<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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:
------------------------------------------------------------------------
<PAGE>
HOST FUNDING, INC.
6116 NORTH CENTRAL EXPRESSWAY
SUITE 1313
DALLAS, TEXAS 75206
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 16, 1998
------------
To the Stockholders of
HOST FUNDING, INC.:
NOTICE IS HERBY GIVEN that the Annual Meeting of Stockholders of Host
Funding, Inc., a Maryland corporation, will be held in the Monterey Room on
the 21st Floor of the Doubletree Hotel at 8250 North Central Expressway,
Dallas, Texas 75206 on Thursday, July 16, 1998 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 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 JUNE 26, 1998, 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 NORTH 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 Monterey Room on the 21st
Floor of the DoubleTree Hotel, Campbell Centre, 8250 North Central
Expressway, Dallas, Texas 75206, on Thursday, July 16, 1998 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 (the
"Common Stock"), on or about June 29, 1998.
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 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 June 26, 1998, 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
1,553,557 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. An automated system administered by
the Corporation's transfer agent will tabulate the votes.
1
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Where a specific designation is given in the Proxy with respect to the
vote on the directors, 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. 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
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 the last annual
meeting of stockholders held on May 21, 1997. The following information has
been furnished to the Corporation by the nominees for director and by the
non-director executive officers:
MICHAEL S. MCNULTY, DIRECTOR AND PRESIDENT
Michael S. McNulty, 50, received his Juris Doctorate from Southern
Methodist University in 1973. 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 also President and
Director of a controlling venture in
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<PAGE>
a Napa Valley based winery. In addition, Mr. McNulty has served from 1994 to
the present as the President and a director of Blacor, Inc., the principal
corporation of a group of companies controlled by a multi-national investor,
the primary purpose of which is to invest in real property in the United
States.
GUY E. HATFIELD, DIRECTOR
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. Since 1989, Mr. Hatfield has served as President and
Chairman of Hatfield Inns, Inc., a corporation involved in the ownership and
management of hotel properties.
DON W. COCKROFT, DIRECTOR
Don W. Cockroft, 57, joined United Inns, Inc. in the early 1960's and
occupied a variety of positions over a period of 25 years, including Chairman
of the Board and President. Mr. Cockroft 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 also an initial franchisee of Holiday Inns
and opened the initial Hampton Inns in Jackson, Mississippi and Atlanta,
Georgia.
WILLIAM M. BIRDSALL, DIRECTOR
William M. Birdsall, 49, was Chairman of the Board and Chief Executive
Officer of the Company until March 31, 1998. Effective April 1, 1998, Mr.
Birdsall resigned his position as Chairman of the Board and Chief Executive
Officer, but continues to serve as an independent director of the Company. 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.
3
<PAGE>
CHARLES R. DUNN, DIRECTOR
Charles R. Dunn, 52, 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 with clients 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.
BONA K. ALLEN, CHIEF FINANCIAL OFFICER
Bona K. Allen, 37, is the Chief Financial Officer and Secretary of the
Company, 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 a 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 Company 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. The
Corporation's Board of Directors has established Audit, Executive and
Compensation Committees. During 1997, there were six (6) meetings of the
Board of Directors, six (6) meetings of the Executive Committee, and one (1)
meeting of the Audit Committee and Compensation Committee. All directors
attended at least seventy-five percent (75%) of all meetings of the Board and
each committee on which each director served as a member. The principal
duties and current membership of the three standing committees are as follows:
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
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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
three non-employee independent directors. 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 approved by the stockholders at the last annual meeting of
the stockholders held on May 21, 1997. Membership of the Compensation
Committee is comprised of three non-employee 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. In addition, each of Messrs. Cockroft, Birdsall, and
Dunn purchased 10,000 shares of Class A Common Stock in the Corporation's
initial public offering. The purchase price for the Class A Common Stock was
paid by the execution by each director of a $100,000 non-recourse promissory
note secured by the purchased shares. In connection with the purchase of the
shares, the Corporation agreed to forgive the promissory notes (i) in
increments of 18% of the principal amount per annum for each year the
director remains a director of the Corporation, and (ii) upon the death,
disability or resignation of the director (except for voluntary resignation
or failure to serve). The Corporation has not paid and does anticipate paying
directors for service on Committees. All of the directors of the Corporation
are entitled to participate in the Host Funding, Inc. 1997 Incentive Plan.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for the years presented, the compensation
paid to the executive officers of the Corporation serving during 1997:
<TABLE>
NAME AND OTHER ALL
PRINCIPAL YEAR SALARY ($) BONUS ($) ANNUAL OTHER
POSITION (1) COMPENSATION COMPENSATION
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William M. Birdsall, 1997 $ 99,000 $ 21,000 (2)
Chairman of the
Board
- -----------------------------------------------------------------------------------------------------
Michael S. McNulty, 1997 $ 99,000
President
- -----------------------------------------------------------------------------------------------------
Bona K. Allen, 1997 $ 65,625
Chief Financial
Officer
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Each of Messrs. Birdsall, McNulty and Allen was employed during fiscal
year 1997 pursuant to an employment agreement with the Company. See
"Employment Agreements and Other Compensation Arrangements" below.
(2) Forgiveness of indebtedness on director promissory note. See
"Compensation of Directors" above.
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION ARRANGEMENTS
WILLIAM M. BIRDSALL
The Company'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
Company and provides for an annual base salary of $108,000, subject to an
annual increase to (i) $150,000 if the assets of the
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<PAGE>
Company exceed $150,000,000, and (ii) $250,000 if the assets of the Company
exceed $250,000,000. The agreement provides for payment of a performance
bonus calculated pursuant to a formula based on the financial results
achieved by the Company during any fiscal year. On January 1, 1998 the
employment agreement with Mr. Birdsall was terminated and in connection
therewith Mr. Birdsall resigned as Chairman of the Board and Chief Executive
Officer of the Company effective April 1, 1998. Pursuant to such termination,
the Company agreed (i) to pay Mr. Birdsall the sum of $4,500 per month for
the period January 1, 1998 through June 30, 1998, and (ii) to forgive the
remaining principal balance of his director note in the amount of $ 80,000.
Mr. Birdsall continues to serve as an independent director of the Company.
MICHAEL S. MCNULTY
The Company'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 Company and
provides for an annual base salary of $108,000, subject to an annual increase
to (i) $150,000 if the assets of the Company exceed $150,000,000 and (ii)
$250,000 if the assets of the Company 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 Company during any fiscal year.
BONA K. ALLEN
The Company'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 Company and provides for an
annual base salary of $75,000, subject to an annual increase to (i) $112,500
if the assets of the Company exceed $150,000,000, and (ii) $150,000 if the
assets of the Company 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 Company during any fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No officer or employee of the Corporation served as a member of the
Compensation Committee of the Corporation during 1997. Membership of the
Compensation Committee is comprised of Don W. Cockroft, Charles R. Dunn, and
Guy E. Hatfield, each of whom is a non-employee director.
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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
January 1, 1997 to December 31 ,1997, all filing requirements applicable to its
officers, directors, and greater than 10 percent beneficial owners were timely
met.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee was responsible for developing the
Corporation's executive compensation policies and administrating compensation
plans during 1997. The objectives of the Corporation's executive compensation
program administered 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 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 1998, 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 Compensation Committee
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, 1997,
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.
<TABLE>
4/22/96 6/30/96 9/30/96 12/31/96 03/31/97 06/30/97 09/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HFD Stock $ 100.00 $ 85.00 $ 83.46 $ 79.32 $101.61 $ 99.96 $101.12 $ 76.39
S & P $ 100.00 $103.55 $106.12 $114.41 $117.47 $137.98 $148.32 $152.58
NAREIT Equity Index $ 100.00 $103.35 $111.28 $132.26 $132.60 $140.15 $155.57 $157.20
</TABLE>
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.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 17, 1998, the beneficial
ownership, as defined by regulations of the Securities and Exchange Commission
(the "Commission"), of the Class A Common Stock (the "Common Stock") held by:
(i) each person or group of persons known to the Corporation to beneficially own
more than five percent (5%) 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 Executive 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 sixty (60) days from June 17, 1998, 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.
<TABLE>
NAME OF AMOUNT AND NATURE OF OWNERSHIP
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) PERCENT
- --------------------- ------------------------- ---------
<S> <C> <C>
Guy E. Hatfield 523,743 (3) 33.71%
Ian Gardner-Smith 116,770 (4) 7.05%
Mark Grosvenor 89,818 (4) 5.67%
Michael S. McNulty 44,399 (4)(5) 2.82%
William M. Birdsall 10,000 *
Don W. Cockroft 10,000 *
Charles R. Dunn 10,000 *
Bona K. Allen 500 *
All Directors and Officers
of the Company as a
Group (six persons,
including those named above) 598,642 38.01%
</TABLE>
* Less than one percent.
(1) The addresses of the more than five percent (5%) holders listed in the
table are as follows:
Guy E. Hatfield, 258 Coast Boulevard, La Jolla, California 92037;
Ian Gardner-Smith,
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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 sixty (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.
(3) Includes l,106 shares held in an Individual Retirement Account with
Sunwest Federal Credit Union for the benefit of Mr. Hatfield's wife,
Dorothy Hatfield; 1,574 shares held in an Individual Retirement
Account with Sunwest Federal Credit Union for the benefit of Mr.
Hatfield; 425 shares held in trust by Mr. Hatfield, as trustee, for
the benefit of Mr. Hatfield and his wife; and 240,000 shares held in
the Hatfield Family Trust; 340 shares held by Sunwest Federal Credit
Union for the benefit of Mr. Hatfield's son, Scott J. Hatfield; and
298 shares held in the name of Scott J. Hatfield, of which Mr.
Hatfield may be deemed the beneficial owner.
(4) Includes shares of Class A Common Stock which may be acquired within
sixty (60) days of June 17, 1998 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 upon exercise of stock warrants
to Blacor, Inc., of which Mr. McNulty is president and a director, and
of which, Mr. McNulty disclaims beneficial ownership.
(5) Includes 9,554 shares of Class A Common Stock owned by Donegal
Partners, Ltd., a family partnership of which Mr. McNulty acts as
general partner, 10,240 shares of Class A Common Stock owned by
Blacor, Inc., of which Mr. McNulty serves as president and a director,
750 shares owned by MGB Partnership, and 686 shares owned by MSM
Consulting, Inc., of which Mr. McNulty serves as president. Mr.
McNulty disclaims beneficial ownership of Common Stock held by Blacor,
Inc. and MGB Partnership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TERMINATION 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. (the "Advisor"), 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-
11
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administered and advised as of the date of termination. 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, LLC (predecessor in name to Host Acquisition Group, LLC)
("HMR"), as amended by the First Amendment to Post-Formation Acquisition
Agreement between the parties dated effective as of June 12, 1996 (as
amended, the "Acquisition Agreement"). The Acquisition Agreement provided for
the payment by the Corporation of acquisition fees on hotel properties
submitted by HMR and acquired by the Corporation. The Acquisition Agreement
was terminated by the Corporation effective September 4, 1997; provided, that
the Corporation remains obligated to pay commissions to HMR pursuant to the
Acquisition Agreement for certain properties submitted to the Corporation
prior to termination of the Acquisition Agreement, if and only if, the
Corporation closes the purchase of such properties within one year from the
date of such termination.
In consideration for the termination of the Advisory Agreement and the
restatement and amendment of the Acquisition Agreement, the Corporation paid the
Advisor $30,000 in cash, and issued Series A Warrants and Series B Warrants to
HMR 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.
ACQUISITION FEES ON COMPANY PROPERTY ACQUISITIONS
On March 14, 1997, the Corporation acquired the Super 8 Hotel located in
Flagstaff, Arizona (the "Flagstaff Super 8") pursuant to the terms of the
Acquisition Agreement by and between the Corporation and HMR. Pursuant to the
terms of the Acquisition Agreement, the Corporation and HMR agreed that the
acquisition fee earned by the Corporation relating to the Flagstaff Super 8 was
16,000 shares of the Class A Common Stock of the Corporation valued at $10 per
share which was paid on May 19, 1997. HMR is a previous affiliate of Mr. Michael
S. McNulty, the president and a director of the Corporation, based upon Mr.
McNulty's ownership and control of 10.38% of the membership units in HMR.
Effective February 1, 1997, HMR agreed to redeem all of Mr. McNulty's direct and
indirect interest in HMR. In addition, Hotel Mortgage Resources Corporation
("HMRC") 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 HMRC during the calendar year 1996 and received a gross
annual salary of $60,000. Mr. McNulty terminated his employment relationship
with HMRC effective January 1, 1997.
The Country Hearth Inns were also acquired pursuant to the terms of the
Acquisition Agreement between the Corporation and HMR. The Corporation and HMR
agreed that the acquisition fee earned by HMR relating to the Country Hearth
Inns was 17,539 shares of the Class A Common Stock of the Corporation valued at
$10 per share which was paid on January 7, 1998. Of the 17,539 shares issued to
HMR, each of Blacor, Inc. ("Blacor") and Donegal
12
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the parties dated effective as of April 8, 1997. Each of Blacor and Donegal
are affiliates of Michael S. McNulty, the president and a director of the
Corporation, based upon Mr. McNulty serving as president of Blacor and
general partner of Donegal.
PAYMENT OF RELATED PARTY NOTE AND REDEMPTION OF CLASS B COMMON STOCK
The Corporation entered into an Exchange and Note Prepayment Agreement (the
"Note Prepayment Agreement") effective as of September 17, 1997 whereby Guy and
Dorothy Hatfield (the "Hatfields") and All American Group, Ltd. satisfied that
certain Promissory Note (the "Related Party Note") dated April 1, 1995, payable
to Host Funding in the principal amount of $1,805,675, with a due date on or
before March 31, 2000. Mr. Hatfield is a principal stockholder and a director of
the Corporation. The amount was partially satisfied by payment of $874,325 in
cash, and a $31,350 credit from the Corporation. Additionally, the Corporation
issued to the Hatfields 140,000 shares of the Corporation's Class A Common Stock
in exchange for the 140,000 shares of Class B Common Stock held by the
Hatfields. Simultaneously with the cash payment of $874,325, and the exchange of
the shares of Class B Common Stock described above, the Hatfields delivered to
the Corporation 90,000 shares of the 140,000 shares of Class A Common Stock
received by the Hatfields in the exchange. The Corporation accepted the 90,000
shares of Class A Common Stock in full and final payment of the remaining
$900,000 principal balance of the Related Party Note.
OTHER RELATED PARTY NOTES
On June 19, 1997, the Corporation executed a promissory note payable to
Blacor, Inc. ("Blacor") in the original principal amount of $70,000 (the
"Original Blacor Note"). On December 30, 1997, the Original Blacor Note was
cancelled and replaced by a new promissory note in the original principal amount
of $86,595 (the "New Blacor Note"). The New Blacor Note bears interest at the
rate of 12% per annum, with all principal and accrued interest due and payable
on demand, but if no demand is made, on May 31, 1998. Proceeds from the New
Blacor Note were used by the Corporation for general operating purposes. Blacor
is an affiliate of Mr. Michael S. McNulty, the president and a director of the
Corporation, based upon Mr. McNulty serving as president of Blacor.
On December 30, 1997, the Corporation also executed a promissory note
payable to Guy and Dorothy Hatfield in the original principal amount of $100,000
(the "Hatfield Note"). The Hatfield Note bears interest at the rate of 12% per
annum, with all principal and accrued interest due and payable on May 31, 1998.
Proceeds from the Hatfield Note were used by the Corporation for general
operating purposes. The Hatfield note was paid in full on May 18, 1998. Mr.
Hatfield is a director and principal stockholder of the Corporation.
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RELATIONSHIP WITH INDEPENDENT AUDITORS
Representatives of Coopers & Lybrand, L.L.P, the independent accounting
firm that audited the consolidated financial statements of the Corporation for
the fiscal year ended December 31, 1997, 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. 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, 1998.
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, 1999, for inclusion in the proxy statement and
form of proxy relating to the 1999 Annual Meeting.
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, 1997, and the Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998, are being sent to each stockholder. The
Corporation will provide, without charge, a copy of the Corporation's Annual
Report on Form 10-K for 1997, as amended, upon written request, directed to:
Host Funding, Inc., 6116 North Central Expressway, Suite 1313, Dallas, Texas
75206 Attention: Bona K. Allen, Secretary.
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PLEASE SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY
By Order of the Board of Directors
Bona K. Allen
Secretary
DATED: June 29, 1998
Dallas, Texas
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<PAGE>
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 Monterey Room on the 21st floor of the Doubletree Hotel at Campbell
Centre, 8250 North Central Expressway, Dallas, Texas on Thursday, July 16,
1998, 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.
JULY 16, 1998
- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED -
A /X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
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<C> <C> <C> <C>
FOR ALL NOMINEES WITHHOLD
LISTED AT RIGHT (EXCEPT AUTHORITY
AS MARKED TO THE TO VOTE FOR ALL NOMINEES
CONTRARY BELOW) LISTED AT RIGHT NOMINEES: GUY E. HATFIELD
MICHAEL S. MCNULTY
a) Election of / / / / WILLIAM M. BIRDSALL
Officers. CHARLES R. DUNN
DONALD W. COCKROFT
INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name in the
space provided below.
________________________________________________________________
b) 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, executor, 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 this proxy card in the enclosed envelope. No postage is required.
</TABLE>
