As filed with the Securities and Exchange Commission on July 22, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
HOSPITALITY WORLDWIDE SERVICES, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
New York 1522 11-3096379
- --------------------------- -------------------------- --------------------
(State or Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
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450 Park Avenue
Suite 2603
New York, New York 10022
(212) 223-0699
-----------------------------------------------------
(Address and telephone number of Principal Executive Offices)
Howard G. Anders, Executive Vice President
Hospitality Worldwide Services, Inc.
450 Park Avenue
Suite 2603
New York, New York 10022
(212) 223-0699
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(Name, Address and Telephone Number of Agent For Service)
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Copies of communications to:
ROBERT H. FRIEDMAN, ESQ. TRACY EDMONSON, ESQ.
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP LATHAM & WATKINS
505 PARK AVENUE 505 MONTGOMERY STREET
NEW YORK, NEW YORK 10022 SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE
TO THE PUBLIC: As soon as practicable after this
registration statement becomes effective.
------------------------------------
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------------
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CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Title of each Class of Securities to be Proposed Maximum Aggregate Amount of Registration
Registered Offering Price(1) Fee
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Common Stock, $.01 par value ("Common $24,527,344.00 $7,432.53
Stock")(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Underwriter's Warrants to purchase Common -- --
Stock(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Total $24,527,344.00 $7,432.53
===================================================================================================================================
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___________________
(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(c) of the Securities Act based on $8.53125,
the average of the high and low sale prices of the Common Stock on July
16, 1997.
(2) Includes up to 375,000 shares of Common Stock issuable upon exercise of
the over-allotment option granted to the Underwriters.
(3) To be issued to Jefferies & Company, Inc. at Closing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 22, 1997
PROSPECTUS
2,500,000 SHARES
[LOGO]
HOSPITALITY WORLDWIDE SERVICES, INC.
COMMON STOCK
ALL OF THE 2,500,000 SHARES (THE "SHARES") OF COMMON STOCK, $.01 PAR
VALUE (THE "COMMON STOCK") OFFERED HEREBY (THE "OFFERING") ARE BEING SOLD BY
HOSPITALITY WORLDWIDE SERVICES, INC. (THE "COMPANY"). THE COMMON STOCK IS
CURRENTLY QUOTED ON THE NASDAQ SMALLCAP MARKET ("NASDAQ") UNDER THE SYMBOL
"ROOM." ON JULY 21, 1997, THE LAST REPORTED SALE PRICE OF THE COMMON STOCK ON
NASDAQ WAS $8.625. SEE "PRICE RANGE OF COMMON STOCK." APPLICATION HAS BEEN MADE
TO HAVE THE COMMON STOCK APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET
("NASDAQ NMS") UNDER THE SYMBOL "ROOM."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION
OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Underwriting
Public Discount(1) Proceeds to Company(2)
------------------ ------------------ -------------------------
<S> <C> <C> <C>
Per Share................. $ $ $
Total (3)................. $ $ $
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(1) The Company has agreed to indemnify the several underwriters identified
elsewhere herein (the "Underwriters") against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $450,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase
up to 375,000 additional shares of Common Stock on the same terms and
conditions set forth above, solely to cover over-allotments, if any. If
all such shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $______, $______ and $_____,
respectively. See "Underwriting."
THE SHARES OF COMMON STOCK ARE OFFERED BY THE UNDERWRITERS, SUBJECT TO
PRIOR SALE, WHEN, AS AND IF ISSUED TO AND ACCEPTED BY THE UNDERWRITERS AND
SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY COUNSEL FOR THE UNDERWRITERS. IT
IS EXPECTED THAT DELIVERY OF THE COMMON STOCK WILL BE MADE AGAINST PAYMENT
THEREFOR ON OR ABOUT __________, 1997, IN NEW YORK, NEW YORK.
JEFFERIES & COMPANY, INC.
_____________, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING
AND MAY BID FOR, AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET. IN
ADDITION, UNDERWRITERS MAY ENGAGE IN PASSIVE MARKET MAKING. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE
103 UNDER REGULATION M. SEE "UNDERWRITING."
IT SHOULD BE NOTED THAT SMITH TRAVEL RESEARCH HAS NOT PROVIDED ANY FORM OF
CONSULTATION, ADVICE OR COUNSEL REGARDING ANY ASPECTS OF, AND IS IN NO WAY
WHATSOEVER ASSOCIATED WITH, THE PROPOSED OFFERING.
-2-
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL
STATEMENTS, EACH INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION HEREIN ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER- ALLOTMENT OPTION. THE TERM "COMPANY" MEANS,
UNLESS THE CONTEXT REQUIRES OTHERWISE, HOSPITALITY WORLDWIDE SERVICES, INC. AND
ITS SUBSIDIARIES. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN
ITS ENTIRETY.
THE COMPANY
Hospitality Worldwide Services, Inc. has evolved over the past two
years from a narrowly focused lighting fixture design, manufacturing and
installation company formerly known as Light Savers U.S.A., Inc., into one of
the leading providers of a broad range of outsourcing services to the
hospitality industry. These services include hotel renovation, procuring hotel
furniture, fixtures and equipment ("FF&E") and reordering hotel operating
supplies and equipment ("OS&E"). This rapid evolution resulted from two primary
factors: (i) the acquisition of the assets comprising the business of
Hospitality Restoration and Builders, Inc. ("HRB") and the acquisition of The
Leonard Parker Company ("LPC"), including its then subsidiary, Parker Reorder
Corporation ("Parker Reorder") and (ii) the Company's disposition of its
lighting business. The Company's pro forma total revenues increased from $52.3
million in 1995 to $83.1 million in 1996 while pro forma earnings increased from
a net loss applicable to common shareholders of $2.4 million to net income
applicable to common shareholders of $1.4 million over the same period. See " --
Summary Historical and Pro Forma Financial Information" and "Selected Historical
and Pro Forma Financial Data."
HRB has performed a wide variety of renovation services for the
hospitality industry for over 18 years. Founded in 1969, LPC provides
procurement services to hotel owners, operators and developers in over 40
countries and over 40 states. The original founders of both HRB and LPC continue
to manage these businesses. Parker Reorder offers hotel properties the ability
to order, on an as needed basis, any and all OS&E products used by such
properties. The Company is enhancing its reorder business with a new proprietary
software product ("Parker FIRST"), which allows clients to reorder OS&E and
other products on-line and will provide such clients with access to forecasting
and product evaluation capabilities. Headquartered in New York, New York and
with offices in Coral Gables, Florida; Los Angeles, California; Singapore;
Dubai, United Arab Emirates and Sandton, South Africa, the Company is
well-situated to meet client needs around the globe.
LINES OF BUSINESS
RENOVATION. The Company provides a complete package of high quality
renovation services to the hotel industry ranging from pre-planning,
value-engineering and scope preparation of a project to performing the
renovation and delivering furnished rooms. For more than 18 years, the Company's
renovation division has been delivering high quality renovations on time and
within budget and is currently working on third- and fourth- generation projects
for a number of its clients. The Company distinguishes itself from its
competitors by striving to keep a hotel fully operational as renovations are
performed, with minimal inconvenience to guests or interruptions to hotel
operations. Almost all of the Company's renovation projects involve interior
cosmetic improvements such as new paint, vinyl and carpeting. According to a
recent industry report, approximately 55 percent of hotel executives placed
upgrading existing facilities as a top priority. The Company's renovation
clients include FelCor Suite Hotels, Inc., Chartwell Leisure, The Griffin Group,
Prime Hospitality Group and The Getty's Group.
PROCUREMENT. The Company procures FF&E products for hotel owners,
operators and developers, including carpeting, bedding, casegoods, wallcovering,
artwork and decorative lighting, as well as OS&E products, including china,
glassware, kitchen supplies, linens, flatware, uniforms and guestroom amenities,
to meet initial hotel operating
-3-
<PAGE>
requirements. As part of this service, the Company prepares budgets, negotiates
pricing and payment terms with manufacturers, issues purchase orders and
oversees shipping, delivery and installation services in connection with both
new hotels and major renovations. Worldwide contacts with over 3,500 vendors and
the Company's substantial buying power enable it to offer its customers
exceptional quality and competitive pricing. LPC purchased approximately $305.0
million of products for its clients in 1996, making it the second largest
purchasing agent for the hospitality industry in the United States ranked by
sales volume. Recently completed projects include The Grand Hyatt and The New
York Palace in New York, New York; The Loews Hotel in Miami Beach, Florida; The
Atlantis Resort in Paradise Island, Bahamas; The Hilton International in
Sandton, South Africa and The Windsor Hotel & Casino in Ontario, Canada.
REORDER. The Company acts as purchasing agent for hotels in connection
with recurring orders of OS&E products, paper and stationery, chemicals and
engineering supplies . The Company has developed, is planning to initiate beta
testing and is currently marketing Parker FIRST, an automated reorder software
package. Parker FIRST provides a single hotel property or group of related hotel
properties with a streamlined on-line ordering, forecasting and product
evaluation system. In addition, Parker Reorder, through Parker FIRST, provides
information regarding existing and new products, order processing, status of
orders, receipt of merchandise, invoicing and associated financial data. Parker
FIRST will simplify the ordering process and provide detailed daily and
historical patterns of use. The Company believes that as Parker FIRST achieves
commercial success, the Company's reorder business will represent a growing
percentage of the Company's overall earnings. See "Risk Factors - Risks
Associated with Development of Parker FIRST."
INDUSTRY DYNAMICS
According to recently published data, the United States hospitality
industry alone consists of approximately 45,000 properties offering
approximately 3.4 million rooms for daily rental. The hospitality industry as a
whole has experienced five consecutive years of growth in which the demand for
rooms has outpaced the growth in the supply of rooms. Industry analysts predict
that this growth will continue in the near future. According to Smith Travel
Research, the combination of increasing revenues, resulting from both higher
occupancies and higher average daily rates, and improving operating efficiencies
at the property level have resulted in dramatic increases in industry
profitability. The forecasted continued high demand for hotel rooms resulting
from the strong business climate coupled with recent record industry profits and
availability of capital to the hospitality industry is expected to continue to
fuel the demand for the Company's services.
Based upon the Company's experience, hotels generally require
refurbishing every five to seven years. In addition, it is common practice in
the hospitality industry for operating entities to allocate funds annually for
ongoing maintenance and renovation. The Company believes that the need for
renovation services, combined with record profits in the hospitality industry,
will continue to provide numerous renovation opportunities. In addition, as a
result of the downturn in the hospitality industry in the late 1980's, many
corporate hotel chains downsized, eliminating significant numbers of technical
personnel. As a result, hotels are finding it necessary to outsource more of
their renovation and procurement needs.
BUSINESS STRATEGY
It is the Company's goal to further its position as one of the leading
providers of renovation and procurement services for the hospitality industry on
a global basis. To that end, the Company intends to:
o leverage the synergies that exist between its procurement,
renovation and reorder businesses by cross selling its
services and pursuing referrals. For example, the Company
obtained renovation
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<PAGE>
projects at The Grand Hyatt Hotel and The Roosevelt Hotel in
New York, New York directly as a result of its performance on
procurement projects for the same hotels;
o take advantage of the recent consolidation in the hospitality
industry by forming additional strategic alliances with both
domestic and international chains and franchised hotels, as
well as major management companies with a global presence;
o seek additional opportunities to complement and expand its
existing businesses, including (i) entering into joint venture
projects that allow the Company to leverage its broad range of
services and (ii) achieving market penetration of Parker
FIRST. The Company is also considering entering into hotel
development; and
o take advantage of the fragmentation in the industry by
acquiring and consolidating hospitality related businesses
throughout the country. Many of these businesses are small,
closely-held or family owned operations which would benefit
from the Company's resources, experience and substantial
customer base.
APOLLO JOINT VENTURE
In May 1997, the Company entered into a joint venture (the "Apollo
Joint Venture") with Apollo Real Estate Advisors II, L.P. ("Apollo") and
Watermark Limited LLC ("Watermark LLC") to identify, acquire, renovate,
refurbish and sell hotel properties. The Company will perform all of the
renovation and procurement services for each of the properties purchased by the
Apollo Joint Venture. In addition, the Company will receive a five percent
equity interest in each of the entities formed to purchase such properties in
exchange for its contribution of five percent of the total equity required to
acquire, renovate and sell such properties. The Apollo Joint Venture has
identified three hotel properties and is actively negotiating for their
acquisition.
The Company's headquarters are located at 450 Park Avenue, Suite 2603,
New York, New York 10022, and its telephone number is (212) 223-0699.
-5-
<PAGE>
THE OFFERING
Common Stock offered
by the Company............................ 2,500,000 shares
Common Stock to be
outstanding after
the Offering.............................. 10,312,239 shares(1)
Use of Proceeds............................ For repayment of certain
indebtedness, additional investment
in Parker FIRST, funding of the
Company's capital contribution to
the projects that may be undertaken
in respect of the Apollo Joint
Venture and general corporate
purposes, including potential
acquisitions and development
activities, and working capital. See
"Use of Proceeds."
Risk Factors............................... The purchase of the Shares offered
hereby involves a high degree of
risk. Prospective investors should
review carefully and consider the
information set forth under "Risk
Factors."
Nasdaq Symbol.............................. ROOM
(1) Does not include: (i) as of March 31, 1997 (a) 50,000 shares of Common Stock
issuable upon exercise of outstanding options granted to an executive
officer of the Company; (b) 50,000 shares of Common Stock issuable upon
exercise of options outstanding under the Company's 1994 Non-Statutory Stock
Option Plan (the "1994 Plan"); (c) 1,688,000 shares of Common Stock issuable
upon exercise of outstanding options under the Company's 1996 Stock Option
Plan (the "Employee Plan") (1,189,000 of which have been granted); (d)
250,000 shares of Common Stock issuable upon exercise of options outstanding
under the Company's 1996 Outside Directors' Stock Option Plan (the
"Directors' Plan") (100,000 of which have been granted); (e) 41,666 shares
of Common Stock issuable upon exercise of outstanding warrants granted to
the underwriter in connection with the Company's initial public offering;
and (f) 300,000 shares of Common Stock issuable upon exercise of an
outstanding option granted to Resource Holdings Associates, L.P. ("Resource
Holdings"); (ii) 750,000 shares of Common Stock issuable upon exercise of an
outstanding warrant granted to Apollo in connection with the Apollo Joint
Venture (which is currently exercisable as to 250,000 shares); (iii)
1,000,000 shares of Common Stock (subject to upward adjustment to a maximum
of 5,000,000 shares in the event that the market price of the Common Stock
is below $5.00 at the time of conversion) issuable upon conversion of the
LPC Preferred (as hereinafter defined); and (iv) shares of Common Stock in
an amount equal to 2.5% of the outstanding Common Stock on a fully diluted
basis after the completion of the Offering issuable upon exercise of
warrants to be granted to Jefferies & Company, Inc. (the "Jefferies'
Warrants").
-6-
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The summary historical and pro forma financial information set forth below
is derived from the consolidated financial statements appearing elsewhere in
this Prospectus. The consolidated financial statements of Hospitality Worldwide
Services, Inc. and Subsidiary as of December 31, 1995 and 1996 and for the years
then ended have been audited by BDO Seidman, LLP, independent certified public
accountants. The information as at and for the three-month periods ended March
31, 1996 and 1997 is unaudited and, in the opinion of management, contains all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position and results of operations
at such dates and for such periods. The results for the three months ended March
31, 1997 are not necessarily indicative of the results for the full year. The
pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the results of operations and financial position that
would have been obtained had the transaction reflected therein been consummated
on the dates indicated. During the periods presented below, the Company
consummated the acquisition of its renovation, purchasing and reorder businesses
and disposed of its lighting business. Consequently, the summary historical and
pro forma financial information presented below may not be comparable for the
periods presented. The summary historical and pro forma financial information
should be read in conjunction with such financial statements, including the
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
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Year Ended December 31, Three Months Ended March 31,
------------------------------------------------- ----------------------------------
Pro Forma Pro Forma Pro Forma
1995 1995(1) 1996 1996(1) 1996 1996(1) 1997
---- ---- ---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
STATEMENT OF OPERATIONS DATA:
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Net revenues............ $4,980,291 $52,302,770 $24,367,112 $83,067,724 $1,993,321 $12,604,793 $18,195,826
Cost of revenues........ 3,823,779 46,579,067 18,289,924 70,171,807 1,676,801 10,444,807 14,737,150
Selling, general and
administrative expenses 1,619,189 8,008,716 3,218,520 10,309,525 440,431 1,914,425 2,642,864
Other income (expense).. 107,250 211,074 (24,960) 215,719 2,708 2,708 (28,990)
Income (loss) from continuing
operations............ (380,427) (2,076,220) 1,907,383 1,735,165 (121,203) 116,269 397,456
Loss from discontinued
operations............ (735,542) -- (64,705) -- -- -- --
Dividends on preferred shares -- 300,000 -- 300,000 -- 75,000 75,000
Net income (loss) applicable
common shareholders... (1,115,969) (2,376,220) 1,842,678 1,435,165 (121,203) 41,269 322,456
Net income (loss) per share
from continuing operations $(0.07) $(0.28) $0.27 $0.17 $(0.02) $0.01 $0.04
Loss per share from discontinued
operations ........... (0.13) -- (0.01) -- -- -- --
Net income (loss) per share $(0.20) $(0.28) $0.26 $0.17 $(0.02) $0.01 $0.04
Weighted average number of
common equivalent shares
outstanding........... 5,653,052 8,375,655 7,192,361 8,442,361 6,949,556 8,199,556 9,031,214
</TABLE>
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March 31, 1997
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BALANCE SHEET DATA: ACTUAL AS ADJUSTED(2) AS FURTHER ADJUSTED(3)
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Current assets........................... $16,162,717 $16,162,717 $31,465,842
Total assets............................. 35,946,914 35,946,914 51,250,039
Working capital (deficit)................ 1,177,840 (1,022,160) 18,580,965
Total current liabilities................ 14,984,877 17,184,877 12,884,877
Total shareholders' equity............... 20,811,248 18,611,248 38,214,373
</TABLE>
(1) Gives effect to the acquisitions of LPC and the assets comprising the
business of HRB by the Company as if such acquisitions had occurred on
January 1, 1995 for the years ended December 31, 1995 and 1996 and to
the acquisition of LPC as if such acquisition had occurred on January
1, 1996 for the quarter ended March 31, 1996. The amounts in the pro
forma columns reflect adjustments for amortization of goodwill,
officers' compensation, interest income, taxes and dividends on
preferred shares.
(2) As adjusted to reflect the $2.2 million the Company borrowed from
Findim Investments S.A. in May 1997 for a period of six months at an
interest rate of 12% per annum in order to exercise an option to
purchase 500,000 shares of Common Stock from Tova Schwartz, the
Company's former President and Chief Executive Officer, as if the
transaction occurred on March 31, 1997. The Company repurchased such
shares from Ms. Schwartz in May 1997.
(3) As further adjusted to reflect the issuance of 2,500,000 shares of
Common Stock offered by the Company hereby at an assumed public
offering price of $8.625, including 1,000,000 shares from the Company's
treasury, and the application of the net proceeds therefrom. See "Use
of Proceeds."
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<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS. SEE "DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS."
RECENT CHANGE OF BUSINESS FOCUS
The Company's historical results of operations do not reflect combined
operations relating to its current lines of business for a significant period of
time and such results may not be indicative of the Company's future results of
operations. In August 1995, the Company acquired substantially all of the assets
and business and assumed certain liabilities of AGF Interior Services, Inc.,
doing business as Hospitality Restoration and Builders ("AGF"), a company that
provided renovation services to the hospitality industry. In February 1996, the
Company disposed of its lighting business, which prior to the acquisition of the
assets of AGF, was its only operating business. In January 1997, the Company
acquired 100% of the outstanding capital stock of LPC. In May 1997, the Company
entered into the Apollo Joint Venture. These businesses represent a substantial
change from the Company's original line of business, designing, manufacturing
and installing energy-efficient lighting fixtures for the hospitality industry.
Management and other key personnel may not have the depth of expertise required
to manage such a substantial change in business focus. If the Company's efforts
are not successful, the Company's results of operations could be materially
adversely affected. See "Selected Historical and Pro Forma Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
MANAGEMENT OF GROWTH
The Company has recently experienced and is expected to continue to
experience growth in the scope of its operations. The Company will need to hire
additional financial, human resources and sales and marketing personnel. This
growth will result in increased responsibilities for management and may place a
strain on the Company's operational, financial and other resources. There can be
no assurance that the Company will be able to achieve or manage any such growth
effectively. Failure to do so could have a material adverse effect on the
Company. See "Business."
HISTORY OF LOSSES
For the year ended December 31, 1996, the Company had net income
applicable to common shareholders of $1,842,678 and pro forma net income
applicable to common shareholders of $1,435,165, compared to a net loss of
$1,115,969 and a pro forma net loss of $2,376,220 for the year ended December
31, 1995. While the historical results for the year ended December 31, 1996 are
reflective of a portion of the Company's current business, there can be no
assurance that the Company's operations will continue to be profitable or that
any positive cash flow generated by the Company's operations will be sufficient
to meet the Company's future cash and operational requirements. See "Selected
Historical and Pro Forma Financial Information."
COMPETITION
Servicing the hospitality industry is a highly competitive business,
with competition based largely on price and quality of service. In its
renovation business, the Company primarily competes with small, closely-held or
family owned businesses. In its purchasing and reorder businesses, the Company
competes with other independent procurement companies, hotel purchasing
companies and food service distribution companies. With respect to Parker FIRST,
the Company expects competition from a number of hotel management companies,
hotel companies, franchise operators and other entities who are pursuing the
development of software systems that attempt to provide on-line procurement
services. There is no single competitor or small number of competitors that is
or are dominant in the Company's business areas. However, some of the Company's
competitors and potential competitors possess substantially greater financial,
personnel, marketing and other resources than the Company. There can be no
assurance that the Company will be able to compete successfully. See "Business
- -- Competition."
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<PAGE>
NEED FOR ADDITIONAL FINANCING
Management believes that the Company's current cash, cash equivalents
and lines of credit, together with the proceeds from this Offering, will be
sufficient to enable the Company to carry out its business objectives for the
next 18 months. Thereafter, the Company will be dependent upon its ability to
generate cash flows from operations sufficient to meet its obligations as they
become due, to fund its working capital needs and to fund any acquisitions or
investments in joint ventures. Unless the Company can generate cash flows from
operations sufficient to fund these requirements, the Company will be required
to obtain additional financing to continue to implement its business strategies.
As part of its business strategy, the Company plans to pursue acquisitions of
renovation businesses and make additional investments in connection with the
Apollo Joint Venture. To the extent the Company consummates any such
acquisitions in the next 18 months or must contribute funds to joint venture
projects in excess of the amount contemplated by "Use of Proceeds", the Company
will need to raise additional capital. There can be no assurance that any
additional financing will be available to the Company on acceptable terms, if at
all. Any inability by the Company to obtain additional financing, if required,
will have a material adverse effect on the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
RISK OF JOINT INVESTMENT
Apollo will have complete discretion over the approval and the terms of
each project presented to the Apollo Joint Venture. Each project will be
governed by a separate operating agreement. Each operating agreement in respect
of the development companies formed to purchase, renovate and sell hotel
properties pursuant to the Apollo Joint Venture will provide that Apollo, as the
majority in interest member, may request that each member provide additional
capital for a specific project. In the event that the Company is unable to meet
such capital request, its interest in such project will be decreased by the
amount which Apollo contributes pursuant to such capital request, as well as an
additional penalty amount. Further, if the Company were to pursue the
opportunity to acquire a hotel during the next five years, it would be required
to first present such opportunity to Apollo.
In addition to Apollo's discretion over projects in which the Apollo
Joint Venture will participate, the operating companies formed in respect of
each project will be controlled by Apollo as the majority member in interest and
Watermark LLC as manager. The risk is present in this joint venture, and in
other joint ventures in which the Company may subsequently determine to
participate, that the other joint venture partners may at any time have
economic, business or legal interests or goals that are inconsistent with those
of the joint venture or the Company. Moreover, if Apollo were unable to meet its
economic or other obligations to the venture, the Company could be required to
fulfill those obligations. In light of the substantial limitations on the
Company's discretion with respect to the Apollo Joint Venture, there can be no
assurance that it will prove to be a successful joint venture for the Company.
See "Business -- Apollo Joint Venture."
RISKS ASSOCIATED WITH DEVELOPMENT OF PARKER FIRST
The future success of the Company's reorder business depends largely on
the successful introduction and subsequent market penetration of Parker FIRST.
The Company plans to initiate beta testing this software in August 1997 and
there can be no assurance that the product will be successfully implemented on
the Company's proposed timetable or that, once introduced, Parker FIRST will be
commercially successful. Significant flaws in the software or delays in
implementation would have a material adverse effect on the Company. In addition,
there can be no assurance that the Company's competitors will not develop
software products that are substantially equivalent or superior to Parker FIRST.
LIMITED INTELLECTUAL PROPERTY PROTECTION
The Company believes that the proprietary nature of Parker FIRST is
critical to the success of such software. There can be no assurance that the
steps taken by the Company to deter misappropriation of its proprietary
information will be adequate or that the Company will be able to take
appropriate steps to enforce intellectual property rights. Further, the laws of
many foreign countries do not protect the Company's intellectual property rights
-10-
<PAGE>
to the same extent as the laws of the United States. The failure of the Company
to protect its proprietary information could have a material adverse effect on
the Company.
HOTEL RENOVATION RISKS
The Company provides renovation services to its clients on a fixed
price basis. As a result, the Company is exposed to certain risks, including the
possibility of unforeseen construction costs and delays due to various factors
such as the inability to obtain regulatory approvals, inclement weather, fires,
acts of nature and labor or material shortages. Such unanticipated delays and
expenses, should they materialize, could affect the Company's results of
operations and its reputation and impair its ability to obtain additional
renovation work and could have a material adverse effect on the Company.
DEPENDENCE UPON AVAILABILITY OF QUALIFIED LABOR
The Company's ability to provide renovation services successfully to
the hospitality industry depends upon its ability to hire local contractors and
laborers in the areas where it provides such renovation services. The Company is
dependent upon the availability of a local labor force, which is affected by
prevailing wages, weather and local economic conditions and there can be no
assurance that such supply will be adequate to meet the Company's requirements
or that such supply can be obtained at wage levels satisfactory to the Company.
Parker FIRST will require substantial software development and
technical support to complete the development and the deployment of the product
and to support it once it is in place. The Company faces intense competition for
software development and technical support personnel from other entities. There
can be no assurance that the Company will be successful in hiring and retaining
such key personnel.
SUPPLIER RELATIONSHIPS
The Company's purchasing arrangements with suppliers of
hospitality-related products are by purchase order and terminable at will by
either party. There can be no assurance that any of the Company's supplier
relationships will not be terminated in the future. While the Company has been
able to obtain products on a timely basis in the past, the Company is subject to
the risk that it will be unable to purchase sufficient products to meet its
clients' requirements. Any shortages or delays in obtaining these products could
have a material adverse effect on the Company.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
A portion of the Company's revenues is derived from international sales
and the Company's business strategy involves expanding its international
operations. There are certain risks inherent in conducting business
internationally, such as unexpected changes in regulatory requirements, export
restrictions, tariff and other trade barriers, difficulties in staffing and
managing foreign operations, different employment laws and practices in foreign
countries, longer payment cycles, political instability, exposure to currency
fluctuations, exchange rates, imposition of currency exchange controls,
potentially adverse tax consequences and country-specific product requirements,
any of which could adversely effect the success of the Company's international
operations. There can be no assurance that one or more of these factors will not
have a material adverse effect on the Company's international operations and,
consequently, on the Company.
CONTROL BY CERTAIN SHAREHOLDERS
Upon completion of the Offering, Watertone Holdings, L.P. ("Watertone")
will beneficially own 1,800,000 shares or 17.5% of the outstanding Common Stock.
See "Principal Shareholders." Robert Berman, the President and Chief Executive
Officer of the Company, is a director of Watermark LLC, the general partner of
Watertone. The Parker family controls 1,250,000 shares or 12.1% of the
outstanding Common Stock and 200,000 shares of LPC Preferred, each of which are
entitled to 4.17 votes. The Parker family, as holders of LPC Preferred are
entitled to (i) vote on all matters submitted to the holders of the Common Stock
and/or directors; and (ii) elect two directors to the Company's Board of
Directors at any time that any of the LPC Preferred is outstanding. Accordingly,
each of Watertone, Watermark
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<PAGE>
LLC, Mr. Berman and the Parker family will be able to influence (in addition to
Mr. Berman's, Leonard Parker's and Douglas Parker's influence as officers and/or
directors) the affairs of the Company, including the election of directors and
other matters requiring shareholder approval.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 10,312,239
shares of Common Stock issued and outstanding. Of these shares, a total of
5,655,168 shares of Common Stock (including the 2,500,000 shares offered hereby)
will be freely tradable without restriction or registration under the Securities
Act by persons other than "affiliates" of the Company, as defined in the
Securities Act (who would be required to sell under Rule 144 under the
Securities Act). The remaining 4,657,071 shares of Common Stock outstanding upon
completion of the Offering will be "restricted securities" as that term is
defined by Rule 144 (the "Restricted Shares").
The Company, its officers, directors and Watertone, who beneficially
own 2,799,458 shares of Common Stock (together with an aggregate of 1,250,000
shares of Common Stock underlying outstanding options), have agreed that,
without the prior written consent of Jefferies, he, she or it will not, during
the period ending 180 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option to contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (ii) enter into any swap or similar agreement that transfers,
in whole or in part, the economic risk of ownership of the Common Stock, whether
any such transaction describe in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
Jefferies may, in its sole discretion and at any time without notice, release
all or any portion of the securities subject to these lock-up agreements.
No predictions can be made as to the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock and
could impair the Company's ability to raise capital through an offering of its
equity securities in the future. See "Shares Eligible for Future Sale."
POSSIBLE ANTI-TAKEOVER EFFECTS OF PREFERRED STOCK; POTENTIAL DILUTION OF COMMON
STOCK OR INTEREST IN PARKER REORDER
The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 3,000,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock"). The Preferred Stock may be issued in one or more
series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by shareholders. As of the date of
this Prospectus, 200,000 shares of 6% Redeemable Convertible Preferred Stock
(the "LPC Preferred") are outstanding, which shares were issued as partial
consideration for the acquisition of LPC. Although the Company currently has no
plans for the issuance of additional shares of Preferred Stock, there can be no
assurance that the Company will not do so in the future. The ability of the
Board of Directors to issue Preferred Stock could have the effect of delaying,
deferring or preventing a change of control of the Company or the removal of
existing management and, as a result, could prevent the shareholders of the
Company from being paid a premium over the market value for their shares of
Common Stock. If the Company fails to redeem the LPC Preferred upon the request
of the holders thereof at any time after January 10, 2002, the holders of LPC
Preferred will be entitled to elect a majority of the members of the Board of
Directors. At any time between January 10, 1998 and January 10, 2000, the
holders of the LPC Preferred will have the right to convert such stock into
either (i) 1,000,000 shares of Common Stock (subject to upward adjustment to a
maximum of 5,000,000 shares in the event that the market price of the Common
Stock is below $5.00 at the time of conversion) or (ii) 9.8% of the capital
stock of Parker Reorder. If the holders exercise the option to convert the LPC
Preferred into shares of Common Stock, holders of Common Stock will experience
dilution. If the holders exercise the option to convert the LPC Preferred into
9.8% of the capital stock of Parker Reorder, the Company's equity ownership in
Parker Reorder will be reduced. The holders of LPC Preferred also have the
right, as long as the LPC Preferred is outstanding, to receive 20% of the
cumulative net profits of Parker Reorder, measured from January 1, 1997. See
"Description of Securities -- Description of Preferred Stock."
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<PAGE>
DILUTION
Purchasers of the Common Stock in the Offering will experience
immediate and substantial dilution of $6.90 per share in the net tangible book
value per share of the Common Stock as of March 31, 1997.
NO DIVIDENDS
The Company has never paid a dividend on its Common Stock and does not
intend to pay any dividends on its Common Stock in the foreseeable future. In
addition, the Company is restricted from paying or declaring any dividends on
any capital stock other than the LPC Preferred, so long as such LPC Preferred is
outstanding. See "Dividend Policy."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than
statements of historical information provided herein are forward-looking and may
contain information about financial results, economic conditions, trends and
known uncertainties. Such statements are indicated by words or phrases such as
"anticipate," "estimate," "project," "management believes," "the Company
believes" and similar words or phrases. The Company cautions the reader that
actual results could differ materially from those expected by the Company,
depending on the outcome of certain factors, including, without limitation,
factors discussed under "Risk Factors." Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to release publicly the result of
any revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof, including, without limitation,
changes in the Company's business strategy or planned capital expenditures, or
to reflect the occurrence of unanticipated events.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Shares offered by the Company hereby at an assumed public offering price of
$8.625 per share, after deducting underwriting discounts and expenses payable by
the Company, are estimated to be $19,603,125 ($22,611,094 if the Underwriters'
over-allotment option is exercised in full).
Of the net proceeds, the Company intends to use $2.2 million to repay a
note which bears interest at a rate of 12% per annum and is due on November 16,
1997; $2.1 million to repay borrowings under the Company's line of credit which
bears interest at a rate of prime plus .5% per annum; $5.0 million for
additional investment in Parker FIRST and the expenses relating to marketing and
hiring of additional personnel in connection therewith; approximately $4.0
million to fund its equity interest in certain entities to be formed to acquire
hotel properties in respect of the Apollo Joint Venture; and approximately $6.6
million for general corporate purposes, including potential acquisitions and
development activities, and working capital. While the Company is currently
considering a number of potential acquisitions of hospitality related service
companies, there are no agreements with respect to any acquisition and there can
be no assurance that the Company will enter into any such agreements or
consummate any such acquisitions.
The allocation of the net proceeds of the Offering set forth above
represents the Company's best estimate based upon its present plans and certain
assumptions regarding general economic and industry conditions and the Company's
future revenues and expenditures. The Company reserves the right to reallocate
these proceeds within the above-mentioned categories or to other purposes if
management believes it is in the Company's best interests.
Any additional net proceeds realized from the exercise of the
Underwriters' over-allotment option (up to approximately $3,007,969) will be
added to the Company's working capital.
Pending application of the net proceeds of the Offering, the Company
intends to invest such net proceeds in short-term, interest-bearing, investment
grade securities.
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<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is currently listed for quotation on Nasdaq under the
symbol "ROOM." The following table sets forth, for the periods indicated, the
high and low bid prices for the Common Stock as reported on Nasdaq. Quotations
reflect prices between dealers, without retail mark-up, mark-down or commissions
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
High Bid Low Bid
------------- -------------
1995
<S> <C> <C>
1st Quarter.................................... $2 1/4 $1 1/4
2nd Quarter.................................... $2 1/2 $ 3/4
3rd Quarter.................................... $2 3/8 $1 7/16
4th Quarter.................................... $2 5/16 $1 1/16
1996
1st Quarter.................................... $1 11/16 $ 1/2
2nd Quarter.................................... $2 3/16 $1 3/8
3rd Quarter.................................... $3 3/8 $1 1/2
4th Quarter.................................... $7 $2 7/16
1997
1st Quarter.................................... $8 9/16 $5 7/8
2nd Quarter.................................... $9 1/16 $5 5/16
3rd Quarter (through July 21).................. $9 $7 3/8
</TABLE>
On July 21, 1997, the last reported sale price of the Common Stock on
Nasdaq was $8.625. As of July 21, 1997, the Company had 60 holders of record of
its Common Stock. Application has been made to have the Common Stock approved
for quotation on Nasdaq NMS under the symbol "ROOM."
DIVIDEND POLICY
The Company has not declared or paid any dividends on the Common Stock
and does not intend to declare or pay any dividends on the Common Stock in the
foreseeable future. The Company currently intends to reinvest earnings, if any,
in the development and expansion of its business. The declaration of dividends
in the future will be at the election of the Board of Directors and will depend
upon the earnings, capital requirements and financial position of the Company,
general economic conditions and other relevant factors. In addition, the Company
is restricted from paying or declaring any dividends on any capital stock other
than the LPC Preferred, so long as such LPC Preferred is outstanding.
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<PAGE>
CAPITALIZATION
The following table sets forth at March 31, 1997, the actual
capitalization of the Company, the capitalization of the Company as adjusted to
reflect a repurchase of Common Stock by the Company and the borrowings related
thereto and the capitalization of the Company as further adjusted to give effect
to the sale of the Shares offered by the Company hereby at an assumed public
offering price of $8.625 per share and application of the estimated net proceeds
therefrom. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
financial statements and pro forma financial statements and notes thereto and
"Selected Historical and Pro Forma Financial Data" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
March 31, 1997
------------------------------------------------------------
As Further
ACTUAL AS ADJUSTED(1) ADJUSTED(2)
<S> <C> <C> <C>
Cash and cash equivalents............................... $ 663,339 $ 663,339 $15,966,464
======= ======= ==========
Current portion of notes payable and capital lease
obligations........................................... 70,000 70,000 70,000
Long-term debt--less current portion..................... 150,789 150,789 150,789
Loan payable bank....................................... 2,100,000 2,100,000 --
Note payable............................................ -- 2,200,000 --
---------- ---------- ---------
$2,320,789 $4,520,789 $ 220,789
---------- ---------- ---------
Shareholders' equity:
Preferred stock,
3,000,000 shares authorized,
200,000 LPC Preferred shares issued
and outstanding...................... 5,000,000 5,000,000 5,000,000
Common stock, $.01 par value;
20,000,000 shares authorized, 8,305,989, 7,805,989 and
10,305,989 shares issued and outstanding respectively;
500,000, 1,000,000 and 0 shares held in treasury
respectively(2)(3)................... 88,065 88,065 103,065
Treasury stock................................. (715,000) (2,915,000) --
Additional paid-in capital..................... 15,884,410 15,884,410 32,557,535
Translation adjustment......................... (4,987) (4,987) (4,987)
Retained earnings.............................. 558,760 558,760 558,760
----------- ---------- -----------
Total shareholders' equity............ 20,811,248 18,611,248 38,214,373
----------- ---------- ------------
Total capitalization......... $23,132,037 $23,132,037 $38,435,162
========== ========== ============
</TABLE>
- ----------------------------
(1) As adjusted to reflect the $2.2 million the Company borrowed from
Findim Investments S.A. in May 1997 for a period of six months at an
interest rate of 12% per annum in order to exercise an option to
purchase 500,000 shares of Common Stock from Tova Schwartz, the
Company's former President and Chief Executive Officer, as if the
transaction occurred on March 31, 1997. The Company repurchased such
shares from Ms. Schwartz in May 1997.
(2) As further adjusted to reflect the issuance of 2,500,000 shares of
Common Stock offered by the Company hereby at an assumed public
offering price of $8.625, including 1,000,000 shares from the Company's
treasury, and the application of a portion of the net proceeds
therefrom. See "Use of Proceeds."
(3) Does not include shares issuable upon exercise of certain options and
warrants. See "Prospectus Summary-- The Offering."
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<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The selected historical and pro forma financial data set forth below is
derived from the consolidated financial statements appearing elsewhere in this
Prospectus. The consolidated financial statements of Hospitality Worldwide
Services, Inc. and Subsidiary of December 31, 1995 and 1996 and for the years
then ended have been audited by BDO Seidman, LLP, independent certified public
accountants. The information as at and for the three-month periods ended March
31, 1996 and 1997 is unaudited and, in the opinion of management, contains all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position and results of operations
at such dates and for such periods. The results for the three months ended March
31, 1997 are not necessarily indicative of the results for the full year.
Unaudited pro forma information in this Prospectus gives effect to the
acquisitions of LPC and the assets comprising the business of HRB as if such
acquisitions had occurred on January 1, 1995 for the years ended December 31,
1995 and 1996, and the acquisition of LPC as if such acquisition had occurred on
January 1, 1996 for the three months ended March 31, 1996. The unaudited pro
forma condensed consolidated statements of operations have been included as
required by the rules of the Securities and Exchange Commission (the
"Commission") and are provided for comparative purposes only. The pro forma
statements of operations do not purport to be indicative of the results which
would have been obtained if the acquisitions had been effected on the date or
dates indicated or which may be obtained in the future. The unaudited pro forma
condensed consolidated statements of operations are based on management's
current estimate of the allocation of the purchase price for the acquisition of
LPC, the actual allocation of which may differ. During the periods presented
below, the Company consummated the acquisition of its renovation, purchasing and
reorder businesses and disposed of its lighting business. Consequently, the
selected historical and pro forma financial information presented below may not
be comparable for the periods presented. The selected historical and pro forma
financial information should be read in conjunction with such financial
statements, including the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31,
------------------------------------------------- ----------------------------------
Pro Forma Pro Forma Pro Forma
1995 1995(1) 1996 1996(1) 1996 1996(1) 1997
---- ---- ---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $4,980,291 $52,302,770 $24,367,112 $83,067,724 $1,993,321 $12,604,793 $18,195,826
Cost of revenues........ 3,823,779 46,579,067 18,289,924 70,171,807 1,676,801 10,444,807 14,737,150
Selling, general and
administrative expenses 1,619,189 8,008,716 3,218,520 10,309,525 440,431 1,914,425 2,642,864
Other income (expense).. 107,250 211,074 (24,960) 215,719 2,708 2,708 (28,990)
Income (loss) from continuing
operations............ (380,427) (2,076,220) 1,907,383 1,735,165 (121,203) 116,269 397,456
Loss from discontinued
operations............ (735,542) -- (64,705) -- -- -- --
Dividends on preferred shares -- 300,000 -- 300,000 -- 75,000 75,000
Net income (loss) applicable
common shareholders... (1,115,969) (2,376,220) 1,842,678 1,435,165 (121,203) 41,269 322,456
Net income (loss) per share
from continuing operations $(0.07) $(0.28) $0.27 $0.17 $(0.02) $0.01 $0.04
Loss per share from discontinued
operations ........... (0.13) -- (0.01) -- -- -- --
Net income (loss) per share $(0.20) $(0.28) $0.26 $0.17 $(0.02) $0.01 $0.04
Weighted average number of
common and common equivalent
shares outstanding........... 5,653,052 8,375,655 7,192,361 8,442,361 6,949,556 8,199,556 9,031,214
</TABLE>
<TABLE>
<CAPTION>
March 31, 1997
------------------------------------------------------
BALANCE SHEET DATA: ACTUAL AS ADJUSTED(2) AS FURTHER ADJUSTED(3)
<S> <C> <C> <C>
Current assets........................... $16,162,717 $16,162,717 $31,465,842
Total assets............................. 35,946,914 35,946,914 51,250,039
Working capital (deficit)................ 1,177,840 (1,022,160) 18,580,965
Total current liabilities................ 14,984,877 17,184,877 12,884,877
Total shareholders' equity............... 20,811,248 18,611,248 38,214,373
</TABLE>
-16-
<PAGE>
- ---------------------
(1) Gives effect to the acquisitions of LPC and the assets comprising the
business of HRB by the Company as if such acquisitions had occurred on
January 1, 1995 for the years ended December 31, 1995 and 1996 and to
the acquisition of LPC as if such acquisition had occurred on January
1, 1996 for the quarter ended March 31, 1996. The amounts in the pro
forma columns reflect adjustments for amortization of goodwill,
officers' compensation, interest income, taxes and dividends on
preferred shares.
(2) As adjusted to reflect the $2.2 million the Company borrowed from
Findim Investments S.A. in May 1997 for a period of six months at an
interest rate of 12% per annum in order to exercise an option to
purchase 500,000 shares of Common Stock from Tova Schwartz, the
Company's former President and Chief Executive Officer, as if the
transaction occurred on March 31, 1997. The Company repurchased such
shares from Ms. Schwartz in May 1997.
(3) As adjusted to reflect the issuance of 2,500,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of
$8.625, including 1,000,000 shares from the Company's treasury, and the
application of the net proceeds therefrom. See "Use of Proceeds."
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE COMPANY'S FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL STATEMENTS AND
THE RELATED NOTES THERETO INCLUDED ELSEWHERE HEREIN. SEE "DISCLOSURE REGARDING
FORWARD-LOOKING STATEMENTS."
OVERVIEW
From its inception in 1991 to August 1995, the Company's only source of
revenues was its decorative energy-efficient lighting fixture design,
manufacturing and installation business. The Company acquired its renovation
business in August 1995 and disposed of its lighting business in February 1996.
As part of its strategy to further its position as one of the leading providers
of renovation and procurement services for the hospitality industry on a global
basis, the Company acquired its procurement and reorder businesses in January
1997. As a result of this significant change in the Company's business focus,
period to period historical comparisons are not considered meaningful.
Additionally, historical comparisons are not considered meaningful
because revenue recognition methodologies vary across the Company's businesses.
The Company recognizes all revenues associated with a renovation project on a
percentage of completion basis, as if the Company were a general contractor. As
part of this process, the Company develops a complete scope of work to be
performed and invoices its clients on a monthly or bi-monthly basis as work is
performed. The Company's cost of renovation services has been relatively stable
over the past two years. In contrast to the Company's recognition of renovation
revenues, the Company recognizes procurement revenues in two ways: (i) when the
Company acts as a purchaser and reseller of products, the Company recognizes all
revenues associated with the products it purchases at the time of shipment of
the product or (ii) when the Company acts as an agent only, service fee income
is recognized as revenue at the time the service is provided. In either case,
the Company charges its clients a procurement fee based upon the amount of time
and effort it expects to spend on a project. The Company intends to continue to
expand its role as a purchaser and reseller because the Company believes that it
can enter into more advantageous arrangements with its vendors when acting as
principal rather than agent. Under both methods of procurement revenue
recognition, profits primarily include only procurement service fees. The
Company realizes reorder revenues based on the fees it charges its clients for
services rendered.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 (ACTUAL) COMPARED TO THREE MONTHS ENDED MARCH
31, 1996 (PRO FORMA)
The following comparison of the three month periods ended March 31,
1997 and 1996 gives pro forma effect to the acquisition of LPC as if it occurred
on January 1, 1996. The Company believes that this comparison is more meaningful
than a comparison of the historical periods due to the acquisition of LPC, a
significant portion of its current business.
Revenues increased $5,591,033, or 44.4%, to $18,195,826 for the three
months ended March 31, 1997, compared to $12,604,793 for the three months ended
March 31, 1996. Renovation revenues increased due to continued growth in the
Company's customer base resulting primarily from increased sales and marketing
efforts and referrals from existing clients in the hospitality industry.
Cost of revenues increased $4,292,343, or 41.1%, to $14,737,150 for the
three months ended March 31, 1997, compared to $10,444,807 for the three months
ended March 31, 1996. This increase resulted primarily from revenue growth in
each of the Company's procurement and renovation businesses. Cost of revenues as
a percentage of revenues for the three months ended March 31, 1997 decreased to
81.0%, compared to 82.9% for the three months ended March 31, 1996. Cost of
renovation revenues as a percentage of revenues decreased to 71.6% for the three
months ended March 31, 1997, compared to 84.1% for the three months ended March
31, 1996. The Company reduced its cost of renovation revenues as a percentage of
revenues in part by replacing higher priced subcontractors with lower cost
internal personnel on certain projects. The Company has been able to realize
greater efficiencies
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from larger renovation projects, which is reflected in the percentage
improvement. Cost of procurement revenues as a percentage of procurement
revenues has remained relatively unchanged.
Selling, general and administrative expenses for three months ended
March 31, 1997 increased $728,439, or 38.1%, to $2,642,864, compared to
$1,914,425 for the three months ended March 31, 1996. Selling, general and
administrative expenses increased primarily as a result of increased development
costs for the Parker FIRST software of $347,000 compared to $26,000 for the
comparable prior period, and increased administrative costs relating to the
Company's growth. In addition, selling, general and administrative expenses
include $197,000 and $199,000 of goodwill amortization relating to the
acquisition of LPC and the assets of AGF for the three months ended March 31,
1997 and 1996, respectively. As a percentage of revenues, selling, general and
administrative expenses for the three months ended March 31, 1997 decreased to
14.5% from 15.2% for the three months ended March 31, 1996 primarily because the
Company controlled its administrative costs and expenses as revenue grew.
The effective income tax rate for the three months ended March 31, 1997
was 49.5%, compared to 53.2% for the same period last year. For the year ended
December 31, 1996, the effective income tax rate was 32.7%. The effective tax
rate of 49.5% and 53.0% for the three months ended March 31, 1997 and 1996,
respectively, was higher than the effective tax rate for the year ended December
31, 1996 primarily due to the nondeductibility of the amortization of goodwill
that resulted from the acquisition of LPC.
As a result of the foregoing, net income applicable to common
shareholders for the three months ended March 31, 1997 was $322,456, or $.04 per
share, compared to $41,269, or $.01 per share, for the three months ended March
31, 1996.
THREE MONTHS ENDED MARCH 31, 1997 (ACTUAL) COMPARED TO THREE MONTHS ENDED MARCH
31, 1996 (ACTUAL)
Revenues increased $16,202,305, or 812.7%, to $18,195,826 for the three
months ended March 31, 1997, compared to $1,993,521 for the three months ended
March 31, 1996, due in large part to the acquisition of LPC, which contributed
approximately $12,700,000 to such revenues.
Cost of revenues increased $13,060,349, or 778.9%, to $14,737,150 for
the three months ended March 31, 1997, compared to $1,676,801 for the three
months ended March 31, 1996. This increase resulted primarily from the
acquisition of LPC which incurred costs of approximately $10,000,000 for the
three months ended March 31, 1997. Cost of revenues as a percentage of net
revenues for the three months ended March 31, 1997 decreased to 81.0%, compared
to 84.1% for the three months ended March 31, 1996. The cost of renovation
revenues decreased to 71.6% for the three months ended March 31, 1997, compared
to 84.1% for the three months ended March 31, 1996. The Company reduced its cost
of renovation revenues as a percentage of revenues in part by replacing higher
priced subcontractors with lower cost internal personnel on certain projects.
The Company has been able to realize greater efficiencies from larger renovation
projects, which is reflected in the percentage improvement. Cost of procurement
revenues as a percentage of procurement revenues has remained relatively
unchanged.
Selling, general and administrative expenses for the three months ended
March 31, 1997 increased $2,202,433, or 500.1%, to $2,642,864, compared to
$440,431 for the three months ended March 31, 1996. Contributing to this
increase was the acquisition of the procurement and reorder businesses, which
incurred expenses of approximately $1,740,000. These expenses include
significant development costs for the Parker FIRST software. Additionally,
selling, general and administrative expenses include $197,030 and $99,000 of
goodwill amortization for the three months ended March 31, 1997 and 1996,
respectively. As a percentage of net revenues, selling, general and
administrative expenses for the three months ended March 31, 1997 decreased to
14.5% from 22.1% for the three months ended March 31, 1996. This reduction is
the result of greater economies of scale provided by the acquisition of LPC, and
because HRB's administrative costs and expenses did not increase proportionally
with revenues.
The effective income tax rate for the three months ended March 31, 1997
was 49.5%, compared to 0.0% for the same period last year. The effective tax
rate for March 31, 1996 was 0% due to a loss for that period. For the year ended
December 31, 1996, the effective income tax rate was 32.7%. The effective tax
rate of 49.5% for the quarter ended March 31, 1997 is higher than the effective
tax rate for the year ended December 31, 1996 because
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of the nondeductibility of the amortization of goodwill of the LPC acquisition,
and the benefits of all net operating loss carry forwards previously recognized.
As a result of the foregoing, net income (loss) applicable to common
shareholders for the three months ended March 31, 1997 was $322,456, or $.04 per
share, compared to ($121,203), or ($.02) per share, for the same period last
year.
YEAR ENDED DECEMBER 31, 1996 (PRO FORMA) COMPARED TO YEAR ENDED DECEMBER 31,
1995 (PRO FORMA)
The following comparison of the years ended December 31, 1996 and 1995
gives pro forma effect to the acquisitions of LPC and the assets of AGF, as if
they occurred on January 1, 1995. The Company believes that this comparison is
more meaningful than a comparison of the historical periods due to the
significant change in its operations resulting from the acquisitions of LPC and
the assets of AGF.
Revenues increased $30,764,954 or 58.8%, to $83,067,724 for the year
ended December 31, 1996 compared to $52,302,770 for the year ended December 31,
1995. Renovation revenues increased approximately $17,500,000 due to the growth
in the Company's renovation business from increased sales and marketing efforts.
Procurement revenues increased approximately $13,000,000 due to growth in
customer base and increased international sales.
Costs of revenues increased $23,592,740, or 50.7%, to $70,171,807, for
the year ended December 31, 1996 compared to $46,579,067 for the year ended
December 31, 1995. Cost of revenues as a percentage of net revenues decreased to
84.5% in 1996 from 89.1% in 1995. The decrease in cost of revenues as a
percentage of revenues is partly the result of an increase in the Company's
higher margin procurement service fees, as well as the hiring of internal
personnel to perform services previously outsourced.
Selling, general and administrative expenses increased $2,300,809, or
28.7% to $10,309,525 for the year ended December 31, 1996, compared to
$8,008,716, for the year ended December 31, 1995. Included in the selling,
general and administrative expenses for the years ended December 31, 1996 and
1995 was $783,922 and $566,048 of amortization of goodwill resulting from the
acquisitions of LPC and the assets of AGF. The dollar increase in selling,
general, and administrative expenses primarily resulted from costs associated
with hiring additional personnel to support growth, as well as the development
costs for the Parker FIRST software of $761,000 for the year ended December 31,
1996 compared to $54,000, for the year ended December 31, 1995.
The effective income tax rate for the year ended December 31, 1996 was
38.1%. For the year ended December 31, 1995, the Company experienced a net loss.
The taxes for 1995 are the result of certain state and minimum tax requirements.
Net income (loss) applicable to common shareholders for the year ended
December 31, 1996 was $1,435,165, or $.17 per share, compared to a net loss of
($2,376,220), or ($.28) per share for the year ended December 31, 1996.
YEAR ENDED DECEMBER 31, 1996 (ACTUAL) COMPARED TO YEAR ENDED DECEMBER 31, 1995
(ACTUAL)
Revenues for the year ended December 31, 1996 increased $19,386,821, or
389.3%, to $24,367,112, compared to $4,980,291 for the year ended December 31,
1995. Revenues increased significantly because the results for the year ended
December 31, 1995 only include renovation revenues from August 1, 1995, the date
the Company acquired the assets and business of AGF, through December 31, 1995.
Cost of revenues for the year ended December 31, 1996 increased
$14,466,145, or 378.3%, to $18,289,924, compared to $3,823,779 for the year
ended December 31, 1995. As a percentage of revenues, cost of revenues decreased
to 75.1% for the year ended December 31, 1996, compared to 76.8% for the year
December 31, 1995. Although the Company experienced rapid growth during this
period, it was able to improve its cost of revenues as a result of continued
hiring and training of internal personnel capable of performing services
previously outsourced at a higher cost.
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Selling, general and administrative expenses increased $1,599,331, or
98.8%, to $3,218,520, for the year ended December 31, 1996 compared to
$1,619,189 for the year ended December 31, 1995. Included in the selling,
general and administrative expenses for the years ended December 31, 1996 and
1995 were $383,922 and $166,048, respectively, of amortization of goodwill
resulting from the acquisition of the assets of AGF. Selling, general and
administrative expenses decreased as a percentage of revenues, from 32.5% to
13.2% as a result of a larger revenue base, without an accompanying increase in
administrative costs.
The effective income tax rate for the year ended December 31, 1996 was
32.7%. For the year ended December 31, 1995, the Company experienced a net loss
and incurred certain state taxes relating to the renovation business. The rates
for 1995 are the result of certain state and federal minimum tax requirements.
Net income (loss) applicable to common shareholders for the year ended
December 31, 1996 was $1,842,678 or $.27 per share, compared to ($1,115,969), or
($.07) per share, for the year ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term and long-term liquidity requirements generally
consist of operating capital for its procurement and renovation businesses and
selling, general and administrative expenses. Historically, the Company has
satisfied its short-term and long-term liquidity requirements with cash
generated from operations and periodic utilization of its lines of credit. Due
to the nature of the Company's renovation business, with a majority of its
renovation resources allocated to personnel for performance of its renovation
services, capital requirements are insignificant. There are substantial capital
requirements necessary to beta test Parker FIRST as well as anticipated
additional costs necessary to sell and market the final product. These future
commitments, however, are at the discretion of the Company's management. As a
result, the Company can use its operating cash and available credit facilities
for operating needs.
Net cash used for operating activities was $1,579,939 for the three
months ended March 31, 1997, compared to $18,459 for the three months ended
March 31, 1996. During the three months ended March 31, 1997, the Company's
accounts receivable increased by $2,433,508, resulting from growth in revenue.
This increase was partially offset by an increase in accounts payable and
accrued expenses of $377,283. Due to the Company's rapid growth and a
significant amount of work performed on numerous projects, billings relating to
a large number of change orders were delayed during the fourth quarter of 1996
and the first quarter of 1997. The Company collected substantially all of such
billings during the second quarter of 1997. Net cash provided by investing
activities for the three months ended March 31, 1997 was $481,029, compared to
$715,000 for the three months ended March 31, 1996. The positive cash flow for
the three months ended March 31, 1996, actual and pro forma, is the result of
the sale of marketable securities. For 1997, the positive cash flow from
investing is a result of the net cash acquired from the acquisition of LPC, net
of acquisition costs.
As of March 31, 1997, the Company had drawn $2,100,000 under its
$2,200,000 line of credit (the "Line of Credit") with Marine Midland Bank of New
York ("Marine"). The Line of Credit matures on September 30, 1997, bears
interest at Marine's prime lending rate plus .5% and is secured by all of the
Company's assets and is guaranteed by HRB. Proceeds from the Line of Credit are
utilized to fund short-term cash requirements. The Company also has available
through LPC a $1,000,000 line of credit with United National Bank (the "LPC Line
of Credit"), which bears interest at a rate of prime plus .25%, and is secured
by accounts receivable of LPC. There were no borrowings under the LPC Line of
Credit as of March 31, 1997.
In January 1997, the Company acquired 100% of the outstanding capital
stock of LPC. The purchase price for LPC of approximately $12.4 million
consisted of 1,250,000 newly issued shares of Common Stock and 200,000 shares of
LPC Preferred which are convertible, on a formula basis, into 1,000,000 shares
of Common Stock (subject to upward adjustment to a maximum of 5,000,000 shares
in the event that the market price of the Common Stock is below $5.00 at the
time of conversion) during the period from January 10, 1998 to January 10, 2000.
In May 1997, the Company borrowed $2.2 million from Findim Investments
S.A. for a period of six months, which bears interest at a rate of 12% per
annum, in order to exercise an option to purchase 500,000 shares of Common Stock
from Tova Schwartz, the Company's former President and Chief Executive Officer.
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Since January 1, 1996, the Company has issued 861,584 shares of Common
Stock in private placements and through the exercise of options and warrants,
raising an aggregate of $1,326,691. During such time, the Company repurchased an
aggregate of 1,500,000 shares of Common Stock from Tova Schwartz for an
aggregate purchase price of $3,175,000.
As the Company grows and continues to explore opportunities for
strategic alliances and acquisitions, investment in additional support systems,
including infrastructure and personnel will be required. The Company expects to
increase its costs and expenses over the remainder of 1997 as it continues to
invest in the development of Parker FIRST. Although these increases may result
in a short-term reduction in operating margin as a percentage of revenues, the
Company anticipates that its investments, including the development of Parker
FIRST, will have a positive impact on its net revenues on a long-term basis. The
Company anticipates making substantial expenditures as it continues to explore
expansion through strategic alliances and acquisitions. See "Use of Proceeds."
The Apollo Joint Venture is currently pursuing three properties as potential
acquisitions and the Company is anticipating commercial introduction of the
Parker FIRST software by the first quarter of 1998. See "Risk Factors -- Risk of
Joint Investment", "-- Need for Additional Financing" and "-- Risks Associated
with Development of Parker FIRST."
To support the Company's growth, as well as to support potential
acquisitions of hospitality-related businesses and the formation of strategic
alliances, the Company is currently negotiating a new line of credit with Marine
for up to $6.0 million. The new line of credit will replace the Line of Credit
and the LPC Line of Credit. There can be no assurance that the Company will
obtain this new line of credit on satisfactory terms, or at all, or that
alternative sources of financing could be obtained. Although the Company
believes that its current cash, cash equivalents and lines of credit, together
with the proceeds from this Offering, will be sufficient to carry out its
business strategy for the next 18 months, if the Company does not obtain the
funds required to meet these requirements, the Company's expansion plans would
have to be scaled back or terminated, and the ongoing operations of the Company
could be materially adversely affected.
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BUSINESS
HISTORY OF THE COMPANY
The Company was formerly known as Light Savers U.S.A., Inc. and was
formed under the laws of the State of New York in October 1991. In January 1994,
the Company consummated an initial public offering of the Common Stock. At such
time, the Company was in the business of designing, manufacturing and installing
decorative, energy-efficient lighting fixtures for the hospitality industry. The
Company's primary marketing tool was the Con Edison Applepower Rebate Program
(the "Rebate Program"), under which Con Edison offered rebates to customers who
converted to energy saving devices, such as the Company's lighting fixtures. In
February 1994, Con Edison substantially reduced the Rebate Program, limiting the
effectiveness of the Rebate Program as a marketing tool. As a result, the
Company's revenues were substantially reduced.
In August 1995, the Company acquired substantially all of the assets
and business and assumed certain liabilities of AGF, a company that provided
renovation services to the hospitality industry. In December 1995, the Company's
Board of Directors, in response to Con Edison's decision to reduce substantially
the Rebate Program, determined to dispose of the Company's lighting business and
concentrate the Company's efforts on renovation services. In February 1996, the
Company, HRB, AGF, Tova Schwartz, and certain other parties thereto entered into
a Divestiture, Settlement and Reorganization Agreement (the "Divestiture
Agreement") pursuant to which, among other things, (i) the Company sold its
lighting business to Tova Schwartz, the Company's former President and Chief
Executive Officer; (ii) Ms. Schwartz resigned from her positions as a director
and officer of each of the Company and HRB; (iii) the Company repurchased
500,000 shares of Common Stock from Ms. Schwartz for $250,000 (which shares were
subsequently sold by the Company in a private placement offering); (iv) Ms.
Schwartz granted to the Company an option to purchase an additional 1,000,000
shares of Common Stock (all of which subsequently were repurchased by the
Company and placed into treasury); and (v) the Company agreed to pay Ms.
Schwartz consulting fees for a period of three years of $100,000 per year.
In October 1996, the Company changed its name to Hospitality Worldwide
Services, Inc. to reflect the significant shift in the Company's strategic focus
as a result of the acquisition of the renovation business and disposal of the
Company's lighting business. Until January 1997, when the Company acquired LPC,
the Company's only line of business was hotel renovation services.
The purchase price for LPC of approximately $12.0 million consisted of
1,250,000 newly issued shares of Common Stock and 200,000 shares of LPC
Preferred, convertible, on a formula basis, into 1,000,000 shares of Common
Stock (subject to upward adjustment to a maximum of 5,000,000 shares in the
event that the market price of the Common Stock is below $5.00 at the time of
conversion) during the period from January 10, 1998 to January 10, 2000. The
acquisition has been accounted for as a purchase with the results of LPC and
Parker Reorder included in the consolidated financial statements of the Company
from the acquisition date.
THE COMPANY
The Company has evolved over the past two years from a narrowly focused
lighting fixture design, manufacturing and installation company into one of the
leading providers of a broad range of outsourcing services to the hospitality
industry. These services include hotel renovation, procuring FF&E products and
reordering OS&E products. This rapid evolution resulted from two primary
factors: (i) the acquisition of the assets comprising the business of HRB and
the acquisition of LPC, including its then subsidiary, Parker Reorder; and (ii)
the Company's disposition of its lighting business.
HRB has performed a wide variety of renovation services for the
hospitality industry for over 18 years. Founded in 1969, LPC provides
procurement services to hotel owners, operators and developers in over 40
countries and over 40 states. The original founders of HRB and LPC continue to
manage these businesses. The Company is enhancing its reorder business with a
new proprietary software product, Parker FIRST, which allows clients to reorder
OS&E and other products on-line and will provide such clients with access to
forecasting and product evaluation capabilities. Parker Reorder, through Parker
FIRST, offers hotel properties the ability to order, on an as needed basis, any
and all OS&E products used by such properties. Headquartered in New York, New
York with
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offices in Coral Gables, Florida; Los Angeles, California; Singapore; Dubai,
United Arab Emirates and Sandton, South Africa, the Company is well-situated to
meet client needs around the globe.
INDUSTRY OVERVIEW
The Company depends almost exclusively on the hospitality industry for
the sale of its services. As a result, the cyclical nature of the growth of the
hospitality industry directly affects the growth of the Company. According to
recently published data, the United States hospitality industry alone consists
of approximately 45,000 properties offering approximately 3.4 million rooms for
daily rental. The hospitality industry as a whole has experienced five
consecutive years of growth in which the demand for rooms has outpaced the
growth in the supply of rooms. This period of growth began in 1992 when new
hotel construction declined considerably as lenders who had previously supported
development shifted their focus to restructurings. Industry analysts predict
that this growth will continue in the near future. According to Smith Travel
Research, the combination of increasing revenues, resulting from both higher
occupancies and higher average daily rates and improving operating efficiencies
at the property level have resulted in dramatic increases in industry
profitability. The forecasted continued high demand for hotel rooms resulting
from the strong business climate coupled with recent record industry profits and
availability of capital to the hospitality industry for hotel operations is
expected to continue to fuel the demand for the Company's services.
Based upon the Company's experience, hotels generally require
refurbishing every five to seven years. In addition, it is common practice in
the hospitality industry for operating entities to allocate funds annually for
maintenance and renovations. The Company believes that the need for renovation
services, combined with record profits in the hospitality industry, will
continue to provide numerous renovation opportunities. In addition, as a result
of the downturn in the hospitality industry in the late 1980's, many corporate
hotel chains downsized, eliminating significant numbers of technical personnel.
As a result, hotels are finding it necessary to outsource more of their
renovation and procurement needs.
Additionally there is a growing demand for hotels in many foreign
countries which the Company believes is due to changing political and economic
conditions and increased interest in tourism. The Company believes that a
significant amount of upscale hotel construction is occurring overseas to
satisfy this increased demand.
BUSINESS STRATEGY
It is the Company's goal to further its position as one of the leading
providers of renovation and procurement services for the hospitality industry on
a global basis. To that end, the Company intends to:
o leverage the synergies that exist between its procurement,
renovation and reorder businesses by cross selling its
services and pursuing referrals. For example, the Company
obtained renovation projects at The Grand Hyatt Hotel and The
Roosevelt Hotel in New York, New York directly as a result of
its performance on procurement projects for the same hotels;
o take advantage of the recent consolidation in the hospitality
industry by forming additional strategic alliances with both
domestic and international chains and franchised hotels, as
well as major management companies with a global presence;
o seek additional opportunities to complement and expand its
existing businesses, including (i) entering into joint venture
projects that allow the Company to leverage its broad range of
services and (ii) achieving market penetration of Parker
FIRST. The Company is also considering entering into hotel
development; and
o take advantage of the fragmentation in the industry by
acquiring and consolidating hospitality related businesses
throughout the country. Many of these businesses are small,
closely-held or family owned operations which would benefit
from the Company's resources, experience and substantial
customer base.
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RENOVATION BUSINESS
The Company provides a complete package of high quality renovation
services to the hotel industry ranging from pre-planning, value-engineering and
scope preparation of a project to performing the renovation and delivering
furnished rooms. For more than 18 years, the Company's renovation division has
been delivering high quality renovations on time and within budget and is
currently working on third- and fourth-generation projects for a number of its
clients. The Company distinguishes itself from its competitors by striving to
keep the hotel fully operational as renovations are performed, with minimal
inconvenience to guests or interruptions to hotel operations. Almost all of the
Company's renovation projects involve interior cosmetic improvements such as new
paint, vinyl and carpeting. According to a recent industry report, approximately
55 percent of hotel executives placed upgrading existing facilities as a top
priority.
The Company assumes total control over a renovation project, which may
include design, architecture, engineering, construction and remodeling
activities. The Company develops budgets for its clients based on individual
needs and specifications or works with a prepared budget, finding creative and
effective ways to use available resources. After assessing a project's
specifications, the Company guarantees the price, the level of quality and the
completion date of a project. During the early stages of a project, the Company
works closely with design teams on pre-planning, value engineering, cost control
and critical path timing. This close interaction between all parties allows for
a smooth transition from planning to construction. To ensure that a renovation
project is completed on time and within budget, the Company controls the
undertaking from start to finish, selecting and supervising the subcontractors
on the project, regardless of location.
Representative recent renovation projects completed by the Company
include:
o The Grand Hyatt Hotel in New York, New York
o The Griffin Group's Beverly Hilton in Los Angeles, California
o The Cambridge Hyatt in Boston, Massachusetts
o The Roosevelt Hotel in New York, New York
o The Radisson Hotel in Myrtle Beach, South Carolina
o The Omni Hotel in Atlanta, Georgia
o The Embassy Suites Inn in Napa Valley, California
o Doubletree Suites in Boca Raton, Florida
o The Deerfield Beach Hilton in Deerfield Beach, Florida
o Marriott Schaumburg in Schaumburg, Illinois
PROCUREMENT BUSINESS
The Company procures FF&E products for hotel owners, operators and
developers including carpeting, bedding, casegoods, wallcovering, artwork and
decorative lighting, as well as OS&E products, including china, glassware,
kitchen supplies, linens, flatware, uniforms and guestroom amenities, to meet
initial hotel operating requirements. As part of this service, the Company
prepares budgets, negotiates pricing and payment terms with manufacturers,
issues purchase orders and oversees shipping, delivery and installation services
in connection with both new hotels and major renovations. Worldwide contacts
with over 3,500 vendors and the Company's substantial buying power enable it to
offer its customers exceptional quality and competitive pricing. LPC purchased
approximately $305.0 million of products for its clients in 1996 making it the
second largest purchasing agent for the hospitality industry in the United
States ranked by sales volume.
The Company advises its clients with respect to every aspect of
procurement for a project, including quantity, design specifications, quality,
price and timing of delivery and installation, whether it be new construction or
renovation. The Company is a knowledgeable and efficient liaison between the
property owner and designers, architects, vendors, contractors and
manufacturers. Because of the volume of products the Company purchases for its
clients, it is able to negotiate more favorable pricing, credit, shipping and
payment terms than clients would be able to negotiate for their own account. By
selling its procurement services on a fee basis, the Company's clients benefit
directly from the Company's ability to negotiate a lower product cost.
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Because of LPC's long-standing presence in the procurement industry and
its commitment to quality service, the Company has developed relationships with
product vendors, as well as hotel owners, managers and developers at a wide
variety of hotel properties throughout the world. Representative recent
procurement projects completed by the Company include:
o The Grand Hyatt Hotel in New York, New York
o The New York Palace in New York, New York
o The Loews Miami Beach Convention Hotel in Miami Beach, Florida
o The Atlantis Resort in Paradise Island, Bahamas
o The Hilton International in Sandton, South Africa
o The Windsor Hotel & Casino in Ontario, Canada
o The Ritz Carlton in Bali, Indonesia
o Mohegan Sun Resort & Casino in Uncasville, Connecticut
o Hotel Le Royale in Phnom Penh, Cambodia
o Victorian & Alfred Hotel in Capetown, South Africa
The Company believes that many hotel property owners and operators are
outsourcing their procurement requirements, giving the Company an opportunity to
offer its experience and reputation in the hospitality industry, as well as its
purchasing power, to these companies in place of more traditional in-house
purchasing, accounting and design personnel.
The Company has procurement offices in Coral Gables, Florida; Los
Angeles, California; Singapore; Dubai, United Arab Emirates; and Sandton, South
Africa. The Company sells procurement services to clients in the Bahamas, the
Caribbean, Central and South America and Mexico from its Miami, Florida office.
The Company is performing ongoing procurement services for Sun International in
Paradise Island, Bahamas. The Company's Los Angeles, California procurement
office services the western United States and supports the Company's Pacific Rim
operations. The Company's South African procurement office recently completed
the Palace of the Lost City project in Sun City. The Company believes that South
Africa has become increasingly popular as a holiday destination due to the slow
decline of the Rand and a steady increase in foreign travelers thereby
increasing demand for the development of new hotels. The Company's Dubai
purchasing office is currently purchasing products for four hotel properties.
The Company's Singapore purchasing office enables the Company to participate in
the increased demand for new hotels in Asia.
REORDER BUSINESS
The Company acts as purchasing agent for hotels in connection with
recurring orders for all of the OS&E products, paper and stationery, chemicals
and engineering supplies. As a result of its many years of experience in the
procurement and reorder business, the Company believes its purchasing power
allows its clients to obtain products at a lower cost than from the Company's
competitors.
The Company has developed and is currently marketing Parker FIRST, an
automated reorder software package. Parker FIRST provides a single hotel
property or group of related hotel properties with a streamlined on-line
ordering, forecasting and product evaluation system. In addition, Parker
Reorder, through Parker FIRST, provides information regarding existing and new
products, order processing, status of orders, receipt of merchandise, invoicing
and associated financial data. Parker FIRST will simplify the ordering process
and provide detailed daily and historical patterns of use. The Company has
completed the development of the initial version of Parker FIRST, plans to begin
beta testing during August 1997 and expects to commercially introduce such
product in 1998. The Company believes that as Parker FIRST achieves commercial
success, the Company's reorder business will represent a growing percentage of
the Company's overall earnings. There can be no assurance that the product will
be successfully implemented on the Company's proposed timetable or that, once
introduced, Parker FIRST will be commercially successful. See "Risk Factor --
Risks Associated with Development of Parker FIRST."
Clients will use an on-site terminal or multiple terminals that will
provide information regarding existing and new products, order processing, the
status of orders, receipt of merchandise, invoicing and associated financial
data. In addition, the client will have access to a series of customized reports
tailored to the client's reporting and
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accounting network, including product cost comparisons, inventory forecasting, a
historical analysis of product usage, yearly requirement estimates, inventory
analysis and interdepartmental budgeting and usage reports. The Company will
charge its clients an initial fee to install and set up the Parker FIRST
software and train their personnel. Thereafter, clients will be charged a
monthly fee. In addition, the Company intends to license the software to vendors
in exchange for a royalty fee based upon the volume of such vendors' products
sold through Parker FIRST.
The Company believes that Parker FIRST will be a logical and efficient
solution for its clients' procurement requirements. The software components that
comprise the initial version of Parker FIRST are:
o HOTEL REORDER SYSTEM (HRS). Clients can order OS&E products
for one or more hotels on-line by using HRS. This system will
provide a completely automated mechanism for obtaining
existing and new product information, ordering products,
determining the status of orders and receiving and tracking
all customer invoices.
o HOST COMPUTER SYSTEM (HOST). The HOST system will act as the
central processing system interfacing between the HRS, the
Laptop Identification Program (LIP) and the On-Line Vendor
System (OVS). For the HRS, the HOST will process all orders
and provide accounting and invoicing data. For the OVS, the
HOST will transmit orders, maintain accounting information and
monitor shipping. For the LIP, the HOST will provide a
mechanism to build a hotel's unique product list and convert
the hotel's product list into a database that will be
transferred to the HRS. The HOST will also have an accounting
system that can track the Company's financial status with
every hotel and vendor.
o HOST ACCOUNTING SYSTEM (HAS). HAS is a customized accounting
software package designed to use the information gathered by
HRS to build an extensive database of an individual client's
activity, ensuring accurate customer billing, timely payment
to vendors and resolution of order discrepancies.
The following software components are in further development and are
expected to be introduced by the end of 1997:
o ON-LINE VENDOR SYSTEM (OVS). OVS will allow for automated
interaction between the Company and vendors. This system will
provide a standardized mechanism for obtaining complete
product information from a vendor on a particular product as
well as the ability to communicate order status, accounting,
invoicing and shipping information between the Company and the
vendor.
o LAPTOP IDENTIFICATION PROGRAM (LIP). LIP will enable Parker
Reorder personnel to accumulate all purchasing data for a
client and transfer such data via modem back to the HOST
computer system (as described below). The LIP will record all
of a client's products and match such products to a database
of the Company's procurement products existing on the HOST
system.
In addition, there are numerous organizations that could benefit from
an on-line reordering system, including universities, municipalities and
hospitals and other healthcare facilities. The Company believes that Parker
FIRST can be readily customized and adapted for these applications. No such
adaptations have been made or attempted however, and the Company has not
completed any research on the marketability of Parker FIRST outside of the
hospitality industry. As a result, no assurance can be given that Parker FIRST
could be adapted successfully to such uses.
APOLLO JOINT VENTURE
In May 1997, the Company entered into the Apollo Joint Venture with
Apollo and Watermark LLC to identify, acquire, renovate, refurbish and sell
hotel properties. The Apollo Joint Venture will enable the parties to pool their
resources, including Apollo's real estate acumen and financing capabilities and
the Company's renovation and procurement experience, in order to exploit
opportunities in the hotel redevelopment market. The Company will perform all of
the renovation and procurement services for each of the properties purchased by
the Apollo Joint
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<PAGE>
Venture. In addition, the Company will receive a five percent equity interest in
each of the entities formed to purchase such properties in exchange for its
contribution of five percent of the total equity required to acquire, renovate
and sell such properties. The Apollo Joint Venture has identified three hotel
properties and is actively negotiating for their acquisition. The joint venture
intends to own and operate the properties, through individual limited liability
companies, for such time as is necessary to upgrade and market them for resale.
As an inducement to enter the Apollo Joint Venture, the Company issued
to Apollo a warrant to purchase 750,000 shares of Common Stock at an exercise
price of $8.115 per share. The warrant expires in 2004 and is currently
exercisable as to 250,000 shares and becomes exercisable as to the remaining
500,000 shares in increments of 100,000 shares for every $7,500,000 of
incremental revenue realized by the Company from the joint venture. Watermark
LLC will manage the properties and will receive a management fee of 1.5% of all
costs incurred by the joint venture on each project, other than soft costs such
as interest, taxes etc. The Company will have a five percent interest in each of
the operating companies formed to purchase, renovate and sell hotel properties
pursuant to the Apollo Joint Venture, while Apollo will own 95%. Apollo will
have complete discretion over the approval and the terms of each project
presented to the Apollo Joint Venture. Each project will be governed by a
separate operating agreement. Each operating agreement in respect of the
development companies formed to purchase, renovate and sell hotel properties
pursuant to the Apollo Joint Venture will provide that Apollo, as the majority
in interest member, may request that each member provide additional capital for
a specific project. In the event that the Company is unable to meet such capital
request, its interest in such project will be decreased by the amount which
Apollo contributes pursuant to such capital request, as well as an additional
penalty amount. Further, if the Company were to pursue the opportunity to
acquire a hotel during the next five years, it would be required first to
present such opportunity to Apollo. See "Risk Factors -- Risk of Joint
Investment."
The operating agreement for each of the limited liability companies
established by the Apollo Joint Venture will provide that the limited liability
company utilize the Company as its renovation and procurement agent. The Company
will benefit from the opportunity to provide renovation and procurement services
to the limited liability companies and the potential to provide such services to
Apollo outside the Apollo Joint Venture.
GROWTH OPPORTUNITIES
The Company is exploring opportunities to acquire other hospitality
related companies, many of which are small, closely-held or family owned
operations. While the Company has held discussions with respect to a number of
such acquisitions it believes could be integrated into its existing businesses,
no assurance can be given that the Company will enter into definitive agreements
with respect to such transactions or that any such transactions will be
consummated. In addition, the Company is considering opportunities to enter into
the hotel development business. There can be no assurance that the Company will
enter into this line of business or what phase of development it would pursue.
The pursuit of any of these growth opportunities could require the Company to
raise additional capital.
SALES AND MARKETING
The Company's sales and marketing strategy is to obtain and maintain
strategic alliances with hotels chains and franchises and to focus on mid to
upscale full service hotels with a global presence. Such segments of the
hospitality industry continue to be successful, with hotel chains and franchises
accounting for the largest percentage of room occupancy and new rooms brought to
market, and full service hotels having over 60% of the hotel rooms in the United
States. The Company also targets as potential clients owners with multiple hotel
properties.
The Company's sales and marketing efforts are coordinated by senior
executives of the Company, together with nine salespersons who contact and
maintain relationships with appropriate hotel personnel. Because of the
Company's commitment to service and customer relationships, the majority of the
Company's business comes from referrals and repeat customers. The Company is
also developing a print and co-op advertising program.
The Company's reorder sales efforts are designed to (i) maximize short
term prospects for the sale of existing services and (ii) create a foundation
for future sales efforts associated with the direct marketing of Parker FIRST.
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<PAGE>
CUSTOMERS
During the three months ended March 31, 1997, the Company had two
customers, The Roosevelt Hotel Corp. and FelCor Suite Hotels, that accounted for
19% and 12%, respectively, of the Company's revenues. During the year ended
December 31, 1996, two customers, FelCor Suite Hotels and Regency/Lexington
Partners accounted for 49% and 31% of the Company's revenues, respectively.
During the year ended December 31, 1995, the Company had four customers that
accounted for 23%, 19%, 18% and 14% of such revenues. As the Company continues
to grow and expand, the Company believes its dependence on a small number of
customers will decrease. There can be no assurance that either continued growth
or decreased dependence on significant customers will occur.
COMPETITION
Servicing the hospitality industry is a highly competitive business,
where competition is based largely on price and quality of service. The
Company's competitive strengths are its experience, knowledge and relationships,
as well as the quality of service, reliability and competitive pricing it
provides. In its renovation business, the Company primarily competes with small,
local closely-held or family owned businesses. In its purchasing and reorder
businesses, the Company competes with other independent procurement companies
serving the hospitality industry, hotel purchasing companies and food service
distribution companies. Internationally, the Company competes with design
companies, architectural companies, construction and purchasing companies. In
addition, many European hotel chains own or control a purchasing unit. In
respect of Parker FIRST, the Company expects competition from a number of
management companies, hotel companies, franchise operators and other entities
who are pursuing the development of software systems that attempt to provide
streamlined procurement services. There is no single competitor or small number
of competitors that is or are dominant in the Company's business areas. However,
some of the Company's competitors and potential competitors possess
substantially greater financial, personnel, marketing and other resources than
the Company. There can be no assurance that the Company will be able to compete
successfully.
REGULATION
The Company's renovation business is subject to various federal, state
and local laws and regulations, pursuant to which it is required to, among other
things, obtain licenses and general liability insurance, workers compensation
insurance and surety bonds. The Company believes that it is currently in
compliance with these laws and regulations in those states in which it currently
operates. There are a number of states in which the Company operates where a
license is not required. The Company's renovation business currently operates in
15 states and has applications pending in an additional 12 states and the
District of Columbia.
The Company's procurement business is subject to regulation by various
state laws and regulations and international customs, duties, taxing and other
authorities that regulate the import and distribution of goods. Domestically,
the freight carrier provides bills of lading and other documentation that record
the pick-up, shipping and delivery of merchandise purchased by the Company on
behalf of its clients. Internationally, the Company must comply with the
individual country's requirements as they relate to commercial documentation.
The Company believes that it is currently in compliance with the laws and
regulations in those states and countries in which it currently operates.
To the extent that additional regulations are imposed and such
regulations prove to be burdensome, such regulations could significantly
increase the costs of compliance, and thereby reduce the Company's
profitability.
EMPLOYEES
As of June 30, 1997, the Company employed 146 full-time employees.
A typical renovation project is staffed by a field supervisor, who
hires subcontractors and laborers specifically for the particular project. Each
project is staffed by trade subcontractors that may or may not be unionized. The
Company purchases workmen's compensation insurance for each of its projects.
Each contractor and subcontractor is required to enter into the Company's
standard contract before commencing work on a project. None
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<PAGE>
of the Company's employees are represented by labor unions and the Company
believes that its relationship with its employees is good.
FACILITIES
The Company maintains its executive office at 450 Park Avenue, Suite
2603, New York, New York 10022, where it occupies 4,803 square feet in a
multi-story office complex. The Company has entered into a ten year lease, which
expires in January 2007, with an unaffiliated lessor pursuant to which it
currently pays an annual fixed rental of approximately $206,000 (exclusive of
rent adjustments).
The Company maintains its renovation headquarters at 1800 Century Park
East, Suite 370, Los Angeles, California 90067, where it occupies 3,336 square
feet in a multi-story office complex. The Company has entered into a five year
lease, which expires in May 1999, with an unaffiliated lessor pursuant to which
it currently pays an annual fixed rental of approximately $67,000 (exclusive of
rent adjustments). The Company also maintains a renovation office in Coral
Springs, Florida.
The Company maintains its procurement and reorder headquarters at 550
Biltmore Way, Coral Gables, Florida 33134. The Company also maintains
procurement offices in Los Angeles, California; Dubai, United Arab Emirates;
Singapore and Sandton, South Africa.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which, individually
or in the aggregate, are believed to be material to the Company's business.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their
respective ages and present positions with the Company are as follows:
Name Age Position with the Company
- ------------------------------ ------- ------------------------------------
Leonard F. Parker............. 67 Chairman of the Board
Robert A. Berman.............. 37 President, Chief Executive Officer
and Director
Howard G. Anders.............. 54 Chief Financial Officer, Executive
Vice President and Secretary
Douglas Parker................ 39 President-Purchasing Division and
Director; President of LPC
Alan G. Friedberg............. 38 President-Renovation Division
Guillermo A. Montero.......... 37 President of HRB
Scott A. Kaniewski(1)......... 33 Director
Louis K. Adler(2)............. 62 Director
George Asch(2)................ 60 Director
Richard A. Bartlett(1)........ 40 Director
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
LEONARD F. PARKER has been Chairman of the Board of the Company since
March 1997. Leonard Parker founded LPC in 1969. Mr. Parker is a graduate of
Tulane University and served in the United States Air Force. Prior to founding
LPC, Mr. Parker was employed from 1950 by Maxwell Company, an interior design
and furnishing Company. Mr. Parker is a director of Pompeii Casual Furniture and
the Douglas Gardens Home for the Aged. He also serves on various committees for
the Special Olympics. Leonard Parker is the father of Douglas Parker.
ROBERT A. BERMAN has been President and Chief Executive Officer and a
director of the Company since March 1997. Prior to joining the Company, Mr.
Berman served as the Managing Director of Watermark LLC from September 1992 to
March 1997 and is currently the sole Manager of Watermark LLC. Mr. Berman is
also Vice Chairman and a director of Unistar Gaming Corporation, a wholly-owned
subsidiary of Executone Information Systems, and a director of Catskill
Development, LLC, the owner of an operating harness track.
HOWARD G. ANDERS has been Executive Vice President, Chief Financial
Officer and Secretary of the Company since February 1996 and was the Executive
Vice President, Chief Operating Officer and a director of the Company from
October 1994 to November 1995. From December 1995 to February 1996, Mr. Anders
was an independent consultant. Mr. Anders served as Vice President and Chief
Financial Officer of Alpine Lace Brands, Inc. in Maplewood, New Jersey from
April 1992 to October 1994. From April 1983 to April 1992, Mr. Anders was
President and Chief Operating Officer of North Hills Electronic, Inc. in Glen
Cove, New York. Mr. Anders is a graduate of Rutgers University and attended the
Harvard Business School PMD Program.
DOUGLAS A. PARKER has been President-Purchasing Division and a director
of the Company since March 1997. Mr. Parker is also President of LPC. Mr.
Parker, a graduate of Tulane University in International Business, has been with
LPC for 17 years. Mr. Parker is responsible for the development of the overseas
offices in Sandton, Singapore
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<PAGE>
and Dubai, coordinating the international operations and sales, as well as
vendor and client relationships. Mr. Parker is also a director of Shelby
Williams Industries, Inc. Douglas Parker is the son of Leonard Parker.
ALAN G. FRIEDBERG has been President - Renovation Division of the
Company since March 1997. Previously, he was the Chief Executive Officer,
President and a director of the Company from February 1996 to March 1997. He
became the Chief Executive Officer of HRB in August 1995. Prior thereto, Mr.
Friedberg was the founder and Chief Executive Officer of AGF.
GUILLERMO A. MONTERO has been President of HRB since March 1997. Mr.
Montero has been a senior executive officer of HRB since August 1995 and prior
thereto was associated with AGF since 1979. Mr. Montero attended Oglethorpe
University and Georgia Tech, receiving a B.A. degree in 1982.
SCOTT A. KANIEWSKI has been a director of the Company since March 1996.
Mr. Kaniewski has been a Member of Watermark LLC since February 1995 and the
Managing Director of Watermark LLC since May 1997. Prior to his involvement with
Watermark LLC, Mr. Kaniewski held several positions with VMS Realty Partners,
including Vice President of Hotel Investments from December 1988 to March 1995.
He is a Certified Public Accountant and a member of the Illinois CPA Society.
LOUIS K. ADLER has been a director of the Company since September 1996.
Mr. Adler has been a private investor for over five years in Houston, Texas. He
has been Chairman of the Board and President of Bancshares, Inc. (Houston, TX)
since 1973; Vice Chairman of the Board since 1992 and a director since 1988 of
Luther's Bar-B- Q, Inc., a group of twenty restaurants in Texas, Louisiana and
Colorado; a director, Secretary and Treasurer of Warwick Communications, Inc.
since 1993; and a director and officer of several other private companies. Mr.
Adler is also a trustee and the President of the Adler Foundation and member of
the Dean's Advisory Counsel of Goizueta Business School of Emory University.
GEORGE ASCH has been a director of the Company since September 1996.
Since September 1994, Mr. Asch has been a Vice President of Gray, Seifert and
Co., Inc. an investment management company which became a wholly-owned
independent subsidiary of Legg Mason, Inc. in April 1994. For 25 years prior to
joining Gray Seifert and Co., Inc. in August 1990, Mr. Asch served as President
of a manufacturing company. He currently serves on the boards of various
philanthropic organizations, including the Montefiore Medical Center and the
Price Foundation. He is a graduate of Columbia College and served as an officer
in the United States Navy.
RICHARD A. BARTLETT has been a director of the Company since September
1996. Mr. Bartlett is a Managing Director of Resource Holdings Limited, a
private merchant banking firm in New York City ("Resource Limited"). He
specializes in legal aspects of mergers, acquisitions and other corporate
restructurings. In that capacity, he sits and has sat on the board of various
companies in which Resource Limited and its principals have made investments.
From 1987 to 1993, he was a member of the Council of Foreign Relations and is a
member of the New York State Bar. Mr. Bartlett received a law degree from Yale
Law School and received his B.A. from Princeton University.
All directors of the Company hold office until the next annual meeting
of the shareholders and until their successors have been elected and qualified.
The officers of the Company are elected by the Board of Directors at the first
meeting after each annual meeting of the Company's shareholders, and hold office
until their death, until they resign or until they have been removed from
office.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established standing Audit and Compensation
Committees. The Audit Committee exercises the power which the Board of Directors
would otherwise hold with respect to matters pertaining to the audit of the
financial statements of the Company and related financial matters. The Audit
Committee consists of Messrs. Bartlett and Kaniewski. The Compensation Committee
exercises the power which the Board of Directors would otherwise hold with
respect to (i) the grant of options under the Employee Plan; and (ii) the
compensation and benefits of all officers of the Company. The Compensation
Committee consists of Messrs. Adler and Asch.
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<PAGE>
DIRECTOR COMPENSATION
The Company does not currently compensate directors who are also
executive officers of the Company for service on the Board of Directors.
Directors are reimbursed for their expenses incurred in attending meetings of
the Board of Directors. In addition, outside directors are entitled to receive
options under the Directors' Plan. See "--1996 Outside Directors' Stock Option
Plan."
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to Tova Schwartz, who served as Chief
Executive Officer of the Company from its inception until February 1996 and Alan
G. Friedberg, who served as Chief Executive Officer of the Company from February
1996 to March 1997, and Howard G. Anders and Guillermo A. Montero, the Company's
two most highly compensated executives (collectively, the "Named Executive
Officers"). There is no other executive officer of the Company whose salary and
bonus exceeded $100,000 with respect to the fiscal years ended December 31,
1996, 1995 and 1994. Robert Berman, who became the Company's Chief Executive
Officer in March 1997, is paid an annual salary of $215,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
- ---------------------------------------------------------------------------------------- ------------
SECURITIES
NAME AND UNDERLYING
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
- ------------------ ---- --------- -------- ----------
<S> <C> <C> <C> <C>
Alan G. Friedberg(2).............. 1996 $225,000 $75,000 400,000
1995 $110,520 -- --
1994 -- -- --
Guillermo A. Montero(3)........... 1996 $190,000 $76,665 300,000
1995 $ 83,337 -- --
1994 -- -- --
Howard G. Anders(4)............... 1996 $150,000 $25,000 100,000
1995 $128,333 -- 50,000
1994 $ 39,999 -- 50,000
Tova Schwartz(5).................. 1996 -- -- --
1995 $103,992 -- --
1994 $100,000 $83,333 --
</TABLE>
- ---------------------------
(1) Perquisites and other personal benefits, securities or property to each
executive officer did not exceed the lesser of $50,000 or 10% of such
executive's salary and bonus.
(2) Mr. Friedberg joined the Company in August 1995 as the Chief Executive
Officer of HRB. In February 1996, he became the Chief Executive Officer
and a director of the Company. Currently, Mr. Friedberg is the
President-Renovation Division of the Company.
(3) Mr. Montero joined the Company in August 1995 as Vice
President-Operations and Chief Operating Officer of HRB. Currently, Mr.
Montero is President of HRB.
(4) Mr. Anders joined the Company in October 1994 as Executive Vice
President, Chief Operating Officer and a director. In February 1996, he
resigned as a director of the Company and became the Chief Financial
Officer, Executive Vice President and Secretary of the Company.
(5) Ms. Schwartz served as the Company's Chief Executive Officer and
President from its inception until she resigned in February 1996.
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<PAGE>
The following table sets forth certain information regarding stock
option grants made to the Named Executive Officers during the fiscal year ended
December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE OR BASE
NAME GRANTED(#) IN FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
- ---- ---------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Alan G. Friedberg......... 400,000 43% $2.75 9/26/06
Guillermo Montero......... 300,000 32% $2.75 9/26/06
Howard G. Anders.......... 100,000 11% $2.75 9/26/06
</TABLE>
The following table sets forth certain information regarding
unexercised stock options held by the Named Executive Officers as of December
31, 1996.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT MONEY OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996 $(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Alan G. Friedberg......... 200,000/200,000 $800,000/$800,000
Guillermo Montero......... 150,000/150,000 $600,000/$600,000
Howard G. Anders.......... 150,000/50,000 $747,500/$200,000
</TABLE>
- ----------------------
(1) On December 31, 1996, the last reported sales price of the Common Stock
on Nasdaq was $6.75 per share.
EMPLOYMENT AGREEMENTS
Pursuant to the Divestiture Agreement, on February 26, 1996 the Company
and Tova Schwartz agreed that Ms. Schwartz would provide consulting services to
the Company on a part-time basis for a term of three years, to be compensated at
a rate of $100,000 per year. As additional consideration for the purchase of the
lighting business, the Company agreed to refer lighting business to Ms. Schwartz
or an entity controlled by her and Ms. Schwartz agreed to pay commissions to the
Company for a period of three years at a rate of 10% (or as negotiated), of the
net invoice price of all sales referred to Ms. Schwartz by the Company. As of
the date of this Prospectus, no commissions have been paid by Ms. Schwartz to
the Company.
In addition, pursuant to the Divestiture Agreement, on February 26,
1996 Mr. Friedberg, Mr. Montero and the Company agreed on the terms of their
respective employment with the Company, for an initial term of three years,
subject to automatic renewal for successive twelve-month periods unless either
party provides the other with a notification of non-renewal. The salary of Mr.
Friedberg is $225,000 annually, and Mr. Montero is $190,000 annually and Messrs.
Friedberg and Mr. Montero have agreed not to compete with the Company during the
two year period after the termination of their employment with the Company.
On April 1, 1996, the Company entered into a two year employment
agreement with Mr. Anders, at an initial base salary of $150,000 per annum,
which was increased to $185,000 effective June 1, 1997. Pursuant to such
agreement, Mr. Anders has agreed not to compete with the Company during the term
of the agreement and for a period of two years thereafter.
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<PAGE>
In connection with the acquisition of LPC, effective January 1, 1997,
the Company and LPC entered into an employment agreement with Leonard Parker,
pursuant to which Mr. Parker is to be employed as Chairman of LPC for a period
of three years at a base salary of $250,000 per annum, which salary is to be
increased based on the consumer price index. Pursuant to the agreement, Mr.
Parker's salary for the period from January 1, 1999 through December 31, 2000
was paid in January 1997. Pursuant to the agreement, Mr. Parker has agreed to
not to compete with the Company during the term of his employment thereunder,
and for a period of one year thereafter.
In connection with the acquisition of LPC, effective January 1, 1997,
the Company and LPC entered into an employment agreement with Douglas Parker,
pursuant to which Mr. Parker is to be employed as President of LPC for a period
of two years at a base salary of $175,000 per annum, which salary is to be
increased based upon the consumer price index. In addition to his base salary,
Mr. Parker is eligible to receive bonuses equal to up to 20% of his base salary
based upon the achievement of performance criteria. In addition, Mr. Parker was
granted options to purchase 65,000 shares of Common Stock at an exercise price
of $6.75 per share under the Employee Plan. Pursuant to the agreement, Mr.
Parker has agreed not to compete with the Company during the term of his
employment thereunder and for a period of one year thereafter.
In connection with the acquisition of LPC, effective January 1, 1997,
the Company and LPC entered into an employment agreement with Bradley Parker
pursuant to which he is to be employed as Chief Executive Officer of LPC upon
the same terms and conditions as those contained in Mr. Douglas Parker's
employment agreement. In addition, effective January 1, 1997, the Company and
Parker Reorder entered into employment agreements with each of Philip Parker and
Mitchell Parker pursuant to which they are to be employed as President and Chief
Executive Officer, respectively, of Parker Reorder upon the same terms and
conditions as those contained in Mr.
Douglas Parker's employment agreement.
1996 EMPLOYEE STOCK OPTION PLAN
In September 1996, the Company's Board of Directors adopted, and the
Company's shareholders approved, the Employee Plan. The purpose of the Employee
Plan is to promote the success of the Company by providing additional incentive
to the officers and employees of the Company who are primarily responsible for
the management and growth of the Company, or otherwise materially contribute to
the conduct and direction of its business, operations and affairs, in order to
strengthen their desire to remain in the employ of the Company and to stimulate
their efforts on behalf of the Company, and to retain and attract to the employ
of the Company persons of competence.
The Employee Plan provides that the maximum number of shares of Common
Stock reserved for awards thereunder shall be 1,700,000. As of the date of this
Prospectus, options to purchase 1,189,000 shares of Common Stock have been
granted under the Employee Plan at a weighted average exercise price of $3.62
per share, of which 1,170,750 remain outstanding. The Employee Plan provides for
the grant of (i) options that are intended to qualify as incentive stock options
("Incentive Stock Options") within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended, and (ii) options not intended to so qualify.
The exercise price of options granted under the Employee Plan may be less than,
more than or equal to the fair market value of such shares on the date of grant;
provided, however, that the exercise price of an Incentive Stock Option at the
time of grant thereof shall (i), if such Incentive Stock Option is being granted
to a 10% shareholder, be at least 110% of the fair market value on the date of
grant and (ii), if such Incentive Stock Option is being granted to any other
person, be at least 100% of the fair market value on the date of grant. Any
options granted under the Employee Plan that shall expire, terminate or
otherwise be annulled for any reason without having been exercised shall again
be available for purposes of the Employee Plan.
The Employee Plan is administered by a committee (the "Committee")
comprised of not less than two members of the Company's Board of Directors who
are "disinterested persons" for purposes of Rule 16b-3 under the Exchange Act.
The Committee has the power and authority to grant to eligible persons options
to purchase shares of Common Stock under the Employee Plan and to determine the
restrictions, terms and conditions of all such options granted as well as to
interpret the provisions of the Employee Plan, any agreements relating to awards
granted under the Employee Plan, and to supervise the administration of the
Employee Plan.
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<PAGE>
No Incentive Stock Options may be granted to any person for which the
"fair market value," as defined within the Employee Plan, determined as of the
time an Incentive Stock Option is granted to such person, of the Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by such person during any calendar year under all plans of the Company and its
subsidiaries, shall exceed $100,000.
Subject to the provisions of the Employee Plan with respect to death,
retirement and termination of employment, the term of each option shall be for
such period as the Committee shall determine as set forth in the applicable
option agreement, but not more than (i) five years from the date of grant in the
case of Incentive Stock Options held by 10% or greater shareholders and (ii) ten
years from the date of grant in the case of all other Incentive Stock Options.
The Employee Plan is intended to comply in all respects with Rule 16b-3
under the Exchange Act.
1996 OUTSIDE DIRECTORS' STOCK OPTION PLAN
In September 1996, the Company's Board of Directors adopted, and the
Company's shareholders approved, the Directors' Plan for purposes of securing
for the Company and its shareholders the benefits arising from stock ownership
by outside directors. Each outside director who becomes a director after March
1, 1996 shall receive an initial grant of an option to purchase 15,000 shares of
Common Stock. To the extent that shares of Common Stock remain available for the
grant of options under the Directors' Plan on April 1 of each year, commencing
on April 1, 1997, each outside director shall automatically be granted an option
to purchase 10,000 shares of Common Stock. Options granted under the Directors'
Plan shall be exercisable in three equal installments, commencing on the first
anniversary of the grant date. The exercise price of such options is the closing
price of the Company's Common Stock on Nasdaq on the business day immediately
prior to grant. As of the date of this Prospectus, 250,000 shares of Common
Stock have been reserved for issuance under the Directors' Plan and the Company
has granted 100,000 options to purchase shares of Common Stock under the
Directors' Plan at a weighted average exercise price of $4.10 per share, none of
which are currently exercisable. The Directors' Plan is intended to comply in
all respects with Rule 16b-3 under the Exchange Act.
1994 NON-STATUTORY STOCK OPTION PLAN
In 1994, the Company adopted a non-statutory stock option plan, which
was subsequently terminated. As of the date of this Prospectus, options to
purchase 50,000 shares of Common Stock are outstanding under such plan.
CERTAIN TRANSACTIONS
The Company hired Interstate Interior Services ("Interstate") as a
subcontractor on certain of its projects. The President of Interstate is the
sister of Alan G. Friedberg, the President of the Renovation Division of the
Company. During 1996 and from August 1, 1995, the date the Company acquired its
hospitality restoration business, to December 31, 1995, the Company paid fees of
$172,786 and $712,137, respectively, to Interstate.
See "Business -- History of the Company" for a description of the
agreement whereby the Company sold its lighting business to Ms. Tova Schwartz,
the Company's former Chief Executive Officer and President.
In February 1996, the Company engaged Resource Holdings as a financial
advisor until December 31, 1997. As compensation for such engagement, the
Company granted Resource Holdings a five-year option to purchase 500,000 shares
of Common Stock at an exercise price of $2.00 per share and paid a retainer of
$10,000 per month for one year. Richard Bartlett, a director of the Company, is
a Managing Director of Resource Holdings.
In April 1996, the Company and Watermark agreed to adjust the
purchase price paid for the assets and business of AGF resulting in a $350,000
note payable to the Company from Watermark.
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The Company is currently renovating Watermark's corporate headquarters.
The Company bills Watermark regularly for such services. At December 31, 1996,
the Company had a receivable of $492,824 from Watermark, which was collected in
full during the first quarter of 1997.
See "Business -- Apollo Joint Venture" for a description of the
agreement whereby the Company entered into a joint venture with Apollo and
Watermark LLC, an affiliate of Watertone, a holder in excess of 10% of the
Company's outstanding Common Stock.
All future and ongoing transactions and loans with officers, directors
and principal shareholders of the Company will be on terms no less favorable
than could be obtained from independent third parties and will be approved by a
majority of the disinterested directors of the Company.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of June 30, 1997, and as adjusted to
reflect the sale of the Shares offered hereby, by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each director of the Company, (iii) each executive officer of the
Company, and (iv) all directors and executive officers as a group. Unless
otherwise indicated, the address of each person listed below is 450 Park Avenue,
Suite 2603, New York, New York 10022.
<TABLE>
<CAPTION>
PERCENT OF CLASS(2)
-----------------------------------------
Shares Upon
Beneficially Completion of
Beneficial Owner(1) Owned Before Offering the Offering
------------------- ------------ --------------- ------------
<S> <C> <C> <C>
Watertone Holdings, LP.................... 1,800,000(3) 23.04% 17.45%
Watermark Limited, LLC.................... 1,800,000(3) 23.04% 17.45%
Robert A. Berman.......................... 1,800,000(3) 23.04% 17.45%
Watertone, LLC............................ 500,000(4) 6.40% 4.85%
Joel A. Asen.............................. 500,000(4) 6.40% 4.85%
John A. Garraty, Jr....................... 500,000(4) 6.40% 4.85%
E.W. Plaut................................ 500,000(4) 6.40% 4.85%
Tova Schwartz............................. 493,155(5) 6.31% 4.78%
John C. Shaw.............................. 411,666(6) 5.07% 3.88%
Richard A. Bartlett....................... 408,166(7) 5.03% 3.85%
Jerry M. Seslowe.......................... 403,334(8) 4.97% 3.80%
Leonard Parker.......................... 300,000 3.84% 2.91%
Douglas Parker.......................... 190,000 2.43% 1.84%
Alan G. Friedberg......................... 210,000(9) 2.62% 2.00%
Guillermo A. Montero...................... 169,792(10) 2.13% 1.62%
Howard G. Anders.......................... 154,500(11) 1.94% 1.48%
Louis K. Adler............................ 75,000 * *
George Asch............................... 75,000 * *
Scott A. Kaniewski........................ 2,000 * *
All Officers and Directors as a group
(10 persons)............................. 3,384,458(12) 39.30% 30.46%
</TABLE>
- -------------------------
* Less than 1%
(1) Except as outlined herein, the persons named in the table, to the
Company's knowledge, have sole voting and dispositive power with
respect to all shares shown as beneficially owned by them, subject to
community property laws where applicable and the information contained
in the footnotes hereunder.
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(2) Calculations assume that all options and warrants which are exercisable
within 60 days after June 30, 1997 have been exercised.
(3) The address for each of Watertone and Watermark LLC is 730 Park Avenue,
9th Floor, New York, New York 10019. Consists of 1,800,000 shares of
Common Stock held by Watertone, as to which each of Watermark LLC and
Mr. Berman are attributed beneficial ownership pursuant to Rule 13d-3
of the Exchange Act ("Rule 13d-3"). Watermark LLC (as the general
partner of Watertone) and Mr. Berman (as the sole Manager of Watermark
LLC) each have sole power to vote and dispose of the 1,800,000 shares
of Common Stock. Watermark LLC disclaims beneficial ownership of all
shares held by Watertone, other than those shares deemed to be
beneficially owned by it pursuant to Rule 16a- 1(a)(2)(ii)(B) of the
Exchange Act.
(4) The address for each of these beneficial owners is c/o Relco Inc., 3
Stamford Landing, 46 Southfield Avenue, Stamford, Connecticut 06902.
Consists of 500,000 shares of Common Stock held by Watertone LLC as to
which each of Watertone LLC, Joel A. Asen, John A. Garraty, Jr. and
E.W. Plaut are attributed beneficial ownership pursuant to Rule 13d-3.
Messrs. Asen, Garraty and Plaut, as Managers of Watertone LLC, have
shared power to vote and dispose of the 500,000 shares of Common Stock.
Each of Messrs. Asen, Garraty and Plaut disclaim beneficial ownership
of all shares held by Watertone LLC other than those shares deemed to
be beneficially owned by them pursuant to Rule 16a- 1(a)(2)(ii)(B) of
the Exchange Act.
(5) The address for Ms. Schwartz is 11 Wedgewood Lane, Lawrence, New York
10178.
(6) The address for Mr. Shaw is c/o Resource Holdings Associates, L.P., 520
Madison Avenue, 40th Floor, New York, New York, 10022. Consists of (i)
100,516 shares of Common Stock owned individually by Mr. Shaw; (ii)
11,150 shares of Common Stock held by The Shaw Foundation, as to which
Mr. Shaw is attributed beneficial ownership pursuant to Rule 13d-3; and
(iii) 300,000 shares of Common Stock underlying the Option as to which
Mr. Shaw is attributed beneficial ownership pursuant to Rule 13d-3. Mr.
Shaw has sole power to vote and dispose of the 100,516 shares of Common
Stock he owns individually and the 11,150 shares held by The Shaw
Foundation. Mr. Shaw, as a Managing Director of Resource Holdings
Limited, has shared power to vote and dispose of the 300,000 shares of
Common Stock underlying the Option. Mr. Shaw disclaims beneficial
ownership of all shares beneficially owned by Resource Holdings and the
Shaw Foundation, other than those shares deemed to be beneficially
owned by him pursuant to Rule 16a- 1(a)(2)(ii)(B) of the Exchange Act.
(7) The address for Mr. Bartlett is c/o Resource Holdings Associates, L.P.,
520 Madison Avenue, 40th Floor, New York, New York, 10022. Consists of
(i) 108,166 shares of Common Stock owned individually by Mr. Bartlett;
and (ii) 300,000 shares of Common Stock underlying an option granted to
Resource Holdings by the Company as partial compensation for services
rendered as a consultant (the "Option") as to which Mr. Bartlett is
attributed beneficial ownership pursuant to Rule 13d-3. Mr. Bartlett
has sole power to vote and dispose of the 108,166 shares of Common
Stock he owns individually. Mr. Bartlett, as a Managing Director of
Resource Holdings Limited, has shared power to vote and dispose of the
300,000 shares of Common Stock underlying the Option. Mr. Bartlett
disclaims beneficial ownership of all shares beneficially owned by
Resource Holdings, other than those shares deemed to be beneficially
owned by him pursuant to Rule 16a-1(a)(2)(ii)(B) of the Exchange Act.
(8) The address for Mr. Seslowe is c/o Resource Holdings Associates, L.P.,
520 Madison Avenue, 40th Floor, New York, New York, 10022. Consists of
(i) 103,334 shares of Common Stock owned individually by Mr. Seslowe;
and (ii) 300,000 shares of Common Stock underlying the Option as to
which Mr. Seslowe is attributed beneficial ownership pursuant to Rule
13d-3. Mr. Seslowe has sole power to vote and dispose of the 103,334
shares of Common Stock he owns individually. Mr. Seslowe, as a Managing
Director of Resource Holdings Limited, has shared power to vote and
dispose of the 300,000 shares of Common Stock underlying the Option.
Mr. Seslowe disclaims beneficial ownership of all shares beneficially
owned by Resource Holdings, other than those shares deemed to be
beneficially owned by him pursuant to Rule 16a-1(a)(2)(ii)(B) of the
Exchange Act.
(9) Consists of (i) 10,000 shares of Common Stock held individually by Mr.
Friedberg; and (ii) 200,000 shares of Common Stock issuable upon
exercise of presently exercisable options currently held by Mr.
Friedberg.
(10) Consists of (i) 19,792 shares of Common Stock held by Mr. Montero's
wife Maria Elizabeth Leon, as to which Mr. Montero disclaims beneficial
ownership pursuant to Rule 16a-1(a)(2)(ii)(A) of the Exchange Act; and
(ii) 150,000 shares of Common Stock issuable upon exercise of presently
exercisable options currently held by Mr. Montero.
(11) Consists of (i) 4,500 shares of Common Stock held individually by Mr.
Anders; and (ii) 150,000 shares of Common Stock issuable upon exercise
of presently exercisable options currently held by Mr. Anders.
(12) Includes options to purchase 710,000 shares of Common Stock at exercise
prices ranging from $1.275 to $2.75 per share.
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DESCRIPTION OF SECURITIES
The following summary of certain terms of the Common Stock and the
Preferred Stock of the Company does not purport to be complete and is subject
to, and qualified in its entirety by, the provisions of the Company's
Certificate of Incorporation and By-laws, each as amended, which are included as
exhibits to the Registration Statement of which this Prospectus is a part, and
the provisions of applicable law.
DESCRIPTION OF COMMON STOCK
The Company's Certificate of Incorporation, as amended, authorizes the
issuance of 20,000,000 shares of Common Stock. As of June 30, 1997, there were
7,812,239 shares of Common Stock issued and outstanding. All outstanding shares
of Common Stock are, and the Shares offered hereby will be, validly issued,
fully paid and non-assessable. Holders of Common Stock are entitled to share
ratably in such dividends and distributions as may from time to time be declared
by the Board of Directors of the Company from funds legally available therefor
and upon liquidation will be entitled to share ratably in any assets of the
Company legally available for distribution to holders of the Common Stock. The
Company's Certificate of Incorporation and By-Laws, each as amended, do not
confer any preemptive, subscription, redemption or conversion rights on the
holders of Common Stock. Holders of Common Stock are entitled to cast one vote
for each share held of record on each matter submitted to a vote of
shareholders. There is no provision in the Company's Certificate of
Incorporation or By-Laws, each as amended, for cumulative voting, which means
that holders of a majority of the voting power may elect all of the directors.
DESCRIPTION OF PREFERRED STOCK
The Company's Certificate of Incorporation, as amended, authorizes the
issuance of 3,000,000 shares of Preferred Stock and, in connection with the
acquisition of LPC the Company has issued 200,000 of such shares of Preferred
Stock as 6% Redeemable Convertible Preferred Stock (the "LPC Preferred"). The
LPC Preferred has a stated value of $25 per share (the "Stated Value").
The holders of LPC Preferred are entitled to receive cash dividends at
the rate of six percent (or $1.50) per annum per share of LPC Preferred (the
"Preferred Dividend"), accruing from the date of issuance and payable commencing
March 31, 1998. If the Company is legally capable of paying the Preferred
Dividend and elects to accrue such amount, such accrued dividends shall bear
interest at the rate of 13 1/2% per annum until paid. The holders of the LPC
Preferred are also entitled to receive out of the cumulative net profits of
Parker Reorder (the "Cumulative Net Profits"), an annual cash payment (the
Participating Dividend") equal to 20% of (i) the Cumulative Net Profits of
Parker Reorder measured from January 1, 1997, less (ii) all Participating
Dividends previously made to the holders of the LPC Preferred. The holders of
the LPC Preferred are also entitled to a liquidation preference.
The LPC Preferred is convertible, at any one time during the period
from January 10, 1998 to January 10, 2001, into (i) 1,000,000 shares of Common
Stock, subject to upward adjustment to a maximum of 5,000,000 shares in the
event that the market price of the Common Stock is below $5.00 at the time of
conversion or (ii) 9.80% of the outstanding capital stock of Parker Reorder. The
LPC Preferred is also redeemable, at any time after January 10, 2002, at the
request of the holders of all of the LPC Preferred, at a redemption price (the
"Redemption Price") equal to the Stated Value for each such share of LPC
Preferred, plus an amount equal to all accrued and unpaid Preferred Dividends
and interest thereon, if any. At any time after January 10, 2000, the Company
shall have the option to redeem the LPC Preferred at the Redemption Price.
The holders of LPC Preferred are entitled to vote on all matters
submitted to the holders of the Common Stock and each share of LPC Preferred is
entitled to 4.17 votes. The holders of record of the LPC Preferred, voting as a
class, are entitled to elect two directors to the Company's Board of Directors
at any time that any of the LPC Preferred is outstanding.
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<PAGE>
INDEMNIFICATION OF DIRECTORS
As permitted by the New York Business Corporation Law (the "NYBCL"),
the Company's Certificate of Incorporation and its By-Laws, each as amended,
limit the personal liability of directors of the Company or its shareholders for
damages for any breach of duty in such capacity. Liability is not eliminated for
(i) any director if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law or that he personally gained in fact a
financial profit or other advantage to which he is not legally entitled or (ii)
any director for any act or omission prior to the adoption of a provision
authorized by Section 402(b) of the NYBCL.
NEW YORK BUSINESS CORPORATION LAW
The Company is subject to the NYBCL. Section 1600 of the NYBCL, known
as the "Security Takeover Disclosure Act," applies to "takeover bids," generally
defined to mean the acquisition of or offer to acquire by an offeror from an
offeree, pursuant to a tender offer or request or invitations for tenders, any
equity security of a target company, if after acquisition thereof, the offeror
would, directly or indirectly, be a beneficial owner of more than five percent
of any class of the issued and outstanding equity securities of such target
company.
No offeror shall make a takeover bid unless as soon as practicable on
the date of commencement on the takeover bid he files with the New York Attorney
General and delivers to the target company at its principal executive offices a
registration statement containing certain specified information as set forth in
Section 1603 of the NYBCL.
The foregoing discussion of certain provisions of the NYBCL is
qualified in its entirety by reference to those NYBCL provisions. The area of
state anti-takeover law has been rapidly changing in recent years. For example,
certain state statutes have been contested on the basis of federal preemption
and other theories. Moreover, the anti-takeover laws do not completely insulate
corporations from hostile takeovers and do not change existing law concerning
directors' fiduciary duties to shareholders. Shareholders are therefore urged to
consult their respective legal counsel regarding applicable anti-takeover laws
and their effect on the Company and its shareholders.
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar for the Common Stock is
Continental Stock Transfer & Trust Company, New York, New York.
QUOTATION ON NASDAQ
The Company's Common Stock is currently quoted on Nasdaq under the
symbol "ROOM." Application has been made to have Common Stock approved for
quotation on Nasdaq NMS under the symbol "ROOM."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 10,312,239
shares of Common Stock issued and outstanding. Of these shares, a total of
5,655,168 shares of Common Stock (including the 2,500,000 shares offered hereby)
will be freely tradable without restriction or registration under the Securities
Act by persons other than "affiliates" of the Company, as defined in the
Securities Act (who would be required to sell under Rule 144 under the
Securities Act). The remaining 4,657,071 shares of Common Stock outstanding upon
completion of the Offering will be "restricted securities" as that term is
defined by Rule 144 (the "Restricted Shares").
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year (including the holding period of any prior owner except an
affiliate), including persons who may be deemed "affiliates" of the Company,
would be entitled to sell within any three-month period a number of shares of
Common Stock that does not exceed the greater of one percent of the number of
shares of Common Stock then outstanding (approximately 130,060 shares upon
completion of the Offering) or the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the
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<PAGE>
filing of a Form 144 with respect to such sales. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements, and to the
availability of current public information about the Company. In addition, a
person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years (including the holding period of any
prior owner except an affiliate), would be entitled to sell such shares under
Rule 144(k) without regard to the requirements described above. Rule 144 also
provides that affiliates who are selling shares that are not Restricted Shares
must nonetheless comply with the same restrictions applicable to Restricted
Shares with the exception of the holding period requirement.
The Company, its officers, directors and Watertone, who beneficially
own 2,799,458 shares of Common Stock (together with an aggregate of 1,250,000
shares of Common Stock underlying outstanding options), have agreed that,
without the prior written consent of Jefferies, he, she or it will not, during
the period ending 180 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option to contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (ii) enter into any swap or similar agreement that transfers,
in whole or in part, the economic risk of ownership of the Common Stock, whether
any such transaction describe in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
Jefferies may, in its sole discretion and at any time without notice, release
all or any portion of the securities subject to these lock-up agreements.
No predictions can be made as to the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock and
could impair the Company's ability to raise capital through an offering of its
equity securities in the future. See "Risk Factors -- Shares Eligible for Future
Sale."
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement")
between the Company and Jefferies, as representative of the several underwriters
named below (collectively, the "Underwriters"), the Company has agreed to sell
to the Underwriters, and the Underwriters have agreed, severally and jointly,
through Jefferies, to purchase the number of shares of Common Stock set forth
opposite their respective names in the table below at the price set forth on the
cover page of this Prospectus.
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
Jefferies & Company, Inc......................
Total................................ 2,500,000
=========
The Underwriting Agreement provides that the obligation of the
Underwriters to purchase the shares of Common Stock offered hereby is subject to
certain conditions. The Underwriters are committed to purchase all of the shares
of Common Stock offered hereby (other than those covered by the over-allotment
option described below), if any are purchased.
The Underwriters propose to offer the Common Stock to the public
initially at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $____ per share. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of $____ per share to certain other dealers. After the
Offering, the public offering price, the concession to selected dealers and the
reallowance to other dealers may be changed by Jefferies.
The Company has granted to the Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase 375,000 additional shares
of Common Stock at the public offering price less the underwriting
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<PAGE>
discounts and commissions, all as set forth on the cover page of this
Prospectus. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase additional shares of
Common Stock proportionate to such Underwriter's initial commitment as indicated
in the preceding table. The Underwriters may exercise such right of purchase
only for the purpose of covering over-allotments, if any, made in connection
with the sale of the shares of Common Stock.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or will
contribute to payments the Underwriters may be required to make in respect
thereof.
The Company has agreed with Jefferies not to offer, issue or sell any
shares of Common Stock or securities exercisable for or convertible into shares
of Common Stock for a period of 180 days from the date of this Prospectus,
subject to certain limited exceptions, without prior written consent of
Jefferies. Certain holders owning an aggregate of 3,792,613 shares of Common
Stock (together with an aggregate of 1,250,000 shares of Common Stock underlying
outstanding options), including all of the officers and directors of the
Company, agreed not to publicly sell or otherwise dispose of their shares of
Common Stock, securities of the Company convertible into or exercisable or
exchangeable for, shares of Common Stock, or shares of Common Stock received
upon conversion, exercise, or exchange of such securities, without the prior
written consent of Jefferies for a period of 180 days from the date of this
Prospectus.
Subject to the sale of all 2,500,000 shares of Common Stock offered
hereby, the Company has also agreed to issue to Jefferies warrants (the
"Jefferies' Warrants") to purchase 2.5% of the outstanding Common Stock on a
fully diluted basis after completion of the Offering at an exercise price of
$12.00 per share. The holders will have certain registration rights with respect
to the Common Stock issuable upon exercise of the Jefferies' Warrants.
In order to facilitate the Offering of the Common Stock, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Common Stock. Specifically, the Underwriters may
over-allot in connection with the Offering, creating a short position in the
Common Stock for their own account. In addition, to cover over-allotments or to
stabilize the price of the Common Stock, the Underwriters may bid for, and
purchase, shares of Common Stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an Underwriter or a dealer
for distributing the Common Stock in the Offering, if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.
The Underwriters and dealers may engage in passive market making
transactions in the Common Stock in accordance with Rule 103 of Regulation M
promulgated by the Securities and Exchange Commission (the "Commission"). In
general, a passive market maker may not bid for, or purchase, the Common Stock
at a price that exceeds the highest independent bid. In addition, the net daily
purchases made by any passive market maker generally may not exceed 30% of its
average daily trading volume in the Common Stock during a specified two month
prior period. A passive market maker must identify passive market making bids as
such on the Nasdaq electronic inter-dealer reporting system. Passive market
making may stabilize or maintain the market price of the Common Stock above
independent market levels. Underwriters and dealers are not required to engage
in passive market making and may end passive market making activities at any
time.
LEGAL MATTERS
The legality of the securities offered hereby and certain other legal
matters will be passed upon for the Company by Olshan Grundman Frome &
Rosenzweig LLP, 505 Park Avenue, New York, New York 10022. Counsel for the
Underwriters in connection with this Offering is Latham & Watkins, 505
Montgomery Street, Suite 1900, San Francisco, California 94111.
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EXPERTS
The financial statements of Hospitality Worldwide Services, Inc. and
Subsidiary except for The Leonard Parker Company (Africa) (Proprietary) Limited
and LPC and Affiliates, included in this Prospectus have been audited by BDO
Seidman, LLP, independent certified public accountants, to the extent and for
the periods set forth in their report appearing elsewhere herein, and is
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting. The financial statements of The Leonard
Parker Company (Africa) (Proprietary) Limited which are not included in this
Prospectus have been audited by Fotinakis Phitidis (SA), to the extent and for
the periods set forth in their report appearing elsewhere herein, and is
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith, files periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information filed with the Commission may be inspected and
copied at the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, its Midwest Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and its Northeast Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
prescribed rates by writing to the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov. The
Common Stock is quoted on Nasdaq and such reports, proxy statements and other
information may also be inspected at the offices of Nasdaq, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form SB-2 under the Securities Act with respect to the securities offered hereby
(such Registration Statement with all exhibits, and amendments thereto being
referred to hereinafter as the "Registration Statement"). This Prospectus, which
is a part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement. For further information with respect to
the Company and the securities offered hereby, reference is made to the
Registration Statement. The statements contained in this Prospectus as to the
contents of any contract or any other document in this Prospectus are not
necessarily complete and, in each instance, reference is made to the copy of
such Registration Statement, each such statement being qualified in any and all
respects by such reference. The Registration Statement, including exhibits, may
be inspected without charge and copied at the Commission's Public Reference
Section located at 450 Fifth Street, N.W., Washington, D.C. 20549, its Midwest
Regional Office, 500 West Madison, Suite 1400, Chicago, Illinois 60661 and its
Northeast Regional Office, 7 World Trade Center, Suite 1300, New York, New York
10048 upon payment of the fees prescribed by the Commission. Such material may
also be accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov.
CHANGE IN ACCOUNTANTS
On March 14, 1996, the Company dismissed Arthur Andersen LLP
("Andersen") as its independent accountants. The Company's Board of Directors
approved such dismissal. Andersen's accountant's report on the financial
statements of the Company for the prior two years did not contain an adverse
opinion or a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope, or accounting principles. On March 15, 1996, BDO
Seidman, LLP was engaged as new independent accountants to the Company.
-43-
<PAGE>
INDEX TO PRO FORMA FINANCIAL STATEMENTS
PAGE
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY
AND THE LEONARD PARKER COMPANY AND AFFILIATES
Unaudited Pro Forma Condensed Consolidated
Financial Information.....................................................P-2
Pro Forma Condensed Consolidated Statements of Operations for
the years ended December 31, 1995 (unaudited) and December 31, 1996
(unaudited), and three months ended March 31, 1996 (unaudited)............P-3
Notes to Pro Forma Condensed Consolidated Statements of Operations..........P-6
P-1
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY
AND THE LEONARD PARKER COMPANY AND AFFILIATES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On August 1, 1995, the Company acquired substantially all of the assets and
business and assumed certain liabilities of AGF Interior Services Co. (d/b/a
Hospitality Restoration and Builders) ("AGF") through its newly formed
subsidiary corporation, Hospitality Restoration and Builders, Inc. ("HRB").
The aggregate consideration for the acquisition pursuant to the Asset Purchase
Agreement which was dated August 1, 1995, subject to final determination
subsequent to that date, was $5,450,000. As finally determined, the purchase
price consists of a $2,150,000 promissory note payable to AGF over five years,
bearing interest at 8% per annum and 2,500,000 shares of the Company's common
stock, delivered to AGF and issued in the name of AGF's sole stockholder,
Watermark Investments Ltd. ("Watermark"). The acquisition resulted in goodwill
of $6,599,639, which is being amortized on a straight-line basis over its
estimated useful life of 17 years. The acquisition was accounted for as a
purchase with the results of HRB included in the consolidated financial
statements from the acquisition date.
On January 10, 1997, Hospitality Worldwide Services, Inc. (the "Company")
acquired The Leonard Parker Company and Affiliates ("LPC"), including its then
subsidiary, Parker Reorder Corporation ("Parker Reorder").
The $12,436,229 purchase price of LPC consisted of 1,250,000 newly issued shares
of Common Stock and 200,000 shares of 6% redeemable convertible preferred stock,
$25 stated value, convertible on a formula basis, into 1,000,000 shares of
Common Stock (subject to upward adjustment to a maximum of 5,000,000 shares in
the event that the market price of the Common Stock is below $5.00 at the time
of conversion) during the period from January 10, 1998 to January 10, 2000. The
acquisition has been accounted for as a purchase with the results of LPC and
Parker Reorder included in the consolidated financial statements of the Company
from the date of acquisition.
The accompanying unaudited pro forma condensed consolidated statements of
operations illustrate the effect of the acquisitions of HRB and LPC on the
Company's results of operations. The unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1996 and three months
ended March 31, 1996, assume the acquisition of LPC took place on January 1,
1996. The condensed consolidated statements of operations for the year ended
December 31, 1995, assumes the acquisitions of LPC and HRB took place on January
1, 1995.
The unaudited pro forma condensed consolidated statements of operations have
been included as required by the rules of the SEC and are provided for
comparative purposes only. The pro forma statements of operations do not purport
to be indicative of the results which would have been obtained if the
acquisitions had been effected on the date or dates indicated or which may be
obtained in the future. The unaudited pro forma condensed consolidated
statements of operations are based on management's current estimate of the fair
value of the securities issued to the former owners of LPC .
The accompanying unaudited pro forma condensed consolidated statements of
operations should be read in conjunction with the respective historical
financial statements of the Company and those of LPC, which are contained
elsewhere herein.
P-2
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY
AND THE LEONARD PARKER COMPANY AND AFFILIATES
PRO FORMA CONDENSED CONSOLIDATED STATMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HWS LPC ADJUSTMENTS (B) PRO FORMA
========================================================================
<S> <C> <C> <C> <C> <C>
Revenues $ 4,980,291 $ 45,143,479 $ 2,179,000 (5) $ 52,302,770
-----------------------------------------------------------------------
Cost of revenues 3,823,779 40,785,288 1,970,000 (6) 46,579,067
Selling, general and administrative
expenses 1,619,189 4,488,527 400,000 (1) 8,008,716
440,000 (2)
835,000 (7)
226,000 (8)
-----------------------------------------------------------------------
5,442,968 45,273,815 3,871,000 54,587,783
-----------------------------------------------------------------------
Loss from operations (462,677) (130,336) (1,692,000) (2,285,013)
-----------------------------------------------------------------------
Other income (expense):
Interest income 120,257 145,425 (17,000) (9) 248,682
Interest expense (13,007) (24,601) (37,608)
-----------------------------------------------------------------------
107,250 120,824 (17,000) 211,074
-----------------------------------------------------------------------
Loss before provision for income taxes (355,427) (9,512) (1,709,000) (2,073,939)
Provision for income taxes 25,000 2,281 (25,000) (10) 2,281
-----------------------------------------------------------------------
Loss from continuing operations (380,427) (11,793) (1,684,000) (2,076,220)
Dividends on preferred shares 300,000 (3) 300,000
-----------------------------------------------------------------------
Loss applicable to common shareholders $ (380,427) $ (11,793) $(1,984,000) $ (2,376,220)
-----------------------------------------------------------------------
Loss per share:
Continuing operations (0.07) (0.28)
------------- ---------------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 5,653,052 8,375,655
------------- ---------------
</TABLE>
See accompanying notes to pro forma financial statements
P-3
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY
AND THE LEONARD PARKER COMPANY AND AFFILIATES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HWS LPC ADJUSTMENTS (B) PRO FORMA
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 24,367,112 $ 58,700,612 $ $ 83,067,724
-----------------------------------------------------------------------
Cost of revenues 18,289,924 51,881,883 70,171,807
Selling, general and administrative
expenses 3,218,520 8,566,005 400,000 (1) 10,309,525
(1,875,000)(2)
-----------------------------------------------------------------------
21,508,444 60,447,888 (1,475,000) 80,481,332
-----------------------------------------------------------------------
Income (loss) from operations 2,858,668 (1,747,276) 1,475,000 2,586,392
Other income (expense):
Interest income 1,141 259,251 260,392
Interest expense (26,101) (18,572) (44,673)
Income (loss) before provision for income
taxes -----------------------------------------------------------------------
2,833,708 (1,506,597) 1,475,000 2,802,111
Provision for income taxes 926,375 45,571 95,000 (4) 1,066,946
-----------------------------------------------------------------------
Income (loss) from continuing operations 1,907,333 (1,552,168) 1,380,000 1,735,165
Dividends on preferred shares 300,000 (3) 300,000
-----------------------------------------------------------------------
Income (loss) applicable to common shareholders $ 1,907,333 $ (1,552,168) $ 1,080,000 $ 1,435,165
-----------------------------------------------------------------------
Income per share:
Continuing operations 0.27 0.17
-------------- --------------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 7,192,361 8,442,361
-------------- --------------
</TABLE>
See accompanying notes to pro forma financial statements
P-4
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY
AND THE LEONARD PARKER COMPANY AND AFFILIATES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HWS LPC ADJUSTMENTS (B) PRO FORMA
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 1,993,321 $ 10,611,472 $ $ 12,604,793
----------------------------------------------------------------
Cost of revenues 1,676,801 8,768,006 10,444,807
Selling, general and administrative
expenses 440,431 1,238,994 100,000 (1) 1,914,425
135,000 (2)
----------------------------------------------------------------
2,117,232 10,007,000 235,000 12,359,232
----------------------------------------------------------------
Income (loss) from operations (123,911) 604,472 (235,000) 245,561
Other income (expense):
Interest income 2,708 - - 2,708
Interest expense - - - -
----------------------------------------------------------------
2,708 - - 2,708
Income (loss) before provision for income
----------------------------------------------------------------
taxes (121,203) 604,472 (235,000) 248,269
Provision for income taxes - - 132,000 (4) 132,000
----------------------------------------------------------------
Income (loss) from continuing operations (121,203) 604,472 (367,000) 116,269
Dividends on preferred shares 75,000 (3) 75,000
----------------------------------------------------------------
Income (loss) applicable to common shareholders $ (121,203) $ 604,472 $ (442,000) $ 41,269
----------------------------------------------------------------
Income per share:
Continuing operations (0.02) 0.01
------------- --------------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 6,949,556 8,199,556
------------- --------------
</TABLE>
See accompanying notes to pro forma financial statements
P-5
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY
AND THE LEONARD PARKER COMPANY AND AFFILIATES
NOTE A
(1) The components of the purchase price of the net assets of LPC are as
follows:
Components of Purchase Price:
Preferred Stock Issued $ 5,000,000
Common Stock Issued 6,953,190
Accrual for acquisition costs 483,039
--------------
Purchase price 12,436,229
Tangible net worth acquired (348,190)
--------------
Goodwill $ 12,088,039
P-6
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY
AND THE LEONARD PARKER COMPANY AND AFFILIATES
NOTE B
The pro forma adjustments to the unaudited pro forma condensed consolidated
statements of income are as follows:
<TABLE>
<CAPTION>
December 31, December 31, March 31,
1995 1996 1996
--------------- ----------------- --------------------
<S> <C> <C> <C>
(1) Amortization of goodwill over an estimated
useful life of 30 years. $400,000 $400,000 $ 100,000
(2) Adjust historical compensation of officers to
compensation per employment agreements entered
into at date of acquisition. $440,000 $(1,875,000) $ 135,000
(3) To record dividends of 6% on preferred stock $300,000 $300,000 $ 75,000
(4) To provide for additional income taxes on LPC's
pro forma income. Prior to the acquisition,
LPC was treated as an S Corporation for
tax purposes. $95,000 $ 132,000
(5) Revenue for seven months for HRB. $2,179,000
(6) Cost of revenues for HRB for seven months. $1,970,000
(7) Selling, general and administrative expenses for
HRB for seven months. $ 835,000
(8) Amortization of goodwill over an estimated
useful life of 17 years. $ 226,000
(9) Adjust interest income for reduction of note
receivable from Watermark. $ (17,000)
(10) Elimination of income tax provision
resulting from utilization of pro forma
operating loss for the seven months
ended July 31, 1995 $ (25,000)
</TABLE>
P-7
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants..........................F-2
Consolidated Balance Sheets as of December 31, 1996 and
March 31, 1997 (unaudited)................................................F-3
Consolidated Statements of Operations for the years ended
December 31, 1995 and 1996 and the three months ended
March 31, 1996 and 1997 (unaudited).......................................F-4
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1995 and 1996
and the three months ended March 31, 1997 (unaudited).....................F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1996 and the three months as ended
March 31, 1996 and 1997 (unaudited).......................................F-6
Notes to Consolidated Financial Statements..................................F-8
THE LEONARD PARKER COMPANY AND AFFILIATES
Reports of Independent Certified Public Accountants.........................F-21
Combined Balance Sheet as of December 31, 1996..............................F-23
Combined Statements of Operations for the years ended
December 31, 1995 and 1996................................................F-24
Combined Statements of Stockholders' Equity for the years
ended December 31, 1995 and 1996..........................................F-25
Combined Statements of Cash Flows for the years ended
December 31, 1995 and 1996................................................F-26
Summary of Accounting Policies..............................................F-28
Notes to Combined Financial Statements......................................F-31
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
Hospitality Worldwide Services, Inc.
New York, New York
We have audited the accompanying consolidated balance sheet of Hospitality
Worldwide Services, Inc. (formerly Light Savers U.S.A., Inc.) and subsidiary as
of December 31, 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hospitality
Worldwide Services, Inc. and subsidiary as of December 31, 1996, and the results
of its operations and its cash flows for each of the two years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
- --------------------
BDO Seidman, LLP
New York, New York
March 21, 1997
F-2
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS (NOTE 8)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
-------------------- ---------------------
Current Assets: (UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 276,191 $ 663,339
Accounts receivable, net of allowance for
doubtful accounts of $50,000 and $309,128 (Notes 5 and 10) 3,134,841 11,745,972
Current portion of note receivable - related party (Note 3) 70,000 88,000
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 6) 2,176,907 2,234,050
Advances to vendors - 744,306
Prepaid and other current assets 421,303 687,050
------------- ------------------
Total current assets 6,079,242 16,162,717
Property and equipment, less accumulated depreciation
of $61,711 and $124,579 (Note 7) 142,877 1,274,223
Goodwill, less accumulated amortization of $549,970 and $747,000 (Note 3) 6,049,669 17,940,655
Notes receivable - related party, less current portion (Note 3) 280,000 262,000
Deferred taxes (Note 9) 65,280 65,280
Other assets 133,022 242,039
============= ==================
$ 12,750,090 $ 35,946,914
============= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
Current Liabilities: (UNAUDITED)
Loan payable - bank (Note 8) $ 1,400,000 $ 2,100,000
Current portion of notes payable and capital lease obligations - 70,000
Accounts payable (Note 5) 1,175,068 6,200,194
Accrued and other liabilities 1,897,389 2,393,490
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 6) 200,802 523,899
Customer deposits - 3,351,265
Income taxes payable 297,860 346,029
---------------- ---------------
Total current liabilities 4,971,119 14,984,877
Notes payable and capital lease obligations,
net of current portion - 150,789
---------------- ---------------
4,971,119 15,135,666
---------------- ---------------
Stockholders' equity: (Notes 3 and 13)
Preferred stock; 3,000,000 shares authorized,
200,000 shares of 6% redeemable convertible,
$25 stated value per share, issued and outstanding - 5,000,000
Common stock, $.01 par value, 20,000,000 shares authorized,
6,725,655 and 8,305,989 outstanding (500,000 shares held in treasury) 72,257 88,065
Additional paid-in capital 8,185,410 15,884,410
Treasury stock (715,000) (715,000)
Foreign currency translation adjustment - (4,987)
Retained earnings 236,304 558,760
---------------- ---------------
Total stockholders' equity 7,778,971 20,811,248
---------------- ---------------
$ 12,750,090 $ 35,946,914
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1995 1996 1996 1997
-------------- ------------- -------------- ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues (Note 12) $ 4,980,291 $ 24,367,112 $ 1,993,321 $ 18,195,826
-------------- ------------- -------------- ---------------
Cost of revenues (Notes 10 and 12) 3,823,779 18,289,924 1,676,801 14,737,150
Selling, general and administrative expenses 1,619,189 3,218,520 440,431 2,642,864
-------------- ------------- -------------- ---------------
5,442,968 21,508,444 2,117,232 17,380,014
-------------- ------------- -------------- ---------------
Income (loss) from operations (462,677) 2,858,668 (123,911) 815,812
-------------- ------------- -------------- ---------------
Other income (expense):
Interest expense (13,007) (26,101) - (34,998)
Interest income 120,257 1,141 2,708 6,008
-------------- ------------- -------------- ---------------
107,250 (24,960) 2,708 (28,990)
-------------- ------------- -------------- ---------------
Income (loss) before provision for income taxes (355,427) 2,833,708 (121,203) 786,822
Provision for income taxes (Note 9) 25,000 926,325 - 389,366
-------------- ------------- -------------- ---------------
Income (loss) from continuing operations (380,427) 1,907,383 (121,203) 397,456
-------------- ------------- -------------- ---------------
Discontinued operations: (Note 4)
Loss from discontinued operations (336,736) (64,705) - -
Loss on disposal of discontinued operations (398,806) - - -
-------------- ------------- -------------- ---------------
Loss from discontinued operations (735,542) (64,705) - -
-------------- ------------- -------------- ---------------
Net income (loss) (1,115,969) 1,842,678 (121,203) 397,456
Preferred dividends - - - 75,000
============== ============= ============== ===============
Net income (loss) applicable to common shareholders $ (1,115,969) $ 1,842,678 $ (121,203) $ 322,456
============== ============= ============== ===============
Primary:
Net income (loss) per share
from continuing operations $ (0.07) $ 0.27 $ (0.02) $ 0.04
-------------- ------------- -------------- ---------------
Discontinued operations:
Loss from operations (0.06) (0.01) - -
Loss on disposal (0.07) - - -
-------------- ------------- -------------- ---------------
(0.13) (0.01) - -
-------------- ------------- -------------- ---------------
Net income (loss) per share $ (0.20) $ 0.26 $ (0.02) $ 0.04
============== ============= ============== ===============
Fully Diluted:
Net income (loss) per share
from continuing operations $ (0.07) $ 0.26 $ (0.02) $ 0.04
-------------- ------------- -------------- ---------------
Discontinued operations:
Loss from operations (0.06) (0.01) - -
Loss on disposal (0.07) - - -
-------------- ------------- -------------- ---------------
(0.13) (0.01) - -
-------------- ------------- -------------- ---------------
Net income (loss) per share $ (0.20) $ 0.25 $ (0.02) $ 0.04
============== ============= ============== ===============
Weighted average number of common and
common equivalent shares outstanding 5,653,052 7,192,361 6,949,556 9,031,214
============== ============ ============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND PERIOD ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK
-------------------------------------------------------
NUMBER OF PAR NUMBER OF PAR TREASURY
SHARES VALUE SHARES VALUE STOCK
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 - $ - 4,625,655 $46,257 $ -
Issuance of 2.5 million shares in
connection with acquisition (Note 3) - - 2,500,000 25,000 -
Sale of available-for-sale securities - - - - -
Net loss - - - - -
----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 - - 7,125,655 71,257 -
Purchase of treasury stock (Note 13) - - (1,000,000) - (1,152,500)
Sale of treasury stock (Note 13) - - 500,000 - 437,500
Stock issued in settlement of
service contract liability (Note 13) - - 75,000 750 -
Stock options issued for consulting
services (Note 13) - - - - -
Exercise of stock options and warrants - - 25,000 250 -
Net income - - - - -
-----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 - - 6,725,655 72,257 (715,000)
-----------------------------------------------------------------------
Exercise of stock options
and warrants (unaudited) (Note 13) - - 330,000 3,000 -
Stock issued in connection with
acquisition (Note 3) (unaudited) 200,000 5,000,000 1,250,000 12,808 -
Foreign currency
translation adjustment (unaudited) - - - - -
Stock options issued for consulting
services (unaudited) - - - - -
Net income (unaudited) - - - - -
----------------------------------------------------------------------------
BALANCE, MARCH 31, 1997 200,000 5,000,000 8,305,655 88,065 (715,000)
============================================================================
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
FOREIGN UNREALIZED
ADDITIONAL CURRENCY LOSS ON RETAINED TOTAL
PAID IN TRANSLATION MARKETABLE EARNINGS STOCKHOLDERS'
CAPITAL ADJUSTMENT SECURITIES (DEFICIT) EQUITY
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $4,590,285 $ - $(52,938) $ (490,405) $ 4,093,199
Issuance of 2.5 million shares in
connection with acquisition (Note 3) 3,275,000 - - - 3,300,000
Sale of available-for-sale securities - - 52,938 - 52,938
Net loss - - - - (1,115,969) (1,115,969)
------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 7,865,285 - - (1,606,374) 6,330,168
Purchase of treasury stock (Note 13) - - - - (1,152,500)
Sale of treasury stock (Note 13) 62,500 - - - 500,000
Stock issued in settlement of
service contract liability (Note 13) 149,250 - - - 150,000
Stock options issued for consulting
services (Note 13) 44,000 - - - 44,000
Exercise of stock options and warrants 64,375 - - - 64,625
Net income - - - 1,842,678 1,842,678
------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 8,185,410 - - 236,304 7,778,971
------------------------------------------------------------------------------
Exercise of stock options
and warrants (unaudited) (Note 13) 742,000 - - - 745,000
Stock issued in connection with
acquisition (Note 3) (unaudited) 6,941,000 - - - 11,953,808
Foreign currency
translation adjustment (unaudited) - (4,987) - - (4,987)
Stock options issued for consulting
services (unaudited) 16,000 - - - 16,000
Net income (unaudited) - - - 322,456 322,456
------------------------------------------------------------------------------
BALANCE, MARCH 31, 1997 15,884,410 (4,987) - 558,760 20,811,248
==============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996
---------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (1,115,969) $ 1,842,678
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation and amortization 178,801 404,114
Provision for losses on accounts receivable 125,366 (101,000)
Write off of accounts receivable - -
Loss on disposal of discontinued operations 398,806 -
Realized loss on sale of securities 52,938 -
Stock options issued for services - 44,000
Deferred income taxes - (65,280)
(Increase) decrease in current assets:
Accounts receivable (539,439) (1,447,005)
Notes receivable - -
Current assets of discontinued operations (145,317) 145,317
Costs and estimated earnings in excess of billings - -
on uncompleted contracts (129,734) (2,047,173)
Advances to vendors - -
Prepaid and other current assets 182,029 (290,632)
Other assets (9,632) (81,014)
Increase (decrease) in current liabilities:
Accounts payable 495,158 134,481
Accrued and other liabilities 360,172 862,204
Billings in excess of costs and estimated earnings - -
on uncompleted contracts (640,175) (419,772)
Customer deposits - -
Accrued loss on disposal of discontinued operations - (398,806)
Income taxes payable - 297,860
-------------- --------------
NET CASH USED FOR OPERATING ACTIVITIES (786,996) (1,120,028)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities 3,047,243 -
(Purchase) sale of short term marketable securities (715,000) 715,000
Payment for acquisition, net of acquired cash 125,966 -
Purchase of property and equipment (40,819) (65,682)
-------------- --------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,417,390 649,318
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1997
---------------- ------------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (121,203) $ 322,456
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation and amortization 127,166 260,078
Provision for losses on accounts receivable (101,000) 10,000
Write off of accounts receivable - (83,050)
Loss on disposal of discontinued operations - -
Realized loss on sale of securities - -
Stock options issued for services - 16,000
Deferred income taxes - -
(Increase) decrease in current assets:
Accounts receivable 462,430 (2,433,508)
Notes receivable (25,000) -
Current assets of discontinued operations 145,317 -
Costs and estimated earnings in excess of billings - -
on uncompleted contracts 83,225 (57,143)
Advances to vendors - (190,306)
Prepaid and other current assets 105,951 (159,051)
Other assets 6,025 (82,038)
Increase (decrease) in current liabilities:
Accounts payable 103,316 409,483
Accrued and other liabilities (54,659) (32,200)
Billings in excess of costs and estimated earnings - -
on uncompleted contracts (351,221) 323,097
Customer deposits - 74,223
Accrued loss on disposal of discontinued operations (398,806) -
Income taxes payable - 42,020
---------------- --------------
NET CASH USED FOR OPERATING ACTIVITIES (18,459) (1,579,939)
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities - -
(Purchase) sale of short term marketable securities 715,000 -
Payment for acquisition, net of acquired cash - 688,925
Purchase of property and equipment - (207,896)
---------------- --------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 715,000 481,029
---------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C>
Proceeds from borrowings on loan payable - bank 455,926 $ 1,400,000
Repayment of loan payable - bank - (455,926)
Purchase of treasury stock - (1,152,500)
Proceeds from sale of treasury stock - 500,000
Note receivable (2,574,521) -
Proceeds from borrowings on notes payable - -
Repayment of notes payable and capital lease obligations - -
Proceeds from issuance of stocks and warrants - 64,625
NET CASH PROVIDED BY (USED FOR)
------------ -----------
FINANCING ACTIVITIES (2,118,595) 356,199
------------ -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH - -
------------ -----------
NET (DECREASE) INCREASE IN CASH (488,201) (114,511)
CASH, BEGINNING OF PERIOD 878,903 390,702
------------ -----------
CASH, END OF PERIOD $ 390,702 $ 276,191
============ ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 12,486 $ 26,101
Income taxes - 696,324
NON-CASH TRANSACTIONS:
Fair value (including goodwill) of net assets acquired 5,450,000 -
Stock issued for assets acquired (3,300,000) -
Note payable for assets acquired (2,150,000) -
Stock issued in settlement of service contract liability - 150,000
Settlement of debt by issuance of stock - (150,000)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
1996 1997
--------------- -------------------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C>
Proceeds from borrowings on loan payable - bank - 700,000
Repayment of loan payable - bank (455,926) -
Purchase of treasury stock (437,500) -
Proceeds from sale of treasury stock 324,700 -
Note receivable - -
Proceeds from borrowings on notes payable - 59,078
Repayment of notes payable and capital lease obligations - (13,033)
Proceeds from issuance of stocks and warrants - 745,000
NET CASH PROVIDED BY (USED FOR)
----------------- -------------
FINANCING ACTIVITIES (568,726) 1,491,045
----------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (4,987)
----------------- -------------
NET (DECREASE) INCREASE IN CASH 127,815 387,148
CASH, BEGINNING OF PERIOD 390,702 276,191
----------------- -------------
CASH, END OF PERIOD $ 518,517 $ 663,339
================= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ - $ 35,442
Income taxes - 307,125
NON-CASH TRANSACTIONS:
Fair value (including goodwill) of net assets acquired - 11,953,190
Stock issued for assets acquired - (11,953,190)
Note payable for assets acquired - -
Stock issued in settlement of service contract liability - -
Settlement of debt by issuance of stock - -
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND
BASIS OF PRESENTATION
Over the past two years, Hospitality Worldwide Services Inc.,
(the "Company") has evolved from a lighting fixture design, manufacturing and
installation company formerly know as Light Savers, U.S.A., Inc., into an
organization dedicated to providing a broad range of outsourcing services to the
hospitality industry. These services include the procurement of hotel furniture,
fixtures and equipment and the reorder of hotel operating supplies and
equipment. In addition, the Company is also engaged in all aspects of the hotel
renovation business. In August 1995, the Company acquired the assets comprising
the business of Hospitality Restoration and Builders, Inc. ("HRB"), and in
January 1997, the Company acquired The Leonard Parker Company and affiliates
("LPC"), including its then subsidiary, Parker Reorder Corporation ("Parker
Reorder").
Founded in 1969, LPC provides procurement services to hotel
owners, operators and developers in the United States and internationally. HRB
has provided a wide variety of renovation services to the hospitality industry
for over 18 years. Parker Reorder provides hotel properties with the ability to
order, on an as needed basis, any and all of the products used by such
properties.
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, HRB, as of December 31, 1996, and
HRB, LPC and Parker Reorder as of March 31, 1997. All significant intercompany
balances and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements as of March 31, 1997 and
for the three months ended March 31, 1997 and 1996 are presented as unaudited.
In the opinion of management, these financial statements include all adjustments
necessary to present fairly the information set forth therein. These adjustments
consist solely of normal recurring accruals. The interim results of operations
for the three months ended March 31, 1997 and 1996 are not necessarily
indicative of the results to be expected for the full year or for any other
interim period.
REVENUE RECOGNITION
Renovation
The Company recognizes revenues and earnings on contracts
using the percentage of completion method, based primarily on contract costs
incurred to date compared to total estimated contract costs.
To the extent contracts extend over one year, revisions in
cost and profit estimates during the course of the work are reflected in the
accounting period in which the facts which require the revision become known.
Assets and liabilities related to contracts are included in current assets and
current liabilities in the accompanying consolidated balance sheet, as they will
be liquidated in the normal course of contract completion, although this may
require more than one year.
F-8
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
Revenues on short-term contracts are recognized based on the
completed contract method, results of which are not materially different than
the percentage of completion method for such contracts.
At the time a loss on a contract becomes known, the amount of
the estimated ultimate loss on both short and long-term contracts is accrued.
Claims (cost recoveries from construction projects) are
recorded when realization is probable and the amount can be reliably estimated.
Procurement
Revenues are recognized two ways; (i) as a purchaser and
reseller of products, the Company recognizes all revenues associated with the
products it purchases at the time of shipment of the respective product, and
(ii) when the Company acts as an agent, revenue is recognized as service fee
income at the time the service is provided. Revenues include both resale of
product and service fee income.
Customer deposits consist of amounts remitted to the Company
by customers as deposits on specific contracts.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and shown net of
depreciation. The Company provides for depreciation using the straight-line
method over estimated useful lives (generally 3-7 years) for financial reporting
purposes, and the accelerated method for income tax reporting purposes.
GOODWILL
Goodwill is amortized on a straight-line basis over its
estimated useful life of 17-30 years. The Company periodically evaluates
goodwill based upon the expected undiscounted cash flow from the acquired
business.
NET INCOME (LOSS) PER SHARE OF COMMON STOCK
Net income (loss) per share of common stock was computed by
dividing the earnings (loss) by the weighted average number of common shares and
common stock equivalents outstanding during the period.
INCOME TAXES
The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("Statement 109"). Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities, if any, are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
F-9
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
FOREIGN CURRENCY
The Company has foreign subsidiaries operating in South Africa
and Asia. With respect to the financial statements, foreign affiliates assets
and liabilities are translated to United States dollars ("U.S. $") at the rate
prevailing on the balance sheet dates and the income statements have been
translated from the functional currency to U.S. $ using an average exchange rate
for the applicable period. Results of this translation process are accumulated
as a separate component of stockholders' equity. Exchange gains or losses are
included in operating expense in the accompanying consolidated statements of
operations.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of",
which requires that certain long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. This standard is effective for fiscal years that begin
after December 15, 1995. The Company's adoption of this pronouncement on January
1, 1996 did not have a material impact on the Company's consolidated financial
statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of financial instruments including cash
and cash equivalents, accounts receivable, loan payable - bank, accounts
payable, and other liabilities approximate fair value due to the relatively
short maturities of these instruments. Due to the nature of the transaction and
the relationship of the parties involved, it is not practical to determine the
fair value of the note receivable - related party.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123 ("SFAS No.123"),
"Accounting for Stock-Based Compensation", which allows a choice of either the
intrinsic value method or the fair value method of accounting for employee stock
options. The Company has chosen to continue the use of the intrinsic value
method. Expenses related to stock options issued to nonemployees are accounted
for using the fair value at the date of grant as required by SFAS No. 123.
RECENT ACCOUNTING STANDARD
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 128 ("SFAS No. 128"), "Earnings Per Share".
SFAS No. 128 specifies the computation, presentation and disclosure requirements
for earnings per share. SFAS No. 128 is effective for periods ending after
December 15, 1997. The adoption of this statement is not expected to have a
material effect on the consolidated financial statements.
PRESENTATION OF PRIOR YEAR DATA
Certain reclassifications have been made to conform prior year
data with the current presentation.
F-10
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
3. ACQUISITION OF BUSINESS
HRB
On August 1, 1995, the Company acquired substantially all of
the assets and business and assumed certain liabilities of AGF Interior Services
Co. (d/b/a Hospitality Restoration and Builders) ("AGF") through its newly
formed subsidiary corporation, HRB. HRB provides interior and exterior cosmetic
renovations and maintenance for hotel and hospitality customers nationwide.
The aggregate consideration for the acquisition was
$5,450,000. As finally determined, the purchase price consists of a $2,150,000
promissory note payable to AGF over five years, bearing interest at 8% per annum
and 2,500,000 shares of the Company's common stock, delivered to AGF and issued
in the name of AGF's sole stockholder, Watermark Investments Ltd. ("Watermark").
The acquisition resulted in goodwill of $6,599,639, which is being amortized on
a straight-line basis over its estimated useful life of 17 years. The
acquisition was accounted for as a purchase with the results of HRB included in
the consolidated financial statements from the acquisition date.
On May 23, 1995, the Company loaned AGF $2,500,000, evidenced
by a promissory note ("Note Receivable"), payable over five years and bearing
interest at 8% per annum. On April 12, 1996, the Company and Watermark agreed to
offset the $2,150,000 note payable and the $2,500,000 note receivable, with a
net balance of $350,000 receivable in 60 equal monthly installments with
interest at 7% per annum with payments commencing January 1997.
LPC
On January 10, 1997, the Company acquired LPC, a purchasing
company for the hospitality industry that acts as an agent for the purchase of
goods and services for its customers which include major hotels and management
companies worldwide. The purchase price of approximately $12,400,000, which is
subject to downward adjustment based on the net worth of LPC as of December 31,
1996, consisted of 1,250,000 newly issued shares of Common Stock of the Company,
and 200,000 shares of newly issued 6% redeemable convertible preferred stock,
$25 stated value per share ("LPC Preferred"). (See Note 13(a)). The acquisition
was accounted for as a purchase, with the results of LPC included in the
consolidated financial statements from the acquisition date. The cost in excess
of net assets acquired (goodwill) was $12,088,016, and is being amortized over
30 years using the straight-line method.
The following pro forma consolidated financial information has
been prepared to reflect the acquisition of the assets and business of AGF, and
the acquisition of LPC. The pro forma financial information is based on the
historical financial statements of the Company, AGF, and LPC, and should be read
in conjunction with the accompanying footnotes. The accompanying pro forma
operating statements are presented as if the transactions occurred January 1,
1995. The pro forma financial information is unaudited and is not necessarily
indicative of what the actual results of operations of the Company would have
been assuming the transactions had been completed as of January 1, 1995, and
neither is it necessarily indicative of the results of operations for future
periods.
F-11
<PAGE>
xx
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------- -------------------------------------------------------
Year Ended Three months ended
December 31, March 31,
(Unaudited) 1996 1995 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues $ 83,067,724 $ 52,302,770 $ 12,604,793
Net income (loss) from continuing operations
applicable to common shares $ 1,435,165 $ (2,376,220) $ 41,269
Net income (loss) per share from continuing
operations
$ 0.17 $ (0.28) $ 0.01
- ----------------------------------------------------------------------------- ---- -------------------- ----
</TABLE>
The above unaudited pro forma consolidated financial
information has been adjusted to reflect the following:
1. HRB - amortization of goodwill, as generated by the acquisition, over a
17-year period, interest income on the $350,000 note receivable, elimination of
the interest income on the $2,500,000 funds used in connection with the
acquisition from January 1 to July 31, 1995 and the issuance of 2,500,000 common
shares in the transaction. The impact of outstanding stock options was not
included in the calculation of net loss per share since the effect would be
antidilutive.
2. LPC - amortization of goodwill as generated by the acquisition, over a 30
year period, adjustments to reflect LPC's officers' employment agreements
entered into at the date of acquisition, dividends of 6% on the LPC Preferred
and additional income taxes on LPC's pro forma income, and the issuance of
1,250,000 common shares in the transaction.
4. DISCONTINUED OPERATIONS
In December 1995, the Company determined to focus its
resources on its hospitality and restoration business and discontinue its
lighting business. On February 26, 1996, the Company entered into a divestiture
agreement with its former President. In accordance with the agreement, the
Company disposed of the lighting business, together with its accounts
receivable, inventory and fixed assets to the former President, who also assumed
certain liabilities. Additionally, in accordance with the agreement, the
following occurred: (i) the Company repurchased 500,000 shares of common stock
from the former President for $250,000 with a market value of $437,500; (ii) the
Company retained the former President as a consultant for a three year period at
an annual salary of $100,000, (iii) the former President granted to the Company
the option to purchase an additional 1,000,000 shares of common stock over a two
year period at a 33% discount from the average trading price for the prior 20
trading days prior to purchase, but not below certain minimum set prices.
In 1995, the Company incurred a loss on disposal of discounted
operations of $398,806, which primarily includes the present value of the
amounts payable to the former President. Revenues of the lighting business
segment for 1995 were $530,000. In 1996, the Company incurred additional losses
from discontinued operations of $64,705.
5. ACCOUNTS RECEIVABLE/ACCOUNTS PAYABLE
Accounts receivable include retainages (amounts withheld by
customers until completion of projects) amounting to $585,000 as of December
31,1996, and $625,000 as of March 31, 1997, on contracts which are collectible
upon the acceptance by the owner, and are anticipated to be collected in their
entirety in 1997.
The Company withholds a portion of payments due subcontractors as retainages
($181,528 at December 31, 1996 and $156,000 as of March 31, 1997). The
subcontractor balances are paid when the Company collects its retainages
receivable.
F-12
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
6. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Billings on uncompleted contracts in excess of costs and estimated earnings
represent deferred revenue and consist of:
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1997
- ------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Costs incurred on uncompleted contracts $ 19,962,133 $21,418,400
Estimated earnings 7,027,729 8,392,978
Billings to date (25,013,757) (28,101,227)
- ---------------------------------------------------------------------------------------------------
Costs on uncompleted contracts in excess of billings
and estimated earnings $ 1,976,105 $ 1,710,151
- ---------------------------------------------------------------------------------------------------
Included in the accompanying consolidated balance
sheet under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 2,176,907 $ 2,234,050
Billings in excess of costs and estimated
earnings on uncompleted contracts (200,802) (523,899)
- ---------------------------------------------------------------------------------------------------
$ 1,976,105 $ 1,710,151
- ---------------------------------------------------------------------------------------------------
7. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
December 31, 1996 March 31, 1997
- ------------------------------------------------------------------------------------------------------
(unaudited)
Furniture and fixtures $ 52,048 $ 267,487
Office equipment 134,153 502,533
Computer Software - 403,349
Leasehold improvements 18,387 225,433
- -----------------------------------------------------------------------------------------------------
204,588 1,398,802
Less: Accumulated depreciation (61,711) (124,579)
- -----------------------------------------------------------------------------------------------------
$ 142,877 $ 1,274,223
- -----------------------------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
8. BORROWINGS
A. PAYABLE - BANK
In 1996, the Company secured a line of credit ("line")
with a bank, which expires September 30, 1997. The line provides for
borrowings up to $2.2 million, with interest at prime + 1/2% (8.75% at December
31, 1996 and 9% at March 31, 1997) and is collateralized by all Company assets.
At December 31, 1996, and March 31 1997, the Company had an outstanding balance
of $1.4 million and $2.1 million, respectively, on the line. LPC also has
available a $1,000,000 line of credit with a bank, which bears interest at prime
+ .25% and is secured by LPC's accounts receivable. There was no borrowing under
this line of credit at March 31, 1997. The Company is currently negotiating a
new line of credit with a bank for up to $6,000,000 that would replace the
current line of credit.
A. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
March 31, 1997
---------------------------------------------------------------------
Prime plus 3/4% (9% at March 31, 1997) note payable
with a financial institution, principal and interest
due monthly, matures June 1998 secured
by certain assets of LPC $ 70,833
19 1/2% note payable, principal and interest due
monthly, matures August 2001, collateralized by
property and equipment
19,465
9 3/4% capital lease obligation, payable in monthly
installments of $1,578, expiring in August 2001,
collateralized by telephone equipment 68,725
Other 61,766
---------------------------------------------------------------------
220,789
Less current maturities 70,000
---------------------------------------------------------------------
$ 150,789
---------------------------------------------------------------------
9. PROVISION FOR INCOME TAXES
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Three months ended
Year ended December 31, March 31,
----------------------------------------------------------------------------------------
1995 1996 1996 1997
- ------------------------------------------------------------------------------------------------- -----------------------
Current: (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Federal $ - $ 620,929 $ - $ 304,177
State 25,000 370,676 - 85,189
---------------- --------------- --------------- ---------------
25,000 991,605 - 389,366
Deferred:
Federal and State - (65,280) - -
- -------------------------------------------------------------------------------------------------------------------------
$ 25,000 $ 926,325 $ - $ 389,366
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
The following is a reconciliation of the Company's income taxes based on the
statutory rate and the actual provision for income taxes:
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------- -------------------
Year ended December 31, March 31,
- ---------------------------------------------------------- ---- ----------------------------------------------- -------------------
1995 1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Statutory Federal income tax @ 34% $ (120,845) $ 963,640 $ (41,209) $ 267,519
Increase (decrease) resulting from:
State and local taxes, net of Federal tax benefit 16,500 239,027 56,224
Nondeductible goodwill amortization and expenses 28,000 56,861 11,390 45,707
Valuation allowance 101,345 (339,120)
Other - 5,917 29,819 19,916
- ------------------------------------------------------------------------------------------------------------- --------------
Provision for income taxes $ 25,000 $ 926,325 $ - $ 389,366
- ------------------------------------------------------------------------------------------------------------- --------------
</TABLE>
At December 31, 1995 there was a deferred tax asset of
$339,120 primarily resulting from net operating loss carry forwards and non
deductible accruals. The full amount of the deferred tax asset was offset by a
valuation allowance due to uncertainties with achieving future profitable
operations. The valuation allowance was decreased by $339,120 during 1996 due to
the Company's profitability during 1996, and an assessment that it is
more-likely-than-not that operations will continue to generate taxable income.
The primary tax effects of the temporary differences, which
give rise to the Company's net deferred tax asset, are as follows:
December 31, 1996
---------------------------------- ------------
Accrued liabilities $ 87,280
Goodwill amortization (22,000)
--------------
$ 65,280
--- -----------
10. RELATED PARTY TRANSACTIONS
The Company hired Interstate Interior Services ("Interstate")
as a subcontractor on certain of its projects. The President of Interstate is
the sister of one of the Company's officers. During 1996 and from August 1,
1995, the date of the acquisition of the assets comprising the business of HRB,
to December 31, 1995, the Company paid fees of $172,786 and $712,137,
respectively, to Interstate.
During 1996 and for the three months ended March 31, 1997, the
Company performed renovation services for Watermark, the Company's major
shareholder. As of December 31, 1996 and March 31, 1997 the Company had a
receivable balance of $492,124 and $200,000, respectively from, Watermark. The
December 31, 1996 balance was paid in full during the first quarter of 1997.
F-15
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
11. COMMITMENTS
(A) LEASE COMMITMENTS
The Company leases office space in New York, California
and Florida, which expire at various dates through 2007.
The aggregate future minimum lease payments due under
operating leases are as follows:
December 31,
- --------------------------------------------------------------------------------
1997 $ $765,404
1998 911,174
1999 867,020
2000 784,318
2001 688,318
Thereafter 1,121,931
- --------------------------------------------------------------------------------
$ 5,138,165
- --------------------------------------------------------------------------------
Rent expense for the years ended December 31, 1995 and 1996
and for the three months ended March 31, 1996 and 1997 was $120,534, $88,000,
$141,000 and $234,000, respectively.
(B) EMPLOYMENT AGREEMENTS
The Company has employment agreements with eight management personnel,
which expire at various periods through January 1, 2000. The agreements call for
annual compensation of $1,550,000.
12. MAJOR CUSTOMERS AND SUBCONTRACTOR
Most of the Company's customers are in the hospitality
industry with a few of them accounting for a substantial portion of annual
revenues. As a result, the trade accounts receivable and costs in excess of
billings subject the Company to concentration of credit risk. As of December 31,
1996, two customers accounted for approximately 80% and 65% of accounts
receivable and costs in excess of billings, respectively. As of March 31, 1997,
one customer accounted for 10.4% of accounts receivable and three customers
accounted for 89% of costs in excess of billings.
The two largest customers of the Company for the year ended
December 31, 1996 accounted for 49% and 31% of net revenues, and the four
largest customers for the year ended December 31, 1995 accounted for 23%, 19%,
18%, and 14% of net revenues. For the period ended March 31, 1997 the Company
had two customers which accounted for 31% of net revenues, and for the period
ended March 31, 1996, the four largest customers accounted for 21%, 17%, 14% and
12% of net revenues.
During 1996, 35% of the Company's cost of revenues were costs
charged by one subcontractor.
13. STOCKHOLDERS' EQUITY
(a) Preferred Stock
In connection with the acquisition of LPC, the Company
designated and issued 200,000 shares of LPC Preferred. Holders of the LPC
Preferred have the right at such holders' option, at any one time during the
period from January 11, 1998 to January 10, 2000, to convert all of such
holder's shares of LPC Preferred into (i) such whole number of shares of Common
Stock equal to the product of 25, which represents the stated value of the LPC
F-16
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
Preferred, and the number of such holder's of LPC Preferred , divided by the
average closing sale price for the Common Stock for the 20 trading days
immediately prior to the date written notice of the holder's intention to
exercise the conversion option is given (the "Conversion Rate"); provided,
however, that in no case shall the number of shares of Common Stock into which
each share of LPC Preferred may be converted be less than five or greater than
25 or (ii) such whole number of shares of Common Stock, par value $1.00 per
share, of Parker Reorder (the "Parker Common Stock") equal to 9.80% of the
outstanding shares of Parker Common Stock as calculated immediately after such
conversion.
The Company is restricted from paying or declaring any dividends on any
capital stock other than the LPC Preferred issued in connection with the
acquisition of LPC ,so long as such LPC Preferred is outstanding.
So long as any of the LPC Preferred remains outstanding, the holders of
the LPC Preferred shall be entitled to receive out of the cumulative net profit,
as defined, of Parker Reorder a cash payment (the "participating dividends")
equal to 20% of the cumulative net profit, as defined, from January 1, 1997 of
Parker Reorder, less all participating dividends previously paid to the holders
of the LPC Preferred .
(b) Common Stock
On January 26, 1994, the Company completed its initial public offering
("IPO") of 1,437,500 shares of Common Stock at a price of $3.00 per share less
an underwriter's discount of 10%. This included an additional 187,500 shares
purchased by the underwriter on an over-allotment option grant, which was
exercised simultaneously with the completion of the offering. Proceeds of the
IPO, net of commissions of $431,250 and other related expenses of $486,958 (of
which $265,016 was recorded in 1993 as deferred costs), were $3,394,292.
The underwriter received warrants to purchase 125,000 shares
exercisable at $3.60 per share for a period of four years commencing one year
from the effective date of the IPO. Additionally, the Company reimbursed the
underwriter on a non-accountable basis for its expense in the amount of 3% of
the gross proceeds of the IPO.. During 1996, 12,500 warrants were exercised. For
the three months ended March 31, 1997 an additional 70,834 warrants were
exercised.
On February 28, 1996, the Company engaged a financial advisor until
December 31, 1997. As compensation for such engagement, the Company granted the
financial advisor a five-year option to purchase 500,000 shares of Common Stock
at an exercise price of $2.00 per share and agreed to pay a retainer of $10,000
per month for at least one year. The fair value of the options of $44,000 has
been recorded as prepaid consulting and is being amortized over a two year
period, the term of the agreement, ending February 28, 1998. A director of the
Company is also a managing director of the financial advisor. On January 15,
1997, the financial advisor exercised 200,000 options resulting in $400,000 of
additional capital to the Company.
In March 1996 in accordance with the divestiture agreement between the
Company and its former President, the Company repurchased 500,000 shares of
Common Stock for $250,000 with a market value of $437,500.
In April 1996, the Company consummated a private placement of the
500,000 shares of Common Stock for aggregate gross proceeds of $500,000.
In September 1996, the Company issued 75,000 shares to two former
consultants to the discontinued lighting business in settlement of the unexpired
portion of their service agreements.
In October 1996, in accordance with the divestiture agreement between
the Company and its former President, the Company repurchased an additional
500,000 shares of Common Stock for $715,000.
During the quarter ended March 31, 1997, 330,000 options were
exercised, including 200,000 options by the financial advisor, for total
proceeds to the Company of $745,000.
F-17
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
14. STOCK OPTION PLAN
At December 31, 1996, the Company has three stock option plans, which
are described below. As permitted by Statement of Financial Accounting Standards
No. 123, the Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for the plans. Under APB
Opinion 25, when the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation cost is recognized.
During 1994, the Company's Board of Directors adopted the 1994
Non-Statutory Stock Option Plan (the "1994 Plan") for purposes of issuance of up
to 100,000 shares of the Company's Common Stock to certain key employees or
consultants. With respect thereto, options to purchase 85,000 shares at $1.275
per share were granted and 50,000 of such options remain outstanding, and are
currently exercisable and expire on October 3, 1999. The 1994 Plan was retired,
and there are no options available for grant. Additionally, during 1995 the
Company granted 75,000 non Plan options at $1.275 per share of which 50,000
options remain outstanding and are currently exercisable. The remaining non plan
options expire on March 15, 2000.
On September 26, 1996, the Company's Board of Directors adopted the
1996 Stock Option Plan (the "Plan") for issuance of up to 1,700,000 shares of
the Company's Common Stock for the purpose of providing incentive to the
officers and employees of the Company who are primarily responsible for the
management and growth of the Company. Each option granted pursuant to the Plan
shall be designated at the time of grant as either an "incentive stock option"
or as a "non-qualified stock option". The Company granted 1,191,500 options
under the Plan since adoption at an average grant price of $3.62 per share, of
which 18,250 options have been exercised to date and 447,500 are currently
exercisable.. The term for each option granted is determined by the Stock Option
Committee, which is composed of two or more members of the Board of Directors,
provided the maximum length of the term of each option granted will be no more
than ten years. The Company has available 508,500 shares for grant under the
Plan.
On September 26, 1996, the Company's Board of Directors adopted, and
the shareholders approved, the 1996 Outside Directors' Stock Option Plan (the
"Outside Directors' Plan") for the issuance of up to 250,000 shares of the
Company's Common Stock for the purpose of securing for the Company and its
shareholders the benefits arising from stock ownership by its outside directors.
Subject to shareholder approval, each outside director who becomes an outside
director after March 1, 1996 shall receive an initial grant of an option to
purchase 15,000 shares of Common Stock. To the extent that shares of Common
Stock remain available for the grant of options under the Outside Directors'
Plan on April 1 of each year, beginning on April 1, 1997, each outside director
shall be granted an option to purchase 10,000 shares of Common Stock. Options
granted under the Outside Directors' Plan shall be exercisable in three equal
installments beginning on the first anniversary of the grant date. The Company
granted options to purchase 100,000 shares under the Outside Directors' Plan at
an average grant price of $4.10, of which none are currently exercisable . The
Company has available 150,000 shares for grant under the Outside Directors Plan.
SFAS No. 123, requires the Company to provide pro forma information
regarding net income and earnings per share as if compensation cost for the
Company's stock option plans had been determined in accordance with the fair
value-based method prescribed in SFAS Statement 123. The Company estimates the
fair value of each stock option at the grant date by using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1995 and 1996, respectively: no dividends paid for all years; expected
volatility of 40%; risk-free interest rate of 6.41%; and expected lives of 2
years.
F-18
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
Under the accounting provisions of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below.
1996 1995
----------- ----------
Net income (in thousands)
As reported $ 1,843 $ (1,116)
Pro forma $ 1,583 $ (1,182)
Primary earnings per share
As reported $ 0.26 $ (0.20)
Pro forma $ 0.22 $ (0.21)
The following table contains information on stock options for the three
year period ended December 31, 1996, and the three months ended March 31, 1997.
<TABLE>
<CAPTION>
Exercise Weighted
Option price range average
Shares per share exercise price
- -------------------------------------------------------------- ----------------------------- -----------------------
<S> <C> <C> <C>
Outstanding, January 1, 1994 - - -
Granted 85,000 $1.275 $1.275
Exercised - - -
Canceled - - -
- -------------------------------------------------------------- ----------------------------- -----------------------
Outstanding, December 31, 1994 85,000 $1.275 $1.275
Granted 75,000 $1.275 $1.275
Exercised - - -
Canceled - - -
- -------------------------------------------------------------- ----------------------------- -----------------------
Outstanding, December 31, 1995 160,000 $1.275 $1.275
Granted 1,491,500 $2.00 to $2.75 $2.50
Exercised (12,500) $1.275 to $2.75 $1.57
Canceled - - -
- -------------------------------------------------------------- ----------------------------- -----------------------
Outstanding, December 31, 1996 1,639,000 $1.275 to $2.75 $2.38
Granted (unaudited) 260,000 $6.75 $6.75
Exercised (unaudited) (259,500) $1.275 to $2.75 $1.89
Canceled (unaudited) - - -
============================================================== ============================= =======================
Outstanding, March 31, 1997 (unaudited) 1,639,500 $1.275 to $6.75 $3.15
============================================================== ============================= =======================
Exercisable at year-end
1994 85,000 $1.275 $1.275
1995 120,000 $1.275 $1.275
1996 1,120,000 $2.00 to $2.75 $2.21
1996 Stock 1996 Outside
1994 PLAN OPTION PLAN DIRECTORS PLAN
Available for future grants at December 31,
1994 - - -
1996 - 768,500 190,000
Exercise price Exercise price Total
LESS THAN MARKET EQUAL TO MARKET OPTIONS
Weighted-average fair value of:
Options granted in 1995 - $0.60 $0.60
Options granted in 1996 - $0.82 $0.82
</TABLE>
F-19
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED WITH
RESPECT TO THE THREE MONTHS ENDED MARCH
31, 1996 AND 1997)
- --------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
December 31, 1996.
Range of exercise prices $1.275-$2.75
Outstanding options
Number outstanding
at December 31, 1996 1,649,000
Weighted-average remaining
contractual life (years) 4.30
Weighted-average exercise price $2.38
Exercisable options
Number outstanding
at December 31, 1996 1,120,000
Weighted-average exercise price $2.21
15. SUBSEQUENT EVENTS (Unaudited)
(a) In May 1997, the Company borrowed $2.2 million from Findim
Investments S.A. ("Findim") for a period of six months at an interest rate of
12% per annum, interest payable monthly commencing June 1, 1997. Upon maturity,
the Company must remit the principal balance plus any unpaid interest. In the
event the Company cannot pay the balance due at maturity, the Company will have
to issue 500,000 shares of its Common Stock to Findim in settlement of all
amounts owed. Findim is required to sell those shares and apply the net proceeds
therefrom against principal plus accrued and unpaid interest. Any surplus of
such net proceeds, after payment of principal and interest, shall be paid over
to the Company. Proceeds from the borrowing were used to exercise an option to
purchase 500,000 shares of Common Stock from Tova Schwartz, the Company's former
President and Chief Executive Officer.
(b) In May 1997, the Company entered into an Agreement to
Joint Venture (the "JV Agreement") with Apollo Real Estate Advisors II, L.P.
("Apollo") and Watermark. The purpose of the joint venture is to identify,
acquire, renovate, refurbish and sell hotel properties. The joint venture
intends to own and operate the properties only for the time necessary to upgrade
and market them for resale. As an inducement to enter the JV Agreement, the
Company issued to Apollo a seven year warrant to purchase 750,000 shares of
Common Stock at $8.115 per share. The warrant expires in 2004. The warrant is
currently exercisable as to 250,000 shares and becomes exercisable as to the
remaining 500,000 shares in increments of 100,000 shares for every $7,500,000 of
incremental revenue realized by the Company from the joint venture. Pursuant to
the JV Agreement, Watermark will receive a management fee of 1.5% of all costs
incurred by the joint venture on each project, other than soft costs such as
interest, taxes etc.
At date of execution, the fair value of the 250,000 currently
exercisable warrants was approximately $1,300,000, which will be recorded as an
intangible asset and amortized over a period of five years, the minimum term of
the JV Agreement, beginning in the second quarter of 1997. The remaining 500,000
warrants will not be valued until vesting occurs, at which time the fair value
of the vested warrants will be charged to operations.
(c) The Company is pursuing a public offering of its
securities. The proposed offering presently contemplates the sale of 2,500,000
shares of Common Stock at $8.625 per share. The Company has filed a registration
statement on Form SB-2 for the offering of such shares.
F-20
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Leonard Parker Company and Affiliates
We have audited the accompanying combined balance sheet of Leonard Parker
Company and Affiliates as of December 31, 1996, and the related combined
statements of operations, stockholders' equity and cash flows for each of the
two years ended December 31, 1996 and 1995. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We did not audit the financial statements of Leonard Parker Company (Africa)
(Propriety) Limited, a foreign affiliate, which statements reflect total assets
of $597,378 as of December 31, 1996, and total revenues of $1,039,762 and
$311,062 for the two years ended December 31, 1996 and 1995, respectively. Those
statements were audited by other auditors whose unqualified auditor's report has
been furnished to us, and our opinion insofar as it relates to the amounts
included for such affiliate, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
combined financial statements referred to above present fairly, in all material
respects, the financial position of Leonard Parker Company and Affiliates as of
December 31, 1996, and the results of their operations and their cash flows for
each of the two years ended December 31, 1996 and 1995 in conformity with
generally accepted accounting principles.
/s/ BDO Seidman, LLP
--------------------
Miami, Florida BDO Seidman, LLP
February 27, 1997
F-21
<PAGE>
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS
Leonard Parker Company and Affiliates
We have audited the annual financial statements set out on pages two to eight.
These financial statements are the responsibility of the Company's Directors.
Our responsibility is to report on these financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit to obtain reasonable
assurance that, in all material respects, fair presentation is achieved in the
financial statements. An audit includes an evaluation of the appropriateness of
the accounting policies, an examination, on a test basis, of evidence supporting
the amounts and disclosures included in the financial statements, an assessment
of the reasonableness of significant estimates and a consideration of the
appropriateness of the overall financial statement presentation. We consider
that our audit procedures were appropriate in the circumstances to express our
opinion presented below.
In our opinion these financial statements fairly present the financial position
of the Company at December 31, 1996, and the results of its operations and cash
flow information for the year then ended in conformity with generally accepted
accounting practice and in the manner required by the Companies Act.
/s/ Fotinakis Phitidis
----------------------
Johannesburg Fotinakis Phitidis
March 14, 1997 Chartered Accountants (SA)
F-22
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1996
- ----------------------------------------------------------------------------------
ASSETS
CURRENT
<S> <C>
Cash $ 781,221
Restricted cash 188,779
Accounts receivable - (net of allowance of $336,000) 6,128,047
Prepaid expenses and other current assets 660,561
- -----------------------------------------------------------------------------------
Total current assets 7,758,608
Property and equipment, net 986,475
- -----------------------------------------------------------------------------------
$ 8,745,083
- -----------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable $ 4,619,765
Accrued expenses 326,031
Current maturities of long-term debt and capital lease obligation 65,198
Customer deposits 3,277,038
- -----------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 8,288,032
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION, LESS CURRENT MATURITIES 108,861
- -----------------------------------------------------------------------------------
Total liabilities 8,396,893
- -----------------------------------------------------------------------------------
COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
- -----------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 72,382
Retained earnings 285,954
Cumulative foreign currency translation adjustment (10,146)
- ------------------------------------------------------------------------------------
Total stockholders' equity 348,190
- -----------------------------------------------------------------------------------
$ 8,745,083
- -----------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO COMBINED FINANCIAL
STATEMENTS.
F-23
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 43,862,635 $ 56,890,803
COST OF SALES 40,785,288 51,881,883
- -------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 3,077,347 5,008,920
Service fees 1,280,844 1,809,809
Operating expenses (4,462,775) (8,516,311)
- -------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (104,584) (1,697,582)
Interest income 145,425 259,251
Interest expense (24,601) (18,572)
Other expense (25,752) (49,694)
- -------------------------------------------------------------------------------------------------------------------
Loss before income taxes (9,512) (1,506,597)
Provision for foreign taxes 2,281 45,571
- -------------------------------------------------------------------------------------------------------------------
NET LOSS $ (11,793) $ (1,552,168)
- -------------------------------------------------------------------------------------------------------------------
Proforma
Loss before income taxes (9,512) (1,506,597)
Benefit for income taxes 2,281 439,205
- -------------------------------------------------------------------------------------------------------------------
Proforma net loss $ (7,231) $ (1,067,392)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO COMBINED FINANCIAL
STATEMENTS.
F-24
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN TOTAL
CURRENCY STOCK-
COMMON RETAINED TRANSLATION HOLDERS'
STOCK EARNINGS ADJUSTMENT EQUITY
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 71,782 $ 3,211,536 $ 9,880 $ 3,293,198
Capital contribution 600 - - 600
Distributions - (480,000) - (480,000)
Net loss - (11,793) - (11,793)
Foreign currency translation
adjustment - - (10,804) (10,804)
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 72,382 2,719,743 (924) 2,791,201
Distributions - (881,621) - (881,621)
Net loss - (1,552,168) - (1,552,168)
Foreign currency translation
adjustment - - (9,222) (9,222)
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $ 72,382 $ 285,954 $ (10,146) $ 348,190
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO COMBINED FINANCIAL
STATEMENTS.
F-25
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995 1996
- -------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (11,793) $ (1,552,168)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Loss on disposal of assets 25,752 49,694
Depreciation and amortization 167,825 185,355
Property distribution treated as compensation - 528,663
Changes in assets and liabilities:
Decrease (increase) accounts receivable 8,144,218 (3,241,743)
Decrease (increase) in prepaid expenses
and other current assets 943,560 (248,158)
(Decrease) increase in accounts payable (4,804,282) 3,197,341
(Decrease) increase in accrued expenses (2,981) 268,917
Decrease in customers deposits and advances (1,177,588) (478,787)
- -------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities 3,284,711 (1,290,886)
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Net purchases of property and equipment (303,520) (633,427)
Increase in cash surrender value of officers
life insurance (59,505) (65,412)
Purchases of securities (200,000) (202,046)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (563,025) (900,885)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 600 -
Restricted deposits - (188,779)
Distributions to shareholders (480,000) (31,621)
Payments of long-term debt and capital lease obligation (67,491) (125,409)
Proceeds of long-term debt and capital lease obligation 48,276 16,061
- -------------------------------------------------------------------------------------------------------------------
Cash used in financing activities (498,615) (329,748)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
F-26
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net (decrease) increase in cash 2,223,071 (2,521,519)
Effect of exchange rate changes in cash (10,804) (9,222)
Cash, at beginning of year 1,099,695 3,311,962
- -------------------------------------------------------------------------------------------------------------------
Cash, at end of year $ 3,311,962 $ 781,221
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION:
Cash Paid During the Year For:
Interest $ 11,820 $ 16,202
Income Taxes $ 10,538 $ 38,009
Capital lease obligation incurred $ - $ 74,665
Non-cash distribution of assets to stockholders $ - $ 1,439,568
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO COMBINED FINANCIAL
STATEMENTS.
F-27
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
SUMMARY OF ACCOUNTING POLICIES
DESCRIPTION OF
BUSINESS THE LEONARD PARKER COMPANY (THE COMPANY) WAS ORGANIZED
IN 1976 UNDER THE LAWS OF THE STATE OF FLORIDA,
OPERATING AS A PURCHASING AGENT FOR HOTEL FURNISHINGS.
IN RECENT YEARS, THE COMPANY HAS EXPANDED ITS
OPERATIONS OVERSEAS AND IS CURRENTLY DOING BUSINESS IN
SOUTH AFRICA AND ASIA IN ADDITION TO ITS DOMESTIC
OPERATIONS. (SEE NOTE 6).
AFFILIATES AND
BASIS OF
PRESENTATION TO FACILITATE THE OPERATIONS IN TWO OF THESE COUNTRIES,
TWO NEW COMPANIES WERE FORMED AND BEGAN DOING BUSINESS
DURING 1994. LEONARD PARKER COMPANY PACIFIC/ASIA PTE.
LTD. OPERATES IN SINGAPORE AND LEONARD PARKER COMPANY
(AFRICA) (PROPRIETARY) LIMITED OPERATES IN SOUTH
AFRICA. DURING 1995, PARKER REORDER CORPORATION WAS
FORMED IN THE UNITED STATES. ALL THREE COMPANIES ARE
COLLECTIVELY KNOWN AS THE "AFFILIATES."
THE FOREIGN AFFILIATES' FINANCIAL STATEMENTS HAVE BEEN
PREPARED IN ACCORDANCE WITH U.S. GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES TRANSLATED TO UNITED STATES
DOLLARS (U.S. $) USING A METHODOLOGY CONSISTENT WITH
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 52,
FOREIGN CURRENCY TRANSLATION. ASSETS AND LIABILITIES
ARE TRANSLATED TO U.S. $ AT THE RATE PREVAILING ON THE
BALANCE SHEET DATES AND THE INCOME STATEMENTS HAVE BEEN
TRANSLATED FROM THE FUNCTIONAL CURRENCY TO U.S. $ USING
AN AVERAGE EXCHANGE RATE FOR THE APPLICABLE PERIOD.
RESULTS OF THIS TRANSLATION PROCESS ARE ACCUMULATED AS
A SEPARATE COMPONENT OF STOCKHOLDERS' EQUITY. EXCHANGE
LOSSES (APPROXIMATELY $19,000 AND $13,000 FOR THE YEARS
ENDED DECEMBER 31, 1996 AND 1995, RESPECTIVELY) ARE
INCLUDED IN OPERATING EXPENSE IN THE ACCOMPANYING
COMBINED STATEMENTS OF OPERATIONS.
PRINCIPLES OF
COMBINATION THE ACCOMPANYING COMBINED FINANCIAL STATEMENTS INCLUDE
THE ACCOUNTS OF THE COMPANY AND THE AFFILIATES, ALL OF
WHICH ARE UNDER COMMON CONTROL. INTERCOMPANY
TRANSACTIONS AND BALANCES HAVE BEEN ELIMINATED IN
COMBINATION.
ACCOUNTS
RECEIVABLE THE COMPANIES PROVIDE AN ALLOWANCE FOR LOSSES ON
RECEIVABLES BASED ON A REVIEW OF THE CURRENT STATUS OF
EXISTING RECEIVABLES AND HISTORICAL COLLECTION
EXPERIENCE, AND CONSIDER THE CURRENT PROVISION TO BE
ADEQUATE.
F-28
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
SUMMARY OF ACCOUNTING POLICIES
PROPERTY AND
EQUIPMENT PROPERTY AND EQUIPMENT ARE RECORDED AT COST AND LEASED
EQUIPMENT UNDER CAPITAL LEASES IS RECORDED AT THE
PRESENT VALUE OF FUTURE LEASE PAYMENTS. DEPRECIATION
AND AMORTIZATION ARE PROVIDED BY THE ACCELERATED AND
STRAIGHT- LINE METHODS OVER THE ESTIMATED USEFUL
ECONOMIC LIVES OF THE ASSETS, RANGING FROM FIVE TO
EIGHT YEARS.
RESTRICTED CASH RESTRICTED CASH CONSISTS OF DEPOSITS TO COLLATERALIZE
OBLIGATIONS UNDER CERTAIN CONTRACTS.
REVENUE
RECOGNITION REVENUES ARE RECOGNIZED AT THE TIME OF SHIPMENT OF THE
RESPECTIVE MERCHANDISE OR AT THE TIME THE SERVICE IS
PROVIDED DEPENDING ON THE CONTRACT.
CUSTOMER DEPOSITS CONSIST OF AMOUNTS REMITTED TO THE
COMPANY BY CUSTOMERS AS DEPOSITS ON SPECIFIC CONTRACTS.
INCOME TAXES THE COMPANY, WITH THE CONSENT OF ITS SHAREHOLDERS,
ELECTED TO BE TAXED AS AN S CORPORATION. SHAREHOLDERS
OF AN S CORPORATION ARE TAXED ON THEIR PROPORTIONATE
SHARE OF THE COMPANY'S TAXABLE INCOME. ACCORDINGLY, NO
PROVISION FOR FEDERAL OR STATE INCOME TAX IS REQUIRED.
TWO OF THE AFFILIATES ARE SUBJECT TO TAXATION IN SOUTH
AFRICA AND SINGAPORE RESPECTIVELY, AND ACCORDINGLY
CALCULATE AND REPORT TAX CHARGES IN ACCORDANCE WITH
APPLICABLE STATUTORY REGULATIONS.
THE PROFORMA BENEFIT FOR INCOME TAXES REPRESENTS THE
ESTIMATED INCOME TAXES THAT WOULD HAVE BEEN REPORTED
HAD THE COMPANY NOT BEEN AN S CORPORATION AND HAD BEEN
SUBJECT TO FEDERAL AND STATE INCOME TAXES.
APPROXIMATELY $1,300,000 OF THE COMPANY'S DOMESTIC LOSS
CAN BE CARRIED BACK AND USED TO OFFSET PREVIOUS TAXABLE
INCOME. REALIZATION OF THE REMAINING LOSS CARRYFORWARD
IS NOT CONSIDERED MORE LIKELY THAN NOT. ACCORDINGLY, A
VALUATION ALLOWANCE HAS BEEN ESTABLISHED FOR THE CARRY
FORWARD PORTION.
F-29
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
SUMMARY OF ACCOUNTING POLICIES
USE OF ESTIMATES THE PREPARATION OF THE FINANCIAL STATEMENTS IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES REQUIRES MANAGEMENT TO MAKE ESTIMATES AND
ASSUMPTIONS THAT EFFECT THE REPORTED AMOUNTS OF ASSETS
AND LIABILITIES AT THE DATE OF THE FINANCIAL STATEMENTS
AND THE REPORTED AMOUNTS OF REVENUES AND EXPENSES
DURING THE REPORTING PERIOD. ACTUAL RESULTS COULD
DIFFER FROM ESTIMATED AMOUNTS.
FINANCIAL
INSTRUMENTS THE CARRYING AMOUNTS OF FINANCIAL INSTRUMENTS INCLUDING
CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
APPROXIMATED FAIR VALUE DUE TO THE RELATIVELY SHORT
MATURITY.
LONG-LIVED ASSETS IN MARCH 1995, THE FINANCIAL ACCOUNTING STANDARDS BOARD
ISSUED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF",
WHICH REQUIRES THAT CERTAIN LONG-LIVED ASSETS BE
REVIEWED FOR IMPAIRMENT WHENEVER EVENTS OR CHANGES IN
CIRCUMSTANCES INDICATE THAT THE CARRYING AMOUNT MAY NOT
BE RECOVERABLE. THIS STANDARD IS EFFECTIVE FOR FISCAL
YEARS THAT BEGIN AFTER DECEMBER 15, 1995. THE COMPANY'S
ADOPTION OF THIS PRONOUNCEMENT ON JANUARY 1, 1996 DID
NOT HAVE A MATERIAL IMPACT ON THE COMPANY'S COMBINED
FINANCIAL STATEMENTS.
F-30
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. PROPERTY AND PROPERTY AND EQUIPMENT CONSIST OF THE FOLLOWING:
EQUIPMENT
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
Office equipment $ 592,445
Furniture and fixtures 466,858
Computer software 369,577
Leasehold improvements 203,022
Telephone equipment under capital leases 74,665
Vehicles 39,329
- ------------------------------------------------------------------------------
1,745,896
Less: accumulated depreciation
and amortization 759,421
- ------------------------------------------------------------------------------
$ 986,475
- ------------------------------------------------------------------------------
2. LONG-TERM DEBT Long-term debt and lease obligations consists of:
AND CAPITAL
LEASE
OBLIGATIONS DECEMBER 31, 1996
-----------------------------------------------------------
Prime + 3/4% (9 1/4% at December 31, 1996)
note payable with a financial institution,
principal and interest due monthly,
matures June 1998, secured by all
corporate assets. $ 83,333
19 1/2% note payable, principal and
interest due monthly, matures
August 2001, collateralized
by property and equipment. 19,989
9 3/4% capital lease obligation, payable
in monthly installments of $1,578,
expiring in August 2001,
collateralized by telephone equipment 70,737
- --------------------------------------------------------------------------------
174,059
Less current maturities 65,198
- --------------------------------------------------------------------------------
$ 108,861
- ------------------------------------------------------------------------------
F-31
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
At December 31, 1996, maturities of notes payable and
capital lease obligations are as follows:
YEARS ENDED DECEMBER 31, AMOUNT
- --------------------------------------------------------------------------------
1997 $ 65,198
1998 50,620
1999 19,438
2000 21,886
2001 16,917
- --------------------------------------------------------------------------------
$ 174,059
- --------------------------------------------------------------------------------
The Company has available a revolving line of credit with
a bank for up to $2 million collateralized by accounts
receivable. The line of credit has a rate of prime + 1/2%
and is payable monthly. This agreement is renewed
annually. The agreement matures in July 1997. As of
December 31, 1996, no amounts are outstanding under this
agreement.
3. COMMITMENTS The Company and Affiliates rent office space under
AND non-cancelable operating leases expiring in 2001. Future
CONTINGENCIES minimum payments under all lease agreements are as
follows:
YEARS ENDED DECEMBER 31, AMOUNT
- --------------------------------------------------------------------------------
1997 $ 607,000
1998 626,000
1999 625,000
2000 572,000
2001 476,000
- --------------------------------------------------------------------------------
$2,906,000
- --------------------------------------------------------------------------------
Rent expense totalled approximately $463,000 and $537,000
in 1995 and 1996, respectively.
F-32
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
The Company, acting as agent for two of its customers,
maintains two repurchase agreement accounts in the name of
the Company as agent for the customers. These accounts are
used to fund the purchases of merchandise. The balance in
these accounts as of December 31, 1996, totaled
approximately $22,000.
The Company is currently a defendant of a lawsuit for
copyright infringement. The claimant is seeking an award
of $100,000 per infringement and there are two alleged
copyrights in the suit. Management and the Company's
counsel believe that the Company has defenses in this
matter and that it will not have a material adverse effect
on these financial statements.
The Florida Department of Revenue has assessed the Company
with a sales tax deficiency in the amount of approximately
$237,000, including penalties and interest. The Company is
appealing the assessment. Management has provided for
approximately $209,000 in connection with this matter.
However, the Company intends to vigorously defend this
matter.
4. STOCKHOLDERS' Common stock consists of the following at December 31,
EQUITY 1996 and 1995:
SHARES AMOUNT
----------------------------------------------------------
Leonard Parker Company, Inc.,
1000 shares authorized,
$10 par value 100 $ 1,000
Leonard Parker Company (Africa)
(Proprietary) Limited,
1,000 shares authorized, R$1 par value 6 2
Leonard Parker Company Pacific/Asia
PTE Ltd., 100,000 shares authorized,
S$1 par value 100,000 70,780
Parker Reorder Corporation,
10,000 shares authorized, $1 par value 600 600
----------------------------------------------------------
100,706 $ 72,382
----------------------------------------------------------
R$ - South African Rand
S$ - Singapore Dollar
F-33
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
During December 1996, the stockholders received a
distribution of assets with a book value of approximately
$1,440,000 of which approximately $850,000 was recorded as
a dividend and approximately $590,000 was recorded as
compensation and other expenses. Furthermore, additional
bonuses of approximately $1,446,000 were paid in 1996.
5. SIGNIFICANT For 1995 and 1996, one customer accounted for 13% and 11%
CUSTOMERS of combined revenues, respectively.
6. FOREIGN Information about the Company's operations in different
OPERATIONS geographic areas for the years ended December 31, 1995 and
1996 is as follows:
<TABLE>
<CAPTION>
UNITED SOUTH
STATES SINGAPORE AFRICA COMBINED
- ------------------------------------------------------------------------------------------------------
Year ended December 31, 1995:
<S> <C> <C> <C> <C>
Sales $ 43,554,034 $ 132,398 $ 176,203 $43,862,635
- ------------------------------------------------------------------------------------------------------
Operating income (loss) $ (83,223) $ (25,866) $ 4,505 $ (104,584)
- ------------------------------------------------------------------------------------------------------
Income (loss) before
income taxes $ 10,546 $ (25,952) $ 5,894 $ (9,512)
- -------------------------------------------------------------------------------------------------------
Identifiable assets $ 8,024,892 $ 104,111 $ 106,304 $ 8,235,307
- ------------------------------------------------------------------------------------------------------
Year ended December 31, 1996:
Sales $ 55,993,092 $ 103,838 $ 793,873 $56,890,803
- ------------------------------------------------------------------------------------------------------
Operating income (loss) $ (1,638,614) $ (167,927) $ 108,959 $(1,697,582)
- -------------------------------------------------------------------------------------------------------
Income (loss) before
income taxes $ (1,472,437) $ (161,974) $ 127,714 $(1,506,697)
- -------------------------------------------------------------------------------------------------------
Identifiable assets $ 8,094,877 $ 52,850 $ 597,356 $ 8,745,083
- -------------------------------------------------------------------------------------------------------
</TABLE>
F-34
<PAGE>
LEONARD PARKER COMPANY
AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
7. SUBSEQUENT On January 9, 1997, the Leonard Parker Company and its
EVENTS affiliates collectively entered into an agreement to merge
with a New York corporation.
At the time of closing the stockholders of the Company
converted the common stock of the Company into an
aggregate of (a) 1,250,000 shares of common stock of the
New York corporation; and (b) 200,000 shares of preferred
stock, stated value of $25 per share of the New York
corporation.
F-35
<PAGE>
No dealer, salesperson or any other person is authorized in connection with any
offering made hereby to give any information or to make any representation not
contained in this Prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or any of the Underwriters. This Prospectus does not constitute an offer to sell
or the solicitation of an offer to buy any of the securities offered hereby by
anyone in any state in which such offer or solicitation is not authorized or in
which the person making the offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstance create any implication that information contained herein is correct
as of any date subsequent to the date hereof.
TABLE OF CONTENTS
PAGE
Prospectus Summary....................................3
Risk Factors..........................................9
Disclosure Regarding Forward-Looking Statements......13
Use of Proceeds......................................13
Price Range of Common Stock..........................14
Dividend Policy......................................14
Capitalization.......................................15
Selected Historical and Pro Forma Financial Data.....16
Management's Discussion and Analysis of
Financial Condition and Results of Operations....18
Business.............................................23
Management...........................................31
Certain Transactions.................................36
Principal Shareholders...............................37
Description of Securities............................39
Shares Eligible for Future Sale......................40
Underwriting.........................................41
Legal Matters........................................42
Experts..............................................43
Additional Information...............................43
Change in Accountants................................43
Pro Forma Financial Statements......................P-1
Financial Statements................................F-1
2,500,000 SHARES
[LOGO]
HOSPITALITY WORLDWIDE
SERVICES, INC.
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
JEFFERIES & COMPANY, INC.
_________, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 722 of the New York Business Corporation Law ("NYBCL") permits,
in general, a New York corporation to indemnify any person made, or threatened
to be made, a party to an action or proceeding by reason of the fact that he or
she was a director or officer of the corporation, or served another entity in
any capacity at the request of the corporation, against any judgment, fines,
amounts paid in settlement and reasonable expenses, including attorney's fees
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, if such person acted in good faith, for a purpose he or she
reasonably believed to be in, or, in the case of service for another entity, not
opposed to, to the best interests of the corporation and, in criminal actions or
proceedings, in addition had no reasonable cause to believe that his or her
conduct was unlawful. Section 723 of the NYBCL permits the corporation to pay in
advance of a final disposition of such action or proceeding the expenses
incurred in defending such action or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount as, and to the
extent, required by statute. Section 721 of the NYBCL provides that
indemnification and advancement of expense provisions contained in the NYBCL
shall not be deemed exclusive of any rights to which a director or officer
seeking indemnification or advancement of expenses may be entitled, provided no
indemnification may be made on behalf of any director or officer if a judgment
or other final adjudication adverse to the director or officer establishes that
his or her acts were committed in bad faith or were the result of active or
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled.
Article Three of the Company's Certificate of Incorporation, as
amended, provides, in general, that the personal liability of the directors of
the Company is eliminated to the fullest extent permitted by the provisions of
paragraph (b) of Section 402 of the NYBCL, as the same may be amended and
supplemented. Section 402(b) of the NYBCL provides that the certificate of
incorporation of a New York corporation may set forth a provision eliminating or
limiting the personal liability of directors to the corporation or its
stockholders for damages for any breach of duty in such capacity, provided that
no such provision shall eliminate or limit (1) the liability of any director if
a judgment or other final adjudication adverse to him establishes that his acts
or omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that he personally gained in fact a financial profit or
other advantage to which he is not legally entitled or (2) the liability of any
director for any act or omission prior to the adoption of a provision authorized
by Section 402(b) of the NYBCL.
Article XII of the Company's By-Laws, as amended, provides that the
Company shall, to the fullest extent now or hereafter permitted by the New York
Business Corporation Law, indemnify any director or officer who is or was made,
or threatened to be made, a party to an action or proceeding, whether civil or
criminal, whether involving any actual or alleged breach of duty, neglect or
error, any accountability, or any actual or alleged misstatement, misleading
statement or other act or omission and whether brought or threatened in any
court or administrative or legislative body or agency, including an action by or
in the right of the Company to procure a judgment in its favor and an action by
or in the right of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Company is serving or
served in any capacity at the request of the Company, or is serving or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, amounts paid in
settlement, and costs, charges and expenses, including attorneys' fees, or any
appeal therein; provided, however, that no indemnification shall be provided to
any such director or officer if a judgment or other final adjudication adverse
to the director or officer establishes that (i) his acts were committed in bad
faith or were the result of active and deliberate dishonesty and, in either
case, were material to the cause of action so adjudicated, or (ii) he personally
gained in fact a financial profit or other advantage to which he was not legally
entitled.
II-1
<PAGE>
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses (other than
underwriting discounts and commissions) which will be paid by the Registrant in
connection with the issuance and distribution of the securities being
registered. With the exception of the registration fee and NASD filing fee, all
amounts shown are estimates.
Registration fee............................................... $7,432.53
NASD filing fee................................................ 2,952.73
Nasdaq listing expenses........................................ 30,000.00
Blue Sky fees and expenses (including legal and filing fees)... 15,000.00
Printing expenses.............................................. 125,000.00
Transfer agent and registrar fees and expenses................. 5,000.00
Legal fees and expenses (other than Blue Sky).................. 150,000.00
Accounting fees and expenses................................... 110,000.00
Miscellaneous expenses......................................... 4,614.74
-----------
TOTAL................................................. $450,000.00
==========
Item 26. RECENT SALES OF UNREGISTERED SECURITIES
(a) The following securities were issued by the Registrant since its
inception and prior to the date of filing of this Registration Statement. There
were no underwriting discounts or commissions paid in connection with the
issuance of any of these securities, except as otherwise noted:
<TABLE>
<CAPTION>
Description of Number of Shares
Date Securities Issued Sold/Issued Offering Price Purchaser
- -------------------- ----------------------- ------------------- ------------------- --------------
<S> <C> <C> <C> <C>
April 1996 Private Placement of 75,000 $1.00 Louis K. Adler
Common Stock 75,000 $1.00 George Asch
100,000 $1.00 James Pinto
83,333 $1.00 John C. Shaw
83,333 $1.00 Richard A. Bartlett
83,334 $1.00 Jerry Seslowe
September 1996 Common Stock issued 37,500 N/A Mark Schindler
to former consultants 37,500 N/A Eugene Stricker
January 1997 Private Placement of 300,000 N/A Leonard Parker
Common Stock in 190,000 N/A Douglas Parker
connection with the 190,000 N/A Bradley Parker
acquisition of LPC 190,000 N/A Philip Parker
190,000 N/A Mitchell Parker
190,000 N/A Gregg Parker
January 1997 Private Placement of 40,000 N/A Douglas Parker
Redeemable 40,000 N/A Bradley Parker
Convertible Preferred 40,000 N/A Philip Parker
Stock in connection 40,000 N/A Mitchell Parker
with the acquisition of 40,000 N/A Gregg Parker
LPC
January 1997 Common Stock issued 200,000 $2.00 Resource Holdings
upon exercise of
options
</TABLE>
II-2
<PAGE>
The sales set forth above are claimed to be exempt from registration
with the Securities and Exchange Commission pursuant to Section 4(2) of the
Securities Act of 1933, as amended, as transactions by an issuer not involving
any public offering. All certificates representing the shares issued by the
Registrant referred to herein and currently outstanding have been properly
legended.
Item 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NO. DESCRIPTION
1.1 Form of Underwriting Agreement between the Registrant
and Jefferies & Company, Inc.
*3.1 Certificate of Incorporation of the Registrant, as
amended.
3.2 Amended and Restated By-Laws of the Registrant.
**4.1 Specimen Certificate of the Registrant's Common
Stock.
4.2 Form of Underwriter's Warrant Agreement.
5.1 Opinion of Olshan Grundman Frome & Rosenzweig LLP as
to the legality of the securities.
***10.1 Asset Purchase Agreement dated as of April 1, 1995,
by and among AGF Interior Services Co., Watermark
Investments Limited (Bahamas), Watermark Investments
Limited (Delaware), Hospitality Restoration and
Builders, Inc., the Registrant and Tova Schwartz
(Incorporated by reference to the Company's Current
Report on Form 8-K dated August 22, 1995).
***10.2 Divestiture, Settlement and Reorganization Agreement
dated as of February 26, 1996, by and among the
Registrant, Hospitality Restoration and Builders,
Inc., Watermark Investments Limited (Bahamas),
Watermark Investments Limited (Delaware), AGF
Interior Services Co., Tova Schwartz, Alan G.
Friedberg and Guillermo Montero.
***10.3 Memorandum Agreement dated April 12, 1996, by and
between the Registrant and Watermark.
***10.4 Bill of Sale and Assumption Agreement dated February
26, 1996, by and between the Registrant and Tova
Schwartz.
***10.5 Consulting Agreement dated February 28, 1996, by and
between the Registrant and Resource Holdings
Associates, L.P.
****10.6 1996 Stock Option Plan.
****10.7 Form of Stock Option Agreement for the 1996 Stock
Option Plan.
****10.8 1996 Outside Directors' Stock Option Plan.
II-3
<PAGE>
****10.9 Form of Stock Option Agreement for the Outside
Directors' Stock Option Plan.
****10.10 Form of Option Granted to Officers.
*****10.11 Agreement and Plan of Merger, dated as of January 9,
1997, by and among The Leonard Parker Company, a
Florida corporation, Leonard Parker, Douglas Parker,
Bradley Parker, Philip Parker, Mitchell Parker and
Gregg Parker and LPC Acquisition Corp. a Florida
corporation.
***10.12 Employment Agreement dated April 1, 1996, by and
between the Registrant and Howard G. Anders.
10.13 Employment Agreement, dated as of January 9, 1997, by
and among The Leonard Parker Company, the Registrant
and Leonard Parker.
10.14 Employment Agreement, dated as of January 9, 1997, by
and among The Leonard Parker Company, the Registrant
and Douglas Parker.
10.15 Employment Agreement, dated as of January 9, 1997, by
and among The Leonard Parker Company, the Registrant
and Bradley Parker.
10.16 Employment Agreement, dated as of January 9, 1997, by
and among Parker Reorder Corporation, a Florida
corporation ("Parker Reorder"), the Registrant and
Philip Parker.
10.17 Employment Agreement, dated as of January 9, 1997, by
and among Parker Reorder, the Registrant and Mitchell
Parker.
10.18 Registration Rights Agreement, dated as of January 9,
1997, by and among the Registrant, Leonard Parker,
Douglas Parker, Bradley Parker, Philip Parker, Gregg
Parker and Mitchell Parker.
10.19 Agreement to Joint Venture, dated as of May 12, 1997,
by and among Apollo Real Estate Advisors II, L.P.,
the Registrant and Watermark Investments Limited,
LLC.
10.20 Warrant dated May 12, 1997 issued to Apollo Real
Estate Advisors II, L.P.
*****16.1 Letter from Arthur Andersen LLP dated March 19, 1996.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Olshan Grundman Frome & Rosenzweig LLP
(included in Exhibit 5.1).
23.2 Consent of BDO Seidman, LLP, certified public
accountants.
23.3 Consent of Fotinakis Phitidis, Chartered Accountants
(SA).
24.1 Powers of Attorney (included on signature page to
this Registration Statement).
- ------------------------------------
* Incorporated by reference to the Registrant's Current Report on Form
8-K dated January 24, 1997.
** Incorporated by reference to the Registrant's Registration Statement
on Form SB-2 (Registration No. 33- 7094-NY).
II-4
<PAGE>
*** Incorporated by reference to the Registrant's Form 10-KSB for the
fiscal year ended December 31, 1995.
**** Incorporated by reference to the Registrant's Registration Statement
on Form S-8 filed on February 12, 1997 (Registration No. 333-21689).
***** Incorporated by reference to the Registrant's Current Report on Form
8-K/A dated March 25, 1996.
II-5
<PAGE>
Item 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that it will:
(1) for determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1), or (4), or
497(h) under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.
(2) for determining any liability under Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial BONA FIDE
offering of those securities.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, the City of New York,
State of New York, on the 21st day of July, 1997.
HOSPITALITY WORLDWIDE SERVICES, INC.
(Registrant)
By: /S/ ROBERT A. BERMAN
--------------------------------------
Robert A. Berman, President, Chief
Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Robert A. Berman and Howard G.
Anders his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his or her substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/S/ ROBERT A. BERMAN
- ------------------------------ President, Chief Executive July 21, 1997
Robert A. Berman Officer(principal executive
officer) and Director
/S/ LEONARD F. PARKER
- ------------------------------ Chairman of the Board Officer July 21, 1997
Leonard F. Parker
/S/ HOWARD G. ANDERS
- ------------------------------ Executive Vice President, July 21, 1997
Howard G. Anders Chief FinancialOfficer
(principal financial officer
and principal accounting
officer) and Secretary
/S/ DOUGLAS PARKER
- ------------------------------ President - LPC and Director July 21, 1997
Douglas Parker
/S/ LOUIS K. ADLER
- ------------------------------ Director July 21, 1997
Louis K. Adler
/S/ GEORGE ASCH
- ------------------------------ Director July 21, 1997
George Asch
/S/ RICHARD A. BARTLETT
- ------------------------------ Director July 21, 1997
Richard A. Bartlett
/S/ SCOTT KANIEWSKI
- ------------------------------ Director July 21, 1997
Scott Kaniewski
II-7
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
Form SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HOSPITALITY WORLDWIDE SERVICES, INC.
(Exact name of issuer as specified in its charter)
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
1.1 Form of Underwriting Agreement between the Registrant
and Jefferies & Company, Inc.
*3.1 Certificate of Incorporation of the Registrant, as
amended.
3.2 Amended and Restated By-Laws of the Registrant.
**4.1 Specimen Certificate of the Registrant's Common
Stock.
4.2 Form of Underwriter's Warrant Agreement.
5.1 Opinion of Olshan Grundman Frome & Rosenzweig LLP as
to the legality of the securities.
***10.1 Asset Purchase Agreement dated as of April 1, 1995,
by and among AGF Interior Services Co., Watermark
Investments Limited (Bahamas), Watermark Investments
Limited (Delaware), Hospitality Restoration and
Builders, Inc., the Registrant and Tova Schwartz
(Incorporated by reference to the Company's Current
Report on Form 8-K dated August 22, 1995).
***10.2 Divestiture, Settlement and Reorganization Agreement
dated as of February 26, 1996, by and among the
Registrant, Hospitality Restoration and Builders,
Inc., Watermark Investments Limited (Bahamas),
Watermark Investments Limited (Delaware), AGF
Interior Services Co., Tova Schwartz, Alan G.
Friedberg and Guillermo Montero.
***10.3 Memorandum Agreement dated April 12, 1996, by and
between the Registrant and Watermark.
***10.4 Bill of Sale and Assumption Agreement dated February
26, 1996, by and between the Registrant and Tova
Schwartz.
***10.5 Consulting Agreement dated February 28, 1996, by and
between the Registrant and Resource Holdings
Associates, L.P.
****10.6 1996 Stock Option Plan.
****10.7 Form of Stock Option Agreement for the 1996 Stock
Option Plan.
****10.8 1996 Outside Directors' Stock Option Plan.
****10.9 Form of Stock Option Agreement for the Outside
Directors' Stock Option Plan.
****10.10 Form of Option Granted to Officers.
*****10.11 Agreement and Plan of Merger, dated as of January 9,
1997, by and among The Leonard Parker Company, a
Florida corporation, Leonard Parker, Douglas Parker,
Bradley Parker, Philip Parker, Mitchell Parker and
Gregg Parker and LPC Acquisition Corp. a Florida
corporation.
<PAGE>
***10.12 Employment Agreement dated April 1, 1996, by and
between the Registrant and Howard G. Anders.
10.13 Employment Agreement, dated as of January 9, 1997, by
and among The Leonard Parker Company, the Registrant
and Leonard Parker.
10.14 Employment Agreement, dated as of January 9, 1997, by
and among The Leonard Parker Company, the Registrant
and Douglas Parker.
10.15 Employment Agreement, dated as of January 9, 1997, by
and among The Leonard Parker Company, the Registrant
and Bradley Parker.
10.16 Employment Agreement, dated as of January 9, 1997, by
and among Parker Reorder Corporation, a Florida
corporation ("Parker Reorder"), the Registrant and
Philip Parker.
10.17 Employment Agreement, dated as of January 9, 1997, by
and among Parker Reorder, the Registrant and Mitchell
Parker.
10.18 Registration Rights Agreement, dated as of January 9,
1997, by and among the Registrant, Leonard Parker,
Douglas Parker, Bradley Parker, Philip Parker, Gregg
Parker and Mitchell Parker.
10.19 Agreement to Joint Venture, dated as of May 12, 1997,
by and among Apollo Real Estate Advisors II, L.P.,
the Registrant and Watermark Investments Limited,
LLC.
10.20 Warrant dated May 12, 1997 issued to Apollo Real
Estate Advisors II, L.P.
*****16.1 Letter from Arthur Andersen LLP dated March 19, 1996.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Olshan Grundman Frome & Rosenzweig LLP
(included in Exhibit 5.1).
23.2 Consent of BDO Seidman, LLP, certified public
accountants.
23.3 Consent of Fotinakis Phitidis, Chartered Accountants
(SA).
24.1 Powers of Attorney (included on signature page to
this Registration Statement).
- ------------------------------------
* Incorporated by reference to the Registrant's Current Report on Form
8-K dated January 24, 1997.
** Incorporated by reference to the Registrant's Registration Statement
on Form SB-2 (Registration No. 33-7094- NY).
*** Incorporated by reference to the Registrant's Form 10-KSB for the
fiscal year ended December 31, 1995.
**** Incorporated by reference to the Registrant's Registration Statement
on Form S-8 filed on February 12, 1997 (Registration No. 333-21689).
***** Incorporated by reference to the Registrant's Current Report on Form
8-K/A dated March 25, 1996.
HOSPITALITY WORLDWIDE SERVICES, INC.
2,875,000 SHARES(1)
COMMON STOCK ($0.01 PAR VALUE)
UNDERWRITING AGREEMENT
_______ __, 1997
JEFFERIES & COMPANY, INC.
580 California Street
San Francisco, California 94104
As Representative of the Several Underwriters
Ladies and Gentlemen:
Hospitality Worldwide Services, Inc., a New York corporation
(the "COMPANY") hereby confirms its agreement with both of you and each of the
other Underwriters named in SCHEDULE I hereto (collectively, the "UNDERWRITERS,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 2(b) hereof), for whom you are acting as representative (in
such capacity, the "REPRESENTATIVE") with respect to the purchase by the
Underwriters, acting severally and not jointly, of 2,500,000 shares of Common
Stock of the Company, $.01 par value per share (the "COMMON STOCK") from the
Company (said 2,500,000 shares of Common Stock are herein called the
"UNDERWRITTEN STOCK"). The Company also proposes to sell to the Underwriters,
acting severally and not jointly, up to 375,000 additional shares of Common
Stock (said 375,000 shares of Common Stock being herein called the "OPTION
STOCK" and the Option Stock with the Underwritten Stock is herein collectively
called the "STOCK"). The Common Stock is more fully described in the
Registration Statement and the Prospectus hereinafter mentioned. This
Underwriting Agreement, as amended, supplemented or modified in writing from
time to time, if at all, is referred to herein as the "AGREEMENT."
The Company hereby confirms the agreements made with respect
to the purchase of the Stock by the several Underwriters. You represent and
warrant that you have been authorized by each of the other Underwriters to enter
into this Agreement on their behalf and to act for them in the manner herein
provided.
The Company has also agreed to issue and sell to you,
Jefferies & Company, Inc., for your own account and not as the Representative of
the several Underwriters, warrants (the "WARRANTS") pursuant to the
Representative's Warrant Agreement (the "WARRANT AGREEMENT") to purchase an
aggregate of ________ shares of Common Stock (the "WARRANT SHARES").
The terms which follow, when used in this Agreement, shall
have the meanings indicated. "PRELIMINARY PROSPECTUS" shall mean any preliminary
prospectus referred to in Section l(a) below and any
- --------
(1) Includes an option to purchase up to 375,000 additional shares to cover
overallotments, if any.
1
<PAGE>
preliminary prospectus included in the Registration Statement on the date that
the Registration Statement becomes effective (the "EFFECTIVE DATE") that omits
Rule 430A Information (as defined below). "REGISTRATION STATEMENT" shall mean
the registration statement referred to in Section l(a) below, including
financial statements, schedules and exhibits, as amended at the Representation
Date (as defined below) or, if not effective at the Representation Date, in the
form in which it shall become effective, and any term sheet filed with the
United States Securities and Exchange Commission (the "COMMISSION") pursuant to
Rule 434 of the rules and regulations (the "ACT REGULATIONS") promulgated under
the Securities Act of 1933, as amended (the "ACT"), the information deemed to be
a part of the Registration Statement at the time it became effective pursuant to
Rule 430A(b) or Rule 434(d) of the Act Regulations, and, in the event of any
amendment thereto or the filing of any abbreviated registration statement,
pursuant to Rule 462(b) of the Act Regulations relating thereto after the
effective date of such registration statement, shall also mean (from and after
the effectiveness of such amendment or the filing of such abbreviated
registration statement) such registration statement as so amended, together with
any such abbreviated registration statement and, in the event any post-effective
amendment thereto becomes effective prior to the Closing Date (as defined in
Section 2 hereof), shall also mean such registration statement as so amended.
Such term shall include Rule 430A Information deemed to be included therein at
the Effective Date as provided by Rule 430A (as defined below). The prospectus
constituting a part of the Registration Statement (including the Rule 430A
Information), as from time to time amended or supplemented, is hereinafter
referred to as the "PROSPECTUS," except that if any revised prospectus shall be
provided to the Underwriters by the Company which differs from the prospectus on
file at the Commission at the Effective Date, whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424 of the
Act Regulations, the term "PROSPECTUS" shall refer to each such revised
prospectus from and after the time it is first provided to the Underwriters for
such use; PROVIDED, HOWEVER, that if in reliance on Rule 434 of the Act
Regulations and with the consent of Jefferies & Company, Inc., the Company shall
have provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c),
as applicable, prior to the time that a confirmation is sent or given for
purposes of Section 2(10)(a) of the Act, the term Prospectus shall mean the
"prospectus subject to completion" (as defined in Rule 434(g) of the Act
Regulations) last provided to the Underwriters by the Company and circulated by
the Underwriters to all prospective purchasers of the Stock (including the
information deemed to be a part of the Registration Statement at the time it
became effective pursuant to Rule 434(d) of the Act Regulations).
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of the
Stock that differs from the prospectus referred to in the immediately preceding
sentence (whether or not such revised prospectus is required to be filed with
the Commission pursuant to Rule 424(b) of the Act Regulations), the term
Prospectus shall refer to such revised prospectus from and after the time it is
first provided to the Underwriters for such use. If, in reliance on Rule 434 of
the Act Regulations and with the consent of Jefferies & Company, Inc., the
Company shall have provided to the Underwriters a term sheet pursuant to Rule
434(b) or (c), as applicable, prior to the time that a confirmation is sent or
given for purposes of Section 2(10)(a) of the Act, the Prospectus and the term
sheet, together, will not be materially different from the prospectus in the
Registration Statement. "RULE 158," "RULE 424," "RULE 430A" and "RULE 434" refer
to such rules under the Act Regulations. "RULE 430A INFORMATION" means
information with respect to the Stock and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective pursuant to
Rule 430A.
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to each of the Underwriters as of the date hereof (such
date being referred to as the "REPRESENTATION DATE"), as follows:
(a). A Registration Statement on Form SB-2 (File No.
333-_____) with respect to the Stock, including a prospectus subject to
completion, has been prepared by the Company in conformity with the requirements
of the Act and the Act Regulations and has been filed with the Commission; such
amendments to such registration statement, such amended prospectuses subject to
completion and such abbreviated registration statements pursuant to Rule 462(b)
of the Act Regulations as may have been required prior to the date hereof, have
been similarly prepared and filed with the Commission; and the Company will file
such additional amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
as may hereafter be required. Copies of such registration statement and
amendments, of each related Preliminary Prospectus and of any Rule 434 term
sheet and of any abbreviated registration statement pursuant to Rule 462(b) of
the Act Regulations have been delivered to you.
2
<PAGE>
(b). The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Act Regulations and, as of its
date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which shares of Option Stock are to be
purchased, (i) the Registration Statement and the Prospectus, and any amendments
and supplements thereto and any abbreviated registration statements, contained
and will contain all material information required to be included therein by the
Act and the Act Regulations and will in all material respects conform to the
requirements of the Act and the Act Regulations; (ii) the Registration
Statement, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and (iii) the Prospectus, and any amendments and supplements thereto
and any abbreviated registration statements, did not and will not include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED that the Company makes no
representations, or warranties or agreements as to the information provided in
writing to the Company by or on behalf of the Underwriters expressly for use in
the Registration Statement or the Prospectus, and the Company agrees that the
only information provided in writing by or on behalf of the Underwriters to the
Company expressly for use in the Registration Statement or the Prospectus is
that information contained in the section of the Prospectus entitled
"Underwriting," the last paragraph of text on the cover page of the Prospectus
and the paragraph regarding stabilization appearing on the inside front cover
page of the Prospectus.
(c). (i) Each of the Company and its subsidiaries is a
corporation duly incorporated and validly existing in good standing under the
laws of its state or jurisdiction of incorporation, with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus; (ii)
each of the Company and its subsidiaries is duly qualified to transact business
and is in good standing in each jurisdiction or place where it owns or leases
property or conducts business so as to require qualification, except where the
failure, individually or in the aggregate, to be so qualified would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not occurring in the ordinary course of
business (a "MATERIAL ADVERSE EVENT"); (iii) the Company does not own or control
any interest in any corporation, association, partnership, limited liability
company, joint venture or other entity other than its subsidiaries listed on
SCHEDULE II hereto; and (iv) except as set forth on SCHEDULE II, each of its
subsidiaries does not own or control any interest in any corporation,
association, partnership, limited liability, joint venture or other entity.
(d). Each of the Company and its subsidiaries has all
necessary authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all regulatory or governmental officials, bodies and
tribunals ("PERMITS") to own or lease its respective properties and to conduct
its businesses as described in the Registration Statement and Prospectus, except
for certificates, authorizations or permits that are not material and the
absence of which do not and will not interfere with the conduct of the business
of the Company, and none of the Company nor any of its subsidiaries has received
any notice or threat of proceedings relating to the revocation or modification
of any such Permits; each of the Company and its subsidiaries has fulfilled and
performed all of its respective current obligations with respect to such
Permits, and no event has occurred which allows, or after notice or lapse of
time, or both, would allow, revocation or termination thereof or results in any
other material impairment of the rights of the holder of any such Permit; and
such Permits contain no restrictions that are materially burdensome to the
Company or its subsidiaries; and each of the Company and its subsidiaries is in
compliance with all applicable laws, rules, regulations, orders and consents.
The property and businesses of the Company and its subsidiaries conform in all
material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(e). Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its subsidiaries has good and marketable
title to all properties and assets described in the Registration Statement
3
<PAGE>
and Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
result in a Material Adverse Event; (ii) the agreements to which the Company or
any of its subsidiaries is a party described in the Registration Statement and
Prospectus are valid agreements, enforceable against (and, to the best of the
Company's knowledge enforceable by) the Company and its subsidiaries (as
applicable), except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements; and (iii) each of the Company and its subsidiaries has
valid and enforceable leases for all properties described in the Registration
Statement and Prospectus as leased by it, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. Except as otherwise disclosed in the Registration
Statement and Prospectus, each of the Company and its subsidiaries own or lease
all such properties as are necessary to its operations as now conducted or as
proposed in the Registration Statement and Prospectus to be conducted.
(f). The Company has full legal right, power and authority to
enter into this Agreement and the Warrant Agreement and perform the transactions
contemplated hereby. Each of this Agreement, the Warrant Agreement and the
Warrants has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the Warrant
Agreement, the issuance and sale of the Stock, the issuance of the Warrants and
the consummation of any other matters herein or therein contemplated will not
(i) result in a material breach or violation of any of the terms and provisions
of, or constitute a default under, any bond, debenture, note or other evidence
of indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective properties may be bound; (ii) violate the
charter or bylaws of the Company or any of its subsidiaries; or (iii) violate
any law, statute, order, rule, regulation, writ, injunction, judgment or decree
applicable to the Company or any of its subsidiaries or their respective
properties of any court, government or governmental agency or body, domestic or
foreign. No consent, approval, authorization or order of or qualification with
any court, government or governmental agency or body, domestic or foreign, is
required for the execution and delivery of this Agreement, the Warrant Agreement
or the Warrants and the consummation by the Company or any of its subsidiaries
of the transactions herein and therein contemplated, except such as may be
required under the Act and state securities laws, all of which requirements have
been satisfied in all material respects.
(g). Each of the Company and its subsidiaries owns or
possesses adequate rights to use all patents, patent applications, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names and copyrights which are necessary to conduct its businesses as described
in the Registration Statement and Prospectus; none of the Company or any of its
subsidiaries has received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent applications, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights; and
none of the Company or any of its subsidiaries has received any notice of, and
has no knowledge of, any infringement of or conflict with asserted rights of
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights.
(h). All outstanding shares of capital stock of the Company
(i) have been duly authorized and validly issued and are fully paid and
nonassessable; (ii) have been issued in compliance with all federal and state
securities laws; and (iii) no further approval or authorization of any
shareholder, the Board of Directors of the Company or others is required for the
issuance and sale or transfer of the Stock hereunder;
(i). Except as described in the Prospectus, (i) there are no
outstanding securities convertible into or exchangeable for, and no outstanding
options, warrants or other rights to purchase, any shares of the capital stock
of the Company or its subsidiaries, nor any agreements or commitments to issue
any of the same; (ii) there are no registration rights, preemptive rights or
other rights to subscribe for or to purchase the securities of the Company
4
<PAGE>
or its subsidiaries that have not been satisfied or expressly waived prior to
the date hereof, or any contracts or commitments to issue or sell, shares of its
capital stock or any such options, rights, convertible securities or
obligations; (iii) there are no restrictions upon the voting or transfer of, any
capital stock pursuant to the Company's or its subsidiaries' certificates or
articles of incorporation or by-laws or any agreement or other instrument to
which the Company or its subsidiaries is a party; and (iv) the Stock when issued
and delivered against payment therefor in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid and nonassessable, and
will be sold free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest.
(j). The Company has reserved and kept available for the
exercise of the Warrants such number of authorized but unissued shares of Common
Stock to permit the exercise in full of the Warrants. The Warrant Shares, when
issued and sold pursuant to the Warrants, (i) will not be subject to any
preemptive rights or other rights to subscribe for or to purchase the Warrant
Shares; (ii) will have no restrictions upon the voting or transfer of, any
Warrant Shares pursuant to the Company's certificate or articles of
incorporation or by-laws or any agreement or other instrument to which the
Company or its subsidiaries is a party; and (iii) the Warrant Shares, when
issued and delivered against payment therefor in accordance with the terms of
the Warrant Agreement, will be duly and validly issued, fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest.
(k). The authorized and outstanding capital stock of the
Company as of June 30, 1997, is as set forth in the Registration Statement and
the Prospectus under the caption "Capitalization" and conforms to the statements
relating thereto contained in the Registration Statement and the Prospectus (and
such statements correctly state the substance of the instruments defining the
capitalization of the Company); and the description of the Company's stock
options or other rights granted and exercised under the Company's stock option,
stock bonus and other stock plans or arrangements, set forth in the Registration
Statement and the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(l). All issued and outstanding shares of capital stock of the
subsidiaries of the Company have been duly authorized and validly issued and are
fully paid and nonassessable, and were not issued in violation of or subject to
any preemptive right, or other rights to subscribe for or purchase shares and
are owned by the Company [or a subsidiary of the Company] free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest.
(m). BDO Seidman, LLP (i) has examined the consolidated
financial statements of the Company, together with the related schedules and
notes for each of the years in the two (2) year period ended December 31, 1996;
and (ii) has performed the procedures set out in Statement on Accounting
Standards No. 71 ("SAS 71") for a review of the interim financial information
for each of the three (3) month periods ended March 31, 1996 and 1997, filed
with the Commission as a part of the Registration Statement and included in the
Prospectus, are independent accountants within the meaning of the Act and the
Act Regulations; the audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company and its subsidiaries at the respective dates and for the
respective periods to which they apply; and all audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, filed with the Commission as
part of the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration Statement
and the Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with the audited financial statements presented
therein. No other financial statements or schedules are required to be included
in the Registration Statement.
(n). Fotinakis Phitidis (SA) has examined the consolidated
financial statements of The Leonard Parker Company (Propriety) Limited, together
with the related schedules and notes for each of the years in the two (2) year
period ended December 31, 1996; and (ii) has performed the procedures set out in
Statement on Accounting Standards No. 71 ("SAS 71") for a review of the interim
financial information for each of the three (3)
5
<PAGE>
month periods ended March 31, 1996 and 1997, filed with the Commission as a part
of the Registration Statement and included in the Prospectus, are independent
accountants within the meaning of the Act and the Act Regulations; the audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited consolidated financial information,
forming part of the Registration Statement and Prospectus, fairly present the
financial position and the results of operations of the Company and its
subsidiaries at the respective dates and for the respective periods to which
they apply; and all audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, filed with the Commission as part of the Registration
Statement, have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except as may be
otherwise stated therein. The selected and summary financial and statistical
data included in the Registration Statement and the Prospectus present fairly
the information shown therein and have been compiled on a basis consistent with
the audited financial statements presented therein. No other financial
statements or schedules are required to be included in the Registration
Statement.
(o). The pro forma financial information and the related notes
thereto included in the Registration Statement have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma basis described therein
and, in the opinion of the Company, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.
(p). The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(q). The statistical, industry and market-related data
included in the Registration Statement and the Prospectus is reliable and
accurate in all material respects.
(r). Each of the Company and its subsidiaries maintains
insurance covering its properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in accordance
with customary industry practice to protect the Company, its subsidiaries and
their businesses. Neither the Company nor its subsidiaries has received written
notice from any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to continue
such insurance. All such insurance is outstanding and duly in force on the date
hereof.
(s). The Company is not, and after application of the proceeds
from the sale of the Stock will not be an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations promulgated
thereunder.
(t). Neither of the Company nor any of its subsidiaries is (i)
in violation of its respective charter or by-laws; (ii) in violation of any law,
ordinance, administrative or governmental rule or regulation applicable to the
Company or its subsidiaries or of any franchise, license, permit, judgment or
any decree of any court or governmental agency or body having jurisdiction over
the Company or its subsidiaries; or (iii) in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease,
bond, debenture, bank loan, credit agreement or other agreement, instrument or
evidence of indebtedness to which the Company or its subsidiaries is a party or
by which any of them may be bound, or to which any of the property or assets of
the Company or its subsidiaries is subject.
(u). There is not any pending or, to the best of the Company's
knowledge, any threatened action, suit, claim or proceeding against the Company,
any of its subsidiaries or any of their respective officers or directors (and
which are related to the Company or such Subsidiaries) or any of the respective
properties, assets or
6
<PAGE>
rights of the Company or any of its subsidiaries before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in a Material Adverse Event; (ii)
might prevent consummation of the transactions contemplated hereby; or (iii) is
required to be disclosed in the Registration Statement or Prospectus and is not
so disclosed; and there are no agreements, contracts, leases or documents of the
Company or any of its subsidiaries of a character required to be described or
referred to in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement by the Act or the Rules and Regulations
which have not been accurately described in the Registration Statement or
Prospectus or filed as exhibits to the Registration Statement.
(v). Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (i) a Material Adverse Event; (ii) any transaction that is material to the
Company and its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business; (iii) any obligation, direct or
contingent, that is material to the Company and its subsidiaries considered as
one enterprise, incurred by the Company or its subsidiaries, except obligations
incurred in the ordinary course of business; (iv) any change in the capital
stock or outstanding indebtedness of the Company or any of its subsidiaries that
is material to the Company and its subsidiaries considered as one enterprise;
(v) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its subsidiaries; or (vi) any loss or
damage (whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which could
reasonably be expected to result in a Material Adverse Event.
(w). Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto or in any abbreviated
Registration Statement), subsequent to the respective dates as of which such
information is given in the Registration Statement and the Prospectus (or any
amendment or supplement thereto or in any abbreviated Registration Statement),
neither the Company nor any of its subsidiaries has issued any securities, or
incurred any material liability or obligations, direct or contingent, or entered
into any transaction not in the ordinary course of business, or entered into any
transaction with an affiliate (as the term "AFFILIATE" is defined in Rule 405
promulgated by the Commission pursuant to the Act) of the Company which would
otherwise be required to be disclosed in the Registration Statement or the
Prospectus, declared or paid any dividend on its capital stock, or made any
other distribution to any of its shareholders, and there has not been any
material change in the capital stock or other equity, or material increase in
the short-term debt or long-term debt, of the Company or its subsidiaries or any
development involving or which could reasonably be expected to result in a
Material Adverse Event.
(x). There is (i) no unfair labor practice complaint pending
or, to the best knowledge of the Company, threatened against the Company or any
of its subsidiaries before the National Labor Relations Board or any state or
local labor relations board, and no significant grievance or significant
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Company or its subsidiaries, or, to the best
knowledge, of the Company, threatened against any of them; (ii) no strike, labor
dispute, slowdown or stoppage pending against the Company or its subsidiaries,
or, to the best knowledge of the Company, threatened against the Company or any
of its subsidiaries; and (iii) to the best knowledge of the Company, no union
representation question existing with respect to the employees of the Company or
its subsidiaries and, to the best knowledge of the Company, no union organizing
activities are taking place, except (with respect to any matter specified in
clause (i), (ii) or (iii) above, singly or in the aggregate) such as could not
reasonably be expected to result in a Material Adverse Event.
(y). The Company has timely filed all necessary federal, state
and foreign income and franchise tax returns and has paid all taxes shown
thereon as due, and there is no tax deficiency that has been or, to the best of
the Company's knowledge, might be asserted against the Company that might result
in a Material Adverse Event; and all tax liabilities are adequately provided for
on the books of the Company.
(z). Neither the Company nor any of its subsidiaries is in
Violation of any federal, state, local or foreign laws or regulations relating
to pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of chemicals,
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pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products ("MATERIALS OF ENVIRONMENTAL CONCERN"), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern
(collectively, "ENVIRONMENTAL LAWS"), which Violation could be reasonably
expected to result in a Material Adverse Event. As used herein, "VIOLATION"
includes, but is not limited to, noncompliance with any permit or other
governmental authorization required under applicable Environmental Laws and
noncompliance with the terms and conditions of any such permit or authorization.
In addition, (i) neither the Company nor any of its subsidiaries has received
any communication, whether from a governmental authority, citizens' group,
employee or otherwise, alleging that the Company or any of its subsidiaries is
not in full compliance with any Environmental Laws or permit or authorization
required under applicable Environmental Laws where such failure to comply could
reasonably be expected to result in a Material Adverse Event; and (ii) there are
no circumstances that may be reasonably anticipated to prevent or interfere with
such full compliance in the future.
(aa). There is no claim, action, cause of action,
investigation or written notice by any person or entity alleging potential
liability (including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) arising out of, based on or
resulting from (i) the presence, or release into the environment, of any
Material of Environmental Concern at any location owned or operated by the
Company or any of its subsidiaries; or (ii) circumstances forming the basis of
any Violation, or alleged violation, of any Environmental Law (collectively,
"ENVIRONMENTAL CLAIMS") pending or threatened against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed either contractually or by operation of law which liability or violation
could be reasonably expected to result in a Material Adverse Event.
(bb). To the best knowledge of the Company, there are no past
or present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that could form the basis of
any Environmental Claim against the Company or its subsidiaries, or against any
person or entity whose liability for any Environmental Claim the Company or any
of its subsidiaries has retained or assumed, either contractually or by
operation of law, which claim could be reasonably expected to result in a
Material Adverse Event.
(cc). To the best knowledge of the Company, the Company and
its subsidiaries have complied with and will be in compliance with the
provisions of that certain Florida act relating to doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations promulgated thereunder or is exempt therefrom.
(dd). The Company, its Subsidiaries, its directors and its
officers, have not taken and will not take, directly or indirectly, any action
designed to, or that might be reasonably expected to, cause or result in
stabilization or manipulation of the price of the Stock. Additionally, the
Company, its Subsidiaries, its directors and its officers have not distributed
and will not distribute prior to the later of (i) the Closing Date, or any date
on which Option Stock are to be purchased, as the case may be, and (ii)
completion of the distribution of the Stock, any offering material in connection
with the offering and sale of the Stock other than any Preliminary Prospectuses,
the Prospectus, the Registration Statement and other materials, if any,
permitted by the Act.
(ee). None of the Company or any of its subsidiaries, and to
the best knowledge of the Company, none of their respective directors or
officers has, at any time during the last five (5) years, (i) made any unlawful
contribution to any candidate for foreign office or failed to disclose fully any
contribution in violation of law; or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof.
(ff). The Stock is duly authorized for listing, subject to
official notice of issuance, on the Nasdaq National Stock Market (herein called
"NASDAQ").
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(gg). There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
SECTION 2. SALE AND DELIVERY TO THE UNDERWRITERS; CLOSING.
(a). Subject to the terms and conditions set forth herein, the
Company agrees to sell to each Underwriter, severally and not jointly, and, on
the basis of the representations and warranties herein contained and subject to
the terms and conditions herein set forth, each Underwriter, severally and not
jointly, agrees to purchase from the Company at $_____ per share the number of
shares of Underwritten Stock set forth opposite its name in SCHEDULE I plus any
additional number of shares of Underwritten Stock that such Underwriter may be
obligated to purchase pursuant to Section 9 below.
(b). In addition, subject to the terms and conditions set
forth herein, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase from the Company up to 375,000 shares of Option
Stock at the purchase price per share paid by the Underwriters set forth in
Section 2(a) hereof. The option granted by the Company pursuant to this Section
2(b) (the "OVER-ALLOTMENT OPTION") will expire automatically at the close of
business on the 30th calendar day after (i) the Effective Date, if the Company
has elected not to rely upon Rule 430A under the Act Regulations; or (ii) the
Representation Date, if the Company has elected to rely upon Rule 430A under the
Act Regulations, and may be exercised in whole or in part at the Closing Date
and at one date subsequent to the Closing Date but prior to the expiration of
such option only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Underwritten Stock upon
notice by the Representative to the Company setting forth the number of shares
of Option Stock as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for such Option Stock. Any
such date (the "OPTION CLOSING DATE") shall be determined by the Representative
and may be the same date as (but not earlier than) the Closing Date, but in no
event shall such Option Closing Date be earlier than two full business days nor
later than seven full business days after the giving of notice of the exercise
of such option to the Company, unless otherwise agreed upon by the
Representative and the Company. If the Over-Allotment Option is exercised as to
all or any portion of the Option Stock, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
shares of Option Stock as to which the Over-Allotment Option is being exercised
which the number of shares of Underwritten Stock set forth opposite its name in
Schedule I bears to the total number of shares of Underwritten Stock, except as
otherwise agreed upon between the Representative and the Company, subject in
each case to such adjustments as the Representative in its discretion shall make
to eliminate any sales or purchases of fractional shares.
(c). Payment of the purchase price for, and delivery of, the
Underwritten Stock to be purchased by the several Underwriters shall be made at
such place as shall be agreed upon by the Representative and, the Company at
10:00 A.M., New York City time, (i) on the third (3rd) full business day
following the first (1st) day that Underwritten Stock is are traded; (ii) if
this Agreement is executed and delivered after 9:30 A.M., New York City time,
the fourth (4th) full business day following the day that this Agreement is
executed and delivered; or (iii) at such other time and date not later than
seven (7) full business days following the first day that Underwritten Stock is
traded as the Representative and the Company may determine (or at such time and
date to which payment and delivery shall have been postponed pursuant to Section
9(e) hereof), such time and date of payment and delivery being herein called the
"CLOSING DATE;" PROVIDED, HOWEVER, that if the Company has not made available to
the Representative copies of the Prospectus within the time provided herein, the
Representative may, in its sole discretion, postpone the Closing Date until no
later than two (2) full business days following delivery of copies of the
Prospectus to the Representative; for purposes of Rule 15c6-1 under the
Securities Exchange Act, the Closing Date (if later than the otherwise
applicable settlement date) shall be the settlement date for payments of funds
and delivery of securities for all Underwritten Stock sold. In addition, if the
Underwriters purchase any or all of the Option Stock, payment of the purchase
price and delivery of certificates for such Option Stock shall be made at such
place as shall be agreed upon by the Representative and the Company on the
Option Closing Date as specified in the relevant notice from the Representative
to the Company.
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(d). Payment shall be made to the Company by wire transfer of
same-day federal funds payable to the Company against delivery to the
Representative for the respective accounts of the Underwriters of certificates
for the Stock to be purchased by them. Certificates for the Stock shall be in
such denominations and registered in such names as the Representative may
request in writing at least two (2) business days before the Closing Date or the
Option Closing Date, as the case may be. The certificates for the Stock will be
made available for examination and packaging by the Representative not later
than 1:00 P.M. New York City time on the last business day prior to the Closing
Date or the Option Closing Date, as the case may be, at the offices of the
transfer agent for the Common Stock in New York, New York.
(e). On the Underwritten Stock Closing Date, the Company shall
issue and sell to Jefferies & Company, Inc. for its own account and not as
Representative of the several Underwriters Warrants to purchase an aggregate of
________ shares of Common Stock at a price per Warrant equal to $_____. The
Warrants will be exercisable at any time and from time to time on or after the
first anniversary of the date of the Prospectus up to the fifth anniversary
thereof. Each Warrant shall be substantially in the form filed as an exhibit to
the Registration Statement.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants
with each Underwriter as follows:
(a). The Company will use its best efforts to cause the
Registration Statement, if not effective at the Representation Date, and any
amendment thereof, to become effective as promptly as possible after the filing
thereof. The Company will not file any amendment to the Registration Statement
or amendment or supplement to the Prospectus, any Rule 434 Act Regulation term
sheet or any 462(b) Act Regulation abbreviated Registration Statement, to which
the Representative shall reasonably object in writing after a reasonable
opportunity to review such amendment or supplement. Subject to the foregoing
sentences in this clause (a), if the Registration Statement has become or
becomes effective pursuant to Rule 430A, or filing of the Prospectus or
supplement to the Prospectus is otherwise required under Rule 424(b), the
Company will cause the Prospectus to be completed, or such supplement thereto to
be filed with the Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence reasonably
satisfactory to the Representative of such timely filing. The Company promptly
will advise the Representative (i) when the Registration Statement, if not
effective at the Representation Date, and any amendment thereto, shall have
become effective; (ii) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule 424(b); (iii)
when any amendment to the Registration Statement shall have been filed or become
effective; (iv) of any request by the Commission for any amendment of or
supplement to the Registration Statement or any Prospectus or for any additional
information; (v) of the receipt by the Company of any notification of, or if the
Company otherwise has knowledge of, the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose; and (vi) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company will use its best
efforts to prevent the issuance of any such stop order and, if issued, to obtain
as soon as possible the withdrawal thereof.
(b). If, at any time when a prospectus relating to the Stock
is required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances under which they
were made not misleading, or if it shall be necessary to amend the Registration
Statement or amend or supplement the Prospectus to comply with the Act or the
Act Regulations, the Company promptly will prepare and file with the Commission,
subject to the second sentence of Section 3(a), an amendment or supplement which
will correct such statement or omission or effect such compliance.
(c). The Company consents to the use of the Prospectus in
accordance with the provisions of the Act and with the securities or Blue Sky
laws of the jurisdictions in which Stock is offered by the Underwriters and by
all dealers to whom Stock may be sold, both in connection with the offering and
sale of the Stock and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with the sales by
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any Underwriters or dealer. The Company will comply with all requirements
imposed upon it by the Act, as now and hereafter amended, so far as necessary to
permit the continuance of sales of or dealing in the Stock in accordance with
the provisions hereof and of the Prospectus.
(d). Not later than the 45th day following the end of the
fourth fiscal quarter first occurring after the "effective date" (as defined in
Rule 158 under the Act) of the Registration Statement (the "EFFECTIVE DATE"),
the Company will mail and make generally available to its security holders a
consolidated earning statement covering a period of at least twelve (12) months
beginning with the first full calendar quarter following the Effective Date
which shall satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder and shall advise you in writing when such statement has been made so
available.
(e). The Company will furnish to the Representative, without
charge, one signed copy of the Registration Statement (including exhibits
thereto) and, so long as delivery of a prospectus by the Underwriters or a
dealer may be required by the Act, as many copies of each Preliminary Prospectus
and the Prospectus and all amendments and supplements thereto as the
Representative may reasonably request.
(f). The Company will apply the net proceeds from the sale of
the Stock to be sold hereunder in accordance with the description set forth in
the "Use of Proceeds" section of the Prospectus.
(g). The Company will cooperate with the Representative and
its counsel in connection with endeavoring to obtain and maintain the
qualification or registration, or exemption from qualification, of the Stock for
offer and sale under the applicable securities or Blue Sky laws of such states
and other jurisdictions of the United States as the Representative may
designate; provided, that in no event shall the Company be obligated to qualify
to do business in any jurisdiction where it is not now so qualified or to take
any action which would subject it to taxation or general service of process in
any jurisdiction where it is not now so subject.
(h). During a period of five (5) years commencing with the
date hereof, the Company will furnish to the Representative, and to each
Underwriter who may so request in writing, copies of all periodic and special
reports furnished to shareholders of the Company and of all information,
documents and reports filed with Commission pursuant to the Act or the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT").
(i). The Company agrees that it will not, without the prior
written consent of Jefferies & Company, Inc., during the period ending 180 days
after the date of the Prospectus, (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option to contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock; (ii) enter
into any swap or similar agreement that transfers, in whole or in part, the
economic risk of ownership of the Common Stock; or (iii) release any security
holder (or his, her or its transferee), from any "lock-up" provision or
agreement, whether any such transaction described in clause (i), (ii) or (iii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing provisions shall not apply to (A) the Common
Stock to be sold to the Underwriters pursuant to this agreement; and (B) options
granted by the Company to purchase Common Stock granted under its option plans
described in the Registration Statement. For purposes of this paragraph a sale,
offer, or other disposition shall be deemed to include any sale to an
institution which can, following such sale, sell Common Stock in reliance on
Rule 144A.
(j). The Company will use its best efforts to cause all
directors, officers, and certain other beneficial owners of shares of Common
Stock or securities convertible or exchangeable into Common Stock (listed on
SCHEDULE III attached hereto) to agree that, without the prior written consent
of Jefferies & Company, Inc., he, she or it will not, without the prior written
consent of Jefferies & Company, Inc., during the period ending 180 days after
the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option to contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, or (ii) enter into any
swap or similar agreement that transfers, in whole or in part, the economic risk
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii)
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above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing provisions shall not apply to (A) the Common
Stock to be sold to the Underwriters pursuant to this agreement; (B) options
granted by the Company to purchase Common Stock granted under its option plans
described in the Registration Statement; and (C) transfers, without
consideration, of the Common Stock or any securities convertible into, or
exercisable or exchangeable for Common Stock to family members or to one or more
trusts established for the benefit of one or more family members are permitted
at any time, provided that the transferee execute and deliver to Jefferies &
Company, Inc., an agreement whereby the transferee agrees to be bound by all of
the foregoing terms and provisions.
(k). In addition, such holder will agree that, without the
prior written consent of Jefferies & Company, Inc. on behalf of the
Underwriters, it will not, from the date hereof through the period ending 180
days after the date of the Prospectus, make any demand for or exercise any right
with respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable for Common Stock. For purposes of this Section 1
and [subparagraph (a)(ii) of Section 5], a holder shall be deemed to
beneficially own shares of Common Stock that are issuable upon the exercise of
options, warrants or other rights to acquire Common Stock on or before 180 days
following the Closing Date.
(l). During the period of five years hereafter the Company
will furnish to the Representatives as soon as practicable after the end of each
fiscal year, a copy of its annual report to stockholders for such year; and the
Company will furnish to the Representative (i) as soon as available, a copy of
each report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to stockholders, and (ii) from time
to time, such other information concerning the Company as the Representative may
reasonably request, provided that prior to the Company's furnishing any such
other information that is nonpublic you shall enter into such agreement
respecting the confidentiality thereof as the Company may reasonably request.
(m). The Company will cooperate with the Underwriters and
their counsel in connection with endeavoring to obtain and maintain the
qualification or registration, or exemption from qualification, of the shares of
Stock for offer and sale under the applicable securities laws of such states and
other jurisdictions of the United States as the Underwriters may designate;
PROVIDED, that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to taxation or general service of process in any
jurisdiction where it is not now so subject.
(n). The Company will not at any time, directly or indirectly
(A) take any action designed to cause or result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Stock, or (B) (1) sell, bid for, purchase or pay anyone any
compensation for soliciting purchases of, Stock or (2) pay or agree to pay any
person any compensation for soliciting another to purchase any other securities
of the Company.
(o). The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(p). The Company shall cause the Stock to be quoted on the
Nasdaq National Market and shall use its best efforts to maintain such trading
while the shares of Stock are outstanding.
(q). Until expiration of the Warrant, keep reserved sufficient
shares of Common Stock for issuance upon exercise of the Warrant.
SECTION 4. PAYMENT OF EXPENSES. Whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated, and, except as noted herein below, the Company will pay (directly or
by reimbursement), and will be responsible for, all costs and expenses incident
to the performance of the obligations of the Company under this Agreement,
including but not limited to expenses related to the following, if incurred, (i)
the printing and filing of the Registration Statement as originally filed and of
each amendment thereto; (ii) the printing and/or copying of this Agreement, the
Master Agreement Among Underwriters, the Selected Dealer Agreement,
communications with the Underwriters and any other documents in connection with
the offering,
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purchase, sale and delivery of the Stock; (iii) the preparation, issuance and
delivery of the Stock to the Underwriters, including capital duties, stamp
duties and transfer taxes, if any, payable upon issuance of any of the Stock or
the sale of the Stock to the Underwriters; (iv) the fees and disbursements of
the Company's counsel and accountants; (v) the qualification of the Stock under
state securities laws, including filing fees and the reasonable fees and
disbursements of counsel for the Representative in connection therewith and in
connection with the preparation of any Blue Sky survey and any supplemental Blue
Sky survey; (vi) the printing and delivery to the Underwriters of copies of the
Registration Statement as originally filed and of each amendment thereto, of the
Preliminary Prospectus and of the Prospectus and any amendments or supplements
thereto; (vii) the printing and/or copying and delivery to the Underwriters of
copies of the Blue Sky survey and any supplemental Blue Sky survey; (viii) the
fees and expenses incurred in connection with the listing of the stock on any
national securities exchange or Nasdaq; (ix) the fees payable to the National
Association of Securities Dealers, Inc.; and (x) the preparation, issuance and
delivery of the Warrants to Jefferies & Company, Inc., including capital duties,
stamp duties and transfer taxes, if any, payable upon issuance of any of the
Warrants or Warrant Shares or the sale of the Warrants to the Underwriters;
If this Agreement is terminated by the Representative in
accordance with the provisions of Sections 5 or 8 hereof, the Company shall
reimburse the Representative and the other Underwriters for all of their
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of their attorneys, but the Company shall in no event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the stock.
SECTION 5. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The
obligation of the Underwriters to purchase and pay for the Stock hereunder is
subject to the continued accuracy of the representations and warranties of the
Company contained herein as of the date hereof and as of the Closing Date (and,
if applicable, as of the Option Closing Date), to the accuracy of the statements
of the Company made in any certificate or certificates pursuant to the
provisions hereof as of the date hereof and as of the Closing Date (and, if
applicable, as of the Option Closing Date), to the performance by the Company of
its obligations hereunder, and to the following further conditions:
(a). The Registration Statement shall have become effective
not later than 1:30 P.M. New York City time on the date hereof, or at such later
date as may be approved by the Representative and the Company and shall remain
effective at the Closing Date and at the Option Closing Date. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the Act or proceedings therefor initiated or, to the knowledge of
the Company or the Representative, threatened by the Commission, and any request
of the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been satisfied to the
satisfaction of Underwriters' Counsel.
(b). All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Stock, shall have been reasonably satisfactory to Underwriters' counsel, and
such counsel shall have been furnished with such papers and information as they
may reasonably have requested to enable them to pass upon the matters referred
to in this Section.
(c). Subsequent to the execution and delivery of this
Agreement, and prior to the Closing Date, there shall not have been a Material
Adverse Event, which, in your sole judgment, is material and adverse and that
makes it, in your sole judgment, impracticable or inadvisable to proceed with
the public offering of the Stock as contemplated by the Prospectus.
(d). The Company shall have furnished to the Representative
the opinion of Olshan Grundman Frome & Rosenzweig LLP, counsel to the Company,
addressed to the Underwriters and dated as of the Closing Date, substantially in
the form attached hereto as SCHEDULE IV, with such changes as may be reasonably
requested by the Representative, and if Option Stock is purchased at any date
after the Closing Date, an additional opinion from Olshan Grundman Frome &
Rosenzweig LLP, addressed to the Underwriters and dated the Option Closing
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Date, confirming that the statements expressed as of the Closing Date in such
opinion remain valid as of the Option Closing Date.
(e). Latham & Watkins, counsel for the Underwriters, shall
have furnished to the Underwriters an opinion with respect to such matters as
maybe reasonably requested by the Representative, dated as of the Closing Date,
and if Option Stock is purchased at any date after the Closing Date, an
additional opinion addressed to the Underwriters and dated the Option Closing
Date confirming that the statements expressed as of the Closing Date in such
opinion remain valid as of the Option Closing Date.
(f). The Company shall furnish the Representative a
certificate, signed by the President and the Chief Financial Officer of the
Company, dated the Closing Date (and, if applicable, the Option Closing Date),
to the effect that the signers of such certificate have carefully examined the
Registration Statement, the Prospectus, any supplement or amendment to the
Prospectus and this Agreement and that, to their knowledge:
(i). the representations and warranties of the Company contained in
this Agreement and the Warrant Agreement are true and correct on and
as of the Closing Date, and, if applicable, on and as of the Option
Closing Date and the Company has complied with all the agreements
and satisfied all the conditions under this Agreement and the
Warrant Agreement on its part to be performed or satisfied at or
prior to the Closing Date (and, if applicable, at or prior to the
Option Closing Date);
(ii). no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have
been instituted or, to the knowledge of the Company, threatened; and
(iii). since the date of the most recent financial statements
included in the Prospectus, there has been no Material Adverse
Event.
(g). At the Effective Date, the Representation Date and at the
Closing Date (and, if applicable, at the Option Closing Date), BDO Seidman, LLP
shall have furnished to the Underwriters a letter or letters, dated respectively
as of the Effective Date, the Representation Date and the Closing Date (and, if
applicable, the Option Closing Date), in form and substance reasonably
satisfactory to the Underwriters, covering the time periods and relating to the
procedures referred to in Section 2(m) hereof and containing statements and
information of the type customarily included in accountants' "comfort letters"
to underwriters with respect to the financial statements and certain other
information contained in the Registration Statement and the Prospectus.
(h). At the Effective Date, the Representation Date and at the
Closing Date (and, if applicable, at the Option Closing Date), Fotinakis
Phitidis (SA) shall have furnished to the Underwriters a letter or letters,
dated respectively as of the Effective Date, the Representation Date and the
Closing Date (and, if applicable, the Option Closing Date), in form and
substance reasonably satisfactory to the Underwriters, covering the time periods
and relating to the procedures referred to in Section 2(n) hereof and containing
statements and information of the type customarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements and
certain other information contained in the Registration Statement and the
Prospectus.
(i). Prior to the Closing Date, the Stock shall have been duly
authorized for quotation on the Nasdaq upon official notice of issuance. (j). On
or prior to the Closing Date, you shall have received from all of the persons
and entities set forth on SCHEDULE III attached hereto, executed lock-up
agreements.
(k). On or prior to the Closing Date, the Company shall have
executed and delivered the Warrant Agreement to Jefferies & Company, Inc.
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(l). On or prior to the Closing Date, the Company shall have
executed and delivered the Warrant to Jefferies & Company, Inc.
(m). If any condition specified in this Section 5 shall not
have been fulfilled in all material respects when and as required to be
fulfilled, this Agreement may be terminated by the Representative by written
notice to the Company at or prior to the Closing Date.
(n). All the agreements, opinions, certificates and letters
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if Latham & Watkins, counsel for the
Underwriters, shall be satisfied that they comply in form and scope.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
(a). The Company agrees to indemnify, defend and hold harmless
each Underwriter and its affiliates and their respective officers, shareholders,
counsel, agents, employees, directors and any person who controls each
Underwriter or any of their respective affiliates within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, and the respective officers,
shareholders, counsel, agents, employees and directors of such persons (each
Underwriter and each such other person or entity being referred to herein as an
"INDEMNIFIED PERSON"), to the fullest extent lawful from and against any loss,
expense, liability or claim (including the reasonable cost of investigating such
claim) which, jointly or severally, the Indemnified Persons may incur under the
Act, the Exchange Act or otherwise, as such expenses are incurred, insofar as
such loss, expense, liability or claim (i) arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement (or in the Registration Statement as amended by any post-
effective amendment thereof) or in a Prospectus (including any Preliminary
Prospectus); (ii) arises out of or is based upon any omission or alleged
omission to state a material fact required to be stated in either such
Registration Statement or the Prospectus or necessary to make the statements
made therein not misleading in light of the circumstances under which they were
made, except insofar as any such loss, expense, liability or claim arises out of
or is based upon any untrue statement or omission or alleged untrue statement or
omission which has been made therein or omitted therefrom in reliance upon and
in conformity with the information provided in writing to the Company by or on
behalf of the Underwriters, expressly for use in the Registration Statement or
the Prospectus, and the Company agrees that the only such information provided
in writing by or on behalf of the Underwriters, expressly for use in the
Registration Statement or the Prospectus, is that information contained in the
section of the Prospectus entitled "Underwriting," the last paragraph of text on
the cover page of the Prospectus and the paragraph regarding stabilization
appearing on the inside front cover page of the Prospectus; provided, that the
indemnity agreement contained in this Section 6(a) with respect to any
Preliminary Prospectus or amended Preliminary Prospectus shall not inure to the
benefit of the Indemnified Person from whom the person asserting any such loss,
expense, liability or claim purchased the Stock which is the subject thereof, if
the Prospectus corrected any such alleged untrue statement or omission and if
such Underwriter failed to send or give a copy of the Prospectus to such person
at or prior to the written confirmation of the sale of Stock to such person,
provided that the Company has delivered the Prospectus to the Underwriters in
sufficient quantity not less than one full business day prior to the sale to the
person asserting such claim; or (iii) arises directly out of or is based
directly upon any act or failure to act or any alleged act or failure to act by
any Underwriter in connection with, or relating in any manner to, the Stock or
the offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (i) or (ii) above (PROVIDED that the Company shall not
be liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction, or stipulated by each of the
Underwriters whose act or omission led to such loss, claim, damage, liability or
action that such loss, claim, damage, liability or action resulted directly from
any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct). The foregoing
indemnity agreement shall be in addition to any liability which the Company may
otherwise have.
(b). If any action or proceeding (including any government
investigation) is brought or asserted against any Underwriter or their
respective officers, shareholders, employees, directors or any person who
15
<PAGE>
controls any of the Underwriters (as described above) in respect of which
indemnity may be sought against the Company pursuant to this Section 6, such
Underwriter shall promptly notify the Company in writing of the institution of
such action (provided, the at the failure to give such notice shall not relieve
the Company of any liability which it may have pursuant to this Agreement,
unless it shall have been determined by a court of competent jurisdiction by
final judgment that such failure has resulted in the forfeiture of substantive
rights or defenses by the indemnifying party) and the Company shall assume the
defense of such action, including the employment of counsel and payment of
reasonable expenses. Such Underwriter or such officer, shareholder, employee,
director or person who controls the Underwriter (as described) shall have the
right to employ its or their own counsel in any such case and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or of such persons unless: (i) the Company shall
have failed to assume the defense of such action or proceeding or the Company
shall have failed to employ counsel reasonably satisfactory to the Underwriter
in any such action; or (ii) such Indemnified Party or parties shall have been
advised by counsel that there may be one or more defenses available to it or
them that are different from or additional to those available to the Company (in
which case, if such indemnified party or parties notifies the Company in writing
that it elects to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such action on behalf
of the indemnified party or parties), in any of which events such fees and
expenses shall be borne by the Company and paid as incurred; provided, that the
Company shall be responsible for the fees and expenses of only one counsel for
all Indemnified Parties hereunder. Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its prior written consent, which consent shall
not be unreasonably withheld.
(c). Each Underwriter severally agrees to indemnity, defend
and hold harmless the Company and its directors, officers, shareholders,
counsel, agents and employees and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any loss, expense, liability or claim (including the reasonable cost of
investigation) which, jointly or severally, the Company or any such person may
incur under the Act, the Exchange Act or otherwise, as such expenses are
incurred insofar as such loss, expense, liability or claim arises out of or is
based upon any untrue statement or omission or alleged untrue statement or
omission which has been made in or omitted from the Registration Statement (or
in the Registration Statement as amended by any post-effective amendment
thereof) or in the Prospectus (including any Preliminary Prospectus) in reliance
upon and in conformity with the information relating to the Underwriters
furnished in writing by or on behalf of the Underwriters to the Company. The
Company agrees that the only information provided in writing by or on behalf of
the Underwriters to the Company, expressly for use in the Registration Statement
or the Prospectus, is that information contained in the section of the
Prospectus entitled "Underwriting," the statements appearing as the last
paragraph of text on the cover page of the Prospectus and the paragraph
regarding stabilization appearing on the inside front cover page of the
Prospectus.
(d). If any action is brought against the Company or any
person in respect of which indemnity may be sought against any Underwriter
pursuant to the foregoing paragraph, the Company or such person shall promptly
notify such Underwriter in writing of the institution of such action (provided,
that the failure to give such notice shall not relieve such Underwriter of any
liability which it may have pursuant to this Agreement, unless it shall have
been determined by a court of competent jurisdiction by final judgment that such
failure has resulted in the forfeiture of substantive rights or defenses by the
indemnifying party) and the Underwriters shall assume the defense of such
action, including the employment of counsel and payment of reasonable expenses.
The Company or such person shall have the right to employ its or their own
counsel in any such case and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Company or such
person unless: (i) such Underwriters shall have failed to assume the defense of
the action or shall have failed to employ counsel reasonably satisfactory to the
Company or such person in any such action; or (ii) such indemnified party or
parties shall have been advised by counsel that there may be one or more
defenses available to it or them that are different from or additional to those
available to such Underwriters (in which case, if such indemnified party or
parties notifies the Underwriters in writing that it elects to employ separate
counsel at the expense of the Underwriters, such Underwriters shall not have the
right to assume the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
Underwriters and paid as incurred; provided, that the Underwriters shall be
responsible for the fees and expenses of only one counsel for all indemnified
parties. Anything in this paragraph to the contrary notwithstanding, the
Underwriters shall not
16
<PAGE>
be liable for any settlement of any such claim or action effected without the
written consent of such Underwriter, which consent shall not be unreasonably
withheld.
(e). If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under subsection (a) or (c) of this Section
6 in respect of any losses, damages, expenses, liabilities or claims referred to
therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, expenses,
liabilities or claims (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and each
Underwriter, on the other hand, from the offering of the Stock or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, on
the one hand, and each Underwriter, on the other hand, in connection with the
statements or omissions which resulted in such losses, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and each Underwriter, on the
other hand, shall be deemed to be in the same proportion as the total proceeds
from the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received under the Agreement by each Underwriter. The
relative fault of the Company, on the one hand, and of each Underwriter, on the
other hand, shall be determined by reference to, among other things, whether the
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission relates to information supplied by the Company or by such
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, expenses, liabilities and
claims referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any claim or action.
(f). The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 6 were determined
by PRO RATA allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 6(e) above.
Notwithstanding the provisions of this Section 6, each Underwriter shall not be
required to contribute any amount in excess of the underwriting discounts and
commissions received by it. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(g). The indemnity and contribution agreements contained in
this Section 6 shall remain in full force and effect irrespective of any
investigation made by or on behalf of the Underwriters, or any of their
officers, employees, directors, shareholders, counsel, agents or any person who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, by or on behalf of the Company, its directors, officers,
counsel, agents, employees or any person who controls the Company, within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, and shall
survive any termination of this Agreement or the issuance and delivery of the
Stock. The Company and each Underwriter agree promptly to notify the others of
the commencement of any litigation or proceeding against it and, in the case of
the Company, against any of its respective officers and directors in connection
with the issuance and sale of the Stock, or in connection with the Registration
Statement or Prospectus.
SECTION 7. SURVIVAL. All representations, warranties and
agreements contained in this Agreement, or contained in certificates of officers
of the Company submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of the
several Underwriters or any of their respective officers, employees, directors,
shareholders or person who controls any Underwriter, or by or on behalf of the
Company and shall survive delivery of the Stock to and payment for the Stock by
the several Underwriters.
SECTION 8. TERMINATION OF AGREEMENT.
The Representative shall have the right to terminate this
Agreement by giving notices hereinafter specified in Section 10 hereof at any
time at or prior to the Closing Date or on or prior to any later date(s) on
which
17
<PAGE>
Option Stock may be purchased, as the case may be, (i) if the Company shall have
failed, refused or been unable to perform any agreement on its part to be
performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled is not fulfilled, including, without
limitation, any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise from that set forth in the Registration Statement
or Prospectus, which, in your sole judgment, is material and adverse, or (ii) if
additional material governmental restrictions, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange or on the American Stock Exchange or in the over the counter
market by the NASD, or trading in securities generally shall have been suspended
on either such exchange or in the over the counter market by the NASD, or if a
banking moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company or any of its subsidiaries shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Stock, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representative, makes it impracticable or
inadvisable to proceed with the public offering of the Stock as contemplated by
the Prospectus.
If this Agreement is terminated pursuant to this Section or
any other provision of this Agreement, such termination shall be without
liability of any party to any other party except as provided in Sections 4 and
6.
SECTION 9. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS.
(a). If one or more of the Underwriters shall fail at the
Closing Date (or the Option Closing Date) to purchase the shares of Underwritten
Stock which it or they are obligated to purchase under this Agreement (the
"DEFAULTED STOCK"), the Representative shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Stock in such amounts as may be agreed upon and upon the terms
herein set forth. If, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(i). If the number of shares of Defaulted Stock does not
exceed 10% of the total number of shares of Underwritten Stock, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(ii). If the number of shares of Defaulted Stock exceeds
10% of the Underwritten Stock, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter or the Company.
(b). No action taken pursuant to this Section 9 shall relieve
any defaulting Underwriter from liability in respect of its default.
(c). In the event of any such default which does not result in
a termination of this Agreement, the Representative and the Company shall have
the right to postpone the Closing Date for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements.
SECTION 10. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Representative shall be directed to Jefferies & Company, Inc., 580 California
Street, Suite 2080, San Francisco, California 94104, attention of ___________,
with a copy to Latham & Watkins, 505 Montgomery Street, Suite 1900, San
Francisco, California 94111-2586, attention of Tracy K. Edmonson, Esq. Notices
to the Company
18
<PAGE>
shall be directed to ___________, Hospitality Worldwide Services, Inc., 450 Park
Avenue, Suite 2603, New York, New York 10022; with a copy to Olshan Grundman
Frome & Rosenzweig LLP, attention of Robert Friedman, Esq.
SECTION 11. PARTIES. This Agreement shall inure to the benefit
of and be binding upon the Underwriters, the Company and their respective
executors, administrators, assigns, successors and legal representatives.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to provide any person, firm or corporation, other than the
Underwriters, the Company and their respective successors and legal
representatives and the controlling persons and officers, employees, directors
and shareholders referred to in Sections 6 and 7 and their respective heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein or therein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters, the Company and their respective
successors and legal representatives, and said controlling persons,
shareholders, officers and directors and their respective heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Stock from the Underwriters shall be deemed to be a successor or
assign by reason merely of such purchase.
SECTION 12. GOVERNING, LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.
[SIGNATURE PAGE(S) FOLLOW]
19
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its terms.
Very truly yours,
HOSPITALITY WORLDWIDE SERVICES, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
CONFIRMED AND ACCEPTED, as of the
date first above written:
JEFFERIES & COMPANY, INC.
By:______________________________________
Name:_________________________________
Title:__________________________________
For themselves and as Representative of the
other Underwriters named in this Agreement
20
<PAGE>
SCHEDULE I
SCHEDULE OF UNDERWRITERS AND NUMBER OF SHARES TO BE PURCHASED
NUMBER OF SHARES OF NUMBER OF SHARES OF
UNDERWRITTEN STOCK TO OPTION STOCK TO BE
UNDERWRITER BE PURCHASED PURCHASED
Jefferies & Company, Inc...........
================================================================================
TOTAL .............. 2,500,000 375,000
I-1
<PAGE>
SCHEDULE II
SCHEDULE OF THE COMPANY'S SUBSIDIARIES
NAME OF SUBSIDIARY JURISDICTION OF ORGANIZATION OWNERSHIP STRUCTURE
II-1
<PAGE>
SCHEDULE III
SCHEDULE OF LOCK-UP AGREEMENT SIGNATORIES
III-1
<PAGE>
SCHEDULE IV
FORM OF OPINION TO BE RENDERED BY
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP, COUNSEL TO THE COMPANY
1. Each of the Company and the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation;
2. Each of the Company and the Subsidiaries has the corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus;
3. Each of the Company and the Subsidiaries is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which it is reasonably known to Olshan Grundman Frome &
Rosenzweig LLP (which has conducted a reasonable and thorough investigation and
legal analysis of where the Company and the Subsidiaries are "doing business"),
to own or lease property or conduct business and in which the failure to qualify
could be reasonably expected to result in a Material Adverse Event. The Company
does not own or control, directly or indirectly, any interest in any
corporation, association, partnership, limited liability company, joint venture
or other entity other than Leonard Parker Company ("LPC"), Hospitality
Restoration and Builders, Inc. ("HRB") and Parker Reorder Company ("REORDER" and
together with LPC and HRB, the "Subsidiaries") and the Subsidiaries do not own
or control, directly or indirectly, any interest in any corporation,
association, partnership, limited liability company, joint venture or other
entity;
4. The authorized, issued and outstanding capital stock of the
Company is as set forth in the Registration Statement and the Prospectus under
the caption "Capitalization" as of the dates stated therein;
5. The issued and outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and nonassessable
and have not been issued in violation of or subject to any preemptive right,
co-sale right, right of first refusal or other similar right, and the
Underwritten Stock or the Option Stock, as the case may be, to be issued by the
Company pursuant to the terms of the Underwriting Agreement has been duly
authorized and, upon issuance and delivery against payment therefor in
accordance with the terms of the Underwriting Agreement, will be duly and
validly issued and fully paid and nonassessable and will not have been issued in
violation of or subject to any preemptive right, co-sale right, right of first
refusal or other similar right;
6. The authorized and outstanding capital stock of the Company
as of June 30, 1997, is as set forth in the Registration Statement and the
Prospectus under the caption "Capitalization" and conforms to the statements
relating thereto contained in the Registration Statement and the Prospectus (and
such statements correctly state the substance of the instruments defining the
capitalization of the Company); and the description of the Company's stock
options or other rights granted and exercised under the Company's stock option,
stock bonus and other stock plans or arrangements, set forth in the Registration
Statement and the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
7. Except as set forth in the Prospectus, no holders of Common
Stock or any other securities of the Company have registration rights with
respect to any securities of the Company and, except as set forth in the
Prospectus, all holders of securities of the Company having registration rights
because of the filing of the Registration Statement by the Company have, with
respect to the offering contemplated thereby, waived such rights or such rights
have expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full satisfaction of
such rights;
8. All issued and outstanding shares of capital stock of the
Subsidiaries have been duly authorized and validly issued and are fully paid and
nonassessable, and have not been issued in violation of or
IV-1
<PAGE>
subject to any preemptive right, co-sale right, right of first refusal or other
similar right and are owned by the Company free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest;
9. The Company has the corporate power and authority to enter
into the Underwriting Agreement and to issue, sell and deliver to the
Underwriters the Stock to be issued and sold by it thereunder;
10. The Underwriting Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization, execution and
delivery by you, is a valid and binding agreement of the Company, enforceable in
accordance with its terms;
11. The Warrant Agreement has been duly and validly
authorized, executed and delivered by the Company and is the legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except insofar as indemnification and contribution provisions
may be limited by applicable law or equitable principles and subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to general
principles of equity;
12. The Warrant has been duly and validly authorized, executed
and delivered by the Company and is the legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity;
13. The Registration Statement has become effective under the
Act and, to our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b);
14. The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the requirements of
the Act and the applicable Rules and Regulations;
15. The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented under the Act and
the applicable Rules and Regulations;
16. To our knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character required to
be described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
17. The performance of the Underwriting Agreement and the
Warrant Agreement and the consummation of the transactions contemplated therein,
the issuance and sale of the Stock and the Warrant Shares , and the issuance of
the Warrants will not (a) result in any violation of the Company's or any of its
Subsidiaries' charter or bylaws or (b) to such counsel's knowledge, result in a
material breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument known to such
counsel to which the Company or any of its Subsidiaries is a party or by which
its properties are bound, or any applicable statute, rule or regulation known to
such counsel or, to such counsel's knowledge, any order, writ or decree of any
court, government or governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries, or over any of their properties or
operations;
IV-2
<PAGE>
18. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or over any of their
properties or operations is necessary in connection with the consummation by the
Company of the transactions contemplated with the Underwriting Agreement, other
than registration of the Stock under the Act and such as may be required under
state securities laws in connection with the purchase and distribution of the
Stock by the Underwriters;
19. To our knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
of a character required to be disclosed in the Registration Statement or the
Prospectus by the Act or the Rules and Regulations;
20. The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations promulgated
thereunder, or subject to registration under such act; and
In addition, we have participated in conferences with officers
and other representatives of the Company, representatives of the independent
public accountants for the Company, the Representative and counsel to the
Underwriters at which the contents of the Registration Statement and Prospectus
and related matters were discussed; and, although we have not undertaken to
investigate or verify independently and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus (except as otherwise expressly set forth
herein), on the basis of the foregoing, nothing has come to our attention that
cause us to believe that (1) any part of the Registration Statement (other than
the financial statements and notes thereto and other financial, statistical and
accounting data or schedules included therein, or omitted therefrom, as to which
we express no opinion), as amended or supplemented, at the time such part of the
Registration Statement became effective and contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading (other than
information omitted therefrom in reliance on Rule 430A under the Securities
Act), or (2) the Prospectus (other than the financial statements and notes
thereto and other financial statistical and accounting data or schedules
included therein, or omitted therefrom, as to which we express no opinion), as
amended or supplemented, as of its date and on the date hereof, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
IV-3
AMENDED AND RESTATED
BY-LAWS
OF
HOSPITALITY WORLDWIDE SERVICES, INC.
(f/k/a Light Savers U.S.A, Inc.)
(Formed under the laws of the State of New York)
(as amended and restated on July 14, 1997)
ARTICLE I
OFFICES
Section 1. OFFICES. The Corporation may have offices at such places
both within or without the State of New York as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of shareholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held at a time fixed by the
Board of Directors. If this date shall fall upon a legal holiday at the place of
the meeting, then such meeting shall be held on the next succeeding business day
at the same hour. If no annual meeting is held in accordance with the foregoing
provisions, the Board of Directors shall cause the meeting to be held as soon
thereafter as convenient.
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Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may
be called by the Board of Directors. Any such meeting shall be held at such time
and at such place, within or without the New York, as shall be determined by the
Board and as shall be stated in the notice of such meeting. At such meetings the
only business which may be transacted is that relating to the purpose or
purposes set forth in the notice thereof.
Section 3. PLACE OF MEETINGS. Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of New York.
Section 4. NOTICE OF MEETINGS. Notice of each meeting of shareholders
shall be given in writing and shall state the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called. Notice of a
special meeting shall indicate that it is being issued by or at the direction of
the person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if
taken, entitle objecting shareholders to receive payment for their shares, the
notice shall include a statement of that purpose and to that effect.
A copy of the notice of each meeting shall be given, personally or by
first class mail, not less than ten nor more than 50 days before the date of the
meeting, to each shareholder entitled to vote at such meeting. If mailed, such
notice is given
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when deposited in the United States mail, with postage thereon prepaid, directed
to the shareholder at his address as it appears on the record of shareholders,
or, if he shall have filed with the Secretary of the Corporation a written
request that notices to him be mailed to some other address, then directed to
him at such other address.
When a meeting is adjourned to another time or place, it shall
not be necessary to give any notice of the adjourned meeting if the time and
place to which the meeting is adjourned are announced at the meeting at which
the adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
However, if after the adjournment the Board of Directors fixes a new record date
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record on the new record date entitled to notice under the
preceding paragraphs of this Section 4.
Section 5. WAIVER OF NOTICE. Notice of meeting need not be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. INSPECTORS OF ELECTION. The Board of Directors, in advance
of any shareholders' meeting, may appoint one
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or more inspectors to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at a shareholders' meeting
may, and on the request of any shareholder entitled to vote thereat shall,
appoint two inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the Board in advance of the meeting
or at the meeting by the person presiding thereat. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.
The inspectors shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all shareholders. On request of
the person presiding at the meeting or any shareholder entitled to vote thereat,
the inspectors shall make a report in writing of any challenge, question or
matter determined by them and execute a certificate of any fact found by them.
Any report or certificate made by them shall be prima facie evidence of the
facts stated and of the vote as certified by them.
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Section 7. LIST OF SHAREHOLDERS AT MEETINGS. A list of shareholders as
of the record date, certified by the Secretary or any Assistant Secretary or by
a transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
Section 8. QUALIFICATION OF VOTERS. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders. Treasury shares as of the record date and shares
held as of the record date by another domestic or foreign corporation of any
type or kind, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held as of the record date by the
Corporation, shall not be shares entitled to vote or to be counted in
determining the total number of outstanding shares. Shares held by an
administrator, executor, guardian, conservator, committee, or other fiduciary,
except a trustee, may be voted by him, either in person or by proxy, without
transfer of such shares into his name. Shares held by a trustee may be voted
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by him, either in person or by proxy, only after the shares have been
transferred into his name as trustee or into the name of his nominee.
Shares standing in the name of another domestic or foreign corporation
of any type or kind may be voted by such officer, agent or proxy as the by-laws
of such corporation may provide, or, in the absence of such provision, as the
board of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. QUORUM OF SHAREHOLDERS. The holders of a majority of the
shares entitled to vote thereat shall constitute a quorum at a meeting of
shareholders for the transaction of any business, provided that when a specified
item of business is required to be voted on by a class or series, voting as a
class, the holders of a majority of the shares of such class or series shall
constitute a quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are
entitled to vote may, by a majority of votes cast, adjourn the meeting despite
the absence of a quorum.
Section 10. PROXIES. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent
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without a meeting may authorize another person or persons to act for him by
proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. VOTE OR CONSENT OF SHAREHOLDERS. Directors shall, except as
otherwise required by law, be elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election.
Whenever any corporate action, other than the election of directors, is
to be taken by vote of the shareholders, it shall, except as otherwise required
by law, be authorized by a majority of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote thereon.
Whenever shareholders are required or permitted to take any action by
vote, such action may be taken without a meeting on written consent, setting
forth the action so taken, signed by the holders of all outstanding shares
entitled to vote thereon. Written consent thus given by the holders of all
outstanding shares
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entitled to vote shall have the same effect as a unanimous vote of shareholders.
Section 12. FIXING RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than 50 nor less than ten days before the date of such meeting, nor
more than 50 days prior to any other action.
When a determination of shareholders of record entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date for the adjourned meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. POWER OF BOARD AND QUALIFICATION OF DIRECTORS. The business
of the Corporation shall be managed by the Board of Directors, who may exercise
all of the powers of the corporation except as otherwise provided by law, the
certificate of incorporation or these by-laws. Each director shall be at least
18 years of age.
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Section 2. NUMBER OF DIRECTORS. The number of directors constituting
the entire Board of Directors shall be the number, not less than three nor more
than fifteen, fixed from time to time by a majority of the total number of
directors which the Corporation would have, prior to any increase or decrease,
if there were no vacancies, provided, however, that no decrease shall shorten
the term of an incumbent director, and provided further, however, that if all of
the shares of the Corporation are owned beneficially and of record by less than
three shareholders, the number of directors may be less than three but not less
than the number of shareholders.
Section 3. ELECTION AND TERM OF DIRECTORS. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Section 4. QUORUM OF DIRECTORS AND ACTION BY THE BOARD. A majority of
the entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these by-laws, the vote of a
majority of the directors present at a meeting at the time of such vote, if a
quorum is then present, shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors
or any committee thereof may be taken without a meeting if all members of the
Board or the committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consent thereto by the
members of
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the Board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
Section 5. MEETINGS OF THE BOARD. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the Chairman or any two directors.
Meetings of the Board of Directors shall be held at such places as may
be fixed by the Board for annual and regular meetings and in the notice of
meeting for special meetings. If no place is so fixed, meetings of the Board
shall be held at the principal office of the Corporation. Any one or more
members of the Board of Directors may participate in meetings by means of a
conference telephone or similar communications equipment.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third day
prior to the meeting or by telegram, written message or orally to the director
not later than noon, New York time, on the day prior to the meeting. Notices are
deemed to have been given: by mail, when deposited in the United States mail; by
telegram at the time of filing; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall be sent to each director at the
address designated by him for that
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purpose, or, if none has been so designated, at his last known residence or
business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any
meeting of the Board of Directors.
A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of any
adjournment of a meeting to another time or place shall be given, in the manner
described above, to the directors who were not present at the time of the
adjournment and, unless such time and place are announced at the meeting, to the
other directors.
Section 6. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Board of Directors or to the President
or to the Secretary of the Corporation. Such resignation shall take effect at
the time specified therein; and unless otherwise specified therein the
acceptance of such resignation shall not be necessary to make it effective.
Section 7. REMOVAL OF DIRECTORS. Any one or more of the directors may
be removed for cause by action of the Board of Directors.
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Section 8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders may be filled by vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring as a result of the removal of directors by shareholders shall be
filled by the shareholders. A director elected to fill a vacancy shall be
elected to hold office for the unexpired term of his predecessor. In the event
of a vacancy in the Board of Directors, the remaining directors, except as
otherwise provided by law, may exercise the powers of the full Board until the
vacancy is filled.
Section 9. EXECUTIVE AND OTHER COMMITTEES OF DIRECTORS. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of three or more directors and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs
shareholders' approval;
(2) The filling of vacancies in the Board or in any committee;
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(3) The fixing of compensation of the directors for serving on
the Board or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of
new by-laws;
(5) The amendment or repeal of any resolution of the Board
which, by its term, shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of
Directors.
Section 10. COMPENSATION OF DIRECTORS. The Board of Directors shall
have authority to fix the compensation of directors for services in any
capacity.
Section 11. INTEREST OF DIRECTORS IN A TRANSACTION. Unless shown to be
unfair and unreasonable as to the Corporation,
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no contract or other transaction between the Corporation and one or more of its
directors, or between the Corporation and any other corporation, firm,
association or other entity in which one or more of the directors are directors
or officers, or are financially interested shall be either void or voidable,
irrespective of whether such interested director or directors are present at a
meeting of the Board of Directors, or of a committee thereof, which authorizes
such contract or transaction and irrespective of whether his or their votes are
counted for such purpose. In the absence of fraud any such contract or
transaction may be conclusively authorized or approved as fair and reasonable
by:
(1) The Board of Directors or a duly empowered
committee thereof, by a vote sufficient for such purpose without
counting the vote or votes of such interested director or directors
(although he or they may be counted in determining the presence of a
quorum at the meeting which authorizes such contract or transaction),
if the fact of such common directorship, officership or financial
interest is disclosed or known to the Board or committee (as the case
may be); or
(2) The shareholders entitled to vote for the
election of directors, if such common directorship, officership or
financial interest is disclosed or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection
with indemnification, shall be made by the
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Corporation to any director unless it is authorized by vote of the shareholders
without counting any shares of the director who would be the borrower.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The Board of Directors, as soon as may be
practicable after the annual election of directors, shall elect a Chairman of
the Board, a President, one or more Vice-Presidents, a Chief Financial Officer
and a Secretary, and from time to time may elect or appoint such other officers
as it may determine. When all of the issued and outstanding stock of the
Corporation is owned by one person, such person may hold all or any combination
of offices.
Section 2. OTHER OFFICERS. The Board of Directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 3. COMPENSATION. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4. TERM OF OFFICE AND REMOVAL. Each officer shall hold office
for the term for which he is elected or appointed, and until his successor has
been elected or appointed and qualified. Unless otherwise provided in the
resolution of the Board of Directors electing or appointing an officer, his term
of
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office shall extend to and expire at the meeting of the Board following the next
annual meeting of shareholders. Any officer may be removed by the Board, with or
without cause, at any time. Removal of an officer without cause shall be without
prejudice to his contract rights, if any, and the election or appointment of an
officer shall not of itself create contract rights.
Section 5. POWERS AND DUTIES.
(a) CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. If
the Board of Directors appoints a Chairman of the Board, he shall, when present,
preside at all meetings of the Board of Directors. He shall perform such duties
and possess such powers as are usually vested in the office of the Chairman of
the Board or as may be vested in him by the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him by the Board
of Directors.
(b) PRESIDENT. The President shall, subject to the direction
of the Board of Directors, have general supervision and control of the business
of the Corporation. Unless otherwise provided by the directors, he shall preside
at all meetings of the shareholders and of the Board of Directors (except as
provided in Section 5(a) above). The President shall perform such other duties
and shall have such other powers as the Board of Directors may from time to time
prescribe.
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(c) VICE PRESIDENTS. Any Vice President shall perform such
duties and possess such powers as the Board of Directors or the President may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the President, the Vice President (or if there shall be more than one,
the Vice Presidents in the order determined by the Board of Directors) shall
perform the duties of the President and when so performing shall have all the
powers of and be subject to all the restrictions upon the President. The Board
of Directors may assign to any Vice President the title of Executive Vice
President, Senior Vice President or any other title selected by the Board of
Directors.
(d) SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall
perform such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of shareholders and special meetings of the Board of Directors, to
attend all meetings of shareholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of shareholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the
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absence, inability or refusal or refusal to act of the Secretary, the Assistant
Secretary, (or if there shall be more than one, the Assistant Secretaries in the
order determined by the Board of Directors) shall perform the duties and
exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of shareholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
(e) CHIEF FINANCIAL OFFICER AND CONTROLLER. The Chief
Financial Officer shall perform such duties and shall have such powers as may
from time to time be assigned to him by the Board of Directors or the President.
The Chief Financial Officer shall also be the Treasurer of the Corporation
unless the Board of Directors has appointed another person as the Treasurer. In
addition, the Chief Financial Officer shall perform such duties and have such
powers as are incident to the office of treasurer, including without limitation
the duty and power to keep and be responsible for all funds and securities of
the Corporation, to deposit funds of the Corporation in depositories selected in
accordance with these By-Laws, to disburse such funds as ordered by the Board of
Directors, to make proper accounts of such funds, and to render as required by
the Board of Directors statements of all such transactions and of the financial
condition of the Corporation.
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The Controller shall perform such duties and possess such powers as the
Board of Directors, the President or the Chief Financial Officer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Chief Financial Officer, the Controller, (or if there shall be more than
one, the Controllers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Chief Financial Officer.
Section 6. BONDED OFFICERS. The Board of Directors may require any
officer to give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors upon such terms and
conditions as the Board of Directors may specify, including without limitation a
bond for the faithful performance of his duties and for the restoration to the
Corporation of all property in his possession or under his control belonging to
the Corporation.
Section 7. BOOKS TO BE KEPT. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
shareholders, Board of Directors and any committees of directors, and (c) a
current list of the directors and officers and their residence addresses. The
Corporation shall also keep at its office in the State of New York or at the
office of its transfer agent or registrar in the State of New York, if any, a
record containing the names and addresses of all shareholders, the number and
class of shares held by each and the dates when they respectively became the
owners of record thereof.
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The Board of Directors may determine whether and to what extent and at
what times and places and under what conditions and regulations any accounts,
books, records or other documents of the Corporation shall be open to
inspection, and no creditor, security holder or other person shall have any
right to inspect any accounts, books, records or other documents of the
Corporation except as conferred by statute or as so authorized by the Board.
Section 8. CHECKS. NOTES, ETC. All checks and drafts on, and
withdrawals from the Corporation's accounts with banks or other financial
institutions, and all bills of exchange, notes and other instruments for the
payment of money, drawn, made, indorsed, or accepted by the Corporation, shall
be signed on its behalf by the person or persons thereunto authorized by, or
pursuant to resolution of, the Board of Directors.
ARTICLE V
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
Section 1. FORMS OF SHARE CERTIFICATES. The shares of the Corporation
shall be represented by certificates, in such forms as the Board of Directors
may prescribe, signed by the Chairman or the President or a Vice-President and
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and may be sealed with the seal of the Corporation or a facsimile
thereof. The signatures of the officers upon a certificate may be facsimiles if
the certificate is countersigned by a transfer agent or registered by a
registrar other than the Corporation or its employee. In case any officer who
has signed or whose facsimile
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signature has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of issue.
Each certificate representing shares issued by the Corporation shall
set forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class of shares, if more than one, authorized to be issued
and the designation, relative rights, preferences and limitations of each series
of any class of preferred shares authorized to be issued so far as the same have
been fixed, and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of
the State of New York;
(2) The name of the person or persons to whom issued;
and
(3) The number and class of shares, and the
designation of the series, if any, which such certificate represents.
Section 2. TRANSFERS OF SHARES. Shares of the Corporation shall be
transferable on the record of shareholders
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upon presentment to the Corporation or a transfer agent of a certificate or
certificates representing the shares requested to be transferred, with proper
indorsement on the certificate or on a separate accompanying document, together
with such evidence of the payment of transfer taxes and compliance with other
provisions of law as the Corporation or its transfer agent may require.
Section 3. LOST, STOLEN OR DESTROYED SHARE CERTIFICATES. No
certificate for shares of the Corporation shall be issued in place of any
certificate alleged to have been lost, destroyed or wrongfully taken, except, if
and to the extent required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or
wrongful taking;
(2) Delivery of a bond indemnifying the Corporation
and its agents against any claim that may be made against it or them on
account of the alleged loss, destruction or wrongful taking of the
replaced certificate or the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its
agents incurred in connection with the issuance of the new certificate;
and
(4) Compliance with such other reasonable
requirements as may be imposed.
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ARTICLE VI
Indemnification
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) The Corporation shall, to the fullest extent now or
hereafter permitted by the New York Business Corporation Law, indemnify any
director or officer who is or was made, or threatened to be made, a party to an
action or proceeding, whether civil or criminal, whether involving any actual or
alleged breach of duty, neglect or error, any accountability, or any actual or
alleged misstatement, misleading statement or other act or omission and whether
brought or threatened in any court or administrative or legislative body or
agency, including an action by or in the right of the Corporation to procure a
judgment in its favor and an action by or in the right of any other corporation
of any type or kind, domestic or foreign, or any partnership, joint venture,
trust, employee benefit plan or other enterprise, which any director or officer
of the Corporation is serving or served in any capacity at the request of the
Corporation, or is serving or served such other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement, and costs, charges and
expenses, including attorneys' fees, or any appeal therein; provided, however,
that no indemnification shall be provided to any such director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that (i) his acts were committed in bad faith or were the result of
active and deliberate dishonesty and, in either case, were material to the cause
of action so adjudicated, or (ii) he personally gained in
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fact a financial profit or other advantage to which he was not legally entitled.
(b) The Corporation may indemnify any other person (including,
without limitation, corporate personnel other than directors or officers) to
whom the Corporation is permitted to provide indemnification or the advancement
of expenses by applicable law, whether pursuant to rights granted pursuant to,
or provided by, the New York Business Corporation Law or other rights created by
(i) a resolution of shareholders, (ii) a resolution of directors, or (iii) an
agreement providing for such indemnification, it being expressly intended that
these By-Laws authorize the creation of other rights in any such manner.
(c) The Corporation shall, from time to time, reimburse or
advance to any person referred to in Section (a) the funds necessary for payment
of expenses, including attorneys' fees, incurred in connection with any action
or proceeding referred to in Section (a), upon receipt of a written undertaking
by or on behalf of such person to repay such amount(s) if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
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<PAGE>
(d) The right to indemnification conferred by Section (a)
shall not be retroactive to events occurring prior to the adoption of this
Article VI.
(e) This Article VI may be amended, modified or repealed
either by action of the Board of Directors of the Corporation or by the vote of
the shareholders. Any repeal or modification of the foregoing provisions of this
Article VI shall not adversely affect any right or protection of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
ARTICLE VII
GENERAL PROVISIONS
Section 1. CORPORATE SEAL. The Board of Directors may adopt a
corporate seal, alter such seal at pleasure, and authorize it to be used by
causing it or a facsimile to be affixed or impressed or reproduced in any other
manner.
Section 2. FISCAL YEAR. The fiscal year of the Corporation shall be
such period as may be fixed by the Board of Directors.
Section 3. EXECUTION OF INSTRUMENTS. The President, the Chief
Executive Officer or the Chief Financial Officer shall have power to execute and
deliver on behalf and in the name of the Corporation any instrument requiring
the signature of an officer of the Corporation, except as otherwise provided in
these by-laws, or where the execution and delivery of such an instrument shall
be
-25-
<PAGE>
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
Section 4. WAIVER OF NOTICE. Whenever any notice whatsoever is
required to be given by law, by the certificate of incorporation or by these
by-laws, a waiver of such notice either in writing signed by the person entitled
to such notice or such person's duly authorized attorney, or by telegraph, cable
or any other available method, whether before, at or after the time stated in
such waiver, or the appearance of such person or persons at such meeting in
person or by proxy, shall be deemed equivalent to such notice.
Section 5. VOTING OF SECURITIES. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as or appoint
any person or persons to act as, proxy or attorney fact for this Corporation
(with or without power of substitution) at, any meeting of shareholders or
shareholders of any other corporation or organization, the securities of which
may be held by this Corporation.
Section 6. EVIDENCE OF AUTHORITY. A certificate by the Secretary, or
an Assistant Secretary, or a temporary Secretary, as to any action taken by the
shareholders, directors, a committee or any officer or representative of the
Corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
Section 7. CERTIFICATE OF INCORPORATION. All references in these
by-laws to the certificate of incorporation
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<PAGE>
shall be deemed to refer to the certificate of incorporation of the Corporation,
as amended and in effect from time to time.
Section 8. SEVERABILITY. Any determination that any provision of these
by-laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-Laws.
Section 9. PRONOUNS. All pronouns used in these by- laws shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
ARTICLE VIII
AMENDMENTS
Section 1. BY THE BOARD OF DIRECTORS. These by-laws may be altered,
amended or replaced or new by-laws may be adopted by the affirmative vote of a
majority of the directors present at any regular or special meeting of the Board
of Directors at which a quorum is present except when a different vote is
required by express provision of law, the certificate of incorporation or these
by-laws.
Section 2. BY THE SHAREHOLDERS. These by-laws may be altered, amended
or repealed or new by-laws may be adopted by the affirmative vote of the holders
of a majority of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote at any regular meeting of shareholders, or at
any special meeting of shareholders, except when a different vote is required by
express provision of law, the certificate of incorporation or these by-laws,
provided notice of such alteration,
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<PAGE>
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
-28-
WARRANT AGREEMENT
DATED AS OF _______ __, 1997
BY AND BETWEEN
HOSPITALITY WORLDWIDE SERVICES, INC.
AND
JEFFERIES & COMPANY, INC
<PAGE>
WHEREAS, Hospitality Worldwide Services, Inc., a New York corporation
(the "COMPANY") proposes to issue to Jefferies & Company, Inc. ("JEFFERIES"), or
its designee, Common Stock Purchase Warrants, as hereinafter described (the
"WARRANTS"), to purchase up to an aggregate of _______ shares of Common Stock,
par value $.01 (the "COMMON STOCK"), of the Company (the Common Stock issuable
on exercise of the Warrants being referred to herein as the "WARRANT SHARES"),
pursuant to an underwriting agreement of even date herewith; and
WHEREAS, the Company has entered into an underwriting agreement, dated
_____ __, 1997, with Jefferies (the "REPRESENTATIVE") in which the Company has
agreed to sell to the Representative 2,875,000(1) shares of the Company's Common
Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. WARRANT CERTIFICATES. The certificates evidencing the
Warrants (the "WARRANT CERTIFICATES") to be delivered pursuant to this Agreement
shall be in registered form only and shall be substantially in the form set
forth in Exhibit A attached hereto.
SECTION 2. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board or its
Chief Executive Officer or Chief Operating Officer and its Secretary or an
Assistant Secretary. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, Chief Executive Officer or Chief Operating Officer and Secretary or
Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, Chief
Executive Officer or Chief Operating Officer, Secretary or Assistant Secretary,
notwithstanding the fact that at the time the Warrant Certificates shall be
countersigned and delivered or disposed of he shall have ceased to hold such
office. The seal of the Company may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be countersigned and delivered or disposed of as
though such person had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate, although at the date of
the execution of this Warrant Agreement any such person was not such officer.
SECTION 3. REGISTRATION. The Company shall number and register the
Warrant Certificates in a register as they are issued. The Company may deem and
treat the registered holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone), for all purposes, and shall not be affected by any
notice to the contrary.
SECTION 4. REGISTRATION OF TRANSFERS AND EXCHANGES. The Company shall
from time to time register the transfer of any outstanding Warrant Certificates
in a Warrant register to be maintained by the Company upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by the Company.
The Warrant holders agree that prior to any proposed transfer of the
Warrant or of the Warrant Shares, if such transfer is not made pursuant to an
effective Registration Statement under the Securities Act of 1933,
- --------
(1) Includes an option to purchase up to 375,000 additional shares to cover
overallotments, if any.
<PAGE>
as amended (the "ACT"), or an opinion of counsel, reasonably satisfactory in
form and substance to the Company, that the Warrant or Warrant Shares may be
sold publicly without registration under the Act, the Warrant holder will, if
requested by the Company, deliver to the Company:
(1) an investment covenant reasonably satisfactory to the Company
signed by the proposed transferee;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the Warrant
Shares;
(3) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order" with any
transfer agent or registrar with respect to the Warrant Shares; and
(4) an agreement by such transferee to be bound by the provisions of
this Section 4 relating to the transfer of such Warrant or Warrant Shares.
The Warrant holders agree that each certificate representing Warrant
Shares will bear the following legend:
"THE SHARES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE
ISSUED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT
TO (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (2) AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
Warrant Certificates may be exchanged at the option of the holder(s)
thereof, when surrendered to the Company at its office for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled and disposed of by the Company.
SECTION 5. TERMS OF WARRANTS; EXERCISE OF WARRANTS. Subject to the
terms of this Agreement, each Warrant holder shall have the right, which may be
exercised until 5:00 p.m., Eastern time on ____ __, 2002, to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
holder may at the time be entitled to receive on exercise of such Warrants. Each
Warrant not exercised prior to 5:00 p.m., Eastern time, on ____ __, 2002 shall
become void and all rights thereunder and all rights in respect thereof under
this Agreement shall cease as of such time. No adjustments as to dividends will
be made upon exercise of the Warrants.
A Warrant may be exercised upon surrender to the Company at the
principal office of the Company of the certificate or certificates evidencing
the Warrants in accordance with the terms of such Warrant.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled by the Company. Such canceled Warrant Certificates shall then be
disposed of by the Company in accordance with applicable law.
The Company shall keep copies of this Agreement and any notices given
or received hereunder available for inspection by the holders during normal
business hours at its office.
SECTION 6. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; PROVIDED, HOWEVER, that the
3
<PAGE>
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or any
certificates for Warrant Shares in a name other than that of the registered
holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 7. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence satisfactory to the Company of such
loss, theft or destruction of such Warrant Certificate and indemnity and
security therefor, if requested, also satisfactory to them. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 8. RESERVATION OF WARRANT SHARES. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or the transfer agent for the Common Stock (the "TRANSFER
AGENT") and every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of any of the rights of purchase
aforesaid will be irrevocably authorized and directed at all times to reserve
such number of authorized shares as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights represented by the Warrants. The
Company will supply such Transfer Agent with duly executed certificates to honor
outstanding Warrants upon exercise thereof and will provide or otherwise make
available any cash which may be payable as provided in Section 14 hereof. The
Company will furnish such Transfer Agent a copy of all notices of adjustments
and certificates related thereto, transmitted to each holder pursuant to Section
15 hereof.
The Company covenants that it will not increase the par value of the
Common Stock to an amount greater than the Exercise Price of the Warrants.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issuance, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
SECTION 9. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from
time to time take all action which may be necessary so that the Warrants and the
Warrant Shares, immediately upon their issuance upon the exercise of Warrants,
will be listed on the principal securities exchanges, interdealer quotation
systems and markets within the United States of America, if any, on which other
shares of Common Stock are then listed or quoted.
SECTION 10. ADJUSTMENT OF NUMBER OF WARRANT SHARES ISSUABLE. Each
Warrant will initially be exercisable by the holder thereof into one Warrant
Share. The number of Warrant Shares issuable upon the exercise of each Warrant
(the "EXERCISE RATE") is subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 10. For purposes of this
Section 10, "COMMON STOCK" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount, and shall also
include any securities, cash or other assets into which the Warrants become
exercisable pursuant to subsection (m).
4
<PAGE>
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares;
(4) pays a dividend or makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of its
capital stock,
then the Exercise Rate in effect immediately prior to such action shall
be proportionately adjusted so that the holder of any Warrant thereafter
exercised may receive the aggregate number and kind of shares of capital stock
of the Company which he or it would have owned immediately following such action
if such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Rate between the
classes of capital stock. After such allocation, the exercise privilege and the
Exercise Rate of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 10.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) ADJUSTMENT FOR RIGHTS ISSUE.
If the Company distributes any rights, options or warrants to subscribe
for or purchase shares of Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion
price per share, if a security is convertible into or exchangeable for Common
Stock) less than the Exercise Price (as defined in the Warrant Certificate) per
share as of the Time of Determination (as defined in subsection (g)), the
Exercise Rate shall be adjusted in accordance with the formula:
E' = E x ((O + N)/(O + (N x (P / M))))
where:
E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
O = the number of shares of Common Stock outstanding as of the Time of
Determination.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
5
<PAGE>
M = the Exercise Price per share as of the Time of Determination.
The adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive the rights, warrants
or options to which this paragraph (b) applies. To the extent that shares of
Common Stock are not delivered after the expiration of such rights or warrants,
the Exercise Rate shall be readjusted to the Exercise Rate which would otherwise
be in effect had the adjustment made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. In the event that such rights or warrants are
not so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect if such date fixed for determination of
stockholders entitled to receive such rights or warrants had not been so fixed.
No adjustment shall be made under this paragraph (b) if the application
of the formula stated above in this paragraph (b) would result in a value of E'
that is lower than the value of E.
(c) ADJUSTMENT FOR OTHER DISTRIBUTIONS.
If the Company distributes to all holders of its Common Stock any of
its assets or debt securities or any rights, options or warrants to purchase
debt securities, assets or other securities of the Company (other than
distributions and dividends payable in shares of Common Stock), the Exercise
Rate shall be adjusted in accordance with the formula:
E' = E x (M / (M-F))
where:
E'= the adjusted Exercise Rate.
E = the current Exercise Rate.
M = the Current Market Value.
F = the fair market value (as determined in good faith by the Board of
Directors) of the assets, securities, rights or warrants applicable
to one share of Common Stock as of the Time of Determination.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection does not apply to rights, options or warrants referred
to in subsection (b) of this Section 10. The Company shall give the Warrant
Holders at least 30 days notice of a record date for any dividend payment on the
Common Shares.
(d) ADJUSTMENT FOR COMMON STOCK ISSUE.
If the Company issues shares of Common Stock for a consideration per
share less than the Exercise Price per share on the date the Company fixes the
offering price of such additional shares, the Exercise Rate shall be adjusted in
accordance with the formula:
E' = E x ((O + N) / (O + (N x (P / M))))
where:
E' = the adjusted Exercise Rate.
6
<PAGE>
E = the then current Exercise Rate.
O = the number of shares outstanding immediately prior to the issuance
of such additional shares.
N = the number of additional shares issued.
P = the aggregate consideration received per share for the issuance of
such additional shares.
M = the Current Market Value per share on the date of issuance of such
additional shares.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to any of the transactions described
in subsections (b) and (c) of this Section 10.
(e) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE.
If the Company issues any securities convertible into or exchangeable
for Common Stock (other than securities issued in transactions described in
subsections (a), (b) and (c) of this Section 10) for a consideration per share
of Common Stock initially deliverable upon conversion or exchange of such
securities less than the Exercise Price per share on the date of issuance of
such securities, the Exercise Rate shall be adjusted in accordance with the
formula:
E' = E x ((O + N) / (O + (N x (P / M))))
where:
E' = the adjusted Exercise Rate.
E = the then current Exercise Rate.
O = the number of shares outstanding immediately prior to the issuance
of such securities.
N = the maximum number of shares deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange
rate.
P = the aggregate consideration received for the issuance of each such
security.
M = the Current Market Value per share on the date of issuance of such
securities.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities has not been issued when such securities are no longer
outstanding, then the Exercise Rate shall promptly be readjusted to the Exercise
Rate which would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion or exchange of such securities.
(f) CURRENT MARKET VALUE; TIME OF DETERMINATION; AFFILIATE.
7
<PAGE>
"CURRENT MARKET VALUE" per share of Common Stock or any other security
at any date means (1) the average of the daily closing sale prices for each of
the 15 business days immediately preceding such date (or such shorter number of
days during which such security has been listed), if the security has been
listed on the New York Stock Exchange, the American Stock Exchange, the NASDAQ
National Market or other national securities exchange for at least 10 business
days prior to such date, (2) if such security is not so listed, the average
daily closing bid prices for each of the 15 business days immediately preceding
such date (or such shorter number of days during which such security has been
quoted), if the security has been quoted on a national over-the-counter market
for at least 10 business days, (3) if the security is not so listed and not so
quoted, the value of the security determined in good faith by the Board of
Directors of the Company and certified in a board resolution, based on the most
recently completed arm's length transaction between the Company and a person
other than an Affiliate of the Company and the closing of which is the cause of
such determination or which occurs on such date or within six months preceding
such date (PROVIDED that if the closing of such transaction is the cause of such
determination, the Current Market Value of such security shall, absent a board
resolution stating otherwise, be deemed to be the sale price of such security in
such transaction) and (4) otherwise, the value of the security most recently
determined as of a date within the six months preceding such date by a
nationally recognized investment banking firm or appraisal firm which is not an
Affiliate of the Company ("INDEPENDENT FINANCIAL EXPERT").
"TIME OF DETERMINATION" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants, or
options or a distribution, in each case, to which paragraph (b) or (c) applies
and (ii) the time ("EX-DIVIDEND TIME") immediately prior to the commencement of
"ex-dividend" trading for such rights, warrants or distribution on such national
or regional exchange or market on which the Common Stock is then listed or
quoted.
"AFFILIATE" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a person
shall be deemed to be control.
(g) CONSIDERATION RECEIVED.
For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 10, the following shall
apply:
(1) in the case of the issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, PROVIDED that in no case shall
any deduction be made for any commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or otherwise in connection
therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors (irrespective of the accounting treatment
thereof) and described in a Board resolution; and
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be received by
the Company upon the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in clauses (1) and (2) of
this subsection).
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<PAGE>
(h) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED.
Notwithstanding anything to the contrary contained herein, no
adjustment of the Exercise Rate shall be made as a result of or in connection
with (i) the issuance of stock options pursuant to either the (A) 1996 Employee
Stock Option Plan of the Company or (B) 1996 Outside Directors' Stock Option
Plan of the Company, each described in the Company's Registration Statement on
Form SB-2, Registration Number 333-____, as being in existence as of the date
hereof, (ii) the issuance or sale of shares of Common Stock upon the exercise of
options referred to in clause (i) above or other outstanding options and
warrants as of ________ __, 1997 and (iii) the issuance of shares of Common
Stock upon exercise of the Warrants pursuant to this Agreement.
No adjustment in the Exercise Rate need be made unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Rate. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment.
All calculations under this Section 13 shall be made to the nearest
1/100th of a share.
(i) WHEN NO ADJUSTMENT REQUIRED.
No adjustment need be made for a transaction referred to in subsections
(a), (b) or (c) of this Section 10 if Warrant holders are to participate in the
transaction on a basis and with notice that the Board of Directors determines to
be fair and appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction.
To the extent the Warrants become convertible into cash pursuant to
subsection (n), no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(j) NOTICE OF ADJUSTMENT.
Whenever the Exercise Rate is adjusted, the Company shall provide the
notices required by Section 12 hereof.
(k) VOLUNTARY INCREASE.
The Company from time to time may increase the Exercise Rate by any
amount for any period of time if the period is at least 20 days and if the
increase is irrevocable during the period.
Whenever the Exercise Rate is increased pursuant to this subsection
(k), the Company shall mail to Warrant holders a notice of the increase. The
Company shall mail the notice at least 15 days before the date the increased
Exercise Rate takes effect. The notice shall state the increased Exercise Rate
and the period it will be in effect.
An increase in the Exercise Rate pursuant to this subsection (k) does
not change or adjust the Exercise Rate otherwise in effect for purposes of
subsections (a), (b), (c), (d), (e) and (f) of this Section 10.
(l) NOTICE OF CERTAIN TRANSACTIONS.
If: (1) the Company takes any action that would require an adjustment
in the Exercise Rate pursuant to subsections (a), (b) or (c) of this Section 10
and if the Company does not arrange for Warrant holders to participate pursuant
to subsection (h) of this Section 10; (2) the Company takes any action that
would require a supplemental Warrant Agreement pursuant to subsection (m) of
this Section 10; or (3) there is a liquidation or dissolution of the Company,
the Company shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(m) REORGANIZATION OF THE COMPANY.
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<PAGE>
If the Company consolidates or merges with or into, or transfers or
leases all or substantially all its assets to, any person, upon consummation of
such transaction the Warrants shall automatically become exercisable for the
kind and amount of securities, cash or other assets which the holder of a
Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
merger if other than the Company, or the person to which such sale or conveyance
shall have been made, shall enter into a supplemental Warrant Agreement so
providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section
10. The successor entity shall mail to Warrant holders a notice describing the
supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants under
the supplemental Warrant Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.
(n) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED.
In any case in which this Section 10 shall require that an adjustment
in the Exercise Rate be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event (i)
issuing to the holder of any Warrant exercised after such record date the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Rate
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 11 hereof; PROVIDED, HOWEVER, that the Company shall deliver
to such holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional Warrant Shares, other capital stock
and cash upon the occurrence of the event requiring such adjustment.
(o) FORM OF WARRANTS.
Irrespective of any adjustments in the Exercise Rate or the number or
kind of shares or other assets purchasable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares or other assets as are stated in the Warrants
initially issuable pursuant to this Agreement.
SECTION 11. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 11,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay to the Warrant holder an amount in cash equal to the Current
Market Value on the day immediately preceding the date the Warrant is presented
for exercise, multiplied by such fraction.
SECTION 12. NOTICES TO WARRANT HOLDERS. Upon any adjustment of the
Exercise Rate pursuant to Section 10, the Company shall promptly thereafter
cause to be given to each of the registered holders of the Warrant Certificates
at his address appearing on the Warrant register written notice of such
adjustments by first-class mail, postage prepaid. Where appropriate, such notice
may be given in advance and included as a part of the notice required to be
mailed under the other provisions of this Section 12.
In case:
(a) the Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants; or
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(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in shares of Common Stock or distributions
referred to in subsection (a) of Section 10 hereof); or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall cause to be given to each of the registered
holders of the Warrant Certificates at his address appearing on the Warrant
Register, at least 20 days (or 10 days in any case specified in clauses (a) or
(b) above) prior to the applicable record date hereinafter specified, or
promptly in the case of events for which there is no record date, by first-class
mail, postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
rights, options, warrants or distribution are to be determined, or (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (iii) the date on which any such consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up is expected
to become effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 12 or any defect therein shall not affect the legality or validity of
any distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
SECTION 13. NOTICES TO THE COMPANY. Any notice or demand authorized by
this Agreement to be given or made by the registered holder of any Warrant
Certificate to or on the Company shall be sufficiently given or made when and if
deposited in the mail, first class or registered, postage prepaid, addressed
(until another address is filed in writing by the Company with the registered
holder), as follows:
Hospitality Worldwide Services, Inc.
450 Park Avenue
Suite 2603
New York, New York 10022
Attention: Howard G. Anders
with a copy to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: Robert H. Friedman
SECTION 14. SUPPLEMENTS AND AMENDMENTS. Any amendment or supplement to
this Agreement that has a material adverse effect on the interests of holders
shall require the written consent of registered holders representing not less
than 50% of the shares of Common Stock then issued upon exercise of all
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<PAGE>
then outstanding Warrants. The consent of each holder of a Warrant affected
shall be required for any amendment pursuant to which the Exercise Price would
be increased or the Exercise Rate would be decreased (other than in connection
with a waiver of any provisions of Section 10 or 11 hereof).
SECTION 15. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 16. TERMINATION. This Agreement shall terminate at 5:00 p.m.,
Eastern time on _______ __, 2002. Notwithstanding the foregoing, this Agreement
will terminate on any earlier date if all Warrants have been exercised. The
provisions of Section 10 hereof shall survive such termination.
SECTION 17. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE. EACH OF THE COMPANY AND THE
HOLDER OF EACH WARRANT CERTIFICATE HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY (EACH, A "NEW
YORK COURT") FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THE WARRANTS, THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF
THE COMPANY AND THE HOLDER OF EACH WARRANT CERTIFICATE IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH OF THE COMPANY AND THE HOLDER OF EACH WARRANT
CERTIFICATE IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THE WARRANTS, THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 18. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company and the
registered holders of the Warrant Certificates any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company and the registered holders of the Warrant
Certificates.
SECTION 19. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
[SIGNATURE PAGE(S) FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
HOSPITALITY WORDLWIDE SERVICES, INC.
By: _________________________
Name:
Title:
JEFFERIES & COMPANY, INC.
By: _________________________
Name:
Title:
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<PAGE>
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH COMMON STOCK MAY BE ISSUED
OR SOLD ONLY PURSUANT TO (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
OR (2) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS WARRANT IS
RESTRICTED AS DESCRIBED HEREIN
NOT EXERCISABLE PRIOR TO _________ __, 1998
VOID AFTER 5:00 P.M. NEW YORK TIME, ON _________ __, 2002
HOSPITALITY WORLDWIDE SERVICES, INC.
Warrant to Purchase Shares of Common Stock
___,___ Shares
THIS CERTIFIES that, for value received, Jefferies & Company, Inc., 580
California Street, San Francisco, California 94104, (the "HOLDER"), is entitled
to subscribe for and purchase from Hospitality Worldwide Services, Inc., a New
York corporation (the "COMPANY"), upon the terms and conditions set forth
herein, at any time or from time to time after _________ __, 1998, and before
5:00 P.M. New York time on _________ __, 2002 (the "EXERCISE PERIOD"), ___,___
shares of the Company's Common Stock, par value $0.01 per share, subject to
adjustment as provided herein (the "WARRANT Shares"), at a price of $12.00 per
share, subject to adjustment as provided herein (the "EXERCISE PRICE"). This
Warrant shall not be redeemable by the Company. This Warrant is the Warrant or
one of the Warrants (collectively, including any Warrant issued upon the
exercise of transfer of any such Warrants, in whole or in part, the "WARRANTS")
issued pursuant to the Underwriting Agreement, dated ______ __, 1997, between
the Company, the Holder and __________. This Warrant may not be sold,
transferred, assigned or hypothecated until ________ __, 1998, except that it
may be transferred, in whole or in part, at any time to (i) one or more officers
or partners of the Holder (or the officers or partners of any such partner);
(ii) any other underwriting firm or member of the selling group which
participated in the public offering of Common Stock of the Company which
commenced on ______ __, 1997 (or the officers or partners of any such firm);
(iii) a successor to the Holder or the officers or partners of such successor;
(iv) a purchaser of substantially all of the assets of the Holder; or (v) by
operation of law; and the term the "HOLDER" as used herein shall include any
transferee to whom this Warrant has been transferred in accordance with the
above. The term "COMMON STOCK" as used herein shall mean the Company's Common
Stock, par value $0.01 per share.
1. METHOD OF EXERCISE. This Warrant may be exercised during the
Exercise Period, as to the whole or any lesser number of the Warrant Shares, by
the surrender of this Warrant (with the election at the end hereof duly
executed) to the Company at its office at 450 Park Avenue, Suite 2603, New York,
New York 10022 or at such other place as may be designated in writing by the
Company, together with a certified or bank cashier's check payable to the order
of the Company in an amount equal to the Exercise Price multiplied by the number
of Warrant Shares for which this Warrant is being exercised.
2. ISSUANCE OF CERTIFICATES. Upon each exercise of the Holder's rights
to purchase Warrant Shares, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise, notwithstanding that
the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares shall not then have been actually delivered to
the
<PAGE>
Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, upon
surrender of this Warrant for cancellation, the Company shall execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares (or portions thereof) subject to purchase hereunder.
3. RECORDING OF TRANSFER. Any Warrants issued upon the transfer or
exercise in part of this Warrant shall be numbered and shall be registered in a
Warrant Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his or its duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the person entitled thereto. This Warrant may be exchanged, at the option of the
Holder hereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender
of this Warrant to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause this Warrant to be
transferred on its books to any person if, in the written opinion of counsel to
the Company, such transfer does not comply with the provisions of the Securities
Act of 1933, as amended (the "ACT"), and the rules and regulations thereunder.
4. RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of providing for the exercise of the Warrants, such number of shares
of Common Stock as shall, from time to time, be sufficient therefor. The Company
covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full payment therefor, shall be
validly issued, fully paid, nonassessable and free of preemptive rights.
5. REGISTRATION RIGHTS.
(a) PIGGYBACK RIGHTS. If at any time during the period commencing on
_________ __, 1997 and ending on _________ __, 2002, the Company shall file a
registration statement (other than on Form S-4, Form S-8, or any successor form)
with the Securities and Exchange Commission (the "COMMISSION"), the Company
shall give all the then holders of any Warrants or Warrant Shares (the "ELIGIBLE
HOLDERS") at least 30 days prior written notice of the filing of such
registration statement. If requested by any Eligible Holder in writing within 30
days after receipt of any such notice, the Company shall, at the Company's sole
expense (other than the fees and disbursements of counsel for the Eligible
Holders and the underwriting discounts payable in respect of the Warrant Shares
sold by any Eligible Holder), register or qualify all or, at each Eligible
Holder's option, any portion of the Warrant Shares of any Eligible Holders who
shall have made such request, concurrently with the registration of such other
securities, all to the extent requisite to permit the public offering and sale
of the Warrant Shares through the facilities of all appropriate securities
exchanges and the over-the-counter market, and will use its best efforts through
its officers, directors, auditors and counsel to cause such registration
statement to become effective as promptly as practicable. Notwithstanding the
foregoing, if the managing underwriter of any such offering shall advise the
Company in writing that, in its opinion, the distribution of all or a portion of
the Warrant Shares requested to be included in the registration concurrently
with the securities being registered by the Company would materially adversely
affect the distribution of such securities by the Company for its own account,
then the Company shall not be required to include such Warrant Shares in such
registration, provided that any such reduction shall be on a pro rata basis
among all selling shareholders; provided, however, (i) that in the event that
the Company does not intend to include all of the requested Warrant Shares in
the registration statement due to such advice received from the managing
underwriter, if the Company includes in the registration statement any
securities other
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<PAGE>
than securities being offered by the Company for its own account, then the
Company shall include any of the Warrant Shares requested to be included in such
registration statement by the Eligible Holders and any such other securities on
a pro rata basis and (ii) if the Company does not include all of the requested
Warrant Shares in the registration statement, then, if requested by the Eligible
Holders, the Company will within six (6) months after the registration statement
becomes effective file at its sole expense a new registration statement relating
to those Warrant Shares which the Company did not include in the prior
registration statement and the Company will use its best efforts to cause the
registration statement to become effective as promptly as practical.
(b) DEMAND RIGHT. If, on any one occasion during the period
commencing on _________ __, 1998 and ending on _________ __, 2002, the Company
shall receive a written request from Eligible Holders who in the aggregate own
(or upon exercise of all Warrants then outstanding would own) a majority of the
total number of shares of Common Stock then included (or upon such exercises
would be included) in the Warrant Shares (the "MAJORITY HOLDERS"), to register
the sale of all or part of such Warrant Shares, the Company shall, as promptly
as practicable, but in no event more than 90 days following the date of such
request, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Warrant Shares through
the facilities of all appropriate securities exchanges and the over-the-counter
market, and will use its best efforts through its officers, directors, auditors
and counsel to cause such registration statement to become effective as promptly
as practicable. All expenses incurred in connection with such registration shall
be borne by the Company (other than the fees and disbursements of counsel for
the Eligible Holders and the underwriting discounts including a pro rata share
of any expense allowance, if any, payable in respect of the Warrant Shares sold
by any Eligible Holder). Within five business days after receiving any request
contemplated by this Section 5(b), the Company shall give written notice to all
the other Eligible Holders, advising each of them that the Company is proceeding
with such registration and offering to include therein all or any portion of any
such other Eligible Holder's Warrant Shares, provided that the Company receives
a written request to do so from such Eligible Holder within 30 days after
receipt by him or it of the Company's notice. Notwithstanding the foregoing, if
at the time of any request to register Warrant Shares pursuant to this Section
5(b), the Company is engaged in an activity which, in the good faith
determination of the Company's Board of Directors, would be adversely affected
by the requested registration to the material determent of the Company, then the
Company may, upon giving written notice to the Eligible Holders, direct that
such request be delayed for a period not in excess of six months from the date
of commencement of such material activity, such right to delay a request to be
exercised by the Company not more than once in any two-year period.
(c) In the event of a registration pursuant to the provisions of
Section 5(a) or 5(b), the Company shall use its best efforts to cause the
Warrant Shares so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdiction as the Holder or such holders
may reasonably request; provided, however, that the Company shall not be
required to qualify to do business in any state by reason of this Section 5(a)
or 5(c) in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or
qualification contemplated by Section 5(a) or 5(b) and shall from time to time
amend or supplement each applicable registration statement, preliminary
prospectus, final prospectus, application, document and communication for such
period of time as shall be required to permit the Eligible Holders to complete
the offer and sale of the Warrant Shares covered thereby. The Company shall in
no event be required to keep any such registration or qualification in effect
for a period in excess of 12 months from the date on which the Eligible Holders
are first free to sell such Warrant Shares; provided, however, that, if the
Company is required to keep any such registration or qualification in effect
with respect to securities other than the Warrant Shares beyond such period, the
Company shall keep such registration or qualification in effect as it relates to
the Warrant Shares for so long as such registration or qualification remains or
is required to remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions of
this Section 5, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations
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<PAGE>
thereunder, and such other documents, as any Eligible Holder may reasonably
request to facilitate the disposition of the Warrant Shares included in such
registration.
(f) The Company's obligation to register the Warrant Shares of any
Eligible Holder shall be conditioned on its receiving such information as it
shall reasonably request for such Eligible Holder for use in the registration
statement.
(g) In the event of a registration pursuant to the provisions of
Section 5(b), the Company shall, if requested, enter into an underwriting
agreement containing conventional representations, warranties, allocation of
expenses and customary closing conditions, including, without limitation,
opinions of counsel and accountants' cold comfort letters, with any underwriter
designated by the Eligible Holders to participate in the sale of the Warrant
Shares.
(h) The Company agrees that until the later of (i) the period when
all the Warrants Shares have been sold under a registration statement or
pursuant to Rule 144 under the Act or (ii) _________ __, 2002, it shall keep
current in filing all reports, statements and other material required to be
filed with the Commission to permit holders of the Warrant Shares to sell such
securities under Rule 144.
(i) Notwithstanding the provisions of Section 5(a) or 5(b), the
Company shall have no obligation to register any of the Warrant Shares of any
Eligible Holder pursuant to such provisions if (i) within 20 days after
receiving the written request from the Majority Holders to register their
Warrant Shares, the Company, its officers, directors or stockholders
beneficially owning 5% or more of the Company's outstanding Common Stock
(collectively, the "PURCHASERS"), by written notice given to each applicable
Eligible Holder (the "PURCHASE NOTICE"), elect (in such proportions as the
Purchasers may agree upon) to purchase the Warrants or the Warrants Shares, as
applicable, of the Eligible Holders and (ii) within 30 days after giving the
Purchase Notice, such Purchasers shall deliver the Purchase Price (as defined
below) therefor against tender by the Eligible Holders of the applicable
certificates representing their Warrants or Warrant Shares, as applicable;
provided, however, that until the Purchase Price is paid as specified in this
Section 5(i), the obligations of the Company under Section 5(b), including the
obligation to register Warrant Shares within 90 days of the request therefor,
shall remain in full force and effect. The "PURCHASE PRICE" shall mean a cash
payment equal to the product of (a) the then current market price of the Common
Stock (meaning the average of the closing sale price for one share of Common
Stock during the five business day period immediately preceding the date on
which the Purchase Notice is given) less the then current Exercise Price and (b)
the number of Warrant Shares underlying the Warrant or the Warrant Shares to be
purchased, as applicable).
6. (a) INDEMNIFICATION AND CONTRIBUTION. Subject to the conditions set
forth below, the Company agrees to indemnify and hold harmless each Eligible
Holder, its officers, directors, partners, employees, agents and counsel, and
each person, if any, who controls any such person within the meaning of Section
15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), from and against any and all loss, liability,
charge, claim, damage and expense whatsoever (which shall include, for all
purposes of this Section 6, without limitation, attorneys' fees and any and all
expense whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (i)(A) any untrue statement or
alleged untrue statement of a material fact contained in (1) any registration
statement, preliminary prospectus or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, relating to
the sale of any of the Warrant Shares, or (2) any application or other document
or communication (in this Section 6 collectively called an "APPLICATION")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify any of the Warrant Shares under the securities or blue sky
laws thereof or filed with the Commission or any securities exchange, or (B) any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to such Eligible Holder by or
on behalf of such person expressly for inclusion in any registration statement,
preliminary prospectus, or final prospectus, or any amendment or supplement
thereto, or in any application, as the
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case may be, or (ii) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Warrant. The foregoing agreement to
indemnify shall be in addition to any liability the Company may otherwise have,
including liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents or counsel, or any controlling
persons of such person (an "INDEMNIFIED PARTY") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability) and the Company shall promptly assume the defense of
such action, including the employment of counsel (reasonably satisfactory to
such indemnified party or parties) and payment of expenses. Such indemnified
party or parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless (I) the employment of such counsel
shall have been authorized in writing by the Company in connection with the
defense of such action, (II) the Company shall not have promptly employed
counsel reasonably satisfactory to such indemnified party or (III) the parties
to have charge of the defense of such action or such indemnified party or
parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of which
events such fees and expenses shall be borne by the Company, and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties; provided that in clauses I, II and III of Section
6(a) hereof the indemnifying party shall not be responsible for the fees and
expenses of more than one counsel (and a local counsel, if necessary) for all
indemnified parties. Anything in this Section 6 to the contrary notwithstanding,
the Company shall not be liable for any settlement of any such claim or action
effected without its written consent, which shall not be unreasonably withheld.
The Company shall not, without the prior written consent of each indemnified
party that is not released as described in this sentence, settle or compromise
any action, or permit a default or consent to the entry of judgment in or
otherwise seek to terminate any pending or threatened action, in respect of
which indemnity may be sought hereunder (whether or not any indemnified party is
a party thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each indemnified party from all liability
in respect of such action. The Company agrees promptly to notify the Eligible
Holders of the commencement of any litigation or proceedings against the Company
or any of its officers or directors in connection with the sale of any Warrant
Shares or any preliminary prospectus, prospectus, registration statement or
amendment or supplement thereto, or any application relating to any sale of any
Warrant Shares.
(b) The Holder agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who shall have signed
any registration statement covering Warrant Shares held by the Holder, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Holder in Section 6(a), but only with respect to statements or omissions, if
any, made in any registration statement, preliminary prospectus or final
prospectus (as from time tot time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company with respect to the Holder by
or on behalf of the Holder expressly for inclusion in any such registration
statement, preliminary prospectus or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
any such registration statement, preliminary prospectus or final prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against the Holder pursuant to this Section 6(b),
the Holder shall have the rights and duties given to the Company and the Company
and each other person so indemnified shall have the rights and duties given to
the indemnified parties, by the provisions of Section 6(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 6(a) or
6(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company
A-5
<PAGE>
who signed any such registration statement, any controlling person of the
Company, and its or their respective counsel), as one entity, and the Eligible
Holders of the Warrants Shares included in such registration in the aggregate
(including for this purpose any contribution by or on behalf of an indemnified
party), as a second entity, shall contribute to the losses, liabilities, claims,
damages and expenses whatsoever to which any of them may be subject, on the
basis of relevant equitable considerations such as the relative fault of the
Company and such Eligible Holders in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses. The relative fault, in
the case of an untrue statement, alleged untrue statement, omission or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Holder agree that it would be unjust and inequitable if the respective
obligations of the Company and the Eligible Holders for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder an the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 6(c). In no case shall any Eligible Holder be responsible for
a portion of the contribution obligation imposed on all Eligible Holders in
excess of its pro rata share based on the number of shares of Common Stock owned
(or which would be owned upon exercise of all Warrant Shares) by it and included
in such registration as compared to the number of shares of Common Stock owned
(or which would be owned upon exercise of all Warrant Shares) by all Eligible
Holders and included in such registration. No person guilty or a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6(c), each person, if any, who
controls and Eligible Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee,
agent and counsel of each such Eligible Holder or control person shall have the
same rights to contribution as such Eligible Holder or control person and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, each officer of the Company who shall
have signed any such registration statement, each director of the Company and
its or their respective counsel shall have the same rights to contribution as
the Company, subject in each case to the provision of this Section 6(c).
Anything in this Section 6(c) to the contrary notwithstanding, no party shall be
liable for contribution with respect to the settlement of any claim or action
effected without its written consent. This Section 6(c) is intended to supersede
any right to contribution under the Act, the Exchange or otherwise.
7. LEGEND. Unless registered pursuant to the provisions of Section 5
hereof, the Warrant Shares issued upon exercise of the Warrant shall be subject
to a stop transfer order and the certificate or certificates evidencing such
Warrant Shares, shall bear the following legend:
"THE SHARES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE
ISSUED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT
TO (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (2) AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
8. REPLACEMENT OF WARRANTS. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant (and
upon surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
9. NO RIGHTS AS STOCKHOLDER. The Holder of any Warrant shall not have,
solely on account of such status, any rights of a stockholder of the Company,
either at law or in equity, or to any notice of meetings of stockholders or of
any other proceedings of the Company, except as provided in this Warrant.
A-6
<PAGE>
10. GOVERNING LAW. This Warrant shall be construed in accordance with
the laws of the State of New York applicable to contracts made and performed
within such State, without regard to principles of conflicts of law.
11. NOTICES. All notices and communications hereunder shall be in
writing and shall be mailed, delivered, facsimiled or telecopies and confirmed
in writing, and shall, in the case of notice of the Company be addressed and
sent to the Company at 450 Park Avenue, Suite 2603, Attention: Howard G. Anders,
Executive Vice President, with a copy to its counsel: Olshan Grundman Frome &
Rosenzweig LLP, 505 Park Avenue, New York, New York 10022, Attention: Robert H.
Friedman, Esq.; and in the case of notice to the Holder be address and sent to
Jefferies & Company, Inc., 580 California Street, San Francisco, California
94104, Attention: __________________, with a copy to its counsel: Latham &
Watkins, 505 Montgomery Street, Suite 1900, San Francisco, California 94111,
Attention: Tracy Edmonson, Esq.
The Company and the Holder may change their respective addresses for
notice, by notice given in the manner aforesaid. Any such notification shall
take effect at the time of receipt.
12. MODIFICATION OF AGREEMENT. This Warrant shall not otherwise be
modified supplemented or amended in any respect unless such modification,
supplement or amendment is in writing and signed by the party against which
enforcement of the same is sought; provided that, Section 5, 6 and 11 of the
this Warrant may be amended with the consent in writing of the Company and the
holders representing not less than 50% of the shares of Common Stock then
issuable upon the exercise of all then outstanding Warrants.
13. CONSENT TO JURISDICTION. The Company irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out of
or relating to this Warrant, any document or instrument delivered pursuant to,
in connection with or simultaneously with this Warrant, or a breach of this
Warrant or any such document or instrument. In any such action or proceeding,
the Company waives personal service of any summons, complaint or other process
and agrees that service thereof may be made in accordance with Section __ of the
Underwriting Agreement.
A-7
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
date set forth below.
Dated: __________ __, 1997 HOSPITALITY WORLDWIDE SERVICES, INC.
By:
----------------------------------
Name:
Title:
A-8
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the attached Warrant).
FOR VALUE RECEIVED, _____________________ hereby sells, assigns, and
transfers unto ___________ a Warrant to purchase _______________ shares of
Common stock, $0.01 par value per share, of Hospitality Worldwide Services, Inc.
(the "COMPANY"), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint as attorney to transfer such Warrant
on the books of the Company, with full power of substitution.
Dated:
----------------------
Signature
----------------------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
Assignment-1
<PAGE>
FORM OF EXERCISE NOTICE
To:
Hospitality Worldwide Services, Inc.
450 Park Avenue
Suite 2603
New York, New York 10022
The undersigned hereby exercise his or its rights to purchase
___________ Warrant Shares covered by the within Warrant and tenders payment
herewith in the amount of $_______________ in accordance with the terms thereof,
and requests that certificates for such securities be issued in the name of, and
delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: Name:
---------------------------------
(Print)
---------------------------------------
(Signature)
Address:
Exercise-1
OLSHAN GRUNDMAN FROME & ROSENZWEIG
505 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 753 7200
July 22, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: HOSPITALITY WORLDWIDE SERVICES, INC.
Gentlemen:
We have acted as counsel to Hospitality Worldwide Services,
Inc., a New York corporation (the "Company"), in connection with its filing of a
registration statement on Form SB-2 (the "Registration Statement") relating to
2,875,000 shares (the "Shares") of its Common Stock, $.01 par value, 375,000 of
which are subject to an over-allotment option, all as more particularly
described in the Registration Statement.
In our capacity as counsel to the Company, we have examined
the Company's Certificate of Incorporation and By-Laws, each as amended to date,
the Registrant Statement and such other documents as we have considered
appropriate for purposes of this opinion.
With respect to factual matters, we have relied upon
statements and certificates of officers of the Company. We have also reviewed
such other matters of law and examined and relied upon such other documents,
records and certificates as we have deemed relevant hereto. In all such
examinations we have assumed conformity with the original documents of all
documents submitted to us as conformed or photostatic copies, the authenticity
of all documents submitted to us as originals and the genuineness of all
signatures on all documents submitted to us.
<PAGE>
July 22, 1997
Page -2-
On the basis of the foregoing, we are of the opinion that the
Shares have been validly authorized and will, when sold as contemplated by the
Registration Statement, be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference made to us under the caption
"Legal Matters" in the prospectus constituting part of the Registration
Statement.
Very truly yours,
/s/ OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
------------------------------------------
OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of January 9, 1997, by and among The Leonard Parker Company, a Florida
corporation located at 550 Biltmore Way, Coral Gables, Florida 33134 (the
"Company"), Hospitality Worldwide Services, Inc., a New York corporation
("Hospitality") and Leonard Parker, residing at 5575 SE 93rd Street, Miami,
Florida 33156 (the "Executive").
IN CONSIDERATION of the covenants and agreements set forth herein, and
other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged) the parties covenant and agree as follows:
1. EMPLOYMENT OF EXECUTIVE. (a) The Company hereby employs the
Executive as its Chairman to perform the duties and responsibilities incident to
such office consistent with the duties and responsibilities heretofore performed
by the Executive for the Company, subject at all times to the control and
direction of the Board of Directors of the Company (the "Board").
(b) The services of the Executive hereunder shall be rendered
primarily in the Miami, Florida metropolitan area at the Company's principal
executive offices; provided, however, that the Executive shall make such trips
outside of the Miami, Florida metropolitan area as shall be reasonably necessary
in connection with the Executive's duties hereunder.
2. ACCEPTANCE OF EMPLOYMENT; TIME AND ATTENTION. The Executive hereby
accepts such employment and agrees that throughout the Employment Period (as
hereinafter defined), he will devote such time, attention, knowledge and skills,
faithfully, diligently and to the best of his ability, in furtherance of the
business of the Company as are necessary to perform the duties and
responsibilities assigned to him pursuant to Section 1 hereof, subject, at all
times, to the direction and control of the Board. The Executive shall at all
times be subject to, observe and carry out such reasonable rules, regulations,
policies, directions and restrictions as the Company shall from time to time
establish, consistent with the office of the Executive and prior practice of the
Company.
3. TERM. The Company agrees to employ the Executive and the Executive
agrees to serve, on the terms and conditions of this Agreement, for a period
commencing as of January 1, 1997 and ending on December 31, 2000, unless earlier
terminated in accordance with Section 11 hereof (the "Employment Period").
<PAGE>
4. COMPENSATION. For all services rendered by the Executive under this
Agreement, the Company shall pay the Executive a base salary of $250,000 per
annum, payable in equal, bi-weekly installments, PROVIDED, HOWEVER, that the
Executive's entire salary for the period commencing January 1, 2000 and ending
on December 31, 2000 shall be paid reasonably promptly following the execution
and delivery by the Executive and the Company of this Agreement but in no event
later than January 15, 1997 (the "Base Salary"). The Base Salary shall be
increased annually, beginning January 1, 1998, by a percentage equal to the
percentage by which the Consumer Price Index for Urban Wage Borrowers and
Clerical Workers: New York, N.Y. - Northeastern New Jersey (1982-84 equals 100),
as published by the Bureau of Labor Statistics of the United States Department
of Labor, shall have increased over the preceding year (the "CPI Adjustment").
The CPI Adjustment shall be made as soon as possible, but in no event later than
fifteen (15) days after the date upon which the Bureau of Labor publishes its
consumer price index statistics for the month of December. Any portion of the
increase in the Executive's compensation retroactively due shall be payable
immediately upon determination of the adjustment. If publication of the Consumer
Price Index is discontinued, the parties hereto shall accept comparable
statistics on the cost of living for the New York, N.Y. - Northeastern New
Jersey area as computed and published by an agency of the United States or by a
responsible financial periodical of recognized authority then to be selected by
the parties.
The parties agree that the Company is authorized to deduct from the
Base Salary and Bonuses of the Executive, and any other compensation paid to the
Executive, only such sums as are required by law to be deducted or withheld.
5. EXECUTIVE BENEFITS. The Executive shall be entitled to receive such
benefits as reasonably determined from time to time by the Board of Directors of
the Company and as are consistent with and not less than benefits provided to
other senior executives of the Company or Hospitality. In addition, the
Executive shall be entitled to fifteen (15) days of paid vacation for each 12
month period during the Employment Period provided, however, that the Executive
may, at his option, carry forward five (5) days of paid vacation to the
following 12 month period, provided further, however, that in no event may the
total number of days of paid vacation exceed twenty (20) during any twelve month
period. Any vacation shall be taken at the reasonable and mutual convenience of
the Company and the Executive.
6. REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
in accordance with its applicable policies for all expenses reasonably incurred
by Executive in connection with the performance of his duties hereunder and the
business of the Company, upon the submission to the Company of appropriate
receipts or vouchers.
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<PAGE>
7. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company, its subsidiaries and any of its
affiliates all confidential information, knowledge and data relating to or
concerned with Hospitality, the Company, other subsidiaries of Hospitality and
any of their affiliates' operations, sales, business and affairs, and he shall
not, at any time, either during the Employment Period or after the termination
of the Executive's employment with the Company, use, disclose or divulge any
such confidential information, knowledge or data to any person, firm or
corporation (unless the Company, or such other entity, no longer treats such
information as confidential) other than to the Company or its designees and
employees or except as may otherwise be required in connection with the business
and affairs of the Company; PROVIDED, HOWEVER, that the Executive may disclose
or divulge such information, knowledge or data that is or becomes generally
available to the public through no wrongful act on the Executive's part or where
such disclosure is legally compelled by judicial or administrative action,
provided that the Executive agrees, to the extent practicable, to give the
Company prompt notice of any such judicial or administrative action to enable
the Company to seek an appropriate protective order.
8. INTELLECTUAL PROPERTY. Any idea, invention, design, written
material, manual, system, procedure, improvement, development or discovery
conceived, developed, created or made by the Executive alone or with others
relating to the businesses of the Company, Hospitality or any of Hospitality's
other subsidiaries during the Employment Period, whether or not patentable or
registrable, shall become the sole and exclusive property of the Company. The
Executive shall disclose the same promptly and completely to the Company and
shall, during the Employment Period and at any time and from time to time
thereafter (i) execute all documents reasonably requested by the Company for
vesting in the Company the entire right, title and interest in and to the same,
(ii) execute all documents reasonably requested by the Company for filing and
prosecuting such applications for patents, trademarks, service marks and/or
copyrights as the Company, in its sole discretion, may desire to prosecute, and
(iii) at the expense of the Company give the Company all assistance it
reasonably requires, including the giving of testimony in any suit, action or
proceeding, in order to obtain, maintain and protect the Company's right therein
and thereto.
9. RESTRICTIVE COVENANT. In consideration of the Company entering into
this Agreement, the Executive agrees that while the Executive is an employee of
the Company and, except in the event of the Executive's termination (i) due to
his becoming "Permanently Incapacitated" (as hereinafter defined), (ii) by the
Company without "Cause" (as hereinafter defined), (iii) by the Executive with
"Good Reason" (as hereinafter defined) or (iv) at the conclusion of the
Executive Period, for a period of one (1) year thereafter, he will not:
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<PAGE>
(i) directly or indirectly own, manage, operate, join,
control, participate in, invest in, lend money to, guarantee the debts or
obligations of or otherwise be connected with, in any manner, whether as an
officer, director, employee, partner, investor or otherwise, any business entity
that is engaged in the business now or at the time of such termination engaged
in by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality in the geographical areas where they conduct such business at the
time of such termination;
(ii) for himself or on behalf of any other person,
partnership, corporation or entity, call on any customer of Hospitality, the
Company or any other subsidiary or affiliate of Hospitality for the purpose of
soliciting, diverting or taking away any customer from Hospitality, the Company
or any other subsidiary or affiliate of Hospitality; or
(iii) induce, influence, or seek to induce or influence, any
person engaged as an employee, representative, agent, independent contractor or
otherwise by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality, to terminate his or her relationship with Hospitality, the Company
or any other subsidiary or affiliate of Hospitality.
The provisions of this Section 9 shall immediately terminate
in the event that the Company fails to redeem the Preferred Stock in accordance
with the provisions of Section 5(b) of the Certificate of Designations,
Preferences and Other Rights and Qualifications of Redeemable Convertible
Preferred Stock of Hospitality.
Nothing herein contained shall be deemed to prohibit the
Executive from investing his funds in securities of an issuer if the securities
of such issuer are listed for trading on a national securities exchange or are
traded in the over-the-counter market and the Executive's holdings therein
represent less than 5% of the total number of shares or principal amount of the
securities of such issuer outstanding.
10. EQUITABLE RELIEF. The parties hereto acknowledge that the
Executive's services are unique and that, in the event of a breach or a
threatened breach by the Executive of any of his obligations under this
Agreement, the Company shall not have an adequate remedy at law. Accordingly, in
the event of any such breach or threatened breach by the Executive, the Company
shall be entitled to such equitable and injunctive relief as may be available to
restrain the Executive and any business, firm, partnership, individual,
corporation or entity participating in such breach or threatened breach from the
violation of the provisions hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available at law or in
equity for such breach or threatened breach.
-4-
<PAGE>
11. EARLY TERMINATION.
(a) The Employment Period shall terminate without action on
the part of the Company upon the death of the Executive. The Employment Period
shall also terminate upon 30 days written notice by the Company to the
Executive, (i) in the event that the Executive shall become "Permanently
Incapacitated" (as hereinafter defined); or (ii) for "Cause" (as hereinafter
defined). The Employment Period shall also terminate upon written notice by the
Executive to the Company for "Good Reason" (as hereinafter defined);
(b) For purposes of this Agreement, the Executive may, in the
sole discretion of the Company, be deemed Permanently Incapacitated in the event
that the Executive shall, by reason of his physical or mental disability as
determined by the Executive's physician or a physician designated by the
Company, fail to substantially perform his usual and regular duties for the
Company for a period of 120 consecutive days or for an aggregate of 120 days in
any consecutive twelve month period.
(c) For purposes of this Agreement, "Cause" shall mean any (i)
criminal conviction of the Executive for an offense involving the
misappropriation of funds or material property of the Company, (ii) willful
refusal of the Executive to follow the reasonable and lawful directives of the
Board for the performance of material duties which the Executive is required to
perform hereunder (other than for reason of becoming Permanently Incapacitated)
in accordance with the prior activities of the Executive for the Company or
(iii) the breach by the Executive of a material provision of this Agreement;
PROVIDED, HOWEVER, that in the event of a claim by the Company pursuant to (ii)
or (iii) above, the Company shall first provide the Executive with written
notice specifying the nature of the cause and the Executive shall have thirty
(30) days within which to cure such cause.
(d) For purposes of this Agreement, "Good Reason" shall mean
any diminution of the Executive's position, duties, responsibilities, executive
benefits or compensation as Chief Executive Officer or the breach by the Company
of a material provision of this Agreement.
(e) In the event the Employment Period is terminated by reason
of the Executive's death, the Company shall, within 30 days, pay to the
Executive's estate the Base Salary, as adjusted, to and including the date of
such termination, any prorated Bonuses computed through the most recently
completed fiscal quarter and all expense reimbursements due the Executive.
(f) In the event the Employment Period is terminated (i) by
the Company for Cause, or (ii) by the Executive without Good Reason, the Company
shall, within 30 days, pay to the Executive his
-5-
<PAGE>
Base Salary, as adjusted, to and including the date of such termination, any
prorated Bonuses computed through the most recently completed fiscal quarter and
all expense reimbursements due the Executive.
(g) In the event the Employment Period is terminated due to
the Executive becoming Permanently Incapacitated, the Company shall, within 30
days, pay to the Executive the Base Salary, as adjusted, to and including the
date of such termination, any prorated Bonuses computed through the most
recently completed fiscal quarter previously determined by the Board and all
expense reimbursements due the Executive.
(h) In the event the Employment Period is terminated (i) by
the Company without Cause, or (ii) by the Executive with Good Reason, the
Company shall, within 30 days, pay to the Executive an amount equal to the total
of all payments of Base Salary for the remainder of the Employment Period. In
addition, the Executive shall be entitled to any Bonuses for the remainder of
the Employment Period, shall be paid for accrued but unused vacation time
determined on a pro-rata basis and shall be entitled to the benefits provided
pursuant to Section 5 hereof for the remainder of the Employment Period.
12. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof (including the
arbitrability of any controversy or claim), shall be settled by arbitration in
the City of Miami, State of Florida (if such claim is brought by the Company,
Hospitality or Parker Reorder) or in the City of New York, State of New York (if
such claim is brought by the Executive), by three arbitrators, one of whom shall
be appointed by the Company, one by the Executive and the third of whom shall be
appointed by the first two arbitrators. If the first two arbitrators cannot
agree on the appointment of a third arbitrator, then the third arbitrator shall
be appointed by the American Arbitration Association. The arbitration shall be
conducted in accordance with the rules of the American Arbitration Association,
except with respect to the selection of arbitrators which shall be as provided
in this Section. The prevailing party shall be entitled to recover its attorneys
fees and costs. In the absence of fraud, the award of the arbitrators shall be
binding upon the parties and judgment thereon may be entered in any court having
jurisdiction thereof.
13. ENTIRE AGREEMENT; AMENDMENT. This agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter.
No amendment to or modification of this Agreement shall be valid or binding
unless made in writing and signed by the party against whom enforcement thereof
is sought.
-6-
<PAGE>
14. NOTICES. Any notice or other communication required or permitted to
be given by this Agreement shall be writing and shall be effectively given if:
(a) delivered personally by hand;
(b) sent by prepaid courier service;
(c) sent by registered mail; or
(d) sent by prepaid telecopier, telex or other similar
means of electronic communication and confirmed by
mailing the original document so sent by prepaid mail
on the same or following day,
in each case addressed as follows:
(i) if to the Executive:
5575 SE 93rd Street
Miami, Florida 33156
(ii) if to the Company or Hospitality:
509 Madison Avenue, Suite 1114
New York, New York 10022
Telecopier No. (212) 223-0865
or at such other address as the party to whom such notice or other communication
is to be given shall have advised the party giving same in the manner provided
in this Section. Any notice or other communication delivered personally or by
prepaid courier service shall be deemed to have been given and received on the
day it is so delivered at such address, provided that if such day is not a
business day such notice or other communication shall be deemed to have been
given and received on the next following business day. Any notice or other
communication sent by registered mail shall be deemed to have been given and
received on the third business day following the date of mailing. Any notice or
other communication transmitted by telecopier, telex or other similar form of
electronic communication shall be deemed given and received on the day of its
transmission provided that such day is a business day and such transmission is
completed before 5:00 p.m. on such day, failing which such notice or other
communication shall be deemed given and received on the first business day after
its transmission. Regardless of the foregoing, if there is a mail stoppage or
labor dispute or threatened labor dispute which has affected or could affect
normal mail delivery, then no notice or other communication may be delivered by
registered mail. If there has been a mail stoppage and if a party sends a notice
or other communication by telecopier, telex or other similar means of electronic
communication, such party shall be relieved from the obligation to mail the
original document in accordance with this Section. "Business day" means any day
other than a Saturday, a Sunday or a statutory holiday observed in New York
City, New York.
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<PAGE>
15. WAIVERS. No course of dealing nor any delay on the part of any
party hereto in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
16. GOVERNING LAW. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York, except that body
of law relating to choice of laws.
17. INVALIDITY. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any court of competent jurisdiction, such provision shall be
ineffective but shall not in any way invalidate or affect any other clause,
paragraph, section or part of this Agreement.
18. FURTHER ASSURANCES. Each of the parties shall execute such
documents and take such other actions as may be reasonably requested by the
other party to carry out the provisions and purposes of this Agreement in
accordance with its terms.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts which may be by facsimile, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
20. GUARANTEE. Hospitality guarantees the full performance of the
obligations of the Company hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
THE LEONARD PARKER COMPANY
/s/ Leonard Parker By: /s/ Douglas Parker
- ---------------------- ---------------------------------
LEONARD PARKER Name: Douglas Parker
Title: President
HOSPITALITY WORLDWIDE SERVICES, INC.
By:/s/ Howard G. Anders
----------------------------------------
Name: Howard G. Anders
Title: Executive Vice President
-9-
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of January 9, 1997, by and among The Leonard Parker Company, a Florida
corporation located at 550 Biltmore Way, Coral Gables, Florida 33134 (the
"Company"), Hospitality Worldwide Services, Inc., a New York corporation
("Hospitality") and Douglas Parker, residing at 4140 Pinta Court, Coral Gables,
Florida 33146 (the "Executive").
IN CONSIDERATION of the covenants and agreements set forth herein, and
other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged) the parties covenant and agree as follows:
1. EMPLOYMENT OF EXECUTIVE. (a) The Company hereby employs the
Executive as its President and Hospitality hereby employs the Execuitive as its
President on a full-time basis to perform the duties and responsibilities
incident to such office consistent with the duties and responsibilities
heretofore performed by the Executive for the Company, subject at all times to
the control and direction of the Board of Directors of the Company (the
"Board").
(b) The services of the Executive hereunder shall be rendered
primarily in the Miami, Florida metropolitan area at the Company's principal
executive offices; provided, however, that the Executive shall make such trips
outside of the Miami, Florida metropolitan area as shall be reasonably necessary
in connection with the Executive's duties hereunder.
2. ACCEPTANCE OF EMPLOYMENT; TIME AND ATTENTION. The Executive hereby
accepts such employment and agrees that throughout the Employment Period (as
hereinafter defined), he will devote such full time, attention, knowledge and
skills, faithfully, diligently and to the best of his ability, in furtherance of
the business of the Company as are necessary to perform the duties and
responsibilities assigned to him pursuant to Section 1 hereof, subject, at all
times, to the direction and control of the Board. The Executive shall at all
times be subject to, observe and carry out such reasonable rules, regulations,
policies, directions and restrictions as the Company shall from time to time
establish, consistent with the office of the Executive and prior practice of the
Company.
3. TERM. The Company agrees to employ the Executive and the Executive
agrees to serve, on the terms and conditions of this Agreement, for a period
commencing as of January 1, 1997 and ending on December 31, 1999, unless earlier
terminated in accordance with Section 11 hereof (the "Employment Period").
<PAGE>
4. COMPENSATION. For all services rendered by the Executive under this
Agreement, the Company shall pay the Executive the following:
(a) a base salary of $175,000 per annum, payable in
equal, bi-weekly installments (the "Base Salary").
The Base Salary shall be increased annually,
beginning January 1, 1998, by a percentage equal to
the percentage by which the Consumer Price Index for
Urban Wage Borrowers and Clerical Workers: New York,
N.Y. - Northeastern New Jersey (1982-84 equals 100),
as published by the Bureau of Labor Statistics of the
United States Department of Labor, shall have
increased over the preceding year (the "CPI
Adjustment"). The CPI Adjustment shall be made as
soon as possible, but in no event later than fifteen
(15) days after the date upon which the Bureau of
Labor publishes its consumer price index statistics
for the month of December. Any portion of the
increase in the Executive's compensation
retroactively due shall be payable immediately upon
determination of the adjustment. If publication of
the Consumer Price Index is discontinued, the parties
hereto shall accept comparable statistics on the cost
of living for the New York, N.Y. - Northeastern New
Jersey area as computed and published by an agency of
the United States or by a responsible financial
periodical of recognized authority then to be
selected by the parties.
(b) In addition to the Base Salary, the Executive shall
be eligible to receive bonuses ("Bonuses") each year
during the Employment Period in an amount of up to
20% of the Base Salary based upon the achievement of
objective criteria presented to the Board by the
Executive and the President of the Company and
approved by the Board. Such objective criteria shall
be determined in consultation with the Executive on
an annual basis and shall be set forth in writing not
later than 60 days after the commencement of each
year during the term hereof.
(c) Simultaneously with the execution hereof, Hospitality
shall grant to the Executive stock options (the
"Options") pursuant to Hospitality's 1996 Stock
Option Plan to purchase Sixty-Five Thousand (65,000)
shares of Hospitality's common stock, $.01 par value,
such Options to be evidenced by an agreement attached
hereto as EXHIBIT A. The Executive shall be eligible
for additional grants during the term hereof in
accordance with policies
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<PAGE>
established from time to time by the Company or
Hospitality.
The parties agree that the Company is authorized to deduct
from the Base Salary and Bonuses of the Executive, and any other compensation
paid to the Executive, only such sums as are required by law to be deducted or
withheld.
5. EXECUTIVE BENEFITS. The Executive shall be entitled to receive such
benefits as reasonably determined from time to time by the Board of Directors of
the Company and as are consistent with and not less than benefits provided to
other senior executives of the Company or Hospitality. In addition, the
Executive shall be entitled to fifteen (15) days of paid vacation for each 12
month period during the Employment Period provided, however, that the Executive
may, at his option, carry forward five (5) days of paid vacation to the
following 12 month period, provided further, however, that in no event may the
total number of days of paid vacation exceed twenty (20) during any twelve month
period. Any vacation shall be taken at the reasonable and mutual convenience of
the Company and the Executive.
6. REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
in accordance with its applicable policies for all expenses reasonably incurred
by Executive in connection with the performance of his duties hereunder and the
business of the Company, upon the submission to the Company of appropriate
receipts or vouchers.
7. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company, its subsidiaries and any of its
affiliates all confidential information, knowledge and data relating to or
concerned with Hospitality, the Company, other subsidiaries of Hospitality and
any of their affiliates' operations, sales, business and affairs, and he shall
not, at any time, either during the Employment Period or after the termination
of the Executive's employment with the Company, use, disclose or divulge any
such confidential information, knowledge or data to any person, firm or
corporation (unless the Company, or such other entity, no longer treats such
information as confidential) other than to the Company or its designees and
employees or except as may otherwise be required in connection with the business
and affairs of the Company; PROVIDED, HOWEVER, that the Executive may disclose
or divulge such information, knowledge or data that is or becomes generally
available to the public through no wrongful act on the Executive's part or where
such disclosure is legally compelled by judicial or administrative action,
provided that the Executive agrees, to the extent practicable, to give the
Company prompt notice of any such judicial or administrative action to enable
the Company to seek an appropriate protective order.
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<PAGE>
8. INTELLECTUAL PROPERTY. Any idea, invention, design, written
material, manual, system, procedure, improvement, development or discovery
conceived, developed, created or made by the Executive alone or with others
relating to the businesses of the Company, Hospitality or any of Hospitality's
other subsidiaries during the Employment Period, whether or not patentable or
registrable, shall become the sole and exclusive property of the Company. The
Executive shall disclose the same promptly and completely to the Company and
shall, during the Employment Period and at any time and from time to time
thereafter (i) execute all documents reasonably requested by the Company for
vesting in the Company the entire right, title and interest in and to the same,
(ii) execute all documents reasonably requested by the Company for filing and
prosecuting such applications for patents, trademarks, service marks and/or
copyrights as the Company, in its sole discretion, may desire to prosecute, and
(iii) at the expense of the Company give the Company all assistance it
reasonably requires, including the giving of testimony in any suit, action or
proceeding, in order to obtain, maintain and protect the Company's right therein
and thereto.
9. RESTRICTIVE COVENANT. In consideration of the Company entering into
this Agreement, the Executive agrees that while the Executive is an employee of
the Company and, except in the event of the Executive's termination (i) due to
his becoming "Permanently Incapacitated" (as hereinafter defined), (ii) by the
Company without "Cause" (as hereinafter defined), (iii) by the Executive with
"Good Reason" (as hereinafter defined) or (iv) at the conclusion of the
Executive Period, for a period of one (1) year thereafter, he will not:
(i) directly or indirectly own, manage, operate, join,
control, participate in, invest in, lend money to, guarantee the debts or
obligations of or otherwise be connected with, in any manner, whether as an
officer, director, employee, partner, investor or otherwise, any business entity
that is engaged in the business now or at the time of such termination engaged
in by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality in the geographical areas where they conduct such business at the
time of such termination;
(ii) for himself or on behalf of any other person,
partnership, corporation or entity, call on any customer of Hospitality, the
Company or any other subsidiary or affiliate of Hospitality for the purpose of
soliciting, diverting or taking away any customer from Hospitality, the Company
or any other subsidiary or affiliate of Hospitality; or
(iii) induce, influence, or seek to induce or influence, any
person engaged as an employee, representative, agent, independent contractor or
otherwise by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality, to terminate his
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<PAGE>
or her relationship with Hospitality, the Company or any other subsidiary or
affiliate of Hospitality.
The provisions of this Section 9 shall immediately terminate
in the event that the Company fails to redeem the Preferred Stock in accordance
with the provisions of Section 5(b) of the Certificate of Designations,
Preferences and Other Rights and Qualifications of Redeemable Convertible
Preferred Stock of Hospitality.
Nothing herein contained shall be deemed to prohibit the
Executive from investing his funds in securities of an issuer if the securities
of such issuer are listed for trading on a national securities exchange or are
traded in the over-the-counter market and the Executive's holdings therein
represent less than 5% of the total number of shares or principal amount of the
securities of such issuer outstanding.
10. EQUITABLE RELIEF. The parties hereto acknowledge that the
Executive's services are unique and that, in the event of a breach or a
threatened breach by the Executive of any of his obligations under this
Agreement, the Company shall not have an adequate remedy at law. Accordingly, in
the event of any such breach or threatened breach by the Executive, the Company
shall be entitled to such equitable and injunctive relief as may be available to
restrain the Executive and any business, firm, partnership, individual,
corporation or entity participating in such breach or threatened breach from the
violation of the provisions hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available at law or in
equity for such breach or threatened breach.
11. EARLY TERMINATION.
(a) The Employment Period shall terminate without action on
the part of the Company upon the death of the Executive. The Employment Period
shall also terminate upon 30 days written notice by the Company to the
Executive, (i) in the event that the Executive shall become "Permanently
Incapacitated" (as hereinafter defined); or (ii) for "Cause" (as hereinafter
defined). The Employment Period shall also terminate upon written notice by the
Executive to the Company for "Good Reason" (as hereinafter defined);
(b) For purposes of this Agreement, the Executive may, in the
sole discretion of the Company, be deemed Permanently Incapacitated in the event
that the Executive shall, by reason of his physical or mental disability as
determined by the Executive's physician or a physician designated by the
Company, fail to substantially perform his usual and regular duties for the
Company for a period of 120 consecutive days or for an aggregate of 120 days in
any consecutive twelve month period.
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<PAGE>
(c) For purposes of this Agreement, "Cause" shall mean any (i)
criminal conviction of the Executive for an offense involving the
misappropriation of funds or material property of the Company, (ii) willful
refusal of the Executive to follow the reasonable and lawful directives of the
Board for the performance of material duties which the Executive is required to
perform hereunder (other than for reason of becoming Permanently Incapacitated)
in accordance with the prior activities of the Executive for the Company or
(iii) the breach by the Executive of a material provision of this Agreement;
PROVIDED, HOWEVER, that in the event of a claim by the Company pursuant to (ii)
or (iii) above, the Company shall first provide the Executive with written
notice specifying the nature of the cause and the Executive shall have thirty
(30) days within which to cure such cause.
(d) For purposes of this Agreement, "Good Reason" shall mean
any diminution of the Executive's position, duties, responsibilities, executive
benefits or compensation as Chief Executive Officer or the breach by the Company
of a material provision of this Agreement.
(e) In the event the Employment Period is terminated by reason
of the Executive's death, the Company shall, within 30 days, pay to the
Executive's estate the Base Salary, as adjusted, to and including the date of
such termination, any prorated Bonuses computed through the most recently
completed fiscal quarter and all expense reimbursements due the Executive.
(f) In the event the Employment Period is terminated (i) by
the Company for Cause, or (ii) by the Executive without Good Reason, the Company
shall, within 30 days, pay to the Executive his Base Salary, as adjusted, to and
including the date of such termination, any prorated Bonuses computed through
the most recently completed fiscal quarter and all expense reimbursements due
the Executive.
(g) In the event the Employment Period is terminated due to
the Executive becoming Permanently Incapacitated, the Company shall, within 30
days, pay to the Executive the Base Salary, as adjusted, to and including the
date of such termination, any prorated Bonuses computed through the most
recently completed fiscal quarter previously determined by the Board and all
expense reimbursements due the Executive.
(h) In the event the Employment Period is terminated (i) by
the Company without Cause, or (ii) by the Executive with Good Reason, the
Company shall, within 30 days, pay to the Executive an amount equal to the total
of all payments of Base Salary for the remainder of the Employment Period. In
addition, the Executive shall be entitled to any Bonuses for the remainder of
the Employment Period, shall be paid for accrued but unused vacation time
determined on a pro-rata basis and shall be entitled to the
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<PAGE>
benefits provided pursuant to Section 5 hereof for the remainder of the
Employment Period.
12. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof (including the
arbitrability of any controversy or claim), shall be settled by arbitration in
the City of Miami, State of Florida (if such claim is brought by the Company or
Hospitality) or in the City of New York, State of New York (if such claim is
brought by the Executive), by three arbitrators, one of whom shall be appointed
by the Company, one by the Executive and the third of whom shall be appointed by
the first two arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be appointed
by the American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section. The prevailing party shall be entitled to recover its attorneys fees
and costs. In the absence of fraud, the award of the arbitrators shall be
binding upon the parties and judgment thereon may be entered in any court having
jurisdiction thereof.
13. ENTIRE AGREEMENT; AMENDMENT. This agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter.
No amendment to or modification of this Agreement shall be valid or binding
unless made in writing and signed by the party against whom enforcement thereof
is sought.
14. NOTICES. Any notice or other communication required or permitted to be given
by this Agreement shall be writing and shall be effectively given if:
(a) delivered personally by hand;
(b) sent by prepaid courier service;
(c) sent by registered mail; or
(d) sent by prepaid telecopier, telex or other similar
means of electronic communication and confirmed by
mailing the original document so sent by prepaid mail
on the same or following day,
in each case addressed as follows:
(i) if to the Executive:
4140 Pinta Court
Coral Gables, Florida 33146
(ii) if to the Company or Hospitality:
509 Madison Avenue, Suite 1114
New York, New York 10022
Telecopier No. (212) 223-0865
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<PAGE>
or at such other address as the party to whom such notice or other communication
is to be given shall have advised the party giving same in the manner provided
in this Section. Any notice or other communication delivered personally or by
prepaid courier service shall be deemed to have been given and received on the
day it is so delivered at such address, provided that if such day is not a
business day such notice or other communication shall be deemed to have been
given and received on the next following business day. Any notice or other
communication sent by registered mail shall be deemed to have been given and
received on the third business day following the date of mailing. Any notice or
other communication transmitted by telecopier, telex or other similar form of
electronic communication shall be deemed given and received on the day of its
transmission provided that such day is a business day and such transmission is
completed before 5:00 p.m. on such day, failing which such notice or other
communication shall be deemed given and received on the first business day after
its transmission. Regardless of the foregoing, if there is a mail stoppage or
labor dispute or threatened labor dispute which has affected or could affect
normal mail delivery, then no notice or other communication may be delivered by
registered mail. If there has been a mail stoppage and if a party sends a notice
or other communication by telecopier, telex or other similar means of electronic
communication, such party shall be relieved from the obligation to mail the
original document in accordance with this Section. "Business day" means any day
other than a Saturday, a Sunday or a statutory holiday observed in New York
City, New York.
15. WAIVERS. No course of dealing nor any delay on the part of any
party hereto in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
16. GOVERNING LAW. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York, except that body
of law relating to choice of laws.
17. INVALIDITY. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any court of competent jurisdiction, such provision shall be
ineffective but shall not in any way invalidate or affect any other clause,
paragraph, section or part of this Agreement.
18. FURTHER ASSURANCES. Each of the parties shall execute such
documents and take such other actions as may be reasonably requested by the
other party to carry out the provisions and purposes of this Agreement in
accordance with its terms.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts which may be by facsimile, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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<PAGE>
20. GUARANTEE. Hospitality guarantees the full performance of the
obligations of the Company hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
THE LEONARD PARKER COMPANY
/s/ Douglas Parker By: /s/ Douglas Parker
- ------------------ ----------------------------
DOUGLAS PARKER Name: Douglas Parker
Title:President
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /s/ Howard Anders
--------------------------
Name: Howard Anders
Title:Executive Vice President
-10-
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of January 9, 1997, by and among The Leonard Parker Company, a Florida
corporation located at 550 Biltmore Way, Coral Gables, Florida 33134 (the
"Company"), Hospitality Worldwide Services, Inc., a New York corporation
("Hospitality") and Bradley Parker, residing at 1251 North Greenway Drive, Coral
Gables, Florida 33134 (the "Executive").
IN CONSIDERATION of the covenants and agreements set forth herein, and
other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged) the parties covenant and agree as follows:
1. EMPLOYMENT OF EXECUTIVE. (a) The Company hereby employs the
Executive as its Chief Executive Officer on a full-time basis to perform the
duties and responsibilities incident to such office consistent with the duties
and responsibilities heretofore performed by the Executive for the Company,
subject at all times to the control and direction of the Board of Directors of
the Company (the "Board").
(b) The services of the Executive hereunder shall be rendered
primarily in the Miami, Florida metropolitan area at the Company's principal
executive offices; provided, however, that the Executive shall make such trips
outside of the Miami, Florida metropolitan area as shall be reasonably necessary
in connection with the Executive's duties hereunder.
2. ACCEPTANCE OF EMPLOYMENT; TIME AND ATTENTION. The Executive hereby
accepts such employment and agrees that throughout the Employment Period (as
hereinafter defined), he will devote such full time, attention, knowledge and
skills, faithfully, diligently and to the best of his ability, in furtherance of
the business of the Company as are necessary to perform the duties and
responsibilities assigned to him pursuant to Section 1 hereof, subject, at all
times, to the direction and control of the Board. The Executive shall at all
times be subject to, observe and carry out such reasonable rules, regulations,
policies, directions and restrictions as the Company shall from time to time
establish, consistent with the office of the Executive and prior practice of the
Company.
3. TERM. The Company agrees to employ the Executive and the Executive
agrees to serve, on the terms and conditions of this Agreement, for a period
commencing as of January 1, 1997 and ending on December 31, 1999, unless earlier
terminated in accordance with Section 11 hereof (the "Employment Period").
<PAGE>
4. COMPENSATION. For all services rendered by the Executive under this
Agreement, the Company shall pay the Executive the following:
(a) a base salary of $175,000 per annum, payable in
equal, bi-weekly installments (the "Base Salary").
The Base Salary shall be increased annually,
beginning January 1, 1998, by a percentage equal to
the percentage by which the Consumer Price Index for
Urban Wage Borrowers and Clerical Workers: New York,
N.Y. - Northeastern New Jersey (1982-84 equals 100),
as published by the Bureau of Labor Statistics of the
United States Department of Labor, shall have
increased over the preceding year (the "CPI
Adjustment"). The CPI Adjustment shall be made as
soon as possible, but in no event later than fifteen
(15) days after the date upon which the Bureau of
Labor publishes its consumer price index statistics
for the month of December. Any portion of the
increase in the Executive's compensation
retroactively due shall be payable immediately upon
determination of the adjustment. If publication of
the Consumer Price Index is discontinued, the parties
hereto shall accept comparable statistics on the cost
of living for the New York, N.Y. - Northeastern New
Jersey area as computed and published by an agency of
the United States or by a responsible financial
periodical of recognized authority then to be
selected by the parties.
(b) In addition to the Base Salary, the Executive shall
be eligible to receive bonuses ("Bonuses") each year
during the Employment Period in an amount of up to
20% of the Base Salary based upon the achievement of
objective criteria presented to the Board by the
Executive and the President of the Company and
approved by the Board. Such objective criteria shall
be determined in consultation with the Executive on
an annual basis and shall be set forth in writing not
later than 60 days after the commencement of each
year during the term hereof.
(c) Simultaneously with the execution hereof, Hospitality
shall grant to the Executive stock options (the
"Options") pursuant to Hospitality's 1996 Stock
Option Plan to purchase Sixty-Five Thousand (65,000)
shares of Hospitality's common stock, $.01 par value,
such Options to be evidenced by an agreement attached
hereto as EXHIBIT A. The Executive shall be eligible
for additional grants during the term hereof in
accordance with policies
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<PAGE>
established from time to time by the Company or
Hospitality.
The parties agree that the Company is authorized to deduct
from the Base Salary and Bonuses of the Executive, and any other compensation
paid to the Executive, only such sums as are required by law to be deducted or
withheld.
5. EXECUTIVE BENEFITS. The Executive shall be entitled to receive such
benefits as reasonably determined from time to time by the Board of Directors of
the Company and as are consistent with and not less than benefits provided to
other senior executives of the Company or Hospitality. In addition, the
Executive shall be entitled to fifteen (15) days of paid vacation for each 12
month period during the Employment Period provided, however, that the Executive
may, at his option, carry forward five (5) days of paid vacation to the
following 12 month period, provided further, however, that in no event may the
total number of days of paid vacation exceed twenty (20) during any twelve month
period. Any vacation shall be taken at the reasonable and mutual convenience of
the Company and the Executive.
6. REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
in accordance with its applicable policies for all expenses reasonably incurred
by Executive in connection with the performance of his duties hereunder and the
business of the Company, upon the submission to the Company of appropriate
receipts or vouchers.
7. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company, its subsidiaries and any of its
affiliates all confidential information, knowledge and data relating to or
concerned with Hospitality, the Company, other subsidiaries of Hospitality and
any of their affiliates' operations, sales, business and affairs, and he shall
not, at any time, either during the Employment Period or after the termination
of the Executive's employment with the Company, use, disclose or divulge any
such confidential information, knowledge or data to any person, firm or
corporation (unless the Company, or such other entity, no longer treats such
information as confidential) other than to the Company or its designees and
employees or except as may otherwise be required in connection with the business
and affairs of the Company; PROVIDED, HOWEVER, that the Executive may disclose
or divulge such information, knowledge or data that is or becomes generally
available to the public through no wrongful act on the Executive's part or where
such disclosure is legally compelled by judicial or administrative action,
provided that the Executive agrees, to the extent practicable, to give the
Company prompt notice of any such judicial or administrative action to enable
the Company to seek an appropriate protective order.
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<PAGE>
8. INTELLECTUAL PROPERTY. Any idea, invention, design, written
material, manual, system, procedure, improvement, development or discovery
conceived, developed, created or made by the Executive alone or with others
relating to the businesses of the Company, Hospitality or any of Hospitality's
other subsidiaries during the Employment Period, whether or not patentable or
registrable, shall become the sole and exclusive property of the Company. The
Executive shall disclose the same promptly and completely to the Company and
shall, during the Employment Period and at any time and from time to time
thereafter (i) execute all documents reasonably requested by the Company for
vesting in the Company the entire right, title and interest in and to the same,
(ii) execute all documents reasonably requested by the Company for filing and
prosecuting such applications for patents, trademarks, service marks and/or
copyrights as the Company, in its sole discretion, may desire to prosecute, and
(iii) at the expense of the Company give the Company all assistance it
reasonably requires, including the giving of testimony in any suit, action or
proceeding, in order to obtain, maintain and protect the Company's right therein
and thereto.
9. RESTRICTIVE COVENANT. In consideration of the Company entering into
this Agreement, the Executive agrees that while the Executive is an employee of
the Company and, except in the event of the Executive's termination (i) due to
his becoming "Permanently Incapacitated" (as hereinafter defined), (ii) by the
Company without "Cause" (as hereinafter defined), (iii) by the Executive with
"Good Reason" (as hereinafter defined) or (iv) at the conclusion of the
Executive Period, for a period of one (1) year thereafter, he will not:
(i) directly or indirectly own, manage, operate, join,
control, participate in, invest in, lend money to, guarantee the debts or
obligations of or otherwise be connected with, in any manner, whether as an
officer, director, employee, partner, investor or otherwise, any business entity
that is engaged in the business now or at the time of such termination engaged
in by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality in the geographical areas where they conduct such business at the
time of such termination;
(ii) for himself or on behalf of any other person,
partnership, corporation or entity, call on any customer of Hospitality, the
Company or any other subsidiary or affiliate of Hospitality for the purpose of
soliciting, diverting or taking away any customer from Hospitality, the Company
or any other subsidiary or affiliate of Hospitality; or
(iii) induce, influence, or seek to induce or influence, any
person engaged as an employee, representative, agent, independent contractor or
otherwise by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality, to terminate his
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<PAGE>
or her relationship with Hospitality, the Company or any other subsidiary or
affiliate of Hospitality.
The provisions of this Section 9 shall immediately terminate
in the event that the Company fails to redeem the Preferred Stock in accordance
with the provisions of Section 5(b) of the Certificate of Designations,
Preferences and Other Rights and Qualifications of Redeemable Convertible
Preferred Stock of Hospitality.
Nothing herein contained shall be deemed to prohibit the
Executive from investing his funds in securities of an issuer if the securities
of such issuer are listed for trading on a national securities exchange or are
traded in the over-the-counter market and the Executive's holdings therein
represent less than 5% of the total number of shares or principal amount of the
securities of such issuer outstanding.
10. EQUITABLE RELIEF. The parties hereto acknowledge that the
Executive's services are unique and that, in the event of a breach or a
threatened breach by the Executive of any of his obligations under this
Agreement, the Company shall not have an adequate remedy at law. Accordingly, in
the event of any such breach or threatened breach by the Executive, the Company
shall be entitled to such equitable and injunctive relief as may be available to
restrain the Executive and any business, firm, partnership, individual,
corporation or entity participating in such breach or threatened breach from the
violation of the provisions hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available at law or in
equity for such breach or threatened breach.
11. EARLY TERMINATION.
(a) The Employment Period shall terminate without action on
the part of the Company upon the death of the Executive. The Employment Period
shall also terminate upon 30 days written notice by the Company to the
Executive, (i) in the event that the Executive shall become "Permanently
Incapacitated" (as hereinafter defined); or (ii) for "Cause" (as hereinafter
defined). The Employment Period shall also terminate upon written notice by the
Executive to the Company for "Good Reason" (as hereinafter defined);
(b) For purposes of this Agreement, the Executive may, in the
sole discretion of the Company, be deemed Permanently Incapacitated in the event
that the Executive shall, by reason of his physical or mental disability as
determined by the Executive's physician or a physician designated by the
Company, fail to substantially perform his usual and regular duties for the
Company for a period of 120 consecutive days or for an aggregate of 120 days in
any consecutive twelve month period.
-5-
<PAGE>
(c) For purposes of this Agreement, "Cause" shall mean any (i)
criminal conviction of the Executive for an offense involving the
misappropriation of funds or material property of the Company, (ii) willful
refusal of the Executive to follow the reasonable and lawful directives of the
Board for the performance of material duties which the Executive is required to
perform hereunder (other than for reason of becoming Permanently Incapacitated)
in accordance with the prior activities of the Executive for the Company or
(iii) the breach by the Executive of a material provision of this Agreement;
PROVIDED, HOWEVER, that in the event of a claim by the Company pursuant to (ii)
or (iii) above, the Company shall first provide the Executive with written
notice specifying the nature of the cause and the Executive shall have thirty
(30) days within which to cure such cause.
(d) For purposes of this Agreement, "Good Reason" shall mean
any diminution of the Executive's position, duties, responsibilities, executive
benefits or compensation as Chief Executive Officer or the breach by the Company
of a material provision of this Agreement.
(e) In the event the Employment Period is terminated by reason
of the Executive's death, the Company shall, within 30 days, pay to the
Executive's estate the Base Salary, as adjusted, to and including the date of
such termination, any prorated Bonuses computed through the most recently
completed fiscal quarter and all expense reimbursements due the Executive.
(f) In the event the Employment Period is terminated (i) by
the Company for Cause, or (ii) by the Executive without Good Reason, the Company
shall, within 30 days, pay to the Executive his Base Salary, as adjusted, to and
including the date of such termination, any prorated Bonuses computed through
the most recently completed fiscal quarter and all expense reimbursements due
the Executive.
(g) In the event the Employment Period is terminated due to
the Executive becoming Permanently Incapacitated, the Company shall, within 30
days, pay to the Executive the Base Salary, as adjusted, to and including the
date of such termination, any prorated Bonuses computed through the most
recently completed fiscal quarter previously determined by the Board and all
expense reimbursements due the Executive.
(h) In the event the Employment Period is terminated (i) by
the Company without Cause, or (ii) by the Executive with Good Reason, the
Company shall, within 30 days, pay to the Executive an amount equal to the total
of all payments of Base Salary for the remainder of the Employment Period. In
addition, the Executive shall be entitled to any Bonuses for the remainder of
the Employment Period, shall be paid for accrued but unused vacation time
determined on a pro-rata basis and shall be entitled to the
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<PAGE>
benefits provided pursuant to Section 5 hereof for the remainder of the
Employment Period.
12. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof (including the
arbitrability of any controversy or claim), shall be settled by arbitration in
the City of Miami, State of Florida (if such claim is brought by the Company or
Hospitality) or in the City of New York, State of New York (if such claim is
brought by the Executive), by three arbitrators, one of whom shall be appointed
by the Company, one by the Executive and the third of whom shall be appointed by
the first two arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be appointed
by the American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section. The prevailing party shall be entitled to recover its attorneys fees
and costs. In the absence of fraud, the award of the arbitrators shall be
binding upon the parties and judgment thereon may be entered in any court having
jurisdiction thereof.
13. ENTIRE AGREEMENT; AMENDMENT. This agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter.
No amendment to or modification of this Agreement shall be valid or binding
unless made in writing and signed by the party against whom enforcement thereof
is sought.
14. NOTICES. Any notice or other communication required or permitted to
be given by this Agreement shall be writing and shall be effectively given if:
(a) delivered personally by hand;
(b) sent by prepaid courier service;
(c) sent by registered mail; or
(d) sent by prepaid telecopier, telex or other similar
means of electronic communication and confirmed by
mailing the original document so sent by prepaid mail
on the same or following day,
in each case addressed as follows:
(i) if to the Executive:
1251 North Greenway Drive
Coral Gables, Florida 33134
Telecopier No. (305) 774-4040
(ii) if to the Company or Hospitality:
509 Madison Avenue, Suite 1114
New York, New York 10022
Telecopier No. (212) 223-0865
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<PAGE>
or at such other address as the party to whom such notice or other communication
is to be given shall have advised the party giving same in the manner provided
in this Section. Any notice or other communication delivered personally or by
prepaid courier service shall be deemed to have been given and received on the
day it is so delivered at such address, provided that if such day is not a
business day such notice or other communication shall be deemed to have been
given and received on the next following business day. Any notice or other
communication sent by registered mail shall be deemed to have been given and
received on the third business day following the date of mailing. Any notice or
other communication transmitted by telecopier, telex or other similar form of
electronic communication shall be deemed given and received on the day of its
transmission provided that such day is a business day and such transmission is
completed before 5:00 p.m. on such day, failing which such notice or other
communication shall be deemed given and received on the first business day after
its transmission. Regardless of the foregoing, if there is a mail stoppage or
labor dispute or threatened labor dispute which has affected or could affect
normal mail delivery, then no notice or other communication may be delivered by
registered mail. If there has been a mail stoppage and if a party sends a notice
or other communication by telecopier, telex or other similar means of electronic
communication, such party shall be relieved from the obligation to mail the
original document in accordance with this Section. "Business day" means any day
other than a Saturday, a Sunday or a statutory holiday observed in New York
City, New York.
15. WAIVERS. No course of dealing nor any delay on the part of any
party hereto in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
16. GOVERNING LAW. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York, except that body
of law relating to choice of laws.
17. INVALIDITY. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any court of competent jurisdiction, such provision shall be
ineffective but shall not in any way invalidate or affect any other clause,
paragraph, section or part of this Agreement.
18. FURTHER ASSURANCES. Each of the parties shall execute such
documents and take such other actions as may be reasonably requested by the
other party to carry out the provisions and purposes of this Agreement in
accordance with its terms.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts which may be by
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<PAGE>
facsimile, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
20. GUARANTEE. Hospitality guarantees the full performance of the
obligations of the Company hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
THE LEONARD PARKER COMPANY
/s/ Bradley Parker
- ---------------------------- By: /s/ Douglas Parker
BRADLEY PARKER --------------------------------
Name: Douglas Parker
Title:President
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /s/ Howard G. Anders
---------------------------------
Name: Howard G. Anders
Title: Executive Vice President
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of January 9, 1997, by and among Parker Reorder Corporation, a Florida
corporation located at 550 Biltmore Way, Coral Gables, Florida 33134 (the
"Company"), Hospitality Worldwide Services, Inc., a New York corporation
("Hospitality") and Philip Parker, residing at 8465 SE 147th Street, Miami,
Florida 33158 (the "Executive").
IN CONSIDERATION of the covenants and agreements set forth herein, and
other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged) the parties covenant and agree as follows:
1. EMPLOYMENT OF EXECUTIVE. (a) The Company hereby employs the
Executive as its President on a full-time basis to perform the duties and
responsibilities incident to such office consistent with the duties and
responsibilities heretofore performed by the Executive for the Company, subject
at all times to the control and direction of the Board of Directors of the
Company (the "Board").
(b) The services of the Executive hereunder shall be rendered
primarily in the Miami, Florida metropolitan area at the Company's principal
executive offices; provided, however, that the Executive shall make such trips
outside of the Miami, Florida metropolitan area as shall be reasonably necessary
in connection with the Executive's duties hereunder.
2. ACCEPTANCE OF EMPLOYMENT; TIME AND ATTENTION. The Executive hereby
accepts such employment and agrees that throughout the Employment Period (as
hereinafter defined), he will devote such full time, attention, knowledge and
skills, faithfully, diligently and to the best of his ability, in furtherance of
the business of the Company as are necessary to perform the duties and
responsibilities assigned to him pursuant to Section 1 hereof, subject, at all
times, to the direction and control of the Board. The Executive shall at all
times be subject to, observe and carry out such reasonable rules, regulations,
policies, directions and restrictions as the Company shall from time to time
establish, consistent with the office of the Executive and prior practice of the
Company.
3. TERM. The Company agrees to employ the Executive and the Executive
agrees to serve, on the terms and conditions of this Agreement, for a period
commencing as of January 1, 1997 and ending on December 31, 1999, unless earlier
terminated in accordance with Section 11 hereof (the "Employment Period").
<PAGE>
4. COMPENSATION. For all services rendered by the Executive under this
Agreement, the Company shall pay the Executive the following:
(a) a base salary of $175,000 per annum, payable in
equal, bi-weekly installments (the "Base Salary").
The Base Salary shall be increased annually,
beginning January 1, 1998, by a percentage equal to
the percentage by which the Consumer Price Index for
Urban Wage Borrowers and Clerical Workers: New York,
N.Y. - Northeastern New Jersey (1982-84 equals 100),
as published by the Bureau of Labor Statistics of the
United States Department of Labor, shall have
increased over the preceding year (the "CPI
Adjustment"). The CPI Adjustment shall be made as
soon as possible, but in no event later than fifteen
(15) days after the date upon which the Bureau of
Labor publishes its consumer price index statistics
for the month of December. Any portion of the
increase in the Executive's compensation
retroactively due shall be payable immediately upon
determination of the adjustment. If publication of
the Consumer Price Index is discontinued, the parties
hereto shall accept comparable statistics on the cost
of living for the New York, N.Y. - Northeastern New
Jersey area as computed and published by an agency of
the United States or by a responsible financial
periodical of recognized authority then to be
selected by the parties.
(b) In addition to the Base Salary, the Executive shall
be eligible to receive bonuses ("Bonuses") each year
during the Employment Period in an amount of up to
20% of the Base Salary based upon the achievement of
objective criteria presented to the Board by the
Executive and the President of the Company and
approved by the Board. Such objective criteria shall
be determined in consultation with the Executive on
an annual basis and shall be set forth in writing not
later than 60 days after the commencement of each
year during the term hereof.
(c) Simultaneously with the execution hereof, Hospitality
shall grant to the Executive stock options (the
"Options") pursuant to Hospitality's 1996 Stock
Option Plan to purchase Sixty-Five Thousand (65,000)
shares of Hospitality's common stock, $.01 par value,
such Options to be evidenced by an agreement attached
hereto as EXHIBIT A. The Executive shall be eligible
for additional grants during the term hereof in
accordance with policies
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<PAGE>
established from time to time by the Company or
Hospitality.
The parties agree that the Company is authorized to deduct
from the Base Salary and Bonuses of the Executive, and any other compensation
paid to the Executive, only such sums as are required by law to be deducted or
withheld.
5. EXECUTIVE BENEFITS. The Executive shall be entitled to receive such
benefits as reasonably determined from time to time by the Board of Directors of
the Company and as are consistent with and not less than benefits provided to
other senior executives of the Company or Hospitality. In addition, the
Executive shall be entitled to fifteen (15) days of paid vacation for each 12
month period during the Employment Period provided, however, that the Executive
may, at his option, carry forward five (5) days of paid vacation to the
following 12 month period, provided further, however, that in no event may the
total number of days of paid vacation exceed twenty (20) during any twelve month
period. Any vacation shall be taken at the reasonable and mutual convenience of
the Company and the Executive.
6. REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
in accordance with its applicable policies for all expenses reasonably incurred
by Executive in connection with the performance of his duties hereunder and the
business of the Company, upon the submission to the Company of appropriate
receipts or vouchers.
7. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company, its subsidiaries and any of its
affiliates all confidential information, knowledge and data relating to or
concerned with Hospitality, the Company, other subsidiaries of Hospitality and
any of their affiliates' operations, sales, business and affairs, and he shall
not, at any time, either during the Employment Period or after the termination
of the Executive's employment with the Company, use, disclose or divulge any
such confidential information, knowledge or data to any person, firm or
corporation (unless the Company, or such other entity, no longer treats such
information as confidential) other than to the Company or its designees and
employees or except as may otherwise be required in connection with the business
and affairs of the Company; PROVIDED, HOWEVER, that the Executive may disclose
or divulge such information, knowledge or data that is or becomes generally
available to the public through no wrongful act on the Executive's part or where
such disclosure is legally compelled by judicial or administrative action,
provided that the Executive agrees, to the extent practicable, to give the
Company prompt notice of any such judicial or administrative action to enable
the Company to seek an appropriate protective order.
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<PAGE>
8. INTELLECTUAL PROPERTY. Any idea, invention, design, written
material, manual, system, procedure, improvement, development or discovery
conceived, developed, created or made by the Executive alone or with others
relating to the businesses of the Company, Hospitality or any of Hospitality's
other subsidiaries during the Employment Period, whether or not patentable or
registrable, shall become the sole and exclusive property of the Company. The
Executive shall disclose the same promptly and completely to the Company and
shall, during the Employment Period and at any time and from time to time
thereafter (i) execute all documents reasonably requested by the Company for
vesting in the Company the entire right, title and interest in and to the same,
(ii) execute all documents reasonably requested by the Company for filing and
prosecuting such applications for patents, trademarks, service marks and/or
copyrights as the Company, in its sole discretion, may desire to prosecute, and
(iii) at the expense of the Company give the Company all assistance it
reasonably requires, including the giving of testimony in any suit, action or
proceeding, in order to obtain, maintain and protect the Company's right therein
and thereto.
9. RESTRICTIVE COVENANT. In consideration of the Company entering into
this Agreement, the Executive agrees that while the Executive is an employee of
the Company and, except in the event of the Executive's termination (i) due to
his becoming "Permanently Incapacitated" (as hereinafter defined), (ii) by the
Company without "Cause" (as hereinafter defined), (iii) by the Executive with
"Good Reason" (as hereinafter defined) or (iv) at the conclusion of the
Executive Period, for a period of one (1) year thereafter, he will not:
(i) directly or indirectly own, manage, operate, join,
control, participate in, invest in, lend money to, guarantee the debts or
obligations of or otherwise be connected with, in any manner, whether as an
officer, director, employee, partner, investor or otherwise, any business entity
that is engaged in the business now or at the time of such termination engaged
in by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality in the geographical areas where they conduct such business at the
time of such termination;
(ii) for himself or on behalf of any other person,
partnership, corporation or entity, call on any customer of Hospitality, the
Company or any other subsidiary or affiliate of Hospitality for the purpose of
soliciting, diverting or taking away any customer from Hospitality, the Company
or any other subsidiary or affiliate of Hospitality; or
(iii) induce, influence, or seek to induce or influence, any
person engaged as an employee, representative, agent, independent contractor or
otherwise by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality, to terminate his
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<PAGE>
or her relationship with Hospitality, the Company or any other subsidiary or
affiliate of Hospitality.
The provisions of this Section 9 shall immediately terminate
in the event that the Company fails to redeem the Preferred Stock in accordance
with the provisions of Section 5(b) of the Certificate of Designations,
Preferences and Other Rights and Qualifications of Redeemable Convertible
Preferred Stock of Hospitality.
Nothing herein contained shall be deemed to prohibit the
Executive from investing his funds in securities of an issuer if the securities
of such issuer are listed for trading on a national securities exchange or are
traded in the over-the-counter market and the Executive's holdings therein
represent less than 5% of the total number of shares or principal amount of the
securities of such issuer outstanding.
10. EQUITABLE RELIEF. The parties hereto acknowledge that the
Executive's services are unique and that, in the event of a breach or a
threatened breach by the Executive of any of his obligations under this
Agreement, the Company shall not have an adequate remedy at law. Accordingly, in
the event of any such breach or threatened breach by the Executive, the Company
shall be entitled to such equitable and injunctive relief as may be available to
restrain the Executive and any business, firm, partnership, individual,
corporation or entity participating in such breach or threatened breach from the
violation of the provisions hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available at law or in
equity for such breach or threatened breach.
11. EARLY TERMINATION.
(a) The Employment Period shall terminate without action on
the part of the Company upon the death of the Executive. The Employment Period
shall also terminate upon 30 days written notice by the Company to the
Executive, (i) in the event that the Executive shall become "Permanently
Incapacitated" (as hereinafter defined); or (ii) for "Cause" (as hereinafter
defined). The Employment Period shall also terminate upon written notice by the
Executive to the Company for "Good Reason" (as hereinafter defined);
(b) For purposes of this Agreement, the Executive may, in the
sole discretion of the Company, be deemed Permanently Incapacitated in the event
that the Executive shall, by reason of his physical or mental disability as
determined by the Executive's physician or a physician designated by the
Company, fail to substantially perform his usual and regular duties for the
Company for a period of 120 consecutive days or for an aggregate of 120 days in
any consecutive twelve month period.
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<PAGE>
(c) For purposes of this Agreement, "Cause" shall mean any (i)
criminal conviction of the Executive for an offense involving the
misappropriation of funds or material property of the Company, (ii) willful
refusal of the Executive to follow the reasonable and lawful directives of the
Board for the performance of material duties which the Executive is required to
perform hereunder (other than for reason of becoming Permanently Incapacitated)
in accordance with the prior activities of the Executive for the Company or
(iii) the breach by the Executive of a material provision of this Agreement;
PROVIDED, HOWEVER, that in the event of a claim by the Company pursuant to (ii)
or (iii) above, the Company shall first provide the Executive with written
notice specifying the nature of the cause and the Executive shall have thirty
(30) days within which to cure such cause.
(d) For purposes of this Agreement, "Good Reason" shall mean
any diminution of the Executive's position, duties, responsibilities, executive
benefits or compensation as Chief Executive Officer or the breach by the Company
of a material provision of this Agreement.
(e) In the event the Employment Period is terminated by reason
of the Executive's death, the Company shall, within 30 days, pay to the
Executive's estate the Base Salary, as adjusted, to and including the date of
such termination, any prorated Bonuses computed through the most recently
completed fiscal quarter and all expense reimbursements due the Executive.
(f) In the event the Employment Period is terminated (i) by
the Company for Cause, or (ii) by the Executive without Good Reason, the Company
shall, within 30 days, pay to the Executive his Base Salary, as adjusted, to and
including the date of such termination, any prorated Bonuses computed through
the most recently completed fiscal quarter and all expense reimbursements due
the Executive.
(g) In the event the Employment Period is terminated due to
the Executive becoming Permanently Incapacitated, the Company shall, within 30
days, pay to the Executive the Base Salary, as adjusted, to and including the
date of such termination, any prorated Bonuses computed through the most
recently completed fiscal quarter previously determined by the Board and all
expense reimbursements due the Executive.
(h) In the event the Employment Period is terminated (i) by
the Company without Cause, or (ii) by the Executive with Good Reason, the
Company shall, within 30 days, pay to the Executive an amount equal to the total
of all payments of Base Salary for the remainder of the Employment Period. In
addition, the Executive shall be entitled to any Bonuses for the remainder of
the Employment Period, shall be paid for accrued but unused vacation time
determined on a pro-rata basis and shall be entitled to the
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<PAGE>
benefits provided pursuant to Section 5 hereof for the remainder of the
Employment Period.
12. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof (including the
arbitrability of any controversy or claim), shall be settled by arbitration in
the City of Miami, State of Florida (if such claim is brought by the Company or
Hospitality) or in the City of New York, State of New York (if such claim is
brought by the Executive), by three arbitrators, one of whom shall be appointed
by the Company, one by the Executive and the third of whom shall be appointed by
the first two arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be appointed
by the American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section. The prevailing party shall be entitled to recover its attorneys fees
and costs. In the absence of fraud, the award of the arbitrators shall be
binding upon the parties and judgment thereon may be entered in any court having
jurisdiction thereof.
13. ENTIRE AGREEMENT; AMENDMENT. This agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter.
No amendment to or modification of this Agreement shall be valid or binding
unless made in writing and signed by the party against whom enforcement thereof
is sought.
14. NOTICES. Any notice or other communication required or permitted to
be given by this Agreement shall be writing and shall be effectively given if:
(a) delivered personally by hand;
(b) sent by prepaid courier service;
(c) sent by registered mail; or
(d) sent by prepaid telecopier, telex or other similar
means of electronic communication and confirmed by
mailing the original document so sent by prepaid mail
on the same or following day,
in each case addressed as follows:
(i) if to the Executive:
8465 SW 147th Street
Miami, Florida 33158
(ii) if to the Company or Hospitality:
509 Madison Avenue, Suite 1114
New York, New York 10022
Telecopier No. (212) 223-0865
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<PAGE>
or at such other address as the party to whom such notice or other communication
is to be given shall have advised the party giving same in the manner provided
in this Section. Any notice or other communication delivered personally or by
prepaid courier service shall be deemed to have been given and received on the
day it is so delivered at such address, provided that if such day is not a
business day such notice or other communication shall be deemed to have been
given and received on the next following business day. Any notice or other
communication sent by registered mail shall be deemed to have been given and
received on the third business day following the date of mailing. Any notice or
other communication transmitted by telecopier, telex or other similar form of
electronic communication shall be deemed given and received on the day of its
transmission provided that such day is a business day and such transmission is
completed before 5:00 p.m. on such day, failing which such notice or other
communication shall be deemed given and received on the first business day after
its transmission. Regardless of the foregoing, if there is a mail stoppage or
labor dispute or threatened labor dispute which has affected or could affect
normal mail delivery, then no notice or other communication may be delivered by
registered mail. If there has been a mail stoppage and if a party sends a notice
or other communication by telecopier, telex or other similar means of electronic
communication, such party shall be relieved from the obligation to mail the
original document in accordance with this Section. "Business day" means any day
other than a Saturday, a Sunday or a statutory holiday observed in New York
City, New York.
15. WAIVERS. No course of dealing nor any delay on the part of any
party hereto in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
16. GOVERNING LAW. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York, except that body
of law relating to choice of laws.
17. INVALIDITY. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any court of competent jurisdiction, such provision shall be
ineffective but shall not in any way invalidate or affect any other clause,
paragraph, section or part of this Agreement.
18. FURTHER ASSURANCES. Each of the parties shall execute such
documents and take such other actions as may be reasonably requested by the
other party to carry out the provisions and purposes of this Agreement in
accordance with its terms.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts which may be by facsimile, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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<PAGE>
20. GUARANTEE. Hospitality guarantees the full performance of the
obligations of the Company hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
PARKER REORDER CORPORATION
/s/ Philip Parker
- ----------------------------- By: /s/ Mitchell Parker
PHILIP PARKER ------------------------------------
Name: Mitchell Parker
Title: Chief Operating Officer
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /s/ Howard G. Anders
--------------------------------------
Name: Howard G. Anders
Title: Executive Vice President
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of January 9, 1997, by and among Parker Reorder Corporation, a Florida
corporation located at 550 Biltmore Way, Coral Gables, Florida 33134 (the
"Company"), Hospitality Worldwide Services, Inc., a New York corporation
("Hospitality") and Mitchell Parker, residing at 6225 SW 123rd Terrace, Miami,
Florida 33156 (the "Executive").
IN CONSIDERATION of the covenants and agreements set forth herein, and
other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged) the parties covenant and agree as follows:
1. EMPLOYMENT OF EXECUTIVE. (a) The Company hereby employs the
Executive as its Chief Executive Officer and Secretary on a full-time basis to
perform the duties and responsibilities incident to such office consistent with
the duties and responsibilities heretofore performed by the Executive for the
Company, subject at all times to the control and direction of the Board of
Directors of the Company (the "Board").
(b) The services of the Executive hereunder shall be rendered
primarily in the Miami, Florida metropolitan area at the Company's principal
executive offices; provided, however, that the Executive shall make such trips
outside of the Miami, Florida metropolitan area as shall be reasonably necessary
in connection with the Executive's duties hereunder.
2. ACCEPTANCE OF EMPLOYMENT; TIME AND ATTENTION. The Executive hereby
accepts such employment and agrees that throughout the Employment Period (as
hereinafter defined), he will devote such full time, attention, knowledge and
skills, faithfully, diligently and to the best of his ability, in furtherance of
the business of the Company as are necessary to perform the duties and
responsibilities assigned to him pursuant to Section 1 hereof, subject, at all
times, to the direction and control of the Board. The Executive shall at all
times be subject to, observe and carry out such reasonable rules, regulations,
policies, directions and restrictions as the Company shall from time to time
establish, consistent with the office of the Executive and prior practice of the
Company.
3. TERM. The Company agrees to employ the Executive and the Executive
agrees to serve, on the terms and conditions of this Agreement, for a period
commencing as of January 1, 1997 and ending on December 31, 1999, unless earlier
terminated in accordance with Section 11 hereof (the "Employment Period").
<PAGE>
4. COMPENSATION. For all services rendered by the Executive under this
Agreement, the Company shall pay the Executive the following:
(a) a base salary of $175,000 per annum, payable in
equal, bi-weekly installments (the "Base Salary").
The Base Salary shall be increased annually,
beginning January 1, 1998, by a percentage equal to
the percentage by which the Consumer Price Index for
Urban Wage Borrowers and Clerical Workers: New York,
N.Y. - Northeastern New Jersey (1982-84 equals 100),
as published by the Bureau of Labor Statistics of the
United States Department of Labor, shall have
increased over the preceding year (the "CPI
Adjustment"). The CPI Adjustment shall be made as
soon as possible, but in no event later than fifteen
(15) days after the date upon which the Bureau of
Labor publishes its consumer price index statistics
for the month of December. Any portion of the
increase in the Executive's compensation
retroactively due shall be payable immediately upon
determination of the adjustment. If publication of
the Consumer Price Index is discontinued, the parties
hereto shall accept comparable statistics on the cost
of living for the New York, N.Y. - Northeastern New
Jersey area as computed and published by an agency of
the United States or by a responsible financial
periodical of recognized authority then to be
selected by the parties.
(b) In addition to the Base Salary, the Executive shall
be eligible to receive bonuses ("Bonuses") each year
during the Employment Period in an amount of up to
20% of the Base Salary based upon the achievement of
objective criteria presented to the Board by the
Executive and the President of the Company and
approved by the Board. Such objective criteria shall
be determined in consultation with the Executive on
an annual basis and shall be set forth in writing not
later than 60 days after the commencement of each
year during the term hereof.
(c) Simultaneously with the execution hereof, Hospitality
shall grant to the Executive stock options (the
"Options") pursuant to Hospitality's 1996 Stock
Option Plan to purchase Sixty-Five Thousand (65,000)
shares of Hospitality's common stock, $.01 par value,
such Options to be evidenced by an agreement attached
hereto as EXHIBIT A. The Executive shall be eligible
for additional grants during the term hereof in
accordance with policies
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<PAGE>
established from time to time by the Company or
Hospitality.
The parties agree that the Company is authorized to deduct
from the Base Salary and Bonuses of the Executive, and any other compensation
paid to the Executive, only such sums as are required by law to be deducted or
withheld.
5. EXECUTIVE BENEFITS. The Executive shall be entitled to receive such
benefits as reasonably determined from time to time by the Board of Directors of
the Company and as are consistent with and not less than benefits provided to
other senior executives of the Company or Hospitality. In addition, the
Executive shall be entitled to fifteen (15) days of paid vacation for each 12
month period during the Employment Period provided, however, that the Executive
may, at his option, carry forward five (5) days of paid vacation to the
following 12 month period, provided further, however, that in no event may the
total number of days of paid vacation exceed twenty (20) during any twelve month
period. Any vacation shall be taken at the reasonable and mutual convenience of
the Company and the Executive.
6. REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
in accordance with its applicable policies for all expenses reasonably incurred
by Executive in connection with the performance of his duties hereunder and the
business of the Company, upon the submission to the Company of appropriate
receipts or vouchers.
7. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company, its subsidiaries and any of its
affiliates all confidential information, knowledge and data relating to or
concerned with Hospitality, the Company, other subsidiaries of Hospitality and
any of their affiliates' operations, sales, business and affairs, and he shall
not, at any time, either during the Employment Period or after the termination
of the Executive's employment with the Company, use, disclose or divulge any
such confidential information, knowledge or data to any person, firm or
corporation (unless the Company, or such other entity, no longer treats such
information as confidential) other than to the Company or its designees and
employees or except as may otherwise be required in connection with the business
and affairs of the Company; PROVIDED, HOWEVER, that the Executive may disclose
or divulge such information, knowledge or data that is or becomes generally
available to the public through no wrongful act on the Executive's part or where
such disclosure is legally compelled by judicial or administrative action,
provided that the Executive agrees, to the extent practicable, to give the
Company prompt notice of any such judicial or administrative action to enable
the Company to seek an appropriate protective order.
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<PAGE>
8. INTELLECTUAL PROPERTY. Any idea, invention, design, written
material, manual, system, procedure, improvement, development or discovery
conceived, developed, created or made by the Executive alone or with others
relating to the businesses of the Company, Hospitality or any of Hospitality's
other subsidiaries during the Employment Period, whether or not patentable or
registrable, shall become the sole and exclusive property of the Company. The
Executive shall disclose the same promptly and completely to the Company and
shall, during the Employment Period and at any time and from time to time
thereafter (i) execute all documents reasonably requested by the Company for
vesting in the Company the entire right, title and interest in and to the same,
(ii) execute all documents reasonably requested by the Company for filing and
prosecuting such applications for patents, trademarks, service marks and/or
copyrights as the Company, in its sole discretion, may desire to prosecute, and
(iii) at the expense of the Company give the Company all assistance it
reasonably requires, including the giving of testimony in any suit, action or
proceeding, in order to obtain, maintain and protect the Company's right therein
and thereto.
9. RESTRICTIVE COVENANT. In consideration of the Company entering into
this Agreement, the Executive agrees that while the Executive is an employee of
the Company and, except in the event of the Executive's termination (i) due to
his becoming "Permanently Incapacitated" (as hereinafter defined), (ii) by the
Company without "Cause" (as hereinafter defined), (iii) by the Executive with
"Good Reason" (as hereinafter defined) or (iv) at the conclusion of the
Executive Period, for a period of one (1) year thereafter, he will not:
(i) directly or indirectly own, manage, operate, join,
control, participate in, invest in, lend money to, guarantee the debts or
obligations of or otherwise be connected with, in any manner, whether as an
officer, director, employee, partner, investor or otherwise, any business entity
that is engaged in the business now or at the time of such termination engaged
in by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality in the geographical areas where they conduct such business at the
time of such termination;
(ii) for himself or on behalf of any other person,
partnership, corporation or entity, call on any customer of Hospitality, the
Company or any other subsidiary or affiliate of Hospitality for the purpose of
soliciting, diverting or taking away any customer from Hospitality, the Company
or any other subsidiary or affiliate of Hospitality; or
(iii) induce, influence, or seek to induce or influence, any
person engaged as an employee, representative, agent, independent contractor or
otherwise by Hospitality, the Company or any other subsidiary or affiliate of
Hospitality, to terminate his
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<PAGE>
or her relationship with Hospitality, the Company or any other subsidiary or
affiliate of Hospitality.
The provisions of this Section 9 shall immediately terminate
in the event that the Company fails to redeem the Preferred Stock in accordance
with the provisions of Section 5(b) of the Certificate of Designations,
Preferences and Other Rights and Qualifications of Redeemable Convertible
Preferred Stock of Hospitality.
Nothing herein contained shall be deemed to prohibit the
Executive from investing his funds in securities of an issuer if the securities
of such issuer are listed for trading on a national securities exchange or are
traded in the over-the-counter market and the Executive's holdings therein
represent less than 5% of the total number of shares or principal amount of the
securities of such issuer outstanding.
10. EQUITABLE RELIEF. The parties hereto acknowledge that the
Executive's services are unique and that, in the event of a breach or a
threatened breach by the Executive of any of his obligations under this
Agreement, the Company shall not have an adequate remedy at law. Accordingly, in
the event of any such breach or threatened breach by the Executive, the Company
shall be entitled to such equitable and injunctive relief as may be available to
restrain the Executive and any business, firm, partnership, individual,
corporation or entity participating in such breach or threatened breach from the
violation of the provisions hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available at law or in
equity for such breach or threatened breach.
11. EARLY TERMINATION.
(a) The Employment Period shall terminate without action on
the part of the Company upon the death of the Executive. The Employment Period
shall also terminate upon 30 days written notice by the Company to the
Executive, (i) in the event that the Executive shall become "Permanently
Incapacitated" (as hereinafter defined); or (ii) for "Cause" (as hereinafter
defined). The Employment Period shall also terminate upon written notice by the
Executive to the Company for "Good Reason" (as hereinafter defined);
(b) For purposes of this Agreement, the Executive may, in the
sole discretion of the Company, be deemed Permanently Incapacitated in the event
that the Executive shall, by reason of his physical or mental disability as
determined by the Executive's physician or a physician designated by the
Company, fail to substantially perform his usual and regular duties for the
Company for a period of 120 consecutive days or for an aggregate of 120 days in
any consecutive twelve month period.
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<PAGE>
(c) For purposes of this Agreement, "Cause" shall mean any (i)
criminal conviction of the Executive for an offense involving the
misappropriation of funds or material property of the Company, (ii) willful
refusal of the Executive to follow the reasonable and lawful directives of the
Board for the performance of material duties which the Executive is required to
perform hereunder (other than for reason of becoming Permanently Incapacitated)
in accordance with the prior activities of the Executive for the Company or
(iii) the breach by the Executive of a material provision of this Agreement;
PROVIDED, HOWEVER, that in the event of a claim by the Company pursuant to (ii)
or (iii) above, the Company shall first provide the Executive with written
notice specifying the nature of the cause and the Executive shall have thirty
(30) days within which to cure such cause.
(d) For purposes of this Agreement, "Good Reason" shall mean
any diminution of the Executive's position, duties, responsibilities, executive
benefits or compensation as Chief Executive Officer or the breach by the Company
of a material provision of this Agreement.
(e) In the event the Employment Period is terminated by reason
of the Executive's death, the Company shall, within 30 days, pay to the
Executive's estate the Base Salary, as adjusted, to and including the date of
such termination, any prorated Bonuses computed through the most recently
completed fiscal quarter and all expense reimbursements due the Executive.
(f) In the event the Employment Period is terminated (i) by
the Company for Cause, or (ii) by the Executive without Good Reason, the Company
shall, within 30 days, pay to the Executive his Base Salary, as adjusted, to and
including the date of such termination, any prorated Bonuses computed through
the most recently completed fiscal quarter and all expense reimbursements due
the Executive.
(g) In the event the Employment Period is terminated due to
the Executive becoming Permanently Incapacitated, the Company shall, within 30
days, pay to the Executive the Base Salary, as adjusted, to and including the
date of such termination, any prorated Bonuses computed through the most
recently completed fiscal quarter previously determined by the Board and all
expense reimbursements due the Executive.
(h) In the event the Employment Period is terminated (i) by
the Company without Cause, or (ii) by the Executive with Good Reason, the
Company shall, within 30 days, pay to the Executive an amount equal to the total
of all payments of Base Salary for the remainder of the Employment Period. In
addition, the Executive shall be entitled to any Bonuses for the remainder of
the Employment Period, shall be paid for accrued but unused vacation time
determined on a pro-rata basis and shall be entitled to the
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<PAGE>
benefits provided pursuant to Section 5 hereof for the remainder of the
Employment Period.
12. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof (including the
arbitrability of any controversy or claim), shall be settled by arbitration in
the City of Miami, State of Florida (if such claim is brought by the Company or
Hospitality) or in the City of New York, State of New York (if such claim is
brought by the Executive), by three arbitrators, one of whom shall be appointed
by the Company, one by the Executive and the third of whom shall be appointed by
the first two arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be appointed
by the American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section. The prevailing party shall be entitled to recover its attorneys fees
and costs. In the absence of fraud, the award of the arbitrators shall be
binding upon the parties and judgment thereon may be entered in any court having
jurisdiction thereof.
13. ENTIRE AGREEMENT; AMENDMENT. This agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter.
No amendment to or modification of this Agreement shall be valid or binding
unless made in writing and signed by the party against whom enforcement thereof
is sought.
14. NOTICES. Any notice or other communication required or permitted to
be given by this Agreement shall be writing and shall be effectively given if:
(a) delivered personally by hand;
(b) sent by prepaid courier service;
(c) sent by registered mail; or
(d) sent by prepaid telecopier, telex or other similar
means of electronic communication and confirmed by
mailing the original document so sent by prepaid mail
on the same or following day,
in each case addressed as follows:
(i) if to the Executive:
6225 SW 123rd Street
Miami, Florida 33156
(ii) if to the Company or Hospitality:
509 Madison Avenue, Suite 1114
New York, New York 10022
Telecopier No. (212) 223-0865
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<PAGE>
or at such other address as the party to whom such notice or other communication
is to be given shall have advised the party giving same in the manner provided
in this Section. Any notice or other communication delivered personally or by
prepaid courier service shall be deemed to have been given and received on the
day it is so delivered at such address, provided that if such day is not a
business day such notice or other communication shall be deemed to have been
given and received on the next following business day. Any notice or other
communication sent by registered mail shall be deemed to have been given and
received on the third business day following the date of mailing. Any notice or
other communication transmitted by telecopier, telex or other similar form of
electronic communication shall be deemed given and received on the day of its
transmission provided that such day is a business day and such transmission is
completed before 5:00 p.m. on such day, failing which such notice or other
communication shall be deemed given and received on the first business day after
its transmission. Regardless of the foregoing, if there is a mail stoppage or
labor dispute or threatened labor dispute which has affected or could affect
normal mail delivery, then no notice or other communication may be delivered by
registered mail. If there has been a mail stoppage and if a party sends a notice
or other communication by telecopier, telex or other similar means of electronic
communication, such party shall be relieved from the obligation to mail the
original document in accordance with this Section. "Business day" means any day
other than a Saturday, a Sunday or a statutory holiday observed in New York
City, New York.
15. WAIVERS. No course of dealing nor any delay on the part of any
party hereto in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
16. GOVERNING LAW. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York, except that body
of law relating to choice of laws.
17. INVALIDITY. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any court of competent jurisdiction, such provision shall be
ineffective but shall not in any way invalidate or affect any other clause,
paragraph, section or part of this Agreement.
18. FURTHER ASSURANCES. Each of the parties shall execute such
documents and take such other actions as may be reasonably requested by the
other party to carry out the provisions and purposes of this Agreement in
accordance with its terms.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts which may be by facsimile, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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<PAGE>
20. GUARANTEE. Hospitality guarantees the full performance of the
obligations of the Company hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
PARKER REORDER CORPORATION
/s/ Mitchell Parker
- ----------------------------- By: /s/ Mitchell Parker
MITCHELL PARKER --------------------------------
Name: Mitchell Parker
Title: Chief Operating Officer
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /s/ Howard G. Anders
--------------------------------
Name: Howard G. Anders
Title: Executive Vice President
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REGISTRATION RIGHTS AGREEMENT
DATED AS OF JANUARY 9, 1997
AMONG
HOSPITALITY WORLDWIDE SERVICES, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of January 9, 1997, by
and among Hospitality Worldwide Services, Inc., a New York corporation (the
"Company"), and Leonard Parker, Douglas Parker, Bradley Parker, Philip Parker,
Gregg Parker and Mitchell Parker (individually, a "Stockholder" and
collectively, the "Stockholders"). This Agreement is made pursuant to that
certain Agreement and Plan of Merger dated as of January 9, 1997, by and among
The Leonard Parker Company, a Florida corporation, the Stockholders, the Company
and LPC Acquisition Corp., a Florida corporation, (the "Merger Agreement").
Capitalized terms used herein without definition shall have the meanings set
forth in the Merger Agreement.
The parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized terms
shall have the following meanings:
"COMMISSION" shall mean the Securities and Exchange
Commission.
"COMMON STOCK" means the common stock, par value $.01 per
share, of the Company.
"DEMAND REGISTRATION" shall have the meaning assigned to such
term in Section 3 hereof.
"HOLDER" shall mean a Stockholder, or his transferee, who is
the owner of Registrable Securities.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments to the
Registration Statement of which such Prospectus is a part, and all material
incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" shall mean the Securities, but only
so long as they remain Restricted Securities.
"REGISTRATION STATEMENT" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits, and all material incorporated by reference in such Registration
Statement.
<PAGE>
"RESTRICTED SECURITIES" means the Registrable Securities
unless and until, in the case of any such Securities, (i) they have been
effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement covering them, (ii) they are distributed to the
public pursuant to Rule 144 (or any similar provisions then in force) under the
Securities Act, or (iii) they are otherwise freely transferable without volume
or other restriction under the Securities Act, and the Stockholders have
received an opinion of their legal counsel to such effect.
"SECURITIES" shall mean the shares of Common Stock issued to
the Stockholders pursuant to the Merger Agreement or issued upon the conversion
of the Preferred Stock or other Restricted Securities acquired by the Holders
from time to time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
2. SECURITIES SUBJECT TO THIS AGREEMENT. The Securities
entitled to the benefits of this Agreement are the Registrable Securities.
3.1 SHELF REGISTRATION. The Company shall prepare and no later
than five (5) months from the date hereof file with the Commission a
Registration Statement on Form S-3 with respect to the resale of the Registrable
Securities and use its best efforts to cause such Registration Statement to
become effective no later than six (6) months from the date hereof, and keep
such Registration Statement effective for a period of 18 months.
3.2 PIGGYBACK REGISTRATION. (a) At any time during the five
year period commencing on the date of this Agreement, each time the Company
proposes to file on its behalf and/or on behalf of any of its security holders a
Registration Statement under the Securities Act on any form (other than a
Registration Statement on Form S-4 or S-8 or any successor form for securities
to be offered in a transaction of the type referred to in Rule 145 under the
Securities Act or to an employee of the Company pursuant to any employee benefit
plan, respectively) for the general registration of securities to be sold for
cash with respect to its Common Stock, it will give written notice to each of
the Holders at least 30 days before the initial filing with the Commission of
such Registration Statement, which notice shall set forth the intended method of
disposition of the securities proposed to be registered by the Company. The
notice shall offer to include in such filing all Registrable Securities as each
Holder may request.
(b) If a Holder desires to have Registrable Securities
registered under this Section 3.2, he shall advise the Company in writing within
15 days after the date of receipt of such offer from the Company, setting forth
the amount of such Registrable Securities for which registration is requested.
The Company shall thereupon include in such filing the number of shares of
Registrable Securities for which registration is so requested,
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<PAGE>
subject to the following. In the event that the proposed registration by the
Company is, in whole or in part, an underwritten public offering of securities
of the Company, the Company shall not be required to include any of the
Registrable Securities in such underwriting unless the Holder agrees to accept
the offering on the same terms and conditions as the shares of Common Stock, if
any, otherwise being sold through underwriters under such registration;
provided, however, that: (i) if the managing underwriter determines and advises
the Company in writing that the inclusion of all Registrable Securities proposed
to be included by the Holders in the underwritten public offering would
jeopardize the success of the Company's offering, then the Company shall be
required to include in the offering (in addition to the number of shares to be
sold by the Company) only that number of Registrable Securities that the
managing underwriter believes will not jeopardize the success of the Company's
offering and the number of Registrable Securities not included in such
underwritten public offering shall be reduced pro rata based upon the number of
shares of Registrable Securities requested by the holders thereof to be
registered in such underwritten public offering; and (ii) in each case all
shares of Common Stock owned by the Holders which are not included in the
underwritten public offering shall be withheld from the market by the Holder for
a period, not to exceed one hundred twenty (120) calendar days, which the
managing underwriter reasonably determines as necessary in order to effect the
underwritten public offering.
4. INFORMATION. The Company may require the Holders to furnish
to the Company such information regarding themselves and the distribution of
Registrable Securities as the Company may from time to time reasonably request
in writing in order to comply with the Securities Act. The Holders agree to
notify the Company as promptly as practicable of any inaccuracy or change in
information they have previously furnished to the Company.
5. REGISTRATION PROCEDURES. In connection with the
registration obligations of the Company pursuant to and in accordance with
Section 3 of this Agreement, the Company shall effect such registrations to
permit the sale of such Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement under the Securities Act that shall be available for the sale of the
Registrable Securities by a Holder in accordance with the intended method or
methods of distribution thereof, and use its best efforts to cause such
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, as the case may be, the
Company shall furnish to such Holders and the managing underwriter or
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the review of such
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<PAGE>
Holders and such underwriter or underwriters, if any, and the Company shall not
file any such Registration Statement, or amendment thereto or any Prospectus or
any supplement thereto to which such Holders, or the managing underwriter or
underwriters, if any, shall reasonably object on a timely basis;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement required to be filed
pursuant to Section 3 of this Agreement as may be necessary to keep such
Registration Statement effective for the time period necessitated by the
intended methods of disposition contemplated by the distribution resulting in
the filing of the Registration Statement; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement, as
so amended, or such Prospectus as so supplemented;
(c) notify any Holders and the managing underwriter or
underwriters, if any, promptly, and (if requested by any such person) confirm
such notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment related to such Registrable Securities has been filed,
and, with respect to a Registration Statement or any post-effective amendment
related to such Registrable Securities, when the same has become effective, (ii)
of any request by the Commission for amendments or supplements to such
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of such Registration Statement or the initiation of any proceedings for that
purpose, (iv) if at any time the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 5(j) below cease to be true and correct, (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (vi) of the happening of any event that makes any statement made in
such Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in such Registration Statement or
Prospectus so that such documents will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vii) of the reasonable determination
of the Company that a post-effective amendment to such Registration Statement
would be appropriate;
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<PAGE>
(d) use its reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement;
(e) if requested by the managing underwriter or underwriters
or any Holders, (i) immediately incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters and any Holders agree should be included therein and as may be
required by applicable law, (ii) make all required filings of such Prospectus
supplement or such post-effective amendment promptly after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or such post-effective amendment and (iii) supplement or make
amendments to such Registration Statement; PROVIDED, HOWEVER, that the Company
shall not be required to take any of the actions set forth in this Section 5(e)
that are not, in the opinion of counsel for the Company, in compliance with or
required by applicable law;
(f) furnish to each managing underwriter, if any, without
charge, at least one signed copy, and furnish to the Holders, without charge, at
least one conformed copy, of each Registration Statement related to such
Registrable Securities and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including, if requested, those previously furnished
or incorporated by reference);
(g) deliver to any Holders and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses related to such
Registrable Securities (including each preliminary prospectus) and as many
copies of any amendment or supplement thereto as they may reasonably request;
(h) prior to any public offering of Registrable Securities, to
register or qualify or cooperate with the Holders, the underwriters, if any, and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions as such Holders or underwriter reasonably requests in writing; use
its best efforts to keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective; PROVIDED, HOWEVER, that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it is not then
so qualified, (ii) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (ii) take
any action that would subject it to the assessment of taxes in any such
jurisdiction where it is not then so subject;
(i) cause all Registrable Securities covered by such a
Registration Statement to be (i) listed on each securities
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<PAGE>
exchange, if any, on which similar securities issued by the Company are then
listed, or (ii) authorized to be quoted on the National Association of
Securities Dealers Automated Quotation System if the securities so qualify and
if the Company does not then have similar securities listed on any securities
exchange;
(j) enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in similar underwritten
offerings) and take all such other actions in connection therewith (including
those reasonably requested by the managing underwriter or underwriters, if any,
or the Holders) in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration (i) obtain opinions of counsel to the Company and updates thereof
addressed to the Holders and each of the underwriters, if any, covering the
matters customarily covered in opinions requested in underwritten offerings;
(ii) obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company addressed to the Holders and each of
the underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with similar underwritten offerings; and (iii) if an underwriting agreement is
entered into, the same shall contain customary indemnification provisions and
procedures no less favorable than those set forth in Section 6 hereof with
respect to all parties to be indemnified pursuant to said Section; and
(k) so long as the Company is required to keep the
Registration effective, comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or are sold in a best
efforts underwritten offering, and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements shall
cover said 12-month periods.
The Company may require any Holder to furnish to the Company
such information regarding the distribution of such Registrable Securities as
the Company may from time to time reasonably request in writing and the Company
may exclude from such registration the Registrable Securities of any Holder if
he fails to furnish such information within a reasonable time after receiving
such request.
Each Holder agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of the
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<PAGE>
happening of any event of the kind described in Section 5(c)(ii), (iii), (iv),
(v), (vi) or (vii) hereof, the Holders shall immediately discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus until the Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(b) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated or deemed to be incorporated by
reference in such Prospectus. In the event the Company shall give any such
notice, the time period mentioned in Section 5(b) hereof shall be extended by
the number of days during the time period from and including the date of the
giving of such notice to and including the date when any Holder shall have
received the copies of the supplemented or amended Prospectus contemplated by
Section 5(b) hereof or the Advice.
6. REGISTRATION EXPENSES.
All reasonable fees and expenses incident to the Company's
performance of or compliance with this Agreement shall be borne by the Company
whether or not any Registration Statement becomes effective including, without
limitation: (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
National Association of Securities Dealers, Inc., and (B) with respect to
compliance with securities or Blue Sky laws); (ii) fees and disbursements of
counsel for the Company; (iii) fees and disbursements of all independent
certified public accountants for the Company; (iv) Securities Act liability
insurance if the Company so desires such insurance; and (v) fees and expenses of
all other persons retained by the Company. The Company shall not pay any fees or
expenses incurred by any Holder, including, without limitation, the Holder's
accounting and legal expenses and commissions or underwriting discounts.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. Whenever a Registration
Statement relating to the Registrable Securities is filed under the Securities
Act, the Company will (except as to matters covered by Section 7(b) hereof)
indemnify and hold harmless each Holder participating in the registration and
each person, if any, who controls any such Person (collectively, the "Holder
Indemnitees" and, individually, a "Holder Indemnitee"), against any losses,
claims, damages or liabilities, joint or several, to which such Holder
Indemnitees may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such Registration Statement, or Prospectus
contained therein, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged
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<PAGE>
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except for statements
or omissions made in reliance on and in conformity with information furnished to
the Company by such Holder specifically for use in the preparation thereof, and
will reimburse each Holder Indemnitee for all legal or other expenses reasonably
incurred by it in connection with investigating or defending against such loss,
claim, damage, liability or action.
(b) INDEMNIFICATION BY HOLDERS. Each Holder participating in
such registration will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the Registration Statement and
each other person, if any, who controls the Company, within the meaning of the
Securities Act (collectively, the "Company Indemnitees" and, individually, a
"Company Indemnitee") and each other Holder Indemnitee against all losses,
claims, damages or liabilities, joint or several, to which any of the Company
Indemnitees or the other Holder Indemnitees may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Registration Statement, or Prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only if, and to the
extent that, such statement or omission was in reliance upon and in conformity
with information furnished to the Company by such Holder specifically for use in
the preparation thereof.
(c) INDEMNIFICATION PROCEDURES. Promptly after receipt by a
Holder Indemnitee or a Company Indemnitee (collectively, "Indemnitees" and,
individually, an "Indemnitee") under Section 7(a) or 7(b) hereof of notice of
the commencement of any action, such Indemnitee will, if a claim in respect
thereof is to be made against the indemnifying party under such clause, notify
the indemnifying party in writing of the commencement thereof; but the failure
so to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any Indemnitee otherwise than under such
clauses or to the extent that the Indemnitee is not prejudiced by the failure to
receive such notice. In case any such action shall be brought against any
Indemnitee, and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
Indemnitee, and after notice from the indemnifying party to such Indemnitee of
its election to assume the defense thereof, the indemnifying party shall not be
liable to such Indemnitee under such clause for any legal or other expenses
subsequently incurred by such Indemnitee in connection with the defense thereof
other than reasonable costs of investigation; PROVIDED, HOWEVER, that the
Indemnitee shall have
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<PAGE>
the right to employ one counsel to represent such Indemnitee if, in the
reasonable judgment of such Indemnitee, it is advisable for such party to be
represented by separate counsel because separate defenses are available, or
because a conflict of interest exists between such indemnified and indemnifying
party in respect of such claim, and in that event the fees and expenses of such
separate counsel shall be paid by the indemnifying party. Notwithstanding the
foregoing, if the Company is an Indemnitee, the Company shall designate the one
counsel, and in all other circumstances, the one counsel shall be designated by
a majority in interest based upon the Registrable Securities of the Indemnities.
For purposes of this Section 7 the terms "control," and "controlling person"
have the meanings which they have under the Securities Act.
8. AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented in any respect only by written agreement by the Company
and the Holders of a majority of the issued and outstanding shares of
Registrable Securities.
9. GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, without
giving effect to the choice of law principles thereof.
10. INVALIDITY OF PROVISION. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
11. NOTICES. All notices and other communications hereunder
shall be in writing and, unless otherwise provided herein, shall be deemed duly
given if delivered personally or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses or (at such other
address for the party as shall be specified by like notice):
(a) If to the Company:
Hospitality Worldwide Services, Inc.
509 Madison Avenue, Suite 1114
New York, NY 10022
Attention: Chief Executive Officer
with a copy to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: Robert H. Friedman, Esq.
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<PAGE>
(b) If to a Holder, as listed on the signature pages attached
hereto or as such Holder shall designate to the Company in
writing.
12. HEADINGS; EXECUTION IN COUNTERPARTS. The headings and
captions contained herein are for convenience of reference only and shall not
control or affect the meaning or construction of any provision hereof. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same instrument.
13. ENTIRE AGREEMENT. This Agreement, including any exhibits
hereto and the documents and instruments referred to herein and therein,
embodies the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the parties hereto and their successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by each of
the parties hereto as of this 9th day of January, 1997.
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /s/ Howard G. Anders
--------------------------------------
Name: Howard G. Anders
Title: Executive Vice President
STOCKHOLDER:
/s/ Leonard Parker
--------------------------------------
Name: Leonard Parker
Address: 5575 SE 93 Street
Miami, FL 33156
/s/ Douglas Parker
---------------------------------------
Name: Douglas Parker
Address: 4140 Pinta Court
Coral Gables, FL 33146
/s/ Bradley Parker
---------------------------------------
Name: Bradley Parker
Address: 1251 N. Greenway Drive
Coral Gables, FL 33134
/s/ Philip Parker
---------------------------------------
Name: Philip Parker
Address: 8465 SE 147 Street
Miami, FL 33158
/s/ Mitchell Parker
---------------------------------------
Name: Mitchell Parker
Address: 6225 SW 123rd Terrace
Miami, FL 33156
/s/ Gregg Parker
---------------------------------------
Name: Gregg Parker
Address: 120 6th Pl.
Manhattan Beach, CA 90266
-11-
AGREEMENT TO JOINT VENTURE
THIS AGREEMENT TO JOINT VENTURE (the "Agreement") is made and entered
into as of May 12, 1997, by and among Apollo Real Estate Advisors II, L.P., a
Delaware limited partnership, having its principal place of business at 1301
Avenue of the Americas, 38th Floor, New York, NY 10019 ("APOLLO"), Hospitality
Worldwide Services, Inc., a New York corporation, having its principal place of
business at 450 Park Avenue, Suite 2603, New York, NY 10022 ("HWS"), and
Watermark Investments Limited, LLC, a Delaware limited liability company, having
its principal place of business at 225 W. Washington Street, Suite 2200,
Chicago, Illinois 60606, ("WATERMARK") (Apollo, HWS, and Watermark collectively
referred to herein as the "Parties").
RECITALS:
WHEREAS, the Parties desire to collectively identify, acquire,
renovate, refurbish, operate and sell hotel properties (the "BUSINESS") through
individual joint venture limited liability companies (each a "Company" and
together the "COMPANIES"), each formed for the exclusive purpose of developing a
single hotel property (each a "PROJECT") acquired pursuant to the Business; and
WHEREAS, the Parties desire to set forth the terms and conditions of
their agreement to operate the Business, form the Companies, and develop the
Projects.
NOW, THEREFORE, in consideration of the mutual agreements, promises,
and undertakings hereinafter set forth, the receipt and sufficiency of which are
hereby acknowledged, Apollo, HWS and Watermark agree that the following shall
constitute the Agreement among the Parties:
AGREEMENT:
ARTICLE I
OPERATION OF THE BUSINESS
1.1 IDENTIFICATION OF PROJECTS. HWS and Watermark shall have the
responsibility of identifying Projects for the Business. Upon the identification
of a potential Project, HWS and Watermark shall submit to Apollo, in the form of
a written proposal, all essential information pertaining to the Project. Within
fifteen (15) days after receipt of such proposal and all information Apollo
reasonably deems essential to its review thereof, Apollo shall deliver to HWS
and Watermark its written election to participate in the Project, or to reject
such participation in the Project. Apollo's election shall be made in its sole
discretion, and its election shall be the final decision regarding the
participation of the Business in such Project. In the event that Apollo elects
not to participate in any Project, the provisions of Section 3.6 of this
Agreement shall apply to the participation of HWS and Watermark in such Project.
<PAGE>
1.2 FORMATION OF COMPANIES. Should Apollo elect to participate in any
Project under Section 1.1 hereof, the Parties shall move as expeditiously as
possible, but in any case within 30 days of Apollo's election, to form a Company
for the purpose of acquiring, renovating, refurbishing, operating and selling
such Project. The Operating Agreement for any such Company created pursuant to
this Section 1.2 shall be in the form of the Operating Agreement attached hereto
as EXHIBIT A and incorporated herein by this reference (the "Operating
Agreement"). Notwithstanding any election by Apollo under Section 1.1, or the
formation of a Company under this Section 1.2, funding by Apollo for each
Project shall be subject to (i) Apollo's completion of its due diligence review
with respect to such Project, (ii) Apollo's satisfaction with any physical,
environmental and feasibility studies which Apollo may perform, (iii) no
material adverse change with respect to HWS, Watermark or such Project, (iv)
Apollo's obtaining a satisfactory opinion of its counsel on the transaction
structure for the Project, (v) all necessary and appropriate approvals of
Apollo's committees, and (vi) documentation for such Project being satisfactory
to Apollo.
1.3 MODIFICATIONS TO STRUCTURE.
(a) In order to qualify and/or preserve the status of Apollo, the
Companies or any entity in which the Parties and/or the Companies own an
interest and which owns any portion of the Company Assets as an "operating
company" under the plan asset rules of ERISA at 29 C.F.R. Section 2510.3-101
("PLAN ASSET RULES"), to avoid the imposition of a corporate tax on any income
of the Companies, or to minimize the effects of any UBTI on Apollo and its
partners, HWS and Watermark agree to consent to modifications proposed from time
to time by Apollo to the structure of any of the Companies (but in no event
changes to the Percentage Interests) and/or the Companies' investments in, and
ownership of the Company Assets and/or to the terms of the Operating Agreement,
including, without limitation, the capital contribution and allocation and
distribution provisions set forth in Articles III, IV and V of the Operating
Agreement, if in any case the modifications will not materially adversely affect
the aggregate amount or timing of Capital Contributions, payment of fees,
distributions of Net Cash Flow and liquidation proceeds or the aggregate
allocations of Profits and Losses; provided, however, that if the modifications
do adversely affect the aggregate amount of timing of Capital Contributions,
fees payable or distributions of Net Cash Flow and liquidation proceeds or the
aggregate allocations of Profits and Losses (an "ADVERSE CHANGE"), the
provisions of Section 1.3(b) shall apply. Subject to and specifically limited by
the foregoing, any such modifications may include, without limitation, the
formation by the Parties of other partnerships, corporations or other entities
(including, without limitation, corporations and trusts that qualify as real
estate investment trusts under Section 856 of the Internal Revenue Code of 1986,
as amended (the "Code")) to be owned by the Parties or their Affiliates and
which will own a portion of the Company Assets. In any such event, the Companies
and such other entities shall be treated as a single partnership for federal
income tax purposes and the fees payable to, the amounts distributable to, the
Profits and Losses allocable to, the Capital Contributions required to be
contributed by, the maintenance of Capital Accounts, and the buy-sell rights and
obligations pursuant to the Operating Agreement and the organic documents
governing such other entities shall be calculated, determined and applied on an
aggregate basis as if the Company Assets were owned by the Companies pursuant to
the Operating Agreement as of its effective date unless Apollo determines in its
sole discretion that such provisions must be calculated, determined and
2
<PAGE>
applied on an entity by entity basis and not on an aggregate basis to qualify or
preserve the status of Apollo, the Companies or any entity in which the Parties
and/or the Companies own an interest and which owns any portion of the Company
Assets as an operating company under the Plan Asset Rules. If Apollo determines
that such provisions must be calculated, determined and applied on an entity by
entity basis and not an aggregate basis, the Parties agree to negotiate in good
faith modifications to the terms of the Operating Agreement and to the organic
documents governing such other entities so as to preserve as nearly as possible
without any material adverse affect to HWS or Watermark the same overall
economic benefits and burdens relating to the Company Assets as exist under the
Operating Agreement as in effect on the date hereof; provided, however, that if
the modifications do cause an Adverse Change, the provisions of Section 1.3(b)
shall apply. HWS and Watermark agree to cooperate with Apollo and to execute,
acknowledge, deliver, file, record and publish all such documents, agreements
and instruments and to do all such other acts and things as Apollo determines
are reasonably necessary to implement the foregoing, subject to the limitations
set forth in the first sentence of this Section.
(b) In the event of an Adverse Change, HWS or Watermark shall notify
Apollo thereof in writing including an estimate of the economic value of the
Adverse Change incurred by HWS or Watermark. If the Parties are unable to
mutually agree upon the amount thereof within 30 days, the value of such Adverse
Change shall be determined by the following valuation procedure. Apollo and HWS
and Watermark shall, within ten days after the expiration of the foregoing 30
day period, mutually agree on an independent third party ("VALUATION AGENT") to
determine the economic value to HWS and Watermark arising from the Adverse
Change resulting from a modification described in Section 1.3(a). If the parties
are unable to agree on a Valuation Agent within such ten day period, the
Valuation Agent shall be appointed by a Judge of the District Court of the
United States of America for the Southern District of New York acting as an
individual. In making its determination of the economic value of the Adverse
Change, the Valuation Agent shall only consider the impact of the modifications
to the amounts and timing of Capital Contributions, fees payable and
distributions of Net Cash Flow and liquidation proceeds and the allocations of
Profits and Losses. Any Valuation Agent selected shall be independent and shall
not have performed any appraisal or valuation services for the Company, Apollo,
HWS or Watermark or any Affiliate of the Company, Apollo, HWS or Watermark at
any time during the two year period prior to its selection. Within 60 days of
the Parties' selection of the Valuation Agent, the Valuation Agent shall deliver
to the Parties a written report of the foregoing valuation, and the
determination of the Valuation Agent thereon shall be conclusive and binding
upon the Parties. Within 30 days of the receipt of such report, Apollo shall pay
(in such proportions as they shall agree) to HWS and Watermark the amount of the
economic value of the Adverse Change determined by the Valuation Agent.
1.4 OPERATING COMPANY STATUS. The Parties will endeavor to qualify and
preserve the status of all of the Companies and each other limited liability
company, partnership, corporation or entity in which the Parties owns an
interest, as an "operating company" under the Plan Asset Rules and, if a Company
and/or any such entity so qualifies, the Parties will use their best efforts to
operate the Company and/or any such entity and exercise its management rights
with respect to the Company Assets in a manner that will permit the Company
and/or any such entity to qualify and continue to qualify as an operating
company.
3
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
2.1 IN GENERAL. As of the date hereof, each of the Parties hereby makes
each of the representations and warranties applicable to such Party as set forth
in Section 2.2 hereof, and such warranties and representations shall survive the
execution of this Agreement.
2.2 REPRESENTATIONS AND WARRANTIES. Each Party hereby represents and
warrants that:
(a) DUE INCORPORATION OR FORMATION; AUTHORIZATION OF
AGREEMENT. If such Party is a corporation or a
company, it is duly organized or duly formed, validly
existing, and in good standing under the laws of the
jurisdiction of its incorporation or formation and
has the corporate or company power and authority to
own its property and carry on its business as owned
and carried on at the date hereof and as contemplated
hereby. Such Party is duly licensed or qualified to
do business and in good standing in each of the
jurisdictions in which the failure to be so licensed
or qualified would have a material adverse effect on
its financial condition or its ability to perform its
obligations hereunder. Such Party has the individual,
corporate, or company power and authority to execute
and deliver this Agreement and to perform its
obligations hereunder and, if such Party is a
corporation or partnership, the execution, delivery,
and performance of this Agreement has been duly
authorized by all necessary corporate or partnership
action. This Agreement constitutes the legal, valid,
and binding obligation of such Party.
(b) NO CONFLICT WITH RESTRICTIONS; NO DEFAULT. Neither
the execution, deliv- ery, and performance of this
Agreement nor the consummation by such Party of the
transactions contemplated hereby (i) will conflict
with, violate, or result in a breach of any of the
terms, conditions, or provisions of any law,
regulation, order, writ, injunction, decree,
determination, or award of any court, any
governmental department, board, agency, or
instrumentality, domestic or foreign, or any
arbitrator, applicable to such Party or any of its
Wholly Owned Affiliates, (ii) will conflict with,
violate, result in a breach of, or constitute a
default under any of the terms, conditions, or
provisions of the articles of incorporation, bylaws,
or company agreement of such Party or any of its
Wholly Owned Affiliates, if such Party is a
corporation or company, or of any material agreement
or instrument to which such Party or any of its
Wholly Owned Affiliates is a party or by which such
Party or any of its Wholly Owned Affiliates is or may
be bound or to which any of its material properties
or assets is subject, (iii) will conflict with,
violate, result in a breach of, constitute a default
under (whether with notice or lapse of time or both),
accelerate or permit the acceleration of the
performance required by, give
4
<PAGE>
to others any material interests or rights, or
require any consent, authorization, or approval under
any indenture, mortgage, lease agreement, or
instrument to which such Party or any of its Wholly
Owned Affiliates is a party or by which such Party or
any of its Wholly Owned Affiliates is or may be
bound, or (iv) will result in the creation or
imposition of any lien upon any of the material
properties or assets of such Party or any of its
Wholly Owned Affiliates.
(c) GOVERNMENTAL AUTHORIZATIONS. Any registration,
declaration or filing with or consent, approval,
license, permit or other authorization or order by,
any governmental or regulatory authority, domestic or
foreign, that is required in connection with the
valid execution, delivery, acceptance, and
performance by such Party under this Agreement or the
consummation by such Party of any transaction
contemplated hereby has been completed, made, or
obtained on or before the effective date of this
Agreement.
(d) LITIGATION. There are no actions, suits, proceedings,
or investigations pending or, to the knowledge of
such Party or any of its Wholly Owned Affiliates,
threatened against or affecting such Party or any of
its Wholly Owned Affiliates or any of their
properties, assets, or businesses in any court or
before or by any governmental department, board,
agency, or instrumentality, domestic or foreign, or
any arbitrator which could, if adversely determined
(or, in the case of an investigation could lead to
any action, suit, or proceeding, which if adversely
determined could) reasonably be expected to
materially impair such Party's ability to perform its
obligations under this Agreement or to have a
material adverse effect on the consolidated financial
condition of such Party; and such Party or any of its
Wholly Owned Affiliates has not received any
currently effective notice of any default, and such
Party or any of its Wholly Owned Affiliates is not in
default, under any applicable order, writ,
injunction, decree, permit, determination, or award
of any court, any governmental department, board,
agency, or instrumentality, domestic or foreign, or
any arbitrator which could reasonably be expected to
materially impair such Party's ability to perform its
obligations under this Agreement or to have a
material adverse effect on the consolidated financial
condition of such Party.
(e) INVESTIGATION. Such Party is acquiring its interest
in the Business based upon its own investigation, and
the exercise by such Party of its rights and the
performance of its obligations under this Agreement
will be based upon its own investigation, analysis,
and expertise. Such Party's acquisition of its
interest in the Business is being made for its own
account for investment, and not with a view to the
sale of distribution thereof.
5
<PAGE>
ARTICLE III
INDEPENDENT COVENANTS OF THE PARTIES
3.1 OWNERSHIP OF COMPANY PROJECTS. The Parties agree to endeavor to own
and operate any hotels acquired pursuant to the Business of the Company for only
the time necessary to upgrade such hotel and market it for resale.
3.2 WATERMARK MANAGEMENT FEE. For each Project, a management agreement
shall be executed under which Watermark will receive a management fee of one and
one-half percent (1 1/2%) of all costs (other than Soft Costs) incurred in
acquiring and rehabilitating the particular Project (the "MANAGEMENT FEE") which
is intended to be a payment to a Party other than in its capacity as a partner
under Code ss.707(a). However, in no event will Watermark be entitled to a
Management Fee until (a) the Project is acquired by the Company formed for the
purpose of owning such Project, and (b) the Project expenditures are funded by
the Company, in its sole discretion. A total budget and schedule for each
Project will be determined prior to the closing of the acquisition of the
Project by the Company. The aggregate scheduled time needed for Project
completion shall be divided into four (4) equal periods (each a "Quarterly
Period"). The Management Fee will be paid to Watermark in the following
fractions at the following times: (i) 1/6 of the Management Fee at the time the
Project is acquired by the Company; (ii) 1/6 of the Management Fee at the end of
the first Quarterly Period; (iii) 1/6 of the Management Fee at the end of the
second Quarterly Period; (iv) 1/6 of the Management Fee at the end of the third
Quarterly Period; (v) 1/6 at the end of the fourth Quarterly Period; and (vi)
1/6 of the Management Fee when the Project is sold by the Company. At monthly
intervals the Company shall make a reasonable determination of any adjustments
to the aggregate time needed for Project completion, and any resulting
adjustment to the Quarterly Periods. In the event of any such adjustment, the
payment dates for the Management Fee shall be adjusted accordingly.
3.3 AFFILIATE TRANSACTIONS. Any of the Companies, or subsidiaries
thereof, shall not enter into any contract, obligation or other commitment to
which an Affiliate of any Party is, or is to be, a party (an "AFFILIATE
TRANSACTION") without compliance with this Section 3.3.
(a) Each Party shall promptly notify the other Parties of
any proposed Affiliate Transaction involving an
Affiliate of the notifying party ("AFFILIATED
PARTY"). The Parties whose Affiliates are not a party
or proposed party to the Affiliate Transaction in
question (the "NON- AFFILIATED PARTIES") shall,
notwithstanding anything to the contrary in this
Agreement be entitled (i) to determine whether the
Company enters into such proposed Affiliate
Transaction in question and (ii) if the Company
enters into such Affiliate Transaction to act
exclusively for the Company in connection with
enforcing, waiving, pursuing, exercising, litigating
or settling any right, remedy or claim of the Company
thereunder, or modifying, amending or terminating
such Affiliate Transaction. Such right of the
Non-Affiliated Parties to act exclusively for the
Company with respect to any such Affiliate
Transaction is generally intended to permit
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the Non-Affiliated Parties to exercise any rights or
remedies, including without limitation any right of
termination of the Affiliate, without being prevented
from doing so by the Affiliated Party; provided, that
such right does not include the right to act
exclusively for the Company with respect to any other
decisions to be made by the Company with respect to
such Affiliate Transaction.
(b) Notwithstanding the provisions of Section 3.3(a),
HWS, through its renovation and purchasing
subsidiaries will provide through fixed price
contracts with the Companies the necessary
renovation, refurbishment and purchasing services
required for each Project. Pricing for such services
will be subject to review and approval by Apollo.
(c) To the extent any Party (or an Affiliate of a Party)
is providing design, development, manufacturing,
distribution, or marketing services to or on behalf
of any Company, such Party (or Affiliate) may enter
into subcontracts with others for the performance of
such services. Pricing for such services will be
subject to review and approval by Apollo and
Watermark.
3.4 HWS WARRANTS TO APOLLO. As an inducement to become a Party to this
Agreement and to contribute its Initial Capital Contributions to any of the
Companies formed hereunder, HWS will issue Apollo 750,000 seven-year warrants
priced at 115% of the average market price for the previous twenty consecutive
trading days from the date of execution hereof (the "Warrant") in substantially
the form of EXHIBIT B attached hereto and incorporated herein by this reference.
Such Warrant shall be exercisable, with respect to 250,000 warrants, at the
earlier of any announcement of this Agreement or the formation of any Company
hereunder. Such Warrant shall be exercisable, with respect to the remaining
500,000 warrants, as follows: 100,000 for every $7.5 million of revenues paid by
the Companies to HWS's renovation subsidiary and/or fees paid by the Companies
to HWS's purchasing subsidiary.
3.5 RIGHT OF FIRST OFFER. HWS and Watermark (the "RESTRICTED PARTY")
hereby covenants to and agrees with Apollo (the "PROTECTED PARTY") that so long
as the Restricted Party is a Party of the Company (the "TRIGGER DATE"), the
Restricted Party shall not, without first offering to the Protected Party the
opportunity to do any or all of the following (which offer shall be made in
accordance with Section 1.1 hereof), directly or indirectly, acting alone or as
a member of a partnership, limited liability company or other business entity or
as a holder of any security of any class issued by a corporation, limited
liability company or other business entity or as an officer, director, partner,
employee, consultant, agent or representative of any corporation, partnership,
limited liability company or other business entity, be or become:
(a) interested or engaged in the Business in the United
States of America other than through or in
association with the Protected Party, or
(b) directly or indirectly, as a stockholder, bondholder
or officer, director or employee of, or in any manner
associated with, or aid or abet or give
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information or financial assistance to any business
which is or may be competitive with any of the
Companies with respect to the Business; provided that
the provisions of this Section 3.5 shall not be
deemed to prohibit a purchase or ownership by the
Restricted Party or any of its affiliates, as a
passive investment, of less than five percent (5%) of
the outstanding capital shares of any publicly held
corporation.
The offer to the Protected Party shall include all financial and legal
information needed by the Protected Party to decide whether to pursue such
opportunity, and shall be supplemented by such information as is reasonably
requested by the Protected Party. Any decision by the Protected Party to pursue
or not to pursue any such opportunity shall be made by such Protected Party in
their sole discretion. In the event the Protected Party decides to not pursue
any such opportunity, then the Restricted Party shall be free to pursue such
opportunity independent of the Protected Party so long as the terms of such
opportunity are no more favorable to the Restricted Party as those offered to
such Protected Party, and so long as such opportunity does not compete with any
other properties that any of the Companies have previously purchased. In the
event the terms offered to the Restricted Party are more favorable than those
previously offered to the Protected Party, the Restricted Party will once again
be required to offer such opportunity to the Protected Party on the basis of the
more favorable terms.
3.6 OTHER ACTIVITIES. Except as restricted by Section 3.5, each of the
Parties and its Affiliates shall be free to engage in any other businesses or
activities and to receive the income and benefits thereof (and no other Party
shall have any interest therein by reason of this Agreement), and no Party shall
have any duty or obligation to present to the Business or any other Party any
such other business opportunities that are outside the scope of the purposes of
the Business.
3.7 DUE DILIGENCE COSTS. On the Closing Date of the first Company
formed pursuant to this Agreement, such Company will reimburse Apollo for its
out-of-pocket and third-party costs associated with and incurred in connection
with formation and creation of such Company. Subject to Apollo's approval, on
such Closing Date, the Company will reimburse HWS and Watermark for their
out-of-pocket and third-party costs associated with and incurred in connection
with formation and creation of such Company. On the Closing Date of any
subsequent Company formed pursuant to this Agreement, such Company will
reimburse Apollo for its out-of-pocket and third-party costs associated with and
incurred in connection with formation and creation of that Company, and, subject
to Apollo's approval, on such Closing Date, the Company will reimburse HWS and
Watermark for their out-of-pocket and third-party costs associated with and
incurred in connection with formation and creation of that Company.
3.8 CLOSING COSTS AND EXPENSES. Apollo, HWS and Watermark represent
that, aside from the advisory relationship between HWS and Resource Holdings
Ltd., no brokers have been involved in either the consummation of this Agreement
or any Company formed hereunder and that no commissions, finder's fees or other
compensation are due to any brokers or agents, including Resource Holdings Ltd.
with regard to any Company or this Agreement. Each party will be separately
responsible for their respective costs incurred prior to execution of this
8
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Agreement and the formation of any Company hereunder, subject to Section 3.7 of
this Agreement.
3.9 EXPENSES OF IDENTIFYING PROJECTS. No party shall be entitled to
reimbursement for expenses, costs or liabilities incurred in identifying
potential Projects for the Business. The Parties agree that any Company formed
to operate a specific Project may reimburse a Party for actual costs and
expenses incurred and directly related to the acquisition of such Project. Such
reimbursement will occur only (i) upon the execution by the Company of a binding
contract for the acquisition of the Project in question; (ii) upon the submittal
by the requesting Party of verification of all costs and expenses to the
reasonable satisfaction of Apollo; and (iii) upon the written approval of
Apollo.
ARTICLE IV
NONDISCLOSURE OF INFORMATION
4.1 CONFIDENTIALITY. All disclosures of trade secrets, know-how,
financial information, or other confidential information made by the Business to
any Party or made by any Party under or in connection with this Agreement or the
Associated Agreements, as well as the terms of this Agreement and all Associated
Agreements, shall be received and maintained in confidence by the recipient
during the term hereof and for three (3) years after dissolution of the Business
and each Party shall treat all such trade secrets, know-how, financial
information or other confidential information as confidential except:
(a) as to the persons directly responsible for the
performance of the obligations of this Agreement and
for the effective operation of the Business;
(b) as to the professional advisers of the Parties and
the Companies;
(c) as to such disclosures to Customers of the Companies
as are necessary for the effective carrying on of
business by the Companies;
(d) as to such information as is required by law to be
disclosed by the Parties or the Companies; and
(e) as to such information as is or may fall within the
public domain otherwise than in violation of the
provisions of this Article.
4.2 DUTY OF CARE. Each Party will take such steps as lie within its
power to assure that all managers, officers and employees of the Companies, to
whom confidential information is disclosed, take all proper precautions to
prevent the unauthorized disclosure and use of the confidential information
referenced in this Article.
9
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ARTICLE V
TERMINATION AND DISSOLUTION
5.1 RIGHT TO TERMINATE. Notwithstanding any other provision of this
Agreement to the contrary, either Apollo, HWS or Watermark may terminate this
Agreement (the "TERMINATION OPTION"). The Termination Option may be exercised by
either Apollo, HWS or Watermark at any time after the fifth-year anniversary of
date of this Agreement by giving 180 days' written notice to the other Party.
Should any Party exercise the Termination Option, such party shall not be in
default of this Agreement. Further, the Parties thereafter be released from any
obligations under Section 3.5 hereof. The exercise of the Termination Option by
any Party shall not affect the rights, responsibilities and obligations of the
Parties under any previously executed Operating Agreement.
ARTICLE VI
DISPUTE RESOLUTION
6.1 ARBITRATION. Any dispute, controversy or claim (except an action
for a temporary restraining order, preliminary injunction or similar equitable
relief) asserted by any Party against another Party arising out of or relating
to this Agreement or any document or agreement executed pursuant to this
Agreement or the breach thereof, shall be settled by arbitration if so requested
by any Party pursuant to Section 6.2. The arbitration shall be conducted by one
arbitrator, who shall be appointed pursuant to the Commercial Arbitration Rules
of the American Arbitration Association ("AAA"). The arbitration shall be held
in New York, New York, and shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA, except that the rules set forth in this Article
shall govern such arbitration to the extent that they conflict with the rules of
the AAA.
6.2 NOTICE. Upon written notice by a Party to another Party of a
request for arbitration hereunder, the Parties shall use their best efforts to
cause the arbitration to be conducted in an expeditious manner with such
arbitration to be completed within sixty (60) days after selection of the
arbitrator. In the arbitration, New York law shall govern, except to the extent
those laws conflict with the Commercial Arbitration Rules of the AAA and the
provisions of this Article. There shall be no discovery except as the arbitrator
shall permit following a determination by the arbitrator that the Party seeking
such discovery has a substantial demonstrable need. All other procedural matters
shall be within the discretion of the arbitrator. In the event a Party fails to
comply with the procedures in any arbitration in any manner as determined by the
arbitrator, the arbitrator shall fix a reasonable period of time for compliance
and, if the Party fails to comply within such period, a remedy deemed just by
the arbitrator, including without limitation, an award of default, may be
imposed. The arbitrator shall have the right to award costs, including without
limitation, attorneys' fees, to a Party to the arbitration.
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6.3 BINDING NATURE. The determination of the arbitrator shall be final
and binding on the parties. Judgement upon the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof.
ARTICLE VII
MISCELLANEOUS
7.1 AMENDMENTS. Amendments to this Agreement may only be made by the
unanimous written consent of all of the Parties hereto.
7.2 NOTICES. All notices and other communications required or permitted
to be given or made under this Agreement shall be given or made in writing. Such
notices shall be delivered by hand delivery, by telecopy, or similar electronic
means, by nationally recognized overnight courier, fees prepaid, addressed as
follows:
If to Apollo: Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Attn: Alfred C. Trivilino
Copy to: Apollo Advisors, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Attn: Michael D. Weiner, Esq.
with a copy to: Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202-4437
Attn: Steven C. Demby, Esq.
If to HWS: Hospitality Worldwide Services, Inc.
450 Park Avenue, Suite 2603
New York, NY 10022
Attn: Howard G. Anders
with a copy to: Olshan Grundman Frome & Rosenzweig, LLP
505 Park Avenue
New York, NY 10022
Attn: Robert Friedman, Esq.
If to Watermark: Watermark Investments Limited, LLC
225 W. Washington Street, Suite 2200
Chicago, IL 60606
Attn: Scott Kaniewski
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with a copy to: Varner, Stephens, Humphries & White, LLP
3350 Cumberland Circle, Suite 1700 Riverwood
Atlanta, Georgia 30339
Attn: William W. Hopson, Esq.
Any Party may change its address for the purpose of this Section 7.2 by
notice to the other given in the manner set forth above.
7.3 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York in a like manner as an
agreement made and wholly to be performed in the State of New York.
7.4 VENUE. Each of the Parties consents to the jurisdiction of any
court in New York County, New York, for any action arising out of matters
related to this Agreement. Each of the Parties waives the right to commence an
action in connection with this Agreement in any court outside of such County.
7.5 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TRIAL BY
JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH
WAIVER IS INFORMED AND VOLUNTARY.
7.6 ATTORNEY FEES. If any Party obtains a judgment against any other
Party by reason of the breach of this Agreement or the failure to comply with
the terms hereof, reasonable attorneys' fees and costs as fixed by the court
shall be included in such judgment.
7.7 HEADINGS. The Article and Section headings of this Agreement are
for convenience only, do not form a part of this Agreement, and shall not in any
way affect the interpretation hereof.
7.8 CAPITALIZED TERMS. Any capitalized terms not defined herein shall
have the meaning ascribed to such term in the Operating Agreement.
7.9 EXTENSION NOT A WAIVER. No delay or omission in the exercise of any
power, remedy or right herein provided or otherwise available to a Party shall
impair or affect the right of such Party thereafter to exercise the same. Any
extension of time or other indulgence granted to a Party hereunder shall not
otherwise alter or affect any power, remedy or right of any other Party, or the
obligations of the Party to whom such extension or indulgence is granted.
7.10 CREDITORS NOT BENEFITED. Nothing contained in this Agreement is
intended or shall be deemed to benefit any creditor of the Parties or any other
third party.
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7.11 PUBLICITY. No Party shall issue any press release or otherwise
publicize or disclose the terms of this Agreement or the terms of the Parties'
acquisition of the interests in any Company, without the consent of the other
Parties, except as such disclosure may be made in the course of normal reporting
practices by a Party to its partners, shareholders, consultants or members or as
otherwise required by law.
7.12 CONSTRUCTION AND AMENDMENT. No oral explanation of or oral
information relating to this Agreement offered by either party hereto shall
alter the meaning or interpretation of this Agreement.
7.13 FURTHER ACTION. Each Party agrees to perform all further acts and
execute, acknowledge, and deliver any documents which may be reasonably
necessary, appropriate, or desirable to carry out the provisions of this
Agreement.
7.14 VARIATION OF PRONOUNS. All pronouns and any variations thereof
shall be deemed to refer to masculine, feminine, or neuter, singular or plural,
as the identity of the person or persons may require.
7.15 SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transferability set forth in the Operating Agreement, this Agreement shall bind
and inure to the benefit of the parties hereto and their respective successors.
This Agreement may not be assigned by the Parties, except that Apollo shall be
entitled to assign this Agreement to any Affiliate. For purposes of this Section
7.14, assignment shall include any change in ownership or control, by merger,
acquisition, operation of law, or otherwise.
7.16 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
7.17 AMBIGUITIES. All of the parties to this Agreement have
participated in the negotiation and drafting hereof. Accordingly, it is
understood and agreed that the general rule that ambiguities are to be construed
against the drafter shall not apply to this Agreement. In the event that any
language of this Agreement is found to be ambiguous, each Party shall have an
opportunity, in any legal proceeding, to present evidence as to the actual
intent of the parties with respect to any such ambiguous language.
7.18 ENTIRE AGREEMENT. The terms and conditions contained herein
constitute the entire agreement between the Parties concerning the subject
matter hereof, and shall supersede all previous communications, either oral or
written, between the parties hereto, and no agreement or understanding varying
or extending this Agreement shall be binding upon any Party unless in writing,
signed by a duly authorized officer or representative of each Party.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
set forth above.
Apollo Real Estate Advisors II, L.P., a Delaware
limited partnership
By: Apollo Real Estate Capital Advisors II, Inc.,
its general partner
By: /s/ Illegible
-----------------------------------------------
Title: Vice President
Hospitality Worldwide Services, Inc., a New York
corporation
By:/s/ Illegible
-----------------------------------------------
Title: President/Chief Executive Officer
Watermark Investments Limited, LLC, a Delaware
limited liability company
By: /s/ Illegible
----------------------------------------------
Title: Manager
14
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT OR LAWS.
HOSPITALITY WORLDWIDE SERVICES, INC.
No. ________ Dated May 12, 1997
WARRANT TO PURCHASE 750,000 SHARES OF COMMON STOCK
This certifies that, for value received, Apollo Real Estate
Advisors II, L.P., a Delaware limited partnership, or assigns (the "Holder"), is
entitled to purchase from HOSPITALITY WORLDWIDE SERVICES, INC., a New York
corporation (the "Company"), Seven Hundred and Fifty Thousand (750,000) shares
of Common Stock of the Company at a price per share equal to the Warrant Price
(as defined herein) at times specified in Section 2(a) hereof during the
Exercise Period. The number of shares of Common Stock subject to this Warrant
and the Warrant Price are subject to adjustment from time to time as set forth
in Section 4 hereof. This Warrant has been issued to the Holder pursuant to the
terms of the Agreement to Joint Venture (as defined herein) among the Company,
the Holder and the other signatories thereto.
SECTION 1. DEFINITIONS.
(a) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares
of Common Stock issued by the Company after the date hereof other than (i)
Common Stock issued to Holder, or any Person controlling, controlled by or under
common control with it, and (ii) Common Stock issued upon exercise of options
granted prior to the date hereof pursuant to the Company's Employee Stock Option
Plan and Non-Employee Director Stock Option Plan.
(b) "AGREEMENT TO JOINT VENTURE" shall mean the Agreement to
Joint Venture dated as of May 12, 1997 by and among Holder, the Company and
Watermark Investments Limited LLC.
(c) "COMMON STOCK" shall mean the Company's Common Stock, par
value $0.01 per share, and, in the case of a reclassification, recapitalization
or other similar change in such Common Stock or in the case of a consolidation
or merger of the Company with or into
<PAGE>
another Person, such consideration to which a holder of a share of Common Stock
would have been entitled upon the occurrence of such event.
(d) "COMMON STOCK EQUIVALENT" shall mean any Convertible
Security or warrant, option or other right to subscribe for or purchase any
shares of Common Stock or any Convertible Security.
(e) "CONVERTIBLE SECURITIES" shall mean evidences of
indebtedness, shares of Stock or other securities which are or may be at any
time convertible into or exchangeable for shares of Common Stock, including
without limitation any shares of the Company's preferred stock which are
convertible into or exchangeable for shares of Common Stock. The term
"Convertible Security" shall mean one of the Convertible Securities.
(f) "COMPANY" shall mean Hospitality Worldwide Services, Inc.
(g) "EXERCISE DATE" shall mean the date on which an exercising
Holder has submitted to the Company this Warrant and the subscription form
attached hereto as EXHIBIT A and, if applicable, has paid the exercise price as
required by Section 2(b) hereof.
(h) "EXERCISE PERIOD" shall mean the period commencing with
and including the date hereof and ending at midnight on May 11, 2004.
(i) "FAIR MARKET VALUE" of a share of Common Stock as of any
date shall mean, as of any date, the average of the closing prices of Common
Stock for the twenty (20) consecutive Trading Days next preceding the date in
question. The closing price for each day shall be:
i) the average of the closing sale price or, in the
absence of a closing sale price, the highest bid and
lowest asked prices of one share of Common Stock
quoted in the NASDAQ Small Cap Market System or any
similar system of automated dissemination of
quotations of securities prices then in common use,
if so quoted; or
ii) if not quoted as described in clause (1), the average
of the highest bid and lowest offered quotations for
one share of Common Stock as reported by the National
Quotation Bureau Incorporated if at least two
securities dealers have inserted both bid and offered
quotations for Common Stock on at least five (5) of
the twenty (20) consecutive Trading Days next
preceding the date in question; or
iii) if the Common Stock is listed or admitted for trading
on any national securities exchange, the last sale
price, or the closing bid price if no sale occurred,
of one share of Common Stock on the principal
securities exchange on which the Common Stock is
listed or admitted for trading.
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If none of the conditions set forth above is met, the closing price of
one share of Common Stock on any day or the average of such closing prices for
any period shall be the Fair Market Value of Common Stock for such day or period
shall be the Fair Market Value of Common Stock for such day or period as
determined by a member firm of the New York Stock Exchange selected by the
Company and approved by the Holder. If the Company and the Holder ar unable to
agree on the selection of a member firm, then the issue of selection of a member
firm shall be submitted to the American Arbitration Association.
(j) "HOLDER" shall mean Apollo Real Estate Advisors II, L.P.,
or its assigns.
(k) "PERSON" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization, limited liability company,
limited liability partnership, government organization or agency or political
subdivision thereof, association, sole proprietorship or any other form of
entity not specifically listed herein.
(l) "STOCK" shall include any and all shares, interests or
other equivalents (however designated) of, or participations in, the capital
stock of the Company of any class.
(m) "TRADING DAY" shall mean, with respect to the Common
Stock: (i) if the Common Stock is quoted on the NASDAQ National Market System,
any similar system of automated dissemination or quotations of securities
prices, or the National Quotation Bureau Incorporated, each day on which
quotations may be made on such system; or (ii) if the Common Stock is listed or
admitted for trading on any national securities exchange, days on which such
national securities exchange is open for business; or (iii) if shares of the
Common Stock are not quoted on any system or listed or admitted for trading on
any securities exchange, a Business Day.
(n) "WARRANT" shall mean this Warrant.
(o) "WARRANT PRICE" shall mean $8.115 per share (as such price
may from time to time be adjusted in accordance with Section 4 hereof).
(p) "WARRANT SPREAD" as of any date shall mean the difference
between (i) the Fair Market Value of a share of Common Stock as of that date and
(ii) the Warrant Price.
SECTION 2. EXERCISE OF WARRANT.
(a) The rights represented by this Warrant may be exercised by
the Holder in the following quantities (in whole or in part) at the times
specified during the Exercise Period hereof:
(i) 250,000: commencing at the date hereof and
continuing through the end of the Exercise Period.
(ii) 500,000: commencing at 100,000 increments for
every $7.5 million of revenues paid to the Company's renovation subsidiary
and/or fees paid to its
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purchasing subsidiary in connection with any Project (as such term is defined in
the Agreement to Joint Venture) pursued in accordance with the Agreement to
Joint Venture, and continuing through the end of the Exercise Period.
(b) The Holder hereof may exercise this Warrant, in whole or
in part, by delivery to the Company at its office at 450 Park Avenue, Suite
2603, New York, NY 10022, Attention: Chief Financial Officer (or such other
address as the Company may specify to Holder from time to time), of (i) a
written notice of Holder's election to exercise this Warrant, which notice shall
specify the number of shares of Common Stock to be purchased, (ii) payment of
the Warrant Price in the manner provided in Section 2(d) and (iii) this Warrant.
Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as EXHIBIT A, duly executed by Holder or
its agent or attorney.
(c) In the event of any exercise of the rights represented by
this Warrant, (i) certificates for the shares of Common Stock so purchased shall
be dated the date of such exercise and delivered to the Holder hereof within a
reasonable time, not exceeding 15 days after such exercise, and the Holder
hereof shall be deemed for all purposes to be the Holder of the shares of Common
Stock so purchased as of the date of such exercise and (ii) unless this Warrant
has expired, a new Warrant representing the number of shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder hereof within such time. Any such warrant shall be dated
the date hereof and shall be identical with this Warrant except as to the number
of shares of Common Stock issuable pursuant thereto. This Warrant may not be
exercised for fractional shares of Common Stock. In the event that upon the
final exercise of this Warrant there is a remaining fractional share hereunder,
the Company shall pay the Holder hereof an amount equal to the comparable
fraction of the current Market Price per share as of the date of exercise.
(d) Subject to the provisions of this Warrant, the Warrant
Price may be paid in the manner set forth in either Section 2(d)(i) or Section
2(d)(ii) below:
(i) Upon presentation to the Company at the office
specified in Section 2(b) of this Warrant with the subscription form attached to
this Warrant as EXHIBIT A duly completed, indicating a cash exercise and signed
by the Holder, and upon payment of an amount equal to the product of the Warrant
Price and the number of shares of Common Stock to be purchased, by, at the
option of Holder, (i) wire transfer to an account in a bank located in the
United States designated for such purpose by the Company or (ii) certified or
official bank check, the Company shall issue and cause to be delivered to or
upon the written order of the Holder and in such name or names as Holder may
designate, a certificate for the shares of Common Stock issued upon such
exercise.
(ii) Upon presentation to the Company at the office
specified in Section 2(b) of this Warrant with the subscription form attached to
this Warrant as EXHIBIT A duly completed, indicating a non-cash exercise and
signed by the Holder, the Company shall issue and cause to be delivered to or
upon the written order of the Holder and in such name or names as Holder may
designate, a certificate for a number of shares of Common Stock equal to the
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result of dividing (i) the product of (A) the number of shares of Common Stock
for which this Warrant may be exercised and (B) the Warrant Spread on the
Exercise Date, by (ii) the Fair Market Value of a share of Common Stock on the
Exercise Date.
SECTION 3. COVENANTS AS TO COMMON STOCK.
The Company covenants and agrees that all shares of Common
Stock which may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance in accordance with the terms hereof, be validly
issued, fully paid and non-assessable, and free from all taxes, liens and
charges with respect to the issuance thereof. Without limiting the generality of
the foregoing, the Company covenants that it will from time to time take all
such action as may be required to assure that the stated or par value per share
of the Common Stock is at all times equal to or less than the then effective
Warrant Price. The Company further covenants and agrees that the Company will at
all times have authorized and reserved, free from any and all restrictions,
including, without limitation, preemptive rights, restrictions with respect to
the voting, transfer or other rights exercisable by a Holder, and encumbrances
or liens, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant. The Company also covenants
and agrees that if any shares of capital stock to be reserved for the purpose of
the issuance of shares upon the exercise of this Warrant require registration
with or approval of any governmental authority under any federal or state law
(other than the Securities Act of 1933, as amended) before such shares may be
validly issued or delivered upon exercise of this Warrant, then the Company will
in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES AND WARRANT PRICE.
(a) The number and kind of securities purchasable upon the
exercise of this Warrant and the amount of the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(i) RECAPITALIZATION, REORGANIZATION, RECLASSIFICATION,
CONSOLIDATION OR MERGER. In case of any recapitalization or reorganization of
the Company of any reclassification or change of outstanding Stock issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value or as a result of a subdivision
of combination), or in case of any consolidation or merger of the Company with
or into another corporation (other than a merger with another corporation in
which the Company is the surviving corporation and which does not result in any
reclassification or change (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination) of outstanding Stock issuable upon exercise of this
Warrant), the Holder of this Warrant shall be entitled to receive, upon exercise
of this Warrant, the kind and the highest amount of shares of Stock, other
securities, money and property receivable upon such recapitalization,
reorganization, reclassification, change, consolidation or merger by a Holder of
one share of Common Stock as if this Warrant had been exercised immediately
prior to such recapitalization, reorganization, reclassification, change,
consolidation or merger. The provisions of this Section 4(a)(i) shall similarly
apply to
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successive recapitalization, reorganizations, reclassifications, changes,
consolidations and mergers.
(ii) SUBDIVISION OR COMBINATION OF SHARES. If the
Company, at any time while this Warrant is outstanding, shall subdivide or
combine any class or classes of its Common Stock, the Warrant Price shall be
proportionately reduced, in case of subdivision of shares, to reflect the
increase in the total number of shares of Common Stock outstanding as a result
of such subdivision, as at the effective date of such subdivision, or if the
Company shall take a record of holders of any class or classes of its Common
Stock for the purpose of so subdividing, as at the applicable record date,
whichever is earlier, or shall be proportionately increased, in the case of
combination of shares, to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination, as at any class or
classes of its Common Stock for the purpose of so combining, as at the
applicable record date, whichever is earlier.
(iii) STOCK DIVIDENDS. If the Company, at any time
while this Warrant is outstanding, shall pay a dividend in, or make any other
distribution of, Common Stock, the Warrant Price shall be adjusted, as at the
date the Company shall take a record of the holders of such class or classes of
Common Stock, for the purpose of receiving such dividend or other distribution
(or if no such record is taken, as at the date of such payment on other
distribution), to that price determined by multiplying the Warrant Price in
effect immediately prior to the record date (or if no such record is taken, then
immediately prior to such payment or other distribution), by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution (plus in the event
that the Company paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Company issued fractional
shares in connection with said dividends).
(iv) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
If the Company, at any time while this Warrant is outstanding, shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
Sections 4(a)(i) through (iii)), at a price per share less than the Warrant
Price or without consideration, then the Warrant Price upon each such issuance
shall be adjusted to that issuance price. The provisions of this Section
4(a)(iv) shall not apply under any of the circumstances for which an adjustment
is provided in Sections 4(a)(i) through (iii). No adjustment of the Warrant
Price shall be made under this Section 4(a)(iv) upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to any Common Stock
Equivalent if upon the issuance of such Common Stock Equivalent (a) any
adjustment shall have been made pursuant to Section 4(a)(v) or (b) no adjustment
was required pursuant to Section 4(a)(v).
(v) ISSUANCE OF COMMON STOCK EQUIVALENTS. If the
Company shall, at any time while this Warrant is outstanding, issue any Common
Stock Equivalent, and the price per share for which Additional Shares of Common
Stock may be issuable thereafter pursuant to such Common Stock Equivalent shall
be less than the current Warrant Price then in effect, or
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<PAGE>
if, after any such issuance of Common Stock Equivalents, the price per share for
which Additional Shares of Common Stock may be issuable thereafter is amended,
and such price as so amended shall be less than the current Warrant Price in
effect at the time of such amendment, then the Warrant Price upon each such
issuance or amendment shall be adjusted as provided in the first sentence of
Section 4(a)(iv) on the basis that Additional Shares of Common Stock issuable
pursuant to such Common Stock Equivalents shall be deemed to have been issued
(whether or not such Common Stock Equivalents are actually then exercisable,
convertible or exchangeable in whole or in part) as of the earlier of (a) the
date on which the Company shall enter into a firm contract for the issuance of
such Common Stock Equivalent, or (b) the date of actual issuance of such Common
Stock Equivalent. No adjustment of the Warrant Price shall be made under this
Section 4(a)(v) upon the issuance of any Convertible Security which is issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any adjustment shall previously have been made in the
Warrant Price then in effect upon the issuance of such warrants or other rights
pursuant to this Section 4(a)(v).
(b) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION 4. The following provisions shall be applicable to the making of
adjustments in the Warrant Price hereinbefore provided in this Section 4:
(i) COMPUTATION OF CONSIDERATION. The consideration
received by the Company shall be deemed to be the following: to the extent that
any Additional Shares of Common Stock or any Common Stock Equivalents shall be
issued for a cash consideration, the consideration received by the Company
therefor; or, if such Additional Shares of Common Stock or Common Stock
Equivalents are offered by the Company for subscription, the subscription price;
or, if such Additional Shares of Common Stock or Common Stock Equivalents are
sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price, in any such case excluding any of
any compensation, discounts, commissions, or expenses paid or incurred by the
Company for or in connection with the underwriting thereof or otherwise in
connection with the issue thereof. The consideration for any Additional Shares
of Common Stock issuable pursuant to any Common Stock Equivalents shall be the
consideration received by the Company for issuing such Common Stock Equivalents,
plus the additional consideration payable to the Company upon the exercise,
conversion or exchange of such Common Stock Equivalents. In case of the issuance
at any time of any Additional Shares of Common Stock or Common Stock Equivalents
in payment or satisfaction of any dividend upon any class of Stock other than
Common Stock, the Company shall be deemed to have received for such Additional
Shares of Common Stock or Common Stock Equivalents a consideration equal to the
amount of such dividend so paid or satisfied. In any case in which the
consideration to be received or paid shall be other than cash, the Board of
Directors of the Company shall determine in good faith the fair market value of
such consideration and promptly notify the Holder of its determination of the
fair market value of such consideration prior to payment or accepting receipt
thereof. If, within thirty (30) days after receipt of said notice, the Holder
shall notify the Board of Directors of the Company in writing of its objection
to such determination, a determination of fair market value of such
consideration shall be made by an appraiser selected by the Company and approved
by the Holder. If the Company and the Holder are unable to
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<PAGE>
agree on the selection of an appraiser, the issue of selection of an appraiser
shall be submitted to the American Arbitration Association.
(ii) READJUSTMENT OF WARRANT PRICE. Upon the
expiration of the right to convert, exchange or exercise any Common Stock
Equivalent the issuance of which effected an adjustment in the Warrant Price, if
such Common Stock Equivalent shall not have been converted, exercised or
exchanged, the number of shares of Common Stock deemed to be issued and
outstanding by reason of the fact that they were issuable upon conversion,
exchange or exercise of any such Common Stock Equivalent shall no longer be
computed as set forth above, and the Warrant Price shall forthwith be readjusted
and thereafter be the price which it would have been (but reflecting any other
adjustments in the Warrant Price Equivalent) had the adjustment of the Warrant
Price been made in accordance with the issuance or sale of the number of
Additional Shares of Common Stock actually issued upon conversion, exchange or
issuance of such Common Stock Equivalent and thereupon only the number of
Additional Shares of Common Stock actually so issued shall be deemed to have
been issued and only the consideration actually received by the Company
(computed as in Section 4(b)(i) shall be deemed to have been received by the
Company.
(c) TREASURY SHARES. In making any adjustments in the Warrant
Price hereinbefore provided in this Section 4, the number of shares of Common
Stock at any time outstanding shall not include any shares thereof then directly
or indirectly owned or held by or for the account of the Company or any of its
Subsidiaries.
(d) OTHER ACTION AFFECTING COMMON STOCK. In case after the
date hereof the Company shall take any action affecting its Common Stock, other
than an action described in any of the foregoing Sections 4(a) and (b),
inclusive, and the failure to make any adjustment would not fairly protect the
purchase rights represented by this Warrant in accordance with the essential
intent and principals of this Section 4, then the Warrant Price shall be
adjusted in such manner as the Board of Directors of the Company shall in good
faith determine to be equitable in the circumstances.
(e) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in
the Warrant Price pursuant to any provision of this Section 4, the number of
shares of Common Stock purchasable hereunder shall be adjusted, to the nearest
whole share, to the product obtained by multiplying the number of such shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter. If the Company shall be in default under any provision
contained in Section 3 of this Warrant so that such shares, upon issuance, would
not be validly issued under applicable law at the Warrant Price adjusted in
accordance with this Section 4, the adjustment of shares provided in the
foregoing sentence shall nonetheless be made and the Holder of this Warrant
shall be entitled to purchase such greater number of shares at the lowest price
at which such shares may be validly issued under applicable law. Such exercise
shall not constitute a waiver of any claim arising against the Company by reason
of its default under Section 3 of this Warrant.
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<PAGE>
SECTION 5. NOTICE OF ADJUSTMENTS.
Whenever the Warrant Price or number of shares of Common Stock
purchasable upon exercise of this Warrant shall be adjusted pursuant to Section
4 hereof, the Company shall cause the independent accounting firm then regularly
engaged by it to report on its financial statements to prepare and execute a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors of the Company made any determination hereunder), and the Warrant
Price and number of shares of Common Stock purchasable hereunder after giving
effect to such adjustment, and shall cause copies of such certificate to be
mailed (by first class mail postage prepaid) to the Holder of this Warrant
promptly after each adjustment.
SECTION 6. EXCHANGE OF WARRANT.
This Warrant is exchangeable, upon the surrender hereof by the
Holder at the office or agency of the Company designated in Section 2(b) hereof,
for new Warrants of like tenor representing in the aggregate the rights to
subscribe for and purchase the number of shares which may be subscribed for and
purchased hereunder, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by said
Holder hereof at the time of such surrender.
SECTION 7. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT.
If this Warrant is lost, stolen, mutilated or destroyed, the
Company shall, upon the receipt of indemnity reasonably satisfactory to it (it
being understood that the written undertaking of any original Holder of this
Warrant shall be sufficient indemnity) and, in the case of a mutilated Warrant,
the surrender thereof, issue a new Warrant of like denomination and tenor as the
Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time
enforceable by anyone.
SECTION 8. LISTING ON SECURITIES EXCHANGES.
The Company shall list on each national securities exchange on
which any Common Stock may at any time be listed, subject to official notice of
issuance upon the exercise of this Warrant, and shall maintain, so long as any
other shares of its Common Stock shall be so listed, all shares of Common Stock
from time to time issuable upon the exercise of this Warrant, and the Company
shall so list on each national securities exchange, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon the
exercise of this Warrant if and so long as any shares of capital stock of the
same class shall be listed on such national securities exchange by the Company.
Any such listing shall be at the Company' expense.
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<PAGE>
SECTION 9. AVAILABILITY OF INFORMATION.
The Company shall comply with all applicable public
information reporting requirements of the Securities and Exchange Commission
(the "SEC") (including those required to make available the benefits of Rule 144
under the Securities Act of 1933) to which it may from time to time be subject.
The Company shall also cooperate with each Holder of this Warrant and Holder of
any Common Stock issued upon exercise of this Warrant in supplying such
information as may be necessary for such Holder to complete and file any
information reporting forms currently or hereafter required by the SEC as a
condition to the availability of an exemption from the Act for the sale of any
Warrant or Common Stock issued upon exercise of this Warrant.
SECTION 10. SUCCESSORS.
All the provisions of this Warrant by or for the benefit of
the Company or the Holder shall bind and inure to the benefit of their
respective successors and assigns. The Company acknowledges and agrees that the
Holder shall have the right to assign its right, title and interests under this
Warrant, in whole or in part, to any of its affiliates or to one or more third
parties, subject only to compliance with applicable securities laws. Any such
assignment shall be evidenced by the Form of Assignment attached as EXHIBIT B.
SECTION 11. HEADINGS.
The headings of sections of this Warrant have been inserted
for convenience of reference only, are not to be considered a part hereof and
shall in no way modify or restrict any of the terms or provisions hereof.
SECTION 12. NO STOCKHOLDER RIGHTS.
The Holder hereof shall not be entitled to any voting rights
or other rights as a stockholder of the Company by reason of the rights granted
under this Warrant until the Holder hereof shall purchase shares of Common Stock
hereunder.
SECTION 13. GOVERNING LAW.
This Warrant shall be governed by and construed in accordance
with the laws of the State of New York without regard to the laws and principles
thereof which would direct the application of the laws of another jurisdiction.
* * * * * * * *
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IN WITNESS WHEREOF, Hospitality Worldwide Services, Inc. has
caused this Warrant to be executed by its duly authorized officers under its
corporate seal, and this Warrant to be dated as of the date first set forth
above.
HOSPITALITY WORLDWIDE SERVICES,
INC.
By:___________________________
Name:
Title:
[CORPORATE SEAL]
ATTEST:
- ----------------------------
Secretary
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EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
Cash Exercise Method
The undersigned registered owner of the attached Warrant
irrevocably exercises, by the Cash Exercise Method in accordance with Section
2(d)(i) of the Warrant, the attached Warrant for the purchase of _________
shares of Common Stock, $[______] par value, of HOSPITALITY WORLDWIDE SERVICES,
INC. and herewith makes payment therefor, to the order of the Corporation in the
amount of $_______________ as payment of the Exercise Price in accordance with
the terms set forth in Section 2(d)(i).
Non-cash Exercise Method
The undersigned registered owner of the attached Warrant
irrevocably exercises, by the Non-cash Exercise Method in accordance with
Section 2(d)(ii) of the Warrant, the attached Warrant for the purchase of
_________ shares of Common Stock, $[_____] par value, of HOSPITALITY WORLDWIDE
SERVICES, INC., calculated as follows:
(a) Number of shares of Common Stock for which the
Warrant may be exercised: ________________
(b) The Warrant Spread on the Exercise Date: ___________
(c) The Fair Market Value of a share of Common Stock on
the Exercise Date: ______________________
(d) Number of shares of Common Stock to be purchased
(line (a) times line (b) divided by line (c)):
____________________________
Issuance Instructions
The undersigned requests that a certificate for such Common
Stock be registered in the name of ____________________________________ whose
address is __________________________________________________________ and that
such certificated be delivered to ______________________________________________
whose address is _____________________________________________. If such number
of shares of Common Stock is less than all of the shares of Common Stock which
may be purchased upon the exercise of the Warrant, the undersigned hereby
requests that a new Warrant representing the remaining balance of this Warrant
be registered in the name of _________________________________ whose address is
_____________________________________________________ and that such
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<PAGE>
Warrant be delivered to _________________________________________________ whose
address is ___________________________________________________________.
________________________________________
Name of Registered Owner
________________________________________
Signature of Registered Owner
________________________________________
Address
________________________________________
Federal ID Number
13
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
For value received, the undersigned hereby sells, assigns and
transfers unto _________________________, all of the rights represented by the
within Warrant to purchase shares of Common Stock of HOSPITALITY WORLDWIDE
SERVICES, INC. to which the within Warrant relates, and appoints
_______________________ Attorney to transfer such right on the books of
HOSPITALITY WORLDWIDE SERVICES, INC. with full power of substitution in the
premises.
Dated:
-----------------------------------------
(Signature)
-----------------------------------------
(Address)
Signed in the presence of:
- ---------------------------
14
Subsidiaries of Hospitality Worldwide Services, Inc.
Hospitality Restoration and Builders, Inc.
1800 Century Park East
Suite 370
Los Angeles, California 90067
State of Incorporation: New York
Leonard Parker Company
550 Biltmore Way
Coral Gables, Florida 33134
State of Incorporation: Florida
Leonard Parker Company Pacific/Asia PTE LTD
10 Collyer Quay
#07-09 Ocean Building
Singapore 049315
Incorporation: Singapore
Leonard Parker Company (Africa) (Proprietary) Limited
3 Sandown Valley Crescent
Suite 502 South Block
PO Box 786598
Sandton 2146 South Africa
Incorporation: South Africa
Parker Reorder Corporation
550 Biltmore Way
Coral Gables, Florida 33134
State of Incorporation: Florida
Hospitality Software Systems, Inc.
450 Park Avenue, Suite 2603
New York, New York 10022
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Hospitality Worldwide Services, Inc.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form SB-2 of our reports dated March 21, 1997,
relating to the consolidated financial statements of Hospitality Worldwide
Services, Inc. (formerly Light Savers U.S.A., Inc.) and subsidiary, and February
27, 1997, relating to the combined financial statements of Leonard Parker
Company and affiliates, which are contained in this Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
- --------------------
BDO Seidman, LLP
New York, New York
July 21, 1997
FOTINAKIS PHITIDIS
CHARTERED ACCOUNTANTS
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
Hospitality Worldwide Services, Inc.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our reports dated March 14, 1997 and October 3, 1996
relating to the financial statements of Leonard Parker Company (Africa)
(Proprietary) Limited, which are not included in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ FOTINAKIS PHITIDIS
- ----------------------
FOTINAKIS PHITIDIS
CHARTERED ACCOUNTANTS (SA)
JOHANNESBURG
July 15, 1997
