SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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(as permitted by Rule 14a-6(e) (2))
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[ ] Soliciting Material Pursuant to Rule 14a-12
LODGIAN, INC.
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(Name of Registrant as Specified In Its Charter)
EDGECLIFF HOLDINGS, LLC
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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EDGECLIFF HOLDINGS, LLC
207 Grandview Drive
Fort Mitchell, Kentucky 41017
September 15, 2000
Dear Fellow Lodgian Stockholder:
We are Lodgian's largest stockholder, with 14.9% of the company's
outstanding common stock. You should have recently received our proxy materials
urging you to support our nominees for election to Lodgian's Board at the 2000
Annual Meeting of Stockholders. We're writing to highlight important facts you
should think about in making your voting decision and to respond to certain
claims made by Lodgian's Board about us and our nominees.
YOUR BOARD IS FAILING YOU!
Under your Board's poor leadership:
o Lodgian's stock value has fallen by over 60% since May of last
year.
o The company has been unable to give you timely reports on its
financial condition.
o The company has been forced to admit that its internal
financial and accounting controls do not comply with minimum
regulatory standards.
o The company has announced preliminary pre-tax losses of over
$18 million for the first quarter of 2000.
o The Board has failed to develop ANY specific transaction that
would maximize the value of your shares despite having hired
Morgan Stanley Dean Witter nine months ago.
ON THE BASIS OF THESE FACTS, WE DO NOT HAVE ANY CONFIDENCE THAT YOUR
CURRENT BOARD'S CONTINUED MANAGEMENT OF THE COMPANY WILL REVERSE THE TIDE OF
LODGIAN'S DECLINING FINANCIAL CONDITION. WE BELIEVE THAT A SALE OF THE COMPANY
TO THE HIGHEST BIDDER REPRESENTS THE BEST OPPORTUNITY FOR YOU TO MAXIMIZE THE
VALUE OF YOUR SHARES.
Since November of 1999, we have had numerous discussions with Lodgian
concerning our interest in acquiring the company, and have made two definitive
proposals to acquire your shares in all-cash transactions at prices of $6.50 and
$5.75 per share, representing premiums of approximately 43% and 46%. We also
requested additional information from Lodgian so that we could make an offer
that would not be subject to any due diligence condition. Despite our
willingness to enter into a customary confidentiality agreement in exchange for
this information and despite the fact that we allowed Lodgian to meet our
financing sources to confirm our ability to finance an acquisition, your Board
has consistently refused to cooperate with us.
WE BELIEVE THAT NOW IS THE APPROPRIATE TIME TO HOLD YOUR BOARD
ACCOUNTABLE FOR ITS POOR MANAGEMENT OF THE COMPANY AND TO SEND YOUR BOARD A
STRONG MESSAGE--THAT IT SHOULD ALLOW YOU TO MAXIMIZE THE VALUE OF YOUR SHARES
THROUGH A SALE OF THE COMPANY TO THE HIGHEST BIDDER. Our nominees will strongly
advocate a sale of the company to the highest bidder, whether to us or any
competing bidder with a superior proposal.
<PAGE>
DON'T BE MISLED BY THE BOARD'S SLICK PUBLIC RELATIONS CAMPAIGN!
YOUR BOARD IS NOT GIVING YOU ALL THE FACTS ABOUT ITS REFUSAL TO DEAL
WITH US. Your Board claims that it has not provided us the information we
requested in order to make a firm offer for your shares because we refused to
sign a "customary" confidentiality agreement. This is simply NOT true. The only
confidentiality agreement your Board was willing to sign would have also
required us to agree to a one-year "standstill" provision--a one-year agreement
that, among other things, would prohibit us from making any offer directly to
Lodgian's stockholders without your Board's approval. We were willing to agree
to a 30-day restriction, but your Board refused to negotiate with us. INSTEAD OF
WORKING WITH US TO MAXIMIZE THE VALUE OF YOUR SHARES, YOUR BOARD'S PRIMARY FOCUS
WAS ON MAINTAINING ITS CONTROL OF LODGIAN.
WHY HAVEN'T WE MADE A TENDER OFFER?
WE'RE INTERESTED IN MAKING A TENDER OFFER FOR YOUR SHARES, BUT YOUR
BOARD HAS WITHHELD THE INFORMATION WE NEED TO DO SO. Your Board claims that our
efforts to maximize the value of your shares are not "for real" because we
haven't launched a formal tender offer for your shares. Since March of 1999, we
have paid over $18 million in open market transactions to acquire 14.9% of
Lodgian's outstanding common stock--the maximum amount that we could acquire
without triggering Lodgian's poison pill and more than twice the number of
shares held by all the members of your Board combined. We have hired a financial
advisor and outside legal counsel to aid us in evaluating our alternatives in
acquiring the company's remaining shares. We have launched this proxy fight to
elect nominees to your Board who will strongly advocate selling the company to
the highest bidder. We believe that these facts provide ample evidence that we
are serious about acquiring the company.
We would like to make a formal tender offer for your shares, but need
to be able to properly evaluate Lodgian's current business and financial
position so that we can make a FIRM offer. Because of your Board's poor
management, the most current publicly available information on Lodgian--other
than a single company press release announcing preliminary results that are
almost six months old and that have not been fully reviewed by the company's
auditors--is dated December 1999! In addition, without direct access to
customary due diligence materials, we have no ability to independently verify
the company's current condition. Your Board knows that our ability to do so is
critical, especially in light of Lodgian's current financial and accounting
irregularities. WE HAVE REPEATEDLY SOUGHT THIS INFORMATION FROM YOUR BOARD SO
THAT WE COULD MAKE A FIRM OFFER, BUT YOUR BOARD HAS BEEN MORE FOCUSED ON
ENTRENCHING ITSELF RATHER THAN COOPERATING WITH US TO MAXIMIZE THE VALUE OF YOUR
SHARES. YOUR BOARD CLAIMS THAT IT WANTS US TO MAKE A TENDER OFFER FOR YOUR
SHARES, BUT ITS ACTIONS PROVE OTHERWISE!
OUR NOMINEES ARE FOCUSED ON MAXIMIZING THE VALUE OF YOUR
SHARES.
Unlike the current members of your Board:
o Our nominees will encourage a sale of the company to the
highest bidder.
o Our nominees will seek to cooperate with potential bidders by
providing access to current company information pursuant to
STANDARD confidentiality agreements.
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<PAGE>
Your Board claims that if our nominees are elected, we will be able to
acquire Lodgian for an inadequate price, or will be able to force the company to
buy back our shares--and only our shares--for a substantial premium to market
price. These allegations are simply NOT true.
o If elected to the Board, our nominees will owe Lodgian's
stockholders a fiduciary duty to support the most favorable
transaction available to ALL of the company's stockholders
o Because of Lodgian's classified Board structure, our nominees
would not constitute a majority of the Board, and would not be
able to force the company to take ANY action (whether or not
for our benefit) without the support of additional Board
members.
Your Board claims that you should not vote for our nominees because we
may be deemed to compete with Lodgian and that certain of our nominees are
affiliated with us. What your Board has failed to fully and clearly disclose is
that one of THE BOARD'S nominees for election is the chairman and chief
executive officer of the nation's tenth largest hotel company!
YOUR CURRENT BOARD HAS FAILED TO EXPLAIN HOW IT WOULD IMPROVE
UPON ITS POOR MANAGEMENT PERFORMANCE.
The Board CLAIMS that it has been evaluating the company's strategic
alternatives since January of 2000. Since that time, the company's stock price
has lost more than 40% of its value, and Lodgian's most significant publicly
announced transaction was to agree to sell ten core assets--at prices we believe
to be below replacement value and fair market value--for a pre-tax loss of $50
million.
Your Board now argues that you should vote for its nominees so that
they can assist the Board in its continued efforts to maximize stockholder
value. Your Board has not articulated any new specific plan or proposed
transaction that would accomplish this goal. WE BELIEVE THE BOARD HAS FAILED TO
PROVIDE ANY PERSUASIVE ARGUMENT AS TO WHY ITS POOR PAST PERFORMANCE WOULD NOT BE
INDICATIVE OF ITS FUTURE RESULTS.
* * *
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<PAGE>
NOW IS THE APPROPRIATE TIME TO HOLD YOUR BOARD ACCOUNTABLE FOR ITS POOR
MANAGEMENT OF THE COMPANY AND TO SEND YOUR BOARD A STRONG MESSAGE--THAT IT
SHOULD ALLOW YOU TO MAXIMIZE THE VALUE OF YOUR SHARES THROUGH A SALE OF THE
COMPANY TO THE HIGHEST BIDDER.
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]
William J. Yung
President
Edgecliff Holdings, LLC
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 already done so, you may revoke your
previously signed proxy by signing, dating and returning a
later dated GREEN proxy card using the envelope provided.
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
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