XXXXXXXXX, XXXXXX & XXXXXXXX
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 . (000) 000-0000
January 14, 1997
PRIVATE AND CONFIDENTIAL
Extended Stay America, Inc.
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Senior Vice President and Chief Financial Officer
Gentlemen:
This letter agreement (the "Agreement") confirms our understanding that
Extended Stay America, Inc. (which together with its subsidiaries and affiliates
is hereinafter referred to as the "Company") has engaged Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation ("DLJ") to act as its exclusive financial
advisor for a period of six months commencing upon your acceptance of this
Agreement, with respect to the possible acquisition of Studio Plus Hotels, Inc.
("Target"), in one or a series of transactions, by merger, consolidation or any
other business combination, by purchase involving all or a substantial amount of
the business, securities or assets of the Target, or otherwise (each a
"Transaction").
As discussed, we propose to undertake certain services on your behalf
including, to the extent requested by you: (i) assisting you in evaluating the
Target, its operations, its historical performance and its future prospects;
(ii) advising on a proposed purchase price and form of consideration; (iii)
assisting you in structuring the Transaction; and (iv) negotiating the
financial aspects of any Transaction under your guidance. If requested, we will
deliver our opinion to the Board of Directors of the Company as to the fairness
to the Company from a financial point of view of the consideration to be paid by
the Company in a Transaction. The scope, form and substance of the opinion shall
be such as DLJ considers appropriate and, in the case of a stock-for-stock
merger, may be an opinion as to the fairness from a financial point of view of
the ratio to be applied for the exchange of common shares in the merger.
As compensation for the services to be provided by DLJ hereunder, the
Company agrees (i) to pay to DLJ (a) a fee of $500,000 at the time DLJ notifies
the Board of Directors of the Company that it is prepared to deliver the opinion
referred to in the preceding paragraph, and (b) additional cash compensation as
set forth below, and (ii) upon request by DLJ from time to time, to reimburse
DLJ
Extended Stay America, Inc.
Page 2 January 14, 1997
promptly for all out-of-pocket expenses (including the reasonable fees and
expenses of counsel) incurred by DLJ in connection with its engagement
hereunder, whether or not a Transaction is consummated. It is understood that
such expenses will not exceed $25,000 without the prior approval of the Company.
As DLJ will be acting on your behalf, the Company agrees to the indemnification
and other obligations set forth in Schedule I hereto, which Schedule is an
integral part hereof.
The additional cash compensation referred to in clause (i)(b) of the
preceding paragraph shall be in an amount equal to $1,500,000, less the amount
paid by the Company pursuant to clause (i)(a) of such paragraph. Such additional
compensation shall be payable in cash promptly upon consummation of the
Transaction. For purposes of this Agreement, a Transaction shall be deemed to
have been consummated upon the earliest of any of the following events to occur:
(a) the acquisition of a majority of the outstanding common stock equity
securities of the Target calculated on a fully-diluted basis; (b) a merger or
consolidation of the Target with the Company or an affiliate of the Company; (c)
the acquisition by the Company or any of its affiliate of assets of the Target
representing a majority of the Target's total value based upon each outstanding
share of the Target's common stock (on a fully-diluted basis) being valued at
$15.00 per share, or (d) in the case of any other Transaction, the consummation
thereof.
The Company shall make available to DLJ all financial and other
information concerning its business and operations which DLJ reasonably requests
as well as any other information relating to any Transaction prepared by the
Company or any of its other advisors. In performing its services hereunder
(including, without limitation, giving an opinion of the type referred to in the
second paragraph hereof), DLJ shall be entitled to rely without investigation
upon all information that is available from public sources as well as all other
information supplied to it by or on behalf of the Company or its advisors and
shall not in any respect be responsible for the accuracy or completeness of, or
have any obligation to verify, the same or to conduct any appraisal of any of
the Company's or the Target's assets. To the extent consistent with legal
requirements, all information given to DLJ by the Company, unless publicly
available or otherwise available to DLJ without restriction or breach of any
confidentiality agreement, will be held by DLJ in confidence and will not be
disclosed to anyone other than DLJ's agents and advisors without the Company's
prior approval or used for any purpose other than those referred to in this
Agreement.
Any opinion requested by the Company and any advice, written or oral,
provided by DLJ pursuant to this Agreement will be treated by the Company as
confidential, will be solely for the information and assistance of the Company
in connection with its consideration of the Transaction and will not be
reproduced, summarized, described or referred to, or furnished to any other
party or used for any other purpose, except in each case with our prior written
consent. It is further understood and agreed that, in the event that any opinion
of DLJ delivered pursuant to this Agreement is to be included in any proxy
statement mailed in connection with the Transaction, the opinion will be
reproduced therein in full and any description of or reference to DLJ or any
summary of the opinion or presentation of DLJ included in such document shall be
in form and substance acceptable to DLJ and its legal counsel.
Extended Stay America, Inc.
Page 3 January 14, 1997
Please note that DLJ is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking and financial advisory services. In the ordinary course of our trading
and brokerage activities, DLJ or its affiliates may at any time hold long or
short positions, and may trade or otherwise effect transactions, for our own
account or on the accounts of customers, in debt or equity securities of the
Company or other entities that may be involved in the Transaction. We recognize
our responsibility for compliance with Federal laws in connection with any such
activities.
The Company acknowledges and agrees that DLJ has been retained solely to
provide the advice or services set forth in this Agreement. DLJ shall act as an
independent contractor, and any duties of DLJ arising out of its engagement
hereunder shall be owed solely to the Company.
This Agreement may be terminated by either the Company or DLJ upon receipt
of written notice to that effect by the other party. Upon any termination or
expiration of this Agreement, DLJ will be entitled to prompt payment of all fees
accrued prior to such termination or expiration and reimbursement of all out-of-
pocket expenses as described above. The indemnity and other provisions contained
in Schedule I will remain operative and in full force and effect regardless of
any termination or expiration of this Agreement.
In addition, if at any time prior to twelve months after termination or
expiration of this Agreement a Transaction is consummated, DLJ will be entitled
to payment in full of the compensation described in the fourth paragraph of this
Agreement.
It is understood that if the Company completes an acquisition transaction
involving the Target in lieu of any Transaction for which DLJ is entitled to
compensation pursuant to this Agreement, DLJ and the Company will in good faith
mutually agree upon acceptable compensation for DLJ taking into account, among
other things, the results obtained and the custom and practice among investment
bankers acting in similar transactions.
The Company further agrees that it will not enter into any transaction
unless, prior to or simultaneously with such transaction referred to in either
of the two preceding paragraphs, adequate provision is made with respect to the
payment of compensation to DLJ as contemplated by such paragraphs.
This Agreement shall be binding upon and inure to the benefit of the
Company, DLJ, each Indemnified Person (as defined in Schedule I hereto) and
their respective successors and assigns.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
Extended Stay America, Inc.
Page 4 January 14, 1997
After reviewing this Agreement, please confirm that the foregoing is in
accordance with your understanding by signing and returning to me the duplicate
of this Agreement attached hereto, whereupon it shall be our binding Agreement.
Very truly yours,
XXXXXXXXX, LUFKIN & XXXXXXXX
SECURITIES CORPORATION
By:/s/ Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx
Managing Director
Accepted and Agreed
this 14th day of January, 1997
EXTENDED STAY AMERICA, INC.
BY:/s/ Xxxxxx X. Xxxxxxx
----------------------------
Xxxxxx X. Xxxxxxx
Senior Vice President and Chief Financial Officer
IN WITNESS WHEREOF, the parties have executed this Stockholder Agreement as
of the date first above written.
EXTENDED STAY AMERICA, INC.
By:/s/ Xxxxxx Xxxx Xxxxxxx, Jr.
-------------------------------
Authorized Representative
STOCKHOLDERS:
/s/ Xxxxxxx Xxxxxxx, Xx.
-------------------------------
Xxxxxxx Xxxxxxx, Xx.
XXXXXXX PARTNERS, L.P.
By: Xxxxxxx Management Company, LLC
General Partner
/s/ Xxxxxxx Xxxxxxx, Xx.
-------------------------------
Authorized Representative
