UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1998
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _____________
Commission File Number: 0-23054
HOSPITALITY WORLDWIDE SERVICES, INC.
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
NEW YORK 11-3096379
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 PARK AVENUE, SUITE 2603, NEW YORK, NY 10022
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(Address of principal executive offices) (Zip Code)
(212) 223-0699
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(Registrant's telephone number, including area code)
Check whether the registrant (1) has filed all reports to be filed by section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
(X) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUER
State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date: 12,113,856 as of August 12, 1998.
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997.............................................3
Consolidated Statements of Operations for the three
months ended June 30, 1998 and 1997 and six months
ended June 30, 1998 and 1997......................................4
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended June 30, 1998.....................5
Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997 ..............................6
Notes to Consolidated Financial Statements .......................7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.......................................................11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security holders..............14
Item 6. Exhibits and Reports on Form 8-K.................................15
Signatures..................................................................16
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995.
Except for historical information contained herein, the Report on Form 10-Q
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which involve certain risks and uncertainties. The
Company's actual results or outcomes may differ materially from those
anticipated. In assessing forward-looking statements contained herein, readers
are urged to carefully read those statements. When used in the Report on Form
10-Q, the words "estimate," "anticipate," "expect," "believe" and similar
expressions are intended to identify forward-looking statements.
2
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
UNAUDITED
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $14,053 $11,964
Marketable securities --- 18,916
Accounts receivable, less allowance for 49,857 21,933
doubtful accounts of $366 and $268
Current portion of note receivable --- 342
Costs and estimated earnings in excess of billings 1,614 3,421
Advances to vendors 5,617 4,255
Prepaid and other current assets 4,535 1,037
-------- -------
Total current assets 75,676 61,868
Property and equipment, less accumulated 8,511 3,548
depreciation of $649 and $338
Goodwill and other intangibles, less 25,579 17,078
accumulated amortization of $2,019 and
$1,490
Deferred taxes 1,059 739
Other assets 5,404 1,035
-------- --------
$116,229 $84,268
======== =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C>
Loan payable - bank 4,450 ---
Current portion of notes payable and 655 ---
capital lease obligations
Accounts payable 26,765 16,374
Accrued and other liabilities 4,347 2,540
Billings in excess of costs and 293 296
estimated earnings
Customer deposits 13,943 13,324
Income taxes payable 619 8
-------- -------
Total current liabilities 51,072 32,542
Notes payable and capital lease
obligations, net of current portion 3,296 ---
-------- -------
Total liabilities 54,368 32,542
-------- -------
STOCKHOLDERS' EQUITY:
Convertible preferred stock,$.01 par 5,000 5,000
value, $25 stated value, 3,000,000
shares authorized, 200,000 shares
issued and outstanding, $5,000,000
liquidation preference
Common stock, $.01 par value, 121 113
50,000,000 shares authorized,
12,105,522 and 11,345,572 shares
issued and outstanding
Additional paid-in capital 54,996 47,520
Retained earnings (deficit) 1,744 (907)
-------- -------
Total stockholders' equity 61,861 51,726
-------- -------
$116,229 $84,268
======== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $52,359 $19,513 $93,649 $37,708
Cost of revenues 43,639 14,958 77,537 29,694
------- ------- ------- -------
Gross profit 8,720 4,555 16,112 8,014
Selling, general and administrative expenses 6,206 3,617 11,695 6,260
------- ------- ------- -------
Income from operations 2,514 938 4,417 1,754
------- ------- ------- -------
Other income (expense):
Interest income 366 78 730 141
Interest expense (115) (164) (260) (256)
------- ------- ------- -------
251 (86) 470 (115)
------- ------- ------- -------
Income before provision for income taxes 2,765 852 4,887 1,639
Provision for income taxes 1,182 422 2,086 817
------- ------- ------- -------
Net income $1,583 $430 $2,801 $822
======= ======= ======= =======
Basic earnings per common share $0.13 $0.04 $0.22 $0.08
======= ======= ======= =======
Diluted earnings per common share $0.12 $0.04 $0.20 $0.08
======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,920 8,138 11,870 7,991
======= ======= ======= =======
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 13,746 9,992 13,862 9,838
======= ======= ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------------------------------------------
Number Addt'l Retained Total
Number of Stated of Par Paid In Earnings Stockholders'
Shares Valued Shares Value Capital (Deficit) Equity
------ ------ ------- ----- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 200 $5,000 11,346 $113 $47,520 $(907) $51,726
Exercise of stock options
and warrants --- --- 246 2 731 --- 733
Stock issued in
connection with
acquisition --- --- 514 6 6,166 --- 6,172
Warrants issued for
services --- --- --- --- 579 --- 579
Net income --- --- 2,801 2,801
Preferred dividends --- --- --- --- --- (150) (150)
----------------------------------------------------------------------------------------------------
Balance, June 30, 1998 200 $5,000 12,106 $121 $54,996 $1,744 $61,861
====================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements notes are an
integral part of these statements.
5
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Six Months ended
June 30,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITES:
<S> <C> <C>
Net income $2,801 $822
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 839 550
Stock based compensation charge 268 22
Deferred income tax benefit (320) 25
(Increase) decrease in current assets:
Accounts receivable (24,762) (2,304)
Notes receivable 342 25
Costs in excess of billings 1,807 126
Advances to vendors (1,362) (1,627)
Prepaid and other current assets (1,025) (384)
(Increase) in other assets (1,090) (109)
Increase (decrease) in current liabilities:
Accounts payable 8,844 (1,082)
Accrued and other liabilities 1,020 205
Billings in excess of costs 3 263
Customer deposits 619 2,846
Income taxes payable 611 (25)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (11,423) (647)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short term marketable securities 18,916 ---
Purchase price of acquisition (1,500) ---
Investment ING Joint Venture (2,359) ---
Cash acquired, upon acquisition,
net of acquisition costs (62) 689
Purchase of property and equipment (2,477) (714)
Investment in mortgages receivable (3,203) ---
--------- --------
NET CASH PROVIDED BY (USED IN)INVESTING ACTIVITIES 9,315 (25)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loan payable (7,300) ---
Proceeds from borrowings on loan payable 11,750 3,295
Repayment of notes payable and capital
lease obligations (986) (15)
Proceeds from exercise of stock options and warrants 733 761
Purchase of treasury stock --- (2,210)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,197 1,831
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,089 1,159
-------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,964 276
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $14,053 $1,435
======== ========
</TABLE>
6
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 1,442 $ 725
Interest $ 268 $ 148
NON-CASH INVESTING & FINANCING ACTIVITIES:
Fair value (including goodwill) of net
assets acquired $ 6,232 $11,166
Stock issued for assets acquired $ 6,172 $11,953
Preferred stock dividends not paid in lieu
of purchase price reduction for LPC $ --- $ 150
acquisition
The accompanying notes to consolidated financial statements are an integral part
of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: CONSOLIDATION
The consolidated financial statements of Hospitality Worldwide Services, Inc.
and Subsidiaries (the "Company") and related notes thereto as of June 30, 1998
and for the three months and six months ended June 30, 1998 and 1997 are
presented as unaudited, but in the opinion of management include all adjustments
necessary to present fairly the information set forth therein. These adjustments
consist solely of normal recurring adjustments. The consolidated balance sheet
information for December 31, 1997 was derived from the audited consolidated
financial statements included in the Company's Form 10-K. These interim
consolidated financial statements should be read in conjunction with that
report. The interim results are not necessarily indicative of the results for
any future period.
NOTE 2: ACQUISITIONS
On January 9, 1998, the Company completed the acquisition of Bekins Distribution
Services, Inc. ("Bekins"), a leading provider of transportation, warehousing and
installation services to a variety of customers worldwide. Founded in 1969,
Bekins is a logistical services company that serves clients who are opening,
renovating or relocating facilities by assuring that materials, fixtures,
furniture and merchandise are moved from multiple vendor locations to their
ultimate destinations in a controlled orderly sequence so that each item can be
installed on schedule. The purchase price of Bekins of approximately $11,000,000
consisted of 514,117 shares of Common Stock and the assumption of certain
Bekins' debt. The purchase agreement contains a make-whole adjustment whereby,
on a formula-basis, additional shares will be transferred if the price of the
Company's common stock for the 20 days prior to the one year anniversary date is
less than 85% of the share price on the date of acquisition. The acquisition was
accounted for as a purchase with the results of Bekins included in the
consolidated financial statements of the Company from the acquisition date.
On February 9, 1998, the Company purchased the assets of the real estate
advisory business, consisting primarily of development contracts, from
7
<PAGE>
Watermark Limited, LLC, an international management company that is the general
partner and manages Watertone Holdings LP, a shareholder of the Company. The
resulting wholly owned subsidiary of the Company is named HWS Real Estate
Advisory Group, Inc. ("HWS REAG"). The purchase price of HWS REAG was $1,500,000
and their results are included in the consolidated financial statements of the
Company from the acquisition date.
On March 6, 1998, in conjunction with a joint venture formed with ING Realty
Partners ("ING Joint Venture"), the Company acquired the Clarion Quality Hotel
in Chicago, Illinois. A wholly-owned subsidiary of the Company will renovate and
refurbish this property pursuant to a contract with the ING Joint Venture, which
is expected to generate approximately $15 million of revenue for the Company in
1998.
NOTE 3: EARNINGS PER SHARE OF COMMON STOCK
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which replaced
the calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share are very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
prior periods have been restated to conform to the new requirements.
Basic earnings per common share are based on net income less preferred stock
dividends divided by the weighted average number of common shares outstanding.
Diluted earnings per common share are adjusted to reflect the assumed conversion
of convertible preferred stock and the elimination of the preferred stock
dividends, if such conversion is dilutive, and the weighted average number of
common share equivalents from stock options and warrants.
NOTE 4: PRO FORMA INFORMATION
The following pro forma consolidated financial information has been prepared to
reflect the acquisition of the assets and business of Bekins. The pro forma
financial information is based on the historical financial statements of the
Company and Bekins, and should be read in conjunction with the accompanying
footnotes. The accompanying pro forma financial information is presented as if
the transaction occurred January 1, 1997. The pro forma financial information is
unaudited and is not necessarily indicative of what the actual results of
operation of the Company would have been assuming the transaction had been
completed as of January 1, 1997, and neither is it necessarily indicative of the
results of operations for future periods.
Six Months Ended June 30, 1997
-----------------------------------------------------------------------
(amounts in thousands, except share data) (Unaudited)
Net revenues $48,454
Net income $948
Basic earnings per common share $0.11
The above unaudited pro forma statements have been adjusted to reflect the
amortization of goodwill, as generated by the acquisition over a 30-year period,
adjustments to reflect historical compensation per employment agreements entered
into at the date of acquisition, additional income taxes on pro forma income and
the 514,117 common shares issued as consideration in the transaction.
8
<PAGE>
NOTE 5: RECENT DEVELOPMENTS
On June 5, 1998, the Company signed a master development agreement with Prime
Hospitality Corp. ("Prime") to develop twenty hotel properties over a two-year
period under the AmeriSuites brand name. Under the agreement, the Company will
provide the site identification, development, construction and purchasing
services required for each project and Prime will provide project design and
management and franchise services once each property is complete. The Company
and Prime will be equally responsible for the financing requirements (up to $30
million each) and will each have a 50% interest in the new hotels.
NOTE 6: COMPREHENSIVE INCOME
In July 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components in a separate
financial statement. Comprehensive income generally includes net income as
reported by the Company adjusted for cumulative foreign translation adjustments
and unrealized gains and losses on marketable securities that are
available-for-sale, which are currently reported in the stockholders' equity
section of the balance sheet. The statement is effective for fiscal years
beginning after December 15, 1997. The Company has adopted the standard at the
beginning of 1998. The differences between net income as reported and
comprehensive income is immaterial for the three and six months ended June 30,
1998 and 1997.
NOTE 7: DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." This statement requires that the Company
report financial and descriptive information about its reportable operating
segments in financial statements issued to shareholders for interim and annual
periods. The Statement also establishes standards for related disclosures about
products and services, geographic areas and major customers. Under this
Statement, operating segments are components of an enterprise about which
separate financial information is available that is regularly evaluated by the
enterprise's chief operational decision-maker in deciding how to allocate
resources and in assessing performance. This statement is effective for fiscal
years beginning after December 15, 1997. The Company will conform with the new
standard as of December 31, 1998.
NOTE 8: YEAR 2000
In July 1996, the Emerging Issues Task Force reached a consensus, on Issue
96-14, "Accounting for the Costs Associated with Modifying Computer Software for
the Year 2000," which requires that costs associated with modifying computer
software for the year 2000 be expensed as incurred. Management has evaluated the
impact of Year 2000 issues on the Company's business and operations. The Company
believes, based upon its internal reviews and other factors, that future
external and internal costs to be incurred relating to the modification of
internal-use software for the year 2000 will not have a material effect on the
Company's results of operations or financial position.
9
<PAGE>
NOTE 9: EARNINGS PER SHARE
The following table reconciles the components of basic and diluted earnings per
common share for the three and six months ended June 30, 1998 and 1997 (in
thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
---- ---- ---- ----
Numerator:
<S> <C> <C> <C> <C>
Net income $1,583 $430 $2,801 $822
Preferred stock dividends (75) (75) (150) (150)
------ ---- ------ ----
Basic earnings per common share - 1,508 355 2,651 672
Net income available to common
shareholders
Effect of dilutive securities 75 75 150 150
Preferred stock dividends ------ ---- ------ ----
Diluted earnings per common share - $1,583 $430 $2,801 $822
Net income available to common
stockholders
Denominator:
Basic earnings per common share - weighted
average common shares outstanding 11,920 8,138 11,870 7,991
Effect of dilutive securities
Stock-based compensation plans 826 854 992 847
Preferred stock 1,000 1,000 1,000 1,000
------ ---- ------ ----
Diluted earnings per common share -
Weighted average common and common
equivalent shares outstanding 13,746 9,992 13,862 9,838
</TABLE>
10
<PAGE>
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS/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 services for
the hospitality industry on a global basis, the Company acquired its procurement
and reorder businesses in January 1997, its transportation, warehousing and
installation business in January 1998 and its real estate advisory business in
February 1998. 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, transportation,
warehousing or installation project on a percentage of completion basis. 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 services has been relatively stable over the past two
years. In contrast to the Company's recognition of renovation, transportation,
warehousing or installation revenues, the Company recognizes procurement
revenues in three ways: (i) when the Company is a principal, during which it
functions 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, (ii) when the Company acts as an agent only, service fee
income is recognized as revenue at the time the service is provided and (iii)
when the Company provides these services under long-term contracts, earnings are
recognized under the percentage of completion method, based on efforts expended
over the life of the contract. In each 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
each method of procurement revenue recognition, profits primarily include only
procurement service fees. The Company realizes reorder and real estate advisory
revenue based on the fees it charges its clients for services rendered.
RESULTS OF OPERATIONS: SIX MONTHS ENDED JUNE 30, 1998 vs. SIX MONTHS ENDED JUNE
30, 1997.
The Company experienced a significant increase in its net revenues to
$93,649,000 for the six months ended June 30, 1998 in comparison to $37,708,000
for the six months ended June 30, 1997, due in large part to increased revenues
for the renovation and procurement businesses which have increased over last
year due to continued growth in their customer base, attributed to increased
sales and marketing efforts, and the further establishment of the Company's name
in the hospitality industry. In addition, the acquisitions of Bekins and HWS
REAG have contributed approximately $11,800,00 to such revenues.
Cost of revenues for the six months ended June 30, 1998 were $77,537,000,
compared to $29,694,000 for the same period last year. This increase is due
mainly to the additions of Bekins and HWS REAG, which incurred costs of
11
<PAGE>
approximately $8,500,000 for the six months ended June 30, 1998 and the result
of revenue growth. Gross profit, as a percent of revenue was 17.2% for the six
months ended June 30, 1998 as compared to 21.3% for the same period last year
due to expansion into businesses which have different pricing structures as well
as increased volume of activity in the procurement businesses which historically
has lower gross margins as compared to the renovation business.
Selling, general and administrative expenses for the six months ended June 30,
1998 have increased to $11,695,000, compared to $6,260,000 for the same period
last year. Contributing to this increase are the acquisitions of Bekins and HWS
REAG, which incurred expenses of approximately $2,200,000 and an investment in
the infrastructure of the Company to support the revenue growth. Additionally,
selling, general and administrative expenses include $526,000 and $394,000 of
goodwill amortization for the periods ended June 30, 1998 and 1997,
respectively. As a percentage of net revenues, selling, general and
administrative expenses for the six months ended June 30, 1998 have decreased to
12.5% from 16.6% for the same period last year. This reduction is the result of
greater economies of scale provided by growth and the acquisitions. Given the
decreased percentage of selling, general and administrative expenses to net
revenues, the Company was able to achieve the same percentage of income from
operations to net revenues, 4.7% for the six months ended June 30, 1998 and
1997.
Interest income increased from $141,000 to $730,000 in the six months ended June
30, 1998 due to the investment of the proceeds received from the Company's
public offering in September 1997. Interest expense increased in the six months
ended June 30, 1998 as compared to the same period last year primarily due to
the acquisition of Bekins which carries approximately $3,900,000 of long-term
debt.
The provision for income taxes for the six months ended June 30, 1998 was
$2,086,000, compared to $817,000 for the six months ended June 30, 1997. The
increase in the provision for income taxes was primarily due to an increase in
income before income taxes.
As a result of the above, net income for the six month period ended June 30,
1998 was $2,801,000 compared to net income of $822,000 for the same period last
year.
RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1998 vs. THREE MONTHS ENDED
JUNE 30, 1997
The Company's net revenues increased substantially in the three months ended
June 30, 1998 to $52,359,000 as compared to $19,513,000 for the three months
ended June 30, 1997. The increase was due primarily to increased revenues for
the procurement and renovation businesses which have utilized sales and
marketing efforts and further establishment of the Company's name in the
hospitality industry to continue growth in their customer base. Additionally,
the acquisition of Bekins and HWS REAG have contributed approximately $5,550,000
to revenue to the quarter ended June 30, 1998.
Cost of revenues for the three months ended June 30, 1998 were $43,639,000,
compared to $14,958,00 for the three months ended June 30, 1997. This increase
is due to revenue growth and the additions of Bekins and HWS REAG, which
incurred cost of revenues of approximately $4,000,000 in the quarter ended June
30, 1998. As a percent of revenues, gross profit was 16.7% for the three months
ended June 30, 1998 as compared to 23.3% for the same period last year. The
change in gross profit percent was primarily due to an increased volume of
activity in the procurement businesses which historically have lower gross
margins as compared to the renovation business.
12
<PAGE>
Selling, general and administrative expenses for the quarter ended June 30, 1998
were $6,206,000, compared to $3,617,000 for the same period last year. The
primary contributors to this increase were the acquisitions of Bekins and HWS
REAG, which incurred expenses of approximately $1,200,000 and an investment in
the infrastructure of the Company to support the revenue growth, Additionally,
selling, general and administrative expenses include $264,000 and $197,000 of
goodwill amortization for the three months ended June 30, 1998 and 1997,
respectively. As a result of greater economies of scale from growth and
acquisitions, selling, general and administrative expenses as a percentage of
net revenues declined to 11.9% in the quarter ended June 30, 1998 from 18.5% in
the same quarter a year ago. Given this decreased percentage, the Company was
able to achieve the same percentage of income from operations to net revenues,
4.8% for the three months ended June 30, 1998 and 1997.
Interest income increased from $78,000 to $366,000 in the quarter ended June 30,
1998 due to the investment of the proceeds received from the Company's public
offering in September, 1997. Interest expense decreased in the three months
ended June 30, 1998 as a result of a lower level of borrowings outstanding in
the current quarter as compared to the same period last year.
The provision for income taxes for the three months ended June 30, 1998 was
$1,182,000 compared to $422,000 for the same period last year. The increase was
primarily due to the increase in income before income taxes.
As a result of the above, net income for the three month period ended June 30,
1998 increased to $1,583,000, compared to net income of $430,000 for the same
period last year.
LIQUIDITY AND CAPITAL RESOURCES
In March 1998, the Company obtained a new unsecured line of credit with Marine
Midland Bank, which provides the Company a maximum borrowing of $7,000,000.
Borrowings under the line of credit bear interest at the bank's prime lending
rate. Proceeds from the borrowing are utilized to fund short-term cash
requirements. At June 30, 1998, there were $4,450,000 in outstanding borrowings
under the line of credit.
In July 1998, the Company obtained a new unsecured line of credit with
NationsBank, which provides the Company a maximum borrowing of $6,000,000.
Borrowings under the line of credit bear interest at the bank's prime lending
rate. Proceeds from the borrowing are utilized to fund short-term cash
requirements. At June 30, 1998 there were no outstanding borrowings under the
line of credit.
The Company's short-term and long-term liquidity requirements generally consist
of operating capital for its businesses and selling, general and administrative
expenses. The Company continues to satisfy its short-term and long-term
liquidity requirements with cash generated from operations, borrowings under
lines of credit and funds from a public offering of its Common Stock in
September 1997. Due to the nature of its resources allocated to personnel for
performance of its services, capital requirements are insignificant.
Net cash used by operating activities was ($11,423,000) for the six months ended
June 30, 1998, compared to ($647,000) for the same period last year. During the
six months ended June 30, 1998, the Company's accounts receivable increased due
to revenue growth and acquisitions. This increase was partially offset by an
increase in accounts payable. The additional accounts receivable at June 30,
1998 are expected to be collected in full in 1998.
13
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Net cash provided by investing activities for the six months ended June 30, 1998
was $9,315,000, compared to a use of $25,000 for the six months ended June 30,
1997. The increase in cash provided is primarily the result of maturing
marketable securities which were used to fund operating activities offset by the
purchase of a subsidiary, HWS REAG, the investment in the ING Joint Venture,
which purchased the Clarion Quality Hotel and the investment in mortgages
receivable.
Net cash provided by financing activities for the six months ended June 30, 1998
was $4,197,000 compared to net cash provided of $1,831,000 for the same period
last year. The primary financing source in the six months ended June 30, 1998
was the proceeds from borrowings on the Company's available line of credit.
As the Company grows and continues to explore opportunities for strategic
alliances and acquisition, investment in additional support systems, including
infrastructure and personnel will be required. The Company expects to increase
its costs and expenses as it continues to invest in the development of its
businesses. Although these increases may result in a short-term reduction in
operating margin as a percentage of revenues, the Company anticipates that its
investments 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.
The Company believes its present cash position, including increasing revenues
and cash on hand, amounts available under lines of credit and its ability to
obtain additional financing as necessary, will allow the Company to meet its
short-term operating needs for at least the next twelve months.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 25, 1998, the Company held its 1998 Annual Meeting of
Shareholders (the "Meeting"), whereby the shareholders (1) elected 7 members to
the Company's Board of Directors; (2) approved amendments to the Company's
Certificate of Incorporation and By-Laws to create three classes of directors
serving for staggered terms ranging from one to three years; (3) approved an
amendment to the Company's Certificate of Incorporation to increase (i) the
number of authorized shares of common stock from 20,000,000 to 50,000,000, and
(ii) the number of authorized shares of preferred stock from 3,000,000 to
5,000,000; (4) approved an amendment to the Company's 1996 Stock Option Plan to
increase the number of shares of common stock issuable upon exercise of stock
options granted thereunder from 1,700,000 to 2,700,000; and (5) ratified the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1998. The vote on such
matters was as follows:
1. Election of Directors:
NUMBER OF SHARES OF NUMBER OF SHARES OF
COMMON STOCK COMMON STOCK
TO THE BOARD OF DIRECTORS: FOR WITHHELD AUTHORITY
Robert A. Berman 11,133,902 107,672
Leonard F. Parker 11,133,902 107,672
Douglas A. Parker 11,133,902 107,672
Scott A. Kaniewski 11,133,902 107,672
Louis K. Adler 11,133,902 107,672
George Asch 11,133,902 107,672
Richard A. Bartlett 11,133,902 107,672
14
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2. Approval of amendments to the Company's Certificate of Incorporation
and By-Laws to create three classes of directors serving for
staggered terms ranging from one to three years:
FOR AGAINST ABSTAINING
6,670,084 2,599,870 45,896
3. Approval of an amendment to the Company's Certificate of
Incorporation to increase (i) the number of authorized shares of
Common Stock from 20,000,000 to 50,000,000, and (ii) the number of
authorized shares of Preferred Stock from 3,000,000 to 5,000,000,
were as follows:
FOR AGAINST ABSTAINING
7,087,452 1,822,348 35,750
4. Approval of an amendment to the Company's 1996 Stock Option Plan to
increase the number of shares issuable upon exercise of stock
options granted thereunder from 1,700,000 to 2,700,000:
FOR AGAINST ABSTAINING
6,965,869 2,378,621 67,360
5. Ratification of the appointment of Arthur Andersen, LLP as the
Company's independent certified public accountants for the fiscal
year ending December 31, 1998 were as follows:
FOR AGAINST ABSTAINING
11,210,232 11,992 19,350
Item 5. Other Information
In accordance with recent amendments to the proxy rules under the
Securities Exchange Act of 1934, as amended, the Company's shareholders are
notified that the deadline for providing the Company timely notice of any
shareholder proposal to be submitted outside of the Rule 14a-8 process for
consideration at the Company's 1999 Annual Meeting of Shareholders will be April
7, 1999. As to all such matters as to which the Company does not have notice on
or prior to April 7, 1999, discretionary authority shall be granted to the
designated persons in the Company's proxy for such Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation, as amended, of the
Company.
3.2 Amended and Restated By-laws of the Company.
10 Master Development Agreement, dated June 5, 1998, by
and between the Company and Prime Hospitality Corp.
11 Computation of earnings per share (Incorporated herein
by reference to Note 9 to the Company's Consolidated
Financial Statements).
27 Financial Data Schedule
(b) Reports on Form 8-K
APRIL 15, 1998 THE FOLLOWING EVENT WAS REPORTED:
The Company filed a Form 8-K/A to amend the filing of Form 8-K/A on March 24,
1998 to include certain revised pro forma financial statements with respect to
the Company's acquisition of Bekins.
The following financial statements were filed with this report:
Hospitality Worldwide Services, Inc. Pro Forma Financial Information.
Balance Sheet as of September 30, 1997.
Income Statement for the nine months ended September 30, 1997. Income Statement
for the year ended December 31, 1996.
15
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /S/ROBERT A. BERMAN
-------------------------------------
ROBERT A. BERMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By: /S/HOWARD G. ANDERS
-------------------------------------
HOWARD G. ANDERS
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER,
PRINCIPAL ACCOUNTING OFFICER) AND
SECRETARY
Dated: August 14, 1998
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
HOSPITALITY WORLDWIDE SERVICES, INC.
Under Section 402 of the Business Corporation Law
1. The name of the corporation is HOSPITALITY WORLDWIDE SERVICES, INC.
(hereinafter referred to as the "Corporation").
2. The purpose or purposes for which the Corporation is formed are as
follows; to wit,
To engage in any lawful act or activity for which corporations may be formed
under the Business Corporation Law. The Corporation is not formed to engage in
any act or activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or approval first
being obtained.
To own, operate, manage, acquire and deal in property, real and personal, which
may be necessary to the conduct of the business.
The Corporation shall have all of the powers enumerated in Section 202 of the
Business Corporation Law, subject to any limitations provided in the Business
Corporation Law or any other statute in the State of New York.
3. The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (b) of
Section 402 of the Business Corporation Law of the State of New York, as the
same may be amended and supplemented. Any repeal or modification of this Article
by the shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing hereunder with respect to
any act or omission occurring prior to such repeal or modification.
4. The county in which the office of the corporation is to
be located in the State of New York is: Nassau
5. The aggregate number of shares of stock that the Corporation shall
have authority to issue is (i) twenty million
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(20,000,000) shares of Common Stock, $0.01 par value per share ("Common Stock"),
and (ii) three million (3,000,000) shares of Preferred Stock, $0.01 par value
per share ("Preferred Stock"). The Board of Directors is hereby authorized to
fix or alter the rights, preferences, privileges and restrictions granted to or
imposed upon any series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or of any of them.
I. DESIGNATIONS AND AMOUNT. 200,000 shares of the Preferred
Stock of the Corporation, stated value of $25 (the "Stated Value") per share,
shall constitute a class of Preferred Stock designated as "Redeemable
Convertible Preferred Stock" (the "Preferred Stock").
II. RANK. The Preferred Stock shall rank senior to all classes
and series of common stock of the Corporation now or hereafter authorized,
issued or outstanding, including, without limitation, the Common Stock, par
value $.01 per share ("Common Stock") of the Corporation, and any other classes
and series of capital stock of the Corporation now or hereafter authorized,
issued or outstanding and specifically designated as being junior to the
Preferred Stock (collectively, the "Junior Securities"). Unless authorized by a
vote of the holders of a majority of the Preferred Stock then outstanding, no
other capital stock of the Corporation shall rank senior to the Preferred Stock.
III. DIVIDENDS.
(a) The holders of shares of Preferred Stock shall
be entitled to receive, out of assets of the Corporation legally available for
payment, cash dividends at the rate of six percent (6%) (or $1.50) per annum per
share of Preferred Stock (the "Preferred Dividend"), payable annually and in
arrears on the ninetieth day following the end of the fiscal year of The Leonard
Parker Company, a Florida corporation ("LPC") in each year, commencing March 31,
1998 (each a "dividend payment date"); PROVIDED, HOWEVER, that if on any such
day banks in the City of New York are authorized or required to close, a
Preferred Dividend otherwise payable on such day will be payable on the next day
that banks in the City of New York are not authorized or required to close. Such
Preferred Dividend shall accrue from the date of issuance and be cumulative from
the later of the date of initial issuance of such shares of Preferred Stock or
the most recent dividend payment date on which dividends have been paid on the
Preferred Stock by the Corporation. The party that holds the Preferred Stock on
an applicable record date, as shall be fixed by the Board, for any Preferred
Dividend will be entitled to receive such Preferred Dividend, without regard to
whether the Preferred Stock is outstanding subsequent to the applicable record
date but prior to the applicable dividend payment date. If the Corporation is
legally capable of paying the Preferred
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Dividend and elects to accrue such amount, such accrued dividends shall bear
interest at the rate of 13 1/2% per annum until paid.
(b) So long as any Preferred Stock shall
remain outstanding, the holders of the Preferred Stock shall be entitled to
receive, and Parker Reorder Corporation, a Florida corporation ("Parker
Reorder"), shall pay, out of the cumulative net profits (the "Cumulative Net
Profits") of Parker Reorder, a cash payment (the "Participating Dividend") equal
to twenty percent (20%) of (i) the Cumulative Net Profits of Parker Reorder,
less (ii) all Participating Dividends previously made to the holders of the
Preferred Stock hereunder, such Participating Dividend to be payable annually to
the holders of the Preferred Stock ninety (90) days following the end of each
fiscal year of Parker Reorder. Such Participating Dividend shall be paid in only
such amounts as shall be authenticated by a certificate executed by two officers
of the Corporation. "Cumulative Net Profits" shall mean net profits of Parker
Reorder computed in accordance with generally accepted accounting principles
based on the audited financial statements of Parker Reorder, assuming that taxes
and other charges are assessed as if it were a standalone company, cumulative
from January 1, 1997. For purposes of calculating Cumulative Net Profits,
expenses allocated to Parker Reorder for goods or services provided by any
affiliate of the Company shall not exceed the sum Parker Reorder would have paid
for such goods or services to an unaffiliated third party. In the event that the
Preferred Stock ceases to be outstanding at a time prior to the end of a fiscal
year of Parker Reorder, Cumulative Net Profits and, consequently, the
Participating Dividend, shall be computed as of the end of the most recently
completed fiscal quarter of Parker Reorder and shall be paid within ninety (90)
days after the Preferred Stock ceases to be outstanding.
(c) So long as any Preferred Stock shall remain
outstanding, neither the Corporation nor any subsidiary thereof shall pay or
declare any dividend or make any distribution upon, nor shall any distribution
be made in respect of, any Junior Securities, unless all accrued and unpaid
Preferred Dividends on the Preferred Stock for all prior and applicable dividend
periods have been or contemporaneously are declared and paid and the Preferred
Dividends on the Preferred Stock for the current and applicable dividend period,
if accrued, have been or contemporaneously are declared and set apart for
payment.
IV. RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP,
ETC.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation available for distribution to the stockholders of the Corporation,
whether from capital, surplus or earnings, shall be distributed in the following
order of priority:
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(i) The holders of shares of Preferred Stock
shall be entitled to receive, in cash, prior and in preference to any
distribution to the holders of any Junior Securities an amount equal to the
Stated Value for each share of the Preferred Stock then outstanding, plus an
amount equal to all accrued and unpaid Preferred Dividends and interest thereon,
if any, on such shares of Preferred Stock as of the date such payment is made to
the holders of shares of Preferred Stock; and
(ii) If there is a distribution pursuant to
Section IV(a)(i) hereof, the remaining assets of the Corporation available for
distribution, if any, to the stockholders of the Corporation shall be
distributed pro rata to the holders of issued and outstanding shares of Common
Stock.
(b) If upon any liquidation, dissolution or winding
up of the Corporation, the assets distributable among the holders of shares of
Preferred Stock are insufficient to permit the payment in full to the holders of
all such shares of all preferential amounts payable to all such holders, then
the entire assets of the Corporation thus distributable shall be distributed
ratably among the holders of the shares of Preferred Stock in proportion to the
respective amounts that would be payable per share if such assets were
sufficient to permit payment in full.
(c) For purposes of this Section IV, a distribution
of assets in any liquidation, dissolution or winding up shall not include (i)
any consolidation or merger of the Corporation with or into any other
corporation, (ii) any liquidation, dissolution, winding up or reorganization of
the Corporation immediately followed by reincorporation of another corporation
or (iii) a sale or other disposition of all or substantially all of the
Corporation's assets to another corporation; PROVIDED, HOWEVER, that, in each
case, effective provision is made in the certificate of incorporation of the
resulting and surviving corporation or otherwise for the protection of the
rights of the holders of shares of Preferred Stock and that the holders of a
majority of the Preferred Stock then outstanding, voting as a class, shall have
given their approval.
(d) After the payment of the full preferential
amounts provided for herein to the holders of shares of Preferred Stock, such
holders shall be entitled to no other or further participation in the
distribution of the assets of the Corporation.
V. REDEMPTION OF PREFERRED STOCK.
(a) OPTIONAL REDEMPTION. At any time and from time to
time after the third anniversary of the closing of the purchase by the
Corporation of all of the common stock of LPC
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(the "Closing"), the Corporation shall have the option, on a pro rata basis, to
(unless otherwise prevented by law) redeem all, or any portion of, the Preferred
Stock in accordance with Section V(c) and upon 30 days prior written notice of
the Corporation's intention to exercise the redemption option to the holders of
shares of Preferred Stock, at a redemption price equal to the Stated Value for
each such share of the Preferred Stock then outstanding, plus an amount equal to
all accrued and unpaid Preferred Dividends and interest thereon, if any, on such
shares of Preferred Stock as of the date such redemption is exercised.
(b) MANDATORY REDEMPTION. At any time after the
fifth anniversary of the Closing, at the request of the holders of all of the
Preferred Stock, the Corporation must redeem, within 90 days after such notice
is received, all of the Preferred Stock in accordance with Section V(d), at a
redemption price equal to the Stated Value for each such share of the Preferred
Stock then outstanding, plus an amount equal to all accrued and unpaid Preferred
Dividends and interest thereon, if any, on such shares of Preferred Stock as of
the date such redemption is exercised. If the Corporation does not redeem all of
the Preferred Stock as provided in this Section V(b) within 90 days of notice
duly served upon the Corporation in accordance with Section V(d) by holders of a
majority in interest of the Preferred Stock, then the holders of the Preferred
Stock, voting together as a class, shall be entitled to elect such number of
directors of the Corporation as shall equal the minimum number required to equal
a majority of such Board of Directors. In order to effect such election, the
Corporation will, to the extent necessary, expand its Board of Directors to
allow for such additional members and will take all such additional actions as
may be reasonably necessary. Upon payment of the redemption price of the
Preferred Stock, the class vote as described herein shall expire and the holders
of the Preferred Stock shall cause the directors so elected to resign. The
obligation of the Corporation to redeem the Preferred Stock pursuant to this
Section V(b) shall be secured by a pledge of all of the capital stock of LPC, as
evidenced by that certain Pledge Agreement, dated January 9, 1997.
(c) OPTIONAL REDEMPTION PROCEDURE. Notice of any
Preferred Stock redemption date pursuant to Section V(a) hereof shall be sent by
the Corporation by first-class certified mail, return receipt requested, postage
prepaid, to the holders of record of shares of Preferred Stock at their
respective addresses as the same shall appear on the books of the Corporation at
its principal corporate office. At any time on or after any Preferred Stock
redemption date, the holders of record of shares of Preferred Stock to be
redeemed on such Preferred Stock redemption date in accordance with this Section
V shall be entitled to receive the applicable redemption price upon actual
delivery to the
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<PAGE>
Corporation or its agents of the certificates representing the shares to be
redeemed or delivery of an affidavit, in form reasonably acceptable to the
Corporation, that such certificates have been lost or destroyed.
(d) MANDATORY REDEMPTION PROCEDURE. If the
Corporation receives an election from the holders of the Preferred Stock
pursuant to Section V(b) hereof, notice of the Preferred Stock redemption date
(which shall be on or before the date 90 days after notice to the Corporation)
shall be sent by the Corporation by first-class certified mail, return receipt
requested, postage prepaid, to the holders of record of shares of Preferred
Stock at their respective addresses as the same shall appear on the books of the
Corporation. At any time on or after any Preferred Stock redemption date, the
holders of record of shares of Preferred Stock to be redeemed on such Preferred
Stock redemption date in accordance with this Section V shall be entitled to
receive the applicable redemption price upon actual delivery to the Corporation
or its agents of the certificates representing the shares to be redeemed.
VI. VOTING RIGHTS.
(a) Except as hereinafter set forth, the holders of
Preferred Stock shall be entitled to vote together with the holders of the
Common Stock on all matters submitted to the holders of the Common Stock. Each
share of Preferred Stock shall be entitled to 4.17 votes.
(b) The holders of record of the Preferred Stock,
voting as a class, shall be entitled to elect two (2) directors of the
Corporation's Board of Directors at any time that any of the Preferred Stock is
outstanding.
(c) The holders of the Preferred Stock shall be
entitled to vote as a class with respect to any action of the Corporation
adversely affecting the Preferred Stock, its rights and preferences.
VII. CONVERSION OF PREFERRED STOCK.
(a) Any holder of the Preferred Stock shall have
the right at such holders' option, at any one time during the period beginning
immediately after the first anniversary of the Closing and ending on the third
anniversary of the Closing, to convert all of such holder's shares of Preferred
Stock into (i) such whole number of shares of Common Stock equal to the product
of the Stated Value and the number of such holder's shares of Preferred Stock,
divided by the average closing sale price (determined as provided in Section
VII(e)) 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
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<PAGE>
Rate"); PROVIDED, HOWEVER, that in no case shall the number of shares of Common
Stock into which each share of Preferred Stock 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.
(b) Before any holder of shares of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, such holder
shall give (a) 10 days written notice in the case of exercising the conversion
rights set forth in Section VII(a)(i) (which notice shall not be given later
than 10 days prior to the end of the third anniversary of the Closing) or (b) 30
days written notice in the case of exercising the conversion rights set forth in
Section VII(a)(ii) to the Corporation at its principal corporate office of the
election to convert the same and shall state therein the name or names in which
the certificates for shares of Common Stock are to be issued. After the
expiration of the applicable notice period, the holder of shares of Preferred
Stock shall surrender the certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for the Preferred Stock. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, or to the nominee or nominees of such
holder, certificates for the number of shares of Common Stock or Parker Common
Stock to which such holders shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock or Parker
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock or Parker Common
Stock as of such date.
(c) The Corporation shall not be required to issue
fractions of shares of Common Stock upon conversion of the Preferred Stock. If
any fractions of a share would, but for this Section, be issuable upon any
conversion of Preferred Stock, in lieu of such fractional share, the Company
shall pay to the holder, in cash, an amount equal to the same fraction of the
price per share of Common Stock as determined in Section VII(a)(i).
Notwithstanding the foregoing, Parker Reorder may issue fractions of shares of
Parker Common Stock upon conversion of the Preferred Stock.
(d) The Corporation and Parker Reorder shall reserve
and shall at all times have reserved out of each of their respective authorized
but unissued shares of Common Stock sufficient shares of Common Stock to permit
the conversion
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of the then outstanding shares of the Preferred Stock pursuant to this Section
VII. All shares of Common Stock or shares of Parker Common Stock which may be
issued upon conversion of shares of the Preferred Stock pursuant to this Section
VII shall be validly issued, fully paid and nonassessable.
(e) The closing price for each day shall be the last
reported sale price or, in case no such reported sale takes place on such date,
the average of the reported closing bid prices for ten consecutive trading days
ending the last trading day before the day in question, on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, the closing sale price of Common Stock, or in case no reported sale
takes place, the average of the daily closing bid and asked prices, for ten
consecutive trading days ending the last trading day before the day in question,
on the Nasdaq SmallCap Market ("NASDAQ"), or if Common Stock is not quoted on
NASDAQ, the OTC Electronic Bulletin Board or any comparable system, the closing
sale price or, in case no reported sale takes place, the average of the closing
bid and asked prices, as furnished by any two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose. If Common Stock is not quoted on NASDAQ, the OTC
Electronic Bulletin Board or any comparable system, the Board of Directors shall
in good faith determine the current market price on such reasonable basis as it
reasonably considers appropriate.
(f) If any of the following shall occur: (i) any
reclassification, stock split or change of outstanding shares of Common Stock
issuable upon conversion of shares of Preferred Stock (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 (ii) any consolidation or
merger to which the Corporation is a party other than a merger in which the
Corporation is the continuing corporation and which does not result in any
reclassification or stock split of, or change (other than a change in name, or
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) in, outstanding shares of Common
Stock, then in addition to all of the rights granted to the holders of Preferred
Stock as designated herein, the Corporation, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to such
reclassification, stock split, change, consolidation or merger, provide in its
certificate of incorporation or other charter document that each share of
Preferred Stock shall have rights which shall be as nearly equivalent as may be
practicable to the rights provided for in this Section VII. If, in the case of
any such
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reclassification, stock split, change, consolidation merger, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Common Stock includes shares of capital stock or other securities and property
of a corporation other than the successor purchasing corporation, as the case
may be, in such reclassification, stock split, change, consolidation or merger,
then the certificate of incorporation or other charter document of such other
corporation shall contain such additional provisions to protect the interests of
the holders of shares of the Preferred Stock as the Board of Directors shall
reasonably consider necessary by reason of the foregoing. The provision of this
Section VII(f) shall similarly apply to successive consolidations, mergers,
sales or conveyances.
(g) The Corporation will not, by amendment of its
Certificate of Incorporation, as amended, or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section VII and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Preferred Stock against impairment.
VIII. NOTICES OF RECORD DATE. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall mail to each
holder of Preferred Stock, at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
IX. RESTRICTION OF TRANSFERABILITY. The shares of Preferred
Stock may not be sold, assigned or transferred except in accordance with the
provisions of Sections V and VII.
X. OTHER. The Corporation and its affiliates may not
purchase shares of Preferred Stock except ratably from all
holders thereof.
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PREFERENCE STOCK:
Section 1. Designation, Amount and Par Value. The series of
Preference Stock shall be designated as "Series A Preference Stock" (the "Series
A Preference Stock"), and the number of shares so designated shall be 100,000.
The par value of each share of Preference Stock shall be $.01. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Series A
Preference Stock to a number less than the number of shares then outstanding
plus the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series A Preference Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any
shares of any series of Preference Stock (or any similar stock) ranking prior
and superior to the Series A Preference Stock with respect to dividends, the
holders of shares of Series A Preference Stock, in preference to the holders of
Common Stock, par value $.01 per share (the "Common Stock"), of the Corporation,
and of any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preference Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preference Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preference Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
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shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preference Stock as provided in paragraph (A) of
this Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Series A Preference Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preference Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preference Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preference Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by- share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preference
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of
Series A Preference Stock shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preference Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
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<PAGE>
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A Preference
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preference Stock or any similar
stock, or by law, the holders of shares of Series A Preference Stock and the
holders of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) Except as set forth in the Certificate of
Incorporation or herein, or as otherwise provided by law, holders of Series A
Preference Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Reacquired Shares. Any shares of Series A
Preference Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preference Stock and may be reissued as part of a new series
of Preference Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designations creating a series of Preference Stock or any similar stock or as
otherwise required by law.
Section 5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preference Stock unless, prior thereto, the holders of shares of Series A
Preference Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preference Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or
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<PAGE>
(2) to the holders of shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preference Stock, except distributions made ratably on the Series A Preference
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preference Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 6. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series A Preference Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preference Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. No Redemption. The shares of Series A Preference
Stock shall not be redeemable.
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<PAGE>
Section 8. Rank. The Series A Preference Stock shall be of
equal rank in respect of the preference as to dividends and to payments upon the
liquidation, dissolution or winding up, whether voluntary or involuntary, of the
Corporation, with all shares of Preference Stock of all series.
Section 9. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preference
Stock so as to affect them adversely without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Series A Preference Stock,
voting together as a single class.
6. The Secretary of State is designated as agent of the corporation
upon whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served upon him is:
The Corporation
218 Rockaway Turnpike, Suite 707
Cedarhurst, New York 11516
7. The directors shall be divided into three clases, each with, as
nearly as possible, one-third of the members of the Board of Directors, and
designated as Class I, Class II and Class III. Class I directors shall be
initially elected at the 1998 Annual Meeting of Shareholders for a term expiring
at the 1999 Annual Meeting of Shareholders; Class II directors shall be
initially elected at the 1998 Annual Meeting of Shareholders for a term expiring
at the 2000 Annual Meeting of Shareholders; Class III directors shall be
initially elected at the 1998 Annual Meeting of Shareholders for a term expiring
at the 2001 Annual Meeting of Shareholders. At each succeeding annual meeting of
shareholders of the Corporation, the successors of the class of directors whose
term expires at that meeting shall be elected for a term expiring at the annual
meeting of shareholders held in the third year following the year of their
election, and until their successors are elected and qualified.
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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 AND JULY 6, 1998)
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.
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
<PAGE>
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 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 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.
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<PAGE>
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.
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 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.
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<PAGE>
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 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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<PAGE>
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.
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. Any newly created directorships or any decrease
in directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as possible.
Section 3. ELECTION AND TERM. The directors shall be divided into three
classes, each with, as nearly as possible, one-third of the members of the Board
of Directors, and designated as Class I, Class II and Class III. Class I
directors shall be initially elected at the 1998 Annual Meeting of Shareholders
for a term expiring at the 1999 Annual Meeting of Shareholders; Class II
directors shall be initially elected at the 1998 Annual Meeting of
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<PAGE>
Shareholders for a term expiring at the 2000 Annual Meeting of Shareholders; and
Class III directors shall be initially elected at the 1998 Annual Meeting of
Shareholders for a term expiring at the 2001 Annual Meeting of Shareholders. At
each succeeding annual meeting of shareholders of the Corporation, the
successors of the class of directors whose term expires at that meeting shall be
elected for a term expiring at the annual meeting of shareholders held in the
third year following the year of their election, and until their successors are
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 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 purpose, or, if none has been so
designated, at his last known residence or business address.
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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.
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. A director
elected to fill a vacancy for a newly created directorship shall be elected to
hold office until the next annual meeting of shareholders and until his
successor has been elected and qualified. For any new Board created directorship
that is filled by a vote of a majority of the directors then in office, there
shall not be any classification of the additional director until the next annual
meeting of shareholders. 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
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<PAGE>
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;
(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, 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
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<PAGE>
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 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 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.
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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.
(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 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
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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.
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 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;
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(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 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.
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
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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 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.
(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.
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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 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 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
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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, amendment, repeal or adoption of new by-laws
shall have been stated in the notice of such special meeting.
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MASTER DEVELOPMENT AGREEMENT
THIS MASTER DEVELOPMENT AGREEMENT (the "Agreement") is made and
entered into as of June 5, 1998, between PRIME HOSPITALITY CORP., a Delaware
corporation, having its principal place of business at 700 Route 46 East,
Fairfield, New Jersey 07004 ("Prime"), and HOSPITALITY WORLDWIDE SERVICES, INC.,
a New York corporation, having its principal place of business at 450 Park
Avenue, Suite 2603, New York, New York 10022 ("HWS") (Prime and HWS may
individually be referred to herein as a "Party" or collectively as the
"Parties").
R E C I T A L S :
WHEREAS, the Parties desire to collectively identify, purchase,
acquire, own, hold, plan, design, construct, finance, lease, manage, operate
and/or sell hotel properties under the "AmeriSuites" brand name, pursuant to a
franchise agreement with AmeriSuites Hospitality, Inc. (all such activities
being hereinafter referred to, collectively, as the "Business") through
individual limited liability companies (each a "Company" and together the
"Companies"), formed for the exclusive purpose of developing a single hotel
property (each a "Project") purchased 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, all as more particularly described herein.
NOW, THEREFORE, in consideration of the mutual agreements, promises,
and undertakings hereinafter set forth, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto hereby agree that the following shall
constitute the Agreement between the Parties:
ARTICLE I
OPERATION OF THE BUSINESS
1.1 HWS BUSINESS PLAN; TRACKING REPORTS.
(a) HWS shall prepare and present to Prime a business plan
specifying the markets and submarkets in which it proposes to conduct the
Business (the "Business Plan"). The initial Business Plan will include the
following regions: (i) the east coast market from Boston south through
Washington, D.C., and (ii) the west coast market from Seattle to San Diego
(collectively, the "Target Market"). The Parties agreed that HWS may explore
other sites outside the Target Market (the "Opportunity"), provided that HWS
submits such Opportunity to Prime for its approval.
(b) HWS shall provide to Prime a monthly tracking report,
containing, with regard to each Project identified, including, without
limitation, those for which a "PAP" (as defined in Section 1.3) has yet to be
<PAGE>
prepared and approved and those for which an Operating Agreement (as defined in
Section 1.4) has been executed, the information described on Exhibit 1.1(b)
hereto, specifying HWS' progress in the identification of markets, the progress
of specific Projects and other matters reasonably specified by Prime.
1.2 IDENTIFICATION OF PROJECTS. HWS shall be primarily responsible
for identifying the location of sites within the Target Market for a Project.
Notwithstanding, Prime shall also have the right to identify and present
potential development sites to HWS for its approval as part of the Business.
However, in either case, the Party that identifies a potential development site
must prepare and submit a PAP to the other Party in accordance with Section 1.3
of this Agreement.
1.3 PRELIMINARY APPROVAL PACKAGE ("PAP"); AUTHORIZATION TO PROCEED.
(a) Once a potential site is identified pursuant to Section 1.2, HWS
or Prime, as the case may be, shall prepare a "Preliminary Approval Package" or
"PAP" which shall set forth all of the pertinent information relating to the
subject property, including, without limitation, the information described on
Exhibit 1.3(a)-1 attached hereto, and submit such information to the other Party
for its approval. The receiving Party shall have five (5) days from the date of
receipt of the PAP to either approve or disapprove of the proposed site in
writing. Either Party's failure to respond in writing within the five-day period
shall be deemed as an approval of the proposed site. In the event that Prime
rejects a site proposal, HWS shall then be restricted from developing any
AmeriSuites Competitive Hotel on the site independent of this Agreement. For
purposes of this paragraph, an "AmeriSuites Competitive Hotel" shall be deemed
to mean any mid-to-upper scale suite hotel without food and beverage service
(for purposes of this restriction, a complimentary breakfast bar shall not
constitute food and beverage service), including, without limitation, those
hotels listed on Exhibit 1.3(a)-2 attached hereto, provided, however, Prime may
waive this restriction in writing to allow HWS to develop an AmeriSuites
Competitive Hotel on the site.
(b) Once a PAP is approved, the Parties, in advance of forming the
Company and executing the Operating Agreement (as hereafter defined) for the
Project pursuant to Section 1.4 below, may elect to authorize HWS to initiate
the process of obtaining one or more the contracts, plans and studies described
in Article 3 of the Operating Agreement, by completing and executing the form
attached hereto as Exhibit 1.3(b) (the "Authorization to Proceed"). Upon
execution of the Authorization to Proceed, HWS shall initiate the process of
obtaining the items described thereon in a manner consistent with the applicable
provisions of the Operating Agreement, with the Parties agreeing to share
equally in the costs incurred by HWS in connection therewith. Additionally, as
more particularly set forth in the Operating Agreement and subject to the
limitations set forth therein, upon approval of a PAP for a Project, Prime and
HWS each shall be entitled to reimbursement by the Company for the out-of-pocket
costs incurred by such Party in preparing and/or evaluating the PAP and Project
site generally.
1.4 FORMATION OF COMPANIES. Once a PAP is approved and the Parties
elect to proceed with a Project, a Company shall be formed for the purpose of
purchasing, acquiring, owning, holding, planning, designing, financing,
<PAGE>
constructing, leasing, managing, operating and selling such Project. The
operating agreement for each Company shall be substantially in the form of the
base form of operating agreement attached hereto as Exhibit 1.4 and incorporated
herein by this reference (the "Operating Agreement"), which shall define the
rights, obligations and responsibilities of the Company and each of the Parties
with respect to each such Project. Upon execution of an Operating Agreement for
a Project, except as specifically provided otherwise herein, the terms of this
Agreement shall be superseded by the terms of the Operating Agreement (and any
agreements executed in connection therewith) with respect to said Project, and
the terms of the Operating Agreement (and any agreements executed in connection
therewith) thereafter shall govern all aspects of said Project, including,
without limitation, the relationship of the Parties with respect to said
Project. Except as set forth in the Operating Agreement or as otherwise agreed
to by the Parties, no investors or partners other than Prime and HWS shall be
permitted to own any interest, whether beneficial or nominal, in a Company
formed or a Project undertaken pursuant to this Agreement; provided, however, it
is acknowledged and agreed that the foregoing limitation shall not apply to a
five percent (5%) equity interest which was granted by HWS to Hospitality
Investment Counselors, Inc. ("HIC") pursuant to a contractual arrangement
between HIC and HWS in each Project. Consequently, the five percent (5%) equity
interest granted by HWS to HIC shall effectively reduce HWS' percentage
ownership interest in a Company, but shall not in any way dilute Prime's
percentage ownership interest (50%) in a Company.
1.5 CAPITALIZATION OF THE COMPANIES; FINANCING OF PROJECTS.
(a) The mutual goal of the Parties is to develop approximately ten
(10) to twenty (20) Projects pursuant to this Agreement. The total equity
necessary to achieve this goal is estimated to be approximately Sixty Million
Dollars ($60,000,000). In accordance with and subject to the terms of the
Operating Agreement, for each Project approved pursuant to Section 1.3 above,
Prime and HWS shall make equity contributions to the Company on a 50%-50% PRO
RATA pari passu basis, either directly or indirectly, for the purpose of
purchasing, developing and constructing a final Project.
(b) Unless otherwise agreed by the Parties, each Company shall elect
to finance the acquisition, construction and permanent financing of a Project
through the effort of Prime. Upon the execution of this Agreement, Prime shall
attempt or shall continue to attempt to arrange for construction and permanent
financing for the Projects. Prime shall endeavor to negotiate to obtain such
financing from one or more third party institutional lenders on commercially
reasonable terms which will be subject to approval by Prime and HWS. If required
by the lender, Prime and HWS will jointly and severally guarantee completion of
the hotels associated with each Project. Once financing for all or a portion of
the Projects has been arranged by Prime and approved by both parties, Prime and
HWS each agree to pay 50% of all costs and fees payable in connection with said
financing (the "Financing Fees"), as and when such Financing Fees are due and
payable, regardless of whether the specific Projects which will utilize such
financing have been identified. Once the parties have executed an Operating
Agreement for a Project, a pro rata portion of the Financing Fees (the "Project
Financing Fees") will be allocated to such Project and the Company formed for
that Project will reimburse Prime and HWS for the Project Financing Fees in
accordance with the terms of the Operating Agreement.
<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.
2.2 REPRESENTATIONS AND WARRANTIES. Each Party hereby represents and
warrants that:
(a) DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENT. 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 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 or corporate, power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and, the execution, delivery, and performance of this Agreement has
been duly authorized by all necessary corporate action. This Agreement
constitutes the legal, valid and binding obligation of such Party.
(b) NO CONFLICT WITH RESTRICTIONS; NO DEFAULT. Neither the
execution, delivery, 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 or bylaws of such Party or any of its wholly-owned
affiliates if such Party is a corporation 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 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,
<PAGE>
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. Each Party is entering into this Agreement 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, and not in reliance on any
representation or promise of the other Party which is not contained in this
Agreement.
(f) NO BROKERS. No brokers have been involved in either the
consummation of this Agreement or any Company formed hereunder and no
commissions, finder's fees or other compensation are due to any brokers or
agents with regard to this Agreement or any Company to be formed hereunder. The
foregoing representation does not extend to any brokers which may be involved
with, or commissions which may be payable in connection with, the purchase of
any real property for a Project.
ARTICLE III
MUTUAL COVENANTS OF THE PARTIES
3.1 MUTUAL EFFORTS. The Parties agree to endeavor to purchase,
develop, own, operate and sell each Project to achieve the purpose of this
Agreement.
3.2 COMMUNICATION. Both Parties commit to communicate regularly with
one another through their respective development representatives in a particular
market and inform one another of any potential conflicts which would affect this
Agreement or any other related agreements.
<PAGE>
3.3 INDEPENDENT IDENTIFICATION AND DEVELOPMENT. Except as otherwise
stated herein, each of the Parties, and their affiliates, shall be free to
identify, purchase and develop sites independent of this Agreement and to
receive the income and benefits thereof (and no other Party shall have any
interest therein by reason of this Agreement). HWS specifically acknowledges
Prime's continuing right to develop sites independently and through alliances
with other third parties, and to grant other franchise rights, in all markets,
including, without limitation, those markets and sub-markets targeted by HWS.
3.4 NO JOINT VENTURE OR PARTNERSHIP CREATED HEREBY. By entering into
this Agreement, the Parties are not creating a joint venture or partnership and
are not authorizing the other to bind either of them in any way not expressly
set forth herein.
3.5 COSTS. Except as expressly provided otherwise herein, in the
Operating Agreement, or in any other agreements executed by the Parties hereto,
each Party shall bear solely the costs incurred by such Party in connection with
this Agreement.
ARTICLE IV
NONDISCLOSURE OF INFORMATION
4.1 CONFIDENTIALITY. All disclosures of trade secrets, know-how,
financial information, or other confidential information made to any Party or
made by any Party under or in connection with this Agreement, shall be received
and maintained in confidence by the recipient during the term hereof and for
three (3) years after termination of this Agreement 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 information as is required by law to be
disclosed by the Parties or the Companies; and
(d) 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 shall endeavor to assume 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.
<PAGE>
ARTICLE V
TERMINATION AND DISSOLUTION
5.1 RIGHT TO TERMINATE. Notwithstanding any other provision of this
Agreement to the contrary, Prime or HWS may terminate this Agreement (the
"Termination Option"). The Termination Option may be exercised by either Prime
or HWS at any time by giving ninety (90) days' written notice to the other Party
of its intention to terminate. No Party shall be in default of this Agreement by
virtue of its exercise of the Termination Option. Further, the Parties shall
thereafter be released from all obligations and restrictions under this
Agreement, except as specifically set forth herein. 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
or contract to purchase land or any liabilities of the Parties arising under
this Agreement prior to the date of exercise of the Termination Option.
ARTICLE VI
DISPUTE RESOLUTION
6.1 ARBITRATION. Any dispute, controversy or claim of whatever
nature (except an interlocutory hearing for 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 the breach hereof, shall be settled by arbitration if 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. Notwithstanding anything herein which may be to the contrary, upon the
execution of an Operating Agreement for a Project, any disputes arising in
connection with said Project will be governed solely by the terms of the
Operating Agreement (and by any other agreements executed in connection
therewith).
6.2 NOTICE. Upon written notice by a Party to another Party of a
request by 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 an
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 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 of a Party fails
to comply with the procedures in any arbitration in any manner 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.
<PAGE>
6.3 BINDING NATURE. The determination and award of the arbitrator
shall be final and binding on the Parties. Judgment upon the award rendered by
the arbitrator may be entered in any court of competent 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 and shall be effective upon receipt if hand delivered or sent by
telecopy or similar electronic means or one (1) business day following deposit
with any nationally recognized overnight delivery service. Such notices shall be
delivered by hand delivery, by telecopy, or similar electronic means, or by
nationally recognized overnight courier providing next business day service,
fees prepaid, addressed as follows:
If to HWS: Hospitality Worldwide Services, Inc.
450 Park Avenue, Suite 2603
New York, New York 10022
ATTN: Mr. Cory Rapkin
With a copy to: c/o HWS Realty Estate Advisory Group, Inc.
1700 Broadway, Suite 1400
Denver, Colorado 80290
ATTN: Mr. Geoff Davis
With a copy to: c/o HWS Realty Estate Advisory Group, Inc.
1281 East Main Street
Stamford, Connecticut 06902
ATTN: Thomas Prins
With a copy to: c/o HWS Real Estate Advisory Group, Inc.
225 W. Washington Street, Suite 2200
Chicago, Illinois 60606
ATTN: Mr. Scott Kaniewski
With a copy to: Hospitality Development Services Corp.
711 Third Avenue, 14th Floor
New York, New York 10017
ATTN: Adrian Werner
<PAGE>
With a copy to: Varner, Stephens, Humphries & White, LLP
3350 Cumberland Circle
Suite 1700 Riverwood
Atlanta, Georgia 30339
ATTN: Louis C. Schwartz, Esq.
If to Prime: Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07004
ATTN: Mr. David A. Simon
With a copy to: Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07004
ATTN: Mr. Ethan P. Kramer
With a copy to: Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07004
ATTN: Mr. Stephen Siegel
With a copy to: Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07004
ATTN: Kathleen T. Kneis, Esq.
Any Party may change its address for the purpose of this Section 7
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 ATTORNEY FEES. If any Party obtains an award in arbitration
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 arbitrator shall be included in such award.
7.6 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.
<PAGE>
7.7 CAPITALIZED TERMS. Any capitalized terms not defined herein
shall have the meaning ascribed to such term in the Operating Agreement.
7.8 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.
7.9 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.
7.10 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.
7.11 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.
7.12 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.
7.13 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.
7.14 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 either Party to this Agreement without the
prior written consent of the other Party, which consent may be withheld in such
Party's sole and absolute discretion.
7.15 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.
7.16 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 proceeding, to present evidence as to the actual intent of
the parties with respect to any such ambiguous language at the time the
Agreement was executed.
<PAGE>
7.17 ENTIRE AGREEMENT. The terms and conditions contained herein,
including those contained in the exhibits attached hereto, 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.
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.
PRIME HOSPITALITY CORP., a Delaware
corporation
By:/s/ David A. Simon
-----------------------------------------
Title: President
HOSPITALITY WORLDWIDE SERVICES, INC.,
a New York corporation
By: /s/ Cory Rapkin
-----------------------------------------
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS, NOTES, THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 14,053
<SECURITIES> 0
<RECEIVABLES> 50,223
<ALLOWANCES> 366
<INVENTORY> 0
<CURRENT-ASSETS> 75,676
<PP&E> 9,160
<DEPRECIATION> 649
<TOTAL-ASSETS> 116,229
<CURRENT-LIABILITIES> 51,072
<BONDS> 3,296
0
5,000
<COMMON> 121
<OTHER-SE> 56,740
<TOTAL-LIABILITY-AND-EQUITY> 116,229
<SALES> 93,649
<TOTAL-REVENUES> 93,649
<CGS> 77,537
<TOTAL-COSTS> 89,232
<OTHER-EXPENSES> 0
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<INCOME-TAX> 2,086
<INCOME-CONTINUING> 2,801
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</TABLE>
