-----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, DJnJkHAGLo/ZvVWSZ03BOdEZpkSBOGF2LiQ3JPVLkKDfI2stWK4G+sF+m1EHiS6j fupEw6KzGSOHkFCSYYK1zw== 0000950142-00-000345.txt : 20000419 0000950142-00-000345.hdr.sgml : 20000419 ACCESSION NUMBER: 0000950142-00-000345 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20000418 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LODGIAN INC CENTRAL INDEX KEY: 0001066138 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [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: 603763 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 AMENDMENT NO. 7 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 7) 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. April 18, 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. 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). 2 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, and as amended by Amendment No. 6 filed on April 7, 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 4. Purpose of Transaction. The information below supplements the information previously reported in Item 4. On April 18, 2000, Edgecliff delivered formal notice to Lodgian in accordance with the requirements of Lodgian's by-laws (the "Notice") of its intention to nominate candidates for election to Lodgian's Board of Directors at Lodgian's 2000 Annual Meeting of Stockholders (the "Annual Meeting") who, subject to their fiduciary duties to Lodgian's stockholders, are expected to strongly advocate a sale of Lodgian to the highest bidder, whether to the Reporting Persons or to any other party offering an acquisition proposal deemed to be superior. The Notice also sets forth Edgecliff's intent to present a stockholder proposal at the Annual Meeting intended to deter the current members of the Board from amending Lodgian's by-laws in a manner that would create obstacles to the consummation of such an acquisition. The above description of the Notice is qualified in its entirety by reference to the Notice, a copy of which is attached hereto as Exhibit 12 and is incorporated herein by reference. Also on April 18, 2000, Edgecliff filed a preliminary proxy statement with the Securities and Exchange Commission (the "Preliminary Proxy Statement") to be used in connection with the solicitation of proxies from Lodgian's stockholders to be used at the Annual Meeting in support of its candidates for election to Lodgian's Board of Directors and its stockholder proposal as described above. A copy of the Preliminary Proxy Statement is attached hereto as Exhibit 13 and is incorporated herein by reference. Also on April 18, 2000, Edgecliff, in accordance with its rights under Delaware law, delivered to Lodgian a letter demanding the right to inspect and to make copies of certain of Lodgian records, including a list of the names and addresses of all holders of common stock of Lodgian (the "Stockholder Request Letter"). A copy of the Stockholder Request Letter is attached hereto as Exhibit 14 and is incorporated herein by reference. 3 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. 12 Notice of Edgecliff Holdings, LLC to Lodgian, Inc., dated April 18, 2000 13 Preliminary Proxy Statement of Edgecliff Holdings, LLC filed with the Securities and Exchange Commission on April 18, 2000. 14 Stockholder Request Letter to Lodgian, Inc. from Edgecliff Holdings, LLC, dated April 18, 2000. 4 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: April 18, 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 5 /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 EX-12 2 EXHIBIT 12 Exhibit 12 EDGECLIFF HOLDINGS, LLC 207 Grandview Drive Fort Mitchell, Kentucky 41017 April 18, 2000 Lodgian, Inc. 3445 Peachtree Road N.E. Suite 700 Atlanta, Georgia 30326 Attention: Thomas Gryboski, Secretary of Lodgian, Inc. Re: Notice of Intention to Nominate Candidates for Election to the Board of Directors and to Present a Stockholder Proposal at the 2000 Annual Meeting of Lodgian, Inc. -------------------------------------------- Dear Mr. Gryboski: Edgecliff Holdings, LLC, a Kentucky limited liability company ("Edgecliff"), is the record and beneficial owner of 2,598,100 shares of the common stock, par value $.01 (the "Shares"), of Lodgian, Inc., a Delaware corporation (the "Company"). This notice (including Appendix I and the Exhibits attached hereto, the "Notice") of the intention of Edgecliff to nominate candidates for election to the Board of Directors of the Company (the "Board") and to present a stockholder proposal at the 2000 Annual Meeting of Stockholders of the Company, including any adjournments or postponements thereof or any special meeting that may be called in lieu thereof (the "2000 Annual Meeting"), is being delivered in accordance with the requirements set forth under Section 10 of Article II (the "Proposal Requirements") and Section 3 of Article III (the "Nomination Requirements") of the Amended Restated By-Laws of the Company (the "By-Laws"). Pursuant to the Nomination Requirements, this Notice sets forth with respect to each of the Edgecliff Nominees (as defined below): (a) the name, age, business address and residence address of the person; (b) the principal occupation or employment of the person; (c) the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by the person; and (d) such other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder. In addition, pursuant to the Nomination Requirements, this Notice sets forth: (1) the name and record address of Edgecliff; (2) the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by Edgecliff; (3) a description of all arrangements or understandings between Edgecliff and each of the Edgecliff Nominees and any other person or persons (including their names) pursuant to which the nominations are to be made by Edgecliff; (4) a representation that Edgecliff intends to appear in person or by proxy at the 2000 Annual Meeting to nominate the Edgecliff Nominees; and (5) such other information relating to Edgecliff that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Pursuant to the Nomination Requirements, this Notice also attaches as Exhibit A hereto evidence of Edgecliff's beneficial ownership of the capital stock of the Company and as Exhibit B hereto signed consents executed by each of the Edgecliff Nominees to being named as a nominee and to serve as a director of the Company if elected. Pursuant to the Proposal Requirements, this Notice sets forth: (a) a brief description of the business desired to be brought before the 2000 Annual Meeting (other than the nomination and election of the Edgecliff Nominees) and the reasons for conducting such business at the 2000 Annual Meeting; (b) the name and record address of Edgecliff; (c) the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by Edgecliff; (d) a description of all arrangements or understandings between Edgecliff and any other person or persons (including their names) in connection with the proposal of such business by Edgecliff and any material interest of Edgecliff in such business; and (e) a representation that Edgecliff intends to appear in person or by proxy at the 2000 Annual Meeting to bring such business before the meeting. Pursuant to the Proposal Requirements, this Notice also attaches as Exhibit A hereto evidence of Edgecliff's beneficial ownership of the capital stock of the Company. A. Background On November 10, 1999, the Edgecliff Group (as defined in Appendix I) retained Greenhill & Co., LLC ("Greenhill") to act as its financial advisor and to assist it in evaluating its strategic alternatives with respect to its investment in the Company. By letter dated November 16, 1999, the Edgecliff Group informed the Company of its intention to offer to acquire the Company at a price of $6.50 per Share (the "Offer") and requested certain due diligence information from the Company. By letter dated November 19, 1999, the Company informed Casuarina Cayman Holdings Ltd. ("Casuarina"), a member of the Edgecliff Group, that the Offer was rejected. The Company in its November 19, 1999 letter stated that the terms and conditions of the Offer were not in the best interests of the Company's stockholders. Moreover, the Company stated that the price Casuarina contemplated 2 offering for the Shares materially understated the value of the Company's business and assets. By letter dated November 22, 1999, the Edgecliff Group informed the Company that it did not know what the Company meant by "terms and conditions" since the Edgecliff Group's November 19 letter did not set forth any terms and conditions and did not even use the phrase. In any case, the Edgecliff Group urged the Company to reconsider the Offer and to provide the information previously requested in connection therewith. The letter underscored that an offer of $6.50 per Share was approximately a 50% premium over recent trading levels, and that providing the requested due diligence materials could enable the Edgecliff Group to increase its valuation above $6.50. By letter dated January 3, 2000, the Company informed Casuarina that it had retained Morgan Stanley Dean Witter as its financial advisor to assist the Company in exploring alternatives to maximize stockholder value. The Company stated that it was willing to provide Casuarina certain non-public, confidential information regarding the Company if Casuarina was willing to demonstrate the ability to finance a transaction at an appropriate price to the Company's stockholders and execute a confidentiality agreement with a standstill provision. Lastly, the Company stated that because Casuarina had been unwilling to do either, the Company believed that it was not in the best interest of the stockholders to grant Casuarina access to confidential, non- public information. By letter dated January 5, 2000, Casuarina informed the Company that it was prepared to execute a customary mutual confidentiality agreement containing a 30-day standstill as a condition to Casuarina's receipt of non-public information from the Company. Casuarina provided the Company with a proposed Confidentiality and Standstill Agreement, which was subsequently rejected by the Company. In response to the Company's continuing refusal to provide the requested due diligence information and the Company's January 12, 2000 press release announcing that the Company's earnings were 24-28% below consensus analyst estimates, by letter dated January 18, 2000 to the Company, the Edgecliff Group withdrew the Offer. On March 6, 2000, the Edgecliff Group met with representatives of the Company and reaffirmed its interest in acquiring the Company, but at a price of $5.75 per Share in cash. During this meeting, the Edgecliff Group discussed potential confidentiality and "standstill" arrangements it was prepared to enter into in exchange for the due diligence information it had requested, but expressed its unwillingness to enter into any agreement that would impair its ability to nominate candidates for election to the Company's Board at the 2000 Annual Meeting. To satisfy the Company's request to provide evidence of the Edgecliff Group's ability to finance an acquisition of the Company, representatives of the Edgecliff Group's 3 financing sources attended the March 6, 2000 meeting and answered all of the Company's questions regarding the Edgecliff Group's financing. On March 9, 2000, three days after the Edgecliff Group's reaffirmation of its interest in the Company and its indication of the possibility of nominating its own slate of directors for election at the 2000 Annual Meeting, the Company announced that certain changes had been made to its classified Board. Before these changes were made, the Company's Board consisted of three classes of directors serving for three- year terms as follows: Class I (term expiring in 2002) included Peter R. Tyson and one vacant seat; Class II (term expiring in 2000) included Michael A. Leven, Joseph C. Calabro and John M. Lang; and Class III (term expiring in 2001) included Robert S. Cole, Richard H. Weiner and one vacant seat. Accordingly, before the changes announced on March 9, 2000, the Company's stockholders had the right to nominate and appoint directors to replace all three Class II Directors at the 2000 Annual Meeting. Against this background, the Company announced that the following actions had been taken. First, Joseph C. Calabro resigned as a Class II Director with a term expiring in 2000 and was immediately appointed to fill a vacancy in Class I. Second, the Board of Directors reduced the Board's size from eight to six members, with the result that each class now consisted of only two directors. Realizing that the Company's By-Laws provided that a director "elected to fill a vacancy shall hold office only until the next election of directors by the stockholders," the Director Defendants (as defined below) deleted this By-Law and provided, instead, that "[a]ny director elected by the Board to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected." As a result, the Company's stockholders now only may nominate and vote for two out of a total of six directors at the 2000 Annual Meeting, whereas previously they were entitled to vote for three out of six directors. Although the Company claims that the changes to the Board were made pursuant to the Company's Restated Certificate of Incorporation (the "Certificate of Incorporation") and the rules of the New York Stock Exchange (the "NYSE"), the Edgecliff Group believes the changes were adopted to prevent the Company's stockholders from replacing 50% of the Company's Board of Directors at the 2000 Annual Meeting. On April 7, 2000, Casuarina and Edgecliff filed a Verified Complaint for Declaratory and Injunctive Relief (the "Complaint") in the Court of Chancery of the State of Delaware in and for New Castle County, naming the Company, Peter R. Tyson, Joseph C. Calabro, John M. Lang, Robert S. Cole and Richard H. Weiner as defendants (collectively, the "Defendants") to redress the foregoing actions (the "Litigation"). 4 The Complaint alleges that defendants Peter R. Tyson, Joseph C. Calabro, John M. Lang, Robert S. Cole and Richard H. Weiner (the "Director Defendants") voted to reduce the size of the Company's Board and limit the number of directors who must stand for election at the 2000 Annual Meeting for the purpose of interfering with the Company stockholders' ability to replace 50% of the Company's Board of Directors at the 2000 Annual Meeting. The Complaint seeks, among other things, judgment (1) declaring that the Defendants have breached their fiduciary duties of loyalty to the Company's stockholders, (2) enjoining the Director Defendants and the Company, its officers, agents, servants and employees from enforcing the reduction in the size of the Company's Board of Directors from eight to six members and (3) declaring that the Company's stockholders have the right to nominate and elect three Class II Directors at the 2000 Annual Meeting. Also on April 7, 2000, Casuarina and Edgecliff filed a Motion in the Court of Chancery of the State of Delaware in and for New Castle County moving for an expedited trial and expedited discovery. At a conference on April 14, 2000, the Chancery Court granted Casuarina and Edgecliff leave to conduct limited expedited discovery, but declined to set an expedited trial date. The Company's court papers disclose that the changes announced on March 9, 2000 to the composition of the Company's Board and By-Laws were in fact adopted on and effective as of January 12, 2000. The Edgecliff Group was disturbed to learn of the Company's failure to timely disclose these changes, especially since the Company did make a public announcement on January 12, 2000 disclosing, among other things, its poor earnings. B. Notice of Nomination of Candidates for Election to the Board Under Article VIII of the Company's Certificate of Incorporation, the Company's directors are divided into three classes. According to publicly available information, the Company currently has six directors, two of whom serve as Class II Directors whose term expires on the date of the 2000 Annual Meeting. Edgecliff hereby notifies the Company of its intent to nominate the individuals listed under the heading "Certain Information Relating to the Edgecliff Nominees" in Appendix I hereto (the "Edgecliff Nominees") for election to the Board. The first two Edgecliff Nominees named in Appendix I hereto will be nominated to succeed the current Class II Directors of the Company (or any director named to fill any vacancy created by the death, retirement, resignation or removal of any such two directors). The third Edgecliff Nominee named in Appendix I hereto will be nominated to be elected (a) in the event that the number of directorships subject to election at the 2000 Annual Meeting is greater than two (including, without limitation, as a result of the Litigation), (b) if the Company makes or announces any changes to its By-Laws or takes or announces any other action that has, or if consummated would have, the effect of disqualifying one or both of the first two Edgecliff Nominees and/or (c) in the event that one or both of the first two Edgecliff Nominees is unable for any reason to serve as a director. Edgecliff hereby represents that it intends to appear in person or by proxy at the 2000 Annual Meeting to nominate the Edgecliff Nominees. Edgecliff reserves the right to nominate substitute or additional persons in the event that (1) the number of directorships subject to election at the 2000 Annual Meeting is greater than three and/or (2) any of the Edgecliff Nominees is unable for any reason (including by reason of the taking or announcement of any action that has, or if 5 consummated would have, the effect of disqualifying any such nominee) to serve as a director. Additional nominations made as a result of any purported attempt by the Company to increase the size of the Board (other than as a result of the Litigation) or to disqualify any of the Edgecliff Nominees are made without prejudice to the position of Edgecliff that any such actions constitute unlawful manipulation of the Company's corporate machinery. The following information constitutes all of the information relating to Edgecliff and the Edgecliff Nominees that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such information includes all information required to be set forth in this Notice pursuant to the Nomination Requirements. To the extent that information set forth at any point in this Notice is responsive to a specific item below, each such item shall be deemed to incorporate such information, no matter where such information appears in this Notice. The information set forth in Appendix I is incorporated herein by reference. All information set forth herein relating to any person other than Edgecliff is given only to the knowledge of Edgecliff. Item 4. Persons Making the Solicitation (b)(1) By virtue of Instruction 3 of Item 4, Edgecliff and each of the Edgecliff Nominees will be considered participants in the solicitation. In addition, the Edgecliff Nominees may make solicitations of proxies, but will not receive compensation therefor. Proxies may be solicited by mail, facsimile, telephone, telegraph, electronic mail, in person and by advertisements. Solicitations may be made by certain directors, officers and employees of Edgecliff, none of whom will receive additional compensation for such solicitation. Edgecliff has retained MacKenzie Partners, Inc. ("MacKenzie") for solicitation and advisory services in connection with the solicitation, for which MacKenzie will receive a fee not to exceed $35,000, together with reimbursement for its reasonable out-of-pocket expenses, and will be indemnified against certain liabilities and expenses. MacKenzie will solicit proxies from individuals, brokers, banks, bank nominees and other institutional holders. Edgecliff will request banks, brokerage houses and other custodians, nominees and fiduciaries to forward all solicitation materials to the beneficial owners of the Shares they hold of record. Edgecliff will reimburse these record holders for their reasonable out-of-pocket expenses in so doing. It is anticipated that MacKenzie will employ approximately 35 persons to solicit the Company's stockholders for the 2000 Annual Meeting. Greenhill is serving as financial advisor to the Edgecliff Group. As compensation for such services, the Edgecliff Group has agreed to pay Greenhill a fee of (i) $250,000 as a retainer fee payable in five installments and (ii) .6% of the transaction value paid by the Edgecliff Group in an acquisition of the Company. In 6 addition, the Edgecliff Group has agreed to reimburse Greenhill for its reasonable out-of-pocket expenses, including, without limitation, reasonable fees and disbursements of its counsel arising out of Greenhill's engagement, and has also agreed to indemnify Greenhill (and certain affiliated persons) against certain liabilities and expenses. Greenhill may from time to time in the future render various investment banking services to the Edgecliff Group and its affiliates, for which it is expected it would be paid customary fees. The entire expense of soliciting proxies is being borne by Edgecliff. Edgecliff does not currently intend to seek reimbursement of the costs of this solicitation from the Company. The costs of this solicitation of proxies, and other costs specifically related to this solicitation (which are not deemed to include any fees payable to Greenhill), are currently estimated to be approximately $175,000. Edgecliff estimates that through the date hereof, its total expenditures to date in connection with this solicitation are approximately $125,000. Item 5. Interest of Certain Persons in Matters to be Acted Upon (b)(1) Information as to any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the 2000 Annual Meeting with respect to Edgecliff and the Edgecliff Nominees is set forth herein. It is expected that, if elected, the Edgecliff Nominees would, subject to their fiduciary duties, attempt to influence the Board to take all such actions as may be necessary to effect the sale or merger of the Company to or with the bidder offering the most favorable acquisition proposal available to the Company and its stockholders, which may be the Edgecliff Group. Edgecliff may be deemed to have an interest in the nomination of the Edgecliff Nominees for election to the Board insofar as the election of such persons to the Board may facilitate an acquisition of the Company by the Edgecliff Group or a sale of the Company to a third party bidder pursuant to which the Edgecliff Group may receive a premium for its Shares. The Edgecliff Nominees may be deemed to have an interest in their nomination for election to the Board by virtue of their ownership of Shares and by virtue of any compensation they will receive from the Company as directors if elected to the Board. In addition to their interests as Edgecliff Nominees, William J. Yung may be deemed to have an interest in the solicitation by virtue of his control of, and pecuniary interest in, the entities that are members of, the Edgecliff Group, and Mr. Berger may be deemed to have an interest in the solicitation in his capacity as a stockholder of a legal professional association which counsels and advises the Edgecliff Group and which may potentially represent the Edgecliff Group in connection with an acquisition of the Company. (i) Set forth in Appendix I attached hereto, which is incorporated herein by reference, are the names and business addresses of Edgecliff and each of the Edgecliff Nominees. Edgecliff's record address in its capacity as a stockholder of the Company is also set forth on Appendix I. Also set forth in Appendix I is the residential address of each Edgecliff Nominee. 7 (ii) Set forth in Appendix I attached hereto, which is incorporated herein by reference, is (a) the principal business of Edgecliff and (b) the present principal occupation or employment for each of the Edgecliff Nominees, and the name, principal business and address of any corporation or other organization in which such employment is carried on. (iii) During the past ten years, neither Edgecliff nor any of the Edgecliff Nominees has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (iv), (v), (vi), (vii) and (x) Except as set forth in Appendix I hereto, neither Edgecliff nor any Edgecliff Nominee owns beneficially, directly or indirectly, or of record but not beneficially, any securities of the Company, or any parent or subsidiary of the Company, nor has Edgecliff or any Edgecliff Nominee purchased or sold any securities of the Company within the past two years. Set forth in Appendix I hereto are transactions in Shares effected by Edgecliff, certain affiliates of Edgecliff and the Edgecliff Nominees within the past two years. (viii) Neither Edgecliff nor any of the Edgecliff Nominees is, or has been within the past year, a party to any contract, arrangement or understanding with any person with respect to any securities of the Company, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies. (ix) Other than as set forth in Appendix I hereto, no associate of Edgecliff or of the Edgecliff Nominees owns beneficially, directly or indirectly, any securities of the Company. (xi) Item 5(b)(xi) cross references the information required by Item 404(a) of Regulation S-K of the Exchange Act with respect to each participant in the solicitation or any associates of such participant. Item 404(a) of Regulation S-K. None of Edgecliff, the Edgecliff Nominees, or any of their respective associates have had or will have a direct or indirect material interest in any transaction or series of similar transactions since the beginning of the Company's last fiscal year or any currently proposed transaction, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party in which the amount involved exceeds $60,000. (xii)(A) and (B) According to the Company's public filings, if elected as directors of the Company, the Edgecliff Nominees would each receive an annual retainer of $24,000 for Board membership, as well as fees of $1,500 per Board meeting, $1,000 per Board committee meeting and $500 per telephonic Board or Board committee meeting. In addition, the Company has in the past reimbursed directors for expenses associated with attending Board and committee meetings. In 9 addition, under the Company's Stock Option Plan, each non-employee director is automatically granted, on the date such director's term of office commences and each year thereafter on the day following any annual meeting of stockholders (as long as such director's term as a director is continuing for the ensuing year), an option to acquire 5,000 Shares at an exercise price equal to the fair market value of the Shares on the date of grant. All options granted to non-employee directors become exercisable upon grant. The Edgecliff Nominees, if elected, will be indemnified for service as a director of the Company to the same extent indemnification is provided to the current directors of the Company under the Certificate of Incorporation and the By-Laws. In addition, Edgecliff believes that upon election, the Edgecliff Nominees will be covered by the Company's officer and director liability insurance. Edgecliff disclaims any responsibility for the accuracy of the foregoing information extracted from the Company's public filings. None of the Edgecliff Nominees will receive any compensation from Edgecliff for their services as directors of the Company. Columbia Sussex Corporation, an affiliate of Edgecliff, has agreed to indemnify the Edgecliff Nominees against losses incurred in connection with their service as nominees for election as directors of the Company, in connection with the solicitation of proxies in respect thereof and in connection with their service as directors of the Company to the extent that indemnification is not available under the Company's Certificate of Incorporation and By-Laws. Columbia Sussex Corporation has also agreed to reimburse the Edgecliff Nominees for out-of-pocket expenses incurred in their capacity as nominees. Each of the Edgecliff Nominees has executed a written consent agreeing to be a nominee for election as a director of the Company and to serve as a director if so elected, which consents are attached hereto as Exhibit B. It is expected that the Edgecliff Nominees will, subject to their fiduciary duties, attempt to influence the Board to take all such actions as may be necessary to effect the sale of the Company to the highest bidder, which may be the Edgecliff Group. Other than as set forth herein (including in Appendix I hereto), none of Edgecliff, the Edgecliff Nominees or any of their respective associates, has any arrangements or understandings with any person or persons with respect to any future employment by the Company or its affiliates or with respect to any future transactions to which the Company or any of its affiliates will or may be a party. (2) The information required to be disclosed in this item with respect to Edgecliff and the Edgecliff Nominees is disclosed in response to Item 5(b)(1) above. Item 7. Directors and Executive Officers (a) Item 7(a) cross references the information required by instruction 4 to Item 103 of Regulation S-K of the Exchange Act with respect to nominees of the persons making the solicitation. Such information is set forth below: 9 Instruction 4 of Item 103 to Regulation S-K. Although not named as plaintiffs in the Litigation, the Edgecliff Nominees may have a material interest in the Litigation insofar as it may result in an increase in the number and percentage of directors subject to election at the 2000 Annual Meeting, and ultimately an increase in the number and voting power of the Edgecliff Nominees should they be elected to the Board. Except as described herein, there are no material proceedings in which any of the Edgecliff Nominees or any of their associates is a party adverse to, or has a material interest adverse to, the Company or any of its subsidiaries. (b) Item 7(b) cross references the information required by Item 401, Items 404(a) and (c) and Item 405 of Regulation S-K of the Exchange Act with respect to nominees of the person making the solicitation. Such information is set forth below: Item 401 of Regulation S-K (a) and (e). Each of the Edgecliff Nominees has executed a consent to being named as an Edgecliff Nominee and to serving as a director of the Company, if so elected. Copies of such consents are attached hereto as Exhibit B. The following information is set forth in Appendix I attached hereto with respect to each Edgecliff Nominee: name, age, any position and office with the Company held by each such nominee, business experience during the past five years (including principal occupation and employment during the past five years and the name and principal business of any corporation or other organization in which such occupation or employment was carried on) and any directorships held by such person in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940, as amended. No occupation or employment is or was, during such period, carried on by any of the Edgecliff Nominees with the Company or any corporation or organization which is or was a parent, subsidiary or other affiliate of the Company, and none of the Edgecliff Nominees has ever served on the Board. Other than as disclosed in the response to Item 5(b) above, there are no arrangements or understandings between any of the Edgecliff Nominees and any other party pursuant to which any such nominee was or is to be selected as a director or nominee. (b), (c) and (g) These provisions of Item 401 of Regulation S-K are not applicable to the Edgecliff Nominees. (d) There exist no family relationships among the Edgecliff Nominees or between any of the Edgecliff Nominees and any director or executive officer of the Company. 10 (f) None of the Edgecliff Nominees was involved in any of the events described in Item 401(f) of Regulation S-K and that are material to an evaluation of the ability or integrity of any such nominee to become a director of the Company. Item 404(a) of Regulation S-K. The response to Item 5(b)(1)(xi) above is incorporated herein by reference. Item 404(c) of Regulation S-K. None of the Edgecliff Nominees, their immediate family members, any corporation or organization of which any of the Edgecliff Nominees is an executive officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, or any trust or other estate in which any of the Edgecliff Nominees has a substantial beneficial interest or serves as a trustee or in a similar capacity, has been indebted to the Company or its subsidiaries, at any time since the beginning of the Company's last fiscal year, in an amount in excess of $60,000 (other than any amounts that may be excluded pursuant to the instructions to Item 404(c) of Regulation S-K). Item 405 of Regulation S-K. The Edgecliff Nominees have timely filed any required Form 3s and Form 4s with respect to the Company. (c) Except as set forth in Appendix I hereto, none of the relationships regarding Edgecliff Nominees described under Item 404(b) of Regulation S-K exists or has existed during the Company's last fiscal year. Item 8. Compensation of Directors and Executive Officers Item 8 cross references the information required by Item 402 of Regulation S-K of the Exchange Act with respect to each nominee of the person making the solicitation and associates of such nominee. Such information is set forth below: Item 402 of Regulation S-K (a), (b), (c), (d), (e), (f), (h), (i) None of the Edgecliff Nominees nor any of their associates has received any cash compensation, cash bonuses, deferred compensation, compensation pursuant to plans, or other compensation, from, or in respect of, services rendered on behalf of the Company that is required to be disclosed under, or is subject to any arrangement described in, these paragraphs of Item 402 of Regulation S-K. (g) The response to Item 5(b)(1)(xii)(A) and (B) above is incorporated herein by reference. Other than as set forth herein, Edgecliff is not aware of any other arrangements pursuant to which any director of the Company was to be compensated for services during the Company's last fiscal year. 11 (j) There are no relationships involving any of the Edgecliff Nominees, or any of their associates, that would have required disclosure under this paragraph of Item 402 of Regulation S-K had the Edgecliff Nominees been directors of the Company. (k), (l) These items do not apply because they do not relate to the Edgecliff Nominees. C. Notice of Intention to Present a Stockholder Proposal Edgecliff hereby notifies the Company of its intent to present the following resolution (the "Proposal") for adoption by the stockholders of the Company at the 2000 Annual Meeting: "RESOLVED, that each provision or amendment of the By-Laws of Lodgian, Inc. (the "Company") adopted by the Board of Directors of the Company without the approval of the Company's stockholders subsequent to March 9, 2000 and prior to the approval of this resolution be, and it hereby is, repealed, effective as of the time this resolution is approved by the Company's stockholders." The Proposal is intended to deter the current members of the Board from amending the Company's By-Laws in a manner that would create obstacles to the acquisition of the Company by any bidder, including, without limitation, the Edgecliff Group. Edgecliff may be deemed to have an interest in the Proposal insofar as adoption of the Proposal may facilitate the acquisition of the Company by a third party bidder or the Edgecliff Group. As stated above, Edgecliff is the record and beneficial owner of 2,598,100 Shares. Edgecliff's record address in its capacity as a stockholder of the Company is set forth in Appendix I hereto. Edgecliff hereby represents that it intends to appear in person or by proxy at the 2000 Annual Meeting to present the Proposal for adoption by the stockholders of the Company. Other than as set forth in this Notice, there are no arrangements or understandings between Edgecliff and any other person or persons in connection with the Proposal. * * * The information included herein represents Edgecliff's best knowledge as of the date hereof. Edgecliff reserves the right, in the event such information shall be or become inaccurate, to provide corrective information to the Company as soon as reasonably practicable, although Edgecliff does not commit to update any information which may change from and after the date hereof. If this Notice shall be deemed for any reason by a court of competent jurisdiction to be ineffective with respect to the nomination of any of the Edgecliff 12 Nominees at the 2000 Annual Meeting, or if any individual nominee shall be unable to serve for any reason, this Notice shall continue to be effective with respect to the remaining Edgecliff Nominees and as to any replacement nominees selected by Edgecliff. Edgecliff requests written notice as soon as practicable but in no event later than April 21, 2000, of any alleged defect in this Notice and reserves the right, following receipt of any such notice, to either challenge, or attempt as soon as practicable to cure, such alleged defect. Edgecliff reserves the right to give further notice of additional nominations or business to be made or conducted at the 2000 Annual Meeting or other meeting of the Company's stockholders. Please direct any questions regarding the information contained in this Notice to James M. Dubin, Esq. or Ronald M. Mandler, Esq., Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York 10019-6064, (212) 373-3000 (Phone), (212) 757-3990 (Facsimile). IN WITNESS WHEREOF, Edgecliff has caused this Notice to be duly executed on this 18th day of April, 2000. EDGECLIFF HOLDINGS, LLC By: /s/ William J. Yung ------------------- Name: William J. Yung Title: President 13 Appendix I Certain Information Relating to Edgecliff ----------------------------------------- Edgecliff is a Kentucky limited liability company. Edgecliff is primarily engaged in the business of investing in securities. The principal executive offices of Edgecliff are located at 207 Grandview Drive, Fort Mitchell, Kentucky 41017. The record address of Edgecliff in its capacity as a stockholder of the Company is 1200 Cypress Street, Cincinnati, Ohio 45206. I-1 Certain Information Relating to the Edgecliff Nominees ------------------------------------------------------ The following table sets forth the name, age, present principal occupation, business address, residential address and business experience for the past five years and certain other information, with respect to each of the Edgecliff Nominees. This information has been furnished to Edgecliff by the respective Edgecliff Nominees. Principal Occupation or Employment Name, Age and Business and Residential During the Last Five Years; Public Address Company Directorships - -------------------------------------- ---------------------------------- William J. Yung (59) Since 1972, Mr. Yung has been President and Chief Executive Officer of Columbia Business Address: Sussex Corporation, a builder, owner Columbia Sussex Corporation and manager of hotels. 1200 Cypress Street Cincinnati, OH 45206 Residential Address: 515 Laguana Royale Unit 101 Naples, FL 34119 Andrew R. Berger (44) Since 1984, Mr. Berger has been a shareholder and Vice President of Katz, Business Address: Teller, Brant & Hild, a legal Katz, Teller, Brant & Hild professional association, where Mr. Suite 2400 Berger engages in the private practice 255 East 5th Street of law. Cincinnati, OH 45202 Residential Address: 2510 Legends Way Crestview Hills, KY 41017 Joseph E. Marquet (52) Since 1986, Mr. Marquet has been Vice President - Finance and Chief Financial Business Address: Officer of Columbia Sussex Corporation, Columbia Sussex Corporation a builder, owner and manager of hotels. 207 Grandview Drive Fort Mitchell, KY 41027 Residential Address: 3857 Lincoln Road Cincinnati, OH 45247 I-2 Ownership of and Transactions in the Securities of the Company Edgecliff is the record and beneficial owner of 2,598,100 Shares. William J. Yung is the beneficial owner of 3,091,800 Shares and does not own any Shares of record. Casuarina is the beneficial owner of 493,700 Shares and does not own any Shares of record. Edgecliff Management, LLC ("Management") is the beneficial owner of 2,598,100 Shares and does not own any Shares of record. Edgecliff, together with certain of its affiliates, may be deemed to constitute a "group" as defined under Rule 13d-5 promulgated under the Exchange Act (the "Edgecliff Group") that beneficially owns 3,091,800 Shares in the aggregate. The affiliates of Edgecliff who may be deemed to be members of the Edgecliff Group are Casuarina, Management, the 1994 William J. Yung Family Trust (the "1994 Trust"), The 1998 William J. Yung and Martha A. Yung Family Trust (the "1998 Trust"), William J. Yung and Joseph Yung. All of the Shares beneficially owned by the Edgecliff Group were originally acquired by Casuarina in open market transactions executed on the NYSE on the dates and at the prices (exclusive of commissions) listed below. Certain of these Shares were then transferred to Edgecliff as the result of the transactions described below. Other than as set forth herein, none of Edgecliff, the Edgecliff Nominees or the other participants to this proxy solicitation is the record or beneficial owner of any securities of the Company, nor any parent or subsidiary of the Company. Other than as set forth below, none of Edgecliff, the Edgecliff Nominees or the other participants to this proxy solicitation has effected any transactions in any securities of the Company in the last two years. Purchases by Casuarina Date of Purchase Number of Shares Purchased Purchase Price Per Share - ---------------- -------------------------- ------------------------ March 29, 1999 22,200 $5.0000 March 30, 1999 45,000 $5.1250 March 30, 1999 5,000 $5.0625 March 30, 1999 300 $4.9375 March 30, 1999 20,000 $5.1250 March 30, 1999 30,000 $5.1875 March 30, 1999 50,000 $5.0000 May 20, 1999 34,400 $6.3125 May 20, 1999 1,000 $6.2500 I-3 Date of Purchase Number of Shares Purchased Purchase Price Per Share - ---------------- -------------------------- ------------------------ May 20, 1999 11,000 $6.3750 May 21, 1999 50,000 $6.5625 May 24, 1999 100,000 $6.8750 May 27, 1999 22,400 $6.8750 June 1, 1999 46,800 $7.1250 June 1, 1999 2,000 $7.0000 June 2, 1999 19,700 $6.8750 June 3, 1999 50,000 $6.8750 June 4, 1999 26,600 $7.0000 June 7, 1999 15,200 $6.8750 June 8, 1999 50,000 $6.8750 June 9, 1999 500 $6.8125 June 9, 1999 24,700 $6.7500 June 10, 1999 33,000 $6.6250 June 11, 1999 12,000 $6.0000 June 14, 1999 33,500 $5.8750 June 15, 1999 11,200 $5.8750 June 15, 1999 12,000 $6.1250 June 18, 1999 3,000 $6.1250 June 18, 1999 35,400 $6.1875 June 21, 1999 18,000 $6.2500 June 21, 1999 10,000 $6.3750 June 22, 1999 21,000 $6.5000 June 22, 1999 2,500 $6.4375 June 23, 1999 146,500 $6.5000 June 24, 1999 15,000 $6.4375 June 25, 1999 22,000 $6.5000 I-4 Date of Purchase Number of Shares Purchased Purchase Price Per Share - ---------------- -------------------------- ------------------------ June 30, 1999 2,000 $6.5000 July 1, 1999 5,300 $6.5000 July 1, 1999 115,000 $6.5625 July 2, 1999 8,400 $6.5000 July 6, 1999 11,000 $6.5000 July 7, 1999 2,100 $6.5000 July 8, 1999 103,400 $6.6250 July 9, 1999 13,200 $6.5000 July 9, 1999 20,000 $6.6250 July 15, 1999 2,500 $5.8750 July 16, 1999 26,000 $5.7500 July 20, 1999 10,000 $5.7500 July 20, 1999 30,000 $5.6875 July 20, 1999 10,000 $5.6250 July 21, 1999 10,000 $5.2500 July 22, 1999 12,500 $4.9375 October 4, 1999 200,000 $4.0000 October 4, 1999 10,000 $3.8740 October 6, 1999 625,800 $4.0000 October 7, 1999 5,400 $4.0000 October 8, 1999 13,900 $4.0000 October 11, 1999 29,900 $4.0000 October 12, 1999 88,300 $4.0000 October 13, 1999 6,000 $4.0000 October 13, 1999 10,000 $4.0625 October 13, 1999 109,000 $4.1250 October 14, 1999 35,000 $4.1875 I-5 Date of Purchase Number of Shares Purchased Purchase Price Per Share - ---------------- -------------------------- ------------------------ October 15, 1999 121,500 $4.2500 November 22, 1999 143,600 $6.0000 December 20, 1999 3,000 $4.8750 December 20, 1999 47,000 $5.0000 December 21, 1999 50,000 $5.0000 December 27, 1999 50,000 $5.0000 December 28, 1999 50,000 $5.0000 December 29, 1999 34,000 $5.0000 January 7, 2000 16,100 $4.8750 January 11, 2000 50,000 $4.7500 January 12, 2000 50,000 $4.7500 Sales by Casuarina Date of Sale Number of Shares Purchased Purchase Price Per Share - ------------ -------------------------- ------------------------ April 21, 1999 40,000 $5.5000 On November 9, 1999, Casuarina transferred 2,546,138 Shares to the 1994 Trust and 51,962 Shares to William J. Yung in the form of a distribution to Casuarina's equity holders. On December 28, 1999, the 1994 Trust contributed 2,546,138 Shares to Edgecliff in exchange for 100 common units of Edgecliff. On the same date, (i) William J. Yung contributed 51,962 Shares to Management in exchange for 9 voting units and 6,991 nonvoting units of Management and (ii) Management contributed 51,962 Shares to Edgecliff in exchange for 266,305.25 preferred units of Edgecliff. On March 23, 2000, Edgecliff caused the 2,598,100 Shares it beneficially owned as a result of the transactions described in this paragraph to be registered in its own name. I-6 EXHIBIT A Evidence of Edgecliff Holdings, LLC Beneficial Stock Ownership of Lodgian, Inc. [Stock Certificate Attached] EXHIBIT B Consent to Being Named as a Nominee and to Serve as Director of Lodgian, Inc. Consent to Being Named as a Nominee and to Serve as Director of Lodgian, Inc. To: Secretary of Lodgian, Inc. The undersigned hereby consents to being named as a nominee for election to the Board of Directors of Lodgian, Inc., a Delaware corporation (the "Company"). The undersigned hereby consents to serve as a director of the Company if (s)he is duly elected by the stockholders thereof. Dated: March 22, 2000. /s/ William J. Yung ------------------- Name: William J. Yung Consent to Being Named as a Nominee and to Serve as Director of Lodgian, Inc. To: Secretary of Lodgian, Inc. The undersigned hereby consents to being named as a nominee for election to the Board of Directors of Lodgian, Inc., a Delaware corporation (the "Company"). The undersigned hereby consents to serve as a director of the Company if (s)he is duly elected by the stockholders thereof. Dated: March 23, 2000. /s/ Andrew R. Berger -------------------- Name: Andrew R. Berger Consent to Being Named as a Nominee and to Serve as Director of Lodgian, Inc. To: Secretary of Lodgian, Inc. The undersigned hereby consents to being named as a nominee for election to the Board of Directors of Lodgian, Inc., a Delaware corporation (the "Company"). The undersigned hereby consents to serve as a director of the Company if (s)he is duly elected by the stockholders thereof. Dated: March 22, 2000. /s/ Joseph E. Marquet --------------------- Name: Joseph E. Marquet EX-13 3 EXHIBIT 13 Exhibit 13 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 14A SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __) Filed by the Registrant [ ] Filed by a Party other than the Registrant [X] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material under Rule 14a-12 Lodgian, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) Edgecliff Holdings, LLC - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount previously paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: Edgecliff Holdings, LLC 207 Grandview Drive Fort Mitchell, Kentucky 41017 April 18, 2000 Dear Fellow Stockholders: We and our affiliates are the beneficial owners of approximately 11% of the Common Stock of Lodgian, Inc. (the "Company"). As the Company's largest stockholder, we have grown increasingly dissatisfied with the Company's performance over the past year. Although we have made repeated overtures to acquire the Company in a transaction that would give stockholders an opportunity to recognize a substantial premium on their shares, the Company has consistently rejected our efforts. Instead, the Company's Board of Directors has taken recent actions to entrench itself and management. As a result, we are seeking your support to elect up to three nominees to the Board of Directors who are expected to strongly advocate the sale of the Company to the highest bidder, whether to us or to any competing bidder with an acquisition proposal determined to be superior. We are also seeking your support for a proposal intended to dissuade the Board from adopting any new by-law amendments that would impair the ability of a bidder to make an acquisition proposal. During the past year, the Company's stock price has lost over 60% of its value, dropping from a trading high of approximately $7.13 per share in May of 1999 to a 52-week closing low of $2.81 on April 14, 2000. The Company's long term performance has been even worse, with the April 14 closing price representing declines of 79% and 83% from the Company's 52-week trading averages of $13.11 and $16.84 during the calendar years ended 1998 and 1997, respectively. Recent announcements by the Company's management do not instill any confidence that it will be able to reverse this course. On January 12, 2000, the Company announced that its earnings for 1999 would be 24-28% below consensus analyst estimates and that earnings for 2000 would be flat. On March 16, the Company announced that its 1999 year-end results would include several non-recurring and one-time pre-tax charges as high as $75 million in the aggregate and that its fourth-quarter losses would be "substantially greater" than its previously announced forecast, resulting in an even greater operating loss for 1999. In the most recent display of management's continuing failures, the Company announced on March 30 that it had been unable to file its annual report in a timely manner and would do so by April 14, the maximum time allowable under an extension request it filed with the Securities and Exchange Commission. On April 14, the Company failed to meet this extended deadline. Since November of 1999, we have had numerous discussions with the Company's management concerning our interest in acquiring the Company. In the context of these discussions, we made two definitive proposals to acquire all of the Company's common stock for cash at prices which represented premiums of approximately 43% and 46% over the prior trading days' closing prices. The Company has consistently refused to cooperate with us or provide us with any due diligence information despite our repeated indications of interest, despite the Company having met with our financing sources to confirm our ability to finance an acquisition and despite the substantial premium being offered. We are particularly disappointed that the Company has persisted in this course of action given its announcement on January 12 that it had retained Morgan Stanley Dean Witter to assist it in reviewing "a number of strategic alternatives to enhance shareholder value" and on March 16 that these alternatives included "a possible sale of the Company." To date, the incumbent Board has not disclosed any alternative proposals that would maximize stockholder value. Instead of pursuing a transaction with us, the Company's Board of Directors has opted to entrench itself and management. On March 9, three days after we had last met with the Company to discuss our acquisition proposal and in which we indicated the possibility of nominating our own slate of candidates for election at the 2000 Annual Meeting, the Company announced that it had made changes in the composition of the Board and the Company's by-laws which would have the effect of reducing the number and percentage of directors subject to election at the 2000 Annual Meeting. Prior to the making of these changes, the Board had six members and two vacant positions, and the Company's stockholders would have had the right to elect three out of the six Board members (representing 50% of the Board's membership). If the Board's actions are allowed to stand, stockholders will only have the right to elect two of the six directors, representing a minority of the Board that could not take action on behalf of the Company without the presence or support of two additional Board members. Although we have commenced litigation against the Company seeking to protect the right of all stockholders to elect three directors at the upcoming annual meeting, there can be no assurance that we will be successful. For all of these reasons, we are asking for your support to elect up to three nominees to the Board of Directors who are expected to strongly advocate the sale of the Company to the highest bidder. Although we applaud the Board's decision to engage Morgan Stanley Dean Witter to assist it in reviewing all available strategic alternatives, the Board's continuing refusal to work with us to maximize stockholder value through a sale of the Company demonstrates that the Board is unwilling to seriously consider such a sale. Our nominees are highly qualified individuals who believe that a sale of the Company to the highest bidder may represent the best opportunity to maximize shareholder value. Given the widespread publicity concerning our efforts to acquire the Company, the amount of time that has lapsed since our initial announcement of interest in November and the failure of any competing bidder to come forward with a superior proposal, we believe that we are uniquely positioned to offer the highest value available to the Company's stockholders. However, as the largest stockholder of the Company, we would welcome any acquisition proposal that would result in a higher valuation for our shares. Our nominees have indicated that in connection with their pursuit of a sale of the Company, they will consider all viable acquisition proposals submitted by any bidder. 2 We are also asking for your support of a proposal intended to dissuade the Board from adopting any new by-law amendments that would impair the ability of a bidder to make or effect an acquisition proposal. The fact that the Company recently manipulated the composition of the Board's classes, which has the effect of reducing director accountability at the 2000 Annual Meeting, demonstrates that our concern is legitimate and well-founded. If adopted, the proposal would repeal any by-law amendments adopted by the Board subsequent to March 9, 2000 (the last date of reported changes) without the consent of the Company's stockholders. The enclosed proxy statement contains important information concerning the Company, us, our nominees and the actions we intend to take at the 2000 Annual Meeting. We strongly urge you to read it carefully. Your vote is important, no matter how many or how few shares you own. A vote for our nominees and our proposal will enable you--as owners of the Company--to send a strong message to the Board that a sale of the Company to the highest bidder represents the best opportunity to maximize shareholder value. SEND YOUR BOARD A MESSAGE IT CAN'T IGNORE! SIGN, DATE AND RETURN THE ENCLOSED GREEN PROXY CARD TODAY. Thank you for your support. Sincerely, [Signature Graphic] /s/ William J. Yung ------------------- William J. Yung President Edgecliff Holdings, LLC 3 IMPORTANT - Please sign, date and return the enclosed GREEN proxy card today in the postage-paid envelope provided. - Do not sign any proxy card that you may receive from the Company, even as a protest vote against the Board and management. If you have any questions regarding your proxy, or need assistance in voting your shares, please call: [MacKenzie Partners, Inc. logo] 156 Fifth Avenue New York, New York 10010 Toll Free: 800-322-2885 or Call Collect: 212-929-5500 4 PRELIMINARY COPY; SUBJECT TO COMPLETION MATERIALS DATED APRIL 18, 2000 PROXY STATEMENT OF EDGECLIFF HOLDINGS, LLC ------------------------------- 2000 ANNUAL MEETING OF STOCKHOLDERS OF LODGIAN, INC. ------------------------------- This proxy statement (the "Proxy Statement") and the enclosed GREEN proxy card are being furnished to you, the stockholders of Lodgian, Inc., a Delaware corporation (the "Company"), by Edgecliff Holdings, LLC, a Kentucky limited liability company ("Edgecliff"), in connection with the solicitation of proxies from the Company's stockholders to be used at the 2000 Annual Meeting of Stockholders of the Company, including any adjournments or postponements thereof and any special meeting that may be called in lieu thereof (the "2000 Annual Meeting"). This Proxy Statement and the GREEN proxy card are first being furnished to the Company's stockholders on or about [date]. Edgecliff is soliciting proxies to take the following actions: (1) to elect up to three persons to be nominated by Edgecliff for election (the "Edgecliff Nominees") to the Board of Directors of the Company (the "Board"); and (2) to approve a binding resolution (the "By-Law Resolution" or the "Proposal") to repeal each provision of the Company's By-Laws or amendment thereto adopted after March 9, 2000 (the last date of reported changes) and prior to the adoption of the resolution. THIS SOLICITATION IS BEING MADE BY EDGECLIFF AND NOT ON BEHALF OF THE BOARD OF DIRECTORS OR MANAGEMENT OF THE COMPANY. Edgecliff and certain of its affiliates that may be deemed to constitute a "group" (the "Edgecliff Group") under Rule 13d-5 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are the beneficial owners of an aggregate of 3,091,800 shares of the Company's outstanding common stock, par value $0.01 per share (the "Shares"), representing approximately 11.09% of the Shares outstanding (based on information publicly disclosed by the Company). As the Company's largest stockholder, the Edgecliff Group has grown increasingly dissatisfied with the Company's performance over the past year. The Shares are traded on the New York Stock Exchange (the "NYSE") under the symbol "LOD." During the past year, the Shares have lost almost over 60% of their value, with the price per Share as reported on the NYSE Composite Tape dropping from a trading high of approximately $7.13 in May of 1999 to a 52-week closing low of $2.81 on April 14, 2000 (the most recent practicable date prior to the printing of this Proxy Statement). The Company's long term performance has been even worse, with the April 14 closing price representing declines of 79% and 83% from the Company's 52-week trading averages of $13.11 and $16.84 per Share during the calendar years ended 1998 and 1997, respectively. Recent announcements by the Company's management do not instill any confidence that it will be able to reverse this course. On January 12, 2000, the Company announced that its earnings for fiscal year 1999 would be 24-28% below consensus analyst estimates and that earnings for fiscal year 2000 would be flat. On March 16, the Company announced that its 1999 year-end results would include several non-recurring and one-time pre-tax charges as high as $75 million in the aggregate and that its fourth-quarter losses would be "substantially greater" than its previously announced forecast, resulting in an even greater operating loss for 1999. In the most recent display of management's continuing failures, the Company announced on March 30 that it had been unable to file its annual report in a timely manner and would do so by April 14, the maximum time allowable under an extension request it filed with the Securities and Exchange Commission (the "Commission"). On April 14, the Company failed to meet this extended deadline. Since November of 1999, the Edgecliff Group has had numerous discussions with the Company's management concerning its interest in acquiring the Company. In the context of these discussions, the Edgecliff Group has made two definitive proposals to the Company's management to acquire all of the Company's outstanding Shares at prices which represented substantial premiums over the prior trading days' closing prices. In connection with these proposals, the Edgecliff Group sought customary due diligence materials from the Company to confirm its internal valuation of the Company's Shares and to enable it to make a definitive acquisition proposal that would not be subject to any due diligence condition. Despite the Edgecliff Group's willingness to enter into a customary confidentiality agreement which contained a 30-day "standstill" provision in exchange for such information and despite the fact that the Edgecliff Group made its financing sources available to the Company to confirm the Edgecliff Group's ability to make a fully-financed proposal, the incumbent Board has consistently refused to cooperate in providing the requested materials, jeopardizing the potential opportunity of the Company's stockholders to realize a substantial premium on their Shares. Specifically, on November 16, 1999, the Edgecliff Group proposed to acquire the Shares at a price of $6.50 per Share, representing a premium of approximately 43% over the $4.56 reported closing sale price of the Company's Shares on the NYSE Composite Tape on the prior trading day. On January 18, 2000, as a result of the Company's continuing refusal to provide the requested due diligence information and in light of the Company's January 12 press release that its 1999 earnings were 2 24-28% below consensus analyst estimates, the Edgecliff Group withdrew its proposal. On March 6, 2000, the Edgecliff Group again proposed to acquire the Shares, despite the disappointing performance of the Company's management, at a price of $5.75 per Share or a premium of approximately 46.03% over the $3.94 reported closing sale price of the Company's Shares on the NYSE Composite Tape on the prior trading day. Despite the Edgecliff Group's repeated indications of interest, the compelling premiums being offered and the Edgecliff Group's willingness to enter into the agreements described above and its giving the Company access to its financing sources, the incumbent Board has consistently refused to provide any due diligence information or to otherwise facilitate the making of an acquisition proposal by it. The Company has persisted in this course of action notwithstanding its announcement on January 12 that it had retained Morgan Stanley Dean Witter to assist it in reviewing "a number of strategic alternatives to enhance shareholder value" and on March 16 that these alternatives included "a possible sale of the Company." To date, the incumbent Board has not disclosed any alternative proposals that would maximize stockholder value. Instead of pursuing a transaction with the Edgecliff Group, the incumbent Board has opted to entrench itself and management. On March 9, 2000, three days after the Edgecliff Group made its second proposal to acquire the Company and indicated to the Company the possibility of nominating its own slate of candidates for election at the 2000 Annual Meeting, the Company announced that recent changes had been made to the composition of its classified Board and the Company's Amended Restated By-Laws (the "By-Laws"), which had the effect of reducing the number and percentage of directors subject to election at the 2000 Annual Meeting. Prior to the making of these changes, the Board had six members and two vacant positions, and the Company's stockholders had the right to elect three out of the six Board members at the 2000 Annual Meeting (representing 50% of the Board's membership). Specifically, the Board was composed of six directors, three of whom had been classified as Class II Directors with terms expiring as of the date of the 2000 Annual Meeting. Joseph C. Calabro, a Class II Director of the Company whose term was to expire as of the date of the 2000 Annual Meeting, purportedly resigned from the Board but was then immediately appointed by the Board to a fill a vacancy as a Class I Director. The Board then deleted a By-Law which had provided that a "director elected to fill a vacancy shall hold office only until the next election of directors by the stockholders" and replaced it with a By-Law which provides that "[a]ny director elected by the Board to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected." The Class I Directors have a term that expires in 2002. Although the Company claims that the changes to the Board were 3 made pursuant to the Company's Restated Certificate of Incorporation (the "Certificate of Incorporation") and the rules of the NYSE, the Edgecliff Group believes these changes were adopted to prevent the Company's stockholders from replacing 50% of the Company's Board of Directors at the 2000 Annual Meeting. As a result of these actions, only two Class II Directors with terms expiring as of the date of the 2000 Annual Meeting remain. Accordingly, if the Board's actions are allowed to stand, the Company's stockholders will only have the right to elect two of the six directors at the 2000 Annual Meeting, representing a minority of the Board which could not take action on behalf of the Company without the presence or support of two additional Board members. In addition, Mr. Calabro is insulated from standing for reelection at the 2000 Annual Meeting. On April 7, 2000, two members of the Edgecliff Group, as substantial beneficial owners of the Company, commenced litigation in the Delaware Court of Chancery which seeks, among other things, a court order mandating that the Company's stockholders be entitled to elect three Company's directors at the 2000 Annual Meeting (the "Litigation"). See "Background and Recent Events." Edgecliff is soliciting proxies at this time because it believes that the incumbent Board is not acting, and will not act, in the best interest of the Company's stockholders. Although Edgecliff applauds the Board's decision to engage Morgan Stanley Dean Witter to assist it in reviewing all available strategic alternatives, the Board's continuing refusal to work with the Edgecliff Group to maximize stockholder value through a sale of the Company demonstrates that the Board is unwilling to seriously consider such a sale. The Edgecliff Nominees are highly qualified individuals who believe that a sale of the Company to the highest bidder may represent the best opportunity to maximize shareholder value. The primary purposes of the solicitation are to elect the Edgecliff Nominees to the Board and to facilitate a sale or merger of the Company to or with the bidder determined by the Board to be offering the most favorable acquisition proposal available to the Company and its stockholders. Given the widespread publicity concerning the Edgecliff Group's efforts to acquire the Company, the amount of time that has lapsed since the Edgecliff Group's initial announcement of interest in November and the failure of any competing bidder to come forward with a superior proposal, Edgecliff believes that the Edgecliff Group is uniquely positioned to offer the highest value available to the Company's stockholders. However, as the largest stockholder of the Company, the Edgecliff Group would welcome any acquisition proposal that would result in a higher valuation for its shares. The Edgecliff Nominees have indicated that in connection with their pursuit of a sale of the Company, they will consider all viable acquisition proposals submitted by any bidder. If elected, the Edgecliff Nominees are expected to act in the best interest of the Company's stockholders and, subject to their fiduciary duties as directors of the Company, to seek Board approval: (1) to encourage expressions of interest by third parties in potential sale or merger transactions (including, without limitation, by providing bidders with access to customary due diligence information of the type requested by the Edgecliff Group pursuant to a standard confidentiality agreement); 4 (2) to negotiate and approve a definitive acquisition agreement with the third party determined to be offering the most favorable acquisition proposal available to the Company and its stockholders; (3) to submit the acquisition agreement to a vote of the Company's stockholders; and (4) to take such additional action as may be necessary to facilitate the consummation of the acquisition transaction, including: (a) approving the acquisition transaction under Section 203 of the Delaware General Corporation Law; and (b) redeeming the preferred stock purchase rights (the "Rights") issued under the Rights Agreement, dated as of April 14, 1999, between the Company and First Union (the "Rights Agreement"), or amending the Rights Agreement to make the Rights inapplicable to the acquisition transaction. The Edgecliff Nominees would encourage the Board to evaluate potential bids on the basis of, among other things, the value of the consideration offered, the ability of the bidder to finance the bid, the quality of any non-cash consideration offered (including the financial condition of any bidder offering non-cash consideration), and the timing and likelihood of consummation of the proposed transaction in light of any required financing or regulatory approvals. However, the Edgecliff Nominees will only seek to encourage the Board to approve an acquisition transaction if they believe that the value of the transaction is fair to the stockholders of the Company from a financial point of view. Because the Company has a classified board structure and because of the Company's recent actions to manipulate the composition of the Board's classes, the Edgecliff Nominees, if elected, would not constitute a majority of the members of the Board. Accordingly, even if the Edgecliff Nominees are elected to the Board and the Proposal is approved, the Edgecliff Nominees will not be able to facilitate or approve the actions listed above without the support of at least two more of the incumbent members of the Board (or, in the event that the Litigation is successful, one more incumbent Board member). Edgecliff believes, however, that stockholder support for the Edgecliff Nominees and the Proposals may encourage the Board to maximize stockholder value through the sale or merger of the Company to or with the highest bidder in accordance with the actions listed above. Since the Company's By-Laws do not permit Edgecliff to call a special meeting of stockholders, the election of the Edgecliff Nominees and the adoption of the Proposal cannot be submitted to a stockholder vote until the 2000 Annual Meeting. The Company has not yet announced the date of the 2000 Annual Meeting. If the Company does not hold the 2000 Annual Meeting by July 25, 2000 (which is 13 months after the date of the Company's 1999 Annual Meeting of Stockholders), 5 Edgecliff intends to exercise its right under Delaware law to seek an order from the Delaware Court of Chancery mandating that the 2000 Annual Meeting be held as promptly as practicable. Edgecliff is soliciting proxies for the election of the Edgecliff Nominees to the Board of Directors of the Company and for the adoption of the Proposal. Edgecliff is not aware of any other matters to be brought before the 2000 Annual Meeting. However, should other matters be brought before the 2000 Annual Meeting, the persons named as proxies in the enclosed GREEN proxy card will vote on such matters in their discretion. As nominees for director, William J. Yung, Andrew R. Berger and Joseph E. Marquet may be deemed to be participants in this proxy solicitation. Casuarina Cayman Holdings Ltd. ("Casuarina"), Edgecliff Management, LLC ("Management"), Joseph Yung, the 1994 William J. Yung Family Trust (the "1994 Trust") and The 1998 William J. Yung and Martha A. Yung Family Trust (the "1998 Trust") are members of the Edgecliff Group and may also be deemed participants in this proxy solicitation. The principal executive offices of the Company are located at 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326. The Company has not yet announced the record date for determining stockholders entitled to notice of and to vote at the 2000 Annual Meeting (the "Record Date"). Stockholders of record at the close of business on the Record Date will be entitled to one vote at the 2000 Annual Meeting for each Share held on the Record Date. As of the date of this Proxy Statement, the Edgecliff Group is the beneficial owner of an aggregate of 3,091,800 Shares, which represents approximately 11.09% of the Shares outstanding (based on information publicly disclosed by the Company). Edgecliff intends to, and to cause its affiliates to, vote such Shares for the election of the Edgecliff Nominees and for the adoption of the Proposal. IMPORTANT Your vote is important, no matter how many or how few Shares you own. Edgecliff urges you to sign, date and return the enclosed GREEN proxy card today to vote for election of the Edgecliff Nominees and for the adoption of the Proposal. Do not sign any proxy card that you may receive from the Company, even as a protest vote against the Board and management. The Edgecliff Nominees are highly qualified individuals who are committed, subject to their fiduciary duties to the Company's stockholders, to selling the Company to the highest bidder. A vote for the Edgecliff Nominees and the Proposal will enable you--as the owners of the Company--to send a message to the Board that you are committed to maximizing the value of your Shares. 6 A vote for the election of the Edgecliff Nominees and for the adoption of the Proposal does not obligate you to vote for the approval of any acquisition agreement that the Company may enter into with the Edgecliff Group or with any other person. If your Shares are registered in your own name, please sign and date the enclosed GREEN proxy card and return it to Edgecliff, c/o MacKenzie Partners, Inc., in the enclosed envelope today. If any of your Shares are held in the name of a brokerage firm, bank, bank nominee or other institution on the Record Date, only it can vote such Shares and only upon receipt of your specific instructions. Accordingly, please contact the person responsible for your account and instruct that person to execute on your behalf the GREEN proxy card. Edgecliff urges you to confirm your instructions in writing to the person responsible for your account and to provide a copy of such instructions to Edgecliff, c/o MacKenzie Partners, Inc., who is assisting in this solicitation, at the address and telephone numbers set forth below and on the back cover of this Proxy Statement, so that Edgecliff may be aware of all instructions and can attempt to ensure that such instructions are followed. If you have any questions regarding your proxy, or need assistance in voting your Shares, please call: [MacKenzie Partners, Inc. logo] 156 Fifth Avenue New York, New York 10010 Toll Free: 800-322-2885 or Call Collect: 212-929-5500 7 WHY YOU SHOULD VOTE FOR THE EDGECLIFF NOMINEES Electing the Edgecliff Nominees will send a strong message to the Board that it should work with the Edgecliff Group and other potential bidders to maximize stockholder value through a sale of the Company. Edgecliff believes that a sale of the Company to the highest bidder represents the best means for the Company's stockholders to maximize the value of their Shares, and that the Edgecliff Group is in a unique position to offer the highest value available. The Edgecliff Nominees are committed to enhancing stockholder value and, if elected, are expected to take all necessary actions, subject to their fiduciary duties to the Company's stockholders, to facilitate a sale or merger of the Company to or with the bidder determined by the Board to be offering the most favorable acquisition proposal available to the Company and its stockholders and to give the Company's stockholders the opportunity to consider whether to accept such a transaction. If elected, the Edgecliff Nominees will not constitute a majority of the members of the Board. Under the Company's Certificate of Incorporation and By-Laws, a majority of the total number of directors then in office constitutes a quorum, and Board action may be taken by the affirmative vote of a majority of those directors present at any such meeting at which a quorum is present. Accordingly, the Edgecliff Nominees would not be able, without the presence or support of at least two other Board members (or, if the Litigation is successful, one other Board member) to determine any Board action. Nonetheless, if elected, the Edgecliff Nominees are expected, subject to their fiduciary duties as directors of the Company, to seek the support of the other Board members: (1) to encourage expressions of interest by third parties in potential sale or merger transactions (including, without limitation, by providing bidders with access to customary due diligence information of the type requested by the Edgecliff Group pursuant to a standard confidentiality agreement); (2) to negotiate and approve a definitive acquisition agreement with the third party determined to be offering the most favorable acquisition proposal available to the Company and its stockholders; (3) to submit the acquisition agreement to a vote of the Company's stockholders; and (4) to take such additional action as may be necessary to facilitate the consummation of the acquisition transaction, including: 8 (a) approving the acquisition transaction under Section 203 of the Delaware General Corporation Law; and (b) redeeming the Rights issued under the Rights Agreement, or amending the Rights Agreement to make the Rights inapplicable to the acquisition transaction. The Edgecliff Nominees would encourage the Board to evaluate potential bids on the basis of, among other things, the value of the consideration offered, the ability of the bidder to finance the bid, the quality of any non-cash consideration offered (including the financial condition of any bidder offering non-cash consideration), and the timing and likelihood of consummation of the proposed transaction in light of any required financing or regulatory approvals. However, the Edgecliff Nominees will only seek to encourage the Board to approve an acquisition transaction if they believe that the value of the transaction is fair to the stockholders of the Company from a financial point of view. Edgecliff believes that the election of the Edgecliff Nominees to the Board would send a strong message from the Company's stockholders that a sale or merger of the Company to or with the highest bidder represents the best opportunity currently available to maximize stockholder value and is too attractive for the Board to ignore. However, because the Edgecliff Nominees, if elected, would not constitute a majority of the Board, there can be no assurance that the Board will seek to solicit or consider offers for the sale or merger of the Company (whether in accordance with the actions described above or otherwise) even if the Edgecliff Nominees are elected. The Edgecliff Nominees are not presently aware of any acquisition proposals with respect to the Company other than those of the Edgecliff Group. Given the widespread publicity concerning the Edgecliff Group's efforts to acquire the Company, the amount of time that has lapsed since the Edgecliff Group's initial announcement of interest in November and the failure of any competing bidder to come forward with a superior proposal, Edgecliff believes that the Edgecliff Group is uniquely positioned to offer the highest value available to the Company's stockholders. However, as the largest stockholder of the Company, the Edgecliff Group would welcome any acquisition proposal that would result in a higher valuation for its Shares. If a third party were to make a proposal to acquire the Company, the interests of Edgecliff and those of the other stockholders of the Company may differ. In any such case, the Edgecliff Nominees, who are highly qualified individuals, have indicated that they would consider any such acquisition proposal that they, in their independent judgment, believe to be superior and would otherwise fully comply with their obligations owed to the Company and its stockholders under Delaware law. Under Delaware law, each director of the Company has an obligation to discharge his or her duties in good faith, in a manner reasonably believed to be in or not opposed to the best interest of the Company and its stockholders and with such care, including 9 reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. Other than as described herein, Edgecliff has no knowledge of any plans of the Edgecliff Nominees as to the specific steps they would take in connection with any such third party proposal, including whether they would appoint an independent financial advisor or retain independent legal counsel. Additional Information Regarding the Edgecliff Nominees; Proxy Matters Relating to the Edgecliff Nominees The first two individuals named in the table below will be nominated to be elected to succeed the current two Class II Directors of the Company (or any director named to fill any vacancy created by the death, retirement, resignation or removal of any of such two directors) of the Company. The third individual named in the table below will be nominated to be elected (a) in the event that the number of directorships subject to election at the 2000 Annual Meeting is greater than two (including, without limitation, as a result of the Litigation), (b) if the Company makes or announces any changes to its By-Laws or takes or announces any other action that has, or if consummated would have, the effect of disqualifying one or both of the first two Edgecliff Nominees and/or (c) in the event that one or both of the first two Edgecliff Nominees is unable for any reason to serve as a director. Additional nominations made as a result of any purported attempt to increase the size of the Board (other than as a result of the Litigation) or to disqualify any of the Edgecliff Nominees are without prejudice to the position of Edgecliff that any such attempt constitutes an unlawful manipulation of the Company's corporate machinery to disenfranchise the Company's stockholders. If required, Edgecliff intends to distribute to the stockholders of the Company supplemental materials in the event that the Board takes action after the date of this Proxy Statement to increase the number of directors of the Company. The following table sets forth the name, age, present principal occupation, business (or residence) address and business experience for the past five years and certain other information, with respect to each of the Edgecliff Nominees. This information has been furnished to Edgecliff by the respective Edgecliff Nominees. Each of the Edgecliff Nominees, if elected, would hold office until the 2003 Annual Meeting of Stockholders of the Company and until his or her successor has been elected and qualified or until earlier death, retirement, resignation or removal. 10 Principal Occupation or Employment During Name, Age and Business Address the Last Five Years; Current Directorships - ------------------------------- ------------------------------------------ William J. Yung (59) Since 1972, Mr. Yung has been President Columbia Sussex Corporation and Chief Executive Officer of Columbia 1200 Cypress Street Sussex Corporation, a builder, owner and Cincinnati, OH 45206 manager of hotels. Andrew R. Berger (44) Since 1984, Mr. Berger has been a Katz, Teller, Brant & Hild stockholder and Vice President of Katz, Suite 2400 Teller, Brant & Hild, a legal 255 East 5th Street professional association, where Mr. Berger Cincinnati, OH 45202 engages in the private practice of law. Joseph E. Marquet (52) Since 1986, Mr. Marquet has been Vice Columbia Sussex Corporation President - Finance and Chief Financial 207 Grandview Drive Officer of Columbia Sussex Corporation, a Fort Mitchell, KY 41017 builder, owner and manager of hotels. The Edgecliff Nominees will not receive any compensation from Edgecliff for their services as directors of the Company. Columbia Sussex Corporation, an affiliate of Edgecliff, has agreed to indemnify the Edgecliff Nominees against losses incurred in connection with their service as nominees for election as directors of the Company, in connection with the solicitation of proxies in respect thereof and in connection with their service as directors of the Company to the extent that indemnification is not available under the Company's Certificate of Incorporation and By-Laws. Columbia Sussex Corporation has also agreed to reimburse the Edgecliff Nominees for out-of- pocket expenses incurred in their capacity as nominees. Each of the Edgecliff Nominees has executed written consents agreeing to be a nominee for election as a director of the Company and to serve as a director if so elected. Schedule II to this Proxy Statement sets forth additional information concerning the number of Shares owned by the Edgecliff Nominees and transactions in Shares made by the Edgecliff Nominees over the past two years. None of the Edgecliff Nominees has been convicted in any criminal proceedings (excluding traffic violations or similar misdemeanors) over the past ten years. Although not named as plaintiffs in the Litigation, the Edgecliff Nominees may have a material interest in the Litigation insofar as it may result in an increase in the number and percentage of directors subject to election at the 2000 Annual Meeting, and ultimately an increase in the number and voting power of the Edgecliff Nominees should they be elected to the Board. Except as described herein, there are no material proceedings in which any of the Edgecliff Nominees or any of their associates is a party adverse to, or has a material interest adverse to, the Company or any of its subsidiaries. According to the Company's public filings, if elected as directors of the Company, the Edgecliff Nominees would each receive from the Company an annual retainer of $24,000 for Board membership, as well as fees of $1,500 per board meeting, $1,000 per Board committee meeting, and $500 per telephonic Board or Board committee meeting. In addition, the Company has in the past reimbursed 11 directors for expenses associated with attending Board and committee meetings. In addition, under the Company's Stock Option Plan, each non-employee director is automatically granted, on the date such director's term of office commences and each year thereafter on the day following any annual meeting of stockholders (as long as such director's term as a director is continuing for the ensuing year), an option to acquire 5,000 Shares at an exercise price equal to the fair market value of the Shares on the date of grant. All options granted to non-employee directors become exercisable upon grant. The Edgecliff Nominees, if elected, will be indemnified by the Company for service as a director of the Company to the extent indemnification is provided to directors of the Company under the Company's Certificate of Incorporation and By-Laws. In addition, Edgecliff believes that upon election, the Edgecliff Nominees will be covered by the Company's director and officer liability insurance. Edgecliff disclaims any responsibility for the accuracy of the information relating to the Company set forth in this paragraph. Edgecliff may be deemed to have an interest in the nomination of the Edgecliff Nominees for election to the Board insofar as the election of such persons to the Board may facilitate an acquisition of the Company by the Edgecliff Group or a sale of the Company to a third party bidder pursuant to which the Edgecliff Group may receive a premium for its Shares. The Edgecliff Nominees may be deemed to have an interest in their nomination for election to the Board by virtue of their ownership of Shares and by virtue of any compensation they will receive from the Company as directors if elected to the Board. In addition to their interests as Edgecliff Nominees, William J. Yung may be deemed to have an interest in the solicitation by virtue of his control of, and pecuniary interest in, the entities that are members of the Edgecliff Group, and Mr. Berger may be deemed to have an interest in the solicitation in his capacity as a stockholder of a legal professional association which counsels and advises the Edgecliff Group and which may potentially represent the Edgecliff Group in connection with an acquisition of the Company. Under the Company's Certificate of Incorporation and By-Laws, at each meeting of stockholders of the Company at which a quorum is present, the persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the directors. In accordance with applicable regulations of the Commission, the GREEN proxy card affords each stockholder the opportunity to designate the names of any of the Edgecliff Nominees whom he or she does not desire to elect to the Board. Edgecliff urges stockholders to vote for all of the Edgecliff Nominees on the enclosed GREEN proxy card. The persons named as proxies in the enclosed GREEN proxy card will vote, in their sole discretion, for each of the Edgecliff Nominees who is nominated for election and for whom authority has not been withheld. Edgecliff expects that each of the Edgecliff Nominees will be able to stand for election as a director of the Company. In the event only two directorships are subject to election at the 2000 Annual Meeting and either of the first two Edgecliff Nominees listed above are unable to serve as a director for any reason, the Shares represented by the enclosed GREEN proxy card will be voted in each such case, for the third 12 Edgecliff Nominee listed above. In addition, Edgecliff reserves the right to nominate substitute or additional persons if the Company makes or announces any changes to its By-Laws or takes or announces any other action that has, or if consummated would have, the effect of disqualifying any or all of the Edgecliff Nominees. In any such case, Shares represented by the enclosed GREEN proxy card will be voted, in the sole discretion of the persons named as proxies in the GREEN proxy card, for all such substitute or additional nominees selected by Edgecliff. You are urged to vote for the election of the Edgecliff Nominees on the enclosed GREEN proxy card. The By-Law Resolution The By-Law Resolution seeks to repeal any additions or changes made to the Company's By-Laws adopted by the Board after March 9, 2000 (the last date of reported changes) and prior to the date of the 2000 Annual Meeting. This resolution is designed to deter the current members of the Board from amending the Company's By-Laws in a manner that would create new obstacles to the consummation of an acquisition of the Company by any bidder, including the Edgecliff Group, without first seeking stockholder approval. Adoption of the By-Law Resolution could potentially result in the repeal of By-Law amendments not relating to the potential acquisition of the Company by a third party or in the repeal of unknown or undisclosed By-Law amendments. However, in each of these cases it is equally true that such amendments can be presented by the Board to the Company's stockholders for approval at the 2000 Annual Meeting. Accordingly, Edgecliff proposes that the stockholders of the Company adopt the following resolution: "RESOLVED, that each provision or amendment of the By-Laws of Lodgian, Inc. (the "Company") adopted by the Board of Directors of the Company without the approval of the Company's stockholders subsequent to March 9, 2000 and prior to the approval of this resolution be, and it hereby is, repealed, effective as of the time this resolution is approved by the Company's stockholders." This resolution, if adopted by the stockholders of the Company, will be legally binding on the Company and would have the effect of repealing any changes or amendments to the By-Laws made by the Board after March 9, 2000 and prior to the adoption of the By-Law Resolution. While the Board could seek to change or amend the By-Laws immediately following the 2000 Annual Meeting, Edgecliff believes that the adoption of the By-Law Resolution would send a clear message to the Board that stockholders oppose the Board's unilateral adoption of changes or amendments to the 13 Company's By-Laws that would impair the ability of a bidder to acquire the Company. You are urged to vote for the approval of the By-Law Resolution on the enclosed GREEN proxy card. BACKGROUND AND RECENT EVENTS On November 10, 1999, the Edgecliff Group retained Greenhill & Co., LLC ("Greenhill") to act as its financial advisor and to assist it in evaluating its strategic alternatives with respect to its investment in the Company. By letter dated November 16, 1999, the Edgecliff Group informed the Company of its intention to offer to acquire the Company at a price of $6.50 per Share (the "Offer") and requested certain due diligence information from the Company. By letter dated November 19, 1999, the Company informed Casuarina, a member of the Edgecliff Group, that the Offer was rejected. The Company in its November 19, 1999 letter stated that the terms and conditions of the Offer were not in the best interests of the Company's stockholders. Moreover, the Company stated that the price Casuarina contemplated offering for the Shares materially understated the value of the Company's business and assets. By letter dated November 22, 1999, the Edgecliff Group informed the Company that it did not know what the Company meant by "terms and conditions" since the Edgecliff Group's November 19 letter did not set forth any terms and conditions and did not even use the phrase. In any case, the Edgecliff Group urged the Company to reconsider the Offer and to provide the information previously requested in connection therewith. The letter underscored that an offer of $6.50 per Share was approximately a 50% premium over recent trading levels, and that providing the requested due diligence materials could enable the Edgecliff Group to increase its valuation above $6.50. By letter dated January 3, 2000, the Company informed Casuarina that it had retained Morgan Stanley Dean Witter as its financial advisor to assist the Company in exploring alternatives to maximize stockholder value. The Company stated that it was willing to provide Casuarina certain non-public, confidential information regarding the Company if Casuarina was willing to demonstrate the ability to finance a transaction at an appropriate price to the Company's stockholders and execute a confidentiality agreement with a standstill provision. Lastly, the Company stated that because Casuarina had been unwilling to do either, the Company believed that it was not in the best interest of the stockholders to grant Casuarina access to confidential, non- public information. By letter dated January 5, 2000, Casuarina informed the Company that it was prepared to execute a customary mutual confidentiality agreement containing a 30-day standstill as a condition to Casuarina's receipt of non-public information from the 14 Company. Casuarina provided the Company with a proposed Confidentiality and Standstill Agreement, which was subsequently rejected by the Company. In response to the Company's continuing refusal to provide the requested due diligence information and the Company's January 12, 2000 press release announcing that the Company's earnings were 24-28% below consensus analyst estimates, by letter dated January 18, 2000 to the Company, the Edgecliff Group withdrew the Offer. On March 6, 2000, the Edgecliff Group met with representatives of the Company and reaffirmed its interest in acquiring the Company, but at a price of $5.75 per Share in cash. During this meeting, the Edgecliff Group discussed potential confidentiality and "standstill" arrangements it was prepared to enter into in exchange for the due diligence information it had requested, but expressed its unwillingness to enter into any agreement that would impair its ability to nominate candidates for election to the Company's Board at the 2000 Annual Meeting. To satisfy the Company's request to provide evidence of the Edgecliff Group's ability to finance an acquisition of the Company, representatives of the Edgecliff Group's financing sources attended the March 6, 2000 meeting and answered all of the Company's questions regarding the Edgecliff Group's financing. On March 9, 2000, three days after the Edgecliff Group's reaffirmation of its interest in the Company and its indication of the possibility of nominating its own slate of directors for election at the 2000 Annual Meeting, the Company announced that certain changes had been made to its classified Board. Before these changes were made, the Company's Board consisted of three classes of directors serving for three-year terms as follows: Class I (term expiring in 2002) included Peter R. Tyson and one vacant seat; Class II (term expiring in 2000) included Michael A. Leven, Joseph C. Calabro and John M. Lang; and Class III (term expiring in 2001) included Robert S. Cole, Richard H. Weiner and one vacant seat. Accordingly, before the changes announced on March 9, 2000, the Company's stockholders had the right to nominate and appoint directors to replace all three Class II Directors at the 2000 Annual Meeting. Against this background, the Company announced that the following actions had been taken. First, Joseph C. Calabro resigned as a Class II Director with a term expiring in 2000 and was immediately appointed to fill a vacancy in Class I. Second, the Board of Directors reduced the Board's size from eight to six members, with the result that each class now consisted of only two directors. Realizing that the Company's By-Laws provided that a director "elected to fill a vacancy shall hold office only until the next election of directors by the stockholders," the Director Defendants (as defined below) deleted this By-Law and provided, instead, that "[a]ny director elected by the Board to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected." As a result, 15 the Company's stockholders now only may nominate and vote for two out of a total of six directors at the 2000 Annual Meeting, whereas previously they were entitled to vote for three out of six directors. Although the Company claims that the changes to the Board were made pursuant to the Company's Certificate of Incorporation and the rules of the NYSE, the Edgecliff Group believes these changes were adopted to prevent the Company's stockholders from replacing 50% of the Company's Board of Directors at the 2000 Annual Meeting. On April 7, 2000, Casuarina and Edgecliff filed a Verified Complaint for Declaratory and Injunctive Relief (the "Complaint") in the Court of Chancery of the State of Delaware in and for New Castle County, naming the Company, Peter R. Tyson, Joseph C. Calabro, John M. Lang, Robert S. Cole and Richard H. Weiner as defendants (collectively, the "Defendants") to redress the foregoing actions. The Complaint alleges that defendants Peter R. Tyson, Joseph C. Calabro, John M. Lang, Robert S. Cole and Richard H. Weiner (the "Director Defendants") voted to reduce the size of the Company's Board and limit the number of directors who must stand for election at the 2000 Annual Meeting for the purpose of interfering with the Company stockholders' ability to replace 50% of the Company's Board of Directors at the 2000 Annual Meeting. The Complaint seeks, among other things, judgment (1) declaring that the Defendants have breached their fiduciary duties of loyalty to the Company's stockholders, (2) enjoining the Director Defendants and the Company, its officers, agents, servants and employees from enforcing the reduction in the size of the Company's Board of Directors from eight to six members and (3) declaring that the Company's stockholders have the right to nominate and elect three Class II Directors at the 2000 Annual Meeting. Also on April 7, 2000, Casuarina and Edgecliff filed a Motion in the Court of Chancery of the State of Delaware in and for New Castle County moving for an expedited trial and expedited discovery. At a conference on April 14, 2000, the Chancery Court granted Casuarina and Edgecliff leave to conduct limited expedited discovery, but declined to set an expedited trial date. The Company's court papers disclose that the changes announced on March 9, 2000 to the composition of the Company's Board and By-Laws were in fact adopted on and effective as of January 12, 2000. The Edgecliff Group was disturbed to learn of the Company's failure to timely disclose these changes, especially since the Company did make a public announcement on January 12, 2000 disclosing, among other things, its poor earnings. VOTING AND PROXY PROCEDURES Under Section 213 of the Delaware General Corporation Law, if the Board does not establish the Record Date for determining stockholders entitled to notice of and to vote at the 2000 Annual Meeting, the Record Date will be at the close of business on the day next preceding the day on which notice of the 2000 Annual Meeting is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. In any case, only stockholders of record on the Record Date will be entitled to notice of and to vote at the 2000 Annual Meeting. Each Share is entitled to one vote. Stockholders who sell Shares before the Record Date (or acquire them without voting rights after the Record Date) may not vote such Shares. Stockholders of record on the Record Date will retain their voting rights in connection with the 2000 Annual Meeting even if they sell such Shares after the Record Date. Based on publicly available information, Edgecliff believes that the only outstanding class of securities 16 of the Company entitled to vote at the 2000 Annual Meeting are the Shares. According to publicly available information, as of November 12, 1999, there were 27,887,040 Shares issued and outstanding. Shares represented by properly executed GREEN proxy cards will be voted at the 2000 Annual Meeting as marked and, in the absence of specific instructions, will be voted for the election of the Edgecliff Nominees to the Board, for the By-Law Resolution and, in the sole discretion of the persons named as proxies on the enclosed GREEN proxy card, on all other matters as may properly come before the 2000 Annual Meeting. Directors are elected by a plurality of votes and the nominees who receive the most votes will be elected. Accordingly, election of the Edgecliff Nominees to the Board requires the affirmative vote of a plurality of the Shares represented and entitled to vote at the 2000 Annual Meeting. Approval of the By- Law Resolution requires the affirmative vote of the holders of 80% of the outstanding Shares entitled to vote at the 2000 Annual Meeting. Under the Company's By-Laws, the presence in person or by proxy of a majority of the Shares entitled to vote at the 2000 Annual Meeting constitutes a quorum on all matters. Shares for which proxies are marked "abstain" will be treated as Shares present for purposes of determining the presence of a quorum. If a broker indicates on a proxy that it does not have discretionary authority and has not received voting instructions from the beneficial owners of certain Shares as to their vote on a particular matter ("broker non-votes"), these Shares will be treated as present for purposes of determining the presence of a quorum, but will not be entitled to vote. Abstentions and broker non-votes will not be taken into account in determining the outcome of the election of directors. Abstentions and broker non-votes will have the effect of votes against the By-Law Resolution. Stockholders of the Company may revoke their proxies at any time prior to their exercise by attending the 2000 Annual Meeting and voting in person (although attendance at the 2000 Annual Meeting will not in and of itself constitute revocation of a proxy) or by delivering a written notice of revocation. The delivery of a subsequently dated proxy which is properly completed will constitute a revocation of any earlier proxy. The revocation may be delivered either to Edgecliff in care of MacKenzie Partners, Inc. at the address set forth on the back cover of this Proxy Statement or to the Company at 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326 or any other address provided by the Company. Although a revocation is effective if delivered to the Company, Edgecliff requests that either the original or photostatic copies of all revocations be mailed to Edgecliff in care of MacKenzie Partners, Inc. at the address set forth on the back cover of this Proxy Statement so that Edgecliff will be aware of all revocations and can more accurately determine if and when proxies have been received from the holders of record on the Record Date of a majority of the outstanding Shares. If you wish to vote for the election of the Edgecliff Nominees to the Board or for the adoption of the By-Law Resolution, please sign, date and return promptly the enclosed GREEN proxy card in the postage-paid envelope provided. 17 SOLICITATION OF PROXIES The solicitation of proxies pursuant to this Proxy Statement is being made by Edgecliff. Proxies may be solicited by mail, facsimile, telephone, telegraph, electronic mail, in person and by advertisements. Solicitations may be made by certain officers and employees of Edgecliff, none of whom will receive additional compensation for such solicitation. Edgecliff has retained MacKenzie Partners, Inc. ("MacKenzie") for solicitation and advisory services in connection with this solicitation, for which MacKenzie will receive a fee not to exceed $35,000, together with reimbursement for its reasonable out-of-pocket expenses, and will be indemnified against certain liabilities and expenses. MacKenzie will solicit proxies from individuals, brokers, banks, bank nominees and other institutional holders. Edgecliff will request banks, brokerage houses and other custodians, nominees and fiduciaries to forward all solicitation materials to the beneficial owners of the Shares they hold of record. Edgecliff will reimburse these record holders for their reasonable out-of-pocket expenses in so doing. It is anticipated that MacKenzie will employ approximately 35 persons to solicit the Company's stockholders for the 2000 Annual Meeting. Greenhill is serving as financial advisor to the Edgecliff Group in connection with its investment in the Company. As compensation for such services, the Edgecliff Group has agreed to pay Greenhill a fee of (i) $250,000 as a retainer fee payable in five installments and (ii) .6% of the transaction value paid by the Edgecliff Group in an acquisition of the Company. In addition, the Edgecliff Group has agreed to reimburse Greenhill for its reasonable out-of-pocket expenses, including, without limitation, reasonable fees and disbursements of its counsel arising out of Greenhill's engagement, and has also agreed to indemnify Greenhill (and certain affiliated persons) against certain liabilities and expenses. Greenhill may from time to time in the future render various investment banking services to the Edgecliff Group and its affiliates, for which it is expected it would be paid customary fees. The entire expense of soliciting proxies is being borne by Edgecliff. Edgecliff does not currently intend to seek reimbursement of the costs of this solicitation from the Company. The costs of this solicitation of proxies, and other costs specifically related to this solicitation (which are not deemed to include any fees payable to Greenhill), are currently estimated to be approximately $175,000. Edgecliff estimates that through the date hereof, its total expenditures in connection with this solicitation are approximately $125,000. INFORMATION ABOUT PARTICIPANTS Edgecliff is a Kentucky limited liability company. Edgecliff is primarily engaged in the business of investing in securities. The address of the principal 18 business office of Edgecliff is 207 Grandview Drive, Fort Mitchell, Kentucky 41017. Edgecliff's telephone number is 606-578-1100. As of the date of this Proxy Statement, the Edgecliff Group beneficially owns an aggregate of 3,091,800 Shares, which represents approximately 11.09% of the Shares outstanding (based on information publicly disclosed by the Company). Edgecliff intends to, and to cause its affiliates to, vote such Shares for the election of the Edgecliff Nominees and for the adoption of the Proposal. In addition to Edgecliff and the Edgecliff Nominees being participants to this proxy solicitation, Casuarina, Management, Joseph Yung, the 1994 Trust and the 1998 Trust may also be deemed participants in this proxy solicitation. For more detailed information regarding the other participants to this proxy solicitation, who may also solicit proxies from the stockholders of the Company, see Schedule I to this Proxy Statement. For more information regarding transactions involving Shares over the past two years and ownership of Shares by Edgecliff, the Edgecliff Nominees and the other participants to this proxy solicitation see Schedule II to this Proxy Statement. CERTAIN TRANSACTIONS BETWEEN EDGECLIFF AND THE COMPANY Except as set forth in this Proxy Statement (including the Schedules hereto), none of Edgecliff, the Edgecliff Nominees, the other participants to this solicitation, or any of their respective associates: (i) directly or indirectly beneficially owns any Shares or any securities of the Company; (ii) has had any relationship with the Company in any capacity other than as a stockholder, or is or has been a party to any transactions, or series of similar transactions, since January 1, 1999 with respect to any Shares of the Company; or (iii) knows of any transactions since January 1, 1999, currently proposed transaction, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeds $60,000 and in which any of them or their respective affiliates had, or will have, a direct or indirect material interest. In addition, other than as set forth herein, there are no contracts, arrangements or understandings entered into by Edgecliff, the Edgecliff Nominees or the other participants to this solicitation or any of their respective associates within the past year with any person with respect to any of the Company's securities, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies. Except as set forth in this Proxy Statement (including the Schedules hereto), none of Edgecliff, the Edgecliff Nominees, the other participants to this solicitation, or any of their respective associates, has entered into any agreement or understanding with any person with respect to (i) any future employment by the Company or its affiliates or (ii) any future transactions to which the Company or any of its affiliates will or may be a party. If and to the extent that the Edgecliff Group acquires control of the Company or otherwise obtains access to the books and records of the Company, the Edgecliff Group intends to conduct a detailed review of the Company and its assets, corporate structure, dividend policy, capitalization, operations, 19 properties, policies, management and personnel and consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. Such strategies could include, among other things, changes in the Company's business strategy, corporate structure, Certificate of Incorporation, By-Laws, capitalization, management or dividend policy. OTHER MATTERS AND ADDITIONAL INFORMATION Edgecliff is unaware of any other matters to be considered at the 2000 Annual Meeting. Should other matters be brought before the 2000 Annual Meeting, the persons named as proxies on the enclosed GREEN proxy card will vote on such matters in their sole discretion. Schedule III to this Proxy Statement sets forth certain information, as made available in public documents, regarding Shares held by certain beneficial owners and the Company's management. The information concerning the Company contained in this Proxy Statement and the Schedules attached hereto has been taken from, or is based upon, publicly available information. To date, Edgecliff has not had access to the books and records of the Company. Although Edgecliff does not have any information that would indicate that any information contained in this Proxy Statement concerning the Company is inaccurate or incomplete, Edgecliff does not take any responsibility for the accuracy or completeness of such information. Stockholders do not have appraisal or similar rights of dissenters under Delaware law with respect to the matters described in this Proxy Statement. STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING The Company's Definitive Proxy Statement on Schedule 14A dated May 11, 1999 sets April 25, 2000 as the deadline by which proposals of the Company's stockholders that are intended to be presented by such stockholders at the 2000 Annual Meeting were to be received by the Company in order to be considered for inclusion in the proxy statement and form of proxy relating to the 2000 Annual Meeting. However, in the event that the 2000 Annual Meeting is held more than 30 days before or after June 25, 2000, the deadline is the close of business on the tenth day following the day on which notice of the date of the annual meeting is mailed or public disclosure of the date of the annual meeting is made, whichever occurs first. Edgecliff expects that in the event that the 2000 Annual Meeting is not held within thirty days of June 25, 2000, a new deadline for stockholder proposals will be included in one of the Company's periodic reports or press releases. Edgecliff Holdings, LLC April 18, 2000 20 SCHEDULE I INFORMATION CONCERNING CERTAIN PARTICIPANTS Set forth in the table below is the present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on for each of the participants to this proxy solicitation other than Edgecliff and the Edgecliff Nominees. Name and Business Present Principal Business, Occupation or Address Employment ----------------- ----------------------------------------- Casuarina Cayman Holdings Casuarina is a corporation organized under Ltd. the laws of the Cayman Islands, British 207 Grandview Drive West Indies. Casuarina is a holding Fort Mitchell, KY 41017 company owning 100% of the outstanding capital stock of Galleon Beach Resort, Ltd., a Cayman Islands, British West Indies corporation, which owns and operates a resort hotel in Grand Cayman, British West Indies. Edgecliff Management, LLC Management is a Kentucky limited liability 207 Grandview Drive company. Management is primarily Fort Mitchell, KY 41017 engaged in the business of investing in securities. Joseph A. Yung Mr. Joseph Yung's principal occupation is Columbia Sussex Corporation Director of Development of Columbia 207 Grandview Drive Sussex Corporation, a builder, owner and Fort Mitchell, KY 41017 manager of hotels. 1994 William J. Yung Family The 1994 Trust is organized under the laws Trust of Ohio. The business of the 1994 Trust is 207 Grandview Drive to hold its assets for the beneficiaries of Fort Mitchell, KY 41017 the 1994 Trust in accordance with the Trust Agreement dated December 19, 1994 and to dispose of such assets and make distributions to such beneficiaries in accordance with such Trust Agreement. I-1 The 1998 William J. Yung The 1998 Trust is organized under the laws and Martha A. Yung of Ohio. The business of the 1998 Trust is Family Trust to hold its assets for the beneficiaries of 207 Grandview Drive the 1998 Trust in accordance with the Trust Fort Mitchell, KY 41017 Agreement dated March 10, 1999 and to dispose of such assets and make distributions to such beneficiaries in accordance with such Trust Agreement. I-2 SCHEDULE II TRANSACTIONS IN THE SECURITIES OF THE COMPANY Edgecliff is the record and beneficial owner of 2,598,100 Shares. William J. Yung is the beneficial owner of 3,091,800 Shares and does not own any Shares of record. Casuarina is the beneficial owner of 493,700 Shares and does not own any Shares of record. Management is the beneficial owner of 2,598,100 Shares and does not own any Shares of record. Edgecliff, together with certain of its affiliates, may be deemed to constitute a "group" as defined under Rule 13d-5 promulgated under the Exchange Act that beneficially owns 3,091,800 Shares in the aggregate. The affiliates of Edgecliff who may be deemed to be members of the Edgecliff Group are Casuarina, Management, the 1994 Trust, the 1998 Trust, William J. Yung and Joseph Yung. All of the Shares beneficially owned by the Edgecliff Group were originally acquired by Casuarina in open market transactions executed on the NYSE on the dates and at the prices (exclusive of commissions) listed below. Certain of these Shares were then transferred to Edgecliff as the result of the transactions described below. Other than as set forth herein, none of Edgecliff, the Edgecliff Nominees or the other participants to this proxy solicitation is the record or beneficial owner of any securities of the Company, nor any parent or subsidiary of the Company. Other than as set forth below, none of Edgecliff, the Edgecliff Nominees or the other participants to this proxy solicitation has effected any transactions in any securities of the Company in the last two years. Purchases by Casuarina Date of Purchase Number of Shares Purchased Purchase Price Per Share - ---------------- -------------------------- ------------------------ March 29, 1999 22,200 $5.0000 March 30, 1999 45,000 $5.1250 March 30, 1999 5,000 $5.0625 March 30, 1999 300 $4.9375 March 30, 1999 20,000 $5.1250 March 30, 1999 30,000 $5.1875 March 30, 1999 50,000 $5.0000 May 20, 1999 34,400 $6.3125 May 20, 1999 1,000 $6.2500 May 20, 1999 11,000 $6.3750 May 21, 1999 50,000 $6.5625 May 24, 1999 100,000 $6.8750 II-1 Date of Purchase Number of Shares Purchased Purchase Price Per Share - ---------------- -------------------------- ------------------------ May 27, 1999 22,400 $6.8750 June 1, 1999 46,800 $7.1250 June 1, 1999 2,000 $7.0000 June 2, 1999 19,700 $6.8750 June 3, 1999 50,000 $6.8750 June 4, 1999 26,600 $7.0000 June 7, 1999 15,200 $6.8750 June 8, 1999 50,000 $6.8750 June 9, 1999 500 $6.8125 June 9, 1999 24,700 $6.7500 June 10, 1999 33,000 $6.6250 June 11, 1999 12,000 $6.0000 June 14, 1999 33,500 $5.8750 June 15, 1999 11,200 $5.8750 June 15, 1999 12,000 $6.1250 June 18, 1999 3,000 $6.1250 June 18, 1999 35,400 $6.1875 June 21, 1999 18,000 $6.2500 June 21, 1999 10,000 $6.3750 June 22, 1999 21,000 $6.5000 June 22, 1999 2,500 $6.4375 June 23, 1999 146,500 $6.5000 June 24, 1999 15,000 $6.4375 June 25, 1999 22,000 $6.5000 June 30, 1999 2,000 $6.5000 July 1, 1999 5,300 $6.5000 July 1, 1999 115,000 $6.5625 II-2 Date of Purchase Number of Shares Purchased Purchase Price Per Share - ---------------- -------------------------- ------------------------ July 2, 1999 8,400 $6.5000 July 6, 1999 11,000 $6.5000 July 7, 1999 2,100 $6.5000 July 8, 1999 103,400 $6.6250 July 9, 1999 13,200 $6.5000 July 9, 1999 20,000 $6.6250 July 15, 1999 2,500 $5.8750 July 16, 1999 26,000 $5.7500 July 20, 1999 10,000 $5.7500 July 20, 1999 30,000 $5.6875 July 20, 1999 10,000 $5.6250 July 21, 1999 10,000 $5.2500 July 22, 1999 12,500 $4.9375 October 4, 1999 200,000 $4.0000 October 4, 1999 10,000 $3.8740 October 6, 1999 625,800 $4.0000 October 7, 1999 5,400 $4.0000 October 8, 1999 13,900 $4.0000 October 11, 1999 29,900 $4.0000 October 12, 1999 88,300 $4.0000 October 13, 1999 6,000 $4.0000 October 13, 1999 10,000 $4.0625 October 13, 1999 109,000 $4.1250 October 14, 1999 35,000 $4.1875 October 15, 1999 121,500 $4.2500 November 22, 1999 143,600 $6.0000 December 20, 1999 3,000 $4.8750 II-3 Date of Purchase Number of Shares Purchased Purchase Price Per Share - ---------------- -------------------------- ------------------------ December 20, 1999 47,000 $5.0000 December 21, 1999 50,000 $5.0000 December 27, 1999 50,000 $5.0000 December 28, 1999 50,000 $5.0000 December 29, 1999 34,000 $5.0000 January 7, 2000 16,100 $4.8750 January 11, 2000 50,000 $4.7500 January 12, 2000 50,000 $4.7500 Sales by Casuarina Date of Sale Number of Shares Purchased Purchase Price Per Share - ------------ -------------------------- ------------------------ April 21, 1999 40,000 $5.5000 On November 9, 1999, Casuarina transferred 2,546,138 Shares to the 1994 Trust and 51,962 Shares to William J. Yung in the form of a distribution to Casuarina's equity holders. On December 28, 1999, the 1994 Trust contributed 2,546,138 Shares to Edgecliff in exchange for 100 common units of Edgecliff. On the same date, (i) William J. Yung contributed 51,962 Shares to Management in exchange for 9 voting units and 6,991 nonvoting units of Management and (ii) Management contributed 51,962 Shares to Edgecliff in exchange for 266,305.25 preferred units of Edgecliff. On March 23, 2000, Edgecliff caused the 2,598,100 Shares it beneficially owned as a result of the transactions described in this paragraph to be registered in its own name. II-4 SCHEDULE III SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY Set forth below is information regarding Shares owned by certain beneficial owners, directors, nominees and executive officers of the Company as of April 7, 2000. Such information is based solely upon publicly filed Schedule 13Ds, Schedule 13Gs, and Form 3s, 4s and 5s, and the Company's 1999 proxy statement. III-1 The following table shows the beneficial ownership of persons owning more than five percent of the outstanding Shares. Number of Shares Name and Address of of Common Stock Percent of Beneficial Owner Beneficially Owned Common Stock (1) ---------------- ------------------ ---------------- Heitman/PRA Securities Advisors, 2,205,100 (2) 7.91% Inc. 180 North LaSalle Street, Suite 3600 Chicago, IL 60601 The Prudential Insurance Company of 1,577,400 (3) 5.66% America 751 Broad Street Newark, NJ 07102-3777 Dimensional Fund Advisors Inc. 1,556,300 (4) 5.58% 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 Edgecliff Holdings, LLC 2,598,100 (5) 9.32% 207 Grandview Drive Fort Mitchell, KY 41017 Edgecliff Management, LLC 2,598,100 (6) 9.32% 207 Grandview Drive Fort Mitchell, KY 41017 William J. Yung 3,091,800 (7) 11.09% 1200 Cypress Street Cincinnati, OH 45206 The Edgecliff Group 3,091,800 (8) 11.09% (1) Percentages are based upon 27,887,040 Shares outstanding, as reported by the Company in its Form 10-Q for the period ended September 30, 1999. (2) Heitman/PRA Securities Advisors, Inc. filed a Schedule 13G/A on October 15, 1998 with the Commission reporting beneficial ownership of 2,205,100 shares of Common Stock of the Company's predecessor, Servico, Inc., with sole voting power with respect to 2,147,400 shares, sole dispositive power with respect to 2,172,500 shares, and shared dispositive power with respect to 32,600 shares. (3) The Prudential Insurance Company of America filed a Schedule 13G/A on January 31, 2000 with the Commission reporting beneficial ownership of 1,577,400 Shares with sole voting and dispositive power with respect to 403,900 Shares and with shared voting and dispositive power with respect to 1,173,500 Shares. III-2 (4) Dimensional Fund Advisors Inc. filed a Schedule 13G on February 3, 2000 with the Commission reporting beneficial ownership of 1,556,300 Shares with sole voting and dispositive power with respect to such Shares. (5) Edgecliff has shared voting and dispositive power over 2,598,100 Shares which it holds of record and is the direct beneficial owner. (6) Management may be deemed to be the indirect beneficial owner of, and have shared voting and dispositive power with respect to, the 2,598,100 Shares held by Edgecliff by virtue of its direct control of Edgecliff. (7) William J. Yung may be deemed to be the indirect beneficial owner of, and have shared voting and dispositive power with respect to, (i) the 2,598,100 Shares held by Edgecliff by virtue of his indirect control of Edgecliff and (ii) the 493,700 Shares held by Casuarina by virtue of his direct control of Casuarina. (8) The Edgecliff Group, which consists of Edgecliff, Casuarina, Management, the 1994 Trust, the 1998 Trust, William J. Yung and Joseph Yung, may be deemed to beneficially own, and have shared voting and dispositive power with respect to, all of the Shares beneficially owned by its individual members by virtue of the fact that it may be deemed to constitute a "group" as defined under Rule 13d-5 promulgated under the Exchange Act. Accordingly, the Edgecliff Group may be deemed to be the beneficial owner of (i) the 2,598,100 Shares held of record by Edgecliff and (ii) the 493,700 Shares as to which Casuarina is the direct beneficial owner. III-3 The following table sets forth the number of Shares owned by each current director and executive officer and by all directors and executive officers as a group as of April 7, 2000. Except as otherwise indicated, each individual named has sole investment and voting power with respect to the securities shown, which has been assumed unless otherwise indicated on the referenced filing with the Commission. Number of Shares of Common Stock Percent of Name Beneficially Owned Common Stock (1) - ---- ------------------ ---------------- Robert S. Cole 627,843 (2) 2.25% Joseph C. Calabro 276,360 (3) * John M. Lang 358,950 (4) 1.29% Michael A. Leven 40,724 (5) * Peter R. Tyson 60,900 (6) * Richard H. Weiner 60,100 (7) * Karyn Marasco Guttierez 64,700 (8) * Peter J. Walz 49,000 (9) * Lawrence Carballo 17,400 (10) * Kenneth R. Posner 90,000 (11) * All Directors and Executive 1,645,977 5.91 officers as a Group (10 persons) - ---------- * Represents less than 1%. (1) Percentages are based upon 27,887,040 Shares outstanding, as reported by the Company in its Form 10-Q for the period ended September 30, 1999, plus the total number of Shares that may be acquired within 60 days of April 7, 2000 by such person. (2) Mr. Cole filed a Form 4 on October 1, 1999 with the Commission reporting beneficial ownership of 627,843 Shares. (3) Mr. Calabro filed a Form 5 on February 15, 2000 with the Commission reporting beneficial ownership of 216,360 Shares and beneficial ownership of exercisable options to purchase 60,000 Shares. (4) Mr. Lang filed a Form 4 on January 6, 2000 with the Commission reporting beneficial ownership of 353,950 Shares. Mr. Lang also filed a Form 5 on February 15, 2000 with the Commission reporting beneficial ownership of exercisable options to purchase 5,000 Shares. (5) Mr. Leven filed a Form 5 on February 15, 2000 with the Commission reporting beneficial ownership of 10,724 Shares and beneficial ownership of exercisable options to purchase 30,000 Shares. III-4 (6) Mr. Tyson filed a Form 4 on September 1, 1999 with the Commission reporting beneficial ownership of 900 Shares. Mr. Tyson filed a Form 5 on February 15, 2000 with the Commission reporting beneficial ownership of exercisable options to purchase 60,000 Shares. (7) Mr. Weiner filed a Form 3 on December 21, 1998 with the Commission reporting beneficial ownership of 100 Shares. Mr. Weiner filed a Form 5 on February 15, 2000 with the Commission reporting beneficial ownership of exercisable options to purchase 60,000 Shares. (8) Ms. Guttierez filed a Form 5 on February 15, 2000 with the Commission reporting beneficial ownership of 2,700 Shares and beneficial ownership of exercisable options to purchase 62,000 Shares. Ms. Guttierez's Form 5 indicates that the options vest in 20% increments annually, beginning in 1999. (9) Based upon the Company's 1999 Proxy Statement. Includes beneficial ownership of exercisable options to purchase 49,000 Shares. (10) Based upon the Company's 1999 Proxy Statement. Includes beneficial ownership of exercisable options to purchase 17,400 Shares. (11) Mr. Posner filed a Form 3 on October 15, 1999 with the Commission reporting beneficial ownership of 10,000 Shares and beneficial ownership of exercisable options to purchase 80,000 Shares. III-5 IMPORTANT Tell your Board what you think! Your vote is important. No matter how many Shares you own, please give Edgecliff your proxy for the election of the Edgecliff Nominees and for approval of the By-Law Resolution by taking three steps: 1. Signing the enclosed GREEN proxy card, 2. Dating the enclosed GREEN proxy card, and 3. Mailing the enclosed GREEN proxy card today in the envelope provided (no postage is required if mailed in the United States). If any of your Shares are held in the name of a brokerage firm, bank, bank nominee or other institution, only it can vote such Shares and only upon receipt of your specific instructions. Accordingly, please contact the person responsible for your account and instruct that person to execute the GREEN proxy card representing your Shares. Edgecliff urges you to confirm in writing your instructions to Edgecliff in care of the address provided below so that Edgecliff will be aware of all instructions given and can attempt to ensure that such instructions are followed. If you have any questions or require any additional information concerning this Proxy Statement, please contact MacKenzie at the address or telephone number set forth below. [MacKenzie Partners, Inc. logo] 156 Fifth Avenue New York, New York 10010 Toll Free: 800-322-2885 or Call Collect: 212-929-5500 III-6 PRELIMINARY COPY; SUBJECT TO COMPLETION MATERIALS DATED April 18, 2000 [FORM OF GREEN PROXY CARD] LODGIAN, INC. 2000 ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF EDGECLIFF HOLDINGS, LLC The undersigned appoints [name] and [name] and each of them, attorneys and agents with full power of substitution to vote all shares of common stock of Lodgian, Inc. (the "Company") which the undersigned would be entitled to vote if personally present at the 2000 Annual Meeting of Stockholders of the Company, and including at any adjournments or postponements thereof and at any special meeting called in lieu thereof (the "2000 Annual Meeting"), as follows: Edgecliff Holdings, LLC ("Edgecliff") recommends a vote FOR items 1 and 2. 1. Election of Directors: To elect to the Board of the Directors of the Company (the "Board") such number of the following Edgecliff nominees as equals the number of directorships subject to election at the 2000 Annual Meeting: William J. Yung, Andrew R. Berger and Joseph E. Marquet (the "Edgecliff Nominees"). The first two of such individuals will be elected to succeed the current two Class II Directors (or any director named to fill any vacancy created by the death, retirement, resignation or removal of any of such two directors) of the Company. The third individual will be elected (a) in the event that the number of directorships subject to election at the 2000 Annual Meeting is greater than two, (b) if the Company makes or announces any changes to its By-Laws or takes or announces any other action that has, or if consummated would have, the effect of disqualifying one or both of the first two Edgecliff Nominees and/or (c) in the event that one or both of the first two Edgecliff Nominees is unable for any reason to serve as a director. Edgecliff hereby represents that it intends to appear in person or by proxy at the 2000 Annual Meeting to nominate the Edgecliff Nominees. [ ] For all Edgecliff Nominees except as marked below [ ] Withhold authority for all Edgecliff Nominees 1 Instruction: To withhold authority to vote for any individual nominee, mark "for" above and print the name(s) of the nominee(s) with respect to whom you wish to withhold authority in the space provided below. I withhold authority to vote for the following nominee(s): ------------------------------------------------ 2. By-Law Resolution Proposed by Edgecliff. To adopt the following resolution: "RESOLVED, that each provision or amendment of the By-Laws of Lodgian, Inc. (the "Company") adopted by the Board of Directors of the Company without the approval of the Company's stockholders subsequent to March 9, 2000 and prior to the approval of this resolution be, and it hereby is, repealed, effective as of the time this resolution is approved by the Company's stockholders." FOR [ ] AGAINST [ ] ABSTAIN [ ] 3. In their sole discretion, the herein named attorneys and proxies, their substitutes, or any of them are authorized to vote upon any other matters as may properly come before the 2000 Annual Meeting. The undersigned hereby revokes any other proxy or proxies heretofore given to vote or act with respect to the shares of common stock of the Company held by the undersigned, and hereby ratifies and confirms all action that the herein named attorneys and proxies, their substitutes, or any of them have taken or may lawfully take by virtue hereof. If properly executed, this proxy will be voted as directed above. If no direction is indicated with respect to the above proposals, this proxy will be voted for items 1 and 2 in the manner set forth in Item 3 above. 2 This proxy will be valid until the earlier of one year from the date indicated below and the completion of the 2000 Annual Meeting. DATED: _________________________________, 2000. PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY. - -------------------------------- (Signature) - -------------------------------- (Signature, if held jointly) - -------------------------------- (Title) When shares are held jointly, joint owners should each sign. Executors, administrators, trustees, etc., should indicate the capacity in which signing. IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE! IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL: MACKENZIE PARTNERS, INC. TOLL FREE: (800) 322-2885 OR CALL COLLECT: (212) 929-5500 3 EX-14 4 EXHIBIT 14 Exhibit 14 EDGECLIFF HOLDINGS, LLC 207 Grandview Drive Fort Mitchell, Kentucky 41017 April 18, 2000 Lodgian, Inc. 3445 Peachtree Road, NE, Suite 700 Atlanta GA 30326 Attention: Mr. Robert S. Cole, Chief Executive Officer and President Dear Mr. Cole: Edgecliff Holdings, LLC ("Edgecliff Holdings") is the record owner of 2,598,100 shares of the common stock of Lodgian, Inc. ("Target" or the "Company"), a Delaware corporation. As a common stockholder of Target, Edgecliff Holdings hereby demands, pursuant to Section 220 of the Delaware General Corporation Law and the common law of the State of Delaware, the right to inspect the following documents and records of the Company and to make copies or abstracts therefrom: (a) A complete record or list of the Company's stockholders, certified by the Company or its transfer agent, showing the names and addresses of each stockholder and the number of shares of stock registered in the name of each such stockholder, as of the date of this demand. (b) A magnetic computer tape list of the holders of the Company's stock as of the date of this demand, showing the names, addresses and number of shares held by such stockholders, such computer processing data as is necessary for Edgecliff Holdings to make use of such magnetic computer tape, and a printout of such magnetic computer tape, if different from the list in (a) above, for verification purposes. (c) All daily transfer sheets showing changes in the names, addresses and number of shares of the Company's stockholders which are in or come into the possession of the Company or its transfer agent, or which can reasonably be obtained from brokers, dealers, banks, clearing agencies or voting trustees or their nominees, from the date of the stockholder list referred to above to the conclusion of the next annual meeting of stockholders of the Company. (d) All information in or which comes into the Company's or its agent's possession, or which can reasonably be obtained from brokers, dealers, banks, clearing agencies or voting trustees or their nominees concerning the names, addresses and number of shares held by the participating brokers and banks named in the individual nominee names of Cede & Co. (whether in electronic form or list form), including any daily or weekly participant list for the Depository Trust Company, or from DLJ and other similar nominees, including any respondent bank lists or omnibus proxies, and a list or lists containing the name, address and number of shares attributable to any participant in any Company employee stock ownership plan, stock purchase plan or comparable plan in which the decision as to the voting of the shares held by such plan is made, directly or indirectly, individually or collectively, by the participants in the plan. (e) All information in or which comes into the Company's or its agent's possession or control, or which can reasonably be obtained from brokers, dealers, banks, clearing agencies, voting trustees or other nominees relating to the names of the beneficial owners of the Company's stock ("NOBO's") pursuant to Rule 14b-1(b) or Rule 14b- 2(b) under the Securities Exchange Act of 1934, as amended, in the format of a printout in descending order balance. If such information is not in the Company's possession, custody or control, such information should be requested from the Independent Election Corporation of America. (f) A stop list or stop lists relating to any shares of stock of the Company and any additions or deletions from the date of the list referred to in paragraph (a) above. (g) A list of all stockholders owning 1,000 or more shares of Company stock arranged in descending order as of the date of this demand. (h) The information and records specified in the foregoing paragraphs as of any record date for stockholder action set by the Company's board of directors, by operation of law or otherwise, 2 including the record date for the Company's next annual meeting of stockholders. Edgecliff Holdings further demands that modifications, additions or deletions to any and all information referred to in paragraphs (a) through (h) above be immediately furnished to Edgecliff Holdings as such modifications, additions or deletions become available to the Company or its agents or representatives. Edgecliff Holdings will bear the reasonable costs incurred by the Company in connection with the production of the above information. The purpose of this demand is to enable Edgecliff Holdings to communicate with other Target stockholders in connection with a proposed solicitation of proxies from Target's stockholders to elect certain persons nominated by Edgecliff Holdings for election to the board of directors of Target at its upcoming annual meeting of stockholders. Edgecliff Holdings hereby designates Paul, Weiss, Rifkind, Wharton & Garrison, its directors, officers and employees, or any other person designated by Edgecliff Holdings or Paul, Weiss, Rifkind, Wharton & Garrison, acting together, singly or in any combination, to conduct, as its agents, the inspection and copying requested herein. Please advise Edgecliff Holdings' counsel, James M. Dubin of Paul, Weiss, Rifkind, Wharton & Garrison ((212) 373-3097), as promptly as practicable when and where the items demanded above will be made available to it. Please also advise its counsel immediately whether you voluntarily will supply the requested information. If assent by the Company to this demand is not received within five (5) business days from the date hereof, Edgecliff Holdings will conclude that this demand has been refused and will take appropriate steps to secure its rights to examine and copy the demanded material. Please sign and date one copy of this letter and indicate your receipt hereof and return it to the undersigned at the above address. Very truly yours, /s/ William J. Yung ------------------- William J. Yung, President Receipt Acknowledged: - ------------------------------ Name - ------------------------------ Title - ------------------------------ Date 3 POWER OF ATTORNEY KNOW ALL MEN that Edgecliff Holdings, LLC does hereby make, constitute and appoint Paul, Weiss, Rifkind, Wharton & Garrison and its directors, officers, employees, agents and other persons designated by Paul, Weiss, Rifkind, Wharton & Garrison, its true and lawful attorneys-in-fact and agents for it in its name, place and stead, giving and granting unto said attorneys and agents full power and authority to act on its behalf, as a Stockholder of Lodgian, Inc., to seek the production, and to engage in the inspection and copying, of records and documents of every kind and description, including, without limitation, the certificate of incorporation and amendments thereto, minutes, bylaws and amendments thereto, the list of stockholders and any other business records relating to Lodgian, Inc. Edgecliff Holdings, LLC reserves all rights on its part to do any act which said attorneys hereby are authorized to do or perform. This Power of Attorney may be terminated by Edgecliff Holdings, LLC or said attorneys by written notice to the other. April 11, 2000 EDGECLIFF HOLDINGS, LLC - -------------- Date By: /s/ William J. Yung ------------------- Name: William J. Yung Title: President 4 STATE OF Ohio ) ) SS: COUNTY OF Hamilton ) On this 11th day of April, 2000, having been duly sworn, William J. Yung, the President of Edgecliff Holdings, LLC, deposes and says under oath that he has read the foregoing demand addressed to Lodgian, Inc., and that the facts and statements in said demand are true and correct. SWORN TO AND SUBSCRIBED before me this 11th day of April, 2000 /s/ Joanne M. Stern - ------------------- Notary Public My commission expires February 1, 2003 ---------------- 5 -----END PRIVACY-ENHANCED MESSAGE-----