<PAGE> 1
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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>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Signature Inns, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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: ...........................................................
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<PAGE> 2
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
<PAGE> 3
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.
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
Name of Title of Beneficial Percent
Beneficial Owner Of Class Ownership(1) (12) Of Class
- ---------------- -------- --------------------- --------
<S> <C> <C> <C>
John D. Bontreger Common Stock 409,568 (2) 19.47%
no par value
Mark D. Carney " 119,730 (3) 5.69%
Bo L. Hagood " 115,112 (4) 5.48%
David R. Miller " 80,946 (5) 3.85%
Stephen M. Huse " 462 (6) *
Cumulative
Convertible
Preferred Stock,
Series A 100 (7) *
George A. Morton Common Stock
no par value 27,703 (8) 1.32%
Richard E. Shank " 27,071 (9) 1.29%
Richard L. Russell " 16,351 (10) *
William S. Watson " 90 (11) *
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C> <C>
All Directors, and Common Stock
Executive Officers as no par value 831,147 39.52%
a group (includes 10 persons
consisting of the above 9 Cumulative Convertible
persons plus Martin D. Brew, Preferred Stock,
Treasurer of the Company) 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.
(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 16,893 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 4.
(10) Mr. Russell holds 6,892 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.
-3-
<PAGE> 5
(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 the person named in
the proxies. Management has no reason to believe that any nominee will be unable
to serve.
-4-
<PAGE> 6
The names, ages, principal occupations and tenures as director of each of
the nominees, are set forth below:
<TABLE>
DIRECTORS STANDING FOR ELECTION
FOR A THREE YEAR TERM EXPIRING MAY 2000
<CAPTION>
Nominee and Principal
Occupation (Age) Office Held Elected as Director
--------------------- ----------- -------------------
<S> <C> <C>
Mark D. Carney, Vice President 11/17/93
Vice President Finance and Finance, CFO and
Chief Financial Officer of Director
Signature Inns, Inc.
(Age 40)
Stephen M. Huse, Director 8/18/94
Chief Executive Officer,
Huse Food Group, Inc.
(Age 55)
</TABLE>
<TABLE>
DIRECTORS CONTINUING IN OFFICE
<CAPTION>
Names and Principal
Occupations (Ages) Office Held Elected as Director Term Expires
------------------ ----------- ------------------- ------------
<S> <C> <C> <C>
John D. Bontreger, President, Chief 3/31/78 5/18/99
President, Chief Executive Officer
Executive Officer and and Chairman of
Chairman of the Board the Board
of Signature Inns, Inc.
(Age 48)
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)
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C> <C> <C>
Bo L. Hagood Vice President 11/17/93 5/19/98
Vice President Hotel Hotel Operations
Operations of Signature and Director
Inns, Inc. (Age 47)
David R. Miller Secretary and 9/23/78 5/19/98
Secretary and Executive Director
Director of Sales and
Marketing of Signature
Inns, Inc. (Age 55)
William S. Watson Director 10/22/96 5/19/98
Hotel Industry Consultant,
WSRW Enterprise
(Age 52)
</TABLE>
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.
-6-
<PAGE> 8
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 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.
-7-
<PAGE> 9
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.
-8-
<PAGE> 10
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
-9-
<PAGE> 11
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.
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. Weavers 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
-10-
<PAGE> 12
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.
<TABLE>
<CAPTION>
Summary Compensation Table(1)
-----------------------------
Name and Year Annual Compensation
Principal Ended ----------------------------------
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 1994 72,795 28,487
</TABLE>
-11-
<PAGE> 13
and Marketing
(1) Columns regarding long-term and all other compensation have been
omitted pursuant to the instructions to Reg. ss.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.
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.
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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.
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<PAGE> 15
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.
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<PAGE> 16
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.
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
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<PAGE> 17
EXHIBIT A
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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.
