SEC Info - Meritage Hospitality Group Inc - ‘PRE 14A’ for 5/21/96

SEC Info℠

Home

Help

Please Sign In

Meritage Hospitality Group Inc – ‘PRE 14A’ for 5/21/96

As of: Thursday, 4/4/96 · For: 5/21/96 · Accession #: 950152-96-1384 · File #: 0-17442

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/04/96  Meritage Hospitality Group Inc    PRE 14A     5/21/96    1:122K                                   Bowne BCL/FA

Preliminary Proxy Solicitation Material — Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PRE 14A     Thomas Edison Inns Preliminary 14A                    51    187K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Certain Relationships and Related Transactions Effective Date Principal Shareholders Thomas Edison Inns, Inc
1	1st Page - Filing Submission
"	Thomas Edison Inns, Inc
3	Principal Shareholders
21	Certain Relationships and Related Transactions
35	Effective Date

PRE 14A 1st Page of 51 TOC ↑Top Previous Next ↓Bottom Just 1st
SCHEDULE 14A

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Thomas Edison Inns, Inc.
(Name of Registrant as Specified In Its Charter)

Thomas Edison Inns, Inc.

(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1

4) Proposed maximum aggregate value of transaction:

1Set forth the amount on which the filing fee is calculated and state how it was
determined. [ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

PRE 14A 2nd Page of 51 TOC 1st Previous Next ↓Bottom Just 2nd

THOMAS EDISON INNS, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1996

Dear Shareholder:

We are pleased to invite you to attend our Annual Shareholders' Meeting
at the Thomas Edison Inn, 500 Thomas Edison Parkway, Port Huron, Michigan on May
21, 1996 at 10:00 a.m. Eastern Daylight Time.

The purposes of this Annual Meeting are:

1. To elect five Class I directors to serve for the next fiscal
year and five Class II directors to serve for the next two
fiscal years;

2. To amend the Articles of Incorporation to change the name of
the Company from Thomas Edison Inns, Inc. to Meritage
Hospitality Group Inc.;

3. To adopt the 1996 Management Equity Incentive Plan;

4. To adopt the 1996 Directors' Share Option Plan;

5. To adopt the Directors' Compensation Plan;

6. To adopt the Employee Share Purchase Plan;

7. To ratify the appointment of Grant Thornton LLP as the
Company's independent public accountants for fiscal 1996; and

8. To transact such other business as may properly come before
the meeting or any adjournment thereof.

After the formal meeting, we will discuss the Company's operations
during the last fiscal year and our plans for fiscal 1996 and answer your
questions regarding the Company. Board members and executive officers will also
be available to discuss the Company's operations with you.

Yours truly,

Robert E. Schermer, Sr.
Chairman of the Board of Directors

Dated: April 17, 1996

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, SIGN, AND PROMPTLY
RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED BY
WRITTEN NOTICE OF REVOCATION, THE SUBMISSION OF A LATER PROXY, OR BY ATTENDING
THE MEETING AND VOTING IN PERSON.

PRE 14A 3rd Page of 51 TOC 1st Previous Next ↓Bottom Just 3rd

THOMAS EDISON INNS, INC.
40 Pearl Street, N.W., Suite 900
Grand Rapids, Michigan 49503

Telephone: (616) 776-2600

P R O X Y S T A T E M E N T

Annual Meeting of Shareholders
May 21, 1996

INTRODUCTION

The Board of Directors of Thomas Edison Inns, Inc. is requesting your
Proxy for use at the Annual Meeting of Shareholders on May 21, 1996, and at any
adjournment thereof, pursuant to the foregoing Notice. The approximate mailing
date of the Proxy Statement and the accompanying Proxy Card is April 17, 1996.

VOTING AT ANNUAL MEETING

General

Shareholders may vote in person or by proxy at the Annual Meeting.
Proxies given may be revoked at any time by filing with the Company either a
written revocation or a duly executed Proxy Card bearing a later date, or by
appearing at the Annual Meeting and voting in person. All shares will be voted
as specified on each properly executed Proxy Card. If no choice is specified,
the shares will be voted as recommended by the Board of Directors in favor of
Items 2 through 7 and "FOR" the nominees for directors named herein. Except as
otherwise provided herein, abstentions and shares not voted for any reason,
including broker non-votes, will have no effect on the outcome of any vote taken
at the Annual Meeting. Meritage Capital Corp., formerly known as Meritage
Hospitality Group Incorporated ("Meritage"), which owns 51% of the outstanding
Common Shares, intends to vote as recommended by the Board of Directors, thus
meaning the passage of all matters presented to shareholders, except the
election of Class II directors, for which the Meritage shares will not have
voting rights. See "Principal Shareholders."

As of March 28, 1996, the record date for determining shareholders
entitled to notice of and to vote at the Annual Meeting, Thomas Edison Inns,
Inc. had 3,020,150 Common Shares outstanding. Each share is entitled to one
vote, except as provided by law. Only shareholders of record at the close of
business on March 28, 1996 will be entitled to vote at the Annual Meeting.

Principal Shareholders

The following persons are the only shareholders known by the Company to
own beneficially 5% or more of its outstanding Common Shares as of March 28,
1996:

PRE 14A 4th Page of 51 TOC 1st Previous Next ↓Bottom Just 4th

- 2 -

[Enlarge/Download Table]

==========================================================================================================================
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
--------------------------------------------------------------------------------------------------------------------------

Christopher B. Hewett 1,553,000 (1) 51.6%
--------------------------------------------------------------------------------------------------------------------------
Robert E. Schermer, Jr. 1,550,100 (1) 51.5%
--------------------------------------------------------------------------------------------------------------------------
Donald W. Reynolds 870,248 (2)(3) 28.8%
==========================================================================================================================

(1) Includes 1,550,000 shares held by Meritage. Mr. Hewett is the
majority shareholder, an executive officer and a director of Meritage, and Mr.
Schermer, Jr. is a shareholder, executive officer and director of Meritage.

(2) Includes 747,850 shares held by Mr. Reynolds in his own name, an
aggregate of 40,000 shares held in joint tenancy with his four children (one of
whom is current director Rebecca L. Awtrey, formerly Rebecca L. Reynolds, and
one of whom is Cynthia Distad, the wife of David Distad, the former Vice
President and Chief Financial Officer of the Company), and 82,398 shares held
indirectly as the sole shareholder of Innkeepers Management Company
("Innkeepers"), a Michigan corporation wholly-owned by Mr. Reynolds, which holds
such shares.

(3) In a Schedule 13D delivered by TEI Acquisitions, Inc. ("TAI") to
the Securities and Exchange Commission ("SEC") on November 27, 1995, TAI
reported that on July 6, 1995 it entered into a Stock Purchase Agreement to
acquire 870,248 Common Shares of the Company beneficially owned by Mr. Reynolds.
TAI also reported that it received an irrevocable proxy to vote the 870,248
Common Shares. TAI further reported that on November 7, 1995, it entered into a
First Amendment to the Stock Purchase Agreement. Despite the information
reported by TAI, Mr. Reynolds, his four children and Innkeepers are identified
in the records of the Company as the owners of the 870,248 Common Shares.
Regardless of a determination of ownership of these Common Shares, judicial or
otherwise, the Company believes the shares are the subject of at least one
control share acquisition as that term is defined by Chapter 7B of the Michigan
Business Corporation Act ("MBCA"), and, as a result, do not have voting rights.

The business address of Messrs. Hewett and Schermer, Jr. is 40 Pearl
Street, N.W., Suite 900, Grand Rapids, Michigan 49503.

The business address of Mr. Reynolds is 1459 Michigan Street, N.E.,
Grand Rapids, Michigan 49503.

See "Certain Relationships and Related Transactions" below for a
description of Meritage's acquisition of 1,500,000 Common Shares of the Company.

From the Company's inception in 1986 until January 1996, Mr. Reynolds
served as Chairman of the Board, President, Chief Executive Officer, Treasurer
and Secretary of the Company. Mr. Reynolds was removed as a director and officer
of the Company by the St. Clair County (Michigan) Circuit Court on January 8,
1996. The Court appointed Frank O. Staiger as acting President and director. On
January 25, 1996, pursuant to the MBCA and the Company's Articles of
Incorporation and Bylaws, and with the consent of the Board of Directors,
Meritage, as majority shareholder, amended the Company's Bylaws by shareholder
consent to expand the size of the Board to ten directors and to classify the
directors into two classes. Class I is comprised of five Meritage nominees
appointed to fill the newly created vacancies (Mr. Hewett, David S. Lundeen,
Joseph L. Maggini, Mr. Schermer, Jr. and Robert E. Schermer, Sr.) and Class II
is comprised of the five incumbent directors (Rebecca L. Awtrey, William F.
Ehinger, Joseph P. Michael, Mr. Staiger

PRE 14A 5th Page of 51 TOC 1st Previous Next ↓Bottom Just 5th

- 3 -

and Raymond A. Weigel, III). On February 12, 1996, the court confirmed the
resignation of Mr. Staiger and the appointment of Mr. Hewett as President.

The Bylaws were also amended to provide that prior to the 1998 Annual
Meeting, Meritage will not have the right to vote the Common Shares that
Meritage owns as of January 25, 1996 (comprising 1,550,000 shares) for the
election or removal of the Class II directors unless (i) the Company determines,
or a court of competent jurisdiction orders, that the Company's Common Shares
acquired by TAI directly or indirectly from Mr. Reynolds, his family and
Innkeepers have voting power, or (ii) permitted by a majority of the Class II
directors. If for any reason a 1998 Annual Meeting does not occur, all such
voting limitations upon the Meritage shares shall become null and void on
December 31, 1998. There are no limitations on the voting rights or voting
powers of any Common Shares with respect to which Meritage acquires ownership or
voting power after January 25, 1996.

Prior to the 1998 Annual Meeting, Article III, Section 1 of the
Restated and Amended Bylaws (which contains the above-described voting
limitations on the Meritage shares) may be amended only with the approval of a
majority of each of the Class I and Class II directors or by the holders of the
majority of the shares entitled to vote at an election of directors, subject to
the limitations applicable to the Meritage shares. If, however, an amendment to
Article III, Section 1 of the Restated and Amended Bylaws is to become effective
on or after the date of the 1998 Annual Meeting, such amendment may be adopted
and approved in the same manner as any other provision of the Restated and
Amended Bylaws. On and after the date of the 1998 Annual Meeting (or if no such
meeting occurs, after December 31, 1998), Article III, Section 1 of the Restated
and Amended Bylaws may be amended in the same manner as any other provision of
the Restated and Amended Bylaws.

PROPOSAL 1
ELECTION OF DIRECTORS

Prior to adoption of the Restated and Amended Bylaws on January 25,
1996, the number of directors of the Company was five. The directors were: Ms.
Awtrey and Messrs. Ehinger, Michael, Staiger and Weigel. As restated and
amended, the Company's Bylaws require that the Board of Directors consist of at
least ten members, divided into two classes as nearly equal in number as
possible (Class I and Class II), with the exact number to be established by the
Board of Directors.

The initial Class I directors (Messrs. Hewett, Lundeen, Maggini,
Schermer, Jr., and Schermer, Sr.) took office on January 25, 1996 and will serve
until the Annual Meeting. The term of office of the Class I directors elected at
the Annual Meeting will expire at the 1997

PRE 14A 6th Page of 51 TOC 1st Previous Next ↓Bottom Just 6th

- 4 -

Annual Meeting. At the 1997 Annual Meeting and thereafter, the term of office of
those elected as Class I directors will be two years.

The initial Class II directors (Ms. Awtrey and Messrs. Ehinger,
Michael, Staiger and Weigel) took office on August 9, 1994, with the exception
of Mr. Staiger, who took office on January 8, 1996, and will serve until the
Annual Meeting. The term of office of the Class II directors elected at the
Annual Meeting will be two years.

Starting with the 1997 Annual Meeting, one class of directors will be
elected annually.

The Board has established the number of directors to be elected at the
Annual Meeting at ten. The Board is nominating for re-election all present Class
I and II Directors, except that James R. Goerlich is being nominated for
election as a Class II director in place of Ms. Awtrey.

Proxies solicited by the Board of Directors will be voted for the
election of these nominees. Until their successors are elected or appointed and
qualified, or until resignation or removal, all Class I directors elected at the
Annual Meeting will be elected to hold office until the 1997 Annual Meeting,
while all Class II directors elected at the Annual Meeting will be elected to
hold office until the 1998 Annual Meeting. Shareholders are not entitled to
cumulate their votes in the election of directors.

Should any of the nominees become unable to serve, proxies will be
voted for any substitute nominee designated by the Board of Directors. Nominees
receiving the highest number of votes cast for the positions to be filled will
be elected.

PROPOSAL 2
AMENDMENT OF THE ARTICLES OF INCORPORATION TO CHANGE
THE COMPANY'S NAME TO MERITAGE HOSPITALITY GROUP INC.

On March 9, 1996, the Board of Directors approved an amendment to the
Articles of Incorporation changing the Company's name from "Thomas Edison Inns,
Inc." to "Meritage Hospitality Group Inc." The proposed new name is considered
by the Board of Directors and Management to be more representative of the
Company's position in the hospitality industry.

The Board of Directors recommends a vote in favor of the proposal to
change the Company's name. The affirmative vote of a majority of the outstanding
Common Shares is required for approval of this Amendment to the Articles of
Incorporation. The failure to vote, abstentions, and broker non-votes will have
the same effect as a vote against the proposal.

PRE 14A 7th Page of 51 TOC 1st Previous Next ↓Bottom Just 7th

- 5 -

PROPOSAL 3
ADOPTION OF THE 1996 MANAGEMENT EQUITY INCENTIVE PLAN

The Board of Directors believes that option grants are an important
factor in enabling a company to attract, retain and motivate its employees.
Accordingly, on __________________________, 1996, the Board of Directors
unanimously adopted, subject to shareholder approval, an employee share option
plan to be designated the 1996 Management Equity Incentive Plan. The Plan
provides for _________________ Common Shares to be the subject of options which
may be granted to employees. The Company presently has approximately _________
employees.

The following is a summary of the 1996 Management Equity Incentive Plan
which is qualified in its entirety by the full text which is set forth in
Appendix A.

The 1996 Management Equity Incentive Plan provides that options may be
granted either as incentive or nonqualified options. Options may be granted for
varying periods of from one to ten years. Employees who own 10% or more of the
Company's outstanding Common Shares may be granted incentive options only for
terms of five years or less. Options do not become exercisable until at least
one year from the date of grant. Thereafter, the right to exercise options vests
at a schedule determined at the time of grant, which generally shall be at a
rate of 20% per year. The right to exercise options is cumulative to the extent
not utilized in prior periods. The Committee determines the exercise prices of
all options that are granted. However, an incentive option may only be granted
with an exercise price at least equal to the market value of the Common Shares
on the date of grant. In addition, in the case of employees who beneficially own
more than 10% of the Company's Common Shares, an incentive option may be granted
only if the option price is at least 110% of the market value of the Common
Shares on the date of grant.

No option will be transferable otherwise than by will, by the laws of
descent and distribution or pursuant to a qualified domestic relations order.

There are no federal income tax consequences to either the Company or
the recipient of an option upon the grant or exercise of an incentive option. If
a person sells or otherwise disposes of shares acquired upon the exercise of an
incentive option within one year of the date of exercise or within two years
from the date of grant, the gain equal to the excess of the amount realized over
the amount paid for the shares will be taxed as ordinary income. The Company
will be entitled to an income tax deduction to the same extent. If the shares
are held for more than one year following the date of exercise and two years
from the date of grant, any gain realized thereafter will be taxed as a capital
gain, in which case the Company will not be entitled to any deduction.

PRE 14A 8th Page of 51 TOC 1st Previous Next ↓Bottom Just 8th

- 6 -

With respect to non-qualified options, there are no federal income tax
consequences upon the grant of an option. A person exercising a non-qualified
option will recognize ordinary income to the extent of the difference between
the exercise price and the fair market value of the Common Shares on the date of
exercise, and the Company will be entitled to a corresponding deduction. Upon
any sale of such shares, the difference between the amount realized and the fair
market value on the date of the exercise will be treated as a capital gain or
loss.

In the event of any changes in the outstanding Common Shares by way of
a share dividend, split-up, recapitalization, combination or exchange, the
number and class of Common Shares authorized to be the subject of options under
the 1996 Management Equity Incentive Plan and the number and class of Common
Shares and option price for each option which is outstanding shall be
correspondingly adjusted by the Committee. The Committee shall also make
appropriate adjustments to reflect any spin-off of assets, extraordinary
dividends or other distributions to shareholders.

In the event of the dissolution or liquidation of the Company or any
merger, consolidation or combination in which the Company is not the surviving
corporation or in which the outstanding Common Shares of the Company are
converted into cash, other securities or other property, each outstanding option
shall terminate as of a date fixed by the Committee, provided that not less than
20 days' written notice of the date of expiration shall be given to each holder
of an option. Each such holder shall have the right during such period following
notice to exercise the portion of the option which is vested at the time of such
notice.

On April 3, 1996, the closing price of the Company's Common Shares was
$5.63 per share.

The Compensation Committee of the Board of Directors, which consists of
Messrs. Schermer, Sr. (Chairman), Maggini, and Ehinger, administers the 1996
Management Equity Incentive Plan. Subject to the express provisions of the Plan,
the Committee shall have the authority to establish the terms and conditions of
option agreements, which need not be uniform.

The affirmative vote of the holders of a majority of Common Shares
voting on the matter at the Annual Meeting is required to approve this Plan.
Abstentions, but not broker non-votes, shall have the effect of being considered
as having voted against the proposal.

The Board of Directors recommends a vote in favor of this proposal.

PRE 14A 9th Page of 51 TOC 1st Previous Next ↓Bottom Just 9th

- 7 -

PROPOSAL 4
ADOPTION OF THE 1996 DIRECTORS' SHARE OPTION PLAN

The Board of Directors believes that option grants to non-employee
directors are an effective means of advancing the interests of the Company and
its shareholders by increasing their proprietary interest in the Company.
Accordingly, on __________________, 1996, the Board of Directors unanimously
adopted the 1996 Director's Share Option Plan, subject to shareholder approval.
The Plan provides for _________ Common Shares to be the subject of options which
may be granted to non-employee directors. The following is a summary of the 1996
Directors' Share Option Plan which is qualified in its entirety by the full text
which is set forth in Appendix B.

A director who is not also an employee of the Company is an Eligible
Director and shall be eligible to receive options under the Plan. Each Eligible
Director at the time of grant shall be granted an option for the purchase of
_________ Common Shares immediately after the 1996 Annual Meeting and an
additional option for _________ Common Shares immediately after each subsequent
Annual Meeting. Persons who become Eligible Directors after the effective date
of the Plan shall be granted an option for _________ shares as a result of their
election, and, upon each subsequent Annual Meeting, another option for
__________ shares.

The term of each option shall be ten years from the date of grant. The
option purchase price will be the last closing sale price reported on the date
of grant. Options are immediately exercisable upon grant.

No option will be transferable otherwise than by will, by the laws of
descent and distribution or pursuant to a qualified domestic relations order.

Neither the optionee nor the Company will incur any federal tax
consequences as a result of the grant of an option. Upon exercise of an option,
the optionee generally must recognize ordinary income equal to the difference
between the exercise price and the fair market value of the Common Shares on the
date of exercise. The Company will be entitled to a deduction of the same
amount. Upon a disposition of option shares acquired under the Plan, the
difference between the sale proceeds and the market value of the shares at the
time of exercise will be treated as a capital gain or loss, either long-term or
short-term, depending on how long the shares have been held. The Company will
not be entitled to a deduction in connection with a disposition of option
shares.

PRE 14A 10th Page of 51 TOC 1st Previous Next ↓Bottom Just 10th

- 8 -

Common Shares and option price for each option which is outstanding shall be
correspondingly adjusted by the Committee. The Committee shall also make
appropriate adjustments to reflect any spin-off of assets, extraordinary
dividends or other distributions to shareholders.

In the event of the dissolution or liquidation of the Company or any
merger, consolidation or combination in which the Company is not the surviving
corporation or in which the outstanding Common Shares of the Company are
converted into cash, other securities or other property, each outstanding option
shall terminate as of a date fixed by the Committee, provided that not less than
20 days' written notice of the date of expiration shall be given to each holder
of an option. Each such holder shall have the right during such period following
notice to exercise the option as to all or any part of the option for which it
is exercisable at the time of such notice.

The following table describes the benefits that would be received by
Eligible Directors under the 1996 Directors' Share Option Plan, assuming certain
values set forth in the footnote to the table. The Named Officers, the Executive
Officers as a group and all non-executive employees as a group would not receive
any benefits under this Plan.

[Enlarge/Download Table]

==================================================================================================================
Potential Realizable Dollar
Value ($/Share) at Assumed
Annual Rates of Share Price
Plan Grants Name Number of Units Appreciation for Option Term*

0% 5% 10%
==================================================================================================================
Non-Executive Director $0 $_____ $_____
Group ______________
==================================================================================================================

* The market value of the Common Shares on April 3, 1996 was $5.63 per
share and was used as the assumed exercise price for options. Neither
the dollar value of the options to be granted nor the benefits or
amounts which would have been received by, or allocated to, the
Eligible Directors for the last fiscal year if the Plan had been in
effect is determinable because the options will be granted at the
market value of the Common Shares as of the date the options are
granted. The potential realizable dollar value, set out in dollars per
share, at assumed annual rates of share price appreciation for the
option term, is hypothetical and is not intended to forecast future
appreciation, if any, of the Common Shares or future dollar value, if
any, of the granted options.

The Compensation Committee of the Board of Directors administers the
1996 Directors' Share Option Plan. Subject to the express provisions of the
Plan, the Committee shall have the authority to establish the terms and
conditions of option agreements, which need not be uniform.

PRE 14A 11th Page of 51 TOC 1st Previous Next ↓Bottom Just 11th

- 9 -

The Board of Directors recommends a vote in favor of this proposal.

PROPOSAL 5
ADOPTION OF THE DIRECTORS' COMPENSATION PLAN

To align further the interests of the non-employee directors with the
interests of shareholders by providing that their compensation be paid through
the issuance of Company Common Shares, the Board of Directors on
___________________, 1996 unanimously adopted, subject to shareholder approval,
the Directors' Compensation Plan. The following is a summary of the Plan which
is qualified in its entirety by the full text which is set forth in Appendix C.

All directors who are not employees of the Company shall be paid a
retainer of $1,000 for each Board of Directors meeting attended and a retainer
of $500 for each Committee meeting attended (for meetings by telephone, such
fees shall be $500 and $250 respectively). Retainers shall be paid quarterly in
arrears in the form of Company Common Shares.

The number of Common Shares to be issued to a director will be
determined by dividing the dollar amount of the fee by the average of the per
share Fair Market Value for the ten trading days prior to the end of each
quarter, rounding up to the nearest whole share as necessary.

Common Shares are authorized for issuance under this Plan in accordance
with the provisions of the Plan. During the term of the Plan, the Company shall
at all times retain as authorized and unissued Common Shares at least the number
of shares from time to time required under the provisions of the Plan, or
otherwise assure itself of its ability to perform its obligations under the
Plan.

The Plan is effective as of January 28, 1996, subject to shareholder
approval at the Annual Meeting. The term of the Directors' Compensation Plan
shall be ten years, unless earlier terminated by the Board of Directors in
accordance with the provisions of the Plan. No Common Shares shall be issued
pursuant to the Plan after its termination.

The Board of Directors may suspend or terminate the Plan or any portion
of it at any time, and may amend it from time to time as the Board of Directors
may deem advisable to conform to any change in applicable law or in any other
respect the Board of Directors may deem to be in the Company's best interests.
Without shareholder approval, however, the Board

PRE 14A 12th Page of 51 TOC 1st Previous Next ↓Bottom Just 12th

- 10 -

of Directors may not amend the Plan to increase the number of Common Shares
issuable, materially increase the benefits accruing to directors, materially
modify the requirements as to eligibility for participation, or extend the
termination date. Furthermore, the amount, pricing and timing of Common Share
issuances under the Plan shall not be amended more than once every six months,
other than to comply with changes in the Internal Revenue Code of 1986, as
amended, the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder.

The affirmative vote of the holders of a majority of Common Shares
voting on the matter at the Annual Meeting is required to adopt the Directors'
Compensation Plan. Abstentions, but not broker non-votes, shall have the effect
of being considered as having voted against the proposal.

The Board of Directors recommends a vote in favor of this proposal.

PROPOSAL 6
ADOPTION OF THE EMPLOYEE SHARE PURCHASE PLAN

The Board of Directors believes that share ownership by employees will
encourage them to perform at increasing levels of effectiveness and to use their
best efforts to promote the growth and profitability of the Company.
Accordingly, on ______________________________, 1996, the Board of Directors
unanimously adopted, subject to shareholder approval, the Employee Share
Purchase Plan. The following description of the Employee Share Purchase Plan is
qualified in its entirety by reference to its text, which is set forth in
Appendix D.

Employees of the Company who have at least three months of service with
the Company and do not own 5% or more of the Company's Common Shares are
eligible to participate in the Employee Share Purchase Plan. Eligibility
generally ceases upon termination of employment with the Company. Approximately
_________________ employees are eligible to participate as of the Record Date.

The maximum number of Common Shares which may be purchased by Eligible
Employees under the Employee Share Purchase Plan is ______________. The number
shall be adjusted to reflect any share dividend, share split or combination of
shares. Shares sold to participating employees by the Company may be previously
acquired treasury shares or authorized but unissued shares or, if and to the
extent authorized by the Compensation Committee, may be shares purchased in
market transactions by a designated agent.

Each Eligible Employee may elect to have a specified amount, not to be
more than 25% of base salary or wages, deducted from each regular paycheck. The
amounts deducted during

PRE 14A 13th Page of 51 TOC 1st Previous Next ↓Bottom Just 13th

- 11 -

any Deduction Period (one, two or three calendar months, as determined by the
Compensation Committee) are used to purchase on the last business day of such
Deduction Period or as soon thereafter as practicable (the "Purchase Date") the
maximum number of whole and fractional Common Shares which such amounts can
purchase at the Purchase Price. Payroll deductions are held by the employing
corporation subject to withdrawal by the employee, and do not bear interest,
pending their application to share purchases. Dividends received on shares held
in an employee's account are, unless otherwise directed by the Compensation
Committee, used to purchase additional shares.

The Purchase Price for each whole or fractional share purchased is
___________% of the fair market value on the Purchase Date, defined as the mean
between the high and low sales prices of the Company's Common Shares on the
Purchase Date. No employee may, in any calendar year, purchase shares which had
an aggregate fair market value exceeding __________ on the respective Purchase
Dates. In addition, if a participating employee sells shares purchased under the
Employee Share Purchase Plan during the first year following the Purchase Date,
that employee will not be eligible to make further purchases under the Employee
Share Purchase Plan, or to have any amounts deducted from paychecks for such
purpose, for a period of one year after such sale or for such shorter period as
the Compensation Committee may establish.

The Employee Share Purchase Plan is administered by the Compensation
Committee of the Board of Directors. Custodial and record keeping functions for
the Employee Share Purchase Plan will be delegated to a bank trust department or
other financial institution as agent. The Board of Directors may amend or
terminate the Employee Share Purchase Plan at any time, without further
shareholder approval. However, without such approval, the Board of Directors may
not change the number of shares purchasable or the eligibility requirements
under the Employee Share Purchase Plan. Unless earlier terminated, the Employee
Share Purchase Plan will continue in effect until the maximum number of shares
available under the Plan has been purchased.

The Employee Share Purchase Plan is intended to qualify as an employee
share purchase plan within the meaning of Section 423 of the Internal Revenue
Code, as amended. Income is not realized by an employee who elects to
participate in purchases under the Plan when the shares purchased are
transferred to him. If an employee disposes of such shares more than two years
from the date of grant of the right to purchase shares under the Plan, the
employee will be required to include in income, as compensation for the year in
which such disposition occurs, an amount equal to the lesser of (i) the excess
of the fair market value of such shares at the time of disposition over the
Purchase Price or (ii) _________% of the fair market value of such shares at the
time of the purchase. The employee's basis in those shares at the time of such a
disposition will be increased by an amount equal to the amount includible in his
income as compensation; and, any gain or loss computed with reference to such
adjusted basis which is

PRE 14A 14th Page of 51 TOC 1st Previous Next ↓Bottom Just 14th

- 12 -

recognized at the time of disposition will be short or long-term capital gain or
loss, depending upon the holding period for such shares. In such event, the
Company will not be entitled to any deduction from income.

If an employee disposes of shares purchased under the Employee Share
Purchase Plan within such two year period, the employee will be required to
include in income, as compensation for the year in which such disposition
occurs, an amount equal to the excess of the fair market value of such shares on
the Purchase Date over the Purchase Price. The employee's basis in such shares
in his hands at the time of disposition will be increased by an amount equal to
the amount includible in his income as compensation; and, any gain or loss
computed with reference to such adjusted basis which is recognized at the time
of disposition will be capital gain or loss, either short-term or long-term,
depending on the holding period for such shares. In the event of a disposition
within such two year period, the Company will be entitled to a deduction from
income equal to the amount the employee is required to include in income as
compensation as a result of such disposition.

The affirmative vote of the holders of a majority of Common Shares
voting on the matter at the Annual Meeting is required to adopt this Plan.
Abstentions, but not broker non-votes, shall have the effect of being considered
as having voted against the proposal.

The Board of Directors recommends a vote in favor of this proposal.

PROPOSAL 7
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS

The Audit Committee of the Board of Directors appointed Grant Thornton
LLP as the Company's independent public accountants for the fiscal year ending
November 30, 1996. Grant Thornton LLP has been the independent accounting firm
for the Company since fiscal 1993. Although not required by law, the Board of
Directors is seeking shareholder ratification of this selection.

The affirmative vote of a majority of shares voting at the Annual
Meeting is required for ratification. If ratification is not obtained, the Board
of Directors intends to continue the employment of Grant Thornton LLP at least
through fiscal 1996.

Representatives of Grant Thornton LLP are expected to be present at the
Annual Meeting and will be given an opportunity to comment, if they so desire,
and to respond to appropriate questions that may be asked by shareholders.

PRE 14A 15th Page of 51 TOC 1st Previous Next ↓Bottom Just 15th

- 13 -

Other Matters

Any other matters considered at the Annual Meeting including
adjournment will require the affirmative vote of a majority of shares voting.

Voting by Proxy

All Proxy Cards properly signed will, unless a different choice is
indicated, be voted "FOR" election of all nominees for director proposed by the
Board of Directors, "FOR" amendment of the Articles of Incorporation to change
the Company's name to Meritage Hospitality Group Inc., "FOR" adoption of the
1996 Management Equity Incentive Plan, "FOR" adoption of the 1996 Directors'
Share Option Plan, "FOR" Adoption of the Directors' Compensation Plan, "FOR"
adoption of the Employee Share Purchase Plan, and "FOR" ratification of the
selection of independent public accountants.

If any other matters come before the Annual Meeting or any adjournment,
each proxy will be voted in the discretion of the individuals named as proxies
on the card.

Shareholder Proposals

Shareholders who desire to have proposals included in the Notice for
the Annual Meeting to be held in 1997 must submit their proposals in writing to
the Company, Attention Secretary, at its offices on or before December 19, 1996.

MANAGEMENT

Directors and Executive Officers

The following is information concerning each director, nominee for
director, current executive officer, and former executive officer listed on the
Summary Compensation Table, as of March 28, 1996:

PRE 14A 16th Page of 51 TOC 1st Previous Next ↓Bottom Just 16th

- 14 -

[Enlarge/Download Table]

==========================================================================================================================
Common Shares
Beneficially Owned
-------------------------------------
Name and Age (1) Position Amount (2) Percentage
==========================================================================================================================
--------------------------------------------------------------------------------------------------------------------------

Robert E. Schermer, Sr. (3), (4) Chairman of the Board of Directors 2,488 *
60
--------------------------------------------------------------------------------------------------------------------------
Christopher B. Hewett (4), (5) President, Chief Executive Officer 1,553,000 51.6%
37 and Director
--------------------------------------------------------------------------------------------------------------------------
Robert E. Schermer, Jr. (4), (5) Executive Vice President, Chief 1,550,100 51.5%
37 Financial Officer and Director
--------------------------------------------------------------------------------------------------------------------------
Gerard Belisle, Jr. Senior Vice President-Operations 0 --
56
--------------------------------------------------------------------------------------------------------------------------
James R. Saalfeld Vice President, General Counsel and 0 --
29 Secretary
--------------------------------------------------------------------------------------------------------------------------
Rebecca L. Awtrey (5), (10) Director 10,000 *
37
--------------------------------------------------------------------------------------------------------------------------
William F. Ehinger (3), (6), (7) Director 41,056 1.3%
67
--------------------------------------------------------------------------------------------------------------------------
James R. Goerlich Nominee for Director 0 --
59
--------------------------------------------------------------------------------------------------------------------------
David S. Lundeen (8) Director 7,000 *
33
--------------------------------------------------------------------------------------------------------------------------
Joseph L. Maggini (3), (7), (9) Director 21,000 *
56
--------------------------------------------------------------------------------------------------------------------------
Joseph P. Michael (8) Director 0 --
56
--------------------------------------------------------------------------------------------------------------------------
Frank O. Staiger (7) Director 0 --
66
--------------------------------------------------------------------------------------------------------------------------
Raymond A. Weigel, III (7), (8) Director 4,975 *
48
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
Donald W. Reynolds (5) Former Chairman of the Board of 870,248 28.8%
66 Directors, President, Chief Executive
Officer, Treasurer and Secretary
--------------------------------------------------------------------------------------------------------------------------

PRE 14A 17th Page of 51 TOC 1st Previous Next ↓Bottom Just 17th

- 15 -

[Enlarge/Download Table]

====================================================================================================================
Common Shares
Beneficially Owned
-------------------------------
Name and Age (1) Position Amount (2) Percentage
===================================================================================================================

David C. Distad (5), (10) Former Vice President and Chief 10,000 *
54 Financial Officer
====================================================================================================================
All Current Executive Officers 1,639,619 54.3%
and Directors as a Group (12
Persons)
====================================================================================================================

(1) Unless otherwise indicated, the persons named have sole voting and
investment power and direct beneficial ownership of the securities.

(2) The column sets forth Common Shares which are deemed "beneficially
owned" by the named persons under Rule 13d-3 of the Securities Exchange
Act of 1934.

(3) Compensation Committee Member

(4) Executive Committee Member

(5) See description of Common Share ownership contained under "Principal
Shareholders."

(6) Includes 23,100 shares held by the Grabill Kitchens and Interiors, Inc.
Retirement Trust, of which Mr. Ehinger is the sole vested beneficiary.

(7) Stock Purchase Agreement Committee Member

(8) Audit Committee Member

(9) Includes 2,000 shares held by Mr. Maggini jointly with his wife and
1,100 shares held directly by his wife.

(10) Includes 10,000 shares held in joint tenancy with Mr. Reynolds.

* Less than 1%

Robert E. Schermer, Sr. has been a director of the Company since
January 25, 1996. He is currently Senior Vice President and Managing Director of
Robert W. Baird & Co. Incorporated, an investment banking and securities
brokerage firm headquartered in Milwaukee, Wisconsin ("Baird"). Mr. Schermer has
held this position for more than five years. He is the father of Robert E.
Schermer, Jr.

Christopher B. Hewett has been President, Chief Executive Officer and a
director of the Company since January 25, 1996. He has served as President of
Meritage since its inception in 1993. Mr. Hewett was Executive Vice President
(1990-91) and later President (1991-93) of Ocean Reef Club, Inc., which was the
owner, developer and operator of the Ocean Reef Club, a 5,000 acre mixed-use
residential resort community in Key Largo, Florida. In 1993, Ocean Reef Club,
Inc. sold the Ocean Reef Club and was renamed Key Largo Group, Inc. ("KLG"). Mr.
Hewett remains President of KLG.

Robert E. Schermer, Jr. has been Executive Vice President, Chief
Financial Officer and a director of the Company since January 25, 1996. He has
served as Executive Vice President of Meritage since 1993. From 1989 until 1993,
he was Executive Vice President of Landquest

PRE 14A 18th Page of 51 TOC 1st Previous Next ↓Bottom Just 18th

- 16 -

Ltd, a private investment partnership which financed and developed residential
real estate and hotel investments.

Gerard Belisle, Jr. has been Senior Vice President-Operations of the
Company since January 25, 1996. He served as Vice President of Meritage since
its inception in 1993. Mr. Belisle has served as Vice President of KLG since
1992. Prior to 1992, Mr. Belisle was a hotel general manager for Carnival Hotels
& Casinos, a Miami-based hotel owner and management company.

James R. Saalfeld has been Vice President, General Counsel and
Secretary of the Company since March 20, 1996. From 1992 until 1996, Mr.
Saalfeld was an attorney with Dykema Gossett PLLC, a Grand Rapids, Michigan law
firm.

Rebecca L. Awtrey has been a director of the Company since May 1988.
She is currently a housewife and mother. She served as Director of Quality
Control at Innkeepers from 1990 to 1994.

William F. Ehinger has been a director of the Company since May 1988.
Since 1966, he has owned and been the President of Grabill Kitchens and
Interiors, Inc., Rockford, Michigan, a manufacturers' representative. Since
1974, he has also been Chairman of the Board of Independent Bank-West Michigan,
Rockford, Michigan.

James R. Goerlich is a nominee for election as a Class II director. He
is a Certified Public Accountant and the founder and Managing Partner of
Goerlich, Richert and Kaiser, PLLC, Port Huron, Michigan.

David S. Lundeen has been a director of the Company since January 25,
1996. Since 1995, he has served as Executive Vice President and Chief Financial
Officer of BSG Corporation, Austin, Texas, an information technology consulting
company. From 1992 to 1995, Mr. Lundeen was President of Blockbuster Technology,
a division of Blockbuster Entertainment. From 1990 to 1992, he worked for
Blockbuster Entertainment as Director of Mergers & Acquisitions and Corporate
Finance. Prior to 1990, Mr. Lundeen was an investment banker at Drexel Burnham
Lambert in New York City.

Joseph L. Maggini has been a director of the Company since January 25,
1996. Since founding it in 1974, he has served as President and Chairman of the
Board of Magic Steel Corporation, Grand Rapids, Michigan, a steel service
center.

Joseph P. Michael has been a director of the Company since December
1988. Since 1995, Mr. Michael has served as Director-Lending Services for River
Capital, Inc., Bloomfield

PRE 14A 19th Page of 51 TOC 1st Previous Next ↓Bottom Just 19th

- 17 -

Hills, Michigan, a mortgage brokerage firm. From November 1992 to 1995, he was
President of Community Financial and Mortgage, Inc., a mortgage broker. From
August 1991 to November 1992, he was a financial and business consultant. From
1983 to August 1991, he was employed by First Federal Savings and Loan
Association, a federal mutual association, formerly known as First Federal
Savings Bank and Trust of Pontiac, Michigan ("First Federal"), where he was a
Senior Vice President.

Frank O. Staiger has been a director of the Company since January 8,
1996. He is currently a member of the law firm of Davidson, Staiger & Hill, Port
Huron, Michigan. Mr. Staiger has held this position for more than 5 years.

Raymond A. Weigel, III has been a director of the Company since
December 1986. Since April 1992, he has been the President of CLB Consulting
Inc., Grand Rapids, Michigan, a business consulting firm. From 1988 to April
1992, he was First Vice President of the Grand Rapids office of Baird. Mr.
Weigel is currently a director of First National Bank of Manatee, Manatee,
Florida.

Board Actions and Compliance with Section 16 of the Securities Exchange Act of
1934

The Board of Directors met 14 times during fiscal 1995. The Board of
Directors had one standing committee in fiscal 1995. The Compliance Committee,
comprised of Messrs. Michael and Weigel, met six times in fiscal 1995 to review
related party transactions.

On January 25, 1996, Meritage acquired majority control of the Company.
On that same date, the Company adopted Restated and Amended Bylaws and created
four Board of Director committees: an Executive Committee, an Audit Committee, a
Compensation Committee, and a Stock Purchase Agreement Committee.

The Executive Committee is comprised of Messrs. Schermer, Sr.
(Chairman), Hewett and Schermer, Jr. The Executive Committee possesses and may
exercise all of the powers of the Board of Directors in the management and
control of the business of the Corporation to the extent permitted by law.

The Audit Committee, comprised of Messrs. Weigel (Chairman), Lundeen
and Michael, all of whom are non-employee directors, reviews the Company's
internal accounting operations. It also recommends the employment of independent
accountants and reviews the relationships between the Company and its outside
accountants.

The Compensation Committee, comprised of Messrs. Schermer, Sr.
(Chairman), Maggini and Ehinger, all of whom are non-employee directors,
establishes compensation levels for

PRE 14A 20th Page of 51 TOC 1st Previous Next ↓Bottom Just 20th

- 18 -

Management and administers the 1996 Management Equity Incentive Plan, 1996
Directors' Share Option Plan and the Employee Share Purchase Plan.

The Stock Purchase Agreement Committee, comprised of Messrs. Staiger
(Chairman), Ehinger, Maggini and Weigel, is responsible for evaluating, in
consultation with legal counsel, the Company's rights and obligations with
respect to Mr. Reynolds and Innkeepers under the Stock Purchase and Sale
Agreement, dated September 19, 1995, and for developing recommendations to the
Board of Directors with regard to the foregoing.

The Company did not establish a nominating committee for fiscal 1996.

In fiscal 1995, directors were compensated $1,000 per meeting for
attending meetings of the Board of Directors. Upon shareholder approval of the
Directors' Compensation Plan at the Annual Meeting, non-employee directors will
be compensated in accordance with the terms of such Plan, beginning as of
January 28, 1996. Directors who are employees of the Company will not be
compensated for serving as directors. See "Proposal 5: Adoption of the
Directors' Compensation Plan" for a summary description of the Plan.

The Company is not aware of any instances where any person, who during
fiscal 1995 was required to file a report pursuant to Section 16(a) of the
Securities Exchange Act of 1934, failed to report any transaction on a timely
basis or failed to file any required report or form.

Executive Compensation

Compensation paid by Thomas Edison Inns, Inc. for the last three fiscal
years to its former Chief Executive Officer and all executive officers earning
in excess of $100,000 is as follows:(1)

[Enlarge/Download Table]

==================================================================================================================================
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation
==================================================================================================================================
Name and Fiscal Salary Bonus Other Annual All Other
Principal Position Year Compensation Compensation
----------------------------------------------------------------------------------------------------------------------------------

Donald W. Reynolds 1995 $ --(2) $ -- $ -- $ 193,875(3)
Former Chairman of the Board of Directors, 1994 --(2) -- -- 193,500(3)
President, Chief Executive Officer, Treasurer 1993 --(2) -- -- 193,500(3)
and Secretary
----------------------------------------------------------------------------------------------------------------------------------
David C. Distad 1995 $ 130,150(4) $ -- $ 8,000(5) $ --
Former Vice President and Chief Financial 1994 98,488(4) -- 8,000(5) --
Officer 1993 92,000(4) -- 4,000(5) 25,000(6)
==================================================================================================================================

PRE 14A 21st Page of 51 TOC 1st Previous Next ↓Bottom Just 21st

- 19 -

(1) Meritage acquired majority control of the Company on January
25, 1996. Mr. Reynolds was removed as a director and officer
of the Company by the St. Clair County (Michigan) Circuit
Court on January 8, 1996. Mr. Distad was removed by the Board
of Directors on January 25, 1996.

(2) In fiscal 1995, 1994 and 1993, Mr. Reynolds received
compensation from Innkeepers. See "Certain Relationships and
Related Transactions" below.

(3) In fiscal 1995, 1994 and 1993, St. Clair Inn, Inc. furnished
an automobile to Mr. Reynolds. In fiscal 1995, 1994 and 1993,
the Company paid $193,875, $193,500, and $193,500,
respectively, to Mr. Reynolds for his personal guarantee of
certain obligations of the Company.

(4) In fiscal 1995, 1994 and 1993, Innkeepers paid Mr. Distad's
salary, which was reimbursed by the Company to Innkeepers.

(5) Represents fees paid by the Company to Mr. Distad for
attending Board of Directors meetings.

(6) On December 2, 1992, the Company advanced $25,000 to Mr.
Distad for costs associated with his relocation in connection
with his employment.

The Company did not pay or distribute to its executive officers any
compensation pursuant to any employee benefit plan other than any group life,
health, hospitalization, or medical reimbursement plan that does not
discriminate in favor of any executive officer or director and that is generally
available to all salaried employees. During fiscal 1994, the Company adopted a
plan established under Section 401(k) of the Internal Revenue Code (the "Plan")
that covers substantially all employees of the Company, each of its subsidiaries
and Innkeepers. Company contributions to the Plan are voluntary and at the
discretion of the Board of Directors. The Company made no contributions to the
Plan during fiscal 1995.

Certain Relationships and Related Transactions

Present Management is unable to determine whether the following
transactions were on terms no less favorable to the Company than those that
could be obtained from unaffiliated parties.

From the Company's inception in 1986 until January 1996, Mr. Reynolds
served as Chairman of the Board, President, Chief Executive Officer, Treasurer
and Secretary of the Company, and the Company engaged Innkeepers, a company
owned by Mr. Reynolds, to manage the Company's properties pursuant to a
Management Agreement. In fiscal 1994 and 1995, the Company paid fees to
Innkeepers of $456,750 and $402,786, respectively.

As reported in the Company's Current Report on Form 8-K filed with the
SEC on February 3, 1996, Mr. Reynolds was removed as a director and officer of
the Company by the St. Clair County (Michigan) Circuit Court on January 8, 1996.
The court appointed Mr. Staiger as acting President and director. On January 25,
1996, Meritage amended the Company's Bylaws to classify the Board of Directors
into two classes, expanded the Board of Directors to 10 directors and appointed
the five new Class I directors. On January 25, 1996, the Board of Directors
removed Mr. Distad, son-in-law of Mr. Reynolds, as Vice President and Chief
Financial Officer of the Company and terminated the Management Agreement with
Innkeepers. As a result, the Company no longer employs a third party management
company; instead, it has installed new management to operate its business
directly in an effort to utilize more effectively

PRE 14A 22nd Page of 51 TOC 1st Previous Next ↓Bottom Just 22nd

- 20 -

the Company's resources and employees. On February 12, 1996, the court confirmed
the resignation of Mr. Staiger and the appointment of Mr. Hewett as President.

On December 12, 1986, the Company and each of its subsidiaries entered
into a Management Agreement with Innkeepers for the management of the Company's
subsidiaries. Mr. Reynolds was the owner, President and Chief Executive Officer
of Innkeepers. Mr. Distad was a Vice President of Innkeepers. The Management
Agreement provided that Innkeepers would manage the Company's three hotels (the
Thomas Edison Inn, the St. Clair Inn and the Spring Lake Holiday Inn,
collectively, the "Hotels") and, in connection therewith, would supervise, hire,
train and discharge Hotel managers and other employees, would enter into various
contracts as agent of and for the benefit of the Hotels, and would furnish the
Hotels with budgets and financial accounting records. Innkeepers was required
only to devote so much time as it determined reasonably necessary to fulfill its
obligations under the Management Agreement. Under the Management Agreement,
Innkeepers received as compensation 3% of the gross revenues of the Hotels. In
fiscal 1994 and 1995, the Company paid fees to Innkeepers of $456,750 and
$402,786, respectively.

Spring Lake Inn, Inc., a subsidiary of the Company, developed several
condominium units adjacent to the Spring Lake Holiday Inn. The Company sold one
condominium unit in fiscal 1994 and two condominium units in fiscal 1995. In
December 1987, Spring Lake Inn, Inc., transferred title to five of the
condominium units to Mr. Reynolds for $325,000, who used the units as collateral
for a loan of the same amount. Mr. Reynolds used the loan proceeds to pay Spring
Lake Inn, Inc., for the units. At the same time, he executed a Quit Claim Deed
to the subsidiary for the pledged condominium units. Spring Lake Inn, Inc. made
payments to Mr. Reynolds on terms identical to his obligation on his personal
loan, and Mr. Reynolds used the proceeds to repay his personal loan. Under this
arrangement, the Company paid $55,550 to Mr. Reynolds for fiscal 1994. This loan
was purportedly repaid in full during fiscal 1994.

At November 30, 1995, the Company owed to Mr. Reynolds and companies
affiliated with him $2,300, a decrease of $248,163 from November 30, 1994
(exclusive of the accrued management fees referred to below). At the same time,
his indebtedness to the Company totaled $477,321, a decrease of $951,668 from
November 30, 1994. During fiscal 1994 and 1995, Mr. Reynolds borrowed $498,951
and $657,918 from the Company and made cash payments in the amount of, or
otherwise reduced the indebtedness by, $691,555 and $1,518,217, respectively.
Approximately $62,341 and $79,311 of Mr. Reynolds's borrowings were an advance
on the management fee to be earned by Innkeepers for fiscal 1994 and 1995,
respectively. In addition, from time to time Innkeepers purportedly purchased,
in privately negotiated transactions, Common Shares of the Company.

PRE 14A 23rd Page of 51 TOC 1st Previous Next ↓Bottom Just 23rd

- 21 -

In addition, at November 30, 1995, companies affiliated with Mr.
Reynolds or Mr. Reynolds and Mr. Ehinger owed the Company $218,109, a decrease
of $636,608 from November 30, 1994. During fiscal 1995, these affiliated
companies had borrowings of $24,330 and payments in the amount of $752,307.

During fiscal 1994 and 1995, the Company paid certain life insurance
premiums to be reimbursed by Mr. Reynolds in the aggregate amount of $33,155 and
$102,284, respectively. In fiscal 1991, Mr. Reynolds transferred to the Company
his interest in shares representing 10% of the outstanding stock of Michigan
Assurance Limited, a Bermuda insurance company. In return, the Company paid Mr.
Reynolds $100,000, representing the amount Mr. Reynolds paid for the stock in
1989. In fiscal 1994 and 1995, the Company purchased fire and general liability
insurance from that insurance company.

To collateralize the amounts due from Mr. Reynolds, the Company
obtained from him a second security interest in a nonrecourse mortgage note
receivable held by him. The mortgage note had a balance of approximately
$1,200,000 at November 30, 1994 and was collateralized by real estate located in
Grand Rapids, Michigan. The second security interest was released in fiscal 1995
when the Company's long-term borrowings were reduced.

Mr. Reynolds guaranteed the Company's obligations to First Federal in
the amount of $2,924,975 at November 30, 1995. Prior to granting to the Company
the security interest described in the preceding paragraph, Mr. Reynolds granted
to First Federal a security interest in the mortgage note as additional
collateral. To secure the loan, Mr. Reynolds also granted to First Federal a
second mortgage on his personal residence and assigned life insurance policies
owned by Mr. Reynolds with a face value, after netting out all policy loans, of
not less than $1,000,000.

Mr. Reynolds pledged personally owned life insurance policies with a
face value of $3,000,000 to Michigan National Bank as additional collateral for
the Company's obligation to that lender in the amount of $4,273,702 at November
30, 1995. In addition, Mr. Reynolds guaranteed the Company's obligation under
the First Federal Letter of Credit Reimbursement Agreement in the amount of
$3,929,506. The Letter of Credit collateralized the Michigan Strategic Fund
Bonds of the Company, which were retired in April 1992 by drawing against the
Letter of Credit. In October 1992, the amount due under the Letter of Credit was
amended to create a mortgage payable due October 1, 1997, with monthly payments
of $37,194. Mr. Reynolds also guaranteed certain notes payable to banks in the
amount of $375,258 at November 30, 1995.

PRE 14A 24th Page of 51 TOC 1st Previous Next ↓Bottom Just 24th

- 22 -

The Board of Directors approved a 1.5% loan guarantee fee to be paid to
Mr. Reynolds as compensation for his loan guarantee for fiscal 1995 and 1994.
The guarantee fee paid was $193,875 for fiscal 1995 and $193,500 for fiscal
1994.

Buckeye Resource & Management, Inc. ("Buckeye") entered into a
consulting agreement with Mr. Reynolds, purportedly on behalf of the Company, in
March 1995. This agreement provided that Buckeye would be paid $900,000 if it
sold the Company pursuant to an agreement that retained the personal services of
Mr. Reynolds and/or a management company that employed or contracted with Mr.
Reynolds. Under this agreement, Investall, Inc. ("Investall") was acknowledged
as being associated with Buckeye. Douglas Ziesemer is the President of Investall
and the former President of TAI. TAI reported in a Form 13D filed with the SEC
on or about November 27, 1995 that it is the owner of 5% or more of the
Company's Common Shares. The Form 13D filed by TAI also reports that Investall
believes it would receive some portion of the $900,000 fee.

In February 1995, Mr. Reynolds entered into a personal loan with Robert
J. Skandalaris for $1,500,000. In February 1995, Mr. Skandalaris also entered
into a consulting agreement with Mr. Reynolds, purportedly on behalf of the
Company, whereby the Company was obligated to pay Mr. Skandalaris $210,000 to,
among other things, make recommendations to the Company regarding long-term
planning, operational efficiencies, customer development, marketing strategies,
personnel and financial matters. Mr. Skandalaris was required to devote no more
than 100 hours under the consulting agreement. Mr. Skandalaris testified in July
1995 that it was his understanding that Mr. Reynolds would reduce the management
fee charged by his wholly-owned management company (Innkeepers) from 3% to 2% as
an offset to the consulting fee to be paid to Mr. Skandalaris. On January 19,
1996, the Company paid Mr. Skandalaris his full consulting fee ($210,000) and
Mr. Reynolds's management company received from the Company the full 3%
management fee.

In fiscal 1995, the Company expended $2,154,163 for litigation expenses
(including attorney's fees) on behalf of Ms. Awtrey, Messrs. Reynolds, Ehinger,
Michael and Weigel, and on behalf of Meritage. These expenses were the result
of: (1) a derivative lawsuit filed in January 1995 against the Company and its
then sitting directors, by 13 of the Company's shareholders (including Meritage,
now the majority shareholder) (Case No. 95-0103-CZ, Kent County (Michigan)
Circuit Court, Leiber, J.) (the "Derivative Proceeding"); (2) a lawsuit filed by
TAI in December 1995 against the Company, Meritage, Ms. Awtrey, and Messrs.
Ehinger, Michael, and Weigel (Case No. 95-00-33-88-CZ, St. Clair County
(Michigan) Circuit Court, Deegan, J.) (the "TAI Suit"); (3) a lawsuit filed by
Meritage on January 4, 1996 against the Company and Messrs. Ehinger and Reynolds
(Case No. 96-000017 CZ, St. Clair County (Michigan) Circuit Court, Deegan, J.)
(the "Meritage Suit"); and (4) a lawsuit filed by Meritage against the Company,
Mr. Reynolds and parties affiliated with Mr. Reynolds (Case No. 1:95

PRE 14A 25th Page of 51 TOC 1st Previous Next ↓Bottom Just 25th

- 23 -

CV 451, Quist, J., U.S. District Court for the Western District of Michigan,
S.D.) (the "7B Suit"). In settling the 7B Suit, the Company agreed to pay the
costs and expenses, including legal fees, of Meritage and Mr. Reynolds and his
affiliates. In the Derivative Proceeding, the Company advanced sums under the
indemnification provisions of the Company's Bylaws for the defense of current
directors Ms. Awtrey and Messrs. Ehinger, Michael, and Weigel, and for Mr.
Reynolds, a director at the time of suit. The 7B Suit has been dismissed and the
Company anticipates being dismissed from the Derivative Proceeding and the
Meritage Suit in the near future.

Management believes that the following transactions were on terms no
less favorable to the Company than those that could be obtained from
unaffiliated parties.

At November 30, 1995, Meritage was indebted to the Company in the
principal amount of $10,500,000. Messrs. Hewett and Schermer, Jr. are
shareholders, directors and officers of Meritage. Mr. Belisle is an officer of
Meritage. In September 1995, a secured, non-interest bearing promissory note in
the amount of $10,500,000 (the "Meritage Note") was given to the Company in
exchange for 1,500,000 Common Shares. Beginning on the third anniversary of the
Meritage Note, Meritage is required to make an annual payment of $1,312,500 for
the next eight years. The note is secured by a Stock Pledge Agreement covering
all 1,500,000 shares.

At November 30, 1995, Mr. Schermer, Jr. was indebted to Spring Lake
Inn, Inc. in the amount of $70,544. This indebtedness arose from a promissory
note dated December 27, 1987 in the amount of $46,000 that Mr. Schermer, Jr.
entered into with a third party. The interest rate on the note was 7%. This note
was, unbeknownst to Mr. Schermer, Jr., assigned to Spring Lake Inn, Inc. On
March 27, 1996, Mr. Schermer, Jr. paid $71,627, all sums then due and owing on
the note.

PRE 14A 26th Page of 51 TOC 1st Previous Next ↓Bottom Just 26th

- 24 -

Other Matters

Thomas Edison Inns, Inc. is not aware of any other matters to be
presented at the Annual Meeting other than those specified in the Notice.

By order of the Board of Directors

Robert E. Schermer, Sr.
Chairman of the Board of Directors

April 17, 1996

PRE 14A 27th Page of 51 TOC 1st Previous Next ↓Bottom Just 27th

APPENDIX A

THOMAS EDISON INNS, INC. 1996

MANAGEMENT EQUITY INCENTIVE PLAN

ARTICLE 1

OBJECTIVES

Thomas Edison Inns, Inc. has established this Management Equity
Incentive Plan effective March __, 1996 as an incentive to the attraction and
retention of dedicated and loyal employees of outstanding ability, to stimulate
the efforts of such persons in meeting Thomas Edison Inns, Inc.'s objectives and
to encourage ownership of its Common Shares by employees.

ARTICLE 2

DEFINITIONS

2.1 For purposes of the Plan the following terms shall have the
definition which is attributed to them, unless another definition is clearly
indicated by a particular usage and context.

A. "Code" means the Internal Revenue Code of 1986, as amended.

B. The "Company" means Thomas Edison Inns, Inc. and any
subsidiary of Thomas Edison Inns, Inc., as the term "subsidiary" is
defined in Section 424(f) of the Code.

C. "Date of Exercise" means the date on which the Company has
received a written notice of exercise of an Option, in such form as is
acceptable to the Committee, and full payment of the purchase price.

D. "Date of Grant" means the date on which the Committee makes
an award of an Option.

E. "Eligible Employee" means any individual who performs
services for the Company and is treated as an employee for federal
income tax purposes.

F. "Fair Market Value" means the last sale price reported on
any stock exchange or over-the-counter trading system on which Shares
are trading on the last trading day prior to a specified date or, if no
last sales price is reported, the average of the closing bid and asked
prices for a Share on a specified date. If no sale has been made

PRE 14A 28th Page of 51 TOC 1st Previous Next ↓Bottom Just 28th

on the specified date, then prices on the last preceding day on which
any such sale shall have been made shall be used in determining Fair
Market Value under either method prescribed in the previous sentence.

G. "Incentive Share Option" shall have the same meaning as
given to that term by Section 422 of the Code.

H. "Nonqualified Share Option" means any Option granted under
the Plan which is not considered an Incentive Share Option.

I. "Option" means the right to purchase a stated number of
Shares at a specified price. The Option may be granted to an Eligible
Employee subject to the terms of this Plan, and such other conditions
and restrictions as the Committee deems appropriate. Each Option shall
be designated by the Committee to be either an Incentive Share Option
or a Nonqualified Share Option.

J. "Option Price" means the purchase price per Share subject
to an Option and shall be fixed by the Committee, but shall not be less
than 100% of the Fair Market Value of a Share on the Date of Grant in
the case of an Incentive Share Option.

K. "Permanent and Total Disability" shall mean any medically
determinable physical or mental impairment rendering an individual
unable to engage in any substantial gainful activity, which disability
can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12 months.

L. "Plan" means this 1996 Management Equity Incentive Plan as
it may be amended from time to time.

M. "Share" means one Common Share, $.01 par value, of the
Company.

ARTICLE 3

ADMINISTRATION

3.1 The Plan shall be administered by a committee (the "Committee")
designated by the Board of Directors of the Company. The Committee shall be
comprised solely of three or more directors each of whom shall be (i) a
"disinterested person" as defined under Rule 16b-3 of the Securities Exchange
Act of 1934 (the "Act") and (ii) an "outside director" to the extent required by
Section 162(m) of the Internal Revenue Code ("Section 162(m)"). Notwithstanding
the foregoing, to the extent relevant state law now or hereafter permits, the
Committee may be comprised solely of two or more such directors.

Actions shall be taken by a majority of the Committee.

PRE 14A 29th Page of 51 TOC 1st Previous Next ↓Bottom Just 29th

3.2 Except as specifically limited by the provisions of the Plan, the
Committee in its discretion shall have the authority to:

A. Determine which Eligible Employees shall be granted
Options;

B. Determine the number of Shares which may be subject to each
Option;

C. Determine the Option Price;

D. Determine the term of each Option;

E. Determine whether each Option is an Incentive Share Option
or Nonqualified Share Option;

F. Interpret the provisions of the Plan and decide all
questions of fact arising in its application; and

G. Prescribe such rules and procedures for Plan administration
as from time to time it may deem advisable.

3.3 Any action, decision, interpretation or determination by the
Committee with respect to the application or administration of this Plan shall
be final and binding upon all persons, and need not be uniform with respect to
its determination of recipients, amount, timing, form, terms or provisions of
Options.

3.4 No member of the Committee shall be liable for any action or
determination taken or made in good faith with respect to the Plan or any Option
granted hereunder, and to the extent permitted by law, all members shall be
indemnified by the Company for any liability and expenses which may occur
through any claim or cause of action.

ARTICLE 4

SHARES SUBJECT TO PLAN

4.1 The Shares that may be made subject to Options granted under the
Plan shall not exceed _______ Shares in the aggregate. Except as provided in
Section , upon lapse or termination of any Option for any reason without being
completely exercised, the Shares which were subject to such Option may again be
subject to other Options.

4.2 The maximum number of Shares with respect to which Options may be
granted to any employee during each fiscal year of the Company
is________________________ Shares. If an Option is canceled, it continues to be
counted against the maximum number of Shares for

PRE 14A 30th Page of 51 TOC 1st Previous Next ↓Bottom Just 30th

which Options may be granted to an employee. If an Option is repriced, the
transaction is treated as a cancellation of the Option and a grant of a new
Option.

ARTICLE 5

GRANTING OF OPTIONS

Subject to the terms and conditions of the Plan, the Committee may,
from time to time prior to March __, 2006, grant Options to Eligible Employees
on such terms and conditions as the Committee may determine. More than one
Option may be granted to the same Eligible Employee.

ARTICLE 6

TERMS OF OPTIONS

6.1 Subject to specific provisions relating to Incentive Share Options
set forth in Article , each Option shall be for a term of from one to ten years
from the Date of Grant and may not be exercised during the first twelve months
of the term of said Option. Commencing on the first anniversary of the Date of
Grant of an Option, the Option may be exercised for 20% of the total Shares
covered by the Option with an additional 20% of the total Shares covered by the
Option becoming exercisable on each succeeding anniversary until the Option is
exercisable to its full extent. This right of exercise shall be cumulative and
shall be exercisable in whole or in part. The Committee in its sole discretion
may permit particular holders of Options to exercise an Option to a greater
extent than provided herein. The Committee may establish a different exercise
schedule and impose other conditions upon exercise for any particular Option or
groups of Options.

6.2 The holder of an Option must remain continuously in the service of
the Company as an employee for a period of at least twelve months. Nothing
contained in this Plan or in any Option granted pursuant to it shall confer upon
any employee any right to continue in the employ of the Company or to interfere
in any way with the right of the Company to terminate employment at any time. So
long as a holder of an Option shall continue to be an employee of the Company,
the Option shall not be affected by any change of the employee's duties or
position.

ARTICLE 7

EXERCISE OF OPTIONS

Any person entitled to exercise an Option in whole or in part may do so
by delivering a written notice of exercise to the Company, attention Corporate
Secretary, at its principal office. The written notice shall specify the number
of Shares for which an Option is being

PRE 14A 31st Page of 51 TOC 1st Previous Next ↓Bottom Just 31st

exercised and the grant date of the option being exercised and shall be
accompanied by full payment of the Option Price for the Shares being purchased.

ARTICLE 8

PAYMENT OF OPTION PRICE

8.1 Payment of the Option Price may be made in cash, by the tender of
Shares, or both. Shares tendered shall be valued at their Fair Market Value on
the Date of Exercise.

8.2 Payment through tender of Shares may be made by instruction from
the Optionee to the Company to withhold from the Shares issuable upon exercise
that number which have a Fair Market Value on the Date of Exercise equal to the
exercise price for the Option or portion thereof being exercised.

ARTICLE 9

INCENTIVE SHARE OPTIONS AND NONQUALIFIED SHARE OPTIONS

9.1 The Committee in its discretion may designate whether an Option is
to be considered an Incentive Share Option or a Nonqualified Share Option. The
Committee may grant both an Incentive Share Option and a Nonqualified Share
Option to the same individual. However, where both an Incentive Share Option and
a Nonqualified Share Option are awarded at one time, such Options shall be
deemed to have been awarded in separate grants, shall be clearly identified, and
in no event will the exercise of one such Option affect the right to exercise
the other such Option.

9.2 Any option designated by the Committee as an Incentive Share Option
will be subject to the general provisions applicable to all Options granted
under the Plan. In addition, the Incentive Share Option shall be subject to the
following specific provisions:

A. At the time the Incentive Share Option is granted, if the
Eligible Employee owns, directly or indirectly, shares representing
more than 10% of (i) the total combined voting power of the Common
Shares of the Company, or (ii) a corporation that owns 50% or more of
the total combined voting power of the Common Shares of the Company,
then:

(i) The Option Price must equal at least 110% of the
Fair Market Value on the Date of Grant; and

(ii) The term of the Option shall not be greater than
five years from the Date of Grant.

PRE 14A 32nd Page of 51 TOC 1st Previous Next ↓Bottom Just 32nd

B. The aggregate Fair Market Value of Shares (determined at
the Date of Grant) with respect to which Incentive Share Options are
exercisable by an Eligible Employee for the first time during any
calendar year under this Plan or any other plan maintained by the
Company shall not exceed $100,000.

9.3 If any Option is not granted, exercised, or held pursuant to the
provisions noted immediately above, it will be considered to be a Nonqualified
Share Option to the extent that the grant is in conflict with these
restrictions.

ARTICLE 10

TRANSFERABILITY OF OPTION

An Option in not transferable by the Eligible Employee to whom granted
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title 1 of the
Employee Retirement Income Security Act, as amended.

ARTICLE 11

TERMINATION OF OPTIONS

11.1 An Option will terminate as follows:

A. Upon exercise or expiration by its terms.

B. Except as provided in Subsection , upon termination of
employment for reasons other than cause, the then-exercisable portion of any
Option will terminate on the 60th day after the date of termination. The portion
not then exercisable will terminate on the date of termination of employment.
For purposes of the Plan, a leave of absence approved by the Company shall not
be deemed to be termination of employment.

C. If an Eligible Employee holding an Option dies or becomes
subject to a Permanent and Total Disability while employed by the Company, or
within 60 days after termination of employment, for reasons other than cause,
such Option may be exercised, to the extent exercisable on the date of such
death, Permanent and Total Disability or termination of employment, at any time
within one year after the date the employment of such Eligible Employee
terminated, by the estate or guardian of such person or by those persons to whom
the Option may have been transferred by will or by the laws of descent and
distribution.

D. Options shall terminate immediately if employment is
terminated for cause. Cause is defined as including, but not limited to, theft
of or intentional damage to Company property, intentional harm to the Company's
reputation, material breach of the Optionee's duty of fidelity to the Company,
the use of illegal drugs, the commission of a criminal act, willful

PRE 14A 33rd Page of 51 TOC 1st Previous Next ↓Bottom Just 33rd

violation of Company policy, or trading in securities of the Company for
personal gain based on knowledge of the Company's activities or results when
such information is not available to the general public.

E. If an Eligible Employee holding an Option violates any
terms of any written employment or noncompetition agreement between the Company
and the Eligible Employee, all existing Options held by such Employee will
terminate. In addition, if at the time of such violation the Employee has
exercised Options but has not received certificates for the shares to be issued,
the Company may void the Option and its exercise. Any such actions by the
Company shall be in addition to any other rights or remedies available to the
Company in such circumstances.

11.2 Except as provided in Article hereof, in no event will the
continuation of the term of an Option beyond the date of termination of
employment allow the Eligible Employee, or his beneficiaries or heirs, to accrue
additional rights under the Plan, or to purchase more Shares through the
exercise of an Option than could have been purchased on the day that employment
was terminated. In addition, notwithstanding anything contained herein, no
Option may be exercised in any event after the expiration of ten years from the
date of grant of such Option.

ARTICLE 12

ADJUSTMENTS TO SHARES AND OPTION PRICE

12.1 In the event of changes in the outstanding Common Shares of the
Company as a result of share dividends, splitups, recapitalizations,
combinations of Shares or exchanges of Shares, the number and class of Shares
for all purposes covered by the Plan, and the number and class of Shares and
price per Share for each Option and each outstanding Option covered by the Plan,
shall be correspondingly adjusted by the Committee.

12.2 The Committee shall make appropriate adjustments in the Option
Price to reflect any spin-off of assets, extraordinary dividends or other
distributions to shareholders.

12.3 In the event of the dissolution or liquidation of the Company or
any merger, consolidation, exchange or other transaction in which the Company is
not the surviving corporation or in which the outstanding Shares of the Company
are converted into cash, other securities or other property, each outstanding
Option shall terminate as of a date fixed by the Committee provided that not
less than 20 days' written notice of the date of expiration shall be given to
each holder of an Option and each such holder shall have the right during such
period following notice to exercise the Option as to all or any part of the
Shares for which it is exercisable at the time of such notice. The Committee, in
its sole discretion, may provide that Options in such circumstances may be
exercised to an extent greater than the number of Shares for which they were
exercisable at the time of such a notice.

PRE 14A 34th Page of 51 TOC 1st Previous Next ↓Bottom Just 34th

12.4 All outstanding Options shall become immediately exercisable in
full if a change in control of the Company occurs. For purposes of this
Agreement, a "change in control of the Company" shall be deemed to have occurred
if (a) any "person," as such term is used in Sections 13(d) and 14(d) of the
Act, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company becomes the "beneficial owner," as defined
in Rule 13d-3 under the Act, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Company's
then outstanding securities; or (b) during any period of one year (not including
any period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors and any new director
whose election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who either were Directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof.

ARTICLE 13

OPTION AGREEMENTS

13.1 All Options granted under the Plan shall be evidenced by a written
agreement in such form or forms as the Committee in its sole discretion may
determine.

13.2 Each optionee, by acceptance of an Option under this Plan, shall
be deemed to have consented to be bound, on the optionee's own behalf and on
behalf of the optionee's heirs, assigns and legal representatives, by all terms
and conditions of this Plan.

ARTICLE 14

AMENDMENT OR DISCONTINUANCE OF PLAN

14.1 The Board of Directors of the Company may at any time amend,
suspend, or discontinue the Plan; provided, however, that no amendments by the
Board of Directors of the Company shall, without further approval of the
shareholders of the Company:

A. Change the definition of Eligible Employees;

B. Except as provided in Articles and hereof, increase the
number of Shares which may be subject to Options granted under the
Plan; or

C. Cause the Plan or any Option granted under the Plan to fail
to be excluded from the $1 million deduction limitation imposed by
Section 162(m) of the Code, or qualify as an "Incentive Share Option"
as defined by Section 422 of the Code.

PRE 14A 35th Page of 51 TOC 1st Previous Next ↓Bottom Just 35th

14.2 No amendment or discontinuance of the Plan shall alter or impair
any Option granted under the Plan without the consent of the holder thereof.

ARTICLE 15

EFFECTIVE DATE

This Plan shall become effective as of March __, 1996, having been
adopted by the Board of Directors of the Company on such date subject to
approval by the affirmative vote of the holders of a majority of the Common
Shares of the Company voting on the issue, and all Options granted prior to such
approval are expressly conditioned upon such approval being received. If
shareholder approval is not received within 12 months of the Effective Date,
Options granted pursuant to this Plan shall be null and void.

ARTICLE 16

MISCELLANEOUS

16.1 Nothing contained in this Plan or in any action taken by the Board
of Directors or shareholders of the Company shall constitute the granting of an
Option. An Option shall be granted only at such time as a written Option shall
have been executed and delivered to the respective employee and the employee
shall have executed an agreement respecting the Option in conformance with the
provisions of the Plan.

16.2 Certificates for Shares purchased through exercise of Options will
be issued in regular course after exercise of the Option and payment therefor as
called for by the terms of the Option but in no event shall the Company be
obligated to issue certificates more often than once each quarter of each fiscal
year. No persons holding an Option or entitled to exercise an Option granted
under this Plan shall have any rights or privileges of a shareholder of the
Company with respect to any Shares issuable upon exercise of such Option until
certificates representing such Shares shall have been issued and delivered. No
Shares shall be issued and delivered upon exercise of an Option unless and until
the Company, in the opinion of its counsel, has complied with all applicable
registration requirements of the Securities Act of 1933 and any applicable state
securities laws and with any applicable listing requirements of any national
securities exchange on which the Company securities may then be listed as well
as any other requirements of law.

16.3 This Plan shall continue in effect until the expiration of all
Options granted under the Plan unless terminated earlier in accordance with
Article ; provided, however, that it shall otherwise terminate ten years after
the Effective Date.

PRE 14A 36th Page of 51 TOC 1st Previous Next ↓Bottom Just 36th

APPENDIX B

THOMAS EDISON INNS, INC.

1996 DIRECTORS' SHARE OPTION PLAN

The purpose of the 1996 Directors' Share Option Plan is to advance the
interests of Thomas Edison Inns, Inc. and its shareholders by affording
non-employee members of the Company's Board of Directors an opportunity to
increase their proprietary interest in the Company by the grant of options to
them to purchase Common Shares under the terms set forth herein. The Company
believes that this Plan will give an incentive to these members of the Board to
increase revenues and profits.

1. Effective Date of the Plan. This Plan shall become effective at such
time as it is approved by shareholders at the 1996 Annual Meeting of
Shareholders of the Company.

2. Shares Subject to the Plan. The shares to be issued upon the
exercise of the options granted under the Plan shall be Common Shares, $.01 par
value, of the Company. Either treasury or authorized and unissued Common Shares,
or both, as the Board of Directors shall from time to time determine, may be so
issued. No Common Shares which are the subject of any lapsed, expired or
terminated options may be made the subject of additional options under the Plan.

Subject to the provisions of Section 4 hereof, the aggregate number of
Common Shares for which options may be granted under the Plan shall be ______.

3. Administration. The Plan shall be administered by a committee
appointed in accordance with the Bylaws and consisting of three or more
directors which directors may also be eligible to participate in the Plan.

Subject to the express provisions of the Plan, the Committee shall have
the authority to establish the terms and conditions of such option agreements,
consistent with this Plan. Such agreements need not be uniform.

4. Adjustments to Common Shares and Option Price.

4.1 In the event of changes in the outstanding Common Shares
of the Company as a result of share dividends, split-ups,
recapitalizations, combinations or exchanges, the number and class of
Common Shares authorized to be the subject of options under the Plan
and the number and class of Common Shares and Option Price for each
option which is outstanding under this Plan shall be correspondingly
adjusted by the Committee.

PRE 14A 37th Page of 51 TOC 1st Previous Next ↓Bottom Just 37th

4.2 The Committee shall make appropriate adjustments in the
Option Price to reflect any spin-off of assets, extraordinary dividends
or other distributions to shareholders.

4.3 In the event of the dissolution or liquidation of the
Company or any merger, consolidation or combination in which the
Company is not the surviving corporation or in which the outstanding
Common Shares of the Company are converted into cash, other securities
or other property, each outstanding option issued hereunder shall
terminate as of a date fixed by the Committee, provided that not less
than 20 days' written notice of the date of expiration shall be given
to each holder of an option. Each such holder shall have the right
during such period following notice to exercise the option as to all or
any part of the option for which it is exercisable at the time of such
notice.

5. Eligible Directors; Grant of Options. An Eligible Director is each
director of the Company as of the time of grant of an Option called for
hereafter who is not also an employee of the Company.

Each Eligible Director shall be granted an option for the purchase of
2,500 Common Shares immediately after the 1996 Annual Shareholders' Meeting and
an additional Option for _______ Common Shares immediately after each subsequent
Annual Shareholders' Meeting. Persons who become Eligible Directors after the
effective date of the Plan shall be granted an option for _____ shares as a
result of their election, whether by shareholders or directors, and upon each
subsequent Annual Shareholders' Meeting, another option for _____ shares. All
grants shall be made on the date of the event giving rise to the option. Such
grants shall continue until the number of shares provided for in Section 2 are
exhausted.

6. Price. The purchase price of the Common Shares which may be acquired
pursuant to the exercise of any option granted pursuant to the Plan shall be the
last closing sale price reported on the date of grant.

7. Period of Option. The term of each option shall be ten years from
the date of grant.

8. Exercise of Option. An option may be exercised by an Eligible
Director as to all or part of the shares covered thereby by giving written
notice to the Company at its principal office, directed to the attention of its
Secretary, accompanied by payment of the Option Price in full for shares being
purchased. The payment of the Option Price shall be either in cash or, subject
to any conditions set forth in the option agreement, by delivery of Common
Shares of the Company having a fair market value equal to the purchase price on
the date of exercise of the option, or by any combination of cash and such
shares.

Unless there is in effect at the time of exercise a registration
statement under the Securities Act of 1933 permitting the resale to the public
of shares acquired under the Plan, the

PRE 14A 38th Page of 51 TOC 1st Previous Next ↓Bottom Just 38th

holder of the option shall, except to the extent determined by the Committee
that such is not required, (i) represent and warrant in writing to the Company
that the shares acquired are being acquired for investment and not with a view
to the distribution thereof, (ii) acknowledge that the shares acquired may not
be sold unless registered for sale under said Act or pursuant to an exemption
from such registration, and (iii) agree that the certificates evidencing such
shares shall bear a legend to the effect of clauses (i) and (ii).

9. Nontransferability of Options. An option is not transferable by an
Eligible Director to whom granted other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986, as amended (the "Code"), or Title 1 of the
Employee Retirement Income Security Act, as amended.

10. Death or Disability of an Optionee. If an optionee shall cease to
be an Eligible Director on account of disability or death, an option theretofore
granted to such Eligible Director may be exercised by the optionee or, in the
case of death, by the legal representative of the estate of the deceased option
holder or by the person or persons to whom such Eligible Director's rights under
the option shall pass by will or the laws of descent and distribution, at any
time within one year from the date the optionee ceased to be an Eligible
Director, but only to the extent the option holder was entitled to exercise the
option at the date of such cessation and only during the option period.
"Disability" shall have the meaning ascribed to it in Section 105(d)(4) of the
Code.

11. Rights as a Shareholder. The holder of an option shall not have any
of the rights of a shareholder of the Company with respect to the shares subject
to an option until a certificate or certificates for such shares shall have been
issued upon the exercise of the option.

12. Amendment and Termination.

12.1 The Plan shall terminate five years after its effective
date and thereafter no options shall be granted thereunder. All options
outstanding at the time of termination of the Plan shall continue in
full force and effect in accordance with and subject to the terms and
conditions of the Plan. The Board of Directors of the Company at any
time prior to that date may terminate the Plan or make such amendments
to it as the Board of Directors shall deem advisable; provided,
however, that except as provided in Section 4 hereof, the Board of
Directors may not, without shareholder approval, increase the maximum
number of shares as to which options may be granted under the Plan,
change the class of persons eligible to receive options under the Plan
or change the number of options to be granted to each eligible person
under the Plan. No termination or amendment of the Plan may, without
the consent of the holder of an option then existing, terminate the
option or materially and adversely affect the rights under the option.

PRE 14A 39th Page of 51 TOC 1st Previous Next ↓Bottom Just 39th

12.2 This Plan may not be amended more than once every six
months other than to conform with changes in the Code, the Employee
Retirement Income Security Act, as amended, or the rules thereunder.

13. Automatic Termination of Option. Notwithstanding anything contained
herein to the contrary:

13.1 If at any time a holder of an option granted under this
Plan becomes an employee, officer or director of or a consultant to an
entity which the Committee determines is a competitor of the Company,
such option shall automatically terminate as of the date such
conflicting relationship was established regardless of whether such
option is exercisable in whole or in part at such time.

13.2 An Option shall terminated immediately if such
termination is for cause. Cause is defined as including, but not
limited to, theft or intentional damage to Company property, the use of
illegal drugs, the commission of a criminal act, or willful violations
of the law or of policies of the Company which prohibit directors from
trading Common Shares for personal gain based on knowledge of the
Company's activities or results when such information is not available
to the general public.

PRE 14A 40th Page of 51 TOC 1st Previous Next ↓Bottom Just 40th

APPENDIX C

THOMAS EDISON INNS, INC.

DIRECTORS' COMPENSATION PLAN - 1996

This Directors' Compensation Plan has been adopted by the Board of
Directors of Thomas Edison Inns, Inc. in order to align further the interests of
the Company's non-employee Directors with the interests of shareholders by
providing that their compensation be paid through the issuance of Common Shares
of the Company.

1. COMPENSATION OF NON-EMPLOYEE DIRECTORS.

All Directors who are not employees of the Company shall be paid the
following fees as provided in Section 2 below:

1.1 a retainer of $1,000 for each meeting of the Board of
Directors attended;

1.2 a retainer of $500 for each committee meeting
attended; and

1.3 such fees shall be reduced to 50% of the amount
stated above if the meetings are by telephone.

2. PAYMENT TERMS.

The meeting fees set forth in Section 1 above shall be paid by the
Company quarterly, in arrears, as soon as practicable following the end of each
quarter in the form of Company Common Shares.

The number of Common Shares to be issued shall be determined by
dividing the dollar amount of the fee by the average of the per share Fair
Market Value of the Common Shares, as defined in Section 3, for the ten trading
days prior to the end of each quarter. The resulting number shall then be
rounded up to the nearest share.

3. FAIR MARKET VALUE OF COMPANY COMMON SHARES.

"Fair Market Value" means the last sale price reported on any stock
exchange or over-the-counter trading system on which the Common Shares are
trading on the last trading day prior to a specified date or, if no last sales
price is reported, the average of the closing bid and asked prices for a Common
Share on a specified date. If no sale has been made on any date, prices on the
last preceding day on which any such sale shall have been made will be used in
determining Fair Market Value under either method prescribed in the previous
sentence.

PRE 14A 41st Page of 51 TOC 1st Previous Next ↓Bottom Just 41st

4. RESTRICTIVE LEGEND; HOLDING PERIOD FOR COMMON SHARES

In order to comply with Federal securities laws, all certificates for
Common Shares issued pursuant to this Plan shall bear the following restrictive
legend which will prevent the recipient from disposing of such shares for six
months from the date of issuance:

THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED UNTIL
THE EXPIRATION OF THE SIX MONTH PERIOD BEGINNING ON THE DATE OF
ORIGINAL ISSUANCE BY THOMAS EDISON INNS, INC. AS PROVIDED BY THE
COMPANY'S DIRECTORS' COMPENSATION PLAN - 1996, A COPY OF WHICH WILL BE
FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON REQUEST.

When the legend requirement imposed by this Section 4 shall terminate,
the holder of Common Shares for which such legend requirements have terminated
may request that the Company issue replacement certificates representing such
shares without such legend.

5. NO RIGHT TO CONTINUANCE AS A DIRECTOR.

Neither the action of the Company in establishing this Plan, nor the
issuance of Common Shares shall be deemed to create any obligation on the part
of the Board of Directors to nominate any non-employee Director for reelection
by the Company's shareholders or to be evidence of any agreement or
understanding, express or implied, that the non-employee Director has a right to
continue as a Director for any period of time or at any particular rate of
compensation.

6. SHARES SUBJECT TO THE PLAN.

Common Shares are authorized for issuance under this Plan in accordance
with the provisions hereof. The Company shall at all times during the term of
the Plan retain as authorized and unissued Common Shares at least the number of
shares from time to time required under the provisions of the Plan, or otherwise
assure itself of its ability to perform its obligations hereunder.

7. AMENDMENT.

The amount, pricing and timing of Common Share issuances pursuant to
this Plan shall not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.

PRE 14A 42nd Page of 51 TOC 1st Previous Next ↓Bottom Just 42nd

8. EFFECTIVE DATE AND EXPIRATION OF PLAN.

The Plan is effective as of January 28, 1996, subject to approval by a
majority of the votes cast at the next Annual Meeting of Shareholders of the
Company, by the holders of Common Shares entitled to vote thereon. Unless
earlier terminated by the Board pursuant to Section 10, this Plan shall
terminate on the tenth anniversary of the Effective Date. No Common Shares shall
be issued pursuant to this Plan after its termination.

9. PAYMENT IN EVENT OF DEATH.

Upon the death of a non-employee Director, any portion of the
compensation pursuant to this Plan then unpaid shall be paid to the
beneficiaries named in the most recent beneficiary designation filed with the
Secretary of the Company. In the absence of such a designation, such
compensation shall be paid to, or as directed by, the decedent's personal
representative, in one or more installments as the non-employee Director may
have elected in writing.

10. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN.

The Board of Directors may suspend or terminate this Plan or any
portion of it at any time, and, subject to Section 7, may amend it from time to
time in such respects as the Board of Directors may deem advisable so that any
awards hereunder shall conform to any change in applicable laws or regulations
or in any other respect the Board of Directors may deem to be in the best
interests of the Company; provided, however, that no such amendment shall,
without shareholder approval, increase the number of Common Shares which may be
issued under the Plan, materially increase the benefits accruing to Directors
under the Plan, materially modify the requirements as to eligibility for
participating in the Plan, or extend the termination date of the Plan.

PRE 14A 43rd Page of 51 TOC 1st Previous Next ↓Bottom Just 43rd

APPENDIX D

THOMAS EDISON INNS, INC.

EMPLOYEE SHARE PURCHASE PLAN

The purpose of the Thomas Edison Inns, Inc. Employee Share Purchase
Plan is to enable employees of Thomas Edison Inns, Inc. and its subsidiaries to
acquire or increase ownership interests in the Company on a basis that will
encourage them to perform at increasing levels of effectiveness and use their
best efforts to promote the growth and profitability of the Company and its
subsidiaries. This is to be done by providing employees a continued opportunity
to purchase Common Shares of the Company, Par Value $0.01 per share ("Shares"),
from the Company through periodic offerings commencing __________________ or as
soon as practicable thereafter (the "Effective Date"). For this purpose, except
as otherwise provided in Section 17, the maximum aggregate number of Shares
which Participating Employees (defined in Section 3 below) may purchase under
the Plan is _______________.

The Plan is intended to comply with the provisions of section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"), and the Plan shall
be administered, interpreted and construed accordingly.

1. Administration.

1.1 The Plan shall be administered by a committee of the Board of
Directors designated by the Board of Directors (the "Committee"), consisting of
at least two directors, each of whom shall be a "disinterested person" as
defined in Rule 16b-3(c)(2) under the Securities Exchange Act of 1934, as
amended. All committee members shall serve, and may be removed, at the pleasure
of the Board of Directors.

1.2 For purposes of administration of the Plan, a majority of the
members of the Committee (but not less than two) eligible to serve as such shall
constitute a quorum, and any action taken by a majority of such members of the
Committee present at any meeting at which a quorum is present, or acts approved
in writing by a majority of such members of the Committee, shall be the acts of
the Committee.

1.3 Subject to the express provisions of the Plan, the Committee shall
have full discretionary authority to interpret the Plan, to issue rules for
administering the Plan, to change, alter, amend or rescind such rules, and to
make all other determinations necessary or appropriate for the administration of
the Plan. All determinations, interpretations and constructions made by the
Committee pursuant to this Section shall be final and conclusive. No member of
the Board of Directors or the Committee shall be liable for any action,
determination or omission taken or made in good faith with respect to the Plan
or any right granted hereunder.

PRE 14A 44th Page of 51 TOC 1st Previous Next ↓Bottom Just 44th

1.4 The Committee will engage a bank trust department or other
financial institution as agent (the "Agent") to perform custodial and
record-keeping functions for the Plan, such as holding record title to the
participating employees' Share certificates, maintaining an individual
investment account for each such employee and providing periodic account status
reports to such employees.

1.5 The Committee shall have full discretionary authority to delegate
ministerial functions to management of the Company.

2. Eligible Employees. All employees of the Company, and of such of its
subsidiaries as may be designated for such purpose from time to time by the
Committee, shall be eligible to participate in the Plan, provided each of such
employees:

(a) has been employed by the Company or any of its
subsidiaries for at least three months;

(b) is customarily employed for more than 20 hours per
week;

(d) does not own, immediately after the right to purchase
Shares under the Plan is granted, shares possessing
5% or more of the total combined voting power or
value of the Company's Common Shares. In determining
share ownership for purposes of the preceding
sentence, the rules of section 424(d) of the Code
shall apply and shares which the employee may
purchase under outstanding options shall be treated
as shares owned by the employee.

For purposes of this Section, "employment" shall be defined in
accordance with the provisions of Section 1.421-7(h) of the Treasury Regulations
(or any successor regulations). Employees eligible to participate in the Plan
pursuant to the provisions of this Section are hereinafter referred to as
"Eligible Employees."

3. Election to Participate. Each Eligible Employee may participate in
the Plan by filing with the Company an election to purchase form (the "Form")
authorizing specified regular payroll deductions. Eligible Employees who so
elect to participate in the Plan are hereinafter referred to as "Participating
Employees." The Form must specify the date on which such deducting is to
commence, which may not be retroactive. Payroll deductions may be in any amount,
but not less than $10 per payroll period, specified by the Participating
Employee up to 25% (or such lower percentage as may be specified by the
Committee) of the Participating Employee's annual rate of base compensation (as
defined by the Committee) in effect at the time of filing of the Form. All
regular payroll deductions shall be recorded in a non-interest bearing

PRE 14A 45th Page of 51 TOC 1st Previous Next ↓Bottom Just 45th

account which the Company shall establish for Participating Employees (the
"Payroll Deduction Account").

All funds recorded in Payroll Deduction Accounts may be used by the
Company and its subsidiaries for any corporate purpose, subject to the right of
a Participating Employee to withdraw at any time an amount equal to the balance
accumulated in his or her Payroll Deduction Account as described in Section 6
below. Funds recorded in Payroll Deduction Accounts shall not be required to be
segregated from any funds of the Company or its subsidiaries.

4. Deduction Changes. A Participating Employee may at any time increase
or decrease his or her payroll deduction by filing a new Form. The change may
not become effective sooner than the next pay period after receipt of the Form.
A payroll deduction change (which shall include any increase or decrease) may
not be made more than twice during any calendar year.

5. Limitation on Purchase of Shares. No employee may be granted a right
to purchase Shares under this Plan and any other share purchase plan of the
Company under section 423 of the Code, at a rate which exceeds $25,000 of the
fair market value of such Shares (determined on the date of purchase of the
Shares) for each calendar year.

The foregoing limitation shall be interpreted by the Committee in
accordance with applicable rules and regulations issued under the Code.

6. Withdrawal of Funds. A Participating Employee may at any time prior
to a Purchase Date (defined in Section 7 below), and for any reason, withdraw
from participation in the Plan, in which case the entire balance accumulated in
his or her Payroll Deduction Account shall be paid to him or her as soon as
practicable thereafter. Partial withdrawals will not be permitted.

7. Method of Purchase and Investment Accounts. The term "Payroll
Deduction Period" shall mean a period of one, two or three calendar months, as
determined by the Committee. The term "Purchase Date" as used in the Plan shall
mean the last business day of each Payroll Deduction Period (or as soon as
practicable thereafter) commencing after the Effective Date. Each Participating
Employee having funds in his or her Payroll Deduction Account on a Purchase Date
shall be deemed, without any further action, to have been granted on such
Purchase Date, and to have exercised on such Purchase Date, the option to
purchase from the Company the number of whole and fractional Shares which the
funds in his or her Payroll Deduction Account would purchase at the Purchase
Price (as hereinafter defined) on such Purchase Date, subject to the Share
limitation set forth in the first paragraph of this Plan and the restrictions
set forth in Section 5. Such option will be deemed exercised if the
Participating Employee does not withdraw such funds prior to the Purchase Date.
All Shares so purchased (including fractional Shares) shall be credited to a
separate Investment Account established by

PRE 14A 46th Page of 51 TOC 1st Previous Next ↓Bottom Just 46th

the Agent for each participating Employee. The Agent shall hold in its name or
the name of its nominee all certificates for Shares purchased until Shares are
withdrawn by a Participating Employee pursuant to Section 9 below.

All cash dividends paid with respect to the whole and fractional Shares
in a Participating Employee's Investment Account shall, unless otherwise
directed by the Committee, be credited to his or her Investment Account and
used, in the same manner as payroll deductions, to purchase additional Shares
under the Plan on the next Purchase Date, subject to the Share limitation set
forth in the first paragraph of this Plan and the restrictions set forth in
Section 5. Shares so purchased shall be added to the Shares held for the
Participating Employee in his or her Investment Account.

8. Purchase Price. The Purchase Price for each whole or fractional
Share shall be __% of the fair market value of such whole or fractional Share on
the Purchase Date (as defined in Section 7 above), provided that the Purchase
Price shall in no event be less than the par value of such Share.

Fair market value shall be the mean of the high and low sales prices of
such Shares on the Purchase Date on the principal market in which the Shares are
traded or, if the Shares shall not have been traded on such Purchase Date, the
mean of the high and low sales prices of such Shares on the next preceding day
on which sales were made.

9. Withdrawal of Certificates. Subject to Sections 12 and 20 below, a
Participating Employee shall have the right at any time to withdraw a
certificate or certificates for all or a portion of the Shares credited to his
or her Investment Account by giving written notice to the Company, provided,
however, that (a) no such request may be made more frequently than once per
calendar quarter and (b) no Participating Employee shall be entitled to receive
a certificate for any fractional Share. The Company will pay any applicable
stamp taxes imposed in connection with the issuance of any certificate under the
Plan.

10. Registration of Certificates. Each certificate withdrawn by a
Participating Employee may be registered only in the name of the Participating
Employee, or, if the Participating Employee so indicated on the Participating
Employee's Form, in the Participating Employee's name jointly with a member of
the Participating Employee's family, with right of survivorship.

11. Voting. The Agent shall vote all Shares held in an Investment
Account in accordance with the Participating Employee's instructions.

12. Limitation on Resale. Notwithstanding anything in the Plan to the
contrary, if any Participating Employee sells any Share purchased under the Plan
(or withdraws any certificate representing such Share) during the first year
following the date of purchase of such Share, such Participating Employee shall
not be eligible to make further purchases under the Plan, or to have

PRE 14A 47th Page of 51 TOC 1st Previous Next ↓Bottom Just 47th

payroll deductions made for such purpose, for a period of one year after such
sale (or for such shorter period, if any, as the Committee shall have
established).

13. Rights on Retirement, Death or Other Termination of Employment. In
the event of a Participating Employee's retirement, death or other termination
of employment, or in the event that a Participating Employee otherwise ceases to
be an Eligible Employee, (a) no payroll deduction shall be taken from any pay
due and owing to the Participating Employee thereafter, and the balance in the
Participating Employee's Payroll Deduction Account shall be paid to the
Participating Employee or, in the event of the Participating Employee's death,
to his or her designated beneficiary under the Plan (and, if none, then to his
or her estate) and (b) a certificate for the full Shares credited to the
Participating Employee's Investment Account will be forwarded to the
Participating Employee (or, in the case of his or her death, such beneficiary or
estate) and any fractional Share interest held in such Investment Account will
be disposed of and the proceeds, less any selling expenses, will be remitted to
the Participating Employee (or, in the case of his or her death, such
beneficiary or estate).

14. Rights not Transferable. Rights under the Plan are not transferable
by a Participating Employee other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title 1 of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.

15. No Right to Continued Employment. Neither the Plan nor any right
granted under the Plan shall confer upon any Participating Employee any right to
continuance of employment with the Company or any subsidiary, or interfere in
any way with the right of the Company or subsidiary to terminate the employment
of such Participating Employee.

16. Application of Funds. All funds received or held by the Company
under this Plan may be used for any corporate purpose.

17. Adjustment in Case of Changes Affecting Shares. In the event of a
subdivision of outstanding Shares, or the payment of a share dividend, the Share
limitation set forth in the first paragraph of this Plan shall be adjusted
proportionately, and such other adjustments shall be made as may be deemed
equitable by the Committee. In the event of any other change affecting Shares
(including any event described in section 424(a) of the Code), such adjustment
shall be made as may be deemed equitable by the Committee to give proper effect
to such event, subject to the limitations of section 424 of the Code.

18. Amendment of the Plan. The Board of Directors may at any time, or
from time to time, amend this Plan in any respect, except that, without
shareholders approval, no amendment shall be made (i) increasing the maximum
aggregate number of Shares which may be purchased by Participating Employees
under this Plan other than as provided in Section 17 or (ii) changing the
designation of employees eligible to participate in the Plan.

PRE 14A 48th Page of 51 TOC 1st Previous Next ↓Bottom Just 48th

19. Termination of the Plan. The Plan and all rights of employees under
any offering hereunder shall terminate.

19.1 On the day that Participating Employees become entitled to
purchase a number of Shares greater than the number of Shares remaining
available for purchase, as adjusted by Section 17. If the number of Shares so
purchasable is greater than the Shares remaining available, the available Shares
shall be allocated by the Committee among such Participating Employees on a pro
rata basis; or

19.2 At any time at the discretion of the Board of Directors.

Upon termination of this Plan (i) all amounts in the Payroll Deduction
Accounts of Participating Employees shall be carried forward into the
Participating Employee's payroll Deduction Account under a successor plan, if
any, or promptly refunded, (ii) all certificates for the full Shares credited to
a Participating Employee's Investment Account shall be forwarded to him or her
and (iii) any fractional Share interest held in a Participating Employee's
Investment Account shall be disposed of and the proceeds, less any selling
expenses, shall be remitted to him or her. The Board of Directors shall have the
right to suspend the Plan at any time.

20. Governmental Regulations.

20.1 Anything contained in the Plan to the contrary notwithstanding,
the Company shall not be obligated to sell or deliver any Shares or certificates
under the Plan unless and until the Company is satisfied that such sale or
delivery complies with (i) all applicable requirements of the governing body of
the principal market in which such Shares are traded, (ii) all applicable
provisions of the Securities Act of 1933 and (iii) all other laws or regulations
by which the Company is bound or to which the Company is subject.

20.2 The Company may make such provisions as it may deem appropriate
for the withholding of any taxes or payment of any taxes which it determines it
may be required to withhold or pay in connection with any Shares. The obligation
of the Company to deliver certificates under this Plan is conditioned upon the
satisfaction of the provisions set forth in the preceding sentence.

21. Source of Shares. Shares to be purchased from the Company under the
Plan shall be (a) previously acquired treasury Shares or (b) authorized but
unissued Shares. Notwithstanding anything to the contrary in this Plan, if and
to the extent authorized by the Committee, the Agent may make purchases of
Shares on behalf of Participating Employees under the Plan through market
transactions rather than purchases from the Company.

22. Repurchase of Shares. The Company shall not be required to
repurchase from any Participating Employee any Shares which such Participating
Employee acquires under the Plan.

PRE 14A 49th Page of 51 TOC 1st Previous Next ↓Bottom Just 49th

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:

1. To elect the following five persons as Class I Directors.

[Enlarge/Download Table]

FOR WITHHOLD Christopher B. Hewett, Davis S. Lundeen, Joseph L.
all nominees AUTHORITY Maggini, Robert E. Schermer, Jr. and Robert E. Schermer,

listed to the right to vote for all Sr.
(except as marked nominees listed
to the contrary) to the right To withhold authority to vote for any individual nominee, write that nomi-
nee's name in the space below.

[ ] [ ] __________________________________________________________________________

To elect the following five persons as Class II directors.

[Enlarge/Download Table]

FOR WITHHOLD William F. Ehinger, James R. Goerlich,
all nominees AUTHORITY Joseph P. Michael, Frank O. Staiger and Raymond A.

listed to the right to vote for all Weigel, III
(except as marked nominees listed
to the contrary) to the right To withhold authority to vote for any individual nominee, write that nomi-
nee's name in the space below.

[ ] [ ] __________________________________________________________________________

2. To amend the Articles of Incorporation to change the name of the
Company to Meritage Hospitality Group Inc.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

3. To adopt the 1996 Management Equity Incentive Plan.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

4. To adopt the 1996 Directors' Share Option Plan.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

PRE 14A 50th Page of 51 TOC 1st Previous Next ↓Bottom Just 50th

5. To adopt the Directors' Compensation Plan.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

6. To adopt the Employee Share Purchase Plan.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

7. To ratify the selection of Authority to transact such
Grant Thornton LLP as independent other business as may properly
public accountants for come before the meeting or any
fiscal 1996. adjournment thereof.
FOR AGAINST ABSTAIN

[ ] [ ] [ ]

THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE LISTED
NOMINEES AND FOR ALL
PROPOSALS.

___________________________, 1996
________________________________
________________________________

Important: Please sign exactly
as name appears hereon
indicating, where proper,
official position or
representative capacity. In
the case of joint holders, all
should sign.

THIS PROXY IS SOLICITED ON
BEHALF OF
THE BOARD OF DIRECTORS

"PLEASE MARK INSIDE BLUE BOXES
SO THAT DATA PROCESSING
EQUIPMENT WILL RECORD YOUR
VOTES."

PRE 14A Last Page of 51 TOC 1st Previous Next ↓Bottom Just 51st

THOMAS EDISON INNS, INC.

PROXY FOR ANNUAL MEETING

The undersigned hereby appoints ROBERT E. SCHERMER, SR. and CHRISTOPHER
B. HEWETT, or either of them, proxies of the undersigned each with the power of
substitution, to vote all Common Shares which the undersigned would be entitled
to vote at the Annual Meeting of Shareholders of Thomas Edison Inns, Inc. to be
held May 21, 1996, at 10:00 a.m. Eastern Daylight Time at the Thomas Edison Inn,
500 Thomas Edison Parkway, Port Huron, Michigan and at any adjournment of such
Meeting as specified on the reverse side on the matters described in the
Company's Proxy Statement and in their discretion with respect to such other
business as may properly come before the Meeting or any adjournment thereof.

(Continued on reverse side)

PRE 14A	1st Page of 51	TOC	↑Top	Previous	Next	↓Bottom	Just 1st

PRE 14A	2nd Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 2nd

PRE 14A	3rd Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 3rd

PRE 14A	4th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 4th

PRE 14A	5th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 5th

PRE 14A	6th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 6th

PRE 14A	7th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 7th

PRE 14A	8th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 8th

PRE 14A	9th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 9th

PRE 14A	10th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 10th

PRE 14A	11th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 11th

PRE 14A	12th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 12th

PRE 14A	13th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 13th

PRE 14A	14th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 14th

PRE 14A	15th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 15th

PRE 14A	16th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 16th

PRE 14A	17th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 17th

PRE 14A	18th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 18th

PRE 14A	19th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 19th

PRE 14A	20th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 20th

PRE 14A	21st Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 21st

PRE 14A	22nd Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 22nd

PRE 14A	23rd Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 23rd

PRE 14A	24th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 24th

PRE 14A	25th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 25th

PRE 14A	26th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 26th

PRE 14A	27th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 27th

PRE 14A	28th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 28th

PRE 14A	29th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 29th

PRE 14A	30th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 30th

PRE 14A	31st Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 31st

PRE 14A	32nd Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 32nd

PRE 14A	33rd Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 33rd

PRE 14A	34th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 34th

PRE 14A	35th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 35th

PRE 14A	36th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 36th

PRE 14A	37th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 37th

PRE 14A	38th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 38th

PRE 14A	39th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 39th

PRE 14A	40th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 40th

PRE 14A	41st Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 41st

PRE 14A	42nd Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 42nd

PRE 14A	43rd Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 43rd

PRE 14A	44th Page of 51	TOC	1st	Previous	Next	↓Bottom	Just 44th

Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘PRE 14A’ Filing	Date	First	Last	Other Filings

	12/31/98	5
	10/1/97	23
	12/19/96	15
	11/30/96	14		10-K
For Period End:	5/21/96	2	51	DEF 14A
	4/17/96	2	26
Filed on:	4/4/96
	4/3/96	8	10
	3/28/96	3	15
	3/27/96	25
	3/20/96	18
	3/9/96	6
	2/12/96	5	22
	2/3/96	21
	1/28/96	11	42
	1/25/96	4	21	8-K
	1/19/96	24
	1/8/96	4	21
	1/4/96	24
	11/30/95	22	25	10KSB, 10KSB/A
	11/27/95	4	24
	11/7/95	4
	9/19/95	20
	7/6/95	4
	11/30/94	22	23
	8/9/94	6
	12/2/92	21
				List all Filings

↑Top

Filing Submission 0000950152-96-001384 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Meritage Hospitality Group Inc – ‘PRE 14A’ for 5/21/96

As of: Thursday, 4/4/96 · For: 5/21/96 · Accession #: 950152-96-1384 · File #: 0-17442

Previous ‘PRE 14A’: None · Next: ‘PRE 14A’ on 3/14/00 for 5/16/00 · Latest: ‘PRE 14A’ on 8/21/06 for 9/15/06

Preliminary Proxy Solicitation Material — Schedule 14AFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Preliminary Proxy Solicitation Material — Schedule 14A
Filing Table of Contents