1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LODGIAN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
2
LODGIAN, INC.
3445 PEACHTREE ROAD, N.E., SUITE 700
ATLANTA, GA 30326
April 27, 2001
To Our Stockholders:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Annual Stockholders Meeting to be held on Thursday, June 21, 2001
at 9:30am. Eastern Standard Time, at Tower Place -- Building 100, 27(th) Floor,
3340 Peachtree Road N. E., Atlanta, GA 30326.
The notice of meeting and proxy statement accompanying this letter describe
the specific business to be acted upon. Also included in the mailing is a copy
of Lodgian's 2000 Annual Report to Stockholders.
In addition to the specific matters to be acted upon, there will be a
report on the progress of the Company and an opportunity for questions of
general interest to the stockholders.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend in person, you are requested to vote, sign, date, and
promptly return the enclosed proxy in the envelope provided.
Sincerely yours,
/s/ Thomas Arasi
Thomas Arasi
President and Chief Executive Officer
3
LODGIAN, INC.
3445 PEACHTREE ROAD, N.E., SUITE 700
ATLANTA, GEORGIA 30326
------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 21, 2001
------------------------------------------------------------------------------
To the Stockholders of Lodgian, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Lodgian,
Inc., a Delaware corporation ("Lodgian"), will be held on Thursday, June 21,
2001, commencing at 9:30 a.m. Eastern Standard Time, at Tower Place -- Building
100, 27(th) Floor, 3340 Peachtree Road N.E., Atlanta, Georgia 30326 for the
following purposes:
1. To elect two Class III directors to serve for three-year terms
expiring at the 2004 Annual Meeting of Stockholders.
2. To ratify the appointment of Arthur Andersen LLP as independent
public accountants of the Company.
3. To consider and act upon such other business as may properly come
before the Annual Meeting.
The Board of Directors has fixed the close of business on April 23, 2001 as
the record date for the determination of stockholders entitled to notice of and
to vote on any matters which may properly come before the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. Even if you plan to attend the Annual Meeting, you are requested to
vote, sign, date and return the accompanying proxy as soon as possible. If you
are planning to attend the Annual Meeting, please notify the Secretary.
By order of the Board of Directors,
/s/ THOMAS S. GRYBOSKI
Thomas S. Gryboski
Secretary
Dated: April 27, 2001
Atlanta, Georgia
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AND VOTED AT THE MEETING
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. PLEASE VOTE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PRE-PAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE.
4
LODGIAN, INC.
3445 Peachtree Road, N.E., Suite 700
Atlanta, Georgia 30326
PROXY STATEMENT
This Proxy statement is furnished by the Board of Directors of Lodgian,
Inc., a Delaware corporation ("Lodgian" or the "Company"), in connection with
Lodgian's solicitation of proxies for use at the 2001 Annual Meeting of
Stockholders of Lodgian (the "Annual Meeting"), which will be held on Thursday,
June 21, 2001, commencing at 9:30 a.m. Eastern Standard Time, at Tower
Place -- Building 100, 27th Floor, 3340 Peachtree Road N.E., Atlanta, Georgia
30326, and at any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. All stockholders are
entitled and encouraged to attend the Annual Meeting in person. This Proxy
Statement and the accompanying Proxy Card are being mailed to stockholders of
Lodgian on or about April 27, 2001.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted in accordance with the directions given, and, in
connection with any other business that may properly come before the Annual
Meeting, in the discretion of the persons named in the proxy. In voting by proxy
with regard to the election of directors, stockholders may vote in favor of the
nominee or withhold their votes as to the nominee. If no direction is given on
the proxy, it will be voted for the election of the nominee for director.
A stockholder who has given a proxy may revoke it at any time before it is
exercised by giving notice of revocation to the Secretary or Assistant Secretary
of Lodgian, by submitting a proxy bearing a later date or by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not,
in itself, constitute revocation of a proxy.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on April 23, 2001 as
the record date for determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting. Holders of record of the common stock, par value
$.01 per share (the "Common Stock"), of Lodgian as of April 23, 2001 will be
entitled to one vote for each share held. On April 23, 2001, there were
28,139,481 shares of Common Stock outstanding and entitled to vote.
5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
Common Stock as of April 23, 2001, by (i) each person known to the Company to be
the beneficial owner of more than 5% of the issued and outstanding Common Stock
as of April 23, 2001, (ii) each of the members of the Company's Board of
Directors, (iii) each of the Company's current executive officers named in the
"Summary Compensation Table" under "Executive Compensation" and (iv) all
directors and executive officers of the Company as a group. All shares were
owned directly with sole voting and investment power unless otherwise indicated.
SHARES OF PERCENT OF
COMMON COMMON
STOCK BENEFICIALLY STOCK BENEFICIALLY
NAME OF BENEFICIAL OWNER AND ADDRESS OF 5% BENEFICIAL OWNER OWNED OWNED(1)
- ----------------------------------------------------------- ------------------ ------------------
BENEFICIAL OWNERS OF 5% OR MORE OF OUTSTANDING COMMON STOCK:
William J. Yung............................................. 3,157,050(2) 10.9%
201 Grandview Drive
Fort Mitchell, KY 41017
Dimensional Fund Advisors................................... 1,502,900(3) 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
DIRECTORS:
Thomas Arasi................................................ 50,000 *
Robert S. Cole.............................................. 761,664(4) 2.6%
Joseph C. Calabro........................................... 283,224(5) *
John M. Lang................................................ 378,061(6) 1.3%
Michael A. Leven............................................ 51,544(7) *
Peter R. Tyson.............................................. 70,164(8) *
Richard H. Weiner........................................... 105,100(9) *
NON-DIRECTOR EXECUTIVE OFFICERS:
Karyn Marasco............................................... 123,200(10) *
Kenneth R. Posner........................................... 420,000(11) 1.5%
All directors and executive officers as a group (nine
persons).................................................. 2,242,957(12) 7.7%
- ---------------
* Represents less than 1%.
(1) Ownership percentages are based on 28,139,481 shares of Common Stock
outstanding as of April 23, 2001 and options to purchase 834,500 shares of
Common Stock currently exercisable by the named individual or group.
(2) William J. Yung filed a Schedule 13D dated March 13, 2001 with the
Securities and Exchange Commission ("SEC") reporting beneficial ownership
of 3,157,050 shares of Common Stock. Mr. Yung may be deemed to be the
indirect beneficial owner of and have shared voting and dispositive power
with respect to (i) the 1,563,350 Shares held by Edgecliff Holdings, LLC by
virtue of his indirect control of Edgecliff Holdings, LLC and (ii) the
1,593,750 Shares held by Casuarina Cayman Holdings, Ltd. by virtue of his
direct control of Casuarina.
(3) Dimensional Fund Advisors filed a Schedule 13G dated February 2, 2001 with
the SEC reporting ownership of 1,502,900 shares of Common Stock with sole
voting and dispositive power with respect to such shares.
(4) Includes currently exercisable options to purchase 74,000 shares of Common
Stock.
(5) Includes currently exercisable options to purchase 65,000 shares of Common
Stock.
(6) The shares in this table above do not include: (i) shares beneficially held
by ProTrust Properties IV, Ltd., ProTrust Properties V, Ltd., Hotel
Investors, LP, and ProTrust Equity Growth Fund I, LP (collectively the
"Entities"), from which, as of June 8, 1999, Mr. Lang resigned his position
as manager, and the shares held by which were formerly deemed to be
beneficially owned by him; and (iii) shares
2
6
beneficially owned by Hotel Capital II, LLC, a limited liability company
whose manager, with sole voting and dispositive power, is Robert H. Woods
(a partner in Lang Capital Partners, LLC), with respect to which Mr. Lang
is not a member or a manager, and does not have voting or dispositive power
with respect to those shares; therefore, such shares are not included in
Mr. Lang's beneficial ownership. Includes currently exercisable options to
purchase 10,000 shares.
(7) Includes currently exercisable options to purchase 35,000 shares of Common
Stock and 5,700 shares owned by Mr. Leven's spouse.
(8) Includes currently exercisable options to purchase 65,000 shares of Common
Stock.
(9) Includes currently exercisable options to purchase 65,000 shares of Common
Stock.
(10) Includes currently exercisable options to purchase 120,500 shares of Common
Stock.
(11) Includes currently exercisable options to purchase 400,000 shares of Common
Stock.
(12) Includes currently exercisable options to purchase 834,500 shares of Common
Stock.
ELECTION OF DIRECTORS
The restated Bylaws of Lodgian provide that the Lodgian Board of Directors
will consist of not less than six members, the exact number to be determined by
resolution adopted by the affirmative vote of a majority of all directors of
Lodgian. The number of directors is currently set at six, considering the
resignation of Michael A. Leven effective April 26, 2001. The Board of Directors
is divided into three classes; directors in each class are elected for a
three-year term in staggered years.
Robert S. Cole, and Richard H. Weiner, Class III directors whose terms
expire at the 2001 Annual Meeting, have been nominated for re-election to the
Board of Directors to hold office for a full three-year term expiring at the
2004 Annual Meeting of Stockholders or until a successor has been duly elected
and qualified. The nominees are presently directors of Lodgian and have
consented to be named as nominees and to serve as directors if elected. Should a
nominee be unable or unwilling to serve as a director, the enclosed proxy will
be voted for such other person or persons as the Board of Directors may
recommend. Management does not anticipate that such an event will occur.
3
7
INFORMATION ABOUT THE NOMINEES, THE CONTINUING DIRECTORS
AND EXECUTIVE OFFICERS
The table below sets forth the names and ages of the directors and
executive officers of the Company, as well as the positions and offices held by
such persons. A summary of the background and experience of each of these
individuals is set forth after the table.
NAME AGE POSITION WITH LODGIAN
- ---- --- ---------------------
NOMINEES FOR ELECTION AS DIRECTOR:
Robert S. Cole.......................... 39 Director
Richard H. Weiner....................... 51 Director
DIRECTORS WHOSE TERMS EXPIRE IN 2002:
Peter R. Tyson.......................... 54 Director
Joseph C. Calabro....................... 49 Director and Chairman of the Office of the Chairman
of the Board
DIRECTORS WHOSE TERMS EXPIRE IN 2003:
John M. Lang............................ 46 Director and Member of the Office of the Chairman of
the Board
Thomas Arasi............................ 43 Director, Chief Executive Officer and President
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS:
Karyn Marasco........................... 43 Chief Operating Officer and Executive Vice President
Thomas R. Eppich........................ 48 Chief Financial Officer
Michael A. Leven resigned from the Board of Directors effective April 26,
2001.
THOMAS ARASI has been Chief Executive Officer and President of the Company
since February 9, 2001. Mr. Arasi was also appointed to the Board of Directors
effective February 9, 2001. From December 2000 to his employment at Lodgian, Mr.
Arasi was President of Harbinger Advisors, L.L.C., an Atlanta based investment
advisory company active in the hospitality industry. Harbinger engaged in
diversified investment activities including acquisition and development of
lodging properties and the growth and restructuring of operating companies. From
June 1997 through November 2000, Mr. Arasi was a member of the management
committee and held several top operating positions with Bass Hotels & Resorts
("BHR"), one of the leading international owners, operators, franchisors of
hotels, including the Inter-Continental, Crowne Plaza, Holiday Inn, Holiday Inn
Express, and Staybridge Suites. Most recently, Mr. Arasi was President, Bass
Hotel & Resorts -- The Americas, a division consisting of 256 hotels and 66,000
guestrooms in 21 countries. In that capacity, Mr. Arasi had full operating,
marketing, brand, development, and asset management responsibilities for
Inter-Continental and Crowne Plaza in North and Latin America and for the
Holiday Inn, Holiday Inn Express and Staybridge Suites in Latin America. He,
furthermore, had responsibility for all company owned and managed hotels for all
five brands in the Americas, totaling approximately 150 properties.
Prior to May 1999, Mr. Arasi was President, Bass Hotels &
Resorts -- Development and Asset Management with global oversight of development
of the company's five hotel brands and for BHR's investment and asset management
activities including its $3.5 billion real estate portfolio. Mr. Arasi joined
BHR in June 1997 as Global Brand President of Crowne Plaza Hotels and Resorts
where he was responsible for the company's brand strategy and operations and
embarked on a major expansion program globally. In that capacity, he also had
responsibility for BHR's Worldwide Sales and Reservations operations.
From January 1992 to May 1997, Mr. Arasi was employed by Tishman Hotel
Corporation, the hotel real estate, management and advisory subsidiary of
Tishman Realty and Construction Company, Inc. Mr. Arasi's
4
8
last position at Tishman Hotel Corporation was President. Prior to joining
Tishman, he was Vice President, Lodging Industry Specialist in the investment
banking division of Salomon Brothers, Inc., having served in New York, Tokyo and
Los Angeles. In addition, Mr. Arasi has held positions with Sheraton, Westin and
HVS International.
KARYN MARASCO has been Chief Operating Officer and Executive Vice President
of Lodgian since the Merger. From 1997 until the Merger, Ms. Marasco was the
Chief Operating Officer and Executive Vice President of Servico. Prior to such
time, Ms. Marasco was affiliated with Westin Hotels & Resorts for 18 years. Most
recently, Ms. Marasco served as Westin's Area Managing Director, based in
Chicago.
THOMAS R. EPPICH has been the Chief Financial Officer for Lodgian since
June 1, 2000. Mr. Eppich is also currently affiliated with Jay Alix &
Associates, a turnaround and restructuring financial consulting firm. During
1997 and 1998, Mr. Eppich was affiliated with Questor Management Company and
during 1995 and 1996 was Vice President of Questor Management Company. Questor
Management Company manages the Questor Partners Funds, which invest in troubled
and underperforming companies. Mr. Eppich possesses more than 25 years of public
accounting, auditing and financial consulting experience.
JOSEPH C. CALABRO has been a director of Lodgian since the Merger, is
currently Chairman of the Office of the Chairman of the Board and was a director
of Servico from August 1992 until the Merger. Mr. Calabro has been a principal
of Joseph C. Calabro C.P.A., a Devon, Pennsylvania accounting firm, since 1982.
Mr. Calabro has also been an officer and director of Bibsy Corporation, which
previously owned and operated a Holiday Inn hotel in Bensalem, Pennsylvania,
since 1971.
ROBERT S. COLE has been a member of the Board of Directors since the Merger
and was Chief Executive Officer and President of the Company from the Merger
until February 9, 2001. From 1990 until the Merger, Mr. Cole was the President
of Impac and its predecessors and affiliates. During his tenure at Impac, the
Company grew from one to fifty-five hotels, including becoming one of Marriott
International and Bass Hotels and Resorts largest franchisee. Prior to that
time, he held a variety of general manager positions in hotels throughout the
United States.
JOHN M. LANG has been a director of Lodgian since the Merger. Mr. Lang is
the President of Lang Capital Partners, LLC, a private venture investment firm
based in Atlanta, Georgia. From June 1996 until May 1998, Mr. Lang served as
Chief Executive Officer of ProTrust Capital, Inc., an investment firm based in
Atlanta, Georgia. Prior to 1996, Mr. Lang, an attorney, was the managing partner
of an Atlanta law firm.
PETER R. TYSON has been a director of Lodgian since the Merger and was a
director of Servico from August 1992 until the Merger. From December 1990 to the
present, Mr. Tyson has been President of Peter R. Tyson & Associates, Inc., a
firm offering consulting services to clients in the hospitality industry. Prior
to forming Peter R. Tyson & Associates, Inc., Mr. Tyson was the
partner-in-charge of the hospitality industry consulting practice in the
Philadelphia office of the accounting and consulting firm of Laventhol &
Horwath, with which he was associated for 20 years.
RICHARD H. WEINER has been a director of Lodgian since the Merger and was a
director of Servico from August 1992 until the Merger. Mr. Weiner is a senior
partner in the Albany, New York law firm of Cooper, Erving, Savage, Nolan &
Heller, where he has practiced law since 1975.
DIRECTOR COMPENSATION
Lodgian pays non-executive Board members a $24,000 total annual retainer,
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. This amount is payable
in either cash or stock of the Company or a combination of both at the
discretion of the Director. In addition, Mr. Joseph C. Calabro, in lieu of the
normal annual retainer and per meeting fees, is receiving annual director
compensation of $100,000 for services rendered to Lodgian in his capacity as
Chairman of the Office of the Chairman of the Board. During 2000, Mr. Robert
Cole, as an executive officer of the Company, received no compensation for
serving as a member of Lodgian's Board. During 2001, Mr. Thomas Arasi, as an
executive officer of the Company, will receive no compensation for serving as a
member of Lodgian's Board.
5
9
Lodgian also reimbursed directors for expenses associated with attending
Board and committee meetings of the Company.
Under the Lodgian, Inc. Non-Employee Directors' Stock 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 of Common
Stock at an exercise price equal to the fair market value of the Common Stock on
the date of grant. All options granted to non-employee directors become
exercisable upon grant.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Lodgian held 18 meetings during fiscal year 2000.
No director attended fewer than 83% of the total aggregate number of the
Company's meetings of the Board of Directors and any committee of the Board of
Directors on which such director served during his tenure as a director or
committee member.
The Board of Directors of Lodgian currently has two standing committees:
the Audit Committee and the Compensation Committee. The full Board of Directors
currently serves as the Nominating Committee.
The Company has an Audit Committee composed of independent directors for
which information regarding the functions performed by the Committee, its
membership, and the number of meetings held during the fiscal year, is set forth
in the "Report of the Audit Committee" included in this annual proxy statement.
The principal functions of the Compensation Committee are to approve or, in
some cases, to recommend to the Board of Directors remuneration arrangements and
compensation plans involving the Company's directors and executive officers,
review bonus criteria and bonus recommendations, review compensation of
directors and administer the Company's Stock Option Plan. See the "Report of the
Compensation Committee on Executive Compensation" included in this annual proxy
statement for further discussion.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors of the Company is composed of
four independent directors and operates under a written charter adopted by the
Board of Directors, a copy of which is included as Appendix A to this proxy
statement. The Audit Committee held 12 meetings during fiscal 2000.
Management is responsible for the Company's internal controls and financial
reporting process. The Company's independent accountants are responsible for
performing an independent audit of the Company's financial statements in
accordance with auditing standards generally accepted in the United States and
to issue a report thereon. The Audit Committee's responsibility is to monitor
and oversee these processes.
In this context, the Audit Committee has met and held discussions with
management and the Company's independent accountants. Management reported to the
Audit Committee that the Company's consolidated financial statements for the
Company's 2000 fiscal year were prepared in accordance with accounting
principles generally accepted in the United States, and the Audit Committee has
reviewed and discussed these consolidated financial statements with management.
The Audit Committee discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61
"Communications with Audit Committee", as amended.
The Company's independent accountants also provided to the Audit Committee
the written disclosures and the letter required by Independence Standards No. 1
"Independence Discussions with Audit Committees" and the Audit Committee
discussed with the independent accountants their firm's independence. The Audit
Committee considered whether the provision of services by the independent
accountants, other than audit services, is compatible with maintaining the
independent accountants' independence.
6
10
Based on the Audit Committee's review and discussions referred to above,
the Audit Committee recommended that the Board of Directors include the
Company's audited consolidated financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000 filed with the SEC. The
Committee and the Board of Directors have also recommended, subject to
stockholder approval, the selection of the Company's independent accountants.
Submitted by,
Joseph C. Calabro, Chairman
John M. Lang
Peter R. Tyson
Richard H. Weiner
FISCAL 2000 AUDIT FIRM FEE SUMMARY
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2000 were $601,000 and $662,500 for the reviews
of the financial statements included in the Company's Quarterly Reports on Form
10-Q for that year.
Arthur Andersen LLP did not provide any services related to financial
information systems design and implementation during the fiscal year ended
December 31, 2000.
Arthur Andersen LLP did not provide any other services during the fiscal
year ended December 31, 2000.
CHANGES IN CERTIFYING ACCOUNTANTS
At a meeting held on August 30, 2000, the Board of Directors, at the
recommendation of its Audit Committee, made the decision to seek the retention
of new independent auditors for the year ending December 31, 2000 to replace the
firm of Ernst & Young LLP as the Company's independent auditors. On September
20, 2000 the Board of Directors appointed Arthur Andersen LLP as the Company's
independent accountants. Arthur Andersen LLP had not consulted with the Company
on any matters within the last two years.
Ernst & Young LLP resigned as the Company's independent auditors on
September 15, 2000. The reports of Ernst & Young LLP on the Company's financial
statements for the years ended December 31, 1999 and 1998 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principles, except the report of
Ernst & Young LLP on the Company's financial statements for the year ended
December 31, 1999, which stated that Ernst & Young LLP was unable to review the
quarterly data included in footnote 17 to the financial statements for the year
ended December 31, 1999 in accordance with standards established by the American
Institute of Certified Public Accountants because the Company's internal
controls for the preparation of interim financial information did not provide an
adequate basis to enable them to complete such a review.
In connection with the audits of the Company's financial statements for
each of the two years ended December 31, 1999, and in the subsequent interim
period, there were no disagreements with Ernst & Young LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Ernst & Young
LLP would have caused Ernst & Young LLP to make reference to the matter in their
report.
In connection with the audit of the Company's financial statements as of
December 31, 1999, Ernst & Young LLP informed the Company of the existence of
the following "reportable events" as that term is described in Item 304(a)(l)(v)
of Regulation S-K as follows:
In their report to the Audit Committee for the year ended December 31,
1999, Ernst & Young LLP advised the Company of the existence of material
weaknesses, as defined by standards established by the
7
11
American Institute of Certified Public Accountants related to (1) Overall
Lack of Controls within the Financial Accounting Processes, (2) Lack of
Account Reconciliations within the Company's Cash, Property and Equipment,
and Accounts Payable and Accrual accounts, (3) Lack of General Application
Controls over the Company's Information Systems, and (4) Lack of Approval
of Journal Entries.
The Company's Audit Committee discussed these matters with Ernst & Young
LLP. The Company had authorized Ernst & Young LLP to respond fully to the
inquiries of Arthur Andersen LLP concerning these matters.
As disclosed in the Company's Form 10-K for the fiscal year ended December
31, 2000, the Company, at the direction of the Audit Committee, has committed
substantial resources to mitigate the previously identified control weaknesses
including contracting with outside consulting accountants to ensure the Company
has the corporate financial personnel needed to provide reasonable assurances
that it can comply with the record keeping and internal control requirements
applicable to SEC registrants. Management believes these efforts have enabled
the Company to produce reliable interim and annual financial statements during
2000. The Company implemented a plan that enabled it to timely comply with the
financial statement reporting requirements applicable to SEC registrants for its
2000 annual financial statement and, in management's opinion, has substantially
developed and implemented an adequate control environment as of this date. As
part of this plan, during the third and fourth quarters of 2000 the Company
implemented the following action steps: (i) developed and implemented numerous
new controls and policies, (ii) implemented a process to insure that material
transactions are recorded on a timely basis, (iii) implemented an account
closing process so that all material accounts are reconciled and reviewed on a
timely basis and (iv) reorganized and changed personnel in the accounting and
finance functions to improve the accuracy and timeliness of the financial
accounting processes. The Company believes the continued implementation of the
plan will allow it to timely comply with the financial statement reporting
requirements applicable to SEC registrants in the future.
8
12
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company, to or on behalf of the Chief
Executive Officer and to each of the Company's executive officers other than the
Chief Executive Officer for the three years ended December 31, 2000.
ANNUAL COMPENSATION COMPENSATION
-------------------------------- AWARDS
OTHER ---------------
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING COMPEN-
YEAR SALARY($) BONUS($) SATION($) OPTIONS/SARS(3) SATIONS(4)
---- --------- -------- --------- --------------- ----------
Robert S. Cole(1)................... 2000 302,349 -- -- -- --
Chief Executive Officer and 1999 293,524 -- -- -- --
President 1998 17,308 -- -- 185,000 --
Karyn Marasco....................... 2000 284,840 75,000 -- -- --
Chief Operating Officer and 1999 257,862 121,000 -- -- --
Executive Vice President 1998 235,000 100,000 -- -- 20,106
Kenneth R. Posner(2)................ 2000 173,078 250,000 -- -- --
Chief Financial Officer and 1999 159,812 180,000 -- 400,000 4,791
Executive Vice President
- ---------------
(1) Mr. Cole served as Chief Executive Officer and President from December 11,
1998 to February 9, 2001.
(2) Mr. Posner served as Executive Vice President and Chief Financial Officer of
Lodgian from April 27, 1999 until June 1, 2000. He continued to serve as
Executive Vice President from June 1, 2000 until July 30, 2000.
(3) Represents the number of shares of common stock underlying the options/SARs.
(4) Each item included in this column represents a contribution made by Lodgian
under its 401(k) Plan on behalf of the named executive based on such
executive's annual elective pre-tax deferred contribution (included under
Salary) to such plan, except for Ms. Marasco, whose figure also includes a
relocation allowance of $19,687 and Mr. Posner whose figure includes a
relocation allowance of $4,791.
STOCK OPTION PLAN
The Lodgian, Inc. 1998 Stock Incentive Plan provides for the issuance of
incentive stock options within the meaning of Section 422A of the Internal
Revenue Code of 1986 ("The Internal Revenue Code") and non-qualified stock
options not intended to meet the requirements of Section 422A of the Internal
Revenue Code. The plan is administered by a committee of the Board of Directors
which, subject to the terms of the plan, determines to whom grants are made and
the vesting, timing and amounts of such grants.
There were no stock option grants made during 2000 to the executive
officers named in the "Summary Compensation Table". Accordingly, the table of
"Stock Option Grants in Fiscal Year 2000" has not been included.
9
13
The following table sets forth certain summary information concerning
exercised and unexercised stock options to purchase the Company's Common Stock
as of April 23, 2001, under the Lodgian, Inc. 1998 Stock Incentive Plan held by
executive officers named in the "Summary Compensation Table."
STOCK OPTION EXERCISES IN FISCAL YEAR
2000 AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS HELD AT OPTIONS/SARS AT
FISCAL YEAR END (#) FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME AND POSITION DURING 2000 FISCAL YEAR EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ------------ ------------ ----------- ------------- ----------- -------------
Robert S. Cole................. -- -- 74,000 111,000 -- --
President and Chief Executive Officer
Karyn Marasco.................. -- -- 120,500 34,500 -- --
Chief Operating Officer and Executive
Vice President
Kenneth R. Posner.............. -- -- 400,000 -- -- --
Chief Financial Officer and Executive
Vice President
- ---------------
(1) The value of unexercised in-the-money options/SARs represents the number of
options/SARs held at year-end 2000 multiplied by the difference between the
exercise price and $3.31, the closing price of Lodgian's Common Stock at
year-end 2000.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT
Employment Agreements
THOMAS ARASI entered into an employment agreement with Lodgian relating to
his employment as President and Chief Executive Officer, as of February 9, 2001.
This employment agreement is for an initial term of three years with a base
salary of not less than $550,000. Annual increases are at the discretion of the
Board of Directors. During the initial three year term Mr. Arasi is eligible to
receive an annual bonus of up to 100% of base salary. During the first, second
and third year of the employment period $325,000, $275,000 and $225,000,
respectively, of the annual bonus will be guaranteed and paid quarterly. The
remainder of the annual bonus will be determined based on the achievement of
performance objectives that are mutually agreed to by the Compensation Committee
of the Board of Directors and Mr. Arasi. Mr. Arasi receives paid health
insurance, paid disability insurance, paid life insurance, a company car and is
entitled to participate, to the extent eligible, under any benefit plans
provided to other executives of Lodgian. Mr. Arasi is entitled to a minimum of
four weeks vacation annually. Mr. Arasi was granted options to acquire 2,000,000
shares of Lodgian's Common Stock, which will vest equally over a period of four
years. The term of the options will be ten years. The exercise price of the
options is derived from a formula that will yield an exercise price that is less
than the fair market value of the stock on the date of grant. The options
granted to Mr. Arasi were granted outside of the Lodgian, Inc. 1998 Stock
Incentive Plan. Mr. Arasi's employment agreement contains provisions for
payments to Mr. Arasi in the event of termination or change of control as
described more fully under "Arrangements Regarding Termination of Employment and
Change of Control".
ROBERT COLE entered into an employment agreement with Lodgian relating to
his employment as President and Chief Executive Officer, as of December 11,
1998. This employment agreement provided for a base salary subject to increases
and bonuses, in each case, at the discretion of the Board of Directors. The base
salary paid to Mr. Cole during 2000 was $302,349. Mr. Cole also receives paid
health insurance, paid disability insurance and is entitled to participate, to
the extent eligible, under any benefit plans provided to other executives of
Lodgian. Mr. Cole is entitled to a minimum of three weeks paid vacation
annually.
10
14
On February 9, 2001, Mr. Cole and Lodgian entered into a Separation
Agreement. On this date Mr. Cole, with the Company's consent, resigned his
position as President and Chief Executive Officer and continued as a non-officer
employee through March 2, 2001. Mr. Cole received a severance payment of
$750,000 in full settlement of all amounts due Mr. Cole by reason of the
termination of his employment agreement. During the period March 3, 2001 to
March 31, 2002 Mr. Cole will provide transition assistance and strategic and
financial advisory services to Lodgian. Mr. Cole received $750,000 for his
consulting services. The Company and Mr. Cole released one another from all
claims rising out of Mr. Cole's employment with the Company.
KARYN MARASCO entered into a three-year employment agreement with Servico
relating to her employment as Executive Vice President and Chief Operating
Officer of Servico on May 2, 1997. On November 24, 1998, the agreement was
extended for a period of one year and on July 28, 2000 was extended through
September 2002. The employment agreement provides for a base salary of $257,862
subject to increases and bonuses at the discretion of the Board. Ms. Marasco is
also entitled to receive the benefits offered other executive officers. Pursuant
to the terms of her employment agreement, Ms. Marasco was granted options to
acquire 50,000 shares of Lodgian Common Stock, with 10,000 of such shares
vesting immediately and 10,000 vesting annually. The employment agreement is
terminable upon 30 days notice but in the event Ms. Marasco is terminated other
than "for Cause," as defined in the agreement, she will be entitled to her base
salary and benefits under the agreement for the greater of the unexpired term or
one year.
KENNETH R. POSNER entered into an agreement with Lodgian relating to his
employment as an Executive Vice President and Chief Financial Officer as of
April 9, 1999 and effective as of April 27, 1999. The employment agreement
provides for a base salary of $250,000. For the calendar year of 1999, Mr.
Posner was guaranteed a bonus equal to one hundred percent (100%) of his
prorated base salary. Thereafter, any bonus payments are at the discretion of
the Board of Directors. Mr. Posner is also entitled to receive the benefits
offered to other executive officers. Pursuant to the terms of his employment
agreement, Mr. Posner was granted options to acquire 400,000 shares of Lodgian
Common Stock. The options vest twenty percent (20%) per year over five years. In
the event Mr. Posner is terminated other than "for Cause", as defined in the
agreement, he will be entitled to receive his base salary, plus a percentage of
his bonus, under the agreement for the greater of the unexpired term or one
year.
On June 30, 2000 Mr. Posner entered into an Amendment to Employment
Agreement and Release with Lodgian, whereby Mr. Posner agreed to resign as
Executive Vice President as of July 30, 2000. Mr. Posner also agreed to complete
work on the 1999 Form 10-K for the Company. The Company agreed to pay Mr. Posner
his salary through July 30, 2000 and thereafter pay Mr. Posner $250,000. All
unvested options granted to Mr. Posner on April 9, 1999 vested on July 30, 2000.
The Company and Mr. Posner released one another from all claims arising out of
Mr. Posner's employment with the Company.
Arrangements Regarding Termination of Employment and Changes of Control
The employment agreement between Lodgian and Mr. Arasi provides for
payments to Mr. Arasi in the event of termination by the Company without cause
or by Mr. Arasi for good reason. The terms of the payments are as follows; (i)
three times his annual base compensation and the maximum amount of annual bonus
that could have been paid; (ii) continuation of health, life and disability
benefits for three years; and (iii) all unvested options shall vest. Mr. Arasi's
change of control provisions vary depending on the circumstances that lead to a
change of control. The maximum payable under the change of control provisions
are approximately the same as described above.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation of Lodgian's executive officers, including it's Chief
Executive Officer, is determined by the Compensation Committee of Lodgian's
Board of Directors. The Compensation Committee is composed of Peter R. Tyson
(Chairman), John M. Lang, Michael A. Leven and Richard H. Weiner. Mr. Leven
resigned as a director of Lodgian effective April 26, 2001. During fiscal 2000,
the Compensation Committee held no formal meetings separate from full meetings
of the Board of Directors.
11
15
Lodgian's executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with Lodgian's short-term
and long-term performance goals, reward corporate performance and recognize
individual initiative and achievement. It is anticipated that these policies
will help Lodgian to continue to attract and retain quality personnel and
thereby enhance Lodgian's long-term profitability and share value.
Executive compensation ranges have been designed to be competitive with
amounts paid to senior executives at companies in the hospitality industry which
compete with Lodgian, companies which are similar in size to Lodgian and
companies with which Lodgian competes for senior executives. Within this
framework, individual executive compensation is based on personal and corporate
achievement and the individual's level of responsibility and experience.
However, in any particular year, Lodgian's executives may be paid more or less
than executives in peer companies depending upon Lodgian's performance.
Base Compensation
The base salaries of Lodgian's executive officers are based in part on
comparative industry data and on various quantitative and qualitative
considerations regarding corporate and individual performance. An executive's
base salary is determined only after an assessment of his or her sustained
performance, current salary in relation to an objective salary range for the
executive's job responsibilities and his or her experience and potential for
advancement. Further, in establishing base salaries for Lodgian's executive
officers the Compensation Committee considers numerous other factors, including
the following:
i. Industry compensation trends;
ii. Cost-of-living and other local and geographic considerations;
iii. Consultation with other Lodgian executives;
iv. Hospitality industry and job-specific skills and knowledge;
v. Historical and expected contributions to Lodgian's performance; and
vi. Level, complexity, breadth and difficulty of duties.
In establishing the base salaries of the executive officers, the
Compensation Committee was cognizant of the roles of each executive officer in
the operations of Lodgian and its predecessors. The Compensation Committee
specifically recognized the results of operations and financial condition of
Lodgian's predecessors during the prior fiscal year and the roles and
responsibilities of each of the executive officers.
Bonus Program
The Incentive Compensation Plan, an annual bonus program, has been
implemented at Lodgian. The objectives of the bonus program are to: motivate and
reward the accomplishment of corporate objectives; reinforce a strong
performance orientation; provide a direct link between corporate performance and
executive compensation; and provide a fully competitive compensation package
which will attract, reward and retain individuals of the highest quality. As a
performance-based plan, cash bonus awards are required to be paid under the plan
only upon the achievement of pre-established corporate performance objectives on
a quarterly and annual basis, and no bonuses are required to be paid if the
minimum established thresholds are not met. A maximum ceiling is also
established for awards under the bonus program which is determined after
consideration of Lodgian's competitive position in the industry, assessment of
long-term goals and business performance considerations.
Stock Options and Stock Appreciation Rights
Lodgian's long-term executive compensation incentives, under the Company's
1998 Stock Incentive Plan and Non-Employee Directors' Stock Plan, are in the
form of stock option awards and stock appreciation rights. The maximum number of
shares of Common Stock which may be issued under the 1998 Stock Incentive Plan
and the Non-Employee Directors' Stock Plan are 3,000,000 and 300,000,
respectively. The
12
16
Compensation Committee believes that stock option awards and stock appreciation
rights are an effective means of advancing the long-term interests of Lodgian's
stockholders by integrating executive compensation with the long-term value of
Lodgian Common Stock. Awards are granted at the prevailing market price on the
date of grant and are valuable to executives only if Lodgian's Common Stock
appreciates. During 2000, the Compensation Committee did not award any options
to purchase shares of Lodgian Common Stock to the executive officers named in
the "Summary Compensation Table".
Chief Executive Officer
Like the other executive officers listed in the "Summary Compensation
Table", 2000 compensation for Robert Cole, Lodgian's former President and Chief
Executive Officer, consisted primarily of a base salary and a discretionary
bonus based on corporate performance. His base salary for 2000 was set at
$300,000 per year. (Mr. Cole received $302,349, due to pay period arrangements.)
Mr. Cole was awarded no discretionary bonus for 2000.
At the time of the Merger, Lodgian's Compensation Committee determined Mr.
Cole's compensation based on the expectation that Mr. Cole would act as
Lodgian's President. Upon David Budderneyer's resignation from the position of
Chief Executive Officer of Servico, Mr. Cole agreed to serve as Chief Executive
Officer of Lodgian upon consummation of the Merger at the same level of
compensation. That level of compensation was not changed during the year 2000.
Submitted by,
Peter R. Tyson, Chairman
John M. Lang
Richard H. Weiner
13
17
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total stockholder
return on Lodgian's Common Stock with the Dow Jones Lodging Index and the Dow
Jones US Total Market Index. The Lodgian common stock traded on the American
Stock Exchange under the symbol "SER" from August 18, 1992 until June 18, 1997
and thereafter traded on the New York Stock Exchange ("NYSE") until December 11,
1998, at which time the symbol was changed to "LOD". The graph assumes an
investment of $100.00 on December 31, 1995 in (i) Lodgian's Common Stock, (ii)
the Dow Jones Lodging Index and (iii) stocks comprising the Dow Jones US Total
Market Index.
DOW JONES US TOTAL
LODGIAN, INC. DOW JONES LODGING INDEX MARKET INDEX
------------- ----------------------- ------------------
1995 100.00 100.00 100.00
1996 135.60 141.28 122.08
1997 141.90 186.00 160.84
1998 40.99 135.26 200.88
1999 42.05 132.83 246.53
2000 27.86 176.52 223.69
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following parties have direct or indirect material interest in
transactions with the Company since the beginning of its most recently completed
fiscal year and such transactions are described below.
Mr. Cole is a minority shareholder of Impac Hotel Development ("IHD"),
which provided acquisition and property development services to Impac for a
development fee of four percent of the total project cost of each property
acquired or developed. Impac agreed to terminate this agreement prior to the
consummation of the Merger so that Impac and its subsidiaries will have no
further obligations under the agreement after the Merger other than the payment
of up to a four percent development fee (not to exceed $2.5 million in the
aggregate) in the event Lodgian acquires or develops any of the hotels or
properties identified in the Merger Agreement as Impac's acquisition and
development pipeline. During 1999, the Company paid $1.0 million in connection
with this arrangement. Of this amount, the Company's former Chief Executive
Officer and President received $225,000. No payments were made in 2000 to IHD or
Mr. Cole. In connection with Mr. Cole's separation from the Company, any future
contingent obligations related to this agreement have ceased.
14
18
IHD had contracted with Elegant Interiors, LLC ("Elegant"), an entity
wholly owned by Sheila Lang (the spouse of John M. Lang, a member of the Board
of Directors) to provide interior design consulting service. In the event IHD,
or its assignee, receives payment of the above-reference development fees, IHD,
or its assignee, will pay Elegant accrued consulting fees (not to exceed
$250,000) with respect to any of the hotels or properties identified in the
merger agreement as being in Impac's acquisition and development pipeline. On
January 3, 2000, Impac Design Company, LLC, the assignee of IHD satisfied its
obligations under this agreement.
Mr. Cole has been an 8% limited partner in the partnership that owns the
Courtyard by Marriott in Tifton, Georgia since 1996. The Company manages this
hotel in accordance with a management agreement, which provides that the Company
is paid a base fee calculated as a percentage of gross revenues, an accounting
services fee and an incentive management fee. The base fee is 3% of gross
revenues and the incentive fee is a percentage of the amount by which gross
operating profit exceeds a negotiated amount. The Company earned fees of
$71,400, $69,300 and $60,000 during 2000, 1999, and 1998, respectively. The
management agreement was terminated in March 2001.
On December 15, 2000 the Company sold a partially constructed hotel located
in Richmond, Virginia to Columbia Sussex Corporation, an entity controlled by
William J. Yung. Mr. Yung is a 10.9% beneficial owner of the Company's common
stock. The Company received net proceeds of approximately $12.3 million from the
sale and recorded a loss on the sale of approximately $.5 million. In addition,
the Company entered into a separate management contract with the purchaser to
provide construction management oversight until completion of the project.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Lodgian's
directors, executive officers and 10% stockholders to file reports of ownership
and reports of changes in ownership of Lodgian's Common Stock and other equity
securities with the SEC and the NYSE. Directors, executive officers and 10%
stockholders are required to furnish Lodgian with copies of all Section 16(a)
forms they file. Based on a review of the copies of such reports furnished to
it, Lodgian believes that during 2000, Lodgian's directors, executive officers
and 10% stockholders complied with all Section 16(a) filing requirements
applicable to them.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, the following directors served on the Compensation Committee
of the Board of Directors: Peter R. Tyson (Chairman), John M. Lang, Michael A.
Leven and Richard H. Weiner. None of such persons is or has been an executive
officer of the Company, and no interlocking relationships exist between any such
person and the directors or executive officers of any other Company.
OTHER BUSINESS
The Board of Directors does not intend to bring any other business before
the meeting, and, as far as is known by the Board of Directors, no matters are
to be brought before the meeting except as disclosed in the Notice of Annual
Meeting of Stockholders. However, as to any other business which may properly
come before the meeting, it is intended that proxies, in the form enclosed, will
be voted in respect thereof in accordance with the judgement of the persons
voting such proxies.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Arthur Andersen LLP to be
Lodgian's independent public accountants for the fiscal year ending December 31,
2001. Arthur Andersen LLP also served as Lodgian's independent public
accountants for the fiscal year ended December 31, 2000. Representatives of
Arthur Andersen LLP are expected to be present at the meeting, will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions from stockholders.
15
19
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of Lodgian's 2000 Annual Report to Stockholders, including audited
financial statements, was mailed to all stockholders of the Company along with
this Proxy Statement. The Annual Report to Stockholders, however, is not part of
the proxy soliciting material. ADDITIONAL COPIES OF THE ANNUAL REPORT TO
STOCKHOLDERS AND COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2000, AS FILED WITH THE SEC (WITHOUT EXHIBITS) ARE AVAILABLE
UPON REQUEST, WITHOUT CHARGE, FROM LODGIAN OR ARE AVAILABLE ON THE COMPANY'S
WEBSITE, www.lodgian.com. SUCH REQUESTS SHOULD BE DIRECTED TO LODGIAN, INC.,
3445 PEACHTREE ROAD, N.E., SUITE 700, ATLANTA, GEORGIA 30326. ATTENTION:
SHAREHOLDER RELATIONS DEPARTMENT.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Lodgian
Board of Directors. Proxies may be solicited by officers, directors and regular
supervisory and executive employees of Lodgian, none of whom will receive any
additional compensation for their services. Such solicitations may be made
personally, or by mail, facsimile, telephone, telegraph or messenger. Lodgian
may reimburse brokers and other persons holding shares in their names or in the
name of nominees for expenses in sending proxy materials to beneficial owners
and obtaining proxies from such owners. Lodgian has engaged Corporate Investor
Communications, Inc. to coordinate the solicitation of proxies by or through
brokers, banks and other custodians, nominees and fiduciaries. All of the costs
of solicitation of proxies will be paid by Lodgian.
STOCKHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Lodgian's Bylaws have an advance notice procedure for stockholders to bring
business before an annual meeting of stockholders. The advance notice procedure
requires that since the date of this year's annual meeting has been changed more
than thirty days from the date of last year's meeting, a stockholder interested
in presenting a proposal for action at the 2002 Annual Meeting of Stockholders
must deliver a written notice of the proposal, together with certain specified
information relating to such stockholder's stock ownership and identity, to
Lodgian's Secretary a reasonable time before the Company begins to print and
mail its proxy materials.
By order of the Board of Directors,
/s/ THOMAS S. GRYBOSKI
Thomas S. Gryboski
Secretary
Dated: April 27, 2001
Atlanta, Georgia
16
20
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
A. The Audit Committee's role is one of oversight. Management is
responsible for preparing the Company's financial statements and the
external auditor is responsible for auditing those financial statements.
B. The Audit Committee shall be appointed by the Board of Directors (the
"Board") to assist the Board in fulfilling its oversight
responsibilities. The Audit Committee's primary duties and
responsibilities shall be to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding financial, accounting, and legal
compliance.
- Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board.
C. The Audit Committee shall have the authority to conduct any
investigation appropriate to fulfilling its responsibilities, and shall
have direct access to the independent auditors as well as anyone else in
the Company. The Audit Committee shall be authorized to retain, at the
Company's expense, special legal, accounting, or other consultants or
experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
A. Audit Committee members shall meet the requirements of New York Stock
Exchange for audit committee members of companies quoted on the NYSE.
(i) The Audit Committee shall be comprised of three or more directors,
as such number shall be determined by the Board; (ii) each member shall
be an independent non-executive director who is free from any
relationship that could interfere with the exercise of his or her
independent judgment; and (iii) all members of the Audit Committee shall
have a basic understanding of finance and accounting and be able to read
and understand fundamental financial statements, and at least one member
of the Audit Committee shall have accounting or past employment
experience in finance or accounting, requisite professional
certification in accounting or other comparable experience which results
in such member's financial sophistication.
B. Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Audit
Committee may designate a Chair by majority vote of the Audit Committee
membership.
C. The Audit Committee shall meet at least two times annually, or more
frequently as circumstances dictate. The Audit Committee shall meet
privately in executive session at least annually with management, the
senior internal auditing executive, the independent auditors, and as a
committee to discuss any matters that the Audit Committee or any of the
foregoing persons believes should be discussed. In addition, the Audit
Committee, or at least its Chair, should communicate with management and
the independent auditors quarterly to review the Company's financial
statements and significant findings based upon the auditors' limited
review procedures prior to public release of information.
Notwithstanding the foregoing, the procedures set forth in this
paragraph are intended as guidelines, to be followed as practicable, and
not as mandatory requirements.
A-1
21
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
The Audit Committee shall:
Review Procedures
A. Review and reassess the adequacy of this Charter at least annually and
suggest revisions as appropriate; submit the Charter to the Board for
approval and ensure that the Charter is published at least every three
years in accordance with SEC regulations.
B. Review the Company's annual audited financial statements prior to filing
or distribution. Review shall include discussion with management and
independent auditors of significant issues regarding accounting
principles, practices, and judgments, as well as the adequacy of
internal controls that could significantly affect the Company's
financial statements.
C. In consultation with the management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control, and
report such exposures. Review significant findings prepared by the
independent auditors and the internal auditing department together with
management's responses.
D. Discuss with the independent auditors any significant changes to the
Company's accounting principles and any items required to be
communicated by the independent auditors in accordance with Statement on
Accounting Standards No. 61, as may be modified or supplemented. The
Chair of the Audit Committee may represent the entire Audit Committee
for purposes of such review.
Independent Auditor
E. Annually recommend to the Board the appointment of independent auditors,
which auditors shall ultimately be accountable to the Audit Committee
and the Board.
F. Review the independence and performance of such auditors and approve any
discharge of such auditors when circumstances warrant.
G. Review fees and other significant compensation to be paid to the
independent auditors, which fees and compensation shall be subject to
the Audit Committee's approval.
H. Review the independent auditors' engagement letter and audit plan and
discuss scope, staffing, locations, reliance upon management, and
internal audit and general audit approach.
I. On an annual basis, review and discuss with the independent auditors
all significant relationships that the independent auditors have with
the Company that could impair such auditors' independence and recommend
that the Board take appropriate action to ensure such independence.
J. Ensure that the independent auditors provide the Audit Committee with
the written disclosures and letter required by Independent Standards
Board Standard No. 1 as may be modified or supplemented and review such
disclosures and letter.
K. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in the
Company's financial reporting.
Internal Audit Department and Legal Compliance
L. Review the Company's budget, business plan, changes in such plan,
activities, organizational structure, and qualifications of the
Company's internal audit department, as needed.
M. Review the appointment, performance, and, when necessary, replacement of
the Company's senior internal audit executive.
A-2
22
N. Review significant reports prepared by the Company's internal audit
department together with management's response and follow-up to these
reports.
O. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the Company's
financial statements, the Company's compliance with applicable laws and
regulations, inquiries received from regulators or governmental agencies
and the response to such inquiries.
Other Audit Committee Responsibilities
P. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission and ensure that such report is included in the
Company's annual proxy statement.
Q. Review with the independent auditor any problems or difficulties the
auditor might have encountered and any letter to management provided by
the auditor and the Companies response to that letter. Such review
should include:
a. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information.
b. Any changes required in the planned scope of the internal audit.
c. The internal audit department responsibilities, budget and staffing.
R. Perform any other activities consistent with this Charter, the Company's
by-laws, and governing law, as the Audit Committee or the Board deems
necessary or appropriate.
S. Maintain minutes of the Committee's meetings and periodically report to
the Board on significant results of the foregoing activities.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. Such activities shall remain the responsibility of management
and the independent auditors. Nor is it the duty of the Audit Committee to
conduct investigations, to resolve disagreements, if any, among management,
the independent auditors or the internal audit department or to assure
compliance with laws and regulations.
A-3
23
LODGIAN, INC.
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 21, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Thomas Arasi and Karyn Marasco, or either of
them with power of substitution, as attorneys in fact, agents and proxies for
the undersigned to vote all shares of Common Stock, par value $.01 per share, of
Lodgian, Inc. ("the Company") which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company, to be held on Thursday, June 21,
2001, commencing at 9:30 a.m. Eastern Standard Time, at Tower Place -- Building
100, 27th Floor, 3340 Peachtree Road N.E., Atlanta, Georgia 30326, and at any
and all adjournments or postponements thereof, to the same extent and with the
same power as if the undersigned was personally present at said meeting or such
adjournments or postponements thereof and, without limiting the generality of
the power hereby conferred, the proxy nominees named above and each of them are
specifically directed to vote as indicated below.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES AS DIRECTORS.
If there are amendments or variations to the matters proposed at the meeting
or at any adjournments or postponements thereof, or if any other business
properly comes before the meeting, this proxy confers discretionary authority on
the proxy nominees named herein and each of them to vote on such amendments,
variations or other business.
THE UNDERSIGNED HEREBY REVOKES ANY PREVIOUS PROXIES WITH RESPECT TO MATTERS
COVERED BY THIS PROXY.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
1. The election as directors of all nominees listed below:
[ ] FOR [ ]
[ ] WITHHOLD AUTHORITY for all nominees
Nominees: Robert S. Cole, Richard H. Weiner
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEES(S), MARK "FOR"
ABOVE AND WRITE THE NAME(S) OF THE NOMINEES(S) FOR WHOM YOU DO NOT WISH TO
VOTE BELOW.
-----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
2. Proposal to ratify the appointment of Arthur Andersen LLP as the independent
public accountants of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed and dated on the other side.)
24
3. In their discretion, act on any other matters that may properly come
before the meeting and matters incidental to the conduct of the meeting.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and the Proxy Statement for the June 21, 2001 meeting.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD. JOINT OWNERS SHOULD
EACH SIGN PERSONALLY. CORPORATION PROXIES SHOULD BE SIGNED IN CORPORATE NAME BY
AN AUTHORIZED OFFICER. EXECUTORS, ADMINISTRATORS, TRUSTEES OR GUARDIANS SHOULD
GIVE THEIR TITLE WHEN SIGNING. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
Dated:
--------------------- , 2001
Signature of Stockholder(s)
----------------------------
----------------------------
Print Name(s) Here
----------------------------
----------------------------
PLEASE COMPLETE, DATE, SIGN
AND MAIL THIS PROXY IN THE
ENVELOPE PROVIDED.
IF YOU NEED ASSISTANCE IN
VOTING YOUR SHARES, PLEASE
CALL LODGIAN'S SECRETARY,
THOMAS S. GRYBOSKI, AT
404-364-9400.