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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HOST FUNDING, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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HOST FUNDING, INC.
6116 N. CENTRAL EXPRESSWAY
SUITE 1313
DALLAS, TEXAS 75206
--------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
--------------------------
April 29, 1997
To the Stockholders of
HOST FUNDING, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Host
Funding, Inc., a Maryland corporation, will be held in the Skyline Room on
the 21st Floor of the Doubletree Hotel at 8250 N. Central Expressway, Dallas,
Texas 75206 on Thursday, May 21, 1997 at 10:00 a.m. Dallas time for the
following purposes:
1. To elect five (5) directors to serve until the next Annual Meeting
of Stockholders and until their successors are elected.
2. To consider and approve the Host Funding, Inc. 1997 Incentive Plan.
3. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
THE BOARD OF DIRECTORS HAS FIXED THE CLOSE OF BUSINESS ON APRIL 27,
1997, AS THE RECORD DATE FOR THE DETERMINATION OF STOCKHOLDERS ENTITLED
TO NOTICE OF, AND TO VOTE AT, THE ANNUAL MEETING AND ANY ADJOURNMENTS
THEREOF. IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, BUT WISH
YOUR SHARES TO BE VOTED, PLEASE COMPLETE, DATE AND SIGN THE ACCOMPANYING
PROXY CARD AND RETURN IT IN THE POSTAGE PAID ENCLOSED ENVELOPE IN ORDER
THAT YOUR SHARES OF COMMON STOCK MAY BE REPRESENTED AT THE ANNUAL MEETING.
By Order of the Board of Directors
Bona K. Allen
Secretary
<PAGE>
HOST FUNDING, INC.
6116 N. CENTRAL EXPRESSWAY
SUITE 1313
DALLAS, TEXAS 75206
-----------------------------
PROXY STATEMENT
This Proxy Statement and accompanying Proxy Card are being furnished by
the Board of Directors of Host Funding, Inc., a Maryland corporation (the
"Corporation"), in connection with the solicitation of proxies for use at the
Annual Meeting of Stockholders to be held in the Skyline Room on the 21st
Floor of the Doubletree Hotel, Campbell Centre, 8250 N. Central Expressway,
Dallas, Texas 75206 on Thursday, May 21, 1997 at 10:00 a.m. Dallas time and
at any adjournments thereof (the "Annual Meeting"). This Proxy Statement
with the accompanying Proxy Card is first being mailed to holders of the
Corporation's Class A Common Stock, $0.01 par value, and Class B Common
Stock, $0.01 par value, (collectively, the "Common Stock"), on or about April
30, 1997.
The purpose and business of the meeting is:
1. To elect five (5) directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected;
2. To consider and approve the Host Funding, Inc. 1997 Incentive Plan;
and
3. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Only stockholders of record of the Common Stock at the close of business
on April 27, 1997, will be entitled to vote at the Annual Meeting. As of the
close of business on such date, there were outstanding and entitled to vote
1,374,049 shares of Common Stock. Each share of Common Stock is entitled
to one vote. The presence in person or by proxy, of the holders of a majority
of the votes represented by the outstanding shares of Common Stock entitled
to vote at the Annual Meeting is necessary to constitute a quorum for the
conduct of business at the Annual Meeting. Shares held by persons who
abstain from voting on a proposal will be counted in determining whether a
quorum is present, but will not be counted as voting either for or against
such proposal. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with
respect to that matter. Assuming the presence of a quorum, the affirmative
vote of the holders of a plurality of the shares voting at the meeting is
necessary for the election of directors and the affirmative vote of the
holders of a majority of the shares of Common Stock is necessary for the
approval of the Host Funding, Inc. 1997 Incentive Plan. An automated system
administered by the Corporation's transfer agent will tabulate the votes.
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Where a specific designation is given in the Proxy with respect to the
vote on the directors and Proposal 2, the Proxy will be voted in accordance
with such designation. If no such designation is made, the Proxy will be
voted FOR the nominees for directors named in this Proxy Statement and in
favor of Proposal 2. Any stockholder giving a Proxy may revoke it at any time
before it is voted at the Annual Meeting by delivering to the Secretary of
the Corporation a written notice of revocation or duly executed Proxy bearing
a later date or by appearing at the Annual Meeting and revoking his or her
Proxy and voting in person.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Five directors are to be elected at the Annual Meeting to serve until
the next Annual Meeting of Stockholders and until their respective successors
are elected. Except where authority to vote for directors has been withheld,
it is intended that the proxies received pursuant to this solicitation will
be voted FOR the nominees named. If for any reason any such nominee is not
available for election, such proxies will be voted in favor of the remaining
named nominees and may be voted for substitute nominees in place of those who
are not candidates. Management, however, has no reason to expect that any of
the nominees will be unavailable for election. All nominees have agreed to
serve if elected.
The Bylaws of the Corporation provide that the Board of Directors shall
consist of not less than three and no more than fifteen members and that
vacancies on the Board of Directors and newly-created directorships may be
filled by a majority vote of the entire Board of Directors at any meeting. To
be elected a director, each nominee must receive a plurality of all votes
cast at the meeting for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH
OF THE NOMINEES NAMED IN THIS PROXY STATEMENT.
All nominees for director have served as directors since November 28,
1995. The following information has been furnished to the Corporation by the
nominees for director and by the non-director executive officers:
MICHAEL S. MCNULTY
Michael S. McNulty, 49, is President and Chief Operating Officer of the
Corporation and has extensive experience in real estate. In 1973, he
received his J.D. from Southern Methodist University. From 1977 to 1985, Mr.
McNulty was employed by the real estate development corporation of a
multi-national family with business interests in various countries. During
that period, Mr. McNulty was responsible for developing partnerships for
investments in over thirty real estate projects with gross investments
exceeding $200,000,000. Prior to election in September 1995 as President of
the Corporation, Mr. McNulty owned his own private financial consulting firm.
Mr. McNulty is President and Director of a controlling venturer in a Napa
Valley based winery. In addition, Mr. McNulty has served from 1992 to the
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present as Trustee for Wilma, Inc., the United States holding company of a
Dutch owned real estate group.
GUY E. HATFIELD
Guy E. Hatfield, 63, has been President of All American Group, Inc., a
Delaware corporation, since 1989. Mr. Hatfield earned a Bachelor of Science
degree from Bradley University in 1955 and a Juris Doctorate from the
University of San Diego in 1962. From 1984 to 1989, Mr. Hatfield was Chairman
of the Board and Chief Executive Officer of Motels of America, Inc., a
corporation which built and managed 107 Super 8 motels and had gross annual
sales of $80,000,000. Currently, Mr. Hatfield is President of Hatfield Inns,
Inc., a corporation which owns and manages five motels which have annual
sales of $2,600,000.
DON W. COCKROFT
Don W. Cockroft, 57, joined United Inns, Inc. in the early 1960's where
he occupied a variety of positions over a period of 25 years. Eventually,
he became Chairman of the Board and President of United Inns, Inc. He
resigned from these positions upon the recent purchase of United Inns, Inc.
by Hampstead, Ltd. United Inns, Inc. was traded on the New York Stock
Exchange and in 1994 achieved the New York Stock Exchange's largest
percentage gain. Mr. Cockroft's duties with United Inns, Inc. included asset
development, acquisitions, dispositions, and debt restructure. United Inns,
Inc. was the initial franchisee of Holiday Inns and also opened the initial
Hampton Inns in Jackson, Mississippi and Atlanta, Georgia.
WILLIAM M. BIRDSALL
William M. Birdsall, 48, is Chairman of the Board and Chief Executive
Officer of the Corporation. He also serves as President of Birdsall &
Corporation, a real estate investment and finance firm located in Durango,
Colorado. Before starting Birdsall & Corporation in 1993, Mr. Birdsall was
Chairman and CEO of the Price REIT, a public corporation which he co-founded
and took public in 1991 in the form of a Real Estate Investment Trust trading
on NASDAQ. Mr. Birdsall has been involved with real estate development
since 1978. He was Chief Operating Officer of Estes Properties, Inc., where
he was responsible for operations of the Lowes Ventana Canyon Resort and Golf
Club in Tucson, Arizona, a 2,000-acre planned community and resort hotel.
From 1982 through 1987 he was Senior Vice President of Real Estate for
Ramada, Inc., the international hotel chain. He now serves on the Scripps
Memorial Hospitals Foundation Board and is a member of the Young Presidents
Organization, Arizona Bar Association, Urban Land Institute, and
International Council of Shopping Centers. Mr. Birdsall was elected Chairman
of the Board and Chief Executive Officer of the Corporation effective
February 1, 1997.
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CHARLES R. DUNN
Charles R. Dunn, 51, is founder and Chief Executive Officer of
Hospitality Concepts, established in July of 1988. Hospitality Concepts
provides accounting and consulting services to the lodging and restaurant
industry in the Southwestern United States. Clients are located in
California, Nevada, Arizona, New Mexico, and Texas. Services range from
financial statement production, budgeting and related planning, to system
design and consulting. Prior to July 1988, Mr. Dunn was Controller for the
San Diego Princess Hotel, a 450 room, full-service convention facility and
resort located in San Diego, California. Mr. Dunn graduated from Washington
State University with a B.A. degree in Hotel Administration.
OTHER EXECUTIVE OFFICERS OF THE CORPORATION
BONA K. ALLEN
Bona K. Allen, 36, is the Chief Financial Officer and Secretary of the
Corporation, and has been involved in financial aspects of real estate
investment, development, management, and construction since graduating from
Birmingham-Southern College in 1982. Prior to appointment to the
Corporation, Mr. Allen served as the financial executive with The Myrick
Company (Atlanta, Georgia) and as a financial consultant from 1994 through
1996. From 1986 to 1994, Mr. Allen was employed by Wilma South Management
Corporation (and affiliates), the United States holding company of a Dutch
owned real estate group. Mr. Allen served in several positions with
increasing responsibility and was named Vice President/Chief Financial
Officer in 1991. He was responsible for the financial operations of the
Company at the time Wilma owned or controlled assets with a cost totaling in
excess of $500 million located in the Southwest, Southeast and Southern
California regions of the United States. Mr. Allen is a member of the
American Institute of Certified Accountants, the Georgia Society of Certified
Public Accountants, and the Alabama Society of Certified Public Accountants.
Mr. Allen was elected Chief Financial Officer of the Corporation effective
February 1, 1997.
OPERATION OF BOARD OF DIRECTORS AND COMMITTEES
The Corporation does not have a nominating committee. Nominations for
directors and officers are considered by the entire Board of Directors.
There were four meetings of the Board of Directors during 1996. All directors
attended at least seventy-five percent of all meetings of the Board.
The Corporation's Board of Directors has established Audit, Executive
and Compensation Committees. The Executive Committee was established in
August 1996 and the Audit and Compensation Committees were established in
March 1997. The Corporation did not become a public corporation until April
1996 and the Audit, Executive and Compensation Committees held no meetings in
1996. The principal duties and current membership of the three standing
committees are as follows:
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AUDIT COMMITTEE: Recommends to the Board of Directors the appointment of
independent auditors; reviews annual financial reports to stockholders prior
to their publication; reviews with the independent public accountants the
plans and results of the audit engagement; approves professional services
provided by the independent public accountants; reviews the independence of
the independent public accountants; considers the range of audit and
non-audit fees; and reviews the adequacy of the Corporation's internal
accounting controller. Membership of the Audit Committee is comprised of two
non-employee independent directors and the Chairman of the Board. The
members of the Audit Committee are Don W. Cockroft, Charles R. Dunn and
William M. Birdsall.
EXECUTIVE COMMITTEE: Except as restricted by applicable law, the
Executive Committee has all the powers of the Board of Directors between
meetings of the Board. Membership of the Executive Committee is comprised of
three directors. The members of the Executive Committee are William M.
Birdsall, Michael S. McNulty and Guy E. Hatfield.
COMPENSATION COMMITTEE: The duties of the Compensation Committee
include providing a general review of the Corporation's compensation and
benefit plans to insure that they meet the Corporation's objectives. In
addition, the Compensation Committee has the sole authority to administer and
grant awards under the 1997 Incentive Plan approved by the Board of Directors
of the Corporation and being submitted for approval by the stockholders.
Membership of the Compensation Committee is comprised of three directors, two
of whom are non-employee independent directors. The members of the
Compensation Committee are Don W. Cockroft, Charles R. Dunn and Guy E.
Hatfield.
COMPENSATION OF DIRECTORS
Each Director receives a director's fee of $1,500 for each Board meeting
the Director attends. The Corporation has not paid and does anticipate
paying directors for service on Committees. In addition, the directors will
be entitled to participate in the Host Funding, Inc. 1997 Incentive Plan.
EXECUTIVE COMPENSATION
The following table sets forth for the years presented, the compensation
paid to the President and Chief Executive Officer of the Corporation who was
the only compensated executive officer of the Corporation serving during 1996.
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SUMMARY COMPENSATION TABLE (1)(2)
- - -----------------------------------------------------------------------------
Name and Other Annual All Other
Principal Position Year Salary ($) Bonus ($) Compensation Compensation
- - -----------------------------------------------------------------------------
Michael S. McNulty, 1996 $60,000 -- -- --
President
- - -----------------------------------------------------------------------------
(1) Mr. McNulty received a salary of $60,000 from HMR Capital, LLC, the parent
company of Host Funding Advisors, Inc. which served as the external advisor
of the Corporation for fiscal year 1996.
(2) Mr. McNulty received 1,286 shares of the Class A Common Stock of the
Corporation relating to the acquisition of the Sleep Inn Hotel properties
by the Corporation in September 1996. See "Certain Transactions."
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION ARRANGEMENTS
WILLIAM M. BIRDSALL
The Corporation's employment agreement with Mr. Birdsall dated February
1, 1997, provides for an initial three-year term through January 31, 2000, and
is automatically renewed for a period of one year on each anniversary date of
February 1 ("Anniversary Date") unless terminated for any reason by written
notice from either party given to the other at least one hundred twenty (120)
days prior to the next Anniversary Date or unless otherwise terminated
pursuant to the terms of the agreement. The agreement vests Mr. Birdsall with
full authority as Chairman of the Board and Chief Executive Officer of the
Corporation and provides for an annual base salary of $108,000; subject to an
annual increase to (i) $150,000 if the assets of the Corporation exceed
$150,000,000 and (ii) $250,000 if the assets of the Corporation exceed
$250,000,000. The agreement also provides for payment of a performance bonus
calculated pursuant to a formula based on the financial results achieved by
the Corporation during any fiscal year. The performance bonus is payable on
or before five (5) days after the filing of the Corporation's Annual Report on
Form 10-K with respect to such fiscal year. In addition, the agreement
provides for participation by Mr. Birdsall, subject to the discretion of the
Compensation Committee, in any incentive compensation or other benefit plans
established by the Company, including, the 1997 Plan being submitted to the
shareholders for approval. The agreement entitles Mr. Birdsall to (i)
reimbursement of reasonable out of pocket expenses incurred in connection with
the performance of his duties for the Corporation, (ii) three (3) weeks of
paid vacation; and (iii) health insurance benefits. In the event of
termination of Mr. Birdsall due to the dissolution or liquidation of the
Corporation, the agreement entitles Mr. Birdsall to nine (9) months severance
pay based upon the base salary then in effect. Upon death, the agreement
entitles Mr. Birdsall's estate to receive his accrued base salary and any
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earned bonuses plus a one-time payment of $10,000. Upon termination of Mr.
Birdsall for disability (defined as inability to perform his duties for 80% or
more of the normal working days for a 180 day period), Mr. Birdsall is
entitled to his base salary then in effect less any disability payments paid
to Mr. Birdsall by applicable disability insurance. If any successor employer
assumes the agreement, either expressly, or by operation of law, and
subsequently terminates Mr. Birdsall without cause and within twenty-four (24)
months after the date of such assumption (the "Assumption Date"), Mr. Birdsall
is entitled to severance compensation in an amount equal to the product of the
base salary then in effect under the agreement multiplied by the difference
between twenty-four (24) months less the number of months after the Assumption
Date during which Mr. Birdsall remains employed by the successor employer.
MICHAEL S. MCNULTY
The Corporation's employment agreement with Mr. McNulty dated February 1,
1997, provides for an initial three-year term through January 31, 2000, and is
automatically renewed for a period of one year on each anniversary date of
February 1 ("Anniversary Date") unless terminated for any reason by written
notice from either party given to the other at least one hundred twenty (120)
days prior to the next Anniversary Date or unless otherwise terminated
pursuant to the terms of the agreement. The agreement vests Mr. McNulty with
full authority as President and Chief Operating Officer of the Corporation and
provides for an annual base salary of $108,000; subject to an annual increase
to (i) $150,000 if the assets of the Corporation exceed $150,000,000 and (ii)
$250,000 if the assets of the Corporation exceed $250,000,000. The agreement
also provides for payment of a performance bonus calculated pursuant to a
formula based on the financial results achieved by the Corporation during any
fiscal year. The performance bonus is payable on or before five (5) days
after the filing of the Corporation's Annual Report on Form 10-K with respect
to such fiscal year. In addition, the agreement provides for participation by
Mr. McNulty, subject to the discretion of the Compensation Committee, in any
incentive compensation or other benefit plans established by the Company,
including, the 1997 Plan being submitted to the shareholders for approval.
The agreement entitles Mr. McNulty to (i) reimbursement of reasonable out of
pocket expenses incurred in connection with the performance of his duties for
the Corporation and (ii) three (3) weeks of paid vacation. In the event of
termination of Mr. McNulty due to the dissolution or liquidation of the
Corporation, the agreement entitles Mr. McNulty to nine (9) months severance
pay based upon the base salary then in effect. Upon death, the agreement
entitles Mr. McNulty's estate to receive his accrued base salary and any
earned bonuses plus a one-time payment of $10,000. Upon termination of Mr.
McNulty for disability (defined as inability to perform his duties for 80% or
more of the normal working days for a 180 day period), Mr. McNulty is entitled
to his base salary then in effect less any disability payments paid to Mr.
McNulty by applicable disability insurance. If any successor employer assumes
the agreement, either expressly, or by operation of law, and subsequently
terminates Mr. McNulty without cause and within twenty-four (24) months after
the date of such assumption (the "Assumption Date"), Mr. McNulty is entitled
to severance compensation in an amount equal to the product of the base
salary then in effect under the agreement multiplied by the difference
between
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twenty-four (24) months less the number of months after the Assumption Date
during which Mr. McNulty remains employed by the successor employer.
BONA K. ALLEN
The Corporation's employment agreement with Mr. Allen dated February 1,
1997, provides for an initial three-year term through January 31, 2000, and is
automatically renewed for a period of one year on each anniversary date of
February 1 ("Anniversary Date") unless terminated for any reason by written
notice from either party given to the other at least one hundred twenty (120)
days prior to the next Anniversary Date or unless otherwise terminated
pursuant to the terms of the agreement. The agreement vests Mr. Allen with
full authority as Chief Financial Officer of the Corporation and provides for
an annual base salary of $75,000; subject to an annual increase to (i)
$112,500 if the assets of the Corporation exceed $150,000,000 and (ii)
$150,000 if the assets of the Corporation exceed $250,000,000. The agreement
also provides for payment of a performance bonus calculated pursuant to a
formula based on the financial results achieved by the Corporation during any
fiscal year. The performance bonus is payable on or before five (5) days
after the filing of the Corporation's Annual Report on Form 10-K with respect
to such fiscal year. In addition, the agreement provides for participation by
Mr. Allen, subject to the discretion of the Compensation Committee, in any
incentive compensation or other benefit plans established by the Company,
including, the 1997 Plan being submitted to the shareholders for approval.
The agreement entitles Mr. Allen to (i) reimbursement of reasonable out of
pocket expenses incurred in connection with the performance of his duties for
the Corporation, (ii) three (3) weeks of paid vacation; and (iii) health
insurance benefits. In the event of termination of Mr. Allen due to the
dissolution or liquidation of the Corporation, the agreement entitles Mr.
Allen to nine (9) months severance pay based upon the base salary then in
effect. Upon death, the agreement entitles Mr. Allen's estate to receive his
accrued base salary and any earned bonuses plus a one-time payment of $10,000.
Upon termination of Mr. Allen for disability (defined as inability to perform
his duties for 80% or more of the normal working days for a 180 day period),
Mr. Allen is entitled to his base salary then in effect less any disability
payments paid to Mr. Allen by applicable disability insurance. If any
successor employer assumes the agreement, either expressly, or by operation of
law, and subsequently terminates Mr. Allen without cause and within
twenty-four (24) months after the date of such assumption (the "Assumption
Date"), Mr. Allen is entitled to severance compensation in an amount equal to
the product of the base salary then in effect under the agreement multiplied
by the difference between twenty-four (24) months less the number of months
after the Assumption Date during which Mr. Allen remains employed by the
successor employer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the period April 22, 1996 (the date the Corporation's Common Stock
became publicly traded) to December 31, 1996, the Corporation did not have a
Compensation Committee. Michel S. McNulty, President and Chief Executive
Officer of the Corporation, was indirectly compensated for his services to the
Corporation through HMR Capital, LLC, the
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parent company of Host Funding Advisors, Inc., which acted as the
external advisement company of the Corporation. The Corporation had no other
paid employees for the fiscal year ended December 31, 1996. The compensation
arrangement of Mr. McNulty was approved and reviewed by the entire Board of
Directors of the Corporation with Mr. McNulty abstaining from the vote.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's officers and
directors, and persons who own more than 10 percent of a registered class of
the Corporation's equity securities, to file reports of ownership and change
in ownership with the Securities and Exchange Commission (the "SEC").
Officers, directors and greater than 10 percent stockholders are required by
SEC regulations to furnish the Corporation with copies of all Section 16(a)
forms they file. Based solely on its review of the copies of such forms
received by it, or written representation from certain reporting persons that
no Forms 3, 4 or 5 were required for those persons, the Corporation believes
that, from April 22, 1996 (the date the Corporation's Common Stock became
publicly traded) to December 31 ,1996, all filing requirements applicable to
its officers, directors, and greater than 10 percent beneficial owners were
timely met.
REPORT ON EXECUTIVE COMPENSATION
The entire Board of Directors was responsible for developing the
Corporation's executive compensation policies and administrating compensation
plans during 1996, which included only one executive officer, Michael S.
McNulty, President and Chief Executive Officer. For the fiscal year 1997, the
Corporation's Compensation Committee will be responsible for determining on an
annual basis the compensation to be paid to the executive officers of the
Corporation, including the grant of awards under the 1997 Incentive Plan.
The objectives of the Corporation's executive compensation program to be
implemented by the Compensation Committee are:
- Support the achievement of desired Corporation performance.
- Provide compensation that will attract and retain superior talent and
reward performance.
- Ensure that there is appropriate linkage between executive compensation
and the enhancement of stockholder value.
The executive compensation program is also designed to provide an overall level
of compensation opportunity that is competitive with companies of comparable
size, capitalization and complexity. Actual compensation levels, however, may be
greater or less than average competitive levels based upon annual and long-term
Corporation performance and specific
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issues peculiar to the Corporation, as well as individual performance.
Executive compensation is not necessarily determined by specific relationship
to objective criteria or benchmarks of corporate performance. For the fiscal
year 1997, the Compensation Committee will use its discretion to set executive
compensation at levels warranted in its judgment by corporate and individual
performance.
Members of the Board of Directors
William M. Birdsall, Chairman
Michael S. McNulty, President
Guy E. Hatfield
Charles R. Dunn
Don W. Cockroft
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CORPORATE PERFORMANCE
The following graph compares the change in the Corporation's shareholder
return on the Common Stock for the period April 22, 1996 (the date the
Corporation's Common Stock became publicly-traded) through December 31, 1996,
with the changes in the Standard & Poor's 500 Stock Index (the "S&P 500
Index") and the National Association of Real Estate Investment Trust Equity
Index (the "NAREIT Equity Index") for the same period, assuming a base
investment of $100 in the Common Stock in each index for comparative
purposes. Total return equals change in stock price plus dividends paid, and
assumes that all dividends are reinvested. During the period presented, the
Common Stock was traded on the American Stock Exchange under the symbol
"HFD". The NAREIT Equity Index is published monthly by the National
Association of Real Estate Investment Trusts, Inc. ("NARIET") in its
publication, REITWATCH. The index is available to the public upon request to
NARIET.
4/22/96 6/30/96 9/30/96 12/31/96
HFD Stock $ 100.00 $ 85.00 $ 83.46 $ 79.32
S & P $ 100.00 $ 103.55 $ 106.12 $ 114.41
NAREIT Equity Index $ 100.00 $ 103.35 $ 111.28 $ 132.26
The foregoing price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to
the extent that the Corporation specifically incorporates this graph by
reference, and shall not otherwise be deemed filed under such Acts.
There can be no assurance that the Corporation's share performance will
continue into the future with the same or similar trends depicted in the
graph above. The Corporation will not make or endorse any predictions as to
future share performance.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 27, 1997, the beneficial
ownership, as defined by regulations of the Securities and Exchange
Commission (the "Commission"), of the Class A Common Stock and Class B Common
Stock (collectively, the "Common Stock") held by: (i) each person or group
of persons known to the Corporation to beneficially own more than five
percent of the outstanding shares of common stock; (ii) each director of the
Corporation; (iii) each current executive officer of the Corporation named in
the preceding Summary
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Compensation Table; and (iv) all directors and executive officers as a group.
The number of shares and percentage ownership of Common Stock for each person
assumes that shares of Class A Common Stock issuable upon exercise of stock
warrants to such person (exclusive of others) exercisable within (60) days
from April 27, 1997 are outstanding. Said information is taken from or based
upon ownership filings made by such persons with the Commission or upon
information provided by such persons.
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OF CLASS (3)
- - -------------------- ------------------------ ------------
Guy E. Hatfield 691,786 (4) 50.3%
Ian Gardner-Smith 116,375 (5) 7.9%
Mark Grosvenor 89,818 (5) 6.4%
Michael S. McNulty 26,491 (5)(6) 1.0%
William M. Birdsall 10,000 *
Don W. Cockroft 10,000 *
Charles R. Dunn 10,000 *
All Directors and Officers
of the Corporation as a
Group (six persons,
including those named above) 748,277 53.1%
- - ------------------------------
*Less than one percent.
- - ------------------------------
(1) The addresses of the more than five percent holders listed in the
table are as follows: Ian Gardner-Smith, 1025 Prospect Street, Suite 350,
La Jolla, California 92037; and Mark Grosvenor, 3145 Sports Arena
Boulevard, San Diego, California 92110.
(2) A person is considered to "beneficially own" the shares over which
such person holds or shares voting power or investment power or over which
such person can acquire such power within 60 days (for example, through
the exercise of stock options, stock warrants or conversion of securities).
Except as otherwise noted, each director and officer has sole voting and
investment power with respect to the shares of Common Stock of the
Corporation.
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(3) Percent of the Class A Common Stock of the Corporation which is the
only class of publicly traded stock. Mr. Hatfield owns 100% of the issued
and outstanding Class B Common Stock of the Corporation for which there
is no public market. Effective January 31, 1997, Mr. Hatfield converted
his ownership of 140,000 shares of the Class C Common Stock of the
Corporation for Class A Common Stock. No shares of Class C Common Stock
remain issued and outstanding. See "Certain Transactions."
(4) Includes 140,000 shares of Class B Common Stock which represents all
of the issued and outstanding shares of such class. Also includes with
respect to Class A Common Stock: 1,106 shares held in an Individual
Retirement Account with Sunwest Federal Credit Union for the benefit of
Mr. Hatfield's wife, Dorothy Hatfield; 255 shares held in an Individual
Retirement Account with Sunwest Federal Credit Union for the benefit of
Mr. Hatfield; 330,425 shares held in trust by Mr. Hatfield, as trustee,
for the benefit of Mr. Hatfield and his wife; 60,000 shares held by All
American Group, Inc., of which Mr. Hatfield serves as President; and
50,000 shares held in the name of Mr. Hatfield's daughter, Julie E. King,
for which Mr. Hatfield may be deemed beneficial owner.
(5) Includes shares of Class A Common Stock which may be acquired within
60 days of April 27, 1997 pursuant to the exercise of stock warrants as
follows: Ian Gardner-Smith 102,908 shares; Donegal Partners, Ltd., a
family limited partnership of which Mr. McNulty acts as General Partner,
11,959 shares; and Mark Grosvenor 30,083 shares. Also includes 11,960
shares issuable to Blacor, Inc., of which Mr. McNulty is President, and
of which, Mr. McNulty disclaims beneficial ownership.
(6) Includes 600 shares of Class A Common Stock owned by Donegal
Partners, Ltd., a family partnership of which Mr. McNulty acts as General
Partner, and 1,286 shares of Class A Common Stock owned by Blacor, Inc.
of which Mr. McNulty serves as President. Mr. McNulty disclaims beneficial
ownership of Common Stock held by Blacor, Inc.
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PROPOSAL TO APPROVE THE HOST FUNDING, INC.
1997 INCENTIVE PLAN
(PROPOSAL 2)
GENERAL
On March 13, 1997, the Board of Directors of the Corporation adopted the
Host Funding, Inc. 1997 Incentive Plan (the "1997 Plan"), which became
effective on the date of adoption by the Board of Directors, subject to
shareholder approval. The purpose of the 1997 Plan is to assist the
Corporation and its subsidiaries in recruiting and retaining individuals with
ability and initiative by enabling such persons to participate in the future
success of the Corporation and its subsidiaries and to associate their
interests with those of the Corporation and its stockholders.
Shareholder approval of the 1997 Plan is necessary for qualification of
the 1997 Plan under Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "1934 Act"). The description of the 1997 Plan
contained herein is a summary of its principal terms and provisions and is
qualified in its entirety by reference to the 1997 Plan which is attached
hereto as EXHIBIT A.
GRANT, TERM AND RESTRICTIONS ON AWARDS
The 1997 Plan is an arrangement under which certain individuals may be
granted awards ("Awards") for incentive stock options, non-statutory stock
options, stock awards, performance shares and incentive awards. Awards
granted under the 1997 Plan may include incentive stock options, which are
qualified under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), non-statutory stock options, which are not qualified under
Section 422 of the Code, restricted stock issued in connection with stock
awards or performance shares, or cash incentives. Restricted Stock is common
stock that may not be disposed of or encumbered in any way until the periods
of restriction on the stock have elapsed.
Each Award will be granted under an agreement (the "Agreement") between
the Corporation and the individual receiving the Award. The Agreement will
specify the exercise periods of options and the restriction periods and
conditions of issuance of restricted stock. The rights under the Agreement
are not transferable by the individual except under the laws of descent and
distribution or to permitted family members under the 1997 Plan. During the
lifetime of the individual receiving an Award, Awards are exercisable only by
him or his legal representative or in the case of options or restricted stock
transferred to a permitted family member under the 1997 Plan by such family
member.
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ADMINISTRATION OF THE 1997 PLAN
THE 1997 Plan is administered by the Compensation Committee of the
Corporation which is comprised of three directors at least two of whom are
non-employee directors within the meaning of Securities and Exchange
Commission Rule 16b-3 (the "Committee"). The Committee is authorized to
designate recipients of Awards granted under the 1997 Plan, to interpret and
construe the provisions of the 1997 Plan and any Awards granted thereunder,
and to do all things necessary or appropriate to administer the 1997 Plan in
accordance with its terms.
AWARDS
The 1997 Plan provides for the discretionary granting to eligible
recipients as described below of (i) incentive stock options; (ii)
non-statutory stock options; and (iii) stock awards, performance shares and
incentive awards.
OPTIONS
The 1997 Plan permits the grant of both options qualifying under Section
422 of the Code ("incentive stock options") and options not so qualifying.
The price per share for Common Stock purchased on the exercise of an option
issued under the 1997 Plan is determined by the Committee on the date of
grant; provided, however, that the price per share for Common Stock purchased
on the exercise of any option shall not be less than the fair market value of
such share on the date of grant or, with respect to options granted in
connection with the initial employment of an individual, eighty-five (85%)
percent of the fair market value of such share on the date of grant. The
price per share for Common Stock on the exercise of any option that is an
incentive stock option shall not be less than the fair market value of such
share on the date of grant, or in the case of an incentive stock option
granted to an individual who owns more than ten (10%) percent of the
outstanding Common Stock of the Corporation on the date of grant, shall not
be less than one hundred ten (110%) percent of the fair market value of such
share on the date of grant. Incentive stock options granted under the 1997
Plan may not be first exercisable in a calendar year for stock having a fair
market value determined as of the date of issuance exceeding $100,000.
STOCK AWARDS
The 1997 Plan provides that the Committee may issue restricted stock to
eligible individuals under the 1997 Plan and in connection with such Award
prescribe that a participant's rights in the Stock Award shall be forfeitable
or otherwise restricted for a period of time or subject to such conditions as
may be otherwise determined by the Committee. For the fiscal year 1997, the
1997 Plan provides that the Committee shall be authorized to issue Stock
Awards with respect to up to 215,000 shares in the aggregate to selected
executives of the Corporation on the following terms and conditions: (i) the
Stock Awards will be granted at a price per share equal to $10 per share; and
(ii) the purchase price will be paid by the selected
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<PAGE>
participants through delivery of a five year promissory note executed in
favor of the Corporation by each recipient, which shall earn interest payable
quarterly, at a fixed rate equal to seven (7%) percent per annum. The
purchased shares will be pledged to the Corporation to secure payment of the
promissory note, which shall be non-recourse to the maker. Principal payments
on the note will be two (2%) percent per year. The Corporation shall forgive
the promissory notes issued in exchange for the shares of Common Stock (i) in
increments of eighteen (18%) percent of the principal amount per annum for
each year that the maker remains employed by the Corporation, and (ii) upon
the death, disability, or resignation of the purchaser (except for a
voluntary resignation). Prior to their forfeiture (in accordance with the
applicable agreement and while shares of Common Stock granted pursuant to the
Stock Award may be forfeited or are non-transferable), a participant will
have all rights of a stockholder with respect to the Stock Award, including
the right to receive dividends and vote the shares.
PERFORMANCE SHARE AWARDS
The 1997 Plan provides for the issuance of Performance Shares to
eligible participants under the 1997 Plan. The Committee, on the date of
grant of the award, may prescribe that the Performance Shares, or portion
thereof, will be earned, and the participant will be entitled to receive
payment pursuant to the award of Performance Shares only upon the
satisfaction of certain requirements or the attainment of certain objectives.
In the discretion of the Committee, the amount payable when an award of
Performance Shares is earned may be settled in cash, by the issuance of
Common Stock or a combination of cash and Common Stock. No participant
shall, as a result of receiving an award of Performance Shares, have any
rights as a stockholder until and to the extent that the award of Performance
Shares is earned and settled by the issuance of Common Stock.
INCENTIVE AWARDS
The 1997 Plan provides that the Committee may issue Incentive Awards in
the form of cash to participants. The terms and conditions of all Incentive
Awards are determined exclusively by the Committee; provided, however, that
no participant may receive an Incentive Award payment in any calendar year
that exceeds the lesser of (i) one hundred (100%) percent of the
participant's base salary (prior to salary reduction or deferral elections)
as of the date of grant of the Incentive Award or (ii) $250,000. No
participant, as a result of receiving an Incentive Award, will have any
rights as a stockholder of the Corporation.
ELIGIBILITY
Awards may be granted under the 1997 Plan to any employee of the
Corporation or an Affiliate of the Corporation, as defined in the 1997 plan,
or any person whose efforts contribute to the performance or success of the
Corporation or an Affiliate. Directors of the Corporation who are not
employees of the Corporation or an Affiliate may also be selected to
participate in the 1997 Plan. The Committee in its sole discretion as
outlined in the 1997 Plan, determines which eligible individuals will receive
Awards under the 1997 Plan.
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<PAGE>
The approximate number of individuals who are eligible to receive awards
under the 1997 Plan as employees or directors is six (6). No individual may
receive awards for more than 90,000 shares of Common Stock in calendar year
1997 and thereafter no individual may be granted Awards in any calendar year
covering more than 200,000 shares of Common Stock. In addition, no more than
2,500,000 shares of Common Stock during the term of the 1997 Plan may be
issued in receipt of incentive stock options.
STOCK SUBJECT TO THE PLAN
THE total number of shares of Common Stock that may be issued under the
1997 Plan in calendar year 1997 is (i) 105,000 shares; or (ii) 215,000 shares
if the total number of shares of the corporation outstanding during 1997
increases by 500,000 shares or more from the number of shares outstanding as
of January 1, 1997. Thereafter, the maximum aggregate number of shares of
Common Stock that may be issued under the 1997 Plan shall be equal to (i) the
maximum number of shares issuable in calendar year 1997 (as determined by the
preceding sentence) reduced by the number of shares subject to Awards made in
1997 which have not lapsed plus (ii) provided the number of shares
outstanding has increased by 1,000,000 shares or more from the number of
shares outstanding as of January 1, 1997 other than (x) as a result of an
event described in Article X of the 1997 Plan (relating to a
recapitalization, stock split or similar event) which resulted in an
adjustment to the number of shares available under the Plan or (y) as a
result of the issuance of shares of Class A Common Stock or Class B Common
Stock pursuant to the exercise or conversion of warrants issued and
outstanding as of March 13, 1997 (such an increase being referred to as an
"Excluded Increase"), the amount determined as follows: if the number of
outstanding shares of Common Stock has increased since the immediately
preceding January 1 other than as a result of an Excluded Increase an amount
equal to the sum of (A) seven (7%) percent of the difference between the
number of shares outstanding as of the immediately preceding January 1 (as
such number may have been adjusted by Article X of the 1997 Plan relating to
a recapitalization, stock split or similar event) and the number of shares
outstanding as of the current January 1 (the "Share Increase Amount"), up to
a maximum difference of 3,000,000 shares, plus (B) five (5%) percent of the
amount of shares represented by the Share Increase Amount in excess of
3,000,000 shares.
The maximum share figures are subject to adjustment upon the occurrence
of a recapitalization, stock split or similar event. See Article X "Adjustment
Upon Change in Common Stock" of 1997 Plan.
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<PAGE>
TERMINATION OF AWARDS
OPTIONS
The maximum time period in which an Option may be exercised shall be
determined by the Committee on the date of grant, except that no Option that
is an incentive option may be exercisable after the expiration of ten years
from the date of grant of such Option. In the case of an incentive stock
option that is granted to a participant who owns more than ten (10%) percent
of the outstanding Common Stock of the Corporation on the date of grant, such
Option shall not be exercisable after the expiration of five years from the
date of grant.
STOCK AWARDS
The Committee, on the date of grant, may prescribe that a participant's
rights in a Stock Award will be (i) forfeitable or otherwise restricted for a
period of time or subject to such conditions as may be set forth in the
applicable agreement with such participant; or (ii) vested immediately upon
grant.
PERFORMANCE SHARE AWARDS
The Committee, on the date of grant, may prescribe that Performance
Shares, or any portion thereof, will be earned, and the participant will be
entitled to receive payment pursuant to the award of Performance Shares only
upon the satisfaction of certain requirements or the attainment of certain
objectives.
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The 1997 Plan provides that the number of shares as to which Options,
Stock Awards and Performance Shares may be granted under the 1997 Plan, the
terms of any outstanding Stock Awards, Options, Performance Share Awards and
Incentive Awards, and the per individual limitations on the number of shares
for which Options, Stock Awards and Performance Shares may be granted, shall
be adjusted as the Committee shall determine to be equitably required in the
event that there is an increase or reduction in the number of shares of
Common Stock, or any change (including, but, not limited to, a change in
value) in the shares of Common Stock or exchange of shares of Common Stock
for a different number or kind of shares or other securities of the
Corporation by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, split-up, subdivision or
consolidation of shares, extraordinary dividend, change in corporate
structure or otherwise.
TAX CONSEQUENCES
An individual who receives an Award of restricted stock is taxed at the
time that the Award is no longer subject to a substantial risk of forfeiture
or becomes transferable, whichever occurs first. At such time, he will
include in gross income the excess of the then fair market
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<PAGE>
value of the restricted stock over the amount, if any, paid for such stock.
However, the individual may elect to include the fair market value of
restricted stock (determined without regard to any restriction, other than a
restriction which by its terms will never lapse) in his gross income for the
taxable year in which he first receives such stock by filing an election with
the IRS under Section 83(b) of the Code within 30 days after such receipt.
The Corporation shall receive a deduction from income in the same tax year
that the individual recognizes tax on the restricted stock that is in the
same amount as the amount on which such individual is taxed.
An individual who receives a non-statutory stock option generally will
be taxed at the time that he exercises the non-statutory option. At such
time, he will include in gross income the difference between the exercise
price and the fair market value of the stock at the time of exercise. The
Corporation shall receive a deduction from income in the same tax year that
the individual recognizes tax on exercise of the non-statutory option that is
in the same amount as the amount on which such individual is taxed.
An individual who receives an incentive stock option shall not be taxed
at the time of receipt or exercise of the incentive stock option. The amount
subject to taxation is amount of gain recognized upon the disposition of the
stock purchased with the incentive option, provided the statutory holding
period is satisfied. The Corporation receives no deduction from income in
connection with the Award of an incentive option.
An individual who receives an Incentive Award will be taxed at the time
of receipt and the Corporation will receive a corresponding deduction from
income.
AMENDMENTS
The Board of Directors or the Committee may at any time alter, amend,
revise, suspend or discontinue the 1997 Plan, provided that such action shall
not adversely affect Awards previously granted under the 1997 Plan. No
amendment may become effective until shareholder approval is obtained if such
approval is required under the rules of the stock exchange on which the
Corporation's shares are then listed or under Section 422 of the Internal
Revenue Code with respect to incentive stock options.
REGISTRATION
The Corporation anticipates registering the shares issuable pursuant to
Awards made under the 1997 Plan with the Securities and Exchange Commission
during 1997.
THE BOARD OF DIRECTORS UNAMINOUSLY RECOMMENDS A VOTE FOR
THE APPROVAL OF THE 1997 PLAN.
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CERTAIN TRANSACTIONS
TERMINATION AND AMENDMENT OF CERTAIN AGREEMENTS
Effective January 31, 1997, the Corporation terminated the Advisory
Agreement dated effective as of April 22, 1996, by and between the
Corporation and Host Funding Advisors, Inc. ("Host Advisors"), as amended by
the First Amendment to Advisory Agreement between the parties dated effective
as of June 12, 1996 (as amended, the "Advisory Agreement"). The purpose and
effect of the termination of the Advisory Agreement was to eliminate the
status of the Corporation as an externally advised real estate investment
trust and thereby become self-administered and advised as of the date of
termination. Pursuant to the termination of the Advisory Agreement, the
Corporation entered into Employment Agreements with William M. Birdsall,
Michael S. McNulty and Bona K. Allen. See "Employment Agreements and Other
Compensation Arrangements".
Also, effective as of January 31, 1997, the Corporation amended the Post
Formation Acquisition Agreement dated effective as of April 22, 1996 by and
between the Corporation and HMR Capital, L.L.C. (f/k/a Host Acquisition
Group, L.L.C.) ("HMR Capital"), as amended by the First Amendment to
Post-Formation Acquisition Agreement between the parties dated effective as
of June 12, 1996, by entering into an Amended and Restated Post-Acquisition
Agreement dated effective as of February 3, 1997 (the "Acquisition
Agreement"). The purpose and effect of the restatement and amendment was to
(i) redefine the role and compensation of HMR Capital as a non-exclusive
representative for property acquisitions by the Corporation; (ii) provide the
Corporation with the opportunity to seek and analyze a wider range of hotel
property acquisitions on an internal basis; and (iii) provide for the
termination by the Corporation of the Acquisition Agreement upon thirty (30)
days prior written notice.
ISSUANCE OF WARRANTS
In consideration for the termination of the Advisory Agreement and the
restatement and amendment of the Acquisition Agreement, as described above,
the Corporation paid Host Advisors $30,000 in cash and issued Series A
Warrants and Series B Warrants to HMR Capital to purchase a total of 450,000
shares of the Class A Common Stock of the Corporation (divided 225,000 shares
to the Series A Warrants and 225,000 shares to the Series B Warrants). The
Series A Warrants have an expiration date of February 2, 2000 with a strike
price of $9.90 per share. The Series B Warrants have an expiration date of
February 2, 2001 with a strike price of $10.80 per share. The Warrants are
subject to price adjustments upon the occurrence of certain events,
including, without limitation, stock splits, mergers, reclassifications of
stock, sale of assets and dividends in the form of stock. The Series B
Warrants are subject to an additional price adjustment upon the successful
completion by the Corporation of a public offering in which the net proceeds
to the Corporation are not less than $50,000,000. Upon the consummation of
such an offering, the exercise price of the Series B Warrants is adjusted to
be equal to the greater of (i) 110% of the public per share offering price
on the effective date of the public offering or (ii) the per share exercise
price on the date
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immediately preceding the effective date of the public offering. The Series
B Warrants are not exercisable during the period of time commencing ten (10)
business days after the Corporation gives written notice to the holder of the
Series B Warrants that within twenty-four (24) months after the date of
issuance of the Warrant, the Corporation intends to file an application with
the Securities and Exchange Commission to register and sell common stock of
the Corporation pursuant to an underwritten public offering with net proceeds
to the Corporation of not less than $50,000,000 and ending on the earlier to
occur of sixty (60) days after the effective date of such public offering or
twenty-four (24) months after the date of issuance of the Warrants (the
"Registration Period").
The holders of the Warrants are also entitled to certain limited
registration rights. The Series A Warrants provide that the Corporation will
prepare and file a Form S-3 Shelf Registration Statement covering all of the
shares issuable upon exercise of the Series A Warrants within ninety (90)
days following the effective date of a public offering of the Corporation's
common stock in which the net proceeds to the Corporation are not less than
$20,000,000. The Series B Warrants provide that the Corporation will prepare
and file a Form S-3 Shelf Registration Statement covering all of the shares
issuable upon exercise of the Series B Warrants following the earlier to
occur of (i) the effective date of a public offering of the Corporation's
common stock in which the net proceeds to the Corporation are not less than
$50,000,000 and (ii) the effective date of a public offering of the Company's
common stock after the expiration of the Registration Period (described
above) in which the net proceeds to the Corporation are not less than
$20,000,000. Upon the filing of a Shelf Registration Statement relating to
either of the Warrant series, the Corporation is required to keep the Shelf
Registration Statement effective for a period ending on the earlier to occur
of two years after the effective date of the Shelf Registration Statement or
the expiration date of the Warrant.
Immediately upon issuance of the Warrants to HMR Capital, HMR Capital
issued (i) 102,908 Series A Warrants and 77,908 Series B Warrants to Ian
Gardner-Smith, who previously served as a director and officer of CrossHost,
Inc., a wholly-owned subsidiary of the Corporation; (ii) 11,959 Series A
Warrants and 11,959 Series B Warrants to Donegal Partners, Ltd., a family
limited partnership of which Michael S. McNulty, the President and a Director
of the Corporation, serves as General Partner; (iii) 11,960 Series A Warrants
and 11,960 Series B Warrants to Blacor, Inc., a corporation of which Mr.
McNulty serves as President, but maintains no equity interest; and (iv)
30,083 Series A Warrants and 30,083 Series B Warrants to Mark Grosvenor, a
beneficial owner of more than 5% of the outstanding Common Stock of the
Corporation.
ACQUISITION FEES ON FLAGSTAFF PROPERTY
The Corporation through Host Ventures, Inc., a wholly-owned subsidiary,
recently acquired a Super 8 Hotel located in Flagstaff, Arizona (the
"Flagstaff Super 8"). The Flagstaff Super 8 was acquired pursuant to the
terms of that certain Restated and Amended Post-Formation Acquisition
Agreement dated February 3, 1997 (the "Acquisition Agreement") by and between
the Corporation and HMR Capital, L.L.C. (f/k/a Host Acquisition Group,
L.L.C.)
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("HMR Capital"). Pursuant to the terms of the Acquisition Agreement, HMR
Capital is entitled to receive an acquisition fee of up to 6%, but not less
than 2% of the gross purchase price of the property. The acquisition fee is
payable in cash or at the option of the Corporation in the Class A Common
Stock of the Corporation. The Corporation and HMR Capital agreed that the
acquisition fee earned by HMR Capital relating to the Flagstaff Super 8 was
16,000 shares of the Class A Common Stock of the Corporation valued at $10
per share and payable on or before April 30, 1997. The shares of Class A
Common Stock of the Corporation received by HMR Capital in payment of the
acquisition fee will be deemed restricted securities under the Securities Act
of 1933 and subject to the resale provisions of Rule 144 promulgated under
the Act. The acquisition fee (based upon a value of $10 per share)
represents approximately 3.1% of the gross purchase price of the Flagstaff
Property which totaled $5,125,000 excluding closing expenses. HMR Capital is
an affiliate of Mr. Michael S. McNulty, a Director and President of the
Corporation, based upon Mr. McNulty's ownership or control of 11.64% of the
membership units in HMR Capital. HMR Capital has redeemed all of Mr.
McNulty's ownership interest in HMR Capital effective as of February 1, 1997.
Hotel Mortgage Resources Corp. ("Hotel Resources") received a loan
origination fee of $84,907 relating to the financing provided by First Boston
for acquisition of the Flagstaff Super 8. Mr. McNulty was an employee of HMR
Capital, the parent company of Hotel Resources, during the calendar year 1996
and received a gross annual salary of $60,000. Mr. McNulty terminated his
employment relationship with HMR Capital effective January 1, 1997.
The total fees received by HMR and Hotel Resources represent
approximately 4.7% of the gross purchase price of the Flagstaff Super 8.
ACQUISITION FEES ON SLEEP INN PROPERTIES
In September 1996, the Corporation acquired four Sleep Inn Hotel
properties located in Sarasota, Tallahassee and Destin, Florida and Ocean
Springs, Mississippi (the "Acquired Properties"). The Acquired Properties
were acquired pursuant to the terms of that certain Post-Formation
Acquisition Agreement dated April 22, 1996, as amended by that certain First
Amendment to Post-Formation Acquisition Agreement dated June 12, 1996 (as
amended, the "Prior Acquisition Agreement"), by and between the Corporation
and HMR Capital, L.L.C. (f\k\a Host Acquisition Group, L.L.C.) ("HMR
Capital"). At the time of such acquisition, HMR Capital was an affiliate of
Mr. Michael S. McNulty, a Director and President of the Corporation, and Mr.
Ian Gardner-Smith, a director and officer of CrossHost, Inc., a wholly-owned
subsidiary of the Corporation.
Pursuant to the terms of the Prior Acquisition Agreement, HMR Capital
was entitled to receive an acquisition fee of up to 6% of the gross purchase
price of the Acquired Properties plus reimbursement of certain expenses. The
acquisition fee was payable in cash or at the option of the Corporation in
the Class A Common Stock of the Corporation. The Corporation and HMR Capital
agreed that the acquisition fee earned by HMR Capital relating to the
Acquired Properties was 42,000 shares of the Class A Common Stock of the
Corporation
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valued at $10 per share and payable on September 19, 1996. The shares of
Class A Common Stock received by HMR Capital in payment of the acquisition
fee are restricted securities under the Securities Act of 1933 and subject to
the resale provisions of Rule 144 promulgated under the Act. The acquisition
fee (based upon a value of $10 per share) represented approximately 3.2% of
the gross purchase price plus expenses of the Acquired Properties.
Hotel Mortgage Resources, Inc. ("Hotel Resources"), an affiliate of Mr.
Ian Gardner-Smith, also received a loan origination fee of $232,500 plus
reimbursement of expenses of approximately $20,000. At the time of the
acquisition, Mr. Michael S. McNulty was an employee of HMR Capital, the
parent company of Hotel Resources. The total fees received by affiliates
relating to the acquisition of the Acquired Properties represented
approximately 5.1% of the gross purchase price of the Acquired Properties.
RELATED PARTY NOTES RECEIVABLE
On April 1, 1995, the Corporation and All American Group, Ltd., a
Delaware limited partnership ("AAG"), entered into a Contribution and
Assumption Agreement (the "Contribution and Assumption Agreement") pursuant
to which AAG transferred, assigned and conveyed to the Corporation all of the
real property, including land and personal property and loan commitment fees,
and the Corporation agreed to assume, stock issuance costs and all real
property debt, at cost, of the four (4) Super 8 motels owned by the
Corporation and located in Somerset, Kentucky; Miner, Missouri; Poplar
Bluff, Missouri; and Rock Falls, Illinois (the "Transferred Properties"). In
addition, AAG contributed a note receivable in the amount of $1,805,675 to
the Corporation (the "Related Party Note"). The Related Party Note is due
from Guy and Dorothy Hatfield and their two children, sole limited partners,
and All American Group, Inc. ("AAG, Inc."), sole general partner of AAG. Mr.
Hatfield is a director of the Corporation and beneficial owner of more than
10% of the outstanding Common Stock of the Corporation. The Related Party
Note bears interest at the rate of 12%, payable quarterly with all
outstanding principal and accrued interest being due and payable on March 31,
2000. The Related Party Note was originally secured by second lien deeds of
trust on the Transferred Properties. In September 1995, the Related Party
Note was amended to release the Transferred Properties as collateral for the
Related Party Note in exchange for delivery to the Corporation of an
unconditional guarantee of the Related Party Note by Mr. Hatfield and his
wife. In addition, AAG entered into a Stock Pledge Agreement with the
Corporation pursuant to which AAG pledged 180,780 shares of the Common Stock
of the Corporation as further security for the Related Party Note.
Simultaneously, with the execution of the Related Party Note, the
Corporation entered into a consulting agreement (the "Related Party
Consulting Agreement") with AAG to provide advisory, accounting and other
consulting services to the Corporation for a monthly fee of $60,000 plus
annual additional compensation as mutually agreed upon. The Related Party
Consulting Agreement was cancelled on April 22, 1996 (the date the
Corporation became a
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publicly traded company) with the outstanding accrued consulting fees owed by
the Corporation being offset against interest due under the Related Party
Note.
On April 22, 1996, the Corporation sold to each of Donald W. Cockroft,
William M. Birdsall and Charles R. Dunn, directors of the Corporation, 10,000
shares of the Class A Common Stock of the Corporation at a price per share
equal to $10 per share. Each director paid the purchase price for such
shares by the execution and delivery of a five year promissory note to the
Corporation bearing interest, payable quarterly, at a fixed rate equal to 7%
per annum. The shares of Common Stock purchased by each director were
pledged to the Corporation to collateralize payment of their respective
promissory notes. The promissory notes are non-recourse to the maker, except
for 10% of the outstanding principal. The Corporation has agreed to forgive
the promissory notes in increments of 18% of the principal amount per annum
for each year that the maker remains a director of the Corporation.
CONVERSION OF CLASS C COMMON STOCK
On January 31, 1997, Guy E. Hatfield, a director of the Corporation,
converted his ownership of 140,000 shares of the Class C Common Stock of the
Corporation to Class A Common Stock on a one-for-one basis. The conversion
was consummated pursuant to the terms of the Class C Common Stock and
represented all of the issued and outstanding shares of Class C Common Stock.
No shares of Class C Common Stock remain issued and outstanding.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Effective April 24, 1996, William H. Ling resigned as the Corporation's
independent accountants and the Corporation engaged Coopers & Lybrand, L.L.P.,
as the independent accounting firm responsible for auditing the Corporation's
consolidated financial statements for the year ended December 31, 1996.
Representatives of Coopers & Lybrand, L.L.P, are expected to be available at
the Annual Meeting with the opportunity to make a statement if they desire to
do so and to answer questions. Coopers & Lybrand, L.L.P served as the
Corporation's independent public accountants for the year ended December 31,
1996. The Board of Directors, on recommendation of the Audit Committee, has
selected the firm of Coopers & Lybrand, L.L.P as the Corporation's independent
accountants for the year ending December 31, 1997.
STOCKHOLDER PROPOSALS
Any stockholder proposal to be presented for action at the next meeting
of stockholders pursuant to the provisions of Rule 14a-8, under the Securities
Exchange Act of 1934, must be received at the Corporation's principal executive
offices no later than January 15, 1998, for inclusion in the proxy statement
and form of proxy relating to the 1998 Annual Meeting.
24
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MISCELLANEOUS
The Board of Directors knows of no other matters which are likely to
come before the Annual Meeting. If any other matters should properly come
before the Annual Meeting, it is the intention of the persons named in the
accompanying form of Proxy to vote on such matters in accordance with their
best judgment.
The solicitation of proxies is made on behalf of the Board of Directors
of the Corporation, and the cost thereof will be borne by the Corporation.
The Corporation will also reimburse brokerage firms and nominees for their
expenses in forwarding proxy material to beneficial owners of the Common
Stock of the Corporation. In addition, officers and employees of the
Corporation (none of whom will receive any compensation therefore in addition
to their regular compensation) may solicit proxies. The solicitation will be
made by mail and, in addition, may be made by facsimile transmission,
telexes, personal interviews, or telephone.
ANNUAL REPORT
The Corporation's Annual Report to Stockholders for the fiscal year
ended December 31, 1996, is being sent to each stockholder. The Corporation
will provide, without charge, a copy of the corporation's Annual Report on
Form 10-K for 1996, as amended, upon written request directed to: Host
Funding, Inc., 6116 N. Central Expressway, Suite 1313, Dallas, Texas 75206
Attn: Bona K. Allen, Secretary.
PLEASE SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY
By Order of the Board of Directors
Bona K. Allen
Secretary
DATED: April 29, 1997
Dallas, Texas
25
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EXHIBIT A
HOST FUNDING, INC.
1997 INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.10 Fair Market Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.11 Family Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Incentive Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Performance Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 Stock Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18 Ten Percent Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PURPOSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V STOCK SUBJECT TO PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Shares Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 Aggregate Limits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.3 Reallocation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 5
<PAGE>
<S> <C> <C>
ARTICLE VI OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Option Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.3 Maximum Option Period . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.4 Nontransferability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.5 Transferable Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.6 Employee Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.7 Exercise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.8 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.9 Shareholder Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.10 Disposition of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VII STOCK AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.1 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.3 Performance Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.4 Employee Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.5 Shareholder Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.6 1997 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VIII PERFORMANCE SHARE AWARDS. . . . . . . . . . . . . . . . . . . . . . . 9
8.1 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.2 Earning the Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.4 Shareholder Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.5 Nontransferability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.6 Transferable Performance Shares . . . . . . . . . . . . . . . . . . . . . 10
8.7 Employee Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ii
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<S> <C> <C>
ARTICLE IX INCENTIVE AWARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Terms and Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.3 Nontransferability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.4 Employee Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.5 Shareholder Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE X ADJUSTMENT UPON CHANGE IN COMMON STOCK . . . . . . . . . . . . . . . . . 12
ARTICLE XI COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES; GOVERNING LAW. . 13
ARTICLE XII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Effect on Employment and Service . . . . . . . . . . . . . . . . . . . . 13
12.2 Unfunded Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.3 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE XIII AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE XIV DURATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE XV EFFECTIVE DATE OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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ARTICLE I
DEFINITIONS
1.1 AFFILIATE means any "subsidiary" or "parent" corporation (within
the meaning of Section 424 of the Code) of the Company.
1.2 AGREEMENT means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of a Stock Award, an award of Performance Shares or an Option or
Incentive Award granted to such Participant.
1.3 AWARD means any of a Stock Award, award of Performance Shares, an
Option or Incentive Award granted pursuant to the Plan.
1.4 BOARD means the Board of Directors of the Company.
1.5 CODE means the Internal Revenue Code of 1986, and any amendments
thereto.
1.6 COMMITTEE means the Compensation Committee of the Board or a
subcommittee thereof comprised of at least two (2) directors each of whom is a
non-employee director within the meaning of Securities and Exchange Commission
Rule 16b-3. References to the Committee shall include any delegate appointed in
accordance with Article III of this Plan.
1.7 COMMON STOCK means the common stock, $0.01 par value, of the
Company.
1.8 COMPANY means Host Funding, Inc. a Maryland corporation.
1.9 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended and as in effect on the effective date of this Plan.
1.10 FAIR MARKET VALUE means, on any given date, the current fair
market value of the shares of Common Stock as determined below:
If the Common Stock is not listed on an established stock exchange,
the Fair Market Value shall be the average of the final bid and asked quotations
on the over-the-counter market in which the Common Stock is traded or, if
applicable, the reported "closing" price of a share of Common Stock in the New
York over-the-counter market as reported by the National Association of
Securities Dealers, Inc. If the Common Stock is listed on one or more
established stock exchanges, Fair Market Value shall be deemed to be the highest
closing price of a share of Common Stock reported on any
<PAGE>
such exchange. In any case, if no sale of Common Stock is made on any stock
exchange or over-the-counter market on that date, then Fair Market Value
shall be determined as of the next preceding day on which there was a sale.
If the Common Stock is not traded, Fair Market Value shall be determined by
the Board using any reasonable method in good faith.
1.11 FAMILY MEMBERS means with respect to a Participant, the
Participant's children, grandchildren, spouse, one or more trusts for the
benefit of such family members or a partnership in which such family members are
the only partners.
1.12 INCENTIVE AWARD means an award which, subject to such terms and
conditions as may be prescribed by the Administrator, entitles the Participant
to receive a cash payment from the Company or an Affiliate.
1.13 OPTION means a stock option that entitles the holder to purchase
from the Company a stated number of shares of Common Stock at the price set
forth in an Agreement.
1.14 PARTICIPANT means an employee of the Company or an Affiliate,
including an employee who is a member of the Board, or an individual whose
efforts contribute to the performance or success of the Company or an Affiliate,
who satisfies the requirements of Article IV and is selected by the Committee to
receive a Stock Award, an Option, an Incentive Award, an award of Performance
Shares or a combination thereof.
1.15 PERFORMANCE SHARES means an award, in the amount determined by
the Committee and specified in an Agreement, stated with reference to a
specified number of shares of Common Stock, that entitles the holder to receive
a payment for each specified share equal to the Fair Market Value of Common
Stock on the date of payment.
1.16 PLAN means the Host Funding, Inc. 1997 Incentive Plan.
1.17 STOCK AWARD means Common Stock awarded to a Participant under
Article VIII.
1.18 TEN PERCENT SHAREHOLDER means any individual owning more than
ten (10%) percent of the total combined voting power of all classes of stock of
the Company or of an Affiliate. An individual shall be considered to own any
voting stock owned (directly or indirectly) by or for his brothers, sisters,
spouse, ancestors or lineal descendants and shall be considered to own
proportionately any voting stock owned (directly or indirectly) by or for a
corporation, partnership, estate or trust of which such individual is a
shareholder, partner or beneficiary.
2
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ARTICLE II
PURPOSES
The Plan is intended to assist the Company and its Affiliates in
recruiting and retaining individuals with ability and initiative by enabling
such persons to participate in the future success of the Company and its
Affiliates and to associate their interests with those of the Company and its
stockholders. The Plan is intended to permit the grant of both Options
qualifying under Section 422 of the Code ("incentive stock options") and Options
not so qualifying, and the grant of Stock Awards, Performance Shares and
Incentive Awards. No Option that is intended to be an incentive stock option
shall be invalid for failure to qualify as an incentive stock option. The
proceeds received by the Company from the sale of Common Stock pursuant to this
Plan shall be used for general corporate purposes.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall
have authority to grant Stock Awards, Performance Shares, Incentive Awards and
Options upon such terms (not inconsistent with the provisions of this Plan) as
the Committee may consider appropriate. Such terms may include conditions (in
addition to those contained in this Plan) on the exercisability of all or any
part of an Option or on the transferability or forfeitability of a Stock Award,
Incentive Award or Performance Shares. Notwithstanding any such conditions, the
Committee may, in its discretion, accelerate the time at which any Option may be
exercised, or the time at which a Stock Award may become transferable or
nonforfeitable or the time at which an Incentive Award or Performance Shares may
be settled. In addition, the Committee shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of Agreements; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific
power to the Committee shall not be construed as limiting any power or authority
of the Committee. Any decision made, or action taken, by the Committee or in
connection with the administration of this Plan shall be final and conclusive.
Neither the Committee nor any member of the Committee shall be liable for any
act done in good faith with respect to this Plan or any Agreement, Option, Stock
Award, Incentive Award or award of Performance Shares. All expenses of
administering this Plan shall be borne by the Company.
The Committee, in its discretion, may delegate to one or more officers
of the Company all or part of the Committee's authority and duties with respect
to grants and awards to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act; provided, however, the
Committee shall not delegate its authority (i) to appoint delegates or its
authority to
3
<PAGE>
amend or revoke any delegation, (ii) under Articles X and XI hereof and (iii)
to accelerate the exercisability of Options, the transferability of Stock
Awards or the time at which Incentive Awards or awards of Performance Shares
may be settled. The Committee may revoke or amend the terms of a delegation
at any time but such action shall not invalidate any prior actions of the
Committee's delegate or delegates that were consistent with the terms of the
Plan.
ARTICLE IV
ELIGIBILITY
Any employee of the Company or an Affiliate (including a corporation
that becomes an Affiliate after the adoption of this Plan) or a person whose
efforts contribute to the performance or success of the Company or an Affiliate
(including a corporation that becomes an Affiliate after the adoption of this
Plan) is eligible to participate in this Plan if the Committee, in its sole
discretion, determines that such person has contributed significantly or can be
expected to contribute significantly to the profits or growth of the Company or
an Affiliate. Directors of the Company who are not employees of the Company or
an Affiliate may be selected to participate in this Plan.
ARTICLE V
STOCK SUBJECT TO PLAN
5.1 SHARES ISSUED. Upon the award of shares of Common Stock pursuant
to a Stock Award or the settlement of a Performance Share award, the Company may
issue shares of Common Stock from its authorized but unissued Common Stock.
Upon the exercise of an Option, the Company may deliver to the Participant (or
the Participant's broker if the Participant so directs), shares of Common Stock
from its authorized but unissued Common Stock.
5.2 AGGREGATE LIMITS.
(a) The maximum aggregate number of shares of Common Stock that
may be issued under this Plan in calendar year 1997 is (i) 105,000
shares or (ii) 215,000 if the number of shares outstanding during
1997 increases by 500,000 shares or more from the number of shares
outstanding as of January 1, 1997.
(b) Thereafter, the maximum aggregate number of shares of
Common Stock that may be issued under this Plan shall be equal to (i)
the number of shares determined under paragraph (a) reduced by the
number of shares subject to Awards made in 1997 which have not lapsed
plus (ii) provided the number of shares outstanding has increased by
1,000,000 shares or more from the number of shares outstanding as of
January 1, 1997 other than (x) as a result of an event described in
Article X which resulted in an adjustment to the number of shares
available under the Plan or (y) as a
4
<PAGE>
result of the issuance of shares of Class A Common Stock or Class B
Common Stock pursuant to the exercise or conversion of warrants
issued and outstanding as of March 13, 1997 (such an increase being
referred to as an "Excluded Increase"), the amount determined as
follows: if the number of outstanding shares of Common Stock has
increased since the immediately preceding January 1 other than as a
result of an Excluded Increase an amount equal to the sum of (A)
seven (7%) percent of the difference between the number of shares
outstanding as of the immediately preceding January 1 (as such number
may have been adjusted by Article X) and the number of shares
outstanding as of the current January 1 (the "Share Increase
Amount"), up to a maximum difference of 3,000,000 shares, plus (B)
five (5%) percent of the amount of shares represented by the Share
Increase Amount in excess of 3,000,000 shares.
(c) The maximum aggregate number of shares that may be issued
under this Plan shall be subject to adjustment as provided in Article
X.
(d) No individual may be granted Awards in calendar year 1997
covering more than 90,000 shares of Common Stock and thereafter, no
individual may be granted Awards in any calendar year covering more
than 200,000 shares of Common Stock. Notwithstanding the foregoing,
any of the authorized shares may be used in respect of any of the
types of Awards described in this Plan, except that no more than
2,500,000 shares during the term may be issued in respect of
incentive stock options.
5.3 REALLOCATION OF SHARES. If an Option is terminated, in whole or
in part, for any reason other than its exercise, the number of shares of Common
Stock allocated to the Option or portion thereof may be reallocated to other
Options, Stock Awards and Performance Share awards to be granted under this
Plan. If an award of Performance Shares or a Stock Award is forfeited, in whole
or in part, the number of shares of Common Stock allocated to the Performance
Share award or Stock Award or portion thereof may be reallocated to other
Options and Stock Awards and Performance Share awards to be granted under this
Plan.
ARTICLE VI
OPTIONS
6.1 AWARD. In accordance with the provisions of Article IV, the
Committee will designate each individual to whom an Option is to be granted and
will specify the number of shares of Common Stock covered by such awards.
5
<PAGE>
6.2 OPTION PRICE. The price per share for Common Stock purchased on
the exercise of an Option shall be determined by the Committee on the date of
grant; provided, however, that the price per share for Common Stock purchased on
the exercise of any Option shall not be less than the Fair Market Value on the
date of grant or, with respect to Options granted in connection with the initial
employment of an individual, eighty-five (85%) percent of the Fair Market Value
on the date the Option is granted. Notwithstanding the preceding sentence, the
price per share for Common Stock purchased on the exercise of any Option that is
an incentive stock option shall not be less than the Fair Market Value on the
date the Option is granted or, in the case of an incentive stock option granted
to an individual who is a Ten Percent Shareholder on the date such option is
granted, shall not be less than one hundred ten (110%) percent of the Fair
Market Value on the date the Option is granted.
6.3 MAXIMUM OPTION PERIOD. The maximum period in which an Option
may be exercised shall be determined by the Committee on the date of grant,
except that no Option that is an incentive stock option shall be exercisable
after the expiration of ten years from the date such Option was granted. In the
case of an incentive stock option that is granted to a Participant who is a Ten
Percent Shareholder on the date of grant, such Option shall not be exercisable
after the expiration of five years from the date of grant. The terms of any
Option that is an incentive stock option may provide that it is exercisable for
a period less than such maximum period.
6.4 NONTRANSFERABILITY. Except as provided in Section 6.5, each
Option granted under this Plan shall be nontransferable except by will or by the
laws of descent and distribution. During the lifetime of the Participant to
whom the option is granted, the Option may be exercised only by the Participant.
No right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.
6.5 TRANSFERABLE OPTIONS. Section 6.4 to the contrary
notwithstanding, if the Agreement provides, an Option that is not an incentive
stock option may be transferred by a Participant to the Participant's Family
Members; provided, however, that the Participant may not receive any
consideration for the transfer. The holder of an Option transferred pursuant to
this section shall be bound by the same terms and conditions that governed the
Option during the period that it was held by the Participant.
6.6 EMPLOYEE STATUS. For purposes of determining the applicability
of Section 422 of the Code (relating to incentive stock options), or in the
event that the terms of any Option provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons, shall not be
deemed interruptions of continuous employment.
6
<PAGE>
6.7 EXERCISE. Subject to the provisions of this Plan and the
applicable Agreement, an Option shall become exercisable in such installments
(which need not be equal) and at such times as may be designated by the
Committee and set forth in the Agreement; provided, however, that incentive
stock options (granted under the Plan and all plans of the Company and its
Affiliates) may not be first exercisable in a calendar year for stock having a
Fair Market Value (determined as of the date an option is granted) exceeding
$100,000. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the Option expires in accordance with Section 6.3
hereof. An Option granted under this Plan may be exercised with respect to any
number of whole shares less than the full number for which the Option could be
exercised. A partial exercise of an Option shall not affect the right to
exercise the Option from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the Option.
6.8 PAYMENT. Unless otherwise provided by the Agreement, payment of
the Option price shall be made in cash or a cash equivalent acceptable to the
Committee. If the Agreement provides, payment of all or part of the Option
price may be made by surrendering shares of Common Stock to the Company. If
Common stock is used to pay all or part of the Option price, the sum of the cash
and cash equivalent and the Fair Market Value (determined as of the day
preceding the date of exercise) of the shares surrendered must not be less than
the Option price of the shares for which the Option is being exercised.
6.9 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder with respect to shares subject to his Option until the date of
exercise of such Option.
6.10 DISPOSITION OF STOCK. A Participant shall notify the Company
of any sale or other disposition of Common Stock acquired pursuant to an Option
that was an incentive stock option if such sale or disposition occurs:
(i) within two years of the grant of an Option or
(ii) within one year of the issuance of the Common Stock to the
Participant.
Such notice shall be in writing and directed to the Secretary of the Company.
7
<PAGE>
ARTICLE VII
STOCK AWARDS
7.1 AWARD. In accordance with the provisions of Article IV, the
Committee will designate each individual to whom a Stock Award is to be made and
will specify the number of shares of Common Stock covered by such awards.
7.2 VESTING. The Committee, on the date of the award, may
prescribe that a Participant's rights in the Stock Award shall be forfeitable or
otherwise restricted for a period of time or subject to such conditions as may
be set forth in the Agreement.
7.3 PERFORMANCE OBJECTIVES. In accordance with Section 7.2, the
Committee may prescribe that Stock Awards will be vested immediately upon grant
or will become vested or transferable or both based on objectives stated with
respect to the Company's, an Affiliate's or an operating unit's return on
equity, earnings per share, total earnings, earnings growth, return on capital,
return on assets, funds from operations or Fair Market Value. If the Committee,
on the date of award, prescribes that a Stock Award shall become nonforfeitable
and transferable only upon the attainment of performance objectives stated with
respect to one or more of the foregoing criteria, the shares subject to such
Stock Award shall become nonforfeitable and transferable only to the extent that
the Committee certifies that such objectives have been achieved.
7.4 EMPLOYEE STATUS. In the event that the terms of any Stock
Award provide that shares may become transferable and nonforfeitable thereunder
only after completion of a specified period of employment, the Committee may
decide in each case to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment.
7.5 SHAREHOLDER RIGHTS. Prior to their forfeiture (in accordance
with the applicable Agreement and while the shares of Common Stock granted
pursuant to the Stock Award may be forfeited or are nontransferable), a
Participant will have all rights of a shareholder with respect to a Stock Award,
including the right to receive dividends and vote the shares; provided, however,
that during such period (i) a Participant may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of shares of Common Stock granted
pursuant to a Stock Award, (ii) the Company shall retain custody of the
certificates evidencing shares of Common Stock granted pursuant to a Stock
Award, and (iii) the Participant will deliver to the Company a stock power,
endorsed in blank, with respect to each Stock Award. The limitations set forth
in the preceding sentence shall not apply after the shares of Common Stock
granted under the Stock Award are transferable and are no longer forfeitable.
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7.6 1997 GRANTS. Subject to the availability of shares as provided
in Section 5.2, the Committee shall be authorized to issue Stock Awards with
respect to up to 215,000 shares in the aggregate to selected executives of the
Company on the following terms and conditions: The Stock Awards will be granted
at a price per share equal to $10 per share. The purchase price will be paid by
the selected participants through delivery of a five year promissory note
executed in favor of the Company by each purchaser, which shall earn interest,
payable quarterly, at a fixed rate equal to seven (7%) percent per annum. The
purchased shares will be pledged to the Company to secure payment of the
promissory note, which shall be non-recourse to the maker. Principal payments
on the note will be two (2%) percent per year. The Company shall forgive the
promissory notes issued in exchange for the shares of Common Stock (i) in
increments of eighteen (18%) percent of the principal amount per annum for each
year that the maker remains employed by the Company, and (ii) upon the death,
disability, or resignation of the purchaser (except for a voluntary
resignation).
ARTICLE VIII
PERFORMANCE SHARE AWARDS
8.1 AWARD. In accordance with the provisions of Article IV, the
Committee will designate each individual to whom an award of Performance Shares
is to be made and will specify the number of shares of Common Stock covered by
such awards.
8.2 EARNING THE AWARD. The Committee, on the date of the grant of
an award, may prescribe that the Performance Shares, or portion thereof, will be
earned, and the Participant will be entitled to receive payment pursuant to the
award of Performance Shares only upon the satisfaction of certain requirements
or the attainment of certain objectives. By way of example and not of
limitation, the restrictions may provide that Performance Shares will be
forfeited without payment if the Participant separates from the service of the
Company and its Affiliates before the expiration of a stated term or unless the
Company, an Affiliate or an operating unit achieves objectives stated with
reference to the Company's, an Affiliate's or an operating unit's return on
equity, earnings per share, total earnings, earnings growth, return on capital,
return on assets, funds from operations or Fair Market Value. If the Committee,
on the date of award, prescribes that no payments will be made with respect to
Performance Shares unless performance objectives stated with respect to the
foregoing criteria are attained, no such payment will be made unless, and then
only to the extent that, the Committee certifies that such objectives have been
achieved.
8.3 PAYMENT. In the discretion of the Committee, the amount
payable when an award of Performance Shares is earned may be settled in cash, by
the issuance of Common Stock or a combination of cash and Common Stock. A
fractional share shall not be deliverable when an award of Performance Shares is
earned, but a cash payment will be made in lieu thereof.
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8.4 SHAREHOLDER RIGHTS. No Participant shall, as a result of
receiving an award of Performance Shares, have any rights as a shareholder until
and to the extent that the award of Performance Shares is earned and settled by
the issuance of Common Stock. After an award of Performance Shares is earned,
if settled completely or partially in Common Stock, a Participant will have all
the rights of a shareholder with respect to such Common Stock.
8.5 NONTRANSFERABILITY. Except as provided in Section 8.6,
Performance Shares granted under this Plan shall be nontransferable except by
will or by the laws of descent and distribution. No right or interest of a
Participant in any Performance Shares shall be liable for, or subject to, any
lien, obligation, or liability of such Participant.
8.6 TRANSFERABLE PERFORMANCE SHARES. Section 8.5 to the contrary
notwithstanding, the Committee may grant Performance Shares which are
transferable to a Participant's Family Members; provided no consideration is
received for such transfer. The holder of Performance Shares transferred
pursuant to this section shall be bound by the same terms and conditions that
governed the Performance Shares during the period that they were held by the
Participant.
8.7 EMPLOYEE STATUS. In the event that the terms of any
Performance Share award provide that no payment will be made unless the
Participant completes a stated period of employment, the Committee may decide to
what extent leaves of absence for government or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
ARTICLE IX
INCENTIVE AWARDS
9.1 AWARD. In accordance with the provisions of Article IV, the
Committee shall designate Participants to whom Incentive Awards are made. All
Incentive Awards shall be finally determined exclusively by the Committee under
the procedures established by the Committee; provided, however, that no
Participant may receive an Incentive Award payment in any calendar year that
exceeds the lesser of (i) one hundred (100%) percent of the Participant's base
salary (prior to any salary reduction or deferral elections) as of the date of
grant of the Incentive Award or (ii) $250,000.
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9.2 TERMS AND CONDITIONS. The Committee, at the time an Incentive
Award is made, shall specify the terms and conditions which govern the award.
Such terms and conditions shall prescribe that the Incentive Award shall be
earned only to the extent that the Company, an Affiliate or an operating unit,
during a performance period of at least one year, achieves objectives stated
with respect to the Company's, an Affiliate's or an operating unit's return on
equity, earnings per share, total earnings, earnings growth, return on capital,
return on assets, funds from operations or Fair Market Value. Such terms and
conditions also may include other limitations on the payment of Incentive Awards
including, by way of example and not of limitation, requirements that the
Participant complete a specified period of employment with the Company or an
Affiliate or that the Company, an Affiliate, or the Participant attain stated
objectives or goals (in addition to those prescribed in accordance with the
preceding sentence) as a prerequisite to payment under an Incentive Award. The
Committee, at the time an Incentive Award is made, shall also specify when
amounts shall be payable under the Incentive Award and whether amounts shall be
payable in the event of the Participant's death, disability, or retirement. No
payment shall be made under an Incentive Award except to the extent that the
Committee certifies that the objectives governing such award have been achieved.
9.3 NONTRANSFERABILITY. Incentive Awards granted under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution. No right or interest of a Participant in an Incentive Award shall
be liable for, or subject to, any lien, obligation, or liability of such
Participant.
9.4 EMPLOYEE STATUS. If the terms of an Incentive Award provide
that a payment will be made thereunder only if the Participant completes a
stated period of employment, the Committee may decide to what extent leaves of
absence for governmental or military service, illness, temporary disability or
other reasons shall not be deemed interruptions of continuous employment.
9.5 SHAREHOLDER RIGHTS. No Participant shall, as a result of
receiving an Incentive Award, have any rights as a shareholder of the Company or
any Affiliate on account of such award.
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ARTICLE X
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options, Stock Awards and
Performance Shares may be granted under this Plan, the terms of outstanding
Stock Awards, Options, Performance Share awards and Incentive Awards, and the
per individual limitations on the number of shares for which Options, Stock
Awards and Performance Shares may be granted, shall be adjusted as the Committee
shall determine to be equitably required in the event that there is an increase
or reduction in the number of shares of Common Stock, or any change (including,
but not limited to, a change in value) in the shares of Common Stock or exchange
of shares of Common Stock for a different number or kind of shares or other
securities of the Company by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, spin-off, split-up, subdivision or
consolidation of shares, extraordinary dividend, change in corporate structure
or otherwise. Any determination made under this Article X by the Committee
shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
maximum number of shares as to which Options, Stock Awards and Performance
Shares may be granted, the per individual limitations on the number of shares
for which Options, Stock Awards and Performance Shares may be granted or the
terms of outstanding Stock Awards, Options, Incentive Awards or Performance
Shares.
The Committee may make Stock Awards and may grant Options, Incentive
Awards and Performance Shares in substitution for performance shares, phantom
shares, stock awards, stock options, stock appreciation rights, or similar
awards held by an individual who becomes an employee of the Company or an
Affiliate in connection with a transaction described in the first paragraph of
this Article X. Notwithstanding any provision of the Plan (other than the
limitation of Section 5.2), the terms of such substituted Stock Awards, Option,
Incentive Awards or Performance Share grants shall be as the Committee, in its
discretion, determines is appropriate.
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ARTICLE XI
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES; GOVERNING LAW
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the
rules of all domestic stock exchanges on which the Company's shares may be
listed. The Company shall have the right to rely on an opinion of its counsel
as to such compliance. Any share certificate issued to evidence Common Stock
when a Stock Award is granted or for which an option is exercised or a
Performance Share settled may bear such legends and statements as the Committee
may deem advisable to assure compliance with federal and state laws and
regulations. No Option shall be exercisable, no Stock Award shall be granted,
no Common Stock shall be issued, no certificate for shares shall be delivered,
and no payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from regulatory bodies
having jurisdiction over such matters. Except as to matters of federal law,
this Plan and the rights of all persons claiming hereunder shall be construed
and determined in accordance with the laws of the State of Texas without giving
effect to conflicts of law principles.
ARTICLE XII
GENERAL PROVISIONS
12.1 EFFECT ON EMPLOYMENT AND SERVICE. Neither the adoption of this
Plan, its operation, nor any documents describing or referring to this Plan (or
any part thereof) shall confer upon any individual any right to continue in the
employ or service of the Company or an Affiliate or in any way affect any right
and power of the Company or an Affiliate to terminate the employment or service
of any individual at any time with or without assigning a reason therefor.
12.2 UNFUNDED PLAN. The Plan, insofar as it provides for grants,
shall be unfunded, and the Company shall not be required to segregate any assets
that may at any time be represented by grants under this Plan. Any liability of
the Company to any person with respect to any grant under this Plan shall be
based solely upon any contractual obligations that may be created pursuant to
this Plan. No such obligation of the Company shall be deemed to be secured by
any pledge of, or other encumbrance on, any property of the Company.
12.3 RULES OF CONSTRUCTION. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
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ARTICLE XIII
AMENDMENT
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment may become effective until shareholder
approval is obtained if such approval is required under the rules of the stock
exchange on which the Company's shares are listed or under Section 422 of the
Code with respect to incentive stock options. No amendment shall, without a
Participant's consent, adversely affect any rights of such Participant under any
outstanding Stock Award, Option, Incentive Award or Performance Share award
outstanding at the time such amendment is made.
ARTICLE XIV
DURATION OF PLAN
No Stock Award, Option, Incentive Award or Performance Share award may
be granted under this Plan more than ten years after the earlier of the date
this Plan is adopted by the Board or the date this Plan is approved by
stockholders in accordance with Article XV. Stock Awards, Options, Incentive
Awards and Performance Share awards granted before that date shall remain valid
in accordance with their terms.
ARTICLE XV
EFFECTIVE DATE OF PLAN
Options, Incentive Awards and Performance Share awards may be granted
under this Plan upon its adoption by the Board, provided that no Option,
Incentive Award or Performance Share award shall be effective or exercisable
unless this Plan is approved by a majority of the votes entitled to be cast by
the Company's stockholders, voting either in person or by proxy, at a duly held
stockholders' meeting or by unanimous consent of the Company's stockholders.
Stock Awards may be granted under this Plan upon the later of its adoption by
the Board or its approval by stockholders in accordance with the preceding
sentence.
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HOST FUNDING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Host Funding, Inc. (the "Company") to be held in
the Skyline Ballroom on the 21st floor of the Doubletree Hotel at Campbell
Centre, 8250 North Central Expressway, Dallas, Texas on Tuesday, May 21,
1997, at 10:00 AM Dallas time, and the Proxy Statement in connection
therewith; and (2) appoints Bona K. Allen and John G. Rebensdorf, and each of
them, for and in the name, place and stead of the undersigned to vote upon
and act with respect to all of the shares of capital stock of the Company
standing in the name of the undersigned or with respect to which the
undersigned is entitled to vote and act, at the meeting and at any
adjournment thereof, and the undersigned directs that this proxy be voted as
follows:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
---------------
SEE REVERSE
SIDE
---------------
- - --------------------------------------------------------------------------------
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
HOST FUNDING, INC.
MAY 21, 1997
<TABLE>
| |
V PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED V
- - -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
PLEASE MARK YOUR --- |
A /X/ VOTES AS IN THIS | |
EXAMPLE USING | |
DARK INK ONLY. --------
FOR all nominees WITHHOLD
listed at right (except AUTHORITY to vote
as marked to the for all nominees listed
contrary below) at right
a) Election of / / / / NOMINEES: b) Ratification and approval of the
Officers Guy E. Hatfield Company's 1997 Incentive Plan.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL Michael S. McNulty
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED William M. Birdsall FOR AGAINST ABSTAIN
BELOW.) Charles R. Dunn / / / / / /
Donald W. Cockrolt
- - --------------------------------------------------------------- c) In the discretion of the proxies
on any other matter that may
properly come before the meeting
or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED
ABOVE. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR THE
MATTERS SPECIFICALLY REFERRED TO
ABOVE.
The undersigned hereby revokes any
proxy or proxies heretofore given to
vote upon or act with respect to such
stock and hereby ratifies and confirms
all that the proxies, their
substitutes, or any of them, may
lawfully do by virtue hereof.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF THE
COMPANY.
Signature ____________________________________ Signature (if held jointly) __________________________ Date ____________________
NOTE: Please date this proxy and sign your name exactly as it appears herein. When there is more than one owner, each should sign.
When signing as an attorney, administrator, guarantor, guardian or trustee, please add your title as such. If executed by
a corporation, the proxy should be signed by a duly authorized officer. Please date, sign and mail the proxy card in the
enclosed envelope. No postage is required.
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