<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 Q. 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(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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Notes:
<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, 1998
-----------------
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
Friday, May 1, 1998, at 9:00 a.m., local time, at the University Plaza
Convention Center, 730 E. St. Louis Street, 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 1, 1999 (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 18, 1998 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 6, 1998
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, 1998
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, 1998 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 1, 1999 (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 6, 1998.
Solicitation, Voting and Revocability of Proxies
The Board of Directors has fixed the close of business on March 18,
1998 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 220 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 1,800 beneficial
<PAGE>
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.
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 1, 1999. 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
Debra Mallonee Shantz, General Counsel, John Q. Hammons Hotels, Inc., 300 John
Q. Hammons Parkway, Springfield, Suite 900, 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 2, 1998 accompanies this Proxy Statement. The Company is required to
file an Annual Report for its fiscal year ended January 2, 1998 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
Investor Relations, John Q. Hammons Hotels, Inc. 300 John Q. Hammons Parkway,
Suite 900, 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)
<PAGE>
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.
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, 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
Age Since of Term Position(s) Held with Company
--- -------- ---------- -----------------------------
<S> <C> <C> <C> <C>
Nominees for 3-year term
Robert T. Jones, Jr....... 59 1994 2001 Director
John E. Lopez-Ona......... 40 1996 2001 Director
Kenneth J. Weber.......... 52 ---- 2001 Chief Financial Officer
(effective 4/27/98)
Continuing Directors:
Jacqueline A. Dowdy....... 54 1989 1999 Director and Secretary
William J. Hart........... 57 1993 1999 Director
David B. Jones............ 54 1993 1999 Director; President and Chief
Operating Officer
Daniel L. Earley.......... 55 1994 2000 Director
John Q. Hammons........... 79 1989 2000 Director, Chairman and Chief
Executive Officer
James F. Moore............ 56 1995 2000 Director
</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
<PAGE>
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.
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.
Kenneth J. Weber has been retained to be the Chief Financial Officer
of the Company, effective April 29, 1998. Prior to joining the Company, Mr.
Weber was the Executive Vice President and Chief Financial Officer of Chartwell
Leisure, a New York based hotel company. From 1992 to 1996, Mr. Weber was the
Senior Vice President and Chief Financial Officer of Omni Hotels, based in
Hampton, New Hampshire. From 1986 to 1992, Mr. Weber worked with Red Lion
Hotels, based in Vancouver, Washington, holding the positions of Senior Vice
President, Chief Accounting Officer and Corporate Controller. Mr. Weber began
his career in the hotel industry with the Marriott Corporation, holding
positions in several of Marriott's divisions, including President and Chief
Executive Officer of Farrell's Ice Cream Parlour Restaurants from 1983 to 1986.
<PAGE>
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 2, 1998, 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 2, 1998, 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 assists the Company in shareholder
relations, in determining the financial feasibility of new projects and in
reviewing all Company financings over $5 million. The Finance Committee met five
times during the fiscal year ended January 2, 1998.
Board Meetings. During the fiscal year ended January 2, 1998, the
Company's Board of Directors held five meetings.
Meeting Attendance. During the fiscal year ended January 2, 1998, 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 60% of all meetings of the Board of Directors and
attended the Compensation Committee meeting.
Compensation of Directors. Non-employee directors of the Company
received $1,000 for each regular Board meeting attended during the fiscal year
ended January 2, 1998. No compensation was paid
<PAGE>
to non-employee directors for attending meetings of committees of the Board.
Employee directors are not compensated for their services as directors or
committee members.
EXECUTIVE COMPENSATION
Cash Compensation
The following table sets forth the salary compensation, cash bonus and
certain other forms of compensation paid by the Company and its subsidiaries for
services rendered in all capacities during the 1997, 1996 and 1995 fiscal years
to the Chief Executive Officer of the Company and the four most highly
compensated executive officers of the Company other than the Chief Executive
Officer serving at the end of the 1997 fiscal year (the "named executive
officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
Fiscal ------------------- All Other
------ ---------
Name and Principal Positions Year Salary ($) Bonus ($) Compensation
- ------------------------------- ------ ---------- --------- ----------------
($)
---
<S> <C> <C> <C> <C>
John Q. Hammons 1997 $100,000 $ $
Chairman of the Board 1996 100,000 -- --
and Chief Executive 1995 36,000 -- --
Officer
David B. Jones 1997 300,000 65,000 3,892(a)
President and Chief 1996 251,750 89,200 3,547(a)
Operating Officer 1995 240,250 85,000 --
Mel J. Volmert 1997 199,184 -- 277,336(b)
Executive Vice 1996 186,375 66,937 3,902(a)
President--Finance, 1995 180,188 63,550 --
Chief Financial Officer
and Treasurer
Pat A. Shivers 1997 120,000 37,500 1,296(a)
Senior Vice President, 1996 112,125 30,000 2,072(a)
Administration and 1995 103,000 25,000 --
Control
Steven E. Minton 1997 118,000 40,000 1,275(a)
Senior Vice President, 1996 106,000 25,000 1,490(a)
Architecture 1995 99,000 22,500 --
</TABLE>
(a) Matching contributions to Company's 401(k) Plan.
(b) Includes matching contributions to Company's 401(k) Plan and severance
payment of $275,000 under employment agreement.
Option Grants
No stock options were granted by the Company during the fiscal year ended
January 2, 1998.
Option Holdings
<PAGE>
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 131,250 43,750 -- --
Pat A. Shivers 18,750 6,250 -- --
Steven A. Minton 18,750 6,250 -- --
</TABLE>
The named executive officers did not exercise any stock options during
the fiscal year ended January 2, 1998. The $16.50 exercise price per share of
all stock options that have been granted by the Company is greater than the
$9.00 closing price of the Company's Class A Common Stock as reported on the New
York Stock Exchange on January 2, 1998.
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 without cause,
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.
The Company intends to enter into an employment agreement with Kenneth
J. Weber, effective April 27, 1998. Under that agreement, Mr. Weber's annual
base salary will be $250,000, plus a discretionary bonus of up to 35% of his
base salary, with such annual increases in compensation as may be determined by
the Board of Directors of the Company. The agreement will contain significant
non-competition provisions extending for a period of one year following
termination of the agreement. The initial term of the agreement will be for
three years.
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.
<PAGE>
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. The Chief Operating Officer received a bonus for the
fiscal year ended January 2, 1998, representing 22% of his base salary on an
annualized basis in accordance with his employment agreement. His bonus for the
fiscal year ending January 1, 1999 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 1, 1999, to other officers will range up to 45% 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 2, 1998. 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.
Chief Executive Officer Compensation. Mr. Hammons' compensation as
Chairman of the Board and Chief Executive Officer for the fiscal year ended
January 2, 1998 was $100,000, which continues to be substantially below
comparable compensation for 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, 1997. 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 presented 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 future financial performance.
<PAGE>
Comparison of Cumulative Total Return Among
-------------------------------------------
John Q. Hammons Hotels, Inc., S&P 500 Index and Lodging Peer Group
------------------------------------------------------------------
[JOHN Q. HAMMONS HOTELS, INC. GRAPH]
<TABLE>
<CAPTION>
- -------------------FISCAL YEAR ENDING---------------
COMPANY 1994 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
JOHN Q. HAMMONS HOTELS 100.00 84.85 56.06 52.27 54.55
PEER GROUP 100.00 93.01 123.93 145.52 171.31
BROAD MARKET 100.00 101.48 139.62 171.68 228.96
</TABLE>
Lodging Peer Group consists of three companies: LaQuinta Inns, Host Marriott and
Prime Hospitality Corporation.
ASSUMES $100 INVESTED ON NOVEMBER 17, 1994
ASSUMES DIVIDENDS REINVESTED
Compensation Committee Interlocks and Insider Participation
The Compensation Committee for the fiscal year ended January 2, 1998,
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, LLC, which performs legal services on a regular
basis for the Company and personally for Mr. Hammons. The Company paid such firm
$207,049.16 in legal fees during the fiscal year ended January 2, 1998.
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 1997, the Partnership provided management services to four
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. Management fees of approximately 3% of gross revenues were paid
to the Company by the Managed Hotels in the aggregate amount of $642,798.00 in
the fiscal year ended January 2, 1998. 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
<PAGE>
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 $131,307.00 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 $1,406,720.00 in the fiscal year ended January 2, 1998. 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.
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 $231,028.50 in 1997.
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 for the Company's Chateau on the
Lake Resort, opened in mid-1997, in Branson, Missouri, from Mr. Hammons. Annual
rent is $80,000 in the first year of operation, and $120,000 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 a right of first refusal to
purchase the land after March 1, 2118 at a proposed transfer price of the
greater of $3,000,000 or the current appraised value.
The Company also leases the real estate for the Company's Embassy
Suites hotel in Little Rock, Arkansas which opened in the fall of 1997, from Mr.
Hammons. Annual rent is $80,000 for the first year of operation, $100,000 for
the second year, and $120,000 per year for the next three years. The lease runs
for 40 years. The Company has an option to purchase the land at any time during
the first 10 years of the lease term, 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
<PAGE>
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.
Certain Transactions
In 1997, the Company paid Anvil Capital, an investment and consulting
firm owned by Mr. Lopez-Ona, a director of the Company, approximately $180,000
for consulting services, including the reimbursement of expenses. In the past,
Mr. Hammons has engaged Anvil Capital to provide personal financial advisory
services. Mr. Hammons and Anvil Capital also have formed a limited liability
company through which they have invested in securities of one or more companies
in industries unrelated to the Company's business. Mr. Lopez-Ona has entered
into a consulting agreement with a major consulting firm to provide services to
that firm in connection with their hospitality practice. Under that contract,
Mr. Lopez-Ona receives a percentage of compensation from the Company to the firm
in connection with services provided to the Company by that firm, if any.
For a description of other transactions regarding Mr. Hammons, Ms.
Dowdy, Mr. Early, 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 11, 1998
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.
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.
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Shares of Class A Common 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) 73.5% 294,100 100%
David B. Jones ..................... 131,998(c) *
Jacqueline A. Dowdy ................ 13,330(d) *
Daniel L. Earley ................... 2,000 *
William J. Hart .................... 500(e) *
Robert Trent Jones, Jr. ............ -- --
John E. Lopez-Ona .................. 6,000 *
James F. Moore ..................... 700 *
Pat A. Shivers ..................... 18,750(f) *
Glenn R. Malone .................... 29,076(g) *
Stephen E. Minton .................. 18,750(f) *
John D. Fulton ..................... 18,750(f) *
Lawrence A. Welch .................. 23,591(h) *
Debra M. Shantz .................... 500 *
All executive officers and directors,
as a group (15) ...................... 16,712,045 73.9 294,100 100%
(b)(c)(d)(e)(f)(g)(h)
</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. Also
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.
(c) Includes 131,250 shares subject to options which are exercisable within 60
days, and 748 shares allocated to 401(k) Plan account as of the end of
1997.
(d) Includes 11,607 shares subject to options which are exercisable within 60
days, and 223 shares allocated to 401(k) Plan account as of the end of
1997.
(e) Includes 500 shares purchased on March 17, 1998.
(f) 18,750 shares subject to options which are exercisable within 60 days.
<PAGE>
(g) Includes 22,500 shares subject to options which are exercisable within 60
days and 576 shares allocated to 401(k) Plan account as of the end of 1997.
(h) Includes 22,500 shares subject to options which are exercisable within 60
days and 135 shares allocated to 401(k) Plan account as of the end of 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information at March 18, 1998 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 after giving 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 to the redemption of all 16,043,900 LP Units for shares of
Class A Common Stock.
<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 950,000 (a) 15.7%
787 Seventh Avenue
New York, NY 10019
Morgan Stanley, Dean Witter, 911,600 (b) 15.1%
Discover & Co.
1585 Broadway
New York, New York 10036
Massachusetts Financial Services Company 549,300 (c) 9.1%
500 Boylston Street
Boston, MA 02116-3741
</TABLE>
- ----------------
(a) Based on Amendment to Schedule 13G dated February 17, 1998. According to
the Amendment, Alliance Capital Management, L.P. has sole dispositive power
as to all such shares and sole voting power as to 511,000 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-UAP,
which beneficially owns a majority interest in The Equitable Companies
Incorporated and the following four companies which, as a group,
beneficially own a majority interest in AXA-UAP: AXA Assurances I.A.R.D.
Mutuelle; AXA Assurances Vie Mutuelle; Alpha Assurances Vie Mutuelle; and
AXA Courtage Assurances Mutuelle.
(b) Based on Schedule 13G dated January 14, 1998. According to the Schedule
13G, Morgan Stanley, Dean Witter, Discover & Co. has shared voting and
dispositive power as to all such shares. Morgan Stanley Asset Management
Inc. holds shared voting and dispositive power as
<PAGE>
to 787,100 shares. Morgan Stanley Institutional Fund Inc. - U.S. Real
Estate Portfolio holds shared voting and dispositive power as to 417,900 of
such shares.
(c) Based on Amendment to Schedule 13G dated February 12, 1998. 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
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.
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 1, 1999, 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 on an
annual basis in connection with an audit for each fiscal year since that time.
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 1, 1999. 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 1999 annual meeting of
shareholders must be received by the Company by December 7, 1998, 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
<PAGE>
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 meeting
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 1998 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.
<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 Glenn R. Malone and Debra M. Shantz, or either of them, as
proxies 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
Friday, May 1, 1998 at 9:00 a.m., local time, at the University Plaza
Convention Center, 730 E. St. Louis Street, 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 General Counsel 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.
1. Election of Directors.
For three-year terms: Robert T. Jones, Jr., John E. Lopez-Ona and Kenneth
J. Weber.
[_] FOR all nominees [_] WITHHOLD
listed above (except AUTHORITY to vote
as marked to the for all nominees
contrary below). listed above
---------------------------------------------------------------------------
(Instruction: To withhold authority to vote for any individual nominee,
print that nominee's name in the space provided.)
(continued and to be signed and dated on reverse side)
2. Ratification of appointment of Arthur Andersen LLP as independent
auditors.
[_] FOR[_] AGAINST[_] ABSTAIN
3. In their discretion, the proxies, or either of them, are 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.
