<PAGE> 1
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
PROXY STATEMENT
SUPERTEL HOSPITALITY, INC.
309 North 5th Street
Norfolk, Nebraska 68701
(402) 371-2520
SUPERTEL HOSPITALITY, INC.
<PAGE> 2
SUPERTEL HOSPITALITY, INC.
309 North 5th Street
Norfolk, Nebraska 68701
(402) 371-2520
NOTICE OF MEETING
To Supertel Hospitality, Inc. Stockholders:
The annual meeting of stockholders of Supertel Hospitality, Inc. will be
held on May 1, 1998 at 2:00 p.m. local time, at The Doubletree Inn, 1616 Dodge
Street, Omaha, Nebraska 68102.
We hope you will be able to attend the Annual Stockholders' Meeting. If you
do not expect to be present and wish your stock to be voted, please sign, date
and mail the enclosed proxy form. If you later decide to attend the meeting,
you may withdraw your proxy at that time and vote your shares in person.
Matters to be considered by the stockholders:
Item 1. Election of Directors.
Item 2. Approval of the appointment of the independent accountants for
fiscal year 1998.
Stockholders of record as of the close of business on March 13, 1998 are
eligible to vote at the Annual Stockholders' Meeting.
By order of the Board of Directors
Paul J. Schulte, President and
Chief Executive Officer
March 24, 1998
<PAGE> 3
PROXY STATEMENT
Annual Meeting of Stockholders to be held May 1, 1998
To our Stockholders:
The Board of Directors of Supertel Hospitality, Inc. ("Supertel")
solicits your proxy in the form enclosed for use at the Annual Meeting of
Stockholders to be held on Friday, May 1, 1998.
Stockholders of record at the close of business on March 13, 1998 are
entitled to vote at the meeting. Supertel at March 13, 1998 had issued and
outstanding 4,840,000 shares of common stock. All holders of common stock are
entitled to one vote for each share of stock held by them.
The presence of a majority of the outstanding shares of common stock,
represented in person or by proxy at the meeting, will constitute a quorum.
Common shares represented by proxies that are marked "abstain" will be counted
as shares present for purposes of determining the presence of a quorum. Proxies
relating to "street name" shares that are voted by brokers on some matters will
be treated as shares present for purposes of determining the presence of a
quorum, but will not be treated as shares entitled to vote at the annual
meeting on those matters as to which authority to vote is withheld by the
broker ("broker non-votes").
The five nominees receiving the highest vote totals will be elected as
directors of Supertel. Accordingly, abstentions and broker non-votes will not
affect the outcome of the election of directors. All other matters to be voted
on will be decided by the affirmative vote of a majority of the common shares
present or represented at the meeting and entitled to vote. On any such matter,
an abstention will have same effect as a negative vote. A broker non-vote will
not be counted as an affirmative vote or a negative vote because shares held by
brokers will not be considered entitled to vote on matters as to which the
brokers withhold authority.
A stockholder giving a proxy may revoke it before the meeting by
mailing a signed instrument revoking the proxy to: Secretary, Supertel
Hospitality, Inc., 309 North 5th Street, Norfolk, Nebraska, 68701. To be
effective, the revocation must be received by the Secretary prior to May 1,
1998. A stockholder may attend the meeting in person, and at that time withdraw
his or her proxy and vote in person. This proxy statement is being mailed to
stockholders on or about March 24, 1998.
The cost of solicitation of proxies, including the cost of reimbursing
the banks and brokers for forwarding proxies and proxy statements to their
principals, will be borne by Supertel.
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<PAGE> 4
CERTAIN STOCKHOLDERS
The following table sets forth information relating to the beneficial
ownership of Supertel's common stock by each person known to Supertel to be the
beneficial owner of more than 5% of the outstanding shares of common stock, by
each director, by each executive officer, and by all directors and executive
officers as a group.
<TABLE>
<S> <C> <C>
Beneficial
Name and Address of Ownership as of Percent
Beneficial Owner March 13, 1998 of Class
- --------------------------------------------------------------------------
Paul Schulte 702,135(1) 14.3%(1)
309 North 5th Street
Norfolk, NE 68701
Steve Borgmann 764,458(1) 15.6%(1)
309 North 5th Street
Norfolk, NE 68701
Loren Steele 7,500(1) (2)
Joseph Caggiano 8,000(1) (2)
Richard Herink 40,000(1) (2)
Troy Beatty 5,200(1) (2)
KPM Investment Management, Inc.
10250 Regency Circle
Omaha, Nebraska 68114 291,100(3) 6.0%
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109 452,000(3) 9.3%
Southeastern Asset Management, Inc.
6410 Poplar Avenue
Memphis, Tennessee 38119 558,346(3) 11.5%
All Executive Officers and
Directors as a Group 1,527,293 31.1%
(6 persons)
</TABLE>
____________________
(1) Beneficial ownership includes shares owned by spouses and minor children
and shares which the persons indicated have the right to acquire through
the exercise of stock options as follows: Mr. Steele and Mr. Caggiano,
6,000 shares each; Mr. Schulte and Mr. Borgmann, 17,500 shares each; Mr.
Schulte's spouse, 7,000 shares; Mr. Herink, 13,000 shares; and Mr. Beatty,
4,000 shares. Beneficial ownership also includes shares indirectly owned
through corporations as follows: Mr. Schulte, 37,504 shares; and Mr.
Borgmann, 82,932 shares.
(2) Less than 1% of the outstanding common stock.
(3) Based on Schedule 13G filed with the Securities and Exchange
Commission in February 1998.
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<PAGE> 5
ELECTION OF DIRECTORS
Supertel's Board of Directors is composed of five members elected on an
annual basis.
The following table sets forth Supertel's nominees for the Board of
Directors. Each nominee is a member of the present Board of Directors. Mr.
Schulte and Mr. Borgmann have served as directors of Supertel since its
formation. Mr. Steele and Mr. Caggiano have served as directors since February
1994. Mr. Herink became a director in February 1997. Supertel became subject to
the reporting requirements of the Securities Exchange Act of 1934 upon
completion of its initial public offering on May 3, 1994. For information
concerning the ownership of Supertel common stock by the nominees, see "Certain
Stockholders".
PAUL J. SCHULTE
Mr. Schulte, age 64, is President and Chief Executive Officer of
Supertel. Mr. Schulte has been involved in acquiring, developing,
owning, managing and operating economy motels for Supertel or its
predecessors since 1978.
STEVE H. BORGMANN
Mr. Borgmann, age 52, is Executive Vice President and Chief Operating
Officer of Supertel. Mr. Borgmann has been involved in acquiring,
developing, owning, managing end operating economy motels for Supertel
or its predecessors since 1978.
LOREN STEELE
Mr. Steele, age 57, is a director of Super 8 Motels, Inc., a wholly
owned subsidiary of Cendant Corp. (a publicly-owned franchiser of
hotels and motels). Mr. Steele is also Chairman of the International
Franchise Association. From 1988 through April 1993, Mr. Steele was
Vice Chairman and Chief Executive Officer of Super 8 Enterprises Motel
System, Inc. (franchiser of Super 8 Motels).
JOSEPH CAGGIANO
Mr. Caggiano, age 72, has served as Vice Chairman Emeritus of Bozell,
Jacobs, Kenyon & Eckhardt, Inc. from 1991 to the present. From 1974 to
1991, Mr. Caggiano served as Chief Financial Officer and Vice Chairman
of the Board of Bozell & Jacobs (advertising and public relations). Mr.
Caggiano is also a director of First Omaha Funds.
RICHARD HERINK
Mr. Herink, age 44, became Executive Vice President of Supertel in
August 1995. From April 1993 to August 1995, he was Executive Vice
President of FirsTier Bank, N.A., Norfolk. Prior to April 1993, he
was a Division President with Farm Credit Services of the Midlands.
The proxies will be voted for the election of these nominees; however,
in the event any nominee should become unavailable, which the Board of
Directors has no reason to believe will be the case, the proxy holders will
have discretionary authority in that instance to vote the proxies for a
substitute.
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<PAGE> 6
DIRECTOR MEETINGS AND COMPENSATION
The Board of Directors meets on a regularly scheduled basis. The Board
of Directors met seven times during 1997. The Board of Directors has assigned
certain responsibilities to committees. Supertel does not have a standing
Nominating Committee.
The Audit Committee, which met four times in 1997, is responsible for
recommending the appointment of Supertel's independent public accountants,
reviewing the scope of the audits recommended by the independent public
accountants, and consulting with the independent public accountants on a
periodic basis on matters relating to financing controls and procedures.
Members of the Audit Committee are Joseph Caggiano (Chairman) and Loren Steele.
The Compensation Committee, which met five times in 1997, determines
the amounts and types of remuneration to be paid to management employees and
administers compensation plans for management employees. Members of the
Compensation Committee are Loren Steele (Chairman) and Joseph Caggiano.
Directors who are not employees of Supertel receives fees of $12,000
per annum plus $750 per board and committee meeting attended (other than
meetings by written consent or telephone communications). In addition, each
non-employee director receives an option to acquire 1,500 shares of common
stock, exercisable at the market price of the shares on the grant date, each
year following such director's election at the annual stockholders' meeting.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows compensation paid by
Supertel for services rendered during calendar years 1997, 1996 and 1995 for
the executive officers of Supertel whose salary and bonus for 1997 exceeded
$100,000.
<TABLE>
<CAPTION>
=========================================================================================================
Annual Compensation Long-Term
Compensation
=========================================================================================================
Name and Principal Position Year Salary Bonus Number of Options
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul Schulte 1997 $250,000 $25,000 7,500
President and 1996 $250,000 -0- 5,000
Chief Executive Officer 1995 $250,000 $10,000 5,000
- ----------------------------------------------------------------------------------------------------------
Steve Borgmann 1997 $250,000 $25,000 7,500
Executive Vice President and 1996 $250,000 -0- 5,000
Chief Operating Officer 1995 $250,000 $10,000 5,000
- ----------------------------------------------------------------------------------------------------------
Richard Herink 1997 $132,000 $15,000 10,000
Executive Vice President(1) 1996 $132,000 -0- 3,000
1995 $ 41,015 $ 4,400 -0-
- ----------------------------------------------------------------------------------------------------------
Troy Beatty 1997 $100,000 $10,000 4,000
Senior Vice President and 1996 -- -- --
Chief Financial Officer (1) 1995 -- -- --
=========================================================================================================
</TABLE>
Mr. Herink became an executive officer of Supertel in August 1995. Mr.
Beatty became an executive officer of Supertel in December 1996.
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<PAGE> 7
OPTION GRANTS IN 1997
The following table sets forth information on grants of stock options
during 1997 to the executive officers named in the Summary Compensation Table.
No stock appreciation rights were granted during 1997.
<TABLE>
<CAPTION>
====================================================================================================================
Potential Realizable Value at
Percent of Assumed Annual Rates of Stock
Total Options Per Share Price Appreciation for Option
Number of Granted to Exercise Term(2)
Options Employees in Price Expiration ===============================
Name Granted(1) Fiscal 1997 Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul Schulte 7,500 13.2% $10.00 2-17-07 $47,250 $119,250
- --------------------------------------------------------------------------------------------------------------------
Steve Borgmann 7,500 13.2% $10.00 2-17-07 $47,250 $119,250
- --------------------------------------------------------------------------------------------------------------------
Richard Herink 5,000 17.6% $8.875 1-21-07 $27,956 $70,556
5,000 $10.00 2-17-07 $31,500 $79,500
- --------------------------------------------------------------------------------------------------------------------
Troy Beatty 4,000 7.1 % $10.00 2-17-07 $25,200 $63,600
====================================================================================================================
</TABLE>
(1) The options were granted at the then fair market value of Supertel's
common stock. All of the options were granted on February 17, 1997 and
become exercisable on February 17, 1998, with the exception of a grant
of 5,000 options to Mr. Herink on January 21, 1997 which become
exercisable on January 21, 1998.
(2) Potential realizable value is based on the assumption that the common
stock price appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten-year option term.
Supertel's common stock price at the end of the ten-year term based on a
$10.00 exercise price and a 5% appreciation would be $16.30 and
Supertel's common stock price at the end of the 10-year term based on a
$10.00 exercise price and a 10% appreciation would be $25.90. The numbers
are calculated based on the requirements promulgated by the Securities and
Exchange Commission. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on
the date the option is exercised (if the executive were to sell the shares
on the date of exercise), so there is no assurance that the value realized
will be at or near the potential realizable value as calculated in this
table.
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<PAGE> 8
OPTION EXERCISES IN FISCAL 1997 AND YEAR-END VALUES
The following table sets forth information on aggregate option exercises
in 1997 and information with respect to the value of unexercised options to
purchase Supertel's Common Stock for the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
====================================================================================================================
Value of Unexercised In-The-
Number of Number of Unexercised Options Money Options Held at
Shares Held at December 31, 1997 December 31, 1997(1)
Acquired on Value --------------------------------------------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul Schulte -0- -0- 10,000 7,500 -0- -0
- --------------------------------------------------------------------------------------------------------------------
Steve Borgmann -0- -0- 10,000 7,500 -0- -0-
- --------------------------------------------------------------------------------------------------------------------
Richard Herink -0- -0- 3,000 10,000 -0- 5,625
- --------------------------------------------------------------------------------------------------------------------
Troy Beatty -0- -0- -0- 4,000 -0- -0
====================================================================================================================
</TABLE>
(1) Value is common stock closing price on December 31, 1997, less the option
exercise price, multiplied by the number of shares.
CERTAIN AGREEMENTS AND TRANSACTIONS
Supertel is a party to employment agreements with Messrs, Schulte,
Borgmann and Herink. Each employment agreement is for a term extending through
December 31, 1998. is annually renewable thereafter, and requires the executive
to refrain from competing with Supertel for one year following termination of
employment. Each employment agreement provides for payment of base salary,
participation in bonus and option plans to the extent determined by the
Compensation Committee, and payment of normal business expenses. If Supertel
terminates an executive without cause (as defined in each employment agreement),
Supertel is required to pay the executive's base salary for the remaining term
of the employment agreement, but in no event for a period of less than twelve
months.
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<PAGE> 9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Supertel's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee is composed of non-employee directors. The Committee's executive
compensation policies are designed to provide competitive levels of compensation
which integrate pay with Supertel's annual and long-term performance goals,
reward above average corporate performance, and assist Supertel in attracting,
motivating and retaining qualified executives.
The program consists of three components: base salary, annual incentives
and long-term incentives. The Committee recommended or established the executive
compensation within each of these components during 1997. In determining
competitive levels of compensation, the Committee obtains and utilizes
information such as executive compensation surveys and comparative analyses of
compensation data in proxy statements of others. The Committee intends to
structure all executive compensation so that such payments will be deductible
under Section 162 (m) of the Internal Revenue Code.
Base Salary. The Committee targets base salary for executives at a level
comparable to base salaries paid by competitive businesses in the same
geographic area. The base salary paid during 1997 to Supertel's chief executive
officer and chief operating officer was established prior to the completion of
Supertel's initial public offering in May 1994 and has not been increased
following such date. The Committee intends to annually review base salaries for
executive officers.
Annual Incentives. The Committee believes that an executive's
contribution to net income should form the basis for annual incentives, since
such results maximize earnings in the best interests of the corporation. For
1997, the Committee granted cash bonuses to executive officers in amounts
approximating 10% of each executive officer's base salary.
Long-Term Incentives. Supertel's long-term incentives for executive
officers are provided through stock options under Supertel's 1994 Stock Option
Plan and 1997 Stock Plan. The Committee intends to grant stock options at the
prevailing market price of Supertel's common stock, and therefore any option
grants will have value only if Supertel's stock price increases. The size of
option grants are expected to be based upon competitive practice and position
level, the expected contribution of each member of the executive officer group
to Supertel's strategic and operational goals, and the Committee's desire to
provide certain executive officers with an opportunity to build a meaningful
stake in Supertel. Past stock option grants are not considered when determining
the number of stock options to grant in a given year.
-9-
<PAGE> 10
The Committee granted options to acquire an aggregate of 56,700 shares
to 46 employees during 1997. The grants to executive officers are set forth
under "Option Grants in 1997" above. The grants reflect the Committee's policy
of issuing stock options for 20% to 25% of the shares authorized under the Stock
Plans on an annual basis, and issuing options to Supertel's executive officers
at a level substantially above the grants for other employees.
Compensation of Chief Executive Officer. The Committee intends to review
the compensation of the Chief Executive Officer on an annual basis. During 1997,
the Committee did not make any change in the base salary of the Chief Executive
Officer from that existing prior to Supertel's initial public offering in May
1994.
Supertel Hospitality, Inc.
Compensation Committee
Loren Steele, Chairman
Joseph Caggiano
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<PAGE> 11
STOCK PRICE PERFORMANCE GRAPH
The following performance graph compares the performance of Supertel's
common stock to the Total Return Index for the NASDAQ Stock Market-United States
Companies (Broad Market Index) and the S & P Hotel/Motel Index. The performance
graph shows cumulative stockholder returns. The performance graph assumes the
value of the investment in Supertel's common stock and each Index was $100 on
May 1, 1994 (immediately prior to the completion of Supertel's initial public
offering on May 3, 1994) and that any dividends were reinvested.
[GRAPH]
<TABLE>
<CAPTION>
========================================================================================
[ ] Supertel [ ] NASDAQ [] S&P Hotel/Motel
Hospitality, Inc. Composite Index Index
PRICE INDEX PRICE INDEX PRICE INDEX
<S> <C> <C> <C> <C> <C> <C>
May 1, 1994 $10.00 100.00 $740.68 100.00 $298.77 100.00
December 31, 1994 12.75 127.50 751.96 101.52 302.00 101.08
December 31, 1995 10.00 100.00 1,052.14 142.05 353.46 118.31
December 31, 1996 9.00 90.00 1,291.03 174.30 407.07 136.25
December 31, 1997 10.00 100.00 1,570.35 212.01 548.85 183.70
=========================================================================================
</TABLE>
- 11 -
<PAGE> 12
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be included in Supertel's proxy
statement for the 1999 annual meeting must be received by Supertel no later than
December 1, 1998 in order for such proposals to be considered for inclusion in
Supertel's proxy statement relating to such meeting.
Supertel's bylaws set forth certain procedures which stockholders must
follow in order to nominate a director or present any other business at an
annual stockholders' meeting. Generally, a stockholder must give timely notice
to the Secretary of Supertel. To be timely, such notice must be received by
Supertel at 309 North 5th Street, Norfolk, Nebraska, 68701, not less than thirty
nor more than sixty days prior to the meeting. The bylaws specify the
information which must accompany any such stockholder notice. Details on these
provisions of the bylaws may be obtained by any stockholder from the Secretary
of Supertel.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors to file reports of changes in ownership of Supertel's
common stock with the U.S. Securities and Exchange Commission. Executive
officers and directors are required by SEC regulations to furnish Supertel with
copies of all Section 16(a) forms so filed. Based solely on a review of the
copies of such forms furnished to Supertel and written representations from
Supertel's executive officers and directors, Supertel believes that all persons
subject to these reporting requirements filed the required reports on a timely
basis during 1997, except that one transaction by Richard Herink, an executive
officer, was not reported on a timely basis.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick has been appointed by the Board of
Directors to conduct the 1998 audit of Supertel's financial statements. The same
firm conducted the 1997 audit. The Board of Directors requests stockholder
approval of their appointment. A representative of KPMG Peat Marwick will be
present at the Annual Stockholders' Meeting and will have the opportunity to
make a statement and to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any other matter that may be
presented for action an the annual meeting of stockholders. If any other matter
or proposal should be presented and should properly come before the meeting for
action, the persons named in the accompanying proxy will vote upon such matter
and upon such proposal in accordance with their best judgment.
By Order of the Board of Directors
Steve H. Borgmann, Secretary
Supertel Hospitality, Inc.
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<PAGE> 13
SUPERTEL HOSPITALITY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS MAY 1, 1998
The undersigned hereby constitutes and appoints Paul Schulte and Steve
Borgmann, or either of them, with full power of substitution in each of them,
for and on behalf of the undersigned to vote as proxies, as directed and
permitted herein at the Annual Meeting of Stockholders of Supertel to be held
at the Doubletree Inn, 1616 Dodge Street, Omaha, Nebraska, 68102, on May 1,
1998 at 2:00 p.m. and at any adjournment thereof, upon matters set forth in
the Proxy Statement, and in their judgment and discretion, upon such other
business as may properly come before the meeting.
ITEM 1.
Election of Directors - For the following nominees for Director: Paul Schulte,
Steve Borgmann, Richard Herink, Loren Steele and Joseph Caggiano.
VOTE FOR WITHHOLD VOTE WITHHOLD VOTE FOR ONLY
ALL NOMINEES FOR ALL NOMINEES THE FOLLOWING NOMINEE(S):
[ ] [ ] -----------------------------------
ITEM 2.
Approval of appointment of independent accountants KPMG Peat Marwick for
fiscal 1998:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy, when
properly executed, will be voted in the manner directed herein by the
undersigned stockholder. If properly executed and no direction is made, this
proxy will be voted FOR proposals 1 and 2.
Dated this day of , 1998. Signature
---- ---------- ------------------------------
Signature
------------------------------
(When signing as attorney,
executor, administrator,
trustee, guardian or
conservator, designate full
title. All joint tenants must
sign.)
<PAGE> 14
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TO COME
