EX-99.28 3 0003.txt EXHIBIT 28 EXHIBIT 28 EDGECLIFF HOLDINGS, LLC 207 Grandview Drive Fort Mitchell, Kentucky 41017 October 4, 2000 Dear Fellow Lodgian Stockholder: As you know, we're 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. AN INDEPENDENT ADVISORY FIRM IS RECOMMENDING THAT YOU VOTE FOR OUR NOMINEES. In a report to its clients dated October 2, 2000, Institutional Shareholder Services (ISS), the largest independent proxy advisory firm, stated that Edgecliff's "dissident slate of director nominees should be supported" and recommended that Lodgian stockholders "vote using the dissident nominees' GREEN proxy card." Among the reasons for its recommendation, ISS expressed "grave concerns" over Lodgian's historical operating results and management's "inability to effectively report the financial condition of the firm." ISS also went on to reject the Board's principal arguments against the election of our nominees. "ISS is not convinced that electing the dissidents would have a detrimental effect on any alternative offers that may emerge for the company...In our opinion, there is no reason to suspect that Mr. Yung [Edgecliff's President and one of its nominees] would attempt to purchase the company at a price below what the market will bear in an attempt to misuse any position on the board he may hold." Having met with our representatives and those of the Board, ISS concluded that the Edgecliff Group "has a stronger case." YOUR BOARD CONTINUES TO MAKE EXCUSES! In its latest mailing, your Board now CLAIMS that it agrees with us that a sale of the company may represent the best opportunity to maximize stockholder value. However, rather than pursuing such a sale with us, your Board continues to disparage our motives and actions. Here are the facts. WHAT YOUR BOARD CLAIMS: WHAT YOU SHOULD KNOW: ---------------------- -------------------- We're not interested in FACT: In order to make an firm offer for your making a firm offer to shares, we need access to current company acquire the company. information. Your Board has consistently refused to provide this information to us. WHAT YOUR BOARD CLAIMS: WHAT YOU SHOULD KNOW: ----------------------- --------------------- We're demanding FACT: The Board's "standard" agreement also confidential information but contains a one-year "standstill" provision that are not willing to sign the would prevent us from making an offer for your Board's "standard" shares without the Board's consent. We've offered confidentiality agreement. to sign a confidentiality agreement with a 30-day standstill provision. Despite recent claims of "flexibility," your Board has refused to negotiate with us. NOTE: YOUR BOARD HAS ALSO TOLD YOU THAT 26 OTHER "POTENTIAL BIDDERS" SIGNED CONFIDENTIALITY AND STANDSTILL AGREEMENTS WITH THE COMPANY, BUT DID NOT INDICATE WHETHER THESE "POTENTIAL BIDDERS" WERE INTERESTED IN ACQUIRING THE ENTIRE COMPANY OR ONLY INDIVIDUAL PROPERTIES. WE BELIEVE THAT OUR PROPOSAL TO ENTER INTO A CONFIDENTIALITY AGREEMENT WITH A 30-DAY STANDSTILL IS A FAIR AND REASONABLE PROPOSAL, AND ARE READY TO SIGN SUCH AN AGREEMENT WITH LODGIAN TODAY. WHAT YOUR BOARD CLAIMS: WHAT YOU SHOULD KNOW: ---------------------- -------------------- We've never provided FACT: We arranged for Lodgian's representatives to credible evidence of our meet with our financing sources on March 6, 2000, ability to finance an and directed our financing sources to answer all acquisition of Lodgian. of the company's questions regarding our financing. In the August 14, 2000 issue of HOTEL & MOTEL MANAGEMENT, Robert S. Cole, President and CEO of Lodgian, is quoted as saying, "I do believe that Mr. Yung [the President of Edgecliff] has the ability to buy the company now." Electing our nominees to the FACT: Because of Lodgian's classified Board Board will allow us to force structure, our nominees would not constitute a the company to buy back our majority of the Board, and would not be able to shares--and only our force the company to take ANY ACTION without the shares--for a substantial support of additional Board members. premium to market price. Electing our nominees to the FACT: We will not be able to acquire your shares Board will allow us to in any transaction without your individual acquire your shares for an approval (in the case of a tender offer) or the inadequate price. approval of a majority of the company's stockholders (in the case of a merger). Our nominees may seek to FACT: If elected, our nominees will have a impede other third parties fiduciary duty to support the most favorable from acquiring the company. transaction available to Lodgian's stockholders, even if it is not our own. As the company's largest stockholder, we would welcome any third party acquisition proposal that would result in a higher valuation for our shares. You should not vote for our FACT: One of the Board's own nominees is the nominees because they are chairman and chief executive officer of another affiliated with a company company competitor--specifically, the nation's that competes with Lodgian. tenth largest hotel company. 2 YOUR BOARD HAS NOT GIVEN YOU ANY REASON TO BELIEVE IT IS SERIOUSLY PURSUING A SALE OF THE COMPANY TO ANY OTHER BIDDER. Your Board claims that it is currently having "substantive discussions" with other third parties interested in a "transaction" involving Lodgian, and will sell the company if its negotiations with one of these third parties produce a fair and fully-financed offer. But your Board has not identified any of these third parties or how many there are, or whether the "transactions" supposedly being discussed with any of them actually include a sale of the company. WE DO NOT BELIEVE THAT ANY SERIOUS BIDDER INTERESTED IN ACQUIRING THE COMPANY WOULD REMAIN SILENT IN THE FACE OF OUR COMPETING EFFORTS TO ACQUIRE YOUR SHARES. Accordingly, we do not believe that the company is seriously pursuing a sale of the company with any of these other parties. YOUR BOARD CONTINUES TO REPORT DISAPPOINTING FINANCIAL RESULTS. On October 2, 2000, Lodgian issued a press release announcing preliminary pre-tax losses of more than $84 million for the six months ended June 30, 2000. The company also "updated" its results for the first quarter of 2000, reporting preliminary pre-tax losses of over $25 million for the period (compared to a previously reported pre-tax loss of approximately $18 million for the period). WE BELIEVE YOUR CHOICE IS CLEAR. We have NO confidence in the current Board's ability to improve the company's current financial and operational condition, and believe that a sale of the company may represent the best opportunity to maximize the value of your shares. We believe that the Board's continuing refusal to work with us--or, to our knowledge, any other third party interested in acquiring the company--demonstrates that the Board is not willing to seriously consider such a sale. 3 NOW IS THE 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, /s/ William J. Yung 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 WHITE PROXY CARD THAT YOU MAY RECEIVE FROM THE BOARD, EVEN AS A PROTEST VOTE AGAINST THE BOARD AND MANAGEMENT. If you return the WHITE proxy card, even as a vote "against" the Board's nominees, it may revoke your previous vote for our nominees. Only the latest dated proxy card counts! - If you have already returned a WHITE proxy card, you may revoke your previous 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 4