SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
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Date of Report: October 13, 2000
LODGIAN, INC.
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(Exact name of registrant as specified in its charter)
Delaware 001-14537 52-2093696
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
3445 Peachtree Road, N.E.,
Suite 700, Atlanta, Georgia 30326
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 364-9400
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ITEM 5. OTHER EVENTS.
On October 12, 2000, Lodgian, Inc. (the "Company") announced that it
postponed its annual meeting in order to give its shareholders the opportunity
to consider important information relating to the board's receipt of a sale
proposal from Whitehall Street Real Estate Limited Partnership XIII, a Delaware
limited partnership, and Whitehall Parallel Real Estate Limited Partnership
XIII, a Delaware limited partnership (collectively, "Whitehall"). The meeting
has been rescheduled for October 20, 2000 and will be held in Atlanta, Georgia
at 9:30 a.m., local time, at The Resource Forum, 3340 Peachtree Road N.E..
Whitehall is the most recent real estate investment fund sponsored by Goldman,
Sachs & Co. The Company's press release announcing postponement of the meeting
is attached to this Form 8-K as Exhibit 99-1 and is incorporated herein by
reference.
The Lodgian Board has received a letter from Whitehall outlining the
terms of the sale proposal (the "Offer Letter"). The Offer Letter is non-binding
and any obligations to proceed with a transaction will be subject to, among
other things, execution of mutually satisfactory definitive agreements. However,
if the Company proceeds with the transaction, the terms set forth in the Offer
Letter are expected to be included in the definitive agreements governing the
transaction (the "Definitive Agreements").
In conjunction with the Offer Letter, the Company has entered into an
Exclusivity and Expense Reimbursement Agreement with Whitehall, dated as of
October 12, 2000 (the "Exclusivity Agreement"). The Exclusivity Agreement is
attached to this Form 8-K as Exhibit 10-1 and is incorporated herein by
reference.
Under the terms of the Offer Letter, Whitehall has proposed that a
subsidiary of Whitehall would purchase all outstanding shares of the Company
(including shares issuable upon the conversion of the Lodgian Capital Trust 7%
Convertible Redeemable Equity Structured Trust Securities issued pursuant to a
prospectus dated September 2, 1999 (the "CRESTS")), for a cash purchase price of
$4.50 per share, subject to certain adjustments as described below (the "Total
Acquisition Price").
CONDITIONS OF THE OFFER
The Definitive Agreements will be entered into only if Whitehall is
satisfied with its due diligence and if the Company files its Form 10-Q reports
for the first, second and third quarters of 2000 and such reports do not
contradict or make inaccurate the assumptions Whitehall has made in connection
with the Offer Letter. If executed, the Definitive Agreements will be subject to
certain conditions, including but not limited to, the following:
(a) there having been no injunction prohibiting or restricting the
consummation of the transaction and there having been no pending
or threatened litigation by a government entity or third party
that would have a material adverse effect on the Company or its
assets;
(b) approval of the transaction by the stockholders of the Company;
(c) receipt of any required regulatory or other material third-party
approval to the transaction;
(d) (i) holders of at least 95% of the CRESTS shall have made an
irrevocable election to convert all CRESTS held by them into
common stock of the Company at the conversion ratio specified in
the terms of the CRESTS upon the completion of the transaction;
and (ii) at least 51% of the Company's high yield bonds shall
have been acquired by the Company through a tender offer made by
the Company and, as part of the tender offer, consents shall be
obtained from the holders so that the terms of the indentures for
such bonds shall be amended to eliminate all the financial and
other restrictive covenants contained in such bonds;
(e) there being no rights of first offer, rights of first refusal or
other restrictions on the transferability of any of the Company's
assets that would be triggered by the transaction or any
subsequent resale or transfer of the assets;
(f) the Company shall have obtained customary lender estoppels with
respect to any financing that will remain in place after the
consummation of the transaction;
(g) all obligations of the Company under all leases or contracts
assumed by Whitehall shall have been performed or waived;
(h) all franchise and management agreements to which the Company is a
party will continue in full force and effect after completion of
the transaction without change in their terms. This condition
will be satisfied if the Company has entered into new franchise
and management agreements, satisfactory to Whitehall, with
respect to all assets of the Company which are not subject to
management and franchise agreements satisfying this clause.
ASSUMPTIONS OF THE OFFER
The Offer Letter states that in determining the Total Acquisition
Price, Whitehall has made the following assumptions which if not verified and
confirmed in the Definitive Agreements would result in a price reduction to the
Total Acquisition Price:
(a) the quarterly reports of the Company to be filed with the
Securities Exchange Commission do not contradict or make
inaccurate any assumptions made by Whitehall;
(b) at December 31, 2000, the excess of (i) the outstanding balance
of the debt (other than the CRESTS and high yield bonds) incurred
by the Company (the "Other Debt") over (ii) the aggregate amount
of unrestricted cash not included in the net working capital will
not be greater than $579.8 million less any portion of the total
net proceeds from the disposition of any asset of the Company
sold after October 12, 2000 actually applied to repay the Other
Debt; all of such Other Debt (with certain exceptions) can be
assumed by Whitehall without any changes in the terms thereof;
and such Other Debt will meet the other assumptions relating to
the Other Debt previously discussed between Whitehall and the
Company. In the event that the net debt of the Company at
December 31, 2000 is less than the amount specified in this
clause or in the event that the Company sells certain assets for
an aggregate amount in excess of the amounts agreed by the
parties, then the parties will negotiate in good faith an
appropriate adjustment to the Total Acquisition Price, without
duplication of any other adjustment to the Total Acquisition
Price, that appropriately reflects such events; provided that in
no event shall the Total Acquisition Price exceed $4.50 per
share.
(c) at December 31, 2000 the net working capital (defined as
restricted cash that would otherwise be accounted for as a
current asset and that is not reserved for liabilities that are
long-term liabilities plus accounts receivable, net of
allowances, plus inventories plus prepaid and other current
assets minus the sum of (i) accounts payable, plus (ii) other
accrued liabilities, plus (iii) advance deposits and other
current liabilities, plus (iv) accrued interest) will be greater
than or equal to negative $30.5 million (assuming accrued
interest of $17 million at December 31, 2000 on all of the
Company's debt, including the high yield bonds and the Other
Debt);
(d) the Company will not distribute any dividends on the common stock
of the Company or make any cash payments to CRESTS holders prior
to closing of the transaction;
(e) during the 2000 calendar year, capital expenditures in the amount
of $75,000,000 will have been expended;
(f) the Company will not incur more than an amount agreed upon by the
parties in financial advisory fees, legal fees and expenses,
franchise and management agreement payments, consent solicitation
fees, debt assumption and prepayment fees and other costs in
connection with the transaction ("Transaction Fees");
(g) the cost of the aggregate expenditures in connection with any
property improvement program ("PIP") agreed to with the Company's
franchisors shall not exceed an amount agreed upon by the
parties;
(h) with respect to the CRESTS: (i) the amount that may be paid for
each CRESTS security shall not exceed the amount that the holder
of such CRESTS security would receive if the CRESTS security were
converted to shares of the Company's Common Stock in accordance
with the conversion rate specified in the CRESTS upon the closing
of the transaction; and (ii) to the extent that less than 100% of
the CRESTS are converted, the Total Acquisition Price will be
reduced by an amount equal to $7 million assuming that exactly
95% of the CRESTS are converted, or if more than 95% but less
than 100% of the CRESTS are converted, by a pro rata portion of
such $7 million amount (e.g., the Total Acquisition Price will be
reduced by $3.5 million if 97.5% of the CRESTS are converted or
purchased). Thus, for example, if the Total Acquisition Price is
$4.50 per share of Common Stock (and there can be no assurance
that this will be the case), then a holder of one CREST security
with a $50 par value would receive upon conversion of such
security into shares of the Company's Common Stock, the
equivalent of approximately $22.62 for such CREST security,
assuming four quarters of accrued and unpaid interest on such
security. If the Total Acquisition Price is $4.00 per share of
Common Stock (and there can be no assurance that this will be the
case), then a holder of one CREST security with a $50 par value
would receive upon conversion of such security into shares of the
Company's Common Stock, the equivalent of approximately $20.10
for such CREST security, assuming four quarters of accrued and
unpaid interest on such security;
(i) no high yield bonds shall be purchased at a price in excess of
101% of the principal amount thereof plus accrued interest;
(j) the Company will have net operating losses available in an amount
sufficient to offset fully any tax liabilities arising out of the
conversion or purchase of the CRESTS, the Company's purchase of
the high yield bonds and the consummation of the transaction;
(k) there will be no severance costs as a result of the transaction
and the Company and its subsidiaries will have no pension
liabilities other than those indicated in the Company's December
31, 1999 financial statements and other than ordinary course
accruals since December 31, 1999 under existing plans, for which
proper provisions shall have been made; and
(l) the property referred to as Fort Pierce has been sold to a third
party for total net proceeds of $2.4 million.
If the expenditures by the Company for PIP and the Transaction Fees are
less than the amounts agreed upon by the parties, then such savings may be
applied to offset any other decrease in the Total Acquisition Price, so long as
the Total Acquisition Price does not exceed $4.50 per share.
ASSET SALES
In the event the Company wishes to sell any assets pursuant to the
Exclusivity Agreement, the following provisions will apply in determining the
Total Acquisition Price and may result in a dollar for dollar reduction in the
Total Acquisition Price:
(a) If the Company sells certain properties (the "Targeted Sale
Properties") at a price agreed upon by the parties, then there
will be no adjustment to the Total Acquisition Price in respect
to the properties;
(b) in the event that one or more of the Targeted Sale Properties are
sold prior to closing for total net proceeds that are greater or
less than the amount agreed upon by the parties, then, with
respect to all Targeted Sale Properties that are sold prior to
closing, the Total Acquisition Price shall be adjusted up or down
based on the number of properties sold and the price at which
they are sold;
(c) in the event that any or all of the Targeted Sale Properties are
not sold prior to closing, then with respect to each such unsold
property, the Total Acquisition Price shall be decreased by an
amount agreed upon by the parties;
(d) in the event that other assets of the Company are sold prior to
closing, the Total Acquisition Price shall be adjusted by the
amount, if any, to be agreed to by the parties.
EXPENSE REIMBURSEMENT PROVISIONS
Pursuant to the Offer Letter, the Definitive Agreements will provide
that the Company will have the right to terminate the transaction if the
consideration to be paid to shareholders is less than $4.00 due to the
adjustments resulting from the assumptions set forth above; provided, however,
that as a condition to such termination, the Company shall pay immediately upon
demand all of the third party expenses incurred by Whitehall (including its
advisors or representatives) in connection with evaluating and pursuing the
transaction, including legal, accounting and other due diligence expenses
("Expenses"), and provided further, that in the event the Company consummates or
enters into an agreement with respect to any acquisition, merger,
recapitalization, liquidation, dissolution or any similar transaction involving
all or any material portion of the Company, its business or assets or all or any
material portion of the Company's capital stock or other equity interests, other
than the transaction for more than the price last offered by Whitehall, after
giving effect to all price adjustments (an "Alternate Transaction") before the
date that is twelve (12) months after the date that the Company elects to
terminate the transaction pursuant to this sentence, the Company shall pay to
the Whitehall, not later than the earlier to occur of (i) consummation of such
Alternate Transaction or (ii) two (2) business days following the execution of
an agreement with respect to an Alternate Transaction, a fee in cash equal to
$6,000,000 in addition to any other fees or expense reimbursements to which the
Purchaser is entitled under the Definitive Agreements; provided that in no event
shall the sum of such fee and the amount of fees or expenses reimbursed by the
Company to Whitehall exceed $13,000,000 in the aggregate. Notwithstanding the
foregoing, in the event that the Total Acquisition Price is reduced to less than
$4.00 per share (determined as provided above) as a result of the adjustments
made to the Total Acquisition Price because of the failure of the assumptions
described in clauses (h) and/or (i) under the heading Assumptions of the Offer
above to be satisfied, together with any other adjustments to the Total
Acquisition Price contemplated by the Definitive Agreements and the Offer
Letter, then Whitehall shall have the right to terminate the transaction, and in
the event Whitehall so elects to terminate the transaction, the Company shall be
obligated to reimburse all of Whitehall's Expenses up to a maximum of $3,500,000
but shall not be obligated to pay the fee contemplated by the previous sentence.
In addition, the Offer Letter provides that the Definitive Agreements
will include a no-shop clause and third party expense reimbursement provisions
in the event the conditions to Whitehall's obligations to close (including
without limitation (i) at least 95% of the CRESTS having converted into common
stock and (ii) at least 51% of the Company's high yield bonds having been
acquired by the Company) are not satisfied or the transaction otherwise does not
close (except for a failure to close caused solely by a default by the Purchaser
and as otherwise provided in the Offer Letter), it being understood and agreed
that the Company shall not be obligated to reimburse Whitehall for any fees or
expenses incurred in connection with the transaction in excess of $13,000,000.
In addition, in the event that the Company consummates, or signs an agreement
with respect to, an Alternate Transaction within one year of the termination of
the Definitive Agreement, the Company will immediately pay to the Purchaser, not
later than the earlier to occur of (i) consummation of such Alternate
Transaction or (ii) two business days following the execution of an agreement
with respect to an Alternate Transaction, a termination fee in an amount equal
to $6,000,000; provided that in no event shall the sum of such termination fee
and the amount of fees or expenses reimbursed by the Company to Whitehall exceed
$13,000,000 in the aggregate.
ITEM 7. EXHIBITS.
EX.-10-1 Exclusivity and Expense Reimbursement Agreement by
and between Lodgian, Inc, Whitehall Street Real
Estate Limited Partnership XIII, a Delaware
limited partnership, and Whitehall Parallel Real
Estate Limited Partnership XIII, a Delaware
limited partnership dated October 12, 2000.
EX. 99-1 Press Release dated October 12, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LODGIAN, INC.
By /s/ Robert S. Cole
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Name: Robert S. Cole
Title: President and Chief Executive Officer
Date: October 13, 2000
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EXHIBIT INDEX
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Exhibit Number Description
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10-1 Exclusivity and Expense
Reimbursement Agreement by and
between Lodgian, Inc, Whitehall
Street Real Estate Limited
Partnership XIII, a Delaware
limited partnership, and
Whitehall Parallel Real Estate
Limited Partnership XIII, a
Delaware limited partnership
dated October 12, 2000.
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99-1 Press Release July 24, 2000.
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