[LIVE]
<PAGE>
SIGNATURE INNS, INC.
250 East 96th Street, Suite 450
Indianapolis, Indiana 46240
_______________
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
May 21, 1996
_______________
INTRODUCTION
This Proxy Statement and the enclosed form of Proxy are being mailed to
shareholders (the "Shareholders") of Signature Inns, Inc. (the "Company") on or
about April 12, 1996, and are being furnished in connection with management's
solicitation of proxies to be used at the annual meeting of Shareholders to be
held Tuesday, May 21, 1996, at the time and place and for the purposes of
considering and acting upon the matters specified in the Notice of Annual
Meeting of Shareholders accompanying and, by this reference, constituting a
part of this Proxy Statement.
Any Shareholder who executes and returns a proxy may revoke the same at any
time prior to the voting thereof by filing a written revocation with the
Secretary of the Company, by submitting another duly executed proxy with a later
date or by attending the meeting and requesting the return of his proxy from the
Secretary prior to the vote.
The entire cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by personal
interview, telephone and facsimile transmission by directors, officers and
employees of the Company without extra compensation. The Company will also
reimburse brokerage houses, custodians, nominees and fiduciaries for actual
expenses incurred in forwarding proxy material to beneficial owners.
The Annual Report to Shareholders for the year ended December 31, 1995,
accompanies this proxy statement.
VOTING SECURITIES AND SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT HOLDERS
Only Shareholders of record at the close of business on Tuesday, April 2,
1996, will be entitled to vote at the annual meeting. On that date, there were
outstanding 7,784,327, shares of common stock of the Company. Each share of
common stock is entitled to one vote with respect to each matter submitted to a
vote at the meeting. Assuming that a quorum (i.e., holders of a majority of the
total shares outstanding) is present at the meeting in person or by proxy, each
of the matters set forth in the Notice of Annual Meeting of Shareholders shall
be decided upon by an affirmative vote of the holders of record of a majority of
the Shares present or represented by proxy at the meeting.
<PAGE>
Set forth in the following table are the beneficial holdings as of April
2, 1996, of the Company's common stock of each of the current directors of the
Company and nominees for director, which group includes each person known to the
Company who may be deemed to own more than 5% of the Company's common stock and
all directors and officers as a group:
<TABLE>
BENEFICIAL HOLDINGS OF DIRECTORS, NOMINEES,
AND NAMED EXECUTIVE OFFICERS
<CAPTION>
Amount & Nature
Name of Title of Beneficial Percent
Beneficial Owner Of Class Ownership(1) Of Class
<S> <C> <C> <C>
John D. Bontreger Common Stock 1,515,400 (2) 19.46 %
no par value
Mark D. Carney " 443,000 (3) 5.69 %
Bo L. Hagood " 425,915 (4) 5.47 %
David R. Miller " 299,500 (5) 3.85 %
Orus E. Weaver " 109,710 (6) 1.41 %
George A. Morton " 102,000 (7) 1.31%
Richard E. Shank " 99,997 (8) 1.28%
Richard L. Russell " 60,000 (9) 0.77%
All directors, and
Executive Officers as 3,182,522 40.87%
a group (includes 10 persons)
<F1>
(1) Information with respect to beneficial ownership is based upon information
supplied by each Shareholder.
<F2>
(2) Mr. Bontreger owns all shares in his name of record and has sole voting and
investment power over such shares.
<F3>
(3) Mr. Carney owns all shares in his name of record and has sole voting and
investment power over such shares.
<F4>
(4) Mr. Hagood owns all shares in his name of record and has sole voting and
investment power over such shares.
<F5>
(5) Mr. Miller owns all shares in his name of record and has sole voting and
investment power over such shares.
<F6>
(6) Mr. Weaver holds 108,500 shares in his name of record and has sole voting
and investment power over such shares and 1,210 shares jointly with his
wife with whom he shares voting and investment power over such shares.
<PAGE>
<F7>
(7) Mr. Morton holds 62,000 shares in his name of record and has sole voting
and investment power over such shares and 40,000 shares are owned by trusts
of which his wife is the trustee with investment power over such shares.
<F8>
(8) Mr. Shank holds all shares as a joint tenant with his wife with whom he
shares voting and investment power over all such shares.
<F9>
(9) Mr. Russell holds 25,000 shares in his name of record and has sole voting
and investment power over such shares and 35,000 shares jointly with his
wife with whom he shares voting and investment power over such shares.
</TABLE>
OPERATING MANAGEMENT'S EQUITY COMMITMENT,
AND MANAGEMENT'S PURCHASE OF COMMON SHARES IN APRIL 1994
As a condition of the 1993 Bank One refinancing, as described below,
"Operating Management," consisting of Messrs. Bontreger, Hagood, Carney, Miller,
Martin D. Brew and Paul A. (Pat) Taylor (Executive Director of Franchising and
Real Estate), were required to make a commitment to invest a minimum of $500,000
in equity capital in the Company ("Management's Equity Commitment").
Management's Equity Commitment was set forth in an Escrow Agreement dated
December 16, 1993, among the Company, BOCP II and Bank One. Under the terms of
that agreement, those officers severally undertook and committed (subject to the
Company's compliance with applicable securities laws) to execute and deliver to
the Company subscription agreements for the purchase of the Company's shares at
a purchase price equal to the subscription price (namely, $ .20 per share) to be
paid by public investors in a planned "Rights Offering" to Shareholders of the
Company. To ensure that Management's Equity Commitment would be satisfied, the
Escrow Agreement required the Management Holders to deposit with the Escrow
Agent the sum of $225,000.
In late 1993, the Company underwent a debt restructuring and refinancing,
under the terms of which Bank One, Indianapolis, N.A. ("Bank One") provided
$2,500,000 of "senior" debt financing, and Banc One Capital Partners II ("BOCP
II") provided an additional $1,800,000 of "subordinated" debt financing, which
funds were used (along with approximately $1,700,000 of funds derived from a
combination of proceeds from the sale of two Company-owned hotels and from the
Company's general cash reserves) to pay off, at a discount, approximately
$20,000,000 of debt then owed to NBD Bank, N.A. The net effect of the 1993 Bank
One refinancing was to restore the Company's solvency.
Immediately prior to the Company's planned "Rights Offering" to its
Shareholders on April 7, 1994, Operating Management performed its commitment and
purchased the number of shares at the aggregate purchase prices shown on the
table below:
<PAGE>
<TABLE>
PRIVATE PLACEMENT SHARES PURCHASED
IN APRIL 1994 BY OPERATING MANAGEMENT
PURSUANT TO MANAGEMENT'S EQUITY COMMITMENT
<CAPTION>
Number of
Shares Held Number of Aggregate Number of Shares
Before Shares Purchased Price for the Held Following
Name Purchase at $.20 Per Share Shares Purchase
- ---- ----------- ------------------- ------------- ----------------
<S> <C> <C> <C> <C>
John D. Bontreger 498,400 1,017,000 $203,400 1,515,400
Mark D. Carney 3,000 440,000 88,000 443,000
Bo L. Hagood 150 425,750 85,150 425,900
David R. Miller 8,250 291,250 58,250 299,500
Paul A. Taylor 100 250,500 50,100 250,600
Martin D. Brew 0 125,000 25,000 125,000
--------- --------- -------- ---------
Total 509,900 2,549,500 $509,900 3,059,400
========= ========= ======== =========
</TABLE>
Operating Management was required to pay in cash at the time of its
purchases a total of $231,400. The $278,500 balance of the subscriptions was
represented by interest-bearing, recourse promissory notes which were executed
by Operating Management in favor of the Company and which recently were paid in
full.
Operating Management also was required to execute a Stock Escrow Agreement
and Stock Pledge Agreement, the terms of which have been satisfied fully.
Accordingly, Operating Management currently has complete beneficial ownership of
and voting rights with respect to the shares set forth on the foregoing table.
<PAGE>
ELECTION OF DIRECTORS
Under the Company's Code of By-Laws, as amended, the Company's Board of
Directors is divided into three separate classes of directors whose terms expire
at different times, but with no term extending beyond three years. The By-Laws
require that the number of directors shall not be less than two nor more than
nine.
On August 18, 1994, the Board of Directors amended the Company's Code of
By-Laws to increase the number of directors from eight to nine with the ninth
director being placed in the First Class of Directors with his term expiring in
1997. Stephen M. Huse was elected to fill the vacancy created by such increase.
In connection with that amendment, the Board classes of directors are now
organized as follows:
<TABLE>
<CAPTION>
Class of Name of Terms
Directors Directors Expire
--------- --------- ------
<S> <C> <C>
First Class Mark D. Carney 1997
(Three Directors) Stephen M. Huse
Richard E. Shank
Second Class Bo L. Hagood 1998
(Three Directors) David R. Miller
Orus E. Weaver
Third Class John D. Bontreger 1996
(Three Directors) George A. Morton
Richard L. Russell
</TABLE>
If any of the nominees elected as directors at the 1996 Annual
Shareholders' Meeting shall be unable to serve, the proxies will be voted to
fill any vacancy so arising in accordance with the discretionary authority of
the person named in the proxies. Management has no reason to believe that any
nominee will be unable to serve.
The names, ages, principal occupations and tenures as director of each of
the nominees, are set forth below:
<PAGE>
<TABLE>
DIRECTORS STANDING FOR ELECTION
FOR A THREE YEAR TERM EXPIRING MAY 1999
<CAPTION>
Nominee and Principal
Occupation (Age) Office Held Elected as Director
--------------------- ----------- -------------------
<S> <C> <C>
John D. Bontreger, President, Chief 3/31/78
President, Chief Executive Officer
Executive Officer and and Chairman of
Chairman of the Board the Board
of Signature Inns, Inc.
(Age 47)
George A. Morton, Director 9/23/78
Agri businessman (Age 59)
Richard L Russell, Director 5/21/91
Executive Director,
Direct Regions National
Retail Hardware
Association (Age 60)
</TABLE>
<TABLE>
DIRECTORS CONTINUING IN OFFICE
<CAPTION>
Names and Principal
Occupations (Ages) Office Held Elected as Director Term Expires
- ------------------- ----------- ------------------- -------------
<S> <C> <C> <C>
Orus E. Weaver Director 9/23/78 5/16/98
Independent Life Insurance
Broker (Age 72)
Bo L. Hagood Vice President 11/17/93 5/16/98
Vice President Hotel Hotel Operations
Operations of Signature and Director
Inns, Inc. (Age 46)
David R. Miller Secretary and 9/23/78 5/16/98
Secretary and Executive Director
Director of Sales and
Marketing of Signature
Inns, Inc. (Age 54)
Mark D. Carney, Vice President 11/17/93 5/16/97
Vice President Finance Finance, CFO and
and Chief Financial Director
Officer of Signature
Inns, Inc. (Age 39)
<PAGE>
Stephen M. Huse, Director 8/18/94 5/16/97
Chief Executive Officer,
Huse Food Group, Inc.
(Age 53)
Richard E. Shank, Director 9/23/78 5/16/97
Real Estate Broker
with Dick Shank
Real Estate
(Age 63)
</TABLE>
INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND MANAGEMENT
A. Nominees, Directors and Offices.
-------------------------------
The foregoing lists of nominees and other directors constitute a complete
listing of all the directors of the Company. The officers of the Company are
John D. Bontreger, President and Chief Executive Officer, David R. Miller,
Secretary and Executive Director of Sales and Marketing, Mark D. Carney, Vice
President Finance and Chief Financial Officer, Bo L. Hagood, Vice President
Hotel Operations and Martin D. Brew, Treasurer and Controller. Each member of
the Board of Directors of the Company is also a member of the Board of Directors
of the Company's four wholly owned subsidiaries, namely, Signature Securities
Corporation, Signature Franchise Corporation, P & N Corporation and S.I.E.
Corporation. David R. Miller is the President and Secretary and Martin D. Brew
is the Treasurer of Signature Securities Corporation. Messrs. Bontreger, Miller
and Brew are the President, Secretary and Treasurer, respectively, of Signature
Franchise Corporation, P & N Corporation and S.I.E. Corporation.
B. Family Relationships.
--------------------
No family relationship exists between any director or nominee for director
and any other director or nominee for director or any executive officer of the
Company.
C. Other Directorships.
-------------------
Except for Mr. Huse, no director or nominee for director holds any
directorship in any company with a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, or which is subject to the
requirements of Section 15(d) of that Act or which is a company registered as an
investment company under the Investment Company Act of 1940.
D. Certain Proceedings.
-------------------
No officer, director or nominee for director, no affiliate thereof and no
associate thereof was a party to any proceeding or the subject of any order,
judgment or decree during the past five years which would be material to an
evaluation of the ability or integrity or such nominee, nor has any such person
been a party to any proceeding adverse to the Company or its subsidiaries or
affiliates, or has had any material interest adverse to the Company or its
subsidiary or affiliates.
<PAGE>
E. Control Persons.
---------------
Mr. Bontreger is a "control person" of the Company as defined under
regulations promulgated by the Securities and Exchange Commission.
F. Committees of the Board.
-----------------------
1. Audit Committee. The Audit Committee meets as deemed necessary (a)
to recommend to the Board of Directors the retention, from time to time, of
independent auditing firms to be engaged by the Company, subject to Shareholder
ratification, (b) to coordinate the annual audit of the Company between
management and the auditing firm, (c) to meet with the auditors at least two
times during the year, including one meeting before the audit is commenced and
one meeting following the completion of the audit and to meet at such other
times as the Board of Directors, in its discretion, directs or as the Committee,
itself, determines. Committee members serve one-year terms from one annual
Shareholders' meeting to the next. Current members of the Audit Committee are
Richard E. Shank, Chairman, and Orus E. Weaver. The Audit Committee met twice
during the year ended December 31, 1995.
2. Compensation Committee. The members of the Compensation Committee
serve from year to year from one annual meeting of Shareholders to the next.
The purposes and functions of the Compensation Committee are to (a) develop and
recommend to the Board of Directors for approval a compensation plan for the
president/chief executive officer and all other individuals within the Company
who are designated as "senior management," (b) review benefit, bonus and
incentive plans and other corporate perquisites on an annual basis, (c) review
and recommend to the Board suggested changes in compensation to be paid to
outside members of the Board, and (d) review expense reimbursement policies of
the Company as they pertain to directors and management. The Compensation
Committee meets as determined necessary by the Board or by the Committee.
Current members of the Compensation Committee are George A. Morton, Chairman,
Richard E. Russell and Stephen M. Huse. The Compensation Committee met twice
during the year ended December 31, 1995.
G. Number of Meetings.
------------------
During 1995, the Board of Directors of the Company held a total of six
regular scheduled and special meetings. All directors listed above attended at
least 75% of those meetings.
H. Section 16(a)Reports.
--------------------
There were no required filings during 1995.
I. Officers/Directors Business Background.
--------------------------------------
A brief description of the business background and experience of each
officer and director is as follows:
JOHN D. BONTREGER, 47 President, Chief Executive Officer and
Chairman of the Board
Mr. Bontreger has served as President, Chief Executive Officer and Chairman
of the Board of Signature Inns, Inc. since the Company's inception on March 31,
1978.
DAVID R. MILLER, 54 Secretary, Executive Director of Sales and
Marketing and Director
<PAGE>
Mr. Miller has been employed by Signature Inns, Inc. since August 1978 and
has served as the Secretary (and Treasurer until May 1986) of the Company since
September, 1978. Since June 1984, he has been President of Signature Securities
Corporation. Since 1990, Mr. Miller has been the Executive Director of
Marketing responsible for hotel room sales programs and the central
reservation system.
MARK D. CARNEY, 39 Vice President Finance, Chief Financial
Officer and Director
Mr. Carney has been employed by Signature Inns, Inc. since September 1992
as Vice-President Finance and Chief Financial Officer. Mr. Carney was
previously employed with the public accounting firm KPMG Peat Marwick in its
real estate, hospitality and financial institution practices. He received
his CPA certification in 1982.
BO HAGOOD, 46 Vice President Hotel Operations and Director
Mr. Hagood has been employed by Signature Inns, Inc. since December 1980
starting as General Manager. In January 1984, he was promoted to Director of
Hotel Operations and then to Vice President Hotel Operations in 1987. Mr.
Hagood has been in the hospitality industry for over 20 years. Prior to
Signature Inns, Mr. Hagood managed several hotels for national chains.
MARTIN D. BREW, 35 Treasurer and Controller
Mr. Brew has been employed by Signature Inns, Inc. since April 1986. In
December 1987, Mr. Brew assumed the position of Controller and additionally, in
April 1992, he began serving as Treasurer. Prior to his employment with
Signature Inns, Mr. Brew worked four years with KPMG Peat Marwick. He received
his CPA certification in 1985.
ORUS E. WEAVER, 72 Director
Mr. Weaver has been an independent life insurance broker since 1981 and
previously assisted in the sale of securities of Signature Inns, Inc. in various
capacities. Mr. Weaver has been a member of the National Association of Life
Underwriters for almost twenty years.
GEORGE A. MORTON, 59 Director
Mr. Morton has been part owner of Morton Farms, Inc. since 1962, and serves
as Vice President and Secretary of that company. From April 1987 to January
1989, Mr. Morton served as Deputy Commissioner of Agriculture for the State of
Indiana. He served as the Indiana Director of Farmers Home Administration from
1989 to 1993.
RICHARD E. SHANK, 63 Director
Mr. Shank has been self-employed in the real estate business since 1961.
Mr. Shank was an elected representative in the Indiana General Assembly for 21
years, and was a State Senator from 1976 to 1987. He served as Executive
Director of the Indiana Professional Licensing Agency during 1988.
<PAGE>
RICHARD L RUSSELL, 60 Director
Mr. Russell has been the Executive Director, Direct Regions of the National
Retail Hardware Association, and has been involved in the hardware industry for
nearly thirty years. He has also served as President or director of several
community and civic organizations.
STEPHEN M. HUSE, 53 Director
Mr. Huse has been President and Chief Executive Officer, Huse Food Group,
Inc., in Bloomington, Indiana, since 1986. Mr. Huse is also a director of Marsh
Supermarkets, Inc., and a member of the Advisory Board of Society National Bank,
Central Indiana District, Indianapolis, Indiana.
EXECUTIVE COMPENSATION
Executive Compensation Philosophy
---------------------------------
The Company believes that the primary objectives of the Company's executive
compensation policies should be:
* To attract and retain talented executives by providing compensation
opportunities that are competitive with the compensation provided to
executives at companies of comparable size and position, while
maintaining compensation within levels that are consistent with the
Company's business plan, financial objectives and operating
performances;
* To provide meaningful annual incentive opportunities for executives
to work toward and achieve the Company's profit and other targets
established in the Company's business plan; and
* To align the interest of executives with those of Shareholders by
providing substantial long-term incentive opportunities through
stock options and other forms of stock ownership.
The Company believes that executive compensation program should be reviewed
periodically to insure its support of the Company's financial performance and
its business plan. It also should be compared to practices of, and levels paid
by, other companies with whom we compete for business and human resources. Our
intent is not simply to copy the practices and levels of others, but rather to
continually strive to have a program that takes into account factors unique to
the Company and is distinguishably better in terms of its performance
relatedness from the perspective of both Company results and each individual's
contribution to those results.
The Company believes that executive compensation should be comprised of (1)
base compensation (2) annual (short-term) compensation (3) long -term
compensation. The Company believes that base compensation is currently set at
levels competitive with executives with similar responsibilities at other
companies similar in size and complexity.
The Company believes that annual incentive compensation should be utilized
to retain management, provide motivation, and move the Company in a positive
financial direction. Substantial incentive opportunities are provided to
executives based upon the level of achievement of targeted profit goals for the
company, and the level of individual responsibility and achievement.
<PAGE>
The Company believes that an integral part of the executive compensation
programs should be long term incentive. Through equity based compensation in
the form of Company stock the long-term interest of executives are aligned
with those of Shareholders. Because the Company believes that significant stock
ownership by management is catalyst in building Shareholder value, it will
continue to utilize stock options and review and possibly use other Shareholder
value related vehicles to provide long-term incentive compensation.
The Company believes that the above philosophy furthers the interests of
the Shareholders since a significant part of executive compensation is based
upon obtaining results that increase the value of the Company and are beneficial
to all Shareholders.
<TABLE>
Summary Compensation Table(1)
-----------------------------
<CAPTION>
Name and Year
Principal Ended Annual Compensation
Position December 31 Salary ($) Bonus ($)
--------- ----------- ---------- ---------
<S> <C> <C> <C>
John D. Bontreger 1995 147,833 61,685
President & CEO 1994 141,901 77,768
1993 136,250 -
Mark D. Carney 1995 89,350 38,217
V.P. Finance & CFO 1994 85,782 47,003
1993 80,337 3,000
Bo Hagood 1995 89,350 38,217
V.P. Hotel Operations 1994 85,792 47,003
1993 82,212 7,787
David R. Miller 1995 75,911 24,124
Secretary, Executive 1994 72,795 28,487
Director of Sales 1993 69,808 3,330
and Marketing
<F1>
(1) Columns regarding long-term a nd all other compensation have been omitted
pursuant to the instructions to Reg. Section 228.402(a), because there
has been no compensation awarded to, earned by, or paid to any of the
named executives required to be reported in those columns in any fiscal
year covered by this Table.
</TABLE>
There have been no options granted to named executive officers since
October 1989. There are no unexercised options held at December 31, 1995, by
the executive officers named in the Summary Compensation Table.
<PAGE>
Employment Contracts
--------------------
The Company has employment contracts with John D. Bontreger, Bo L.
Hagood, Mark D. Carney, David R. Miller, Martin D. Brew and Paul A. Taylor.
The terms of the employment contracts began in December 1993 and the contracts
provide for base salaries of the officers/employees, plus bonuses, as
determined annually by the Company's Board of Directors. In addition, the
employment contracts provide for the payment of other customary benefits,
including medical, life and disability insurance premiums. The current terms
of Messrs. Bontreger, Hagood and Carney's contracts expire in December 1996.
The current terms of Messrs. Miller, Brew and Taylor's contracts expire in May
1996. The contracts are renewable for subsequent terms: Mr. Bontreger's for
one and one-half years; Messrs. Hagood's and Carney's for one year; Messrs.
Miller's, Brew's and Taylor's for six months. The contracts are not
terminable by the Company except upon "just cause" as defined in the
contracts.
In the event the Company terminates an officer/employee's employment
without "just cause," or in the event an officer/employee resigns "with just
cause" (i.e., where the Company materially breaches the agreement), the
officer/employee is entitled to receive from the Company lump sum severance
payments equal to a multiple of yearly "regular compensation," as defined in
the contracts. In such events, Mr. Bontreger would receive severance benefits
equal to three times his "regular compensation," Messrs. Hagood, Carney and
Miller would receive severance benefits equal to one time such compensation,
and Messrs. Brew and Taylor would each receive severance benefits equal to
one-half times such compensation.
In the event of the termination of an employment contract by the Company
"for just cause" or a resignation by an officer/employee "without just cause"
the severance benefits would not be payable. In addition, in the event the
Company terminates an employment contract for "just cause" or the
officer/employee resigns "without just cause," the officer/employee must abide
by certain restrictive, non-compete provisions for the same period as the then
current term of the contract.
COMPENSATION OF DIRECTORS
The following fees and expense reimbursement arrangements are effective
for each member of the Board of Directors and the two Committees of the Board
who is not an employee of the Company (an "Outside Director") for all meetings
held on and after January 1, 1996:
(a) Each outside Board member shall be paid a retainer of $5,400 per
year, payable in quarterly installments of $1,350;
(b) In addition to the retainer, each Outside Director shall receive a
fee of $650 per Board meeting attended (other than telephonic
Board meetings which are covered by the retainer);
(c) Each Outside Director shall receive a fee of $650 for each
Committee meeting which such Board member attends, unless such
Committee meeting is held "in conjunction with" a Board meeting,
in which event, the fee for e ach outside Board member shall be $325;
(d) In addition, Outside Directors shall also be reimbursed for
reasonable costs and expenses, including travel expenses, incurred
by them in connection with their attendance at any Board or
Committee meeting.
<PAGE>
In addition to the foregoing, directors are holders of Signature VIP
cards, which entitle them and their immediate families to complimentary room
accommodations at any Signature Inn hotel.
OTHER INFORMATION
Except for the promissory notes executed and delivered to the Company by
members of Operating Management in connection with their purchase of shares in
1994, as described above, no loans have ever been made by the Company or its
subsidiaries to any officer or director of the Company.
PROPOSAL TO AMEND ARTICLE V AND ARTICLE VI
OF THE ARTICLES OF INCORPORATION OF THE COMPANY
The Board of Directors has adopted and is submitting herewith for the
approval of the Shareholders an amendment to the Articles of Incorporation of
the Company (the "Amendment") which would (a) increase the number of
authorized shares of Common Stock from 20,000,000 to 50,000,000, and (b)
decrease the number of authorized shares of Preferred Stock from 20,000,000 to
5,000,000 while revising the rights and preferences of the Preferred Stock.
Each component of the Amendment is discussed below.
Increase in Authorized Common Stock. Currently, under Article V of the
Articles, the Company has authority to issue 20,000,000 shares of no-par value
common stock (the "Common Stock"). The Company's shares of Common Stock do
not have any preemptive rights, nor do these shares have any redemption or
similar rights. There is no provision in the Articles for cumulative voting.
Therefore, cumulative voting is not permitted, and each share of Common Stock,
which is the only voting stock of the Company, is entitled to one vote with
respect to all matters to come before the Shareholders.
As of the date of this Proxy Statement, there were 7,784,327 shares of
Common Stock outstanding, leaving 12,215,673 shares authorized but unissued.
Management and the Board of Directors anticipate a need to sell additional
shares in possible future private or registered public offerings and for other
legitimate corporate purposes. In addition, if approved, the Company's 1996
Equity Incentive Plan will authorize the Company to grant to selected
officers, employees, and directors awards of Restricted Stock Grants or Stock
Options to purchase up to an aggregate of 750,000 shares of Common Stock.
Accordingly, management and the Board of Directors are proposing to amend
Article V of the Articles of Incorporation of the Company to increase the
number of authorized shares of Common Stock from 20,000,000 to 50,000,000
shares.
The types of transactions in which the shares may be issued, the nature
and approximate amount of the consideration to be paid for the shares in
connection with those transactions and the purposes for which the
consideration will be used ultimately by the Company are not currently known
and will not be ascertainable unless and until the terms of an actual
transaction are formulated sometime in the future. It is impossible,
therefore, to predict at this time the general effect of the increase in
authorization of shares of Common Stock upon the rights of existing security
holders. It is possible that some future transactions in which the authorized
shares of Common Stock are actually issued could have a diluting impact upon
the value and/or voting power of the shares of Common Stock currently
outstanding.
<PAGE>
Although, the Indiana Business Corporation Law grants to the
shareholders the power to authorize new shares, generally, it is the Board of
Directors of the Company which has the authority to determine when, how many
and on what terms shares are to be issued. The Board of Directors, in its
discretion, determines the consideration (both nature and amount) for issuance
of shares. Accordingly, it may be anticipated that the Shareholders will not
be accorded an opportunity to vote on the particular transactions pursuant to
which the additional shares of common stock ultimately will be issued, sold,
or distributed. Other than as might be required under applicable state and
federal law, no vote of security holders will be solicited in connection with
any future issuance, sale or distribution of shares of Common Stock.
Assuming that the Amendment is approved and that the number of
authorized shares of the Company's Common Stock is increased from 20,000,000
to 50,000,000 shares, there will remain approximately 7,784,327 shares
outstanding, leaving 42,215,673 shares authorized but unissued.
The Company is not aware of any third party planning to acquire a
controlling interest in the Company's common shares. However, the proposed
amendment increasing the authorized number of shares of Common Stock from
20,000,000 to 50,000,000 will make available a large number of common shares
which could be issued in a defense against an unfriendly take-over attempt, if
management believes that to do so would be appropriate. The establishment of
such a defense is not, however, the primary purpose of the proposal to
increase the number of authorized shares of Common Stock.
Decrease in Authorized Preferred Stock and Revision of Rights and
Preferences of Preferred Stock. On June 16, 1993, the Articles of
Incorporation of the Company were amended and restated to provide, among other
matters, authority for the Company to issue up to 20,000,000 shares of
Preferred Stock. The terms of the Preferred Stock, set forth in Section 7 of
Article VI of the Articles, were established in connection with, and as a
condition of, the Restructuring Plan entered into at that time between the
Company and NBD Bank, N.A., formerly known as Indiana National Bank (the
"Bank"). The debt owed the Bank subsequently was repaid and refinanced and
the Restructuring Plan superseded. The special terms applicable to the
Preferred Stock are, therefore, no longer necessary or desirable.
Accordingly, the Board of Directors has unanimously adopted and submitted to
the Shareholders for approval an amendment to Article VI of the Articles to
decrease the number of authorized shares of Preferred Stock from 20,000,000 to
5,000,000, to eliminate all of the terms of the Preferred Stock relating to
the Restructuring Plan, and to grant to the Board of Directors the authority
to designate all rights and preferences of the Preferred Stock, as and when
issued.
The Board of Directors believes that the continued authorization of a
reduced number of shares of Preferred Stock is in the best interest of the
Company and its Shareholders and believes that it is advisable to have such
shares available in connection with possible future transactions, such as
financings, strategic alliances, mergers, acquisitions, possible funding of
new projects and other uses not presently determinable, and as may be deemed
feasible and in the best interest of the Company. In addition, the Board of
Directors believes that it is desirable that the Company have the flexibility
to issue shares of Preferred Stock without further Shareholder action, except
as otherwise provided by law.
If the Amendment is approved, the Preferred Stock will have such
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as are determined by the
Board of Directors. Thus, if the Amendment is approved, the Board of
Directors would be entitled to authorize the issuance of up to 5,000,000
shares of Preferred Stock in one or more series with such limitations and
restrictions as may be determined in the Board's sole discretion, without
further authorization by the Company's Shareholders. Shareholders will not
have preemptive rights to subscribe for shares of Preferred Stock.
<PAGE>
It is not possible to determine the actual effect of the Preferred Stock
on the rights of the Shareholders of the Company until the Board of Directors
determines the rights of the holders of a series of the Preferred Stock.
However, such effects might include (i) restrictions on the payments of
dividends to holders of the Common Stock; (ii) dilution of voting power to the
extent that the holders of shares of Preferred Stock are given voting rights;
(iii) dilution of the equity interests and voting power if the Preferred Stock
is convertible into Common Stock; and (iv) restrictions upon any distribution
of assets to the holders of the Common Stock upon liquidation or dissolution
and until the satisfaction of any liquidation preference granted to the
holders of Preferred Stock.
The Board of Directors is required by Indiana law to make any
determination to issue shares of Preferred Stock based upon its judgment as to
the best interests of the Shareholders and the Company. Although the Board
of Directors has no present intention of doing so, it could issue shares of
Preferred Stock (within the limits imposed by applicable law) that could,
depending on the terms of such series, make more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or other means. When in the judgment of the Board of Directors
such action would be in the best interests of the Shareholders and the
Company, the issuance of shares of Preferred Stock could be used to create
voting or other impediments or to discourage persons seeking to gain control
of the Company, for example, by the sale of Preferred Stock to purchasers
favorable to the Board of Directors. In addition, the Board of Directors
could authorize holders of a series of Preferred Stock to vote either
separately as a class or with the holders of Common Stock, on any merger, sale
or exchange of assets by the Company or any other extraordinary corporate
transaction. The existence of the authorized Preferred Stock could have the
effect of discouraging unsolicited takeover attempts. The issuance of new
Preferred Stock could also be used to dilute the stock ownership of a person
or entity seeking to obtain control of the Company should the Board of
Directors consider the action of such entity or person not in the best
interests of the Shareholders and the Company. Such issuance of Preferred
Stock could also have the effect of diluting the earnings per share and book
value per share of the Common Stock.
While the Company may consider effecting an equity offering of Preferred
Stock in the future for the purpose of raising additional working capital or
otherwise, the Company, as of the date hereof, has no agreements or
understandings with any third party to effect any such offering and no
assurances are given that any offering will in fact be effected.
Vote Required. Approval of the Amendment requires approval by the
holders of a majority of the shares of the Company's Common Stock present or
represented and entitled to vote at the annual meeting
If the Amendment is approved, Articles V and VI of the Articles of
Incorporation of the Company will read in their entirety as set forth in
Exhibit A hereto.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT.
PROPOSAL TO APPROVE
THE 1996 EQUITY INCENTIVE PLAN
General. The Board of Directors has adopted and is submitting to the
Shareholders for their approval a ten-year incentive plan entitled "Signature
Inns, Inc. 1996 Equity Incentive Plan" (the "Plan") for directors, officers and
employees of the Company and its subsidiaries. The Plan will not be put into
effect unless approved by the affirmative vote of the holders of a majority of
the shares of the Company's Common Stock present or represented and entitled
to vote at the annual meeting.
<PAGE>
The Board of Directors believes that the Company's earnings performance
and growth is dependent upon ensuring the best possible management. The Board
of Directors further believes that the Plan will encourage equity ownership in
the Company by key employees and in turn provide such individuals with further
incentive and motivation to perform in the best interests of the Company and
the Shareholders, and that the Plan will aid in attracting and retaining high
quality employees.
The Plan will be effective on the date the Plan is approved by the
Shareholders at the annual meeting. The principal features of the Plan are
summarized below. This summary is qualified by reference to the full text of
the Plan which is annexed as Exhibit B to this Proxy Statement. Awards
granted under the Plan may be in the form of Incentive Stock Options,
Non-qualified Stock Options (Incentive Stock Options and Non-qualified Stock
Options shall hereinafter be referred to as "Stock Options"), Restricted Stock
Grants, or any combination thereof within the limitations set forth in the
Plan. The Plan provides that, for purposes of making awards of Stock Options
and Restricted Stock Grants, the Plan will remain in effect for a term of 10
years from the date of its adoption by the Board of Directors, namely,
February 20, 1996 (the "Plan Term Commencement Date"). The Plan will continue
in effect thereafter (i.e., beyond 10 year term for making awards) until all
matters relating to the payment of awards and the administration of the Plan
have been fully settled.
The Plan is intended to supersede and replace the 1986 Signature Inns,
Inc. Incentive Stock Option Plan (the "1986 Plan"), which expires on March 26,
1996, and to govern any outstanding unexercised stock options granted under
the 1986 Plan. As of the date of this Proxy Statement, there are unexercised
options to purchase 8,500 shares of Common Stock under the 1986 Plan at an
exercise price of $1.125. All such unexercised options expire in July 1997.
Administration. The Plan, if approved by the Shareholders, will be
administered by the Compensation Committee, one of two standing committees
appointed by the Board of Directors. The Compensation Committee consists of
three Directors of the Company none of whom are employees of the Company or
its subsidiaries. The Compensation Committee and the Plan will be required
always to possess characteristics required to comply with Rule 16b-3
promulgated under the Securities Exchange Act of 1934. The current members of
the Compensation Committee are Messrs. Morton, Russell and Huse. The
Compensation Committee has sole authority to administer and interpret the
Plan. The Compensation Committee, within the terms of the Plan, selects
eligible officers and employees to participate in the Plan, recommends the
type, amount and duration of individual awards and may recommend acceleration
of payments and vesting of Plan awards. The Compensation Committee shall
recommend to the Board of Directors any of the foregoing matters and actions
in respect of awards. The Board of Directors shall only accept or reject such
recommendations, acting by affirmative vote of not less than a majority of the
actual number of directors of the Company who are not employees of the Company
or its subsidiaries (the "Outside Directors") serving as Directors at that
time. No awards may be granted other than those recommended by the
Compensation Committee.
Shares Available. The Plan provides that the aggregate number of shares
of the Company's Common Stock which may be awarded as either Stock Options or
Restricted Stock Grants may not exceed 750,000 Shares subject to adjustment in
certain circumstances (the "Available Shares"). At the discretion of the
Compensation Committee, the Company's Common Stock delivered under the Plan
may be authorized and unissued shares, treasury stock or shares purchased on
the open market. Shares underlying awards that are canceled, expired,
forfeited, or terminated again shall be available, in most circumstances, for
the grant of additional awards within the limits provided by the Plan. The
Company shall register the Available Share under the Securities Act of 1933
and any applicable state securities laws, and shall deliver a prospectus to
each Participant together with all other documents required by law.
<PAGE>
There are other additional limits on the number of Available Shares.
First, Available Shares cannot exceed 10% of the total outstanding shares of
Common Stock of the Company at any time during the term of the Plan. Second,
no more than 5% of the Available Shares may be awarded in the form of
Restricted Stock Grants.
Eligibility. Only full-time officers and employees of the Company and
its subsidiaries will be eligible to receive the award of both Stock Options
and Restricted Stock Grants under the Plan. Outside Directors are eligible
only to receive awards of Restricted Stock Grants. Awards of Restricted Stock
Grants to Outside Directors will be on an automatic, non-discretionary basis,
upon the occasion of each election or re-election of each Outside Director, as
explained under "Restricted Stock" below. Because it is within the discretion
of the Compensation Committee to determine and recommend to the Board of
Directors which officers and employees receive awards and the amount and type
of the award received, it is not possible at the present time to determine the
number of individuals to whom awards will be made under the Plan, or the
amount of the awards. The executive officers of the Company named in the
table under the caption "Executive Compensation" herein are among the officers
who would be eligible to receive awards under the Plan.
Stock Options. Stock Options granted under the Plan may be Incentive
Stock Options or Non-qualified Stock Options. Subject to the terms and
provisions of the Plan, options may be granted to officers or employees at any
time and from time to time as shall be recommended by the Compensation
Committee and approved by the Board of Directors as described under
"Administration" above. The Compensation Committee shall have discretion in
recommending to the Board the number of shares subject to options granted to
each Participant. Each option grant shall be evidenced by an option agreement
which shall specify the option price, the duration of the option, the number
of shares to which the option pertains, the percentage of the option that
becomes exercisable on specified dates in the future, and such other
provisions as the Compensation Committee shall determine.
The option price at which the Participant can exercise each Stock Option
(the "Exercise Price") shall be recommended by the Compensation Committee and
approved by the Board of Directors as described under "Administration" above,
provided that the Exercise Price shall not be less than the Fair Market Value
(as such term is defined in the Plan) per share of the Company's Common Stock
at the time of the grant. No Stock Option may be granted after ten years
following the Plan Term Commencement Date. All Stock Options granted under
the Plan shall expire no later than ten years from the date of the grant,
subject to the limitations set forth in the Plan. Any option may be exercised
by payment to the Company of cash or by surrender of shares of the Company's
Common Stock already owned by the grantee, or a combination of cash and such
shares. Options will be evidenced by a stock option agreement in a form
approved by the Compensation Committee, which may contain additional
limitations, term and conditions, in addition to the restrictions set forth in
the Plan, which the Compensation Committee otherwise deems desirable.
Stock Options awarded to Employees under the Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the
Committee shall in each instance approve, which need not be the same for each
award or for each Employee. However, each Non-qualified Stock Option shall
become exercisable in respect of 331/3 percent of the Shares subject to the
Stock Option on the first, second and third anniversary of grant.
Notwithstanding any other provision of the Plan, in no event may any Stock
Option awarded under this Plan to an Employee subject to the restrictions of
Section 16 of the Exchange Act become exercisable prior to six months
following the date of its award, or following the date upon which this Plan is
approved by stockholders, whichever is later.
<PAGE>
The Plan places limitations on the exercise of options following
termination of employment or in the event of death, disability or retirement
or termination associated with a Change in Control (as defined in the Plan) of
the Company. At the discretion of the Compensation Committee the agreement
evidencing the option award may contain additional limitations upon the
exercise of options, or may provide certain limited rights to exercise such
options. Stock options are nontransferable except by will or in accordance
with the applicable laws of descent and distribution. The granting of an
option does not accord the Participant the rights of a Shareholder, and such
rights accrue only after the exercise of an option and the registration of
shares of Common Stock in the Participant's name.
Restricted Stock. The Plan provides for the award of shares of Common
Stock of the Company which are subject to certain restrictions provided in the
Plan or otherwise determined by the Compensation Committee ("Restricted
Stock"). Restricted Stock Grants pursuant to the Plan will be represented by
Common Stock certificates registered in the names of the Participants who
receive such awards. Upon the award of a Restricted Stock Grant, the
Participant is entitled to vote the Restricted Stock and to exercise other
rights as a Shareholder of the Company, including the right to receive all
dividends and other distributions paid or made with respect to the Restricted
Stock. However, the Participant may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the Restricted Stock during the
restriction period designated by the Compensation Committee except by will or
as may be determined by the Compensation Committee. Non-compliance with any
of the restrictions will result in a forfeiture of the Restricted Stock. When
the conditions of the Restricted Stock award established by the Compensation
Committee are satisfied, the Company will deliver at the end of the
restriction period stock certificates representing the shares of Common Stock
which are no longer subject to any restrictions, except those restrictions
required by applicable securities laws. The awards of Restricted Stock to
Outside Directors shall be non-discretionary and shall be automatically
granted upon the election or re-election of an Outside Director. Upon the
stockholder approval of the Plan, the Compensation Committee shall grant to
each Director that number of shares, rounded to the nearest whole number,
equal to 500 multiplied by a fraction the numerator of which is the number of
years remaining in such Director's present term, rounded to the nearest
complete year, and the denominator of which is 3 (the "Initial Grants").
Additionally, each Outside Director will receive non-discretionary awards of
500 shares of Restricted Stock upon the occasion of each election or re-election
of such Outside Director. The restriction period for Restricted
Stock awarded to an Outside Director shall extend to the expiration of such
Outside Director's remaining term of office, in the case of an Initial Grant,
or to the expiration of such Outside Director's full three-year term, in the
case of an award upon the election or re-election of such Outside Director.
Federal Income Tax Treatment. The following is a brief summary of the
Federal income tax rules currently applicable to participation in the Plan.
The summary is not exhaustive and does not cover any state or local tax
consequences of participation in the Plan. Participants will be advised to
consult their own tax advisors with respect to the consequences of their
participation in the Plan.
Income is not recognized by a Participant on receipt of an option. Upon
the exercise of a Non-qualified Stock Option, the Participant will recognize
ordinary income in an amount equal to the excess of the fair market value of
the shares of Common Stock on the date of the exercise over the exercise price
paid by the Participant. The Participant's tax basis in those shares will be
the exercise price paid plus the amount of recognized ordinary income, and the
Participant's holding period will commence on the date the shares are
transferred. Special rules apply in the event all or a portion of the
exercise price is paid in the form of shares of Common Stock of the Company.
Other special rules may also apply to a Participant who is subject to Section
16 of the Exchange Act.
<PAGE>
The exercise of an Incentive Stock Option by payment of cash will
generally have no immediate tax consequences to the Participant (except to the
extent it is an adjustment in computing alternative minimum taxable income).
A Participant who disposes of shares of Common Stock acquired pursuant to the
exercise of an Incentive Stock Option after a certain holding period will
generally realize long-term capital gain or loss equal to the difference
between the amount realized upon the sale and the purchase price of the shares
(i.e., the exercise price paid by the Participant). However, a Participant
who disposes of shares acquired pursuant to exercise of an Incentive Stock
Option prior to the expiration of such holding period will recognize ordinary
income equal to the excess of the fair market value of the shares of Common
Stock on the date of exercise (or the proceeds of the disposition, if less)
over the exercise price. Special rules apply in the event all or a portion of
the exercise price is paid in the form of shares of Common Stock of the
Company
With respect to Restricted Stock, the Participant will have ordinary
income equal to the fair market value of the Restricted Stock on the date
those shares are no longer subject to forfeiture, unless the Participant
elects within 30 days of initial receipt of the Restricted Stock to include as
ordinary income the fair market value of the shares on the date of issuance.
Generally, to the extent a Participant recognizes ordinary income as
described above, the Company (or the subsidiary of the Company for which the
Participant performs services) will be entitled to a corresponding deduction,
provided that, among other things (i) the amount deductible (I) is an
ordinary, necessary and reasonable business expense; (II) is not an excess
parachute payment within the meaning of Section 280G of the Code; and (III) is
not disallowed by the $1.0 million limitation on certain highly compensated
executive compensation pursuant to Section 162(m) of the Code; and (ii) any
applicable reporting obligations are satisfied.
Amendment and Termination. The Compensation Committee may amend, alter,
or discontinue the Plan, but no amendment, alteration or discontinuation shall
be made more than every six months or which would (i) impair an Award without
the consent of the Participant, except such an amendment made to cause the
Plan to qualify for the exemption provided by Rule 16b-3 or (ii) disqualify
the Plan from the exemption provided by Rule 16b-3. In addition, no such
amendment shall be made without the approval of the Company's Shareholders to
the extent such approval is required by law, agreement or the rules of any
exchange upon which the Common Stock is listed or quoted.
The Compensation Committee may amend the terms of any Award therefore
granted, prospectively or retroactively, but no such amendment shall impair
the rights of the Participant without his consent except such an amendment
made to cause the Plan or Award to qualify for the exemption provided by Rule
16b-3. The Compensation Committee may also substitute new Options for
previously granted Options, including previously granted Stock Options having
higher option prices.
Subject to the above provisions, the Compensation Committee shall have
the authority to amend the Plan to take into account changes in law and tax
and accounting rules, as well as other factors necessary to administer the
Plan in accordance with the intentions of the Company in establishing the Plan
and to grant Awards which qualify for beneficial treatment under such rules
without Shareholder approval.
The table designated "New Plan Benefits" required under Item 10 of
Schedule 14A of the regulations promulgated under the Securities Exchange Act
of 1934 is omitted because the benefits or amounts to be disclosed in such
table are not presently determinable.
Vote Required. Approval of the Plan requires approval by the holders of
the majority of the shares of the Company's Common Stock present or
represented and entitled to vote at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1996
EQUITY INCENTIVE PLAN.
CONFIRMATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
The Board of Directors has proposed and recommends to the Shareholders
confirmation of the appointment of the firm of KPMG Peat Marwick LLP ("KPMG"),
certified public accountants, as independent auditors to conduct an audit of
the financial statements of the Company for the fiscal year ending December
31, 1996, and to provide such other accounting services as may be considered
necessary by the officers of the Company. KPMG has been the Company's auditor
since 1984. Representatives of KPMG will be present at the meeting and shall
have the opportunity to make a statement if they desire to do so, and respond
to appropriate questions.
Vote Required. Confirmation of appointment of the Independent Public
Accountants requires approval by the holders of the majority of the shares of
the Company's Common Stock present or represented and entitled to vote at the
annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE CONFIRMATION OF THE
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS.
NO DISSENTERS' RIGHTS
There are no rights of appraisal or similar rights of dissenters with
respect to any matter to be acted upon at the annual meeting.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations as of December 31, 1995, is set forth in full in the Company's
1995 Annual Report to Shareholders which accompanies this Proxy Statement, and
is incorporated herein by reference.
PROPOSALS OF SHAREHOLDERS
Certain regulations of the Securities and Exchange Commission require
that, in the event an eligible Shareholder of the Company timely notifies the
Company of his intention to present a proper proposal for action at a
forthcoming Shareholders' meeting, the Company include the proposal in its
proxy statement, identify it in its form of proxy and provide the Shareholders
an opportunity to vote in respect to the proposal. Any proposal which a
Shareholder intends to present at the Company's 1996 Annual Shareholders'
Meeting must be received by the Company for inclusion in its proxy statement
and form of proxy relating to that meeting not less than 120 days in advance
of the release of such proxy statement and form of proxy. The Company's proxy
statement and form of proxy are typically mailed to the Shareholders on or
about April 14, and accordingly, proposals with respect to the May 20, 1997
annual meeting must be received no later than December 12, 1996.
OTHER BUSINESS
Management knows of no business which will be presented for
consideration other than the matters described in the Notice of Annual Meeting
of Shareholders, but if other matters are presented, it is the intention of
the persons designated as proxies to vote in accordance with their judgment on
such matters.
<PAGE>
ANNUAL REPORT
The 1995 Annual Report of the Company, including audited financial
statements is hereby incorporated in its entirety herein by reference and is
being mailed with this Proxy Statement.
April l2, 1996
<PAGE>
SIGNATURE INNS, INC.
250 East 96th Street, Suite 450
Indianapolis, IN 46240
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1996
To the Shareholders of
SIGNATURE INNS, INC.
Notice is hereby given that the annual meeting of the Shareholders of
Signature Inns, Inc. (the "Company"), will be held at the Ritz Charles, 12156
North Meridian Street, Carmel, Indiana 46032, on Tuesday, May 21, 1996, at
2:00 p.m., Local Time for the following purposes:
1. To consider and vote upon the election of three directors for three
(3) year terms;
2. To consider and vote upon a proposal to amend Article V and Article
VI of the Company's Articles of Incorporation (the "Articles") to
increase the number of authorized shares of its common stock (the
"Common Stock") from 20,000,000 to 50,000,000 shares, to decrease the
authorized shares of Preferred Stock from 20,000,000 to 5,000,000, and to
revise the rights and preferences of the Preferred Stock;
3. To consider and vote upon a proposal to approve the 1996 Equity
Incentive Plan;
4. To consider and vote upon the ratification of the appointment of KPMG
Peat Marwick LLP as independent auditors for the Company for the
year ending December 31, 1996; and
5. To consider and transact such other business as may properly come
before the meeting, or any adjournments thereof.
The Board of Directors has fixed the close of business on Tuesday, April
2, 1996, as the record date for the determination of Shareholders entitled to
notice of and to vote at the annual meeting and any adjournments thereof.
Only Shareholders of record at the close of business on that date will be
entitled to vote. Holders of shares of the Company's common stock as of that
date are entitled to vote upon all matters to be presented at the meeting.
A form of proxy, being solicited by management on behalf of the Board of
Directors, is enclosed.
All Shareholders are cordially invited to attend the annual meeting.
Whether or not you plan to attend the meeting, the Board of Directors requests
that you sign your proxy and mail it promptly in the enclosed postage
guaranteed envelope. If you do attend the meeting, you may, of course, vote
your shares even though you have sent in your proxy; or, if, at any time prior
to actual exercise, you desire to revoke your proxy, you may do so. Approval
of each of the matters set forth above requires the affirmative vote of a
majority of outstanding shares present or represented and entitled to vote
thereon.
By Order of the Board of Directors,
DAVID R. MILLER, Secretary
April 12, 1996
PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE GUARANTEED ENVELOPE
[TEST]
<PAGE>
EXHIBIT A
ARTICLE V
Authorized Shares
Section 1. Number and Classes of Shares:
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 55,000,000 shares, of which 50,000,000 shares
shall be Common Stock and of which 5,000,000 shares shall be Preferred Stock.
A. The number of authorized shares which the Corporation designates
as having par value is none.
B. The number of authorized shares which the Corporation designates
as without par value is 55,000,000.
ARTICLE VI
Terms of Authorized Shares
Section 1. Designation. The authorized shares of the Corporation shall
be of two classes and kinds; Common Stock and Preferred Stock, and further
designations, voting powers, preferences and relative participating, optional
or other special rights, and qualifications, limitations or restrictions of
each of the above classes of stock and other general provisions relating
thereto shall be as follows:
(a) Common Stock. The Common Stock of the Corporation shall be
voting stock without par value and shall otherwise be issued subject to the
terms applicable to Common Stock of the Corporation as set forth in this
Article VI.
(b) Preferred Stock. The Preferred Stock of the Corporation
shall have such designations, preferences, conversion rights, cumulative,
relative, participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as shall be determined by
the Board of Directors.
Section 2. Issuance of Shares. The shares of capital stock of the
Corporation may be issued by the Corporation from time to time at the
discretion of the Board of Directors to such persons for such consideration,
including consideration less than par value, and upon such terms and
conditions as it may determine, subject to the provisions of the Act and these
Articles. Such of its shares as the Corporation may reacquire may be resold
or otherwise disposed of upon such terms and conditions and for such
consideration as the Board of Directors may determine from time to time. The
Board of Directors may from time to time grant or issue options, warrants, or
rights to purchase shares of capital stock of the Corporation upon such terms
and conditions and for such consideration as it shall determine, subject to
the provisions of the Act.
<PAGE>
Section 3. Stated Capital. The amount of the consideration received by
the Corporation, less the amounts allocated to capital surplus, from time to
time, shall be the stated capital of the Corporation. The consideration
received by the Corporation for authorized shares of any class shall, subject
to the provisions of the Act, be allocated to stated capital and to capital
surplus by resolution of the Board of Directors within a period of sixty (60)
days after the issuance of such shares. The stated capital of the Corporation
may be increased from time to time by resolution of the Board of Directors
directing a transfer from capital or earned surplus.
Section 4. Dividends. Dividends and other distributions, if any,
(hereinafter referred to as "Dividends") shall be payable with respect to
shares of the capital stock of the Corporation or classes or series thereof
when and as declared by the Board of Directors and subject to the relative
rights, limitations, restrictions and qualifications of the shares. Dividends
shall be paid out of the unreserved and unrestricted capital or earned surplus
of the Corporation or other sources legally available therefor, and may be
paid in cash or property. Such dividends may be declared in respect of the
capital stock of the Corporation from time to time to be paid by the
Corporation in its own authorized but unissued shares of such capital stock or
in treasury shares of capital stock out of any unreserved or unrestricted
capital or earned surplus or any other legally available source.
Section 5. Dissolution Distribution on Common Stock. In the event of
any voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the holders of the outstanding shares of common stock shall be
entitled, after due payment or provisions for payment of the debts and other
liabilities of the Corporation and after and subject to such distributions as
may be required with respect to any shares of Preferred Stock outstanding (if
any), to share ratably share for share, in the remaining net assets of the
Corporation.
Section 6. Voting Rights of Common Stock. The holder of each share of
the Common Stock of the Corporation, subject to the provisions of the Act,
shall be entitled to one (1) vote for each share of such stock standing in his
name on the books of the Corporation at all meetings of the shareholders of
the Corporation.
<PAGE>
SIGNATURE INNS, INC.
1996 EQUITY INCENTIVE PLAN
----------------------------------------
ARTICLE 1
ESTABLISHMENT, PURPOSE AND DURATION
1.1. Establishment of the Plan. Signature Inns, Inc., an Indiana
corporation (hereinafter referred to as the "Company"), hereby establishes an
equity incentive compensation plan to be known as the "Signature Inns, Inc.
1996 Equity Incentive Plan" (hereinafter referred to as the "Plan"), as set
forth in this document. The Plan permits the granting of Non-qualified Stock
Options, Incentive Stock Options and Restricted Stock.
Upon approval by the Board of Directors of the Company, subject to
ratification by an affirmative vote of holders of a majority of Shares present
and entitled to vote at the 1996 Annual Meeting at which a quorum is present,
the Plan shall become effective as of February 20, 1996 (the "Effective
Date"), and shall remain in effect as provided in Section 1.3 herein.
1.2. Purpose of the Plan. The purpose of the Plan is to promote the
success, and enhance the value, of the Company by linking the personal
interests of Employees and Directors with those of Company stockholders.
The Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract and retain the services of Employees upon
whose judgment, interest and special effort the successful conduct of its
operation largely is dependent.
1.3. Duration of the Plan. Subject to approval by the Board of
Directors of the Company and ratification by the stockholders of the Company,
the Plan shall commence on the Effective Date and shall remain in effect,
subject to the right of the Board of Directors to terminate the Plan at any
time pursuant to Article 14 herein, until all Shares subject to it shall have
been purchased or acquired according to the Plan's provisions. However, in no
event may an Award be granted under the Plan on or after the tenth (10th)
anniversary of the Plan's Effective Date.
1.4. Prior Incentive Stock Option Plan Superseded. The Plan is
intended to supersede and replace the 1986 Signature Inns, Inc. Incentive
Stock Option Plan and to govern in all respects any outstanding unexercised
stock options granted under that plan. In addition, any unissued incentive
stock options reserved for issuance under the prior plan are, upon adoption of
this Plan, reserved for issuance hereunder.
ARTICLE 2
DEFINITIONS AND CONSTRUCTION
2.1. Definitions. Whenever used in the Plan, the following terms shall
have the meanings set forth below:
(a) "Award" means, individually or collectively, a grant under this
Plan of Non-qualified Stock Options, Incentive Stock Options or
Restricted Stock.
<PAGE>
(b) "Board" or "Board or Directors" means the Board of Directors of
the Company.
(c) "Cause" means Participant's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order,
or material breach of this agreement. For purposes of this
subsection, no act, or failure to act, on Participant's part shall
be considered "willful" unless done, or omitted to be done, not in
good faith and without reasonable belief that the action or
omission was in the best interest of the Company. In determining
incompetence, the acts or omissions shall be measured against
standards generally prevailing in the hotel industry.
Notwithstanding the foregoing, the Participant shall be deemed to
have been terminated for Cause upon the affirmative vote of not
less than fifty percent (50%) of the quorum of the Board at a
meeting of the Board called and held for that purpose, which vote
shall be recorded in the minutes of such meeting.
(d) "Change in Control" of the Company shall be defined in accordance
with Section 10.2 herein.
(e) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute thereto.
(f) "Committee" means the Committee, as specified in Article 3,
appointed by the Board to administer the Plan or the Board if a
Committee has not been appointed.
(g) "Company" means Signature Inns, Inc., an Indiana corporation
(including any and all Subsidiaries), or any successor thereto as
provided in Article 14 herein.
(h) "Director" means any individual who is a member of the Board of
Directors of the Company or Subsidiary who is not an Employee of
the Company or Subsidiary on the relevant date.
(i) "Disability" means a permanent and total disability as determined
under procedures established by the Committee for purposes of the
Plan.
(j) "Employee" means a full-time, salaried Employee of the Company or
a Subsidiary. Directors who are not otherwise employed by the
Company shall not be considered Employees under this Plan.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute
thereto.
(1) "Fair Market Value" of a Share on any particular date is the
closing market price of a Share on the relevant date, according to
a stock quotation source selected by the Committee. If the Shares
did not trade on the relevant date, the Fair Market Value is
determined as of the most recent preceding date for which a quoted
price is available, or as of the most recent date for which quoted
bid and asked prices are available, whichever is th e most recent,
from a qualified third party selected by the Committee. Should
Fair Market Value be determined at the time of the most recent
quoted bid and asked prices, Fair Market Value shall be equal to
the average of such bid and asked prices. In the event none of
the foregoing information is available, Fair Market Value for a
relevant date shall be established by the Board of Directors.
<PAGE>
(m) "Incentive Stock Option," or "ISO," means an option to purchase
Shares granted under Article 6 herein, which is designated as an
Incentive Stock Option and is intended to meet the requirements of
Section 422 of the Code.
(n) "Non-qualified Stock Option," or "NQSO," means an option to
purchase Shares, granted under Article 6 herein, which is not
intended to be an Incentive Stock Option.
(o) "Option" means an Incentive Stock Option or a Non-qualified Stock
Option.
(p) "Option Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option, as determined by the
Committee.
(q) "Participant" means an Employee or Director of the Company who has
outstanding an Award granted under the Plan.
(r) "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Committee, in its
discretion), and the Shares are subject to a substantial risk of
forfeiture, as provided in Article 7 herein.
(s) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act.
(t) "Retirement" means termination of a Participant's employment with
the Company after the Participant attains age 65.
(u) "Restricted Stock" means an Award granted to an Employee or
Director pursuant to Article 7 herein.
(v) "Rule 16b-3" means Rule 16b-3, as promulgated by the Securities
and Exchange Commission, or its successor agency, under Section
16(b) of the Exchange Act, as amended and in effect from time to
time, or its successor provision.
(w) "Shares" mean the Common Stock of the Company.
(x) "Subsidiary" means any corporation in which the Company owns
directly, or indirectly through subsidiaries, at least 50 percent
of the total combined voting power of all classes of stock, or any
other entity (including, but not limited to, partnerships and
joint ventures) in which the Company owns at least 50 percent of
the combined equity thereof; provided, however, that with respect
to Incentive Stock Options, it has the meaning set forth in
Section 424(f) of the Code.
<PAGE>
2.2. Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; and,
the plural shall include the singular and the singular shall include the
plural.
2.3. Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
ARTICLE 3
ADMINISTRATION
3.1. The Committee. The Plan shall be administered exclusively by a
Committee appointed by the Board of Directors consisting of not less than two
(2) Directors who serve on the Compensation Committee and who shall be
appointed from time to time by, and shall serve at the discretion of, the
Board. No member of the Committee shall receive any Award pursuant to the
Plan or any similar plan of the Company or any of its Subsidiaries while
serving on the Committee, or shall have received any such Award at any time
within one (1) year prior to his or her service on the Committee (or, if
different, for the time period just necessary to fulfill the then requirements
of Rule 16b-3), other than Restricted Stock Shares pursuant to Section 7.2.
However, if for any reason the Committee does not qualify to administer the
Plan, as contemplated by Rule 16b-3, the Board may appoint a new Committee so
as to comply with Rule 16b-3. Subject to the foregoing, the Board may from
time to time remove members from the Committee, fill all vacancies in the
Committee, however caused, and may select one of the members of the Committee
to serve as its Chairman.
3.2. Authority of the Committee. The Committee shall have sole power
except as limited by law or by the Articles of Incorporation or Bylaws of the
Company, and subject to the provisions herein, to determine the size and types
of Awards; to determine the terms and conditions of such Awards in a manner
consistent with the Plan; and (subject to the provisions of Article 11 herein)
to amend the terms and conditions of any outstanding Award to the extent such
terms and conditions are within the discretion of the Committee as provided in
the Plan. The Committee shall recommend any of foregoing determinations and
actions in respect of Awards to the Board of Directors, which shall only
accept or reject such recommendations, acting by affirmative vote of not less
than fifty percent of Directors attending a meeting of the Board called and
held for that purpose. No Awards may be granted other than those recommended
by the Committee.
The Committee shall also have the sole power to construe and interpret
the Plan and any agreement or instrument entered into under the Plan; and to
establish, amend or waive rules and regulations for the Plan's administration.
Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by
law, the Committee may delegate its authorities as identified hereunder.
The discretion of the Committee shall be limited to the extent necessary
to retain the status of the members of the Committee as "disinterested
persons" pursuant to Rule 16b-3.
3.3. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive and binding on all
Persons, including the Company, its stockholders, Employees, Participants and
their respective successors.
<PAGE>
ARTICLE 4
SHARES SUBJECT TO THE PLAN
4.1. Number of Shares. Subject to adjustment as provided in Section
4.3 herein, the aggregate number of Shares available for grant under the Plan
shall not exceed 750,000 (which includes all Shares in any options awarded
under prior plans), provided, however, (i) no more than five (5) percent of
the Shares available for grant under the Plan shall be granted other than
through Options; and (ii) Shares subject to the Plan (and prior plans) at any
time shall not exceed ten (10) percent of then issued and outstanding Shares.
The Shares available for grant under the Plan may be either authorized but
unissued or Shares that have been reacquired by the Company. The grant of an
Option or Restricted Stock Award shall reduce the Shares available for grant
under the Plan by the number of Shares subject to such Award.
4.2. Lapsed Awards. If any Award granted under this Plan (or prior
plans) terminates, expires, or lapses for any reason, any Shares subject to
such Award again shall be available for the grant of an Award under the Plan,
with the exception of Restricted Stock Awards upon which dividends have been
paid to the Participants.
4.3. Adjustments in Authorized Shares. Except as provided in Section
4.4 hereof, in the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend or split, reverse
-----------------
stock split, split-up, Share combination, or other change in the corporate
- ------------
structure of the Company affecting the Shares (in each case, a "Capital
-------------------------
Readjustment"),such adjustment shall be made in the number and class of
- --------------
Shares which may be delivered under the Plan, and in the number and class of
- ----------------------------------------------------------------------------
and/or price of Shares subject to outstanding Options and Restricted Stock
granted under the Plan, as may be determined to be appropriate and equitable
by the Committee, in its sole discretion, to prevent dilution or enlargement
of rights; and provided that the number of Shares subject to any Award shall
always be a whole number.
4.4. Certain Capital Readjustments Ignored. Section 4.3 hereof will
not apply to a Capital Readjustment which occurs within eighteen (18) months
-------------------- -------------
after approval by the stockholders of the Company of the Plan.
ARTICLE 5
ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. Persons eligible to participate in this Plan include
all Employees of the Company, including Employees who are members of the
Board, and all Directors, including Directors of Subsidiaries; provided,
however, that Directors shall be eligible to receive Awards only pursuant to
Section 7.2 of this Plan.
5.2. Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom Awards shall be granted and shall determine the nature and amount of each
Award. No Employee or Director shall have any right to be granted an Award
under this Plan.
<PAGE>
ARTICLE 6
STOCK OPTIONS
6.1. Grant of Options. Subject to the terms and provisions of the
Plan, Options may be granted to Employees at any time and from time to time as
shall be determined by the Committee. The Committee shall have discretion in
determining the number of Shares subject to Options granted to each Employee.
The Committee may grant ISOs, NQSOs, or a combination thereof. Nothing in
this Article 6 shall be deemed to prevent the grant of NQSOs in excess of the
limits on ISO grants imposed by Section 422 of the Code. Notwithstanding
anything in this Section 6.1 to the contrary, the aggregate Fair Market Value
of Shares with respect to which ISOs are exercisable, determined as of the
date of grant, for the first time by a grantee in any calendar year under the
Plan shall not exceed $100,000.
6.2. Option Agreement. Each Option grant shall be evidenced by an
Option agreement that shall specify the Option Price, the duration of the
Option, the number of Shares to which the Option pertains, and the percentage
of the Option that becomes exercisable on specified dates in the future. The
Option agreement also shall specify whether the Option is intended to be an
ISO within the meaning of Section 422 of the Code or a NQSO whose grant is
intended not to be subject to the provisions of such Section 422. The Option
agreement may contain such other provisions as the Committee deems advisable,
including an obligation of the Company, to be undertaken at its own expense,
to list, register or qualify Shares subject to the Option upon any applicable
securities exchange or under any applicable Federal or state law.
6.3. Option Price. The Option Price for each grant of an Option to an
Employee shall be determined by the Committee, provided that (a) the Option
Price shall not be less than the Fair Market Value of the Share(s) covered by
the Option on the date of grant; and (b) if at the time an ISO is granted the
grantee owns or would be considered to own by reason of Section 424(d) of the
Code more than ten (10) percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary, the Option Price of the
Shares covered by such ISO shall be not less than 110 percent of the Fair
Market Value of a Share on the date of grant.
6.4. Duration of Options. Except as otherwise provided in this Section
6.4 or in Section 6.8 below, each Option granted to an Employee shall expire
or terminate at such time as the Committee shall determine at the time of
grant. No Option shall be exercisable later than (i) ten (10) years from the
date of grant or (ii) five (5) years from the date of grant in the case of an
ISO the grantee of which, on the date of grant, owns or would be considered to
own by reason of Section 424(d) of the Code more than ten (10) percent of the
total combined voting power of all classes of stock of the Company or any
Subsidiary.
6.5. Exercise of Options. Options granted to Employees under the Plan
shall be exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve, which need not be
the same for each grant or for each Employee. However, each Non-qualified
Stock Option shall become exercisable in respect of 33 1/3 percent of the
Shares subject to the Option on the first, second and third anniversary of
grant. Notwithstanding any other provision of the Plan, in no event may any
Option granted under this Plan to an Employee subject to the restrictions of
Section 16 of the Exchange Act become exercisable prior to six (6) months
following the date of its grant, or following the date upon which this Plan is
approved by stockholders, whichever is later.
6.6. Payment. Options shall be exercised by the delivery of a written
notice of exercise to the Chief Financial Officer of the Company, setting
forth the number of Shares with respect to which the Option is to be
exercised, accompanied by payment in full of the Option Price.
<PAGE>
The Option Price upon exercise of any Option shall be payable to the
Company in full either (a) in cash or its equivalent, (b) by tendering
previously acquired Shares having a Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Participant for at least six (6) months prior to
their tender to satisfy the Option Price), or (c) by a combination of (a) and
(b). The proceeds from such a payment shall be added to the general funds of
the Company and shall be used for general corporate purposes. In addition,
the Company may establish a cashless exercise program in accordance with
Federal Reserve Board Regulation T.
As soon as practicable after receipt of a written notification of
exercise and payment in full of the Option Price, the Company shall deliver to
the Participant, in the participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased under the
Option(s).
6.7. Restrictions on Share Transferability. The Committee shall impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan, as it may deem advisable, including, without limitation,
restrictions under applicable Federal securities laws, under the requirements
of any stock exchange or market upon which such Shares are then listed and/or
traded, and under any blue sky or state securities laws applicable to such
Shares.
6.8. Termination of Service Due to Death, Disability, or Retirement.
(a) Termination by Death. In the event death terminates the
employment of a Participant, any outstanding Options granted to him that
are not exercisable as of the date of termination shall immediately
become exercisable. All of such Options shall remain exercisable until
their respective expiration dates, or for one (1) year after the
termination date, whichever period is shorter, by such Person or
Persons as shall have acquired the rights of the Participant under the
Option by will or by the laws of descent and distribution.
(b) Termination by Disability. In the event Disability
terminates the employment of a Participant, any outstanding Options
granted to him that are not exercisable as of the date of termination
shall immediately become exercisable. All of such Options shall remain
exercisable until their respective expiration dates, or for one (1) year
after the date such Disability is determined by the Committee to be
total and permanent, whichever period is shorter. Should the
Participant die during this period, exercisability of his Options shall
be permitted for a period of one (1) year following the date of death.
(c) Termination by Retirement. In the event Retirement terminates
the employment of a Participant, any outstanding Options granted to him
that are not exercisable as of the date of termination shall immediately
become exercisable. All of such Options shall remain exercisable until
their respective expiration dates, or for one (1) year after the date of
such termination, whichever period is shorter.
6.9. Termination of Employment for Other Reasons. Except as otherwise
provided in Section 6.8. above, if the employment of a Participant shall
terminate, all outstanding Options that are not exercisable as of the date of
termination immediately shall be forfeited to the Company. However, unless
such termination is for Cause, the Committee, in its sole discretion, shall
have the right immediately to make exercisable all or any portion of such
Options. Thereafter, all exercisable Options shall remain exercisable at any
time prior to their expiration date, or for one (1) year after the date of
termination, whichever period is shorter. If termination is for Cause, all
outstanding Options shall be immediately forfeited to the Company and no
additional exercise period shall be allowed, regardless of the status of the
Options.
<PAGE>
6.10. Nontransferability of Options. No Option granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or the laws of descent and distribution.
Further, all Options granted to an Employee under the Plan shall be
exercisable during his or her lifetime only by such Employee.
6.11. Shareholder Rights. A Participant holding an Option shall
have no rights as a holder of the Shares subject to such Option until the actual
issuance of such Shares to him and his payment to the Company of the full
purchase price for the Shares. No adjustment will be made for dividends or
other rights for which the record date is prior to the date of issuance of the
Shares.
ARTICLE 7
RESTRICTED STOCK
7.1. Grant of Restricted Stock to Employees. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time to time, may
grant Shares of Restricted Stock to Employees in such amounts as the Committee
shall determine.
7.2. Grant of Restricted Stock to Directors. Subject to the terms and
provisions of the Plan, including Sections 4.3 and 4.4, the Committee shall
grant to each Director for no consideration five hundred (500) Shares of
Restricted Stock, effective as of the date of his election or re-election to
the Board of Directors by the Company's stockholders, provided such Director
serves his full term as Director and subject to such other restrictions and
conditions as the Committee shall determine pursuant to Section 7.3 hereof.
In addition, subject to the foregoing restrictions and conditions, the
Committee shall grant to each Director on the Board, on the date of
stockholder approval of the Plan, for no consideration that number of Shares
of Restricted Stock equal to five hundred (500) multiplied by the fraction
obtained from dividing the number of years remaining in such Director's
present term, rounded to the nearest complete year, by three (3), with the
resulting number of Shares rounded to the nearest whole number.
7.3. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock agreement that shall specify the Period (or
Periods) of Restriction and the number of Restricted Stock Shares granted. A
Restricted Stock agreement shall also contain such other provisions as the
Committee shall determine, including an obligation of the Company, to be
undertaken at its own expense, to list, register or qualify Restricted Stock
shares upon any applicable securities exchange or under any applicable Federal
or state law.
7.4. Transferability. Except as provided in this Section 7.4, the
Shares of Restricted Stock granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock agreement. The Restricted Stock is subject to
substantial risk of forfeiture during the Period of Restriction. However,
notwithstanding any other provisions of the Plan, in no event may any
Restricted Stock granted under the Plan become vested in a Participant prior
to six (6) months following the date of its grant, or following the date upon
which this Plan is approved by stockholders, whichever is later. All rights
with respect to the Restricted Stock granted to a Participant under the Plan
shall be available during his or her lifetime only to such Participant and may
not be transferred.
<PAGE>
7.5. Other Restrictions. The Committee may impose such other
restrictions on any Shares of Restricted Stock as it may deem advisable
including, without limitation, restrictions based upon the achievement of
specific performance goals (Company-wide, Subsidiary, and/or individual),
and/or restrictions under or in respect of applicable Federal or state
securities or tax laws; and may legend the certificate representing Restricted
Stock to give appropriate notice of such restrictions. The Committee may also
require that Participants make cash payments at the time of grant or upon
lapsing of restrictions. Such cash payments, if imposed, will be in an amount
not less than the par value of the Shares.
7.6. Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 7.5 herein, each certificate representing
Shares of Restricted Stock granted pursuant to the Plan shall bear the
following legend:
"The sale or other transfer of the Shares of stock re presented by
this certificate, whether voluntary, involuntary, or by operation
of law, is subject to certain restrictions on transfer as set
forth in the Signature Inns Inc. 1996 Equity Incentive Plan, and
in a Restricted Stock agreement dated . A copy of the Plan and
such Restricted Stock agreement may be obtained from the Chief
Financial Officer of Signature Inns Inc."
7.7. Removal of Restrictions. Except as otherwise provided in this
Section 7.7, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the participant after
the last day of the Period of Restriction. Once the Shares are released from
the restrictions, the Participant shall be entitled to have the legend
required by Section 7.6 removed from his or her Share certificate.
7.8. Voting Rights. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.
7.9. Dividends and Other Distributions. During the Period of
Restriction, Participants holding Shares of Restricted Stock granted hereunder
shall be entitled to receive all dividends and other distributions paid with
respect to those Shares while they are so held. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
7.10. Termination of Service Due to Death or Disability. In the event
death or Disability terminates a Participant's employment with, or a
Director's service on the Board of Directors for, the Company, the
restrictions on the Restricted Stock held by him shall lapse as of the date of
termination (in the case of Disability, the restrictions shall lapse on the
date the Participant's Disability is determined by the Committee to be total
and permanent).
7.11. Termination of Service for Other Reasons. Except as otherwise
provided in Section 7.10. above, if the employment of the Participant or
service of a Director shall terminate for any reason, all nonvested Shares of
Restricted Stock held by him at that time immediately shall be forfeited and
returned to the Company. In the case of such a termination other than for
Cause, the Committee, in its sole discretion and with any affected Director
abstaining, shall have the right to provide for lapsing of the restrictions on
Restricted Stock following termination, upon such terms and provisions as it
deems proper. No such right shall exist in respect of a termination for
Cause.
<PAGE>
ARTICLE 8
BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under the Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a
form prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Chief Financial Officer of the Company during
the Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to his estate.
ARTICLE 9
RIGHTS OF EMPLOYEES
9.1. Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ
of the Company.
For purposes of the Plan, transfer of employment of a Participant
between the Company and any one of its Subsidiaries (or between Subsidiaries)
shall not be deemed a termination of employment.
9.2. Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award.
ARTICLE 10
CHANGE IN CONTROL
10.1. General. In the event of a Change in Control of the Company as
defined in Section 10.2 below, all Options granted under this Plan that are
still outstanding and not yet exercisable shall become immediately exercisable
as of the date of the Change in Control and shall remain exercisable for their
term. Further, all restrictions placed on Restricted Stock Awards shall lapse
in the event of a Change in Control.
10.2. Definition. For purposes of the Plan, a Change in Control shall
mean liquidation, dissolution, consolidation, or merger of the Company in
which the Company is not the resulting institution, or transfer of all or
substantially all of its assets in which the Company is not the resulting
institution, except, in each case, where the resulting institution is a
Subsidiary of the Company. The Board has final authority to determine the
exact date on which a Change in Control has been deemed to have occurred.
<PAGE>
ARTICLE 11
AMENDMENT, MODIFICATION, AND TERMINATION
The Committee may amend, alter, or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made more than once every
six (6) months or which would (i) impair an Award without the consent of the
Participant, except such an amendment made to cause the Plan to qualify for
the exemption provided by Rule 16b-3 or (ii) disqualify the Plan from the
exemption provided by Rule 16b-3. In addition, no such amendment shall be
made without the approval of the Company's stockholders to the extent such
approval is required by law, agreement or the rules of any exchange upon which
the Common Stock is listed or quoted.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights
of the Participant without his consent except such an amendment made to cause
the Plan or Award to qualify for the exemption provided by Rule 16b-3. The
Committee may also substitute new Options for previously granted Options,
including previously granted Stock Options having higher option prices.
Subject to the above provisions, the Committee shall have the authority
to amend the Plan to take into account changes in law and tax and accounting
rules, as well as other factors necessary to administer the Plan in accordance
with the intentions of the Company in establishing the Plan and to grant
Awards which qualify for beneficial treatment under such rules without
shareholder approval.
ARTICLE 12
WITHHOLDING
12.1. Tax Withholding. The Company shall have the power and the right
to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state and local income, payroll and
unemployment taxes required to be withheld with respect to any grant,
exercise, or payment made under or as a result of this Plan.
12.2. Share Withholding. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, or
upon any other taxable event hereunder, Employees may elect, subject to the
approval of the Committee, to satisfy the withholding requirement, in whole or
in part, by having the Company withhold Shares having a Fair Market Value, on
the date the tax is to be determined, equal to the minimum marginal tax which
could be imposed on the transaction.
Stock withholding upon the exercise of an Option will be done if the
Participant makes a signed, written election and one of the following occurs:
(a) The Option exercise occurs during a "window period" and the
election to use stock withholding is made at any time prior to exercise.
For this purpose, "window period" means the period beginning on the
third (3rd) business day following the date of public release of the
Company's quarterly financial information and ending on the twelfth
(12th) business day following such date. An earlier election can be
revoked up until the exercise of the Option during the window period; or
<PAGE>
(b) An election to withhold stock is made at least six (6)
months before the Option is exercised. If this election is made, then
the Option can be exercised outside of the window period.
Stock withholding upon the vesting of Restricted Stock will be done if
the Participant makes a signed, written election and one of the following
occurs:
(a) The election occurs during a window period, and the
Restricted Stock Award is subject to vesting according to a fixed
schedule established by the Committee at the time of grant; or
(b) An election to use stock withholding is made at least six
(6) months before vesting occurs.
ARTICLE 13
INDEMNIFICATION
Each Person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by him or her
in settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against
him or her, provided he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such Persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.
ARTICLE 14
SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company.
ARTICLE 15
REQUIREMENTS OF LAW
15.1. Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
15.2. Governing Law. To the extent not pre-empted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Indiana.
[TEST]
<PAGE>
SIGNATURE INNS, INC.
PROXY FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 21, 1996
THIS PROXY IS SOLICITED BY THE COMPANY'S MANAGEMENT
ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned hereby appoints JOHN D. BONTREGER, or any other corporate
executive officer the proxy for the undersigned, with full power of
substitution, to represent the undersigned and to vote all shares of common
stock of SIGNATURE INNS, INC. (the "Company") held in the name of the
undersigned at the close of business on April 2, 1996, at the Annual Meeting
of the Shareholders of the Company, to be held at 12156 North Meridian
Street, Carmel, Indiana, on Tuesday, May 21, 1996, and at any adjournments
thereof, with all the powers the undersigned would have if personally present as
follows:
1. The Election of Three Directors to serve for terms of three years each:
NOMINEES: John D. Bontreger
George A. Morton
Richard L. Russell
__
/__/ FOR all the nominees listed above
__
/__/ WITHHOLD AUTHORITY to vote for any of the nominees listed above
INSTRUCTIONS: To withhold authority to vote for one or more individual
nominees, write the nominee(s) name(s) here:_____________________________
2. The approval of the proposal to amend Article V and Article VI of the
Company's Articles of Incorporation to increase the number of authorized shares
of its common stock from the 20,000,000 to 50,000,000 shares, to decrease the
authorized shares of preferred stock from 20,000,000 to 5,000,000, and to revise
the rights and preferences of the preferred stock.
__ __ __
/__/ APPROVE /__/ DISAPPROVE /__/ ABSTAIN
3. The approval of the 1996 Equity Incentive Plan.
__ __ __
/__/ APPROVE /__/ DISAPPROVE /__/ ABSTAIN
4. The ratification of the appointment of KPMG Peat Marwick, LLP as
independent auditors for the Company for the fiscal year ending December 31,
1996.
__ __ __
/__/ APPROVE /__/ DISAPPROVE /__/ ABSTAIN
<PAGE>
5. To consider and transact such other business as may properly come before
the meeting, or any adjournments thereof.
__ __ __
/__/ APPROVE /__/ DISAPPROVE /__/ ABSTAIN
SPECIFY DESIRED ACTION BY CHECK MARK IN THE APPROPRIATE BOX. IF THIS
PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED HEREBY
WILL BE VOTED. IF A CHOICE IS SPECIFIED BY THE SHAREHOLDER, THE SHARES WILL
BE VOTED ACCORDINGLY. IF NOT OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS SET FORTH ABOVE.
Receipt of the Annual Report of the Company, a copy of the Notice of Annual
Meeting of Shareholders and the Proxy Statement is hereby acknowledged.
Dated:_____________________, 1996
_______________________________________
Signature of Shareholder
_______________________________________
Signature of Shareholder
IMPORTANT: Please sign exactly as your name appears on your stock certificate.
When signing as an attorney, executor, trustee, etc., add title. If signer is
a corporation, execute in full corporate name by authorized officer.
NEW ADDRESS INFORMATION: If your current address is different than the address
indicated on the label, please record your current address, including zip code
on the lines below:
_______________________________________
_______________________________________
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE GUARANTEED ENVELOPE.
