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. 1)
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):
<PAGE>
(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:
<PAGE>
Edgecliff Holdings, LLC
207 Grandview Drive
Fort Mitchell, Kentucky 41017
May 4, 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. Our nominees will also consider any viable alternative transaction
that would provide superior stockholder value. 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 made an earnings release which, based on our analysis, revealed 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. As of May 1, 2000, the Company still had not made the
required filings and was in default under its credit agreement.
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
<PAGE>
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 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 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, or any
alternative transaction, that would result in a higher valuation for our shares.
Our nominees have indicated that in connection with their efforts to maximize
shareholder value, they will consider all viable acquisition proposals submitted
by any bidder, and any viable alternative transaction that would be superior to
the Company's stockholders from a financial point of view. Although there can be
no assurance that our nominees to the Board will be able to enhance or maximize
stockholder value, we believe that their election would increase the likelihood
that stockholder value would be maximized because our nominees, who are highly
qualified individuals based on their extensive hotel industry experience, are
open to considering all of the Company's strategic alternatives, rather than a
select few.
2
<PAGE>
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
<PAGE>
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
<PAGE>
PRELIMINARY COPY; SUBJECT TO COMPLETION
MATERIALS DATED May 4, 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 10.99% 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.
<PAGE>
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 date the Edgecliff Group filed preliminary proxy materials with the
Securities and Exchange Commission). 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. As of [date]
(the most recent practicable date prior to the printing of this proxy
statement), the closing price per Share as reported on the NYSE Composite Tape
was $[price].
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 made an earnings release which, based on our analysis, revealed 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. As of May 1,
2000, the Company still had not made the required filings and was in default
under its credit agreement.
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
revealing that its 1999 earnings were
2
<PAGE>
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
<PAGE>
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 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, or to facilitate a superior
alternative transaction.
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 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, or any alternative
transaction, 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, and any viable alternative transaction that would be
superior to the Company's stockholders from a financial point of view. Although
there can be no assurance that the Edgecliff Nominees will be able to enhance or
maximize stockholder value, we believe that their election would increase the
likelihood that stockholder value would be maximized because the Edgecliff
Nominees, who are highly qualified individuals based on their extensive hotel
industry experience, are open to considering all of the Company's strategic
alternatives, rather than a select few.
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
<PAGE>
(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
<PAGE>
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 10.99% 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 committed, subject to their fiduciary duties
to the Company's stockholders, to selling the Company to the highest bidder. The
Edgecliff Nominees will also consider any viable alternative transaction that
would provide superior stockholder value. 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
<PAGE>
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
<PAGE>
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 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. In addition, the Edgecliff
Nominees will consider any viable alternative transaction that would provide
superior stockholder value.
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
<PAGE>
(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.
If, as a result of the Litigation, stockholders are entitled to elect
three out of six directors at the 2000 Annual Meeting and all three Edgecliff
Nominees are subsequently elected to the Board, the Edgecliff Nominees would
still not constitute a majority of Board, but neither would the remaining
incumbent directors. In such a case, neither group of directors would be able to
take action on behalf of the Board without the support of at least one member of
the other group. Such a Board composition could have a detrimental effect on the
Company because of the potential for deadlocks in Board-level decision making
and because, according to the Company's publicly filed documents, it would cause
the Company to be in default of a provision under its credit agreement
prohibiting "changes of control." Under the credit agreement, a change of
control will occur if the current directors cease to hold a majority of the
seats on the Board.
The Edgecliff Group believes that the potential for creating deadlocks
will provide the Edgecliff Nominees with leverage that can be used to convince
the remaining incumbent directors to consider all available alternatives to
maximize stockholder value, including a sale of the Company to the highest
bidder. In addition, although the Edgecliff Group believes that the Company
would seek and obtain a waiver of any technical default that may arise solely as
a result of election of the Edgecliff Nominees to the Board, there can be no
assurance as to the actions of the Company's lenders under its credit agreement.
In the event the Company's lenders refuse to grant such a waiver, the Edgecliff
Nominees would seek to cause the Company to obtain alternative financing
sufficient to pay off the Company's obligations under its credit agreement and
to terminate such credit agreement concurrently therewith.
9
<PAGE>
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 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, or any alternative
transaction, 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 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
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.
As described in "Additional Information Regarding the Edgecliff
Nominees" below, the Edgecliff Nominees have interests that may present them
with potential conflicts of interest in comparing a proposal made by the
Edgecliff Group against a competing transaction. Specifically, (i) William J.
Yung may be deemed to have an interest in an Edgecliff Group proposal by virtue
of his control of, and pecuniary interest in, the entities that are members of
the Edgecliff Group, (ii) Andrew R. Berger may be deemed to have an interest in
an Edgecliff Group proposal 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 and (iii) Joseph E. Marquet may be deemed to have an
interest in an Edgecliff Group proposal in his capacity as an executive officer
of Columbia Sussex Corporation, an Edgecliff Group affiliate.
Additional Information Regarding the Edgecliff Nominees; Proxy Matters
Relating to the Edgecliff Nominees
The Edgecliff Nominees are William J. Yung, Andrew R. Berger and Joseph
E. Marquet. The Edgecliff Nominees are highly qualified individuals based on
their extensive hotel industry experience. William J. Yung has over 28 years of
experience in owning, managing and operating hotels. Andrew R. Berger has over
13 years of experience in advising hotel operators on hotel financings,
acquisitions and dispositions. Joseph E. Marquet has over 14 years experience
serving as the Chief Financial Officer of Columbia Sussex Corporation, a
builder, owner and manager of hotels.
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
<PAGE>
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
<PAGE>
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. Stockholders may not vote for the Company's
nominees for election to the Board using the enclosed GREEN proxy card.
Stockholders who wish to vote for the Company's nominees, and not for the
Edgecliff Nominees, should use the proxy card provided by the Company in
connection with the Company's solicitation materials.
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 revealing 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 10.99% 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
<PAGE>
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
May 4, 2000
20
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 Price Per Share Sold
- ------------ -------------------------- --------------------
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
<PAGE>
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 May 1, 2000. Such information is based solely upon publicly filed Schedule
13Ds, Schedule 13Gs, and Form 3s, 4s and 5s, and the Company's filing, dated May
1, 2000, on Form 8-K.
III-1
<PAGE>
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) 7.84%
Inc.
180 North LaSalle Street, Suite 3600
Chicago, IL 60601
The Prudential Insurance Company of 1,577,400 (3) 5.61%
America
751 Broad Street
Newark, NJ 07102-3777
Dimensional Fund Advisors Inc. 1,556,300 (4) 5.53%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Edgecliff Holdings, LLC 2,598,100 (5) 9.24%
207 Grandview Drive
Fort Mitchell, KY 41017
Edgecliff Management, LLC 2,598,100 (6) 9.24%
207 Grandview Drive
Fort Mitchell, KY 41017
William J. Yung 3,091,800 (7) 10.99%
1200 Cypress Street
Cincinnati, OH 45206
The Edgecliff Group 3,091,800 (8) 10.99%
(1) Percentages are based upon 28,130,325 Shares outstanding as of December
31, 1999, as reported by the Company in its Form 8-K filed on May 1,
2000.
(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
<PAGE>
(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
<PAGE>
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) 2.23%
Joseph C. Calabro 276,360 (3) *
John M. Lang 358,950 (4) 1.28%
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 5.85
officers as a Group (10 persons)
- ----------
* Represents less than 1%.
(1) Percentages are based upon 28,130,325 Shares outstanding as of December
31, 1999, as reported by the Company in its Form 8-K filed on May 1,
2000, 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
<PAGE>
(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
<PAGE>
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
<PAGE>
PRELIMINARY COPY; SUBJECT TO COMPLETION
MATERIALS DATED May 4, 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
<PAGE>
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
<PAGE>
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
