<PAGE>
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:
[_] 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
JOHN O. HAMMONS HOTELS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
JOHN Q. HAMMONS HOTELS, INC.
300 JOHN Q. HAMMONS PARKWAY
SPRINGFIELD, MISSOURI 65806
(417) 864-4300
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 1, 1997
----------------
To the Shareholders of
John Q. Hammons Hotels, Inc.
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the "Annual
Meeting") of John Q. Hammons Hotels, Inc. (the "Company") will be held on
Thursday, May 1, 1997, at 10:00 a.m., local time, at the Holiday Inn
University Plaza Hotel, 333 John Q. Hammons Parkway, Springfield, Missouri for
the following purposes:
1. Election of Directors. To elect three directors, each for a three-year
term (Proposal One);
2. Ratification of Appointment of Auditors. To ratify the appointment by
the Board of Directors of the firm of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending January 2, 1998
(Proposal Two); and
3. Other Business. To transact such other business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors of the Company has fixed the close of business on
March 17, 1997 as the record date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting. Only shareholders of
record at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting or any adjournments thereof.
Sincerely,
John Q. Hammons
Chairman of the Board
Springfield, Missouri
April 2, 1997
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
JOHN Q. HAMMONS HOTELS, INC.
300 JOHN Q. HAMMONS PARKWAY
SPRINGFIELD, MISSOURI 65806
(417) 864-4300
PROXY STATEMENT
FOR
ANNUAL MEETING OF JOHN Q. HAMMONS HOTELS, INC. SHAREHOLDERS
TO BE HELD ON MAY 1, 1997
INTRODUCTION
As used herein, the term "Company" means (i) John Q. Hammons Hotels, Inc., a
Delaware corporation, (ii) John Q. Hammons Hotels, L.P., a Delaware limited
partnership of which John Q. Hammons Hotels, Inc. is the sole general partner,
and (iii) Hammons, Inc., a Missouri corporation, as predecessor general
partner, collectively, or, as the context may require, John Q. Hammons Hotels,
Inc. only. As used herein, the term "Partnership" means John Q. Hammons
Hotels, L.P., a Delaware limited partnership.
GENERAL
This Proxy Statement (the "Proxy Statement") is being furnished to the
shareholders of the Company as part of the solicitation of proxies by its
board of directors (the "Board of Directors" or the "Board") from holders of
the outstanding shares of the Company's class A common stock, par value $.01
per share (the "Class A Common Stock"), and class B common stock, par value
$.01 per share (the "Class B Common Stock", and, together with the Class A
Common Stock, the "Common Stock") for use at the Annual Meeting of
Shareholders of the Company to be held on May 1, 1997 and at any adjournments
thereof (the "Annual Meeting"). At the Annual Meeting, shareholders will be
asked to elect three (3) members of the Board of Directors (Proposal One), to
ratify the appointment by the Board of Directors of the firm of Arthur
Andersen LLP as independent auditors of the Company for the fiscal year ending
January 2, 1998 (Proposal Two), and to transact such other business as may
properly come before the meeting or any adjournments thereof. This Proxy
Statement, together with the enclosed proxy card, is first being mailed to
shareholders of the Company on or about April 2, 1997.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The Board of Directors has fixed the close of business on March 17, 1997 as
the record date for the determination of the Company's shareholders entitled
to notice of and to vote at the Annual Meeting. Accordingly, only holders of
record of shares of Common Stock at the close of business on such date will be
entitled to vote at the Annual Meeting, with each share of Class A Common
Stock entitling its owner to one vote and each share of Class B Common Stock
entitling its owner to 50 votes on all matters properly presented at the
Annual Meeting. On the record date, there were approximately 200 holders of
record of the 6,042,000 shares of Class A Common Stock then outstanding. Based
on the number of annual reports requested by brokers, the Company estimates
that it has approximately 2,600 beneficial owners of its Class A Common Stock.
The presence, in person or by proxy, of holders of at least a majority of the
total number of outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting for
the election of directors and other matters. Shareholders' votes will be
tabulated by the persons appointed by the Board of Directors to act as
inspectors of election for the Annual Meeting. Abstentions and broker non-
votes will be treated as shares that are present, in person or by proxy, and
entitled to vote for purposes of determining a quorum at the Annual Meeting.
Abstentions and broker non-votes will not be counted as a vote cast on any
matter presented at the Annual Meeting.
<PAGE>
If the enclosed form of proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
Executed but unmarked proxies will be voted FOR the election of the three (3)
nominees for election to the Board of Directors and FOR the ratification of
the appointment of Arthur Andersen LLP as the Company's independent auditors
for the fiscal year ending January 2, 1998. The Board of Directors does not
know of any matters other than those described in the Notice of Annual Meeting
that are to come before the Annual Meeting. If any other matters are properly
brought before the Annual Meeting, the persons named in the proxy will vote
the shares represented by such proxy upon such matters as determined by a
majority of the Board of Directors.
The presence of a shareholder at the Annual Meeting will not automatically
revoke such shareholder's proxy. A shareholder may, however, revoke a proxy at
any time prior to its exercise by filing a written notice of revocation with,
or by delivering a duly executed proxy bearing a later date, to Mel J.
Volmert, Executive Vice President-Finance, Chief Financial Officer and
Treasurer, John Q. Hammons Hotels, Inc., 300 John Q. Hammons Parkway,
Springfield, Missouri 65806, or by appearing at the Annual Meeting and voting
in person.
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited personally or by telephone or
telegraph by directors, officers and employees of the Company. The Company
also will request persons, firms and companies holding shares in their names
or in the name of their nominees, which are beneficially owned by others, to
send proxy materials to and obtain proxies from such beneficial owners. The
Company will reimburse such persons for their reasonable expenses incurred in
that connection.
A copy of the Annual Report to Stockholders for the fiscal year ended
January 3, 1997 accompanies this Proxy Statement. THE COMPANY IS REQUIRED TO
FILE AN ANNUAL REPORT FOR ITS FISCAL YEAR ENDED JANUARY 3, 1997 ON FORM 10-K
WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). SHAREHOLDERS MAY
OBTAIN, FREE OF CHARGE, A COPY OF THE FORM 10-K (WITHOUT EXHIBITS) BY WRITING
TO MEL J. VOLMERT, EXECUTIVE VICE PRESIDENT-FINANCE, CHIEF FINANCIAL OFFICER
AND TREASURER, JOHN Q. HAMMONS HOTELS, INC. 300 JOHN Q. HAMMONS PARKWAY,
SPRINGFIELD, MISSOURI 65806.
A list of shareholders of record entitled to vote at the Annual Meeting will
be available for inspection by any shareholder for any purpose germane to the
meeting during ordinary business hours for a period of 10 days prior to the
meeting at the Company's office at 300 John Q. Hammons Parkway, Springfield,
Missouri 65806.
ELECTION OF DIRECTORS
(PROPOSAL ONE)
At the Annual Meeting, three directors will be elected, each for a three-
year term. Unless otherwise specified on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as directors of the persons named below as
nominees. The Board of Directors believes that the nominees will stand for
election and will serve if elected as directors. However, if any of the
persons nominated by the Board of Directors fails to stand for election or is
unable to accept election, the proxies will be voted for the election of such
other person as the Board of Directors may recommend.
Under the Company's Bylaws, the Board of Directors currently is comprised of
nine persons divided into three classes. The term of office of only one class
of directors expires in each year, and their successors are elected for terms
of three years and until their successors are elected and qualified. There is
no cumulative voting for election of directors. The three nominees receiving
the greatest number of votes cast for the election of directors at the Annual
Meeting will become directors at the conclusion of the tabulation of votes.
2
<PAGE>
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names of the Board of Directors' nominees
for election as a director and those directors who will continue to serve
after the Annual Meeting. Also set forth is certain other information with
respect to each person's age at March 1, 1997, principal occupation or
employment during the past five years, the periods during which they have
served as a director of the Company and positions currently held with the
Company.
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION POSITION(S)
AGE SINCE OF TERM HELD WITH COMPANY
--- -------- ---------- -----------------
<S> <C> <C> <C> <C>
NOMINEES FOR 3-YEAR
TERM:
Daniel L. Earley........ 54 1994 2000 Director
John Q. Hammons......... 78 1989 2000 Director, Chairman and Chief
Executive Officer
James F. Moore.......... 55 1995 2000 Director
CONTINUING DIRECTORS:
Jacqueline A. Dowdy..... 53 1989 1999 Director and Secretary
William J. Hart......... 55 1993 1999 Director
David B. Jones.......... 53 1993 1999 Director; President and Chief
Operating Officer
Robert T. Jones, Jr..... 58 1994 1998 Director
John E. Lopez-Ona....... 39 1996 1998 Director
Mel J. Volmert.......... 49 1994 1998 Director; Executive
Vice President--Finance; Chief
Financial Officer and Treasurer
</TABLE>
Jacqueline A. Dowdy, has been the Secretary and director of the Company
since 1989. She has been active in Mr. Hammons' hotel operations since 1981.
She is an officer of several affiliates of the Company.
Daniel L. Earley has been a director of the Company since February 1994.
Since 1985, Mr. Earley has been President, Chief Executive Officer and a
director of The Clermont Savings Bank, a community bank located in Milford,
Ohio, which is owned by Mr. Hammons.
John Q. Hammons is the Chairman, Chief Executive Officer, a director and the
founder of the Company. Mr. Hammons has been actively engaged in the
acquisition, development and management of hotel properties since 1959. From
1959 through 1969, Mr. Hammons and a business partner developed 34 Holiday Inn
franchises, 23 of which were sold in 1969 to Holiday Inns, Inc. Since 1969,
Mr. Hammons has developed 76 hotels on a nationwide basis, primarily under the
Holiday Inn and Embassy Suites tradenames. Mr. Hammons is the controlling
shareholder of the Company. See "Security Ownership of Management."
William J. Hart has been a director of the Company since December 1993. He
is a partner in the law firm of Husch & Eppenberger, formerly Farrington &
Curtis, P.C., a position he has held since 1970. Mr. Hart's firm performs
legal services on a regular basis for the Company and personally for Mr.
Hammons. Mr. Hart has also been a director since 1981 of Johnson Industries,
Inc., a commercial textiles company listed on the New York Stock Exchange.
David B. Jones is the President, Chief Operating Officer and a director of
the Company. Mr. Jones has been President and a director of the Company since
February 1993. From 1992 until joining the Company, Mr. Jones was Chief
Executive Officer of Davidson Hotel Partnership, a Memphis-based hotel
management company. Prior to 1992, Mr. Jones was President and Chief Executive
Officer of Homewood Suites, Inc., a subsidiary of The Promus Companies
Incorporated, which also then owned Holiday Inns, Inc. Mr. Jones began his
career in the hotel industry with Holiday Inns, Inc. in 1966. While with
Holiday Inns, Inc., Mr. Jones held the positions of Senior Vice President of
Franchise and Senior Vice President of Development. He is a former board
member of the American Hotel and Motel Association.
3
<PAGE>
Robert Trent Jones, Jr. became a director of the Company in November 1994.
Since 1969, Mr. Jones has been a President and principal designer for Robert
Trent Jones II, a golf course architectural company located in Palo Alto,
California. Mr. Jones has designed more than 150 golf courses on five
continents in 33 countries. Mr. Robert Trent Jones, Jr. is not related to
David Jones.
John E. Lopez-Ona became a director of the Company in May 1996. He was a
managing director of Kidder Peabody & Company, Inc., an investment banking
firm, from March 1990 through March 1995. Since June 1995, Mr. Lopez-Ona has
been the President of Anvil Capital, Inc., a firm owned by him which
specializes in principal investment.
James F. Moore became a director of the Company in May 1995. Since 1987, Mr.
Moore has been Chairman, Chief Executive Officer and a Director of Champion
Products, Incorporated, a privately owned manufacturing company serving the
telecommunications industry located in Strafford, Missouri. Prior to 1987, Mr.
Moore had served as President of the Manufacturing Division of Service
Corporation International, a company listed on the New York Stock Exchange.
Mel J. Volmert is Executive Vice President--Finance, Chief Financial
Officer, Treasurer and a director of the Company. Prior to joining the Company
in January 1994, Mr. Volmert was a partner of Baird, Kurtz & Dobson, a public
accounting firm which serves as Mr. Hammons' personal accountants. Mr. Volmert
had been with that firm for over five years.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF ITS NOMINEES AS DIRECTORS.
CORPORATE GOVERNANCE AND OTHER MATTERS
Selection of Nominees and Nominations by Shareholders. The Board of
Directors of the Company acts as a nominating committee for selecting nominees
for election as directors. The Company's Bylaws also permit shareholders
eligible to vote at the Annual Meeting to make nominations for directors if
such nominations are made pursuant to timely notice in writing to the
Secretary of the Company. To be timely such notice must be delivered to, or
mailed to and received at, the principal executive offices of the Company not
less than 120 days nor more than 180 days prior to the date of the meeting,
provided that at least 130 days' notice or prior public disclosure of the date
of the Annual Meeting is given or made to shareholders. If less than 130 days'
notice or prior public disclosure of the date of the meeting is given or made
to shareholders, notice by the shareholder must be received by the Company not
later than the close of business on the 10th day following the day on which
such notice of the date of the Annual Meeting was mailed or such public
disclosure was made. A shareholder's notice of nomination must also set forth
certain information specified in Section 3.5 of the Company's Bylaws
concerning each person the shareholder proposes to nominate for election and
the nominating shareholder. The Company has not received any nominations for
directors from shareholders.
Board of Directors Committees. The Board of Directors appointed a standing
Audit Committee in February 1995. The members of the Audit Committee currently
are Messrs. Earley and Moore and Ms. Dowdy. During the fiscal year ended
January 3, 1997, they met three times. The Audit Committee reviews the scope
and results of the independent annual audit. The Audit Committee also reviews
the scope and results of audits performed by the Company's internal auditor.
The Compensation Committee of the Board of Directors reviews employee
compensation and makes recommendations to the Board regarding changes in
compensation and also administers the Company's stock option plan and makes
grants of options thereunder. During the fiscal year ended January 3, 1997,
the Compensation Committee held one meeting. The members of the Compensation
Committee currently are Messrs. Hammons, Hart and Robert Trent Jones, Jr.
The Board of Directors of the Company established a Finance Committee in
February, 1996. The Members of the Finance Committee are Messrs. Earley, Hart
and Lopez-Ona. The Finance Committee will assist the
4
<PAGE>
Company in shareholder relations, in determining the financial feasibility of
new projects and in reviewing all Company financings over $5 million.
Board Meetings. During the fiscal year ended January 3, 1997, the Company
held five meetings of the Board of Directors.
Meeting Attendance. During the fiscal year ended January 3, 1997, all
current directors attended at least 75% of all meetings of the Board of
Directors and of the committees of the Board on which they served, except
Robert Trent Jones, Jr., who attended two meetings of the Board.
Compensation of Directors. Non-employee directors of the Company received
$1,000 for each regular Board meeting attended during the fiscal year ended
January 3, 1997. No compensation was paid to non-employee directors for
attending meetings of committees of the Board. Employee directors are not
compensated for their services as directors or committee members.
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth the salary compensation, cash bonus and
certain other forms of compensation paid by the Company and its subsidiaries
for services rendered in all capacities during the 1996, 1995 and 1994 fiscal
years to the Chief Executive Officer of the Company serving at the end of the
1996 fiscal year (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------ AWARDS/SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY UNDERLYING COMPENSATION
POSITIONS YEAR ($) BONUS ($) OPTIONS (#)(C) ($)(D)
- ------------------ ------ ------ --------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
John Q. Hammons......... 1996 $100,000 $ -- $ -- $ --
Chairman of the Board 1995 36,000 -- -- --
and
Chief Executive Officer 1994 36,000 -- -- --
David B. Jones.......... 1996 251,750 89,200 -- 3,547
President and Chief 1995 240,250 85,000 -- --
Operating
Officer 1994 232,500 82,000 175,000 --
Mel J. Volmert.......... 1996 186,375 66,937 -- 3,902
Executive Vice 1995 180,188 63,550 -- --
President--
Finance, Chief 1994(a) 159,716 61,688 131,250 --
Financial Officer and
Treasurer
Pat A. Shivers.......... 1996 112,125 30,000 -- 2,072
Senior Vice President, 1995 103,000 25,000 -- --
Administration and 1994 100,500 25,000 25,000 --
Control
Lawrence A. Welch....... 1996 110,923 38,850 -- 2,288
Vice President, Food 1995 107,192 37,800 -- --
and
Beverage 1994(b) 88,401 35,000 30,000 --
</TABLE>
5
<PAGE>
- --------
(a) Represents actual amount earned by Mr. Volmert for the 1994 fiscal year.
Mr. Volmert was not employed by the Company for the full 1994 fiscal year.
On an annualized basis, Mr. Volmert would have earned $176,250 in base
salary and the same $61,688 bonus.
(b) Represents actual amount earned by Mr. Welch for the 1994 fiscal year. Mr.
Welch was not employed by the Company for the full 1994 fiscal year. On an
annualized basis, Mr. Welch would have earned $105,000 in base salary and
the same $35,000 bonus.
(c)Options relate to Class A Common Stock.
(d)Matching contributions to Company's 401(k) Plan.
OPTION GRANTS
No stock options were granted by the Company during the fiscal year ended
January 3, 1997.
OPTION HOLDINGS
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David B. Jones.............. 87,500 87,500 -- --
Mel J. Volmert.............. 65,625 65,625 -- --
Pat A. Shivers.............. 12,500 12,500 -- --
Lawrence A. Welch........... 15,000 15,000 -- --
</TABLE>
The named executive officers did not exercise any stock options during the
fiscal year ended January 3, 1997. The $16.50 exercise price per share of all
stock options that have been granted by the Company is greater than the $8.625
closing price of the Company's Class A Common Stock as reported on the New
York Stock Exchange on January 3, 1997.
401(K) PLAN
Effective January 1, 1996, the Company adopted a contributory retirement
plan (the "401(k) Plan") for its employees age 21 and over with at least one
year of service to the Company. The 401(k) Plan is designed to provide tax-
deferred income to the Company's employees in accordance with the provisions
of Section 401(k) of the Internal Revenue Code of 1986. The 401(k) Plan
provides that the Company will make a matching contribution to each
participant's account equal to 50% of such participant's eligible
contributions up to a maximum of 3% of such participant's annual compensation.
EMPLOYMENT AGREEMENTS
David B. Jones entered into an Amended and Restated Employment Agreement
with the Company on July 28, 1996, effective January 1, 1997. Under that
agreement, Mr. Jones' annual base salary for the current year is $300,000,
plus a discretionary bonus of up to $100,000, with such annual increases in
compensation as may be determined by the Board of Directors of the Company. In
the event the Company terminates or fails to renew the agreement, Mr. Jones is
entitled to a $350,000 payment. The agreement contains significant non-
competition provisions extending for one year after termination of the
agreement. Mr. Jones' agreement continues on a year to year basis unless
either the Company or Mr. Jones terminates the agreement by giving the other
45 days' written notice.
Mr. Volmert entered into an employment agreement when he joined the Company
in January 1994. The agreement was amended July 28, 1996 to provide for a base
salary of $200,000, plus a discretionary bonus of up
6
<PAGE>
to $75,000, effective January 28, 1997. In the event the Company fails to
renew the agreement or terminates Mr. Volmert, without cause, he is entitled
to a $275,000 payment. Mr. Volmert's agreement continues on a year to year
basis unless either party terminates the agreement at the end of a one-year
term by giving the other not less than six months' written notice.
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate other filings with
the Securities and Exchange Commission ("SEC"), including this Proxy
Statement, in whole or in part, the following Report of the Compensation
Committee and Comparative Company Performance Graph shall not be incorporated
by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE
The Company's executive compensation program provides competitive levels of
compensation designed to integrate pay with the Company's annual and long term
performance goals. Underlying this objective are the following concepts:
supporting an individual pay-for-performance policy that differentiates
compensation levels based on corporate and individual performance; motivating
key senior officers to achieve strategic business objectives and rewarding
them for that achievement; providing compensation opportunities which are
competitive to those offered in the marketplace, thus allowing the Company to
compete for and retain talented executives who are critical to the Company's
long term success; and aligning the interest of executives with the long term
interest of the Company's shareholders.
In the interest of balancing all key shareholder interests, the Compensation
Committee believes that the compensation of the Chief Operating Officer and
Chief Financial Officer of the Company, along with the compensation of other
officers, should be comprised of a combination of base pay, short-term annual
incentive bonus and long-term stock options. While these elements are balanced
in total in comparison to other comparable organizations, the Compensation
Committee believes that potential compensation in the form of performance-
related variable compensation should be emphasized. Variable compensation will
be both short-term and long-term based. The resulting total package has been
designed to reward officers for the creation of long-term shareholder value in
excess of other comparable organizations.
Base Salary. In determining the appropriate amount of fixed base pay for
officers, the Compensation Committee compared the officers' base salaries with
those paid to other executives in the hotel industry.
Incentive Bonus. Each of the Chief Operating Officer and Chief Financial
Officer received bonuses for the fiscal year ended January 3, 1997,
representing 35% of their respective base salaries on an annualized basis in
accordance with their respective employment agreements. Bonuses for the fiscal
year ending January 2, 1998 to the Chief Operating Officer and Chief Financial
Officer will be as set forth above under "Executive Compensation--Employment
Agreements." The bonus component paid to other officers is structured to pay
bonuses only upon fulfillment of predetermined corporate and individual goals.
Annual bonus payouts for fiscal year ending January 2, 1998, to other officers
will range up to 35% of base salary. Full bonus payouts to other officers will
be made only if the Company's performance goals are exceeded. Bonuses to other
officers will not be available if minimum performance goals are not met.
Stock Options. To encourage growth and shareholder value, stock options are
granted under the Company's option plan to officers and other key employees
who are in a position to make substantial contributions to the long-term
success of the Company. The Compensation Committee believes that the grant of
options focuses attention on managing the Company from the perspective of an
owner with an equity stake in the business. The Compensation Committee did not
grant any options to officers and other key employees during the fiscal year
ended January 3, 1997. All options previously granted were at the fair market
value, as of the date of grant, which was the initial public offering price of
the Class A Common Stock. Since the value of an option bears a direct
relationship to the Company's stock price, it serves as an effective long-term
incentive, which is highly compatible with the interests of shareholders, and
is therefore an important element of the Company's compensation policy.
7
<PAGE>
Chief Executive Officer Compensation. Mr. Hammons' compensation as Chairman
of the Board and Chief Executive Officer for the fiscal year ended January 3,
1997 was $100,000, which is substantially below comparable compensation for
other chief executive officers in the hotel industry. Mr. Hammons'
compensation for the current fiscal year will be $150,000, which will continue
to be substantially below other chief executive officers in the hotel
industry. Prior to the fiscal year ended January 3, 1997, Mr. Hammons
established his compensation.
Compensation Committee
John Q. Hammons, Chairman and Chief Executive Officer
William J. Hart, Director
Robert Trent Jones, Jr., Director
COMPARATIVE COMPANY PERFORMANCE
The following table sets forth comparative information regarding the
Company's cumulative shareholder return on its Class A Common Stock from
November 16, 1994 (the date of the Company's initial public offering) to
December 31, 1996. Total shareholder return is measured by dividing total
dividends (assuming dividend reinvestment), if any, plus share price change
for a period by the share price at the beginning of the measurement period.
The Company's cumulative shareholder return is based on an investment of $100
on November 16, 1994 and is compared to the cumulative total return on the S&P
500 Index and the Lodging Peer Group. The graph displayed below is represented
in accordance with SEC requirements. Shareholders are cautioned against
drawing any conclusions from the data contained therein, as past results are
not necessarily indicative of future performance. These graphs in no way
reflect the Company's forecast of financial performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
JOHN Q. HAMMONS HOTELS, INC., S&P 500 INDEX AND LODGING PEER GROUP
<TABLE>
<CAPTION>
Measurement Period JOHN Q. S&P
(Fiscal Year Covered) HAMMONS HOTELS 500 INDEX PEER GROUP
- ------------------- -------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-
11/17/94 $100.00 $100.00 $100.00
FYE 12/31/94 $ 84.85 $101.48 $ 93.01
FYE 12/31/95 $ 56.06 $139.62 $123.93
FYE 12/31/96 $ 51.52 $171.68 $147.85
</TABLE>
LODGING PEER GROUP CONSISTS OF THREE COMPANIES: LAQUINTA INNS, HOST MARRIOTT
AND PRIME HOSPITALITY CORPORATION.
ASSUMES $100 INVESTED ON NOV. 17, 1994
ASSUMES DIVIDEND REINVESTED
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee for the fiscal year ended January 3, 1997, was
comprised of three directors--John Q. Hammons, William J. Hart and Robert
Trent Jones, Jr. Mr. Hammons is Chairman, Chief Executive Officer and
controlling shareholder of the Company. See "Security Ownership of
Management." Mr. Hart is a non-employee director of the Company. Mr. Hart is a
partner in the law firm of Husch & Eppenberger, which performs legal services
on a regular basis for the Company and personally for Mr. Hammons. The Company
paid such firm's predecessor, Farrington & Curtis, $118,680.39 in legal fees
during the fiscal year ended January 3, 1997.
The Partnership is controlled by Mr. Hammons through his control of the
Company, which is the sole general partner of the Partnership. His equity
interest in the Partnership (based on his beneficial ownership of 110,100
shares of Class A Common Stock of the Company, all 294,100 shares of Class B
Common Stock of the Company and all 16,043,900 limited partnership units of
the Partnership (the "LP Units") is 73.4%. There are significant potential
conflicts of interests between Mr. Hammons as a limited partner of the
Partnership, and the holders of Class A Common Stock of the Company, which
conflicts may be resolved in favor of Mr. Hammons.
Holders of LP Units have the right to require the redemption of their LP
Units. This redemption right will be satisfied, at the sole option of the
Company, by the payment of the then cash equivalent thereof or by the issuance
of shares of Class A Common Stock on a one-for-one basis. Mr. Hammons
beneficially owns all 16,043,900 LP Units. If Mr. Hammons, as a holder of LP
Units, requires the Partnership to redeem LP Units, the non-employee directors
of the Company would decide, consistent with their fiduciary duties as to the
best interests of the Company, whether to redeem the LP Units for cash or for
shares of Class A Common Stock. Mr. Hammons would not vote or otherwise
participate in the decision of the non-employee directors. Mr. Hammons has
informed the Company that he has no current plan to require the Partnership to
redeem his LP Units.
During 1996, the Partnership provided management services to five hotels not
owned by the Company (the "Managed Hotels") pursuant to management contracts
(the "Management Contracts"). Three of the Managed Hotels are owned by Mr.
Hammons and one is owned 50% by Mr. Hammons; 25% by Jacqueline A. Dowdy, the
Secretary and a director of the Company; and 25% by Daniel L. Earley, a
director of the Company. The fifth hotel was sold in 1996, and prior to the
sale was owned 90% by Mr. Hammons. Management fees of approximately 3% of
gross revenues were paid to the Company by the Managed Hotels in the aggregate
amount of $717,275 in the fiscal year ended January 3, 1997. Each of the
Management Contracts is for an initial term of 20 years, which automatically
extends for four periods of five years, unless otherwise canceled. In addition
to the management fees paid by the Managed Hotel to the Partnership in that
year, the Managed Hotels reimbursed the Company for a portion of the salaries
paid by the Company to its five regional vice presidents, whose duties include
management services related to the Managed Hotels, and for certain marketing
and other expenses allocated to the Managed Hotels. Such reimbursed services
and expenses aggregated $173,485 in such fiscal year.
The Partnership has an option granted by Mr. Hammons or persons or entities
controlled by him to purchase the Managed Hotels. The options are effective
until February 2009. If an option is exercised, the purchase price is based on
a percentage of the fair market value of the Managed Hotel as determined by an
appraisal firm of national standing. One hotel owned by the Company and two
Managed Hotels are located in Springfield, Missouri. These hotels are
potentially competing with one another for customers. The Company, however,
believes that these hotels do not significantly compete with one another due
to their respective locations and attributes.
Mr. Hammons has a 45% ownership interest in Winegardner & Hammons, Inc.
("WHI"). All of the hotels owned by the Company (the "Owned Hotels") have
contracted with WHI to provide accounting and other administrative services.
The accounting and administrative charges expensed by the Owned Hotels were
approximately $1.2 million in the fiscal year ended January 3, 1997. The fee
may increase if the number of hotels for which accounting and administrative
services are performed drops below 35 hotels. The accounting services contract
expires in June 1999.
9
<PAGE>
The Company leases space in the John Q. Hammons Building for its
headquarters from a Missouri general partnership, of which Mr. Hammons is a
50% partner and the remaining 50% is collectively held by other employees,
including Jacqueline A. Dowdy, the Secretary and a director of the Company,
who is a 9.5% partner. Pursuant to four lease agreements, expiring December
31, 1998, the Company pays monthly rental payments of approximately $19,250.
The Company made aggregate annual lease payments to the Missouri general
partnership of approximately $220,000 in 1996.
Mr. Hammons also owns trade centers adjacent to three of the Owned Hotels
(the "JQH Trade Centers"). The Company leases the convention space in the JQH
Trade Center located in Portland, Oregon from Mr. Hammons pursuant to a long-
term lease expiring in 2004, requiring annual payments of approximately
$300,000. With respect to the other two JQH Trade Centers, the Company makes
nominal annual lease payments to Mr Hammons. The Company has assumed
responsibility for all operating expenses of the JQH Trade Centers.
The Company leases the real estate on which the Company's new Chateau on the
Lake Resort, in Branson, Missouri, is built from Mr. Hammons. When the hotel
opens in mid-1997, annual rent will be $80,000 in the first year of operation,
and $120,019 in the second year. Thereafter, rent will be an amount based on
adjusted gross revenues from room sales on the property. The lease runs for 50
years, with an option to renew for an additional 10 years. The Company also
has an option to purchase the land after March 1, 2118 at the greater of
$3,000,000 or the current appraised value.
The Company also leases the real estate on which the Company's Embassy
Suites hotel in Little Rock, Arkansas, is built from Mr. Hammons. When the
hotel opens in the fall of 1997, annual rent will be $80,000 for the first
year of operation, $100,000 for the second year, and $120,000 a year for the
next three years. The lease runs for 55 years, with options to renew for three
10-year periods. The Company has an option to purchase the land at any time
after the fifth lease year, for the greater of $1,900,000 or the current
appraised value.
Mr. Hammons owns parcels of undeveloped land throughout the United States.
Although there are no current plans to do so, the Company may purchase or
lease one or more of these parcels in the future in order to develop hotels.
Since Mr. Hammons controls the Company, such transactions would not be arms-
length transactions but will be subject to restrictions contained in the
indentures relating to the Partnership's outstanding mortgage notes due in
2004 and 2005.
The Company receives no management fee or similar compensation in connection
with its management of the Partnership. The Company receives the following
remuneration from the Partnership; (i) distributions, if any, in respect of
its equity interest in the Partnership; and (ii) reimbursement for all direct
and indirect costs and expenses incurred by the Company for or on behalf of
the Partnership and all other expenses necessary or appropriate to the conduct
of the business of, and allocable to, the Partnership.
SECTION 16(A) COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers to file with the SEC initial reports of ownership of the Company's
equity securities and to file subsequent reports when there are changes in
such ownership. Based on a review of reports submitted to the Company, the
Company believes that all Section 16(a) filing requirements applicable to the
Company's directors and officers during the fiscal year ended January 3, 1997,
were complied with on a timely basis.
CERTAIN TRANSACTIONS
As of January 1, 1996, the Company entered into a two year agreement with
Anvil Capital, an investment firm owned by Mr. Lopez-Ona, a director of the
Company, to provide financial consulting services in exchange for an annual
payment of $188,000 (including expenses) by the Company. Mr. Hammons also has
engaged Anvil Capital to provide personal financial advisory services. Mr.
Hammons and Anvil Capital also have formed a limited liability company to
invest in securities of one or more companies in industries unrelated to the
Company's business.
10
<PAGE>
For a description of other transactions regarding Mr. Hammons and the
Company or the Partnership and Mr. Hart and the Company, see "Compensation
Committee Interlocks and Insider Participation."
The Company is unaware of any other transactions to which the Company is a
party in which any director or executive officer of the Company has or will
have a direct or indirect material interest.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of March 1, 1997 regarding the
beneficial ownership of Class A and Class B Common Stock of the Company by
each of the Company's executive officers and directors, and by the Company's
executive officers and directors as a group. The number of shares of Class A
Common Stock shown in the table gives effect to the conversion of all 294,100
shares of Class B Common Stock into an equal number of shares of Class A
Common Stock and also gives effect to the redemption of all 16,043,900 LP
Units of the Partnership for shares of Class A Common Stock on a one-for-one
basis, as described in footnote (b) below. Except as indicated in the
footnotes, all shares set forth in the table are owned directly, and the
indicated person has sole voting and investment power with respect to all
shares shown as beneficially owned by such person.
<TABLE>
<CAPTION>
NAME AND SHARES OF CLASS A COMMON
ADDRESS OF STOCK SHARES OF CLASS B COMMON STOCK
BENEFICIAL ------------------------------------ ------------------------------------
OWNER (A) NUMBER OF SHARES PERCENTAGE NUMBER OF SHARES PERCENTAGE
---------- ---------------- ---------- ------------------ -------------
<S> <C> <C> <C> <C>
Executive Officers and
Directors:
John Q. Hammons....... 16,448,100(b) 73.4% 294,100 100%
David B. Jones........ 87,992(c) 1.4
Mel J. Volmert........ 67,859(d) 1.4
Jacqueline A. Dowdy... 7,817(e) *
Daniel L. Earley...... 2,000 *
William J. Hart....... 300 *
Robert Trent Jones,
Jr................... -- --
John E. Lopez-Ona..... 6,000 *
James F. Moore........ 5,000 *
Pat A. Shivers........ 12,500(f) *
Glenn R. Malone....... 18,930(g) *
Stephen E. Minton..... 12,500(f) *
John D. Fulton........ 12,500(f) *
Lawrence A. Welch..... 16,273(h) *
Debra M. Shantz....... 500 *
All executive officers
and directors, 16,688,271(b)(c)(d)
as a group (15)........ (e)(f)(g)(h) 73.8 294,100 100%
</TABLE>
- --------
*Less than 1%
(a) The address of each of the executive officers and directors of the Company
is 300 John Q. Hammons Parkway, Suite 900, Springfield, Missouri 65806.
(b) Includes 110,100 outstanding shares of Class A Common Stock. Also includes
294,100 shares of Class B Common Stock convertible into Class A Common
Stock on a share-for-share basis at any time and which will be
automatically converted into Class A Common Stock upon the occurrence of
certain events. Prior to conversion of the Class B Common Stock and
without giving effect to the redemption of the LP Units, the Class B
Common Stock (which has 50 votes per share) represents 70.88% of the
combined voting power of both classes of the Company's outstanding Company
Stock. In addition, includes 16,043,900 LP Units of the Partnership
redeemable, at the sole option of the Company, by payment of the then cash
equivalent of such LP Units or by the issuance of shares of Class A Common
Stock on a one-for-one basis. Remaining LP Units are owned for Mr.
Hammons' benefit through Hammons, Inc., of which the John Q. Hammons
Revocable Living Trust dated December 26, 1986, as amended, is the sole
shareholder.
11
<PAGE>
(c) Includes 87,500 shares subject to options which are exercisable within 60
days, and 492 shares allocated to 401(k) Plan account as of the end of
1996.
(d) Includes 65,625 shares subject to options which are exercisable within 60
days, and 234 shares allocated to 401(k) Plan account as of the end of
1996.
(e) Includes 7,738 shares subject to options which are exercisable within 60
days, and 79 shares allocated to 401(k) Plan account as of the end of 1996.
(f) 12,500 shares subject to options which are exercisable within 60 days.
(g) Includes 15,000 shares subject to options which are exercisable within 60
days and 430 shares allocated to 401(k) Plan account as of the end of 1996.
(h) Includes 15,000 shares subject to options which are exercisable within 60
days and 317 shares allocated to 401(k) Plan account as of the end of 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information at March 1, 1997 with respect to
ownership of Class A Common Stock by each person believed by management to be
the beneficial owner of more than 5% of the outstanding Class A Common Stock.
The information set forth below is based on beneficial ownership information
contained in the most recent Schedule 13D or 13G filed on behalf of such person
with the SEC. The percentages shown are based on the outstanding shares of
Class A Common Stock or the redemption of the LP Units for Class A Common
Stock, as described in footnote (b) under "Security Ownership of Management."
<TABLE>
<CAPTION>
PERCENT OF CLASS A
NAME AND ADDRESS OF AMOUNT AND NATURE OF COMMON STOCK
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
- ------------------- -------------------- ------------------
<S> <C> <C>
The Equitable Companies Incorporated... 1,881,000(a) 31.1%
787 Seventh Avenue
New York, NY 10019
Morgan Stanley Group, Inc.............. 1,286,700(b) 21.3%
1585 Broadway
New York, NY 10036
Massachusetts Financial Services 549,300(c) 9.1%
Company...............................
500 Boylston Street
Boston, MA 02116-3741
</TABLE>
- --------
(a) Based on Amendment to Schedule 13G dated February 12, 1997. According to
the Amendment, Alliance Capital Management, L.P. has sole dispositive power
as to all such shares and sole voting power as to 1,640,000 of such shares.
Alliance Capital Management, L.P. is a subsidiary of The Equitable
Companies Incorporated. The filing was also made on behalf of AXA, which
beneficially owns a majority interest in The Equitable Companies
Incorporated and the following five companies which, as a group,
beneficially own a majority interest in AXA: AXA Assurances I.A.R.D.
Mutuelle; AXA Assurances Vie Mutuelle; Alpha Assurances I.A.R.D. Mutuelle;
Alpha Assurances Vie Mutuelle; and AXA Courtage Assurances Mutuelle.
(b) Based on Schedule 13G dated February 14, 1997. According to the Schedule
13G, Morgan Stanley Group, Inc. has sole dispositive power as to all such
shares and shared voting power as to 1,044,900 shares. Morgan Stanley Asset
Management Inc. holds shared voting power as to 840,000 shares and shared
dispositive power as to 1,081,000 shares. Morgan Stanley Institutional Fund
Inc.--U.S. Real Estate Portfolio holds shared dispositive power as to
473,000 of such shares. Also includes 317,900 shares held by Morgan Stanley
SICAV Real Estate Fund.
(c) Based on Amendment to Schedule 13G dated February 12, 1997. According to
the Amendment, Massachusetts Financial Services Company has sole voting and
dispositive power as to all such shares, and the shares are also
beneficially owned by MFS Series Trust II--MFS Emerging Growth Fund.
12
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Mr. Lopez-Ona made one late filing, on Form 3. Mr. Hammons filed three
reports late (for a total of nine transactions occurring in February 1996,
March 1996 and February 1997).
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL TWO)
The Board of Directors has appointed the firm of Arthur Andersen LLP to act
as independent auditors for the Company for the fiscal year ending January 2,
1998, subject to ratification of such appointment by the Company's
shareholders. Representatives of Arthur Andersen LLP will be present at the
Annual Meeting, will have the opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
Arthur Andersen LLP was retained by the Company in 1993 to act as
independent auditors for the Company in connection with an audit for the 1990,
1991, 1992 and 1993 fiscal years. The firm was subsequently retained in
connection with an audit for the 1994, 1995 and 1996 fiscal years.
Unless otherwise indicated, properly executed proxies will be voted in favor
of ratifying the appointment of Arthur Andersen LLP to audit the books and
accounts of the Company for the fiscal year ending January 2, 1998. No
determination has been made as to what action the Board of Directors would
take if the shareholders do not ratify the appointment.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company's proxy
statement and form of proxy relating to the Company's 1998 annual meeting of
shareholders must be received by the Company by December 3, 1997, pursuant to
the proxy soliciting regulations of the SEC. In addition, the Company's Bylaws
require that notice of shareholder proposals and nominations for director be
delivered to the Secretary of the Company not less than 120 days nor more than
180 days prior to the date of an annual meeting, unless notice or public
disclosure of the date of the meeting occurs less than 130 days prior to the
date of such meetings, in which event, shareholders may deliver such notice
not later than the 10th day following the day on which notice of the date of
the meeting was mailed or public disclosure thereof was made. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement or the form of proxy for such meting any shareholder proposal which
does not meet the requirements of the SEC in effect at the time.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matters to be presented for action by the
shareholders at the 1997 Annual Meeting. If, however, any other matters not
now known are properly brought before the meeting, the persons named in the
accompanying proxy will vote such proxy in accordance with the determination
of a majority of the Board of Directors.
13
<PAGE>
JOHN Q. HAMMONS HOTELS, INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned shareholder of John Q. Hammons Hotels, Inc. (the "Company")
hereby appoints Marilyn Smilie as proxy to cast all votes which the undersigned
shareholder is entitled to cast at the annual meeting of shareholders (the
"Annual Meeting") to be held on Thursday, May 1, 1997 at 10:00 a.m., local
time, at the Holiday Inn University Plaza Hotel, 333 John Q. Hammons Parkway,
Springfield, Missouri, and at any adjournments thereof, upon the following
matters. The undersigned shareholder hereby revokes any proxy or proxies
heretofore given.
This proxy will be voted as directed by the undersigned shareholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED IN PROPOSAL 1, AND FOR PROPOSAL 2, AND IN ACCORDANCE WITH THE
DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS AS TO OTHER MATTERS. The
undersigned shareholder may revoke this proxy at any time before it is voted by
delivering to the Treasurer of the Company either a written revocation of the
proxy or a duly executed proxy bearing a later date, or by appearing at the
Annual Meeting and voting in person. The undersigned shareholder hereby
acknowledges receipt of the Notice of Annual Meeting and Proxy Statement.
(continued and to be signed and dated on reverse side)
1. Election of Directors.
For three-year terms: Daniel L. Earley, John Q. Hammons and James F. Moore.
FOR all nominees listed WITHHOLD AUTHORITY to vote for
above (except as marked to all nominees listed above
the contrary below).
[_] [_]
- --------------------------------------------------------------------------------
(Instruction: To withhold authority to vote for any individual nominee, print
that nominee's name in the space provided.)
2. Ratification of appointment of Arthur Andersen LLP as independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In her discretion, the proxy is
authorized to vote upon such other business
as may properly come before the meeting, or
any adjournments thereof.
IF YOU RECEIVE MORE THAN ONE PROXY CARD,
PLEASE SIGN AND RETURN ALL CARDS IN THE
ACCOMPANYING ENVELOPE.
Date: _______________________________________
---------------------------------------------
Signature of Shareholder or Authorized
Representative
Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary should
sign and indicate his or her full title. Only one signature is required in the
case of Stock ownership in the name of two or more persons, but all should sign
if possible.
