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>
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 April 23, 1999 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 1999.
Stockholders of record as of the close of business on March 12, 1999 are
eligible to vote at the Annual Stockholders' Meeting.
By order of the Board of Directors
/s/ Paul J. Schulte
Paul J. Schulte, President and
Chief Executive Officer
March 23, 1999
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<PAGE>
PROXY STATEMENT
Annual Meeting of Stockholders to be held April 23, 1999
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, April 23, 1999.
Stockholders of record at the close of business on March 12, 1999 are
entitled to vote at the meeting. Supertel at March 12, 1999 had issued and
outstanding 4,843,400 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 the 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 April 23, 1999. 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 23, 1999.
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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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>
Name and Address of Beneficial Percent
Beneficial Owner Ownership as of of Class
March 12, 1999
--------------------------------------- ----------------------- -------------
<S> <C> <C>
Paul Schulte 712,635(1) 14.6%(1)
309 North 5th Street
Norfolk, NE 68701
Steve Borgmann 771,958(1) 15.9%(1)
309 North 5th Street
Norfolk, NE 68701
Loren Steele 9,000(1) (2)
Joseph Caggiano 9,500(1) (2)
Richard Herink 49,500(1) 1.0%
Troy Beatty 19,200(1) (2)
KPM Investment Management, Inc. 261,500 5.4%(3)
10250 Regency Circle
Omaha, NE 68114
Wellington Management Company, LLP 402,000 8.3%(3)
75 State Street
Boston, MA 02109
Southeastern Asset Management, Inc.
6410 Poplar Avenue 481,486 9.9% (3)
Memphis, TN 38119
All Executive Officers and
Directors as a Group (6 persons)
1,571,793 31.8%
-----------------------------
</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, 7,500 shares each; Mr. Schulte and Mr. Borgmann,
25,000 shares each; Mr. Schulte's spouse, 10,000 shares; Mr. Herink,
18,000 shares; and Mr. Beatty, 8,000 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 1999.
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<PAGE>
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 65, 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 53, is Executive Vice President and Chief Operating
Officer of Supertel. Mr. Borgmann has been involved in acquiring,
developing, owning, managing and operating economy motels for Supertel
or its predecessors since 1978.
Loren Steele
Mr. Steele, age 58, is Past 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.
(franchisor of Super 8 Motels).
Joseph Caggiano
Mr. Caggiano, age 73, retired, served as Vice Chairman Emeritus of
Bozell, Jacobs, Kenyon & Eckhardt, Inc. from 1991 through December 31,
1998. 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 45, 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.
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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.
DIRECTOR MEETINGS AND COMPENSATION
The Board of Directors meets on a regularly scheduled basis. The Board
of Directors met eleven times during 1998, including seven meetings via
teleconference. 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 1998, 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 1998, 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 receive 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.
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<PAGE>
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows compensation paid by
Supertel for services rendered during calendar years 1998, 1997 and 1996 for the
executive officers of Supertel whose salary and bonus for 1998 exceeded
$100,000. <TABLE>
================================================ ============================================ ================ ==================
Annual Compensation Long-Term All Other
Compensation Compensation(2)
================================================ ============= ============== =============== ================ ==================
Name and Principal Position Year Salary Bonus Number of Amount
Options
================================================ ============= ============== =============== ================ ==================
<S> <C> <C> <C> <C> <C>
Paul Schulte 1998 $250,000 $37,500 7,500 $5,000
President and 1997 $250,000 $25,000 7,500 -0-
Chief Executive Officer 1996 $250,000 -0- 5,000 -0-
================================================ ============= ============== =============== ================ ==================
Steve Borgmann 1998 $250,000 $37,500 7,500 $5,000
Executive Vice President and 1997 $250,000 $25,000 7,500 -0-
Chief Operating Officer 1996 $250,000 -0- 5,000 -0-
================================================ ============= ============== =============== ================ ==================
Richard Herink 1998 $150,000 $22,500 5,000 $3,134
Executive Vice President 1997 $132,000 $15,000 10,000 -0-
1996 $132,000 -0- 3,000 -0-
================================================ ============= ============== =============== ================ ==================
Troy Beatty 1998 $106,000 $15,900 4,000 $2,282
Senior Vice President and 1997 $100,000 $10,000 4,000 -0-
Chief Financial Officer(1) 1996 --- --- --- -0-
================================================ ============= ============== =============== ================ ==================
</TABLE>
(1) Mr. Beatty became an executive officer of Supertel in December 1996.
(2) Amounts represent Supertel contributions to its 401(k) savings plan.
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<PAGE>
OPTION GRANTS IN 1998
The following table sets forth information on grants of stock options
during 1998 pursuant to the Supertel 1997 Stock Option Plan to the executive
officers named in the Summary Compensation Table. No stock appreciation rights
were granted during 1998.
<TABLE>
============================ ============= ============= ============= ============= ==============================
Percent of Potential Realizable Value
Total Per Share at Assumed Annual Rates of
Number of Options Exercise Stock Price Appreciation
Options Granted to Price for Option Term(2)
Name Granted(1) Employees in Expiration
Fiscal 1998 Date =============================
5% 10%
============================ ============== ============== ============= ============= ============= ==============
<S> <C> <C> <C> <C> <C> <C>
Paul Schulte 7,500 14.5% $9.625 11-18-08 $45,478 $114,778
============================ ============== ============== ============= ============= ============= ==============
Steve Borgmann 7,500 14.5% $9.625 11-18-08 $45,478 $114,778
============================ ============== ============== ============= ============= ============= ==============
Richard Herink 5,000 9.6% $9.625 11-18-08 $30,319 $ 76,519
============================ ============== ============== =========== ============== ============= ===============
Troy Beatty 4,000 7.7% $9.625 11-18-08 $24,255 $ 61,215
============================ ============== ============== =========== ============== ============= ===============
</TABLE>
(1) The options were granted at the then fair market value of Supertel's
common stock. All of the options were granted on November 18, 1998 and
become exercisable on November 18, 1999.
(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 $9.625 exercise price and a 5% appreciation would be $15.69 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 $24.93. 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>
OPTION EXERCISES IN 1998 AND YEAR-END VALUES
The following table sets forth information on aggregate option
exercises in 1998 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>
- ------------------------ ------------- ----------- ------------------------------- ---------------------------------
Number of Value
Name Shares Realized Number of Unexercised Options Value of Unexercised
Acquired on Held at December 31, 1998 In-The-Money Options Held at
Exercise December 31, 1998(1)
- ------------------------ ------------- ----------- ------------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ------------- ----------- -------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Paul Schulte -0- -0- 17,500 7,500 -0- -0-
- ------------------------ ------------- ----------- -------------- ---------------- --------------- -----------------
Steve Borgmann -0- -0- 17,500 7,500 -0- -0-
- ------------------------ ------------- ----------- -------------- ---------------- --------------- -----------------
Richard Herink -0- -0- 13,000 5,000 $1,250 -0-
- ------------------------ ------------- ----------- -------------- ---------------- --------------- -----------------
Troy Beatty -0- -0- 4,000 4,000 -0- -0-
- ------------------------ ------------- ----------- -------------- ---------------- --------------- -----------------
</TABLE>
(1) Value is common stock closing price on December 31, 1998, 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 one year annually
renewable term, 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>
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 ss.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 1998 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
1998, the Committee granted cash bonuses to executive officers in amounts
approximating 15% 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.
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<PAGE>
The Committee granted options to acquire an aggregate of 51,600 shares
to 78 employees during 1998. The grants to executive officers are set forth
under "Option Grants in 1998" 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 1998, 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>
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>
[ ] 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
December 31, 1998 9.125 91.25 2,192.69 296.04 441.11 147.64
</TABLE>
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<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick has been appointed by the Board of
Directors to conduct the 1999 audit of Supertel's financial statements. The same
firm conducted the 1998 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.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be included in Supertel's proxy
statement for the 2000 annual meeting must be received by Supertel no later than
December 1, 1999 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.
OTHER MATTERS
The Board of Directors does not know of any other matter that may be
presented for action at 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>
- --------------------------------------------------------------------------------
Supertel Hospitality, Inc.
Proxy for Annual Meeting of Stockholders April 23, 1999
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 April 23, 1999 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 WITHHOLD VOTE FOR
ALL NOMINEES VOTE FOR ALL ONLY THE FOLLOWING
NOMINEES NOMINEE(S):
/-/ /-/ -----------------------
ITEM 2.
Approval of appointment of independent accountants KPMG Peat Marwick for fiscal
1999:
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 _______________, 1999.
Signature______________________________________
Signature______________________________________
(When signing as attorney, executor, administrator, trustee, guardian
or conservator, designate full title.
All joint tenants must sign.)
- --------------------------------------------------------------------------------
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