<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
SIGNATURE INNS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
SIGNATURE INNS, INC.
250 EAST 96TH STREET, SUITE 450
INDIANAPOLIS, IN 46240
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1997
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 20, 1997, at 2:00
p.m., Local Time for the following purposes:
1. To consider and vote upon the election of two directors for three (3)
year terms;
2. To consider and vote upon a proposal to amend Article V of the Company's
Amended and Restated Articles of Incorporation (the "Articles") to
increase the number of authorized shares of its common stock from
13,513,514 to 25,000,000 shares;
3. 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, 1997; and
4. 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 1,
1997, 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 15, 1997
PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE GUARANTEED ENVELOPE
<PAGE> 3
SIGNATURE INNS, INC.
250 EAST 96TH STREET, SUITE 450
INDIANAPOLIS, INDIANA 46240
------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1997
------------------------------
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 15, 1997, 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 20, 1997, 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 mail, 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, 1996,
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 1,
1997 will be entitled to vote at the annual meeting. On that date, there were
outstanding 2,102,408 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.
On January 24, 1997, the Company completed a public offering of 2,000,000
shares of its $1.70 Cumulative Convertible Preferred Stock, Series A (the
"Series A Preferred Stock"). An additional 256,000 shares of Series A Preferred
Stock was sold on January 31 and February 6, 1997, pursuant to over-allotment
options granted to the underwriters. The Series A Preferred Stock is convertible
at the option of the holders at any time, unless previously redeemed, into
shares of common stock of the Company at an initial conversion price of $9.60
per share of common stock (equivalent to 2.08 shares of common stock for each
share of Series A Preferred Stock converted, for an aggregate of 4,700,000
shares of common stock subject to conversion), subject to adjustment upon
certain events. The Series A Preferred Stock has no voting rights, except that
holders of the Series A Preferred Stock will have the right, together with the
holders (if any) of other series of the Company's cumulative preferred stock, to
elect two members of the Board of Directors of the Company if dividends on any
series of the Company's cumulative preferred stock remain unpaid for six
quarters.
1
<PAGE> 4
Set forth in the following table are the beneficial holdings as of April 1,
1997 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:
BENEFICIAL HOLDINGS OF
DIRECTORS, NOMINEES,
AND NAMED EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
AMOUNT & NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP(1) (12) PERCENT OF CLASS
- -------------------------------------- ------------------- ------------------ ----------------
<S> <C> <C> <C>
John D. Bontreger Common Stock 409,566(2) 19.47%
no par value
Mark D. Carney " 119,728(3) 5.69%
Bo L. Hagood " 115,111(4) 5.47%
David R. Miller " 80,945(5) 3.85%
Stephen M. Huse " 253(6) *
Cumulative
Convertible
Preferred Stock,
Series A 100(7) *
George A. Morton Common Stock
no par value 27,701(8) 1.32%
Richard E. Shank " 27,071(9) 1.29%
Richard L. Russell " 16,350(10) *
William S. Watson " 89(11) *
All Directors, and Executive Officers Common Stock
as a group (includes 10 persons no par value
consisting of the above 9 persons plus
Martin D. Brew, Treasurer of the
Company) 831,137 39.52%
Cumulative
Convertible
Preferred Stock,
Series A 100 *
</TABLE>
- ---------------
* Less than 1%.
(1) Information with respect to beneficial ownership is based upon information
supplied by each Shareholder.
(2) Mr. Bontreger owns all shares in his name of record and has sole voting and
investment power over such shares.
(3) Mr. Carney owns all shares in his name of record and has sole voting and
investment power over such shares.
(4) Mr. Hagood owns all shares in his name of record and has sole voting and
investment power over such shares.
(5) Mr. Miller owns all shares in his name of record and has sole voting and
investment power over such shares.
2
<PAGE> 5
(6) Of the shares listed, 208 are shares Mr. Huse has the right to acquire by
conversion of his 100 shares of Cumulative Convertible Preferred Stock,
Series A. Mr. Huse owns 45 shares of Common Stock in his own name of record
and has sole voting and investment power over such shares.
(7) Mr. Huse owns all shares in his name of record and has sole voting and
investment power over such shares.
(8) Mr. Morton holds 16,891 shares in his name of record and has sole voting
and investment power over such shares and 10,810 shares are owned by trusts
of which his wife is the trustee with investment power over such shares.
(9) Mr. Shank holds all shares as a joint tenant with his wife with whom he
shares voting and investment power over all such shares. Mr. Shank will
become a Director Emeritus upon the expiration of his current term at the
1997 Annual Shareholders' Meeting. See the discussion at page 7.
(10) Mr. Russell holds 6,891 shares in his name of record and has sole voting
and investment power over such shares and 9,459 shares jointly with his
wife with whom he shares voting and investment power over such shares.
(11) Mr. Watson owns all shares in his name of record and has sole voting and
investment power over such shares.
(12) Mr. Orus E. Weaver, Director Emeritus of the Company, is the beneficial
owner of 29,651 shares of Company common stock. Mr. Weaver holds 29,324
shares in his name of record and has sole voting and investment power over
such shares and he holds 327 shares jointly with his wife with whom he
shares voting and investment power over such shares. Mr. Weaver served as a
Director of the Company from its inception through October 1996. He was
designated a Director Emeritus by the Board of Directors on October 22,
1996. As a Director Emeritus Mr. Weaver is invited to attend meetings of
the Board of Directors and receives the same compensation as a Director,
but has no vote with respect to any matter coming before the Board. Mr.
Weaver's invitation to attend Board meetings and his compensation therefor
terminate in May 1998.
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 March 19, 1997, the Board of Directors amended the Company's Code of
By-Laws to decrease the number of directors from nine to eight, effective as of
the 1997 Annual Shareholders' Meeting, with the ninth directorship being
eliminated from the First Class of Directors with their terms expiring in 1997.
Accordingly, only two directors are to be elected at the 1997 Annual
Shareholders' Meeting. Also on March 19, 1997, the Board of Directors designated
Richard E. Shank, who has served as a Director of the Company since September
23, 1978, Director Emeritus as of the expiration of his current term at the 1997
Annual Shareholders' Meeting. On October 22, 1996, the Board of Directors
accepted the resignation as a Director of Orus E. Weaver, who had served as a
Director of the Company since its inception and designated him a Director
Emeritus. The Board of Directors elected William S. Watson to serve as a
Director of the Company for the remainder of Mr. Weaver's term. As Director
Emeriti, Mr. Weaver and Mr. Shank are invited to attend meetings of the Board of
Directors and receive the same compensation as a Director, but have no vote with
respect to any matter coming before the Board. Mr. Weaver's and Mr. Shank's
invitations to attend Board meetings and their compensation therefor terminate
in May 1998. The Board of Directors is now organized in three classes, with the
terms of the First Class, consisting of two Directors, expiring in 1997, the
terms of the Second Class, consisting of three Directors, expiring in 1998, and
the terms of the Third Class, consisting of three Directors, expiring in 1999.
If any of the nominees elected as directors at the 1997 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
3
<PAGE> 6
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:
DIRECTORS STANDING FOR ELECTION
FOR A THREE YEAR TERM EXPIRING MAY 2000
<TABLE>
<CAPTION>
NOMINEE AND PRINCIPAL
OCCUPATION (AGE) OFFICE HELD ELECTED AS DIRECTOR
- ------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Mark D. Carney, Vice President Finance and Chief Vice President 11/17/93
Financial Officer of Signature Inns, Inc. (Age 40) Finance, CFO and
Director
Stephen M. Huse, Chief Executive Officer, Huse Food Director 8/18/94
Group, Inc. (Age 55)
</TABLE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
OCCUPATIONS (AGES) OFFICE HELD ELECTED AS DIRECTOR TERM EXPIRES
- ------------------------------------------ ------------------ ------------------- ------------
<S> <C> <C> <C>
John D. Bontreger, President, Chief President, Chief 3/31/78 5/18/99
Executive Officer and Chairman of the Executive Officer
Board of Signature Inns, Inc. (Age 48) and Chairman of
the Board
George A. Morton, Director 9/23/78 5/18/99
Agri businessman (Age 60)
Richard L Russell, Director 5/21/91 5/18/99
Executive Director, Direct Regions
National Retail Hardware Association
(Age 61)
Bo L. Hagood Vice President Hotel Vice President 11/17/93 5/19/98
Operations of Signature Inns, Inc. (Age Hotel Operations
47) and Director
David R. Miller Secretary and Executive Secretary and 9/23/78 5/19/98
Director of Sales and Marketing of Director
Signature Inns, Inc. (Age 55)
William S. Watson Director 10/22/96 5/19/98
Hotel Industry Consultant, WSRW
Enterprise (Age 52)
</TABLE>
4
<PAGE> 7
INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND MANAGEMENT
A. NOMINEES, DIRECTORS AND OFFICERS.
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 five wholly owned subsidiaries, namely, P & N Corporation,
S.I.E. Corporation, SI Kokomo Corporation, SI South Bend Corporation and SI
Springfield Corporation. Each officer of the Company holds the same office and
title in each subsidiary of the Company.
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, who is a director of Marsh Supermarkets, Inc., 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.
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 Richard L. Russell. The Audit Committee met
twice during the year ended December 31, 1996.
2. COMPENSATION COMMITTEE. 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
5
<PAGE> 8
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, and Stephen M.
Huse. During the year ended December 31, 1996, the Compensation Committee met
three times in conjunction with a meeting of the Board of Directors and three
times not in conjunction with a meeting of the Board of Directors, one of which
was a telephonic meeting.
G. NUMBER OF MEETINGS.
During 1996, the Board of Directors of the Company held a total of nine
regularly scheduled meetings and three telephonic meetings. All directors listed
above attended at least 75% of those meetings.
H. SECTION 16(a)REPORTS.
No officer, director or beneficial owner of more than ten percent of any
class of equity securities of the Company who was required to file reports under
Section 16(a) of the Exchange Act failed to file such reports on a timely basis
during 1996.
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, 48 President, Chief Executive Officer and Chairman
of the Board
Mr. Bontreger is the founder of the Company and has served as its
President, Chief Executive Officer, and Chairman of the Board since the
Company's inception in March 1978. He is responsible for the overall management
of the business affairs of the Company. Prior to founding the Company, Mr.
Bontreger served from 1975 to 1978 as a vice president for an Indiana-based
hotel company. Mr. Bontreger holds a Bachelor of Science Degree from Goshen
College, Goshen, Indiana, where he graduated in 1972.
DAVID R. MILLER, 55 Secretary, Executive Director of Sales and
Marketing and Director
Mr. Miller has been employed by the Company since August 1978 and has
served as the Secretary (and Treasurer until May 1986) of the Company since
September 1978. Since 1990, Mr. Miller has been the Executive Director Sales and
Marketing responsible for assisting in the development and implementation of the
Company's advertising, marketing and public relations programs. He has served as
liaison with the Company's advertising and public relations agencies and has
directed the local, regional and national hotel room sales program and the
central reservation system. Mr. Miller is a 1965 graduate of Ashland University,
Ashland, Ohio, with a B.S. in Business Administration.
MARK D. CARNEY, 40 Vice President Finance, Chief Financial Officer and
Director
Mr. Carney joined the Company in 1992 as the Vice President of
Finance/Chief Financial Officer and is responsible for the financial operations
and finance functions of the Company and affiliated entities. Prior to joining
the Company, Mr. Carney was employed by KPMG Peat Marwick, in Indianapolis,
Indiana. He was responsible for services to publicly and privately owned real
estate developers and operators, hospitality companies and financial
institutions. Mr. Carney is a 1979 graduate of Indiana University, with a
Bachelor of Science Degree from the School of Business and is a member of the
American Institute of Certified Public Accountants.
BO HAGOOD, 47 Vice President Hotel Operations and Director
Mr. Hagood has been employed by the Company since December 1980 starting as
a hotel 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 employed in the hospitality industry for 25 years, having managed several
hotels for national chains prior to joining Signature Inns. Mr. Hagood graduated
from Appalachian State University in 1971 with a Bachelor of Science Degree in
Business Administration.
6
<PAGE> 9
MARTIN D. BREW, 36 Treasurer and Controller
Mr. Brew has been employed by the Company since April 1986. In December,
1987, Mr. Brew assumed the position of Controller and, in April 1992, he began
serving as Treasurer. Mr. Brew is responsible for the Accounting and Information
Systems Department and the functions of: financial reporting, investor
reporting, cash management, property and casualty insurance, legal compliance,
automation concepts of the chain, tax planning and audit coordination. Prior to
his employment with Signature Inns, Mr. Brew was employed by KPMG Peat Marwick.
Mr. Brew is a 1982 graduate of Indiana University, with a Bachelor of Science
Degree from the School of Business and is a member of the American Institute of
Certified Public Accountants.
GEORGE A. MORTON, 60 Director
Mr. Morton has been manager, operator and 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. Mr. Morton is a 1958 graduate of
Purdue University.
RICHARD L RUSSELL, 61 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 is also serving as president or director of several
community and civic organizations. Mr. Russell is a 1958 graduate of Purdue
University.
STEPHEN M. HUSE, 54 Director
Mr. Huse is Chairman and Chief Executive Officer, Huse Food Group, Inc.,
Bloomington, Indiana. In addition, Mr. Huse is President of St. Elmo,
Incorporated, which operates the St. Elmo Steak House in downtown Indianapolis,
and Chief Executive Officer of Beef Corporation of America, franchisee of 14
Arby's Roast Beef Restaurants in Central and Southern Indiana. Previously, Mr.
Huse was President and Chief Executive Officer of Consolidated Products, Inc.,
operator of Steak 'n' Shake restaurants. He is also the founder of Noble Romans
Incorporated, a publicly traded franchisor of pizza parlors in the Midwest. Mr.
Huse is also a director of Marsh Supermarkets, Inc., and a member of the
Advisory Board of KeyBank of Central Indiana, Indianapolis, Indiana. Mr. Huse is
a 1965 graduate of Indiana University.
WILLIAM S. WATSON, 52 Director
Mr. Watson currently provides hotel industry consulting services through
WSRW Enterprise, which is affiliated with Stratus Management Group, Inc. Mr.
Watson previously served as Vice-Chairman of Pegasus Systems, Inc., and Chairman
of THISCO (The Hotel Industry Switch Company). Mr. Watson previously held
positions with Best Western International as Senior Vice President Worldwide
Marketing and Executive Vice President. Mr. Watson was also employed as a Vice
President of ITT Sheraton Corporation, and held executive positions with
Bicoastal Air Service, Inc., Altair Airlines, Inc., and Pan American World
Airways. Mr. Watson holds a Mechanical Engineering degree from Croydon
Polytechnic in England.
RICHARD E. SHANK, 63 Director Emeritus
Mr. Shank, who served as Director of the Company from September 23, 1978,
was designated a Director Emeritus by the Board of Directors on March 19, 1997,
effective as of the 1997 Annual Shareholders' Meeting. As a Director Emeritus
Mr. Shank is invited to attend meetings of the Board of Directors and receives
the same compensation as a Director, but has no vote with respect to any matter
coming before the Board. Mr. Shank's invitation to attend Board meetings and his
compensation therefor terminate in May, 1998. 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. Mr. Shank attended Hesston College in Hesston, Kansas.
7
<PAGE> 10
ORUS E. WEAVER, 73 Director Emeritus
Mr. Weaver, who served as a Director of the Company from its inception
through October 1996, was designated a Director Emeritus by the Board of
Directors on October 22, 1996. As a Director Emeritus Mr. Weaver is invited to
attend meetings of the Board of Directors and receives the same compensation as
a Director, but has no vote with respect to any matter coming before the Board.
Mr. Weaver's invitation to attend Board meetings and his compensation therefor
terminate in May, 1998. He has been an independent life insurance broker since
1981 and previously assisted in the sale of limited partnership interests in
limited partnerships formed to develop Signature Inn hotels. Mr. Weaver has been
a member of the Indiana and National Association of Life Underwriters for almost
20 years.
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.
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 a 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.
8
<PAGE> 11
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
YEAR ENDED ------------------------
NAME AND PRINCIPAL POSITION DECEMBER 31 SALARY ($) BONUS ($)
---------------------------------------------- ------------ ---------- ---------
<S> <C> <C> <C>
John D. Bontreger 1996 153,317 89,066
President & CEO 1995 147,833 61,685
1994 141,901 77,768
Mark D. Carney 1996 92,663 56,679
V.P. Finance & CFO 1995 89,350 38,217
1994 85,782 47,003
Bo Hagood 1996 92,663 56,679
V.P. Hotel Operations 1995 89,350 38,217
1994 85,792 47,003
David R. Miller 1996 78,624 32,388
Secretary, Executive 1995 75,911 24,124
Director of Sales and Marketing 1994 72,795 28,487
</TABLE>
- ---------------
(1) Columns regarding long-term and 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.
At December 31, 1996, there were no unexercised options held by the
executive officers named in the Summary Compensation Table.
EMPLOYMENT CONTRACTS
The Company has employment contracts with John D. Bontreger, Bo L. Hagood,
Mark D. Carney, and David R. Miller. 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. Mr. Bontreger's contract expires in June 1998. Messrs. Hagood's and
Carney's contracts expire in December 1997. Mr. Miller's contract expires in
June 1997. 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; Mr.
Miller'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 one and one-half times his "regular compensation," Messrs. Hagood and Carney
would receive severance benefits equal to one time such compensation, and Mr.
Miller would 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.
9
<PAGE> 12
COMPENSATION OF DIRECTORS
Each of the Company's non-employee directors (each, an "Outside Director")
is paid a retainer of $6,000 per year, payable quarterly. In addition, each
Outside Director receives a fee of $750 per Board meeting attended (other than
telephonic Board meetings which are covered by the retainer), and receives a fee
of $750 for each Committee meeting. Under the terms of the 1996 Equity Incentive
Plan, awards of Restricted Stock to Outside Directors are automatically granted
upon such directors' election or re-election. Initially, each Outside Director
was granted 167 shares, 333 shares or 500 shares of Restricted Stock depending
upon the number of years then remaining in such director's term. Upon
re-election, each Outside Director is granted awards of 500 shares of Restricted
Stock. Outside Directors are also reimbursed for reasonable costs and expenses,
including travel expenses, incurred by them in connection with their attendance
at any board or committee meeting.
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, which were paid in full in 1996, 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 OF THE AMENDED AND
RESTATED 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 Amended and Restated Articles
of Incorporation of the Company (the "Amendment") which would increase the
number of authorized shares of no par value Common Stock (the "Common Stock")
from 13,513,514 to 25,000,000. 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 is entitled
to one vote with respect to all matters to come before the Shareholders.
In connection with the Company's offering of its Series A Preferred Stock
in January 1997, the Board of Directors approved a 1-for-3.7 share reverse stock
split effective on January 21, 1997. As a result of the reverse stock split, the
number of shares of common stock which the Company is authorized to issue was
reduced from 50,000,000 to 13,513,514. As of the date of this Proxy Statement,
there were 2,102,408 shares of common stock outstanding, leaving 11,411,106
shares authorized but unissued. The Series A Preferred Stock is convertible at
the option of the holder at any time, unless previously redeemed, into shares of
common stock of the Company at an initial conversion price of $9.60 per share of
common stock (equivalent to 2.08 shares of common stock for each share of Series
A Preferred Stock converted), subject to adjustment upon certain events. A total
of 4,700,000 authorized but unissued shares of common stock are subject to such
conversion rights.
In addition, the Company's 1996 Equity Incentive Plan authorizes 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 10%
of the total outstanding shares of common stock of the Company, which was
210,240 shares as of March 21, 1997.
Because of the possible issuance of up to 4,700,000 shares of common stock
in the event of the conversion of the Series A Preferred Stock, the potential
issuance of up to 210,240 shares of common stock pursuant to the Company's 1996
Equity Incentive Plan and the possible issuance of additional shares in future
private or registered public offerings and for other legitimate corporate
purposes, management and the Board of Directors are proposing to amend Article V
of the Amended and Restated Articles of Incorporation of the Company to increase
the number of authorized shares of Common Stock from 13,513,514 to 25,000,000
shares. The Company has no present arrangements, agreements, understandings or
plans for the issuance or use of the additional shares proposed to be authorized
by the amendment.
10
<PAGE> 13
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.
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, OR THE RULES OF THE NASDAQ STOCK MARKET, 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 13,513,514 to 25,000,000
shares, there will remain approximately 2,102,408 shares outstanding, leaving
22,897,592 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
13,513,514 to 25,000,000 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.
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, Article V of the Amended and Restated
Articles of Incorporation of the Company will read in its entirety as set forth
in Exhibit A hereto.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has proposed and recommends to the Shareholders
ratification 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,
1997, 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 to make a
statement if they desire to do so, and respond to appropriate questions.
VOTE REQUIRED. Ratification of appointment of KPMG 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 RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS.
11
<PAGE> 14
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, 1996, is set forth in full in the Company's 1996
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 1998 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 19, 1998 annual meeting must be received no
later than December 16, 1997.
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.
ANNUAL REPORT
The 1996 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 15, 1997
12
<PAGE> 15
EXHIBIT A
SECTION 1. NUMBER OF SHARES. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 30,000,000 shares,
of which 25,000,000 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 30,000,000.
13
<PAGE> 16
PROXY PROXY
SIGNATURE INNS, INC.
250 EAST 96TH STREET, SUITE 450
INDIANAPOLIS, IN 46240
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS -- MAY 20, 1997
The undersigned appoints John D. Bontreger with full power of
substitution and revocation, to vote, as designated above, all the Common
Stock of Signature Inns, Inc. which the undersigned has power to vote, with all
powers which the undersigned would possess if personally present, at the annual
meeting of shareholders thereof to be held on May 20, 1997, or at any
adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of
the nominees named and FOR Proposal Nos. 2 and 3.
PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE GUARANTEED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 17
<TABLE>
<CAPTION>
SIGNATURE INNS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. []
[ ]
<S> <C> <C> <C>
For All
For Withhold (Except Nominees(s)
1. ELECTION OF DIRECTORS FOR THREE YEAR TERM -- All All written below)
Nominees: mark D. Carney and Stephen M. Huse. [ ] [ ] [ ]
_____________________________________________________
For Against Abstain
2. Proposal to amend Article V of the Company's Amended [ ] [ ] [ ]
and Restated Articles of Incorporation.
For Against Abstain
[ ] [ ] [ ]
3. Ratification of KPMG Peat Marwick LLP as the
Company's independent public auditors of 1997.
4. To transact such other business as may properly
come before the meeting, or any adjournments
thereof.
</TABLE>
Dated:_____________________________, 1997
Signature(s)____________________________________________________________________
________________________________________________________________________________
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
