engagement by the Company of Xxxxxx Xxxxxxx & 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
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similar compensation, except with respect to the Marketing of the Category One
Assets and Category Two Assets.
5. Publicity. This Agreement and the Letter are intended to be
confidential and neither their existence nor the Purchaser's or Parent's
involvement in pursuing the Transaction shall 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
or the Letter is so required, any public announcement shall be subject to the
review and reasonable approval of the Parent prior to its release which shall
not be unreasonably withheld or delayed.
6. 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 Parent or the Purchaser.
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IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Agreement on the date first above written.
LODGIAN, INC.
By: _______________________________
Name:
Title:
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP XIII
By: WH Advisors, L.L.C. XIII,
its general partner
By: _________________________
Name:
Title:
WHITEHALL PARALLEL REAL ESTATE
LIMITED PARTNERSHIP XIII
By: WH Parallel Advisors, L.L.C. XIII,
its general partner
By: _________________________
Name:
Title:
