-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WvDYX4lPtO+p1qRSoEdGYaOxuxxWS2OkFZ/EeYm8Ip2MLY2rtsRMXlifzHHRg/qV zBACXKmZRVHWp0Es2PKrcQ== /in/edgar/work/0000950142-00-000863/0000950142-00-000863.txt : 20001018 0000950142-00-000863.hdr.sgml : 20001018 ACCESSION NUMBER: 0000950142-00-000863 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20001017 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LODGIAN INC CENTRAL INDEX KEY: 0001066138 STANDARD INDUSTRIAL CLASSIFICATION: [7011 ] IRS NUMBER: 522093696 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-54947 FILM NUMBER: 741208 BUSINESS ADDRESS: STREET 1: 3445 PEACHTREE ROAD N E SUITE 700 CITY: ATLANTA STATE: CA ZIP: 30326 BUSINESS PHONE: 4043649400 MAIL ADDRESS: STREET 1: 3445 PEACHTREE ROAD N E SUITE 700 CITY: ATLANTA STATE: CA ZIP: 30326 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: EDGECLIFF HOLDINGS LLC CENTRAL INDEX KEY: 0001109862 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 611359148 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 207 GRANDVIEW DRIVE CITY: FORT MITCHELL STATE: KY ZIP: 41017 BUSINESS PHONE: 6065781100 MAIL ADDRESS: STREET 1: 207 GRANDVIEW DRIVE CITY: FORT MICTCHELL STATE: KY ZIP: 41017 SC 13D/A 1 0001.txt AMENDMENT NO. 18 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 18) LODGIAN, INC. (Name of Issuer) Common Stock (Title of Class of Securities) 54021P106 (CUSIP Number) Edgecliff Holdings, LLC Casuarina Cayman Holdings Ltd. Edgecliff Management, LLC 1994 William J. Yung Family Trust Joseph Yung William J. Yung The 1998 William J. Yung and Martha A. Yung Family Trust 207 Grandview Drive Fort Mitchell, Kentucky 41017 Attn: Mr. William J. Yung with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, NY 10019-6064 Attn: James M. Dubin, Esq. October 16, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. 2 The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 3 Edgecliff Holdings, LLC ("Edgecliff"), Casuarina Cayman Holdings Ltd. ("Casuarina"), Edgecliff Management, LLC ("Management"), the 1994 William J. Yung Family Trust (the "1994 Trust"), William J. Yung, Joseph Yung, and The 1998 William J. Yung and Martha A. Yung Family Trust (the "1998 Trust") (collectively, the "Reporting Persons") hereby amend the report on Schedule 13D filed by certain of the Reporting Persons on October 19, 1999, as amended by Amendment No. 1 filed on November 12, 1999, as amended by Amendment No. 2 filed on November 16, 1999, as amended by Amendment No. 3 filed on November 22, 1999, as amended by Amendment No. 4 filed on December 29, 1999, as amended by Amendment No. 5, filed on January 18, 2000, as amended by Amendment No. 6 filed on April 7, 2000, as amended by Amendment No. 7 filed on April 18, 2000, as amended by Amendment No. 8 filed on May 4, 2000, as amended by Amendment No. 9 filed on May 30, 2000, as amended by Amendment No. 10 filed on July 14, 2000, as amended by Amendment No. 11 filed on July 19, 2000, as amended by Amendment No. 12 filed on July 20, 2000, as amended by Amendment No. 13 filed on August 22, 2000, as amended by Amendment No. 14 on August 31, 2000, as amended by Amendment No. 15 filed on September 8, 2000, as amended by Amendment No. 16 filed on September 18, 2000 and as amended by Amendment No. 17 filed on October 5, 2000 (the "Schedule 13D"), in respect of the common stock, par value $.01 per share, of Lodgian, Inc., a Delaware corporation ("Lodgian"), as set forth below. Item 1. SECURITY AND ISSUER. ------------------- Unchanged Item 2. IDENTITY AND BACKGROUND. ----------------------- Unchanged. Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. ------------------------------------------------- The information below supplements the information previously reported in item 3. As described in Item 4 below, Edgecliff has proposed, subject to due diligence and other customary conditions, to acquire Lodgian for $5.00 per share (the "Edgecliff Offer"). The Edgecliff Offer would be funded through a combination of cash from Edgecliff and its affiliates, preferred equity financing from DLJ Real Estate Capital Partners, Inc. ("DLJ") and debt financing raised by Lehman Brothers Inc. ("Lehman"). Edgecliff and an affiliate have entered into separate agreements with each of DLJ (the "DLJ Agreement") and Lehman (the "Lehman Agreement") relating to the Edgecliff Offer. Copies of the DLJ Agreement and the Lehman Agreement are attached hereto as Exhibits 29 and 30, respectively, and are incorporated herein by reference. The above descriptions of the DLJ Agreement and the Lehman Agreement are qualified in their entirety by reference to the terms of the respective agreements. Item 4. PURPOSE OF TRANSACTION. ---------------------- The information below supplements the information previously reported in item 4. 4 On October 15, 2000, Edgecliff delivered a letter to Lodgian in which it offered to acquire Lodgian for $5.00 per share of common stock, subject to due diligence and other customary conditions. A copy of the letter is attached hereto as Exhibit 31 and is incorporated herein by reference. The above description of the letter is qualified in its entirety by reference to the letter. Item 5. INTEREST IN SECURITIES OF THE ISSUER. ------------------------------------ Unchanged. Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH ------------------------------------------------------------- RESPECT TO SECURITIES OF THE ISSUER. ----------------------------------- Unchanged. Item 7. MATERIAL TO BE FILED AS EXHIBITS. -------------------------------- The Exhibit Index incorporated by reference in Item 7 of the Schedule 13D is hereby supplemented by adding the following to the end thereof. 29. DLJ Agreement. 30. Lehman Agreement. 31. Letter, dated October 16, 2000. 5 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 17, 2000 EDGECLIFF HOLDINGS, LLC By: /s/ William J. Yung --------------------------------------- Name: William J. Yung Title: President CASUARINA CAYMAN HOLDINGS LTD. By: /s/ William J. Yung --------------------------------------- Name: William J. Yung Title: President EDGECLIFF MANAGEMENT, LLC By: /s/ William J. Yung --------------------------------------- Name: William J. Yung Title: President 1994 WILLIAM J. YUNG FAMILY TRUST By: The Fifth Third Bank, as Trustee By: /s/ Timothy A. Rodgers ---------------------------------- Name: Timothy A. Rodgers Title: Trust Officer 6 /s/ Joseph Yung -------------------------------------------- Joseph Yung /s/ William J. Yung -------------------------------------------- William J. Yung THE 1998 WILLIAM J. YUNG AND MARTHA A. YUNG FAMILY TRUST By: The Fifth Third Bank, as Trustee By: /s/ Timothy A. Rodgers ---------------------------------- Name: Timothy A. Rodgers Title: Trust Officer 7 EXHIBIT INDEX ------------- EXHIBIT DESCRIPTION - ------- ----------- 1. Engagement Letter between Casuarina Cayman Holdings Ltd. and Greenhill & Co., LLC, dated November 10, 1999. 1/ 2. Letter to Lodgian, Inc. from Casuarina Cayman Holdings Ltd., dated November 16, 1999. 2/ 3. Letter to Casuarina Cayman Holdings Ltd. from Lodgian, Inc., dated November 19, 1999. 3/ 4. Letter to Lodgian, Inc. from Casuarina Cayman Holdings Ltd., dated November 22, 1999. 3/ 5. Joint Filing Agreement, dated November 22, 1999, among Casuarina Cayman Holdings Ltd., the 1994 William J. Yung Family Trust, Joseph Yung and William J. Yung. 3/ 6. Joint Filing Agreement, dated December 29, 1999, among Edgecliff Holdings, LLC, Casuarina Cayman Holdings Ltd., Edgecliff Management, LLC, 1994 William J. Yung Family Trust, Joseph Yung, William J. Yung and The 1998 William J. Yung and Martha A. Yung Family Trust. 4/ 7. Letter to Lodgian, Inc. from Casuarina Cayman Holdings Ltd., dated January 18, 2000. 5/ - ------------------------- 1/ Filed as an Exhibit to Amendment No. 1 to the Schedule 13D. 2/ Filed as an Exhibit to Amendment No. 2 to the Schedule 13D. 3/ Filed as an Exhibit to Amendment No. 3 to the Schedule 13D. 4/ Filed as an Exhibit to Amendment No. 4 to the Schedule 13D. 5/ Filed as an Exhibit to Amendment No. 5 to the Schedule 13D. 8 8. Joint Filing Agreement, dated January 18, 2000, among Edgecliff Holdings, LLC, Casuarina Cayman Holdings Ltd., Edgecliff Management, LLC, 1994 William J. Yung Family Trust, Joseph Yung, William J. Yung and The 1998 William J. Yung and Martha A. Yung Family Trust. 5/ 9. Complaint, dated April 7, 2000. 6/ 10. Motion, dated April 7, 2000. 6/ 11. Joint Filing Agreement, dated April 7, 2000, among Edgecliff Holdings, LLC, Casuarina Cayman Holdings Ltd., Edgecliff Management, LLC, 1994 William J. Yung Family Trust, Joseph Yung, William J. Yung and The 1998 William J. Yung and Martha A. Yung Family Trust. 6/ 12. Notice of Edgecliff Holdings, LLC to Lodgian, Inc., dated April 18, 2000. 7/ 13. Preliminary Proxy Statement of Edgecliff Holdings, LLC filed with the Securities and Exchange Commission on April 18, 2000. 7/ 14. Stockholder Request Letter to Lodgian, Inc. from Edgecliff Holdings, LLC, dated April 18, 2000. 7/ 15. Amendment No. 1 to Preliminary Proxy Statement of Edgecliff Holdings, LLC filed with the Securities and Exchange Commission on May 4, 2000. 8/ 16. Letter to Lodgian, Inc. from Casuarina Cayman Holdings Ltd., dated July 13, 2000. 9/ 17. Press Release issued by Lodgian, Inc., dated July 17, 2000. 10/ - ------------------------- 5/ Filed as an Exhibit to Amendment No. 5 to the Schedule 13D. 6/ Filed as an Exhibit to Amendment No. 6 to the Schedule 13D. 7/ Filed as an Exhibit to Amendment No. 7 to the Schedule 13D. 8/ Filed as an Exhibit to Amendment No. 8 to the Schedule 13D. 9/ Filed as an Exhibit to Amendment No. 10 to the Schedule 13D. 10/ Filed as an Exhibit to Amendment No. 11 to the Schedule 13D. 9 18. Letter to Lodgian, Inc. from Casuarina Cayman Holdings Ltd., dated July 17, 2000. 10/ 19. Complaint, dated July 19, 2000. 11/ 20. Motion, dated July 19, 2000. 11/ 21. Lodgian Complaint, dated August 16, 2000. 12/ 22. Definitive Proxy Statement of Edgecliff Holdings, LLC filed with the Securities and Exchange Commission on August 31, 2000. 13/ 23. Press Release, dated August 31, 2000. 13/ 24. Motion to Dismiss, dated September 7, 2000. 14/ 25. Additional Soliciting Material. 15/ 26. Additional Soliciting Material. 15/ 27. Press Release, dated October 3, 2000. 16/ 28. Additional Soliciting Material. 16/ 29. DLJ Agreement. 17/ 30. Lehman Agreement. 17/ 31. Letter, dated October 16, 2000. 17/ - ------------------------- 10/ Filed as an Exhibit to Amendment No. 11 to the Schedule 13D. 11/ Filed as an Exhibit to Amendment No. 12 to the Schedule 13D. 12/ Filed as an Exhibit to Amendment No. 13 to the Schedule 13D. 13/ Filed as an Exhibit to Amendment No. 14 to the Schedule 13D. 14/ Filed as an Exhibit to Amendment No. 15 to the Schedule 13D. 15/ Filed as an Exhibit to Amendment No. 16 to the Schedule 13D. 16/ Filed as an Exhibit to Amendment No. 17 to the Schedule 13D. 17/ Filed herewith. EX-99.29 2 0002.txt EXHIBIT 29 EXHIBIT 29 [LETTERHEAD OF DLJ REAL ESTATE CAPITAL PARTNERS, INC.] June 14, 2000 Columbia Sussex Corporation Attention: Mr. William J. Yung, President 207 Grandview Drive Ft. Mitchell, KY 41017-2799 Gentlemen: DLJ Real Estate Capital Partners, Inc. ("RECP") is pleased to provide you with this letter and the Memorandum of Understanding attached hereto as Appendix A with respect to our mutual interest in pursuing the acquisition and privatization of Lodgian, Inc. (NYSE: LOD) (the "Transaction"). This letter, together with the Memorandum of Understanding, is intended to confirm certain understandings between RECP and Columbia Sussex Corporation (together with its shareholders, directors and affiliates "Columbia Sussex"; RECP and Columbia Sussex herein referred to individually as a "Party" and collectively as the "Parties"), with respect to the Transaction. Subject to the requirements of applicable law, the terms and conditions of this letter, the Memorandum of Understanding and the Transaction, including the identities of all Parties, will be held by the Parties in strict confidence and will not be disclosed to anyone, other than legal counsel, agents and representatives who need to know such information in connection with the Transaction, otherwise as advisable after approval by RECP, or as required by law. Subject to the requirements of applicable law, neither Columbia Sussex nor RECP, their respective agents or representatives, shall make any news releases or other public disclosure with respect to the Transaction without the prior consent of the other Party. This letter is intended solely for the benefit of the Parties hereto and is not intended to confer, and shall not be deemed to confer, any benefits upon, or create any rights for or in favor of, any person other than the Parties. This letter shall be governed by the laws of the State of New York and may not be amended, and no provision hereof may be waived or modified, except by an instrument in writing signed by the party to be bound. Recognizing that RECP's review of the Transaction and the negotiation and drafting of documents have to date required and will continue to require RECP to expend significant time, effort and money, and to induce RECP to continue such review, negotiation and drafting, the Parties agree that from the date of their acceptance of this letter agreement until the earlier of December 31, 2001 or such time as either Party stops pursuing the Transaction (such period, the "Exclusivity Period") the Parties will negotiate in good faith with each other to consummate the Transaction, and will not, and will cause each Party's respective offices and directors and any advisors which have been retained for the purpose of evaluating the proposed Transaction to not, encourage any offers from, solicit, encourage, initiate, respond to (other than by a bare statement without further detail or explanation that they are not permitted to respond) or continue any discussions with, engage in or continue to engage in negotiations with, or provide any information to, or enter into any agreements or understandings with, any corporation, partnership, person, entity or group, other than the other Party and its respective officers, directors, employees and agents, concerning or relating to equity financing for the Transaction without the prior written consent of the other Party. Should a Party become aware Columbia Sussex Corporation June 14, 2000 Page 2 of any inquiry or request by another person or entity with respect to the Transaction, such Party shall promptly notify the other Party of such inquiry, indicate the identity of the offeror and the terms and conditions of any proposals or the nature of any inquiries or contacts, and thereafter keep all Parties informed, on a current basis, of the status and terms of any such proposals or offers. Upon the consummation of the Transaction, as and when requested by RECP, Columbia Sussex will promptly reimburse RECP for all of their actual legal and other out-of-pocket expenses in connection with the Transaction. Prior to the consummation of the Transaction, or in the event the Transaction is not consummated, as and when requested by RECP, Columbia Sussex will promptly reimburse RECP for all of their respective out-of-pocket expenses incurred in connection with the Transaction (including those incurred prior to the execution of this letter agreement), including up to $500,000 in fees and expenses of advisors, accountants, attorneys, consultants, and other parties whom RECP has engaged to assist them in connection with the Transaction. This letter sets forth the intent of the parties with respect to the transaction but, except for the third, fourth, fifth, and sixth paragraphs hereof, shall not create any legal or binding obligation. No such obligation (except for such paragraphs, which shall be immediately binding) shall arise unless and until mutually satisfactory definitive documentation (a "Definitive Agreement") has been executed and delivered by the Parties hereto. The obligations of RECP and Columbia Sussex under this letter agreement shall automatically terminate and be superseded by the provisions of a Definitive Agreement, if any. If the foregoing accurately summarizes your understanding with respect to the proposed Transaction, please date and execute the duplicate original of this letter that is enclosed and return the same to the undersigned. Sincerely, DLJ REAL ESTATE CAPITAL PARTNERS, INC. By: /s/ Philip C. Tager ------------------------------- Print: Philip C. Tager ------------------------------- Title: Senior Vice President ------------------------------- Accepted and agreed this 15TH day of June, 2000: COLUMBIA SUSSEX CORPORATION By: /s/ Joseph E. Marquet ------------------------ Print: Joseph E. Marquet ------------------------ Title: Vice President - Finance ------------------------ Columbia Sussex Corporation June 14, 2000 Page 3 APPENDIX A MEMORANDUM OF UNDERSTANDING DLJ REAL ESTATE CAPITAL PARTNERS, INC., EDGECLIFF, INC. AND COLUMBIA SUSSEX CORPORATION Issuer ............................ Edgecliff, Inc., a Delaware corporation (the "Issuer") wholly owned by Edgecliff Holdings, LLC ("Holdings"), the sole member of which is Edge Cliff Management, LLC (the sole members of which are William Yung and his family trusts). Issuer Equity Contribution ........ At a minimum, $50,000,000.00 (but in no event less than thirty percent (30%) of the total amount of equity to be contributed to the Issuer by Holdings and DLJ Real Estate Capital Partners, Inc. ("RECP") required to effect the Transaction (as hereinafter defined)) shall be contributed to the Issuer by Columbia Sussex Corporation and Holdings (such amount to be reduced by the cost of 4,191,800 shares of Lodgian, Inc. acquired by Columbia Sussex Corporation, Holdings and their affiliates as of the date hereof, currently estimated to be $18,000,000); such equity contribution shall be maintained by the Issuer until such time as all of the Preferred Stock has been redeemed by the Issuer. Preferred Stock ................... Cumulative Redeemable Preferred Stock of the Issuer. Stated Amount ..................... The lesser of (i) $150,000,000.00 and (ii) seventy percent (70%) of the total amount of equity to be contributed to the Issuer by Holdings and RECP required to effect the Transaction, provided that RECP shall have the right, but not the obligation, to contribute at least $100,000,000.00. The amount of debt of the Issuer shall be reduced in order to accommodate the minimum amount to be contributed hereunder and under the heading "Issuer Equity Contribution" above. Columbia Sussex Corporation June 14, 2000 Page 4 Issue Date ........................ The date the Preferred Stock is issued to the holder. Use of Proceeds ................... Solely for the acquisition and privatization of Lodgian, Inc. (the "Transaction"). Dividend Guaranty ................. Columbia Sussex Corporation ("Guarantor") shall guarantee the Issuer's payment of Quarterly Cash Dividends for the four quarters in the second year after the Issue Date. Hotel Assets ...................... All of the hotels and other assets owned by the Issuer, whether acquired before or after the Issue Date. Senior Debt ....................... Any existing debt as of the Issue Date and any other debt incurred by the Issuer after the Issue Date. Term .............................. 8 years. Stated Value ...................... $25 per share plus the dollar amount which will produce an annual IRR of 30% calculated on a quarterly basis on the Stated Amount of the Preferred Stock being redeemed by the Issuer; taking into consideration (i) any Quarterly Cash Dividends paid to date attributable to the value of such shares being redeemed and (ii) any payment of a portion of the Management Fee (as hereinafter defined) to the holder. Liquidation Preference; Ranking ... $25 per share plus the dollar amount which will produce an annual IRR of 30% calculated on a quarterly basis on the Stated Amount of the Preferred Stock then outstanding, taking into consideration (i) any Quarterly Cash Dividends paid to date attributable to the value of the outstanding Preferred Stock and (ii) any payment of a portion of the Management Fee to the holder. The Preferred Stock will rank senior, with respect to distributions upon liquidation, to (x) the Issuer's common stock and (y) any other classes of the Issuer's capital stock (common or preferred, whether now existing or created in the future). Quarterly Cash Dividend ........... 15% per annum is to be paid on the Stated Amount (as it may be increased pursuant to this paragraph) less any portion of the Management Fee actually received by the Columbia Sussex Corporation June 14, 2000 Page 5 holder; payable in cash quarterly in arrears; cumulative; the Quarterly Cash Dividend for the first quarter of the first year shall be paid in kind. Work-In-Progress Reserve Fund ..... There shall be set aside at closing an amount necessary to complete the work-in-progress construction of new Hotel Assets; such amount to be approved by the holder after completion of its due diligence. Excess Cash Flow from Operations .. Any net cash flow from operations in excess of debt service on the Senior Debt and FF&E reserves and any other required reserves under the Senior Debt documents or franchise agreements ("Excess Cash Flow") generated by the Issuer shall be used as follows: first to fund Interest Reserve (to be defined) requirements of the Senior Debt; second to pay Quarterly Cash Dividends of Preferred Stock; and third at the Issuer's option, to either repay Senior Debt or to redeem Preferred Stock, subject to the Optional Cash Redemption provision below. Upon or after the fifth anniversary of the Issue Date, any Excess Cash Flow generated by the Issuer shall be used to fund the Mandatory Redemption. Proceeds from Capital Events ...... All proceeds of a disposition or refinancing of any of the assets comprising the Hotel Assets shall be applied as and in the order set forth below: (i) FIRST, to pay third-party out-of-pocket costs and expenses incurred and paid in connection with such disposition or refinancing; (ii) SECOND, to fund payments required to discharge Senior Debt, in accordance with its terms, encumbering any property transferred; (iii)THIRD, to fund any payments required by any other Senior Debt, if any, after taking into consideration the $10,000,000 general basket allowed to the Issuer by the High Yield financing provided by Lehman Brothers, which basket shall be utilized to the fullest extent to provide for the payment to the holder of the amounts due hereunder; and Columbia Sussex Corporation June 14, 2000 Page 6 (iv) FOURTH, any additional proceeds shall be applied in the same manner as Excess Cash Flow. Veto Rights ....................... At all times while the holder owns any amount of Preferred Stock, the holder will be entitled to (i) prevent dividends, redemptions and other distributions with respect to the Issuer's capital stock (other than with respect to the Preferred Stock); (ii) prevent the Issuer from incurring any additional debt or from refinancing the Senior Debt unless any such replacement debt (A) shall contain covenants which are not more restrictive than those in the existing Senior Debt (provided further, that in connection with refinancing any Senior Debt upon its stated final maturity, any such replacement debt need only be on terms consistent with those generally available in the market place at the time of such refinancing so long as such replacement debt complies with clause (B) below and that the Issuer complies with clause (C) below at the time of such refinancing), (B) does not prohibit the Issuer from paying the holder the amounts payable hereunder as and when they are due and (C) the Issuer maintains, on a pro forma basis after incurring any such debt, a Cumulative Coverage Ratio (as hereinafter defined) equal to 1.1 during the first year after the Issue Date and the Cumulative Coverage Ratio increases by 0.1 per year thereafter; (iii) prevent the Issuer from liquidating or dissolving; (iv) prohibit mergers, consolidations, changes of control or similar transactions including the reduction in William Yung's investment in the Issuer; (v) prohibit sale or other disposition of the Hotel Assets except for a pre-determined list of hotels to be determined during the due diligence process; (vi) prohibit sale-leasebacks; (vii) place restrictions on major alterations or modifications (based on certain dollar thresholds) of any property except for a pre-determined list of hotels to be determined during the due diligence process; (viii) place restrictions on the issuance of additional equity (other than equity ranking junior to Preferred Stock); (ix) place restrictions on Columbia Sussex Corporation June 14, 2000 Page 7 transactions with affiliates of the Issuer other than with respect to the Management Agreement (as hereinafter defined); and (x) place restrictions on any change in the officers of the Issuer. "Cumulative Coverage Ratio" shall mean the ratio, for the latest four consecutive quarters, of EBITDA to an amount which is equal to the sum of (i) debt service on Senior Debt and (ii) Quarterly Cash Dividends. Additional Covenants .............. Those typical for this type of transaction and any additional ones appropriate in the context of the Transaction, including, without limitation, those set forth below: (i) prohibition on amendment of organizational documents; (ii) restrictions on modification of hotel management/franchise agreements; (iii)restrictions on amending or refinancing the Senior Debt; (iv) restrictions on making loans or other investments; (v) restrictions on the settlement of any claim, subject to the customary basket exclusions; (vi) except as otherwise authorized by the Senior Debt documents, restrictions on the restoration of properties after any casualty or condemnation; (vii)requirement to maintain insurance coverage; (viii) ERISA covenants; (ix) restrictions on capital expenditure; and (x) requirement to maintain a minimum amount of working capital, or in lieu thereof, an approved line of credit. Mandatory Redemption .............. All of the holders remaining Preferred Stock is mandatorily redeemable by the Issuer at the Liquidation Preference upon the fifth anniversary of the Issue Date. Columbia Sussex Corporation June 14, 2000 Page 8 Sale of Hotel Assets .............. If: (a) The Issuer fails to pay the holder the required amount of the Mandatory Redemption in cash as and when required, or (b) At any time after the first anniversary of the Issue Date, the Issuer fails to pay a Quarterly Cash Dividend as and when required, subject to any applicable cure period (including cure by the Guarantor), or (c) At any time after the first anniversary of the Issue Date, the Issuer defaults under any of the Veto Rights or Additional Covenants and such default is continuing after any applicable cure period, or (d) At any time after the first anniversary of the Issue Date, the Guarantor fails to pay the holder any amount due and payable under the Dividend Guaranty within 30 days after the holder demands payment, or (e) The Issuer fails to comply with the restrictions placed upon the use of Excess Cash Flow, or (f) The Issuer fails to purchase any Preferred Stock put to it in accordance with the provisions described under "Certain Events", or (g) a default under the Senior Debt at any time after the Issue Date, subject to any applicable notice and cure period under the Senior Debt documents. (Such events described in clauses (a) - (g) collectively referred to as the "Redemption Defaults"), then the holder will immediately have the right (but not the obligation) to direct the sale of the Hotel Assets by merger, consolidation or single or multiple asset sale (collectively, hereinafter referred to as "Hotel Asset Sales"). After application of the net proceeds from such Hotel Asset Sales to the payment of any outstanding Quarterly Cash Dividends and the Liquidation Preference, the Issuer's Columbia Sussex Corporation June 14, 2000 Page 9 redemption obligation will continue to be in default to the extent of any cumulative remaining deficiency. To the extent any net proceeds from Hotel Asset Sales exceed any outstanding Quarterly Cash Dividend and the Liquidation Preference, the Issuer shall be entitled to the residual of such proceeds. Hotel Asset Sales will be effected in a manner that does not conflict with the limitations set forth in any instrument evidencing the Senior Debt ("Senior Debt Instruments"). Optional Cash Redemption .......... The Issuer has the option to redeem the Preferred Stock for cash, at the Stated Value (plus accrued and unpaid dividends) in accordance with the following schedule: a. Years 1 and 2 No Optional Cash Redemption b. From the second Redemption of anniversary of one-third of the the Issue Date - Preferred Stock end of Year 3 c. From the third Redemption of an anniversary of additional 42% of the Issue Date - the end Preferred end of year 4 Stock d. From the fourth Redemption of the anniversary of remaining Preferred the Issue Date - Stock outstanding end of year 5 e. Anytime: IPO Redemption of all Preferred Stock outstanding Certain Events .................... Upon (i) any voluntary or involuntary, direct or indirect change of control of Issuer or Guarantor (by sale of capital stock, merger, consolidation or otherwise) or (ii) any amendment or modification to the Senior Debt Instruments after the Issue Date that reduces or limits the amount of cash or other consideration that the Issuer is able to pay in order to fund a dividend or redemption payment provided for under the terms of the Preferred Stock or otherwise would preclude the performance by the Issuer of its obligations under the terms of the Preferred Columbia Sussex Corporation June 14, 2000 Page 10 Stock, the holder will have the option to put all of the Preferred Stock to the Issuer for cash at the Liquidation Preference. Notwithstanding the foregoing, the transfer of William Yung's interest in the Issuer upon his death shall not be deemed a change of control for the purposes of clause (i) above; however, upon William Yung's death, the holder shall have the right to approve the new chief executive officer of both the Issuer and the Management Company (as hereinafter defined), such approval shall not be unreasonably withheld by the holder. Public Offerings of Stock; IPO Redemption; Redemption Premium .... The holder will have customary "piggy-back" rights in public offerings of any class of stock. In the event of the initial public offering of the common stock of the Issuer, the holder shall be entitled to a redemption premium equal to the greater of (i) the initial Stated Amount and (ii) the dollar amount which would produce an annual IRR of 30% calculated on a quarterly basis on the initial Stated Amount as calculated at the time such initial public offering occurs. Management ........................ The Hotel Assets shall be managed by an affiliate of Columbia Sussex Corporation reasonably approved by the holder (the "Management Company") pursuant to a management agreement acceptable to the holder (the "Management Agreement"). The Management Agreement shall provide that upon a Redemption Default, the holder shall have the right to terminate the Management Agreement. The Management Company shall receive a 4% management fee from the Issuer (the "Management Fee"). The holder shall own twenty-five percent of the Management Company and the governance structure of the Board of Directors of the Management Company shall mirror that of the Issuer. A dividend equal to twenty-five percent of the Management Fee shall be paid to the holder. Upon redemption in full of the Preferred Stock, the Issuer shall have the right to purchase the holder's interest in the Management Company for $1.00. Columbia Sussex Corporation June 14, 2000 Page 11 Officers of Management Company .... The officers of the Management Company shall include a chief financial officer, an accounting officer and chief operating officer approved by the holder from time to time. Voting Rights ..................... After the Issue Date and until such time as all Preferred Stock has been redeemed by the Issuer, the holder will have the sole right to elect three directors to the Board of Directors of the Issuer, which directors shall comprise 50% of such Board of Directors. During the pendency of any Redemption Default, the holder will have the right to take control of the Board of Directors of Issuer by expanding the Board of Directors to add an additional director and the holder shall have the right to appoint such additional director. After the appointment of such additional director, the majority of the Board of Directors shall have the right to replace the officers of the Issuer and such new officers shall have the right, among other things, to (i) declare and pay the defaulted and all future Quarterly Cash Dividends and to provide for any unpaid and any future Mandatory Redemption payments (in each case out of funds legally available therefor); (ii) to direct the sale of Hotel Assets in order to fund any defaulted dividend or redemption obligation; (iii) terminate the Management Agreement and enter into a new management agreement with a management company selected by the holder; and (iv) take any such actions as the Board of Directors may direct. Information ....................... Until all of the Preferred Stock has been redeemed, the Issuer will furnish the holder with (i) monthly consolidated profit and loss statements and monthly profit and loss statements for each property comprising the Hotel Assets, (ii) quarterly consolidated financial statements and (iii) any other available financial information it may request. Conditions to Closing ............. (i) The holders of the Senior Debt must consent to the terms of the Preferred Stock; (ii) Satisfactory completion of due diligence by the holder; and Columbia Sussex Corporation June 14, 2000 Page 12 (iii)Final approval of the holder's investment committee. Placement Fee ..................... 2% of the Stated Amount payable to the holder upon closing of the Transaction. Break-Up Fee ...................... 50% of any "break-up fee" the Issuer may be entitled to pursuant to any agreement with Lodgian, Inc. Transfer of Preferred Stock/RECP's Interest in the holder ............ RECP shall have the right to transfer (i) up to 49% of the shares of Preferred Stock and/or (ii) up to 49% of its interest in the holder. Transfer of RECP's Interest in the Management Company ............ RECP shall not transfer any interest in the Management Company to a third party that does not hold the Preferred Stock or any interest in the holder. Other Terms ....................... The Preferred Stock purchase agreement will contain representations, warranties, closing conditions and opinion requirements as the holder may reasonably request; outside counsel to the Issuer must opine on the validity of the Preferred Stock and the Special Committee; the Issuer will reimburse the holder for its reasonable legal and other expenses in connection with the issuance of the Preferred Stock; other terms as agreed. EX-99.30 3 0003.txt EXHIBIT 30 EXHIBIT 30 [GRAPHIC OMITTED] LEHMAN BROTHERS ENGAGEMENT LETTER October 13, 2000 Edgecliff Holdings LLC 207 Grandview Drive Fort Mitchell, Kentucky 41017-2799 Attention: Mr. Joseph E. Marquet Dear Mr. Marquet: This engagement letter agreement (this "Agreement") will confirm the understanding and agreement between Lehman Brothers Inc. ("Lehman Brothers" or the "Manager") and Edgecliff Holdings LLC, a Kentucky limited liability company (together with each of its subsidiaries, the "Company"), in connection with the proposed financing in connection with the acquisition of all of the issued and outstanding common stock and the refinancing of certain indebtedness of Lodgian, Inc. (together with each of its subsidiaries, the "Acquired Business"). We understand that the Company proposes to sign an agreement (the "Acquisition Agreement") to acquire all of the issued and outstanding common stock of the Acquired Business (the "Acquisition"). This Agreement will confirm our agreement with you concerning certain terms and conditions related to the retention of the Manager as the lead underwriter, lead initial purchaser and/or lead placement agent in connection with the sale of high yield securities (the "High Yield Securities") and mortgage notes (the "Mortgage Notes") (the High Yield Securities and Mortgage Notes are collectively referred to as the "Permanent Securities"), as well as our understanding concerning related fees and expenses, indemnification obligations and other matters. 1. RETENTION. (a) Subject to subparagraph (c) below, the Company hereby confirms that it retains the Manager to act as the exclusive lead underwriter, lead initial purchaser and/or lead placement agent for the Company and for its affiliates in connection with any underwritten offering or private placement (including, without limitation, the purchase and resale of securities pursuant to Rule 144A (a "Rule 144A Transaction") under the Securities Act of 1933, as amended (the "Act"), of the Permanent Securities issued by the Company or any of its affiliates, the proceeds of which will be applied to finance (or refinance) any portion of the purchase price to be paid in connection with the Acquisition and to refinance certain indebtedness of the Acquired Business. The Manager's assignment may also include the arranging of a working capital facility if so requested by the company. (b) The Company agrees that for the term of this Agreement none of the Company or its affiliates, officers, directors or equity holders will directly or indirectly offer any of the Permanent Securities for sale to, or solicit any offer to purchase any of the same in connection with financing the Acquisition and refinancing the Indebtedness of the Acquired Business from, or otherwise contact, approach or negotiate with respect thereto with, any person or persons (including any co-managers) other than through the Manager (or through its affiliates). (c) Notwithstanding anything to the contrary contained herein or any oral representations or assurances previously or subsequently made by the parties hereto, this Agreement does not constitute a commitment by or legally binding obligation of the Manager or any of its affiliates to act as exclusive underwriter, initial purchaser and/or placement agent in connection with any offering of securities or to provide any financing. Such a commitment on the part of the Manager or any of its affiliates will exist only upon the execution of a final, written underwriting, purchase or placement agent agreement, and then only in accordance with the terms and conditions thereof. (d) The Manager also will provide financial advisory services as requested by the Company. The Company agrees that the Manager has the right to place advertisements in financial and other newspapers and journals at its own expense describing its services to the Company, provided that the Manager will submit a copy of any such advertisements to the Company prior to their inclusion in any newspaper or journal for its approval, which approval shall not be unreasonably withheld. Furthermore, the Company agrees to include a reference to the Manager's role as financial advisor in any press release announcing the transaction so long as such reference would not, in the opinion of counsel to the Company, violate any federal or state securities laws. (e) During the term of this Agreement, Lehman Brothers undertakes not to enter into any agreement with any third party (including any potential buyer) the scope of which relates to the acquisition or sale of any controlling interest in the Acquired Business without the prior consent of the Company or until the Company ceases to pursue the Acquisition actively. 2. TERM OF THIS AGREEMENT. The term of this Agreement shall extend until terminated in accordance with Section 8 hereof. 3. TERMS OF PERMANENT SECURITIES. The Manager will work with the Company to determine the specific types, terms and conditions of the Permanent Securities, to be mutually agreed upon by the parties hereto, based upon the then prevailing market conditions and the business, operations, financial condition, management, prospects, and value of the Company and the Acquired Business. The Parties currently contemplate that the Permanent Securities will take the form of high yield securities and mortgage backed bonds to be issued at market rates. The collateral for such securities will in no event include a pledge of Lodgian stock acquired by the Company. 4. FEES AND EXPENSES. (a) PLACEMENT FEE. As compensation for placing the Permanent Securities, the Company agrees to pay the Manager a fee equal to: (i) 3.00% of the aggregate principal amount of the High Yield Securities, and (ii) 1.75% of the aggregate principal amount of the Mortgage Notes, provided however, that if the interest rate spread achieved over one-month LIBOR shall be less than 2.00% (the "Spread") (based on monthly pay, in arrears, and calculated on the basis of actual days elapsed in a 360-day year), the Loan Fee shall increase in an amount equal to the amount by which the actual spread is less than the Spread; provided further, however, in no event shall the Loan Fee exceed 2.25%. For example, if the spread achieved shall equal 1.90%, the Loan Fee shall be 1.85%. In the event that the Permanent Securities are purchased by the Manager from the Company on a backstopped or committed basis, the schedule of placement fees will change and will be negotiated by the Manager and the Company at such time as both the Manager and the Company elect to pursue the transaction on such basis. (b) EXPENSES. Whether or not the Acquisition is consummated, the Company hereby agrees to reimburse the Manager, promptly upon demand, for all reasonable out-of-pocket costs and expenses incurred by the Manager in connection with the transactions contemplated by this Agreement, whether incurred prior or subsequent to the date hereof, including, without limitation, (i) travel expenses, 2 professional fees or other expenses incurred in connection with our due diligence investigation of the Company and the Acquired Business and the reasonable fees and disbursements of Manager's legal counsel, in connection with the transactions contemplated hereby; provided, however, that with respect to any financing that is consummated by means of a public offering of the Permanent Securities or a Rule 144A Transaction, the expenses of Manager's legal counsel relating thereto will be borne by the Manager, other than customary Blue Sky fees and expenses, which fees and expenses will be borne by the Company. Once the transaction structure, proceeds amounts and types of securities to be utilized has been established, the Manager will provide the Borrower with an Expense Budget. 5. COOPERATION. The Company agrees that it and its affiliates will cooperate with the Manager and provide information reasonably required by the Manager in connection with the offer, sale and placement of, or obtaining commitments for the purchase of, the Permanent Securities and any other financing contemplated by this Agreement. 6. CONFIDENTIALITY. Except as required by applicable law, any financial advice rendered by the Manager pursuant to this Agreement may not be disclosed publicly in any manner without the Manager's prior written approval and will be treated as confidential. The Company will provide the Manager with all financial and other information requested by the Manager for the purpose of rendering its services pursuant to this Agreement. Except as required by applicable law, any reference to the Manager or any of its affiliates in this Agreement may not be disclosed publicly in any manner without such party's prior approval, and this Agreement and its contents will be treated by the Company as confidential except that such references may be made in any tender offer or other documents required to be filed with the Securities and Exchange Commission or documents sent to the Company, Lodgian Inc.'s security holders or Lodgian Inc., provided that such references are reviewed and approved by Lehman Brothers, which approval will not be unreasonably withheld. 7. INDEMNIFICATION. (a) The Company hereby agrees to indemnify and hold harmless the Manager and each of its officers, directors, partners, trustees, employees, advisors and agents (each, an "indemnified person") from and against any and all losses, claims, damages and liabilities to which any indemnified person may become subject (i) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any preliminary offering memorandum, offering memorandum or any other similar disclosure document or in any amendment or supplement thereto, any omission or alleged omission to state in any preliminary offering memorandum, offering memorandum or any other similar disclosure document or in any amendment or supplement thereto any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) arising in any manner out of or in connection with the transactions contemplated by this Agreement and shall reimburse each indemnified person promptly for any reasonable legal or other expenses reasonably incurred by it in connection with investigating, preparing to defend or defending, or providing evidence in or preparing to serve or serving as a witness with respect to, any lawsuits, investigations, claims or other proceedings arising in any manner out of or in connection with the transactions contemplated by this Agreement (including, without limitation, in connection with the enforcement of the indemnification obligations set forth herein); provided, however, that no indemnified person shall be entitled to indemnity (A) under clause (i) above in respect of any loss, claim, damage, liability or expense resulting from any information concerning the Manager furnished to the Company by the Manager specifically for inclusion in the above-described documents or (B) under clause (ii) above in respect of any loss, claim, damage, liability or expense to the extent that it is finally judicially determined that such loss, claim, damage, liability or expense resulted directly from the gross negligence or willful misconduct of such indemnified person. 3 (b) The Company further agrees that without the Manager's prior written consent, which consent will not be unreasonably withheld, it will not enter into any settlement of a lawsuit, claim or other proceeding arising out of the transactions contemplated by this Agreement unless such settlement includes an explicit and unconditional release from the party bringing such lawsuit, claim or other proceeding of all indemnified persons. (c) In case any action or proceeding shall be instituted involving any indemnified person for which indemnification is to be sought hereunder by such indemnified person, then such indemnified person shall promptly notify the Company of the commencement of any action or proceeding; provided, however, that the failure so to notify the Company shall not relieve the Company from any liability that it may have to such indemnified person pursuant to this Section 7 or from any liability that they may have to such indemnified person other than pursuant to this Section 7 except to the extent the Company was unaware of such action or proceeding and has been prejudiced in any material respect by such failure. Notwithstanding the above, following such notification, the Company may elect in writing to assume the defense of such action or proceeding, and, upon such election, it shall not be liable for any legal costs subsequently incurred by such indemnified person (other than reasonable costs of investigation and providing evidence) in connection therewith, unless (i) they have failed to provide counsel reasonably satisfactory to such indemnified person in a timely manner, (ii) counsel provided by the Company reasonably determines that its representation of such indemnified person would present it with a conflict of interest or (iii) the indemnified person reasonably determines that there may be legal defenses available to it which are different from or in addition to those available to the Company. In connection with any one action or proceeding, the Company shall not be responsible for the fees and expenses of more than one separate law firm (in addition to local counsel) for all indemnified persons. (d) The Company and the Manager agree that if any indemnification or reimbursement sought pursuant to this Section 7 is judicially determined to be unavailable for a reason other than as set forth in the proviso at the end of the first paragraph of this Section 7, then, whether or not the Manager is the indemnified person, the Company, on the one hand, and the Manager, on the other hand, shall contribute to the losses, claims, damages, liabilities and expenses for which such indemnification or reimbursement is held unavailable (i) in such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and the Manager, on the other hand, in connection with the transactions to which such indemnification or reimbursement relates, or (ii) if the allocation provided by clause (i) above is judicially determined not to be permitted, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative faults of the Company, on the one hand, and the Manager, on the other hand, as well as any other equitable considerations; provided, however, that in no event shall the amount to be contributed by the Manager pursuant to this paragraph exceed the amount of the fees actually received by the Manager in connection with the transactions contemplated by this Agreement. 8. TERMINATION. This Agreement may be terminated without liability or continuing obligations (except as provided below) by the Company or the Manager at any time upon 15 days' written notice, and, in any event, shall expire on the first anniversary of the date hereof, provided, however, that (A) the Company's obligations and liabilities to pay fees and expenses accrued hereunder to the date of termination or expiration, as the case may be, and any obligations and liabilities for indemnification, reimbursement and contribution and the agreements relating to confidentiality contained in Section 6 hereof will, in each case, continue in the event of any such termination or expiration in accordance with their terms and (B) if this Agreement expires or is terminated by the Company and, within 12 months of such expiration or termination of this Agreement, the Company (or any affiliate or subsidiary thereof) issues any Permanent Securities or enters into any financing transaction involving similar securities (whether debt, mezzanine or any other related securities) in connection with financing the Acquisition and refinancing the indebtedness of the Acquired Business in which the Manager did not act as the exclusive 4 lead underwriter, lead initial purchaser and/or lead placement agent, the Company hereby agrees to pay a fee on the date and in an amount equal to the fee that would have been payable to the Manager if the Manager did act as the lead underwriter, lead initial purchaser and/or lead placement agent or financial advisor in connection with such transaction pursuant to the terms hereof; provided, however, that clause (B) shall not apply in respect of any placement of securities with DLJ Real Estate Capital Partners or any placement of securities substantially similar to the securities contemplated to be issued to DLJ Real Estate Capital Partners with a third-party other than DLJ Real Estate Capital Partners (together, the "DLJ Securities"). DLJ Securities specifically exclude all types of straight debt such as high yield debt, investment grade debt, bank debt (other than a working capital facility) or mortgage backed security debt, among others. 9. SURVIVAL; ASSIGNMENT. The provisions of this Agreement relating to the payment of fees and expenses, indemnification and contribution and the agreements relating to confidentiality and the provisions of Section 10 below will survive the expiration or termination of this Agreement (including any extensions hereof). 10. CHOICE OF LAW; JURISDICTION; WAIVERS. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. To the fullest extent permitted by applicable law, each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court or Federal court sitting in the County of New York in respect of any suit, action or proceeding arising out of or relating to the provisions of this Agreement and irrevocably agrees that all claims in respect of any such suit, action or proceeding may be heard and determined in any such court. The parties hereto hereby waive, to the fullest extent permitted by applicable law, any objection that they may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in any such court, and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right to trial by jury with respect to any action or proceeding arising out of or relating to this Agreement. 11. MISCELLANEOUS. (a) This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same instrument. (b) This Agreement sets forth the entire understanding of the parties hereto as to the scope of the engagement and the Manager's obligations thereunder. This Agreement shall supersede all prior understandings and proposals, whether written or oral, between the Manager and you relating to the transactions contemplated hereby. (c) This Agreement has been and is made solely for the benefit of the parties hereto, the indemnified persons, and their respective successors and assigns, and nothing in this Agreement, expressed or implied, is intended to confer or does confer on any other person or entity any rights or remedies under or by reason of this Agreement or the covenants of the parties contained herein. (d) The Manager and its affiliates are a full service financial firm and as such from time to time may effect transactions for its own accounts or the account of customers, and hold long or short positions in debt or equity securities or loans of companies that may be the subject of the transactions contemplated by this Agreement. 5 Please confirm that the foregoing is in accordance with your understanding by signing and returning to the Manager the enclosed duplicate of this Agreement. Sincerely yours, LEHMAN BROTHERS INC. By: /s/ Ali Elam ----------------------------- Name: Ali Elam Title: Senior Vice President Accepted and agreed to as of the date first above written: EDGECLIFF HOLDINGS LLC By: /s/ Joseph E. Marquet -------------------------------- Name: Joseph E. Marquet Title: Vice President of Finance 6 EX-99.31 4 0004.txt EXHIBIT 31 EXHIBIT 31 EDGECLIFF HOLDINGS, LLC 207 Grandview Drive Fort Mitchell, KY 41017 October 16, 2000 Lodgian, Inc. 3445 Peachtree Road, NE Suite 700 Atlanta, GA 30326 Attention: Mr. Robert S. Cole, President and Chief Executive Officer Dear Mr. Cole: The purpose of this letter is to reaffirm, for the benefit of your Board and your stockholders, our interest in acquiring all of the capital stock of Lodgian, Inc. ("Lodgian"). On October 12, Lodgian announced that it had received a non-binding proposal from Whitehall Street Real Estate Limited Partnership XIII and its affiliates ("Whitehall") to acquire all of Lodgian's outstanding shares, subject to due diligence and the satisfaction of numerous conditions, for a cash price of between $4.00 and $4.50 per share (the "Whitehall Proposal"). In connection with its receipt of the Whitehall Proposal, Lodgian announced that it had granted Whitehall an exclusive 60-day period in which to conduct its due diligence and negotiate definitive transaction agreements. As you are aware, we have made several all-cash offers to acquire the company over the last year. Lodgian's Board has consistently rejected our efforts, and has continuously refused to negotiate with us. We hereby offer to acquire Lodgian for $5.00 per share. This is an all-cash offer to purchase all outstanding shares, which would be funded through a combination of equity and debt from Edgecliff Holdings, LLC, DLJ Real Estate Capital Partners, Inc. and Lehman Brothers Inc. This offer is subject to due diligence and other customary conditions. Although we would have preferred to make an offer that is not subject to any due diligence condition, Lodgian's continuing refusal to provide us with access to customary information despite our repeated indications of interest in acquiring Lodgian and despite our willingness to enter into a customary confidentiality agreement left us with no practical alternative. We are prepared to begin conducting due diligence and negotiating definitive transaction agreements in connection with our offer immediately, with the expectation 2 that such due diligence and definitive agreements could be completed within a 45-day period. We have signed and enclosed a standard confidentiality agreement. As you are aware, in light of your Board's decision to pursue an all-cash sale of Lodgian to Whitehall, your Board has a fiduciary responsibility to conduct a full and fair sale process, which includes providing competing bidders with equivalent company information. Accordingly, we hereby request that you provide us with access to the requisite non-public due diligence information that would allow us to proceed with our offer, as you have already begun to provide Whitehall such access in connection with the Whitehall Proposal. In light of your Board's fiduciary obligations, we do not understand how Lodgian could legally enter into an exclusivity agreement with Whitehall, commit to reimburse Whitehall's expenses of up to $3.5 million and grant to Whitehall a five-day right to match any competing offer without first approaching us to determine our willingness to make a superior offer. We believe that these facts, coupled with Lodgian's 3:30 a.m. announcement of its dealings with Whitehall on the morning of its long delayed 2000 annual meeting of stockholders and its immediate postponement of that meeting, demonstrates that the company's primary goal was to prevent Lodgian's stockholders from electing our nominees to Lodgian's Board, rather than to maximize stockholder value. We intend to pursue vigorously the election of our nominees to the Board, and, as you are aware, have already requested an order from the Delaware Court of Chancery to protect the right of Lodgian's stockholders to a timely election process and to stop the flagrant abuse of Lodgian's corporate governance procedures by Lodgian's Board. We are prepared to meet promptly with you and your representatives to answer any questions you may have about our offer and to negotiate a mutually beneficial transaction. You may reach me at our office (859-578-1100). 3 In light of your Board's fiduciary duties, we expect to hear from you promptly. In addition, we do not expect that Lodgian will take any action that would interfere with the ability of Lodgian's stockholders to receive the maximum value for their shares, including entering into any agreement to sell additional assets or grant break-up fees or reimbursements of additional expenses, without first approaching us. If we do not hear from you promptly concerning our offer, we will take such further actions as we deem appropriate. Very truly yours, /s/ William J. Yung ------------------- William J. Yung President cc: Joseph C. Calabro John M. Lang Michael A. Leven Peter R. Tyson Richard H. Weiner -----END PRIVACY-ENHANCED MESSAGE-----