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: SEPTEMBER 30, 1999
( ) 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
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
- --------------------------------------------------------------------------------
201 ALHAMBRA CIRCLE, CORAL GABLES, FL 33134
(Address of principal executive offices) (Zip Code)
- --------------------------------------------------------------------------------
(305) 774-3200
(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: 14,663,563 as of November 12, 1999.
<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 September 30, 1999
and December 31, 1998...............................................3
Consolidated Statements of Operations for the three months
ended September 30, 1999 and 1998 and the nine months
ended September 30, 1999 and 1998...................................4
Consolidated Statement of Changes in Stockholders'
Equity for the nine months ended September 30, 1999.................5
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998 ...........................6
Notes to Consolidated Financial Statements ......................7-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations......................................................11-15
Item 3. Quantitative and Qualitative Disclosures about Market Risk.........15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................TBA
Item 5. Other Information................................................TBA
Item 6. Exhibits and Reports on Form 8-K.................................TBA
Signatures.................................................................TBA
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>
September 30, 1999 December 31, 1998
Unaudited
<S> <C> <C>
Cash and cash equivalents $ 6,862 $ 2,179
Marketable securities -- 8,500
Accounts receivable, less allowance for
doubtful accounts of $ 1,234 and $444 30,094 34,375
Costs and estimated earnings in excess of
billings 407 498
Advances to vendors 19,268 12,760
Income taxes receivable 4,250 --
Deferred taxes -- 3,834
Prepaid and other current assets 965 891
Net current assets of discontinued operations 423 20,367
---------- ---------
Total current assets 62,269 83,404
---------- ---------
Property and equipment, less accumulated
depreciation of $ 1,679 and $1,432 5,339 8,227
Goodwill and other intangibles, less
accumulated amortization of $854 and $554 11,140 17,762
Deferred taxes -- 701
Other assets 509 783
Non-current assets of discontinued operations 1,800 11,478
---------- ---------
$ 81,057 $ 122,355
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 602 $ 621
Accounts payable 22,404 24,516
Accrued and other liabilities 3,961 4,630
Billings in excess of costs and estimated
earnings 255 227
Customer deposits 24,512 19,864
Loans payable 15,835 10,925
Income taxes payable -- 176
---------- ---------
Total current liabilities 67,569 60,959
Long-term debt, net of current portion 2,492 2,965
---------- ---------
Total liabilities 70,061 63,924
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01 par
value, $25 stated value, 5,000,000
shares authorized, 40,000 and 120,000
shares issued and outstanding, $1,000
and $3,000 liquidation preference
1,000 3,000
Common stock, $.01 par value, 50,000,000
shares authorized, 14,237,622 and
12,710,156 shares issued and outstanding 142 127
Additional paid-in capital 58,505 56,448
Accumulated deficit (48,651) (1,144)
---------- ---------
Total stockholders' equity 10,996 58,431
---------- ---------
$ 81,057 $ 122,355
========= =========
</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 Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 52,840 $ 45,687 $165,339 $120,478
Cost of revenues 51,536 41,336 154,799 107,333
-------- -------- -------- --------
Gross profit 1,304 4,351 10,540 13,145
Selling, general and administrative expenses 7,579 5,066 17,589 12,236
Asset impairment charge 9,017 - 9,017 -
--------- -------- --------- ---------
Income (loss) from operations (15,292) (715) (16,066) 909
Other income (expense):
Interest income 76 518 618 1,248
Interest and other expense (281) (191) (1,224) (451)
--------- -------- ---------- ---------
Income (loss) from continuing operations
before provision for income taxes (15,497) (388) (16,672) 1,706
Provision (benefit) for income taxes 755 (155) 285 682
--------- -------- --------- -------
Income (loss) from continuing operations (16,252) (233) (16,957) 1,024
--------- -------- --------- -------
Discontinued operations:
Income (loss) from discontinued operations (20,045) 2,531 (19,355) 4,075
Loss on disposal of discontinued operations (11,060) - (11,060) -
--------- -------- -------- --------
(31,105) 2,531 (30,415) 4,075
-------- -------- ------- --------
Net income (loss) ($47,357) $2,298 ($47,372) $5,099
======== ======== =========== =========
Basic earnings per common share:
Income (loss) from continuing operations ($1.22) ($ 0.03) ($ 1.28) $0.07
Discontinued operations:
Income (loss) from discontinued operations (1.50) 0.21 (1.45) 0.34
Loss on disposal (0.83) - (0.83) -
-------- -------- ------ -------
Net income (loss) ($ 3.55) $ 0.18 ($ 3.56) $0.41
======== ======== ======= ========
Diluted earnings per common share:
Income (loss) from continuing operations (a) (a) (a) $0.06
Discontinued operations:
Income (loss) from discontinued operations (a) (a) (a) 0.32
Loss on disposal (a) - (a) -
--------- -------- --------- -------
Net income (loss) (a) (a) (a) $0.38
========= ======== ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 13,353 12,112 13,332 11,952
========= ======== ========= =======
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING (a) (a) (a) 12,651
========= ======== ========= =======
</TABLE>
(a) antidilutive
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 NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
Number Number Addt'l Total
of Stated of Par Paid in Accumulated Stockholders
Shares Value Shares Value Capital Deficit Equity
------ ----- ------ ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 120 $3,000 12,710 $127 $56,448 ($1,144) $58,431
Exercise of stock options - - 41 - 72 - 72
Conversion of preferred stock (80) (2,000) 847 9 1,991 - -
Stock issued in connection
with acquisition - - 640 6 (6) - -
Net loss - - - - - (47,372) (47,372)
Preferred dividends - - - - - (135) (135)
--- ------- ------ ---- ------- --------- -------
Balance, September 30, 1999 40 $1,000 14,238 $142 $58,505 ($48,651) $10,996
=== ======= ====== ==== ======= ========= =======
</TABLE>
The accompanying notes to consolidated financial statements 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>
Nine Months Ended
September 30,
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITES:
<S> <C> <C>
Net income (loss) $ (47,372) $ 5,099
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 1,092 1,103
Deferred income tax provision (benefit) 4,535 (320)
Loss from discontinued operations 19,355 (4,075)
Loss on disposal of discontinued operations 11,060 -
Asset impairment charge 9,017 -
(Increase) decrease in current assets:
Accounts receivable, net 4,281 (6,483)
Costs and estimated earnings in excess of billings 91 301
Advances to vendors (6,508) (3,374)
Income taxes receivable (4,250) -
Prepaid and other current assets (74) 372
(Increase) decrease in other assets 274 (26)
Increase (decrease) in current liabilities:
Accounts payable (1,977) 6,045
Accrued and other liabilities (669) 1,634
Billings in excess of costs and estimated earnings 28 -
Customer deposits 4,648 209
Income taxes payable (176) 903
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,645) 1,388
--------- -------
NET CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED
OPERATIONS (3,543) (19,052)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities 8,500 18,916
Notes receivable repayment - 342
Cash acquired, upon acquisition,
net of acquisition costs - (62)
Purchase of property and equipment (599) (2,875)
--------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 7,901 16,321
--------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
OF DISCONTINUED OPERATIONS 2,750 (9,686)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loans payable - (8,800)
Proceeds from borrowings on loans payable 4,910 19,800
Repayment of long term debt (492) (1,336)
Payment of preferred stock dividends (270) -
Proceeds from exercise of stock options and warrants 72 723
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,220 10,387
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,683 (642)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,179 11,964
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,862 $ 11,322
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 162 $ 507
Interest $ 1,017 $ 288
NON-CASH INVESTING & FINANCING ACTIVITIES:
Preferred stock dividends accrued $ 135 $ 225
Net assets acquired (including goodwill) - $ 6,233
Stock issued for assets acquired - $ 6,171
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
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 September 30,
1999 and for the three and nine months ended September 30, 1999 and 1998 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, 1998 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: ACQUISITION
In January 1998, the Company acquired Bekins Distribution Services, Inc.
("Bekins"), a provider of transportation, warehousing and installation services
to a variety of customers worldwide. Under the terms of the purchase agreement,
the Company was required to issue an additional 639,512 shares of Common Stock
in January 1999 given the decrease in the price of the Company's common stock on
the one year anniversary date of the acquisition.
NOTE 3: DISCONTINUED OPERATIONS
In September 1999, the Company announced a strategic initiative to reposition
the core supply and distribution businesses into a business-to-business
e-commerce company, and to divest itself of its renovation business and real
estate investment and asset management business. In December 1998, the Company
decided to discontinue its hotel development business. As a result, the Company
has reflected the operating results associated with the renovation, real estate
investment and asset management, and hotel development businesses, as well as
the estimated losses on disposal, as discontinued operations on the consolidated
statements of operations for all periods presented. Results of these operations
were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
Renovation Business:
- --------------------
<S> <C> <C> <C> <C>
Revenues 1,751 $ 23,895 $ 23,594 $ 41,911
Income (loss) from operations,
net of taxes (19,379) 2,774 (18,148) 4,114
Loss on disposal,
net of taxes (5,497) - (5,497) -
Real Estate Investment and Asset
- --------------------------------
Management Business:
- --------------------
Revenues - 355 78 1,197
Income (loss) from operations,
net of taxes (666) 25 (1,207) 489
Loss on disposal,
net of taxes (4,410) - (4,410) -
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
Hotel Development Business:
- ---------------------------
<S> <C> <C> <C> <C>
Revenues - - - -
Loss from operations,
net of taxes - (268) - (528)
Loss on disposal,
net of taxes (1,153) - (1,153) -
Total Discontinued Operations
- -----------------------------
Revenues 1,751 24,250 23,672 43,108
Income (loss) from operations
net of taxes (20,045) 2,531 (19,355) 4,075
Loss on disposal,
net of taxes (11,060) - (11,060) -
</TABLE>
The remaining assets and liabilities of the discontinued operations as of
September 30, 1999, as presented in the accompanying consolidated balance
sheets, are as follows (in thousands):
<TABLE>
<CAPTION>
Real Estate Hotel
Renovation Investment & Asset Development
Business Management Business
Business
<S> <C> <C> <C>
Accounts receivable $ 25,681 $ - $ -
Allowance for doubtful accounts (20,537) - -
Costs and estimated earnings in excess
of billings 2,674 - -
Prepaids and other current assets 6 885 31
Accounts payable (4,412) - -
Accrued and other liabilities (2,303) (1,125) -
Billings in excess of costs and
estimated earnings (477) - -
--------- --------- -----------
Net current assets (liabilities) $ 632 $ (240) $ 31
--------- --------- -----------
Property and equipment, net $ 150 $ - $ 54
Other assets 38 1,071 487
--------- --------- ----------
Non-current assets $ 188 $ 1,071 $ 541
--------- --------- ----------
</TABLE>
The Company anticipates selling the renovation business in the fourth quarter of
1999, or alternatively, ceasing operations in the first quarter of 2000.
However, the resolution date as to certain disputed receivables with customers
related to specific renovation projects, which have been substantially complete
is uncertain. Losses from discontinued operations for the three months ended
September 30, 1999 include additional provisions on contract receivables of
approximately $17.0 million related to renovation projects which have been
substantially completed but have not yet been closed out with customers. The
loss on disposal includes a write-off of goodwill of approximately $5.0 million
and anticipated operating losses during the phase-out period of $490,000.
The Company anticipates disposing of the real estate investments, and
concurrently ceasing the real estate asset management and advisory operations,
in 2000. Losses from discontinued operations for the three months ended
September 30, 1999 include the write-off of certain real estate investments and
receivables no longer deemed realizable of approximately $500,000. The loss on
disposal includes a goodwill write-off of $450,000 and anticipated write-downs
and reserves in connection with the disposal of the real estate investments of
approximately $3.9 million. On September 30, 1999, the Company and Watermark
Investments Limited LLC ("Watermark") entered into a Termination Agreement
pursuant to which Watermark agreed to pay $885,000 to the Company. Watermark is
affiliated with Robert A. Berman, the Company's former Chief Executive Officer
and Chairman of the Board, and certain shareholders of the Company. Robert A.
Berman has guaranteed the payment from Watermark.
8
<PAGE>
The Company ceased the operations associated with its hotel development business
in April 1999, however, the resolution date as to the recovery of costs incurred
by the Company and lost profits under the master development agreement with
Prime Hospitality Corporation is uncertain. The loss on disposal for the three
months ended September 30, 1999 includes approximately $1.1 million of
additional write-downs to record certain real estate development projects at
their revised estimated recoverable amount.
NOTE 4: ASSET IMPAIRMENT CHARGE
As a result of the Company's strategic initiative to reposition the core
businesses into a business-to-business e-commerce company, the Parker Reorder
proprietary software product, Parker Fully Integrated Reorder Systems Tracking
("Parker FIRST"), which is a client server-based system used by clients to
reorder operating supplies and equipment, will be phased out completely over the
next six to twelve-month period as the Company migrates the reorder business to
an internet web-based system. Consequently, management has determined that the
Parker FIRST system will not provide future long-term benefits to the Company.
In addition, management has determined that the goodwill and other intangibles
associated with the acquisition of Parker Reorder Online in January 1997 is
closely related to the Parker FIRST system, which was under development at the
time of the acquisition.
As of September 30, 1999, the net capitalized computer software costs associated
with the Parker FIRST system was $2,864,000, and the net goodwill and other
intangibles balance was $6,153,000. Accordingly, the Company has recorded for
the three months ended September 30, 1999, an asset impairment charge of
$9,017,000.
NOTE 5: INCOME TAXES
For the nine months ended September 30, 1999, the Company has recorded a total
tax provision of $285,000. The total provision is comprised of a current benefit
for Federal and state and local income taxes of approximately $4.2 million,
representing the carryback claim given the Company's estimated taxable losses
for 1999, net of estimated alternative minimum taxes payable, and a deferred
provision for Federal and state and local income taxes of approximately $4.5
million, representing a valuation allowance against the Company's previously
recorded deferred tax assets. The Company has also provided for a valuation
allowance against the deferred tax assets arising in 1999 representing
additional deductible temporary differences, given the Company's current and
historical tax position.
NOTE 6: PREFERRED STOCK CONVERSION
On September 30, 1999, an additional 80,000 shares of Convertible Preferred
Stock were converted into an aggregate of 847,458 shares of common stock. On
October 4, 1999, the remaining 40,000 shares of Convertible Preferred Stock were
converted into 421,941 shares of common stock. The dividends on the Convertible
Preferred Stock for 1999 have been accrued up to the time of conversion.
NOTE 7: COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standards 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 includes net income plus other
comprehensive income, which includes cumulative foreign translation adjustments
and unrealized gains and losses on marketable securities that are
available-for-sale. The differences between net income as reported and
comprehensive income is immaterial for the three and nine months ended September
30, 1999 and 1998.
NOTE 8: OPERATING SEGMENTS
The Company's operating segments are based on the separate lines of business
acquired over the past several years which provide different services to the
hospitality industry. Due to the strategic repositioning of the Company's lines
of business, the Company has changed the composition of its reportable segments.
The Company's renovation business and real estate investment and asset
management business have been classified as discontinued operations (Note 3),
and thus are no longer reported as part of segment reporting. In addition, the
previously reported purchasing segment has been disaggregated into the
purchasing business and reorder business. The Company has restated the prior
year to conform to the revised segment reporting. Segment data is as follows (in
thousands):
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
Sales to Customers:
<S> <C> <C> <C> <C>
Reorder $ 4,230 $ 920 $ 10,482 $ 3,423
Purchasing 42,166 38,720 130,280 99,912
Logistics 6,444 6,047 24,577 15,276
Corporate - - - 1,867
---------- ---------- ---------- ----------
$ 52,840 $ 45,687 $ 165,339 $ 120,478
========== ========== ========== ==========
Inter-segment Sales:
Reorder $ - $ - $ - $ -
Purchasing - - - -
Logistics 1,960 1,736 4,286 2,861
Corporate - - - -
---------- ---------- --------- -----------
$ 1,960 $ 1,736 $ 4,286 $ 2,861
========== ========== ========= ==========
Income (Loss) from Operations:
Reorder $ (9,870) $ (918) $ (11,317) $ (2,363)
Purchasing (2,332) 1,191 (753) 3,360
Logistics 85 388 1,365 1,016
Corporate (3,175) (1,376) (5,361) (1,104)
---------- ---------- ----------- ----------
($ 15,292) ($ 715) ($ 16,066) $ 909
============ ============ ============ ==========
</TABLE>
Sales to customers include sales to related parties, namely the Apollo joint
ventures and the ING joint venture.
The Company's revenue and assets predominately relate to the United States
operations, with immaterial amounts related to foreign operations.
For the three and nine months ended September 30, 1999 and 1998, no customers
accounted for over 10% of the Company's revenues.
NOTE 9: EARNINGS PER SHARE
The following table reconciles the components of basic and diluted earnings per
common share for income from continuing operations for the three and nine months
ended September 30, 1999 and 1998 (in thousands, except per share amounts).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
Numerator:
<S> <C> <C> <C> <C>
Income (loss) from continuing operations ($ 16,252) ($ 233) ($ 16,957) $ 1,024
Preferred stock dividends (45) (75) (135) (225)
---------- --------- --------- --------
Income (loss) available to common
stockholders from continuing
operations-Basic (16,297) (308) (17,092) 799
Effect of dilutive securities:
Preferred stock dividends (a) (a) (a) (a)
---------- --------- --------- --------
Income available to common
stockholders from continuing
operations-Diluted ($ 16,297) ($ 308) ($ 17,092) $ 799
========= ========= ========== =========
Denominator:
Weighted average common shares
outstanding-Basic 13,353 12,112 13,332 11,952
Effect of dilutive securities:
Stock-based compensation plans (a) (a) (a) 664
Contingently issuable shares - (a) - 35
Convertible preferred stock (a) (a) (a) (a)
---------- --------- --------- ----------
Weighted average common and common
equivalent shares outstanding-Diluted (a) (a) (a) 12,651
========== ========= ========= ==========
Basic earnings per common share from
continuing operations ($ 1.22) ($ 0.03) ($ 1.28) $ 0.07
Diluted earnings per common share from
continuing operations (a) (a) (a) $ 0.06
</TABLE>
(a) antidilutive.
10
<PAGE>
ITEM 2. HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company believes that historical comparisons of revenue levels, gross profit
levels and gross profit percentages may not be meaningful on a period to period
basis because revenue recognition methodologies vary across the Company's
businesses. The Company recognizes revenues and the associated earnings of fixed
fee service contracts under the percentage of completion method. Under this
method, the Company recognizes earnings relating to the portion of the total
earnings anticipated from a contract which the efforts expended bears to the
estimated efforts over the life of the contract. Earnings for variable fee
service contracts are generally recognized upon completion of the associated
service. In addition, in the purchasing and reorder business, the Company
performs its services either acting as a principal, for which it functions in a
manner similar to a purchaser and reseller of merchandise, or as an agent. As an
agent, revenues include solely the service fee income and the cost of the
contracts includes labor and other direct costs associated with the contract and
those indirect costs related to contract performance. As a principal, the
revenues and costs of contracts also include the cost of the associated
merchandise purchased for the customer, which are recognized when the
merchandise is shipped directly from the vendor to the customer.
THREE MONTHS ENDED SEPTEMBER 30, 1999 vs. THREE MONTHS ENDED SEPTEMBER 30, 1998
The Company posted a 15.7% increase in revenues to $52,840,000 for the third
quarter of 1999 as compared to $45,687,000 for the comparable period in 1998.
The increase was primarily due to increased revenues from the reorder and
purchasing businesses which experienced continued growth in the number of
customers and scope of projects, as a result of increased efforts in sales and
marketing.
Cost of revenues for the three months ended September 30, 1999 were $51,536,000
compared to $41,336,000 for the same period last year. The increase is primarily
due to revenue, growth. Gross profit, as a percent of revenue was 2.5% in the
current quarter, as compared to 9.5% for the third quarter last year. The
decrease in gross profit, as a percent of revenue, was due primarily to
additional costs associated with a change in the sales mix in the purchasing and
logistics businesses where large dollar volume contracts yielded additional
revenues without corresponding fee or profit percentage increases.
Selling, general and administrative expenses for the quarter ended September 30,
1999 increased to $7,579,000 compared to $5,066,000 for the third quarter last
year. The increase for the nine month period is attributed to the expansion of
the administrative staff to support the higher sales level. In addition,
expenses for the nine month period include charges for employee terminations and
other costs associated with office closings in New York, Chicago, and Los
Angeles, as well as expenses related to office relocations in Florida and St.
Louis. Further, the Company increased their reserves against certain receivables
and selling, general and administrative expenses also include $157,000 and
$156,000 of goodwill amortization for the quarters ended September 30, 1999 and
1998, respectively. As a percentage of net revenues, selling, general and
administrative expenses have increased from 11.1% to 14.3% in the current
quarter.
An asset impairment charge of $9,017,000 was recorded in the current quarter as
the Company made a determination that the Parker Reorder proprietary software
product, Parker FIRST, will not provide future long-term benefits to the Company
based on the repositioning of the Company's core businesses. The Parker FIRST
system, which is a client server-based system, will be phased out completely
over the next 6 to 12 months as the Company migrates the reorder business to an
internet web-based system. Additionally, the Company has determined that the
goodwill and other intangibles associated with the acquisition of Parker Reorder
Online in 1997 is closely related to the Parker FIRST system and is considered
an impaired asset as well. Together, these assets were written-off at their net
book value of $9,017,000 at September 30, 1999.
Interest income decreased from $518,000 to $76,000 due to a decline in
investable funds in the current quarter as compared with the prior year quarter.
Interest expense increased from $191,000 in the third quarter of 1998 to
$281,000 in the third quarter of 1999 due to increased borrowings under the
Company's lines of credit for working capital purposes.
11
<PAGE>
The provision for income taxes in the current quarter was $755,000, which was
comprised of a current benefit of a carryback claim for Federal, state and local
taxes based on estimated taxable losses for 1999, net of estimated alternative
minimum taxes payable, offset by a valuation allowance against previously
recorded deferred tax assets and the benefit recorded in prior quarters. For the
third quarter of 1998, the benefit for income taxes was $155,000 at an effective
rate of 40%.
As a result of the above, the loss from continuing operations for the three
month period ended September 30, 1999 was $16,252,000 compared to a loss from
continuing operations of $233,000 for the same period last year.
In September 1999, the Company announced a strategic initiative to reposition
the core supply and distribution businesses into a business-to-business
e-commerce company, and to divest itself of its renovation business and real
estate investment and asset management business. In December 1998, the Company
decided to discontinue its hotel development business. As a result, the Company
has reflected the operating results associated with the renovation, real estate
investment and asset management, and hotel development businesses, as well as
the estimated losses on disposal, as discontinued operations on the consolidated
statements of operations for all periods presented. Note 3 to the financial
statements includes further discussion regarding the discontinued businesses.
The operating results associated with the discontinued operations were a loss of
$20,045,000 for the three months ended September 30, 1999 compared to income of
$2,531,000 for the comparable period in 1998. The loss for the current quarter
includes additional provisions on contract receivables relating to the
renovation business of approximately $17.0 million for substantially complete
renovation projects which have not yet been closed out with customers, and the
write-off of certain real estate investments and receivables of approximately
$500,000 relating to the real estate investment and asset management business.
The loss on disposal of discontinued operations for the three months ended
September 30, 1999 was $11,060,000. The loss includes the write-off of goodwill
of approximately $5.0 million and anticipated operating losses during the
phase-out period of $490,000 relating to the renovation business; the write-off
of goodwill of $450,000 and anticipated write-downs and reserves in connection
with the disposal of the real estate investments of approximately $3.9 million
relating to the real estate investment and asset management business; and
additional write-downs of approximately $1.1 million on certain real estate
development projects relating to the hotel development business. Management
anticipates disposing of these businesses and their related assets, or
alternatively, ceasing the associated operations during 2000. However, the
resolution date as to certain disputed matters is uncertain.
NINE MONTHS ENDED SEPTEMBER 30, 1999 vs. NINE MONTHS ENDED SEPTEMBER 30, 1998
The Company experienced a significant increase in revenues of over 37% to
$165,339,000 for the nine months ended September 30, 1999 in comparison to
$120,478,000 for the nine months ended September 30, 1998. The increase was
spread across all businesses through growth in the scope of projects and the
number of customers, based primarily on increased sales and marketing efforts
which further established name recognition in the hospitality industry.
Cost of revenues for the nine months ended September 30, 1999 were $154,799,000
compared to $107,333,000 for the same period last year. This increase is due
mainly to revenue growth. Gross profit, as a percent of revenue was 6.4% for the
nine months ended September 30, 1999 as compared to 10.9% for the same period
last year. The decrease in gross profit, as a percent of revenue, was due
primarily to additional costs associated with a change in the sales mix in the
purchasing and logistics businesses where large dollar volume contracts yielded
additional revenue without corresponding fee or profit percentage increases.
Selling, general and administrative expenses for the nine month period ended
September 30, 1999 have increased to $17,589,000 compared to $12,236,000 for the
same period last year. The increase for the nine month period is attributed to
the expansion of the administrative staff to support the higher sales level. In
addition, expenses for the nine month period include charges for employee
terminations and other costs associated with office closings in New York,
Chicago, and Los Angeles, as well as expenses related to office relocations in
Florida and St. Louis. Further, the Company increased their reserves against
certain receivables and selling, general and administrative expenses include
$470,000 and $467,000 of goodwill amortization for the periods ended September
30, 1999 and 1998, respectively. As a percentage of net revenues, selling,
general and administrative expenses for the nine months ended September 30, 1999
have remained virtually unchanged, at 10.6% for 1999 and 10.2% for 1998.
12
<PAGE>
An asset impairment charge of $9,017,000 was recorded in the current quarter as
the Company made a determination that the Parker Reorder proprietary software
product, Parker FIRST, will not provide future long-term benefits to the Company
based on the repositioning of the Company's core businesses. The Parker FIRST,
which is a client server-based system, will be phased out completely over the
next 6 to 12 months as the Company migrates the reorder business to an internet
web-based system. Additionally, the Company has determined that the goodwill and
other intangibles associated with the acquisition of Parker Reorder Online in
1997 is closely related to the Parker FIRST system and is considered an impaired
asset as well. Together, these assets were written-off at their net book value
of $9,017,000 at September 30, 1999.
Interest income decreased from $1,248,000 to $618,000 based on a decline in
investable funds in the current nine months as compared to the prior year nine
month period. Interest expense increased from $451,000 in the first nine months
of 1998 to $1,224,000 in the first nine months of 1999 due to increased
borrowings under the Company's lines of credit for working capital purposes.
The provision for income taxes in the current nine month period was $285,000,
which was comprised of a current benefit of a carryback claim for Federal, state
and local taxes based on estimated taxable losses for 1999, net of estimated
alternative minimum taxes payable, offset by a valuation allowance against
previously recorded deferred tax assets. For the nine months ended September 30,
1998, the provision for income taxes was $682,000 at an effective tax rate of
40%.
As a result of the above, the loss from continuing operations for the nine month
period ended September 30, 1999 was $16,957,000 compared to income from
continuing operations of $1,024,000 for the same period last year.
In September 1999, the Company announced a strategic initiative to reposition
the core supply and distribution businesses into a business-to-business
e-commerce company, and to divest itself of its renovation business and real
estate investment and asset management business. In December 1998, the Company
decided to discontinue its hotel development business. As a result, the Company
has reflected the operating results associated with the renovation, real estate
investment and asset management, and hotel development businesses, as well as
the estimated losses on disposal, as discontinued operations on the consolidated
statements of operations for all periods presented. Note 3 to the financial
statements includes further discussion regarding the discontinued businesses.
The operating results associated with the discontinued operations were a loss of
$19,355,000 for the nine months ended September 30, 1999 compared to income of
$4,075,000 for the comparable period in 1998. The loss for the current nine
month period includes additional provisions on contract receivables relating to
the renovation business of approximately $17.0 million for substantially
complete renovation projects which have not yet been closed out with customers,
and the write-off of certain real estate investments and receivables of
approximately $500,000 relating to the real estate investment and asset
management business.
The loss on disposal of discontinued operations for the nine months ended
September 30, 1999 was $11,060,000. The loss includes the write-off of goodwill
of approximately $5.0 million and anticipated operating losses during the
phase-out period of $490,000 relating to the renovation business; the write-off
of goodwill of $450,000 and anticipated write-downs and reserves in connection
with the disposal of the real estate investments of approximately $3.9 million
relating to the real estate investment and asset management business; and
additional write-downs of approximately $1.1 million on certain real estate
development projects relating to the hotel development business. Management
anticipates disposing of these businesses and their related assets, or
alternatively, ceasing the associated operations during 2000. However, the
resolution date as to certain disputed matters is uncertain.
13
<PAGE>
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
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 and capital expenditure requirements with cash generated from
operations, and funds from a public offering of its Common Stock in September
1997.
Net cash used in operating activities was $6,645,000 for the nine months ended
September 30, 1999, compared to net cash provided of $1,388,000 for the same
period last year. During the nine months ended September 30, 1999, the Company's
accounts receivable balance decreased by $4,281,000 from December 31, 1998 and
customer deposits increased by $4,648,000. This inflow of cash was offset by an
increase in advances made to vendors of $6,508,000 and a decrease in the
accounts payable balance from December 31, 1998 of $1,977,000.
Net cash used in operating activities of discontinued operations was $3,543,000
for the nine months ended September 30, 1999, compared to net cash used of
$19,052,000 for the same period last year. In 1999, the discontinued operations
were generating limited business compared to 1998.
Net cash provided by investing activities for the nine months ended September
30, 1999 was $7,901,000 compared to $16,321,000 for the nine months ended
September 30, 1998. The increase in cash is primarily the result of the sale of
the marketable securities.
Net cash provided by investing activities of discontinued operations of
$2,750,000 and used in investing activities of $9,686,000 for the nine months
ended September 30, 1999 and 1998, respectively, relate to the Company's
investments, in 1998, and return on investments, in 1999, in the real estate
investment and asset management businesses.
Net cash provided by financing activities for the nine months ended September
30, 1999 was $4,220,000 compared to net cash provided by financing activities of
$10,387,000 for the same period last year. The primary financing source in the
nine months ended September 30, 1999 was the proceeds from borrowings under the
Company's lines of credit.
The Company currently has unsecured lines of credit with HSBC Bank (formerly
Marine Midland Bank) and Bank of America (formerly NationsBank). These lines
have expired with a total of $15,835,000 in outstanding borrowings at September
30, 1999. Borrowings under the lines of credit bear interest at each bank's
prime lending rate. No further borrowing is available to the Company and at the
present time, the Company is in active, on-going discussions to extend the
expiration dates. Currently, there are no assurances that the Company will be
able to obtain an extension from the banks at terms favorable to the Company.
The management of the Company believes that the strategic initiatives being
undertaken to reposition the core businesses, as well as the decision to divest
itself of its renovation, real estate investment and asset management, and hotel
development businesses, will help to improve the long-term liquidity position of
the Company. The businesses which are being discontinued have resulted in the
liquidity and cash flows of the Company being significantly decreased over the
past two years. Management anticipates disposing of these businesses or ceasing
the associated operations within the next year.
The Company believes its present cash position, including cash on hand, cash
anticipated to be generated from future operations and its ability to obtain
additional financing, as necessary, will allow the Company to meet its
anticipated capital commitments and its short-term operating needs for at least
the next twelve months.
INFLATION
Inflation and changing prices during the current year did not significantly
affect the major markets in which the Company conducts its business. In view of
the moderate rate of inflation, its impact on the Company's business has not
been significant.
14
<PAGE>
YEAR 2000 INFORMATION DISCLOSURE STATEMENT
The year 2000 issue results from computer programs and circuitry that do not
differentiate between the year 1900 and the year 2000 because they were written
using two-digit rather than four-digit dates to define the applicable year. If
not corrected, many computer applications and date-sensitive devices could fail
or create erroneous results before, on or after January 1, 2000. The Year 2000
issue affects virtually all companies and organizations, including the Company.
The Company has developed, and is implementing a plan, the goal of which is to
assure that the Company will achieve Year 2000 readiness in time to avoid
significant Year 2000 failures. The Company is proceeding with its assessment of
the Year 2000 readiness issues for its computer systems, business processes,
facilities and equipment to assure their continued functionality. The Company is
continuing its assessment of the readiness of external entities, including
subcontractors, suppliers, vendors, and customers that interface with the
Company. To that end, the Company has taken the following actions:
o Computer Systems. The Company periodically upgrades its computer systems
as its needs require. The Company began the process of replacing or
upgrading the software for its internal computer systems in 1998, and
expects to complete this process to achieve Year 2000 readiness by the
fourth quarter of 1999. Vendors of the new internal computer systems
certified them to be Year 2000 compliant. The Company's computer hardware
is limited to stand-alone and networked desk-top systems. The Company has
assessed the Year 2000 readiness of its computer hardware and potential
risks to operations, and intends to replace those systems that may pose a
risk to operations in 1999. Parker FIRST, the Company's proprietary
software product, has been developed and maintained by Parker Reorder.
Parker FIRST software was designed to account for the Year 2000 and
beyond.
o Business Processes. The Company has and continues to assess the potential
impact of Year 2000 on its business processes. Management for each
division is assessing the risks of Year 2000 issues as it specifically
relates to such businesses and the division's readiness. The Company is in
the process of contacting its key vendors, suppliers and subcontractors
regarding their Year 2000 readiness.
The Company believes that its internal computer systems, facilities, and
equipment will be Year 2000 compliant. However there is no assurance that all of
the planned upgrades will be completed in time or function as intended. As the
Company has no contingency plan other than to deal as expeditiously as possible
with situations if and when they arise, the Company may experience significant
disruptions, the costs of which the Company is unable to estimate at this time.
The Company also believes that disruptions in some of its vendors' or
subcontractors' operations will not significantly affect its projects because
the Company has relationships with other vendors and subcontractors with similar
expertise. The Company cannot assume, however, that an adequate supply of
vendors or subcontractors will be available.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have a material exposure to risks associated with foreign
currency fluctuations related to its operations. The Company does not use
derivative financial instruments in its operations. The Company does not have a
material exposure to market risks associated with changes in interest rates
given (a) the relative stability of interest rates currently, (b) the types of
debt securities the Company invests in and (c) the Company's lack of significant
balances of variable interest rate debt. The Company does not believe that it
has any other material exposure to market risks associated with interest rates.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 5. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
15
<PAGE>
Part II. Other Information
Item 1. LEGAL PROCEEDINGS
On June 1, 1998, an action (the "State Action") was brought
against the Company by West Atlantic Corp. ("West Atlantic") in the Supreme
Court of the State of New York. The State Action alleged that the Company
retained West Atlantic pursuant to an agreement dated March 1, 1995 (the
"Agreement") to perform certain marketing and selling services for the Company.
The State Action further alleged that fees were earned and not paid under the
Agreement and seeks damages relating to breach of contract of not less than
$10,000,000, damages with respect to "significant benefits to the Company" in an
amount not less than$5,000,000 and damages relating to breach of the duties of
good faith and fair dealing in an amount of not less than $10,000,000. The
Company has denied and continues to deny all of the allegations and claims of
wrongdoing made by West Atlantic in the State Action. However, in order to avoid
further expense, the Company has reached an agreement in principle with West
Atlantic pursuant to which it has agreed to pay $250,000 to West Atlantic in a
combination of cash and restricted stock (with registration rights), subject to
the execution of a settlement agreement and other related documents. In
connection with the State Action, the Company brought claims in federal and
state court against Tova Schwartz, the former President and Chief Executive
Officer of the Company's predecessor, seeking indemnity and punitive damages.
The state and federal actions claim that, among other things, Schwartz failed to
disclose to the Company the existence of the Agreement when the Company
purchased from Schwartz certain shares of Common Stock of the Company which she
then held. Schwartz' motion for dismissal of the Company's State Action
indemnification claims was denied on June 28, 1999. Schwartz has joined Robert
Berman, Alan Friedberg and Howard Anders, former employees of the Company, as
fourth party defendants in the State Action and as defendants on counterclaim in
the federal action. Both the State Action and the federal claim are in the
discovery stage. The Company has moved to dismiss the State Action counterclaim
and is still pursuing the State Action against Schwartz. The federal action has
been reinstated.
In July 1999, Hospitality Restoration and Builders, Inc.
initiated an action in the Supreme Court of the State of New York, County of New
York, against Servico Niagara Falls, Inc., Servico Grand Island, Inc., Servico
Jamestown, Inc., Servico New York, Inc., Servico Rolling Meadows, Inc., Servico
Houston, Inc., Servico, Inc., Impac Hotel Group, Inc. and Lodgian, Inc. The
amount claimed in the lawsuit totals approximately $21,000,000 plus interest,
which represents claims for quantum meruit, breach of contract, wrongful
termination and other similar claims arising out of the construction and
renovation (and purchase of furniture, fixtures and equipment) of six hotels,
four which are located in New York, one in Chicago, Illinois, and one in
Houston, Texas. The defendants have answered and counterclaimed for alleged
excess cost incurred by the defendants in completing HRB's work on the six
hotels.
Item 5. OTHER INFORMATION
On September 30, 1999, the Company and Watermark Investments
Limited LLC ("Watermark") entered into a Termination Agreement which terminated
the Agreement, by and between the Company and Watermark, dated February 23,
1998, and pursuant to which
16
<PAGE>
Watermark agreed to pay $885,000 to the Company immediately after the 1999
Annual Meeting of Shareholders, subject to certain conditions. Robert A. Berman,
the Company's former Chief Executive Officer and Chairman of the Board, has
personally and unconditionally guaranteed this payment.
On September 30, 1999, Mr. Berman agreed with the Company as
to a termination of his position as Chief Executive Officer and Mr. Berman also
resigned as Chairman of the Board and a director of the Company effective
November 1, 1999. The Board of Directors has not yet filled the Board vacancy
created by this resignation.
Scott Kaniewski resigned as a director of the Company
effective November 1, 1999.
Howard G. Anders has also agreed with the Company as to a
termination of his positions as Chief Financial Officer, Executive Vice
President and Secretary effective November 9, 1999. On November 10, 1999, the
Board of Directors of the Company elected Leonard F.
Parker as the Company's Secretary.
On September 30, 1999 and October 4, 1999, the remaining
120,000 shares of Convertible Preferred Stock were converted into an aggregate
of 1,269,399 shares of the Company's common stock. As of October 4, 1999, no
shares of Convertible Preferred Stock remain outstanding.
Item 6. EXHIBITS AND REPORTS ON 8-K
(a) Exhibits
10.1 Agreement, by and between the Company and Watermark Investments
Limited, LLC, as terminated by Termination Agreement, dated September
30, 1999.
10.2 Termination Agreement, dated September 30, 1999, by and between the
Company and Robert A. Berman.
10.3 Employment Agreement, dated September 1, 1999, by and between the
Company and John F. Wilkens.
11 Computation of earnings per share (incorporated by reference to Note
9 to the Company's Consolidated Financial Statements).
27 Financial Data Schedule.
(b) Reports on Form 8-K
NONE
<PAGE>
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/ Douglas Parker
----------------------
DOUGLAS PARKER
PRESIDENT AND ACTING
CHIEF EXECUTIVE OFFICER
By: /S/ JOHN F. WILKENS
-----------------------
JOHN F. WILKENS
VICE PRESIDENT - TREASURER
(PRINCIPAL FINANCIAL OFFICER,
PRINCIPAL ACCOUNTING OFFICER)
Dated: November 18, 1999
16
THIS AGREEMENT is made and entered into on this 23rd day of February,
1998, by and between HOSPITALITY WORLDWIDE SERVICES, INC., a New York
corporation having an address at 450 Park Avenue, Suite 2603, New York, New York
10022 ("Hospitality"), and WATERMARK INVESTMENTS LIMITED, LLC, a Delaware
limited liability company having an address at 77 West Wacker Drive, Suite 4120,
Chicago, Illinois 60601 ("Watermark").
W I T N E S S E T H:
WHEREAS, Watermark entered into an Agreement to Joint Venture on May
12, 1997 (the "Joint Venture Agreement"), with APOLLO REAL ESTATE ADVISORS II,
L.P., a Delaware limited partnership having its principal place of business at
1301 Avenue of the Americas, 38th Floor, New York, New York 10019 ("Apollo"),
and Hospitality to collectively identify, acquire, renovate, refurbish, operate
and sell hotel properties (the "Business") through individual joint venture
limited liability companies (each a "Project"); and
WHEREAS, pursuant to the terms of the Joint Venture Agreement,
Watermark receives a management fee of one and one-half percent (1 1/2 %) of all
costs (other than soft costs) incurred in acquiring and rehabilitating a
particular Project ("Management Fee Interest") and a percentage equity interest
("Equity Interest") in each Project contingent upon the internal rate of return
on Apollo's capital contribution for such Project; and
WHEREAS, Hospitality is desirous of purchasing all of Watermark's
interest in the Joint Venture Agreement, including its Management Fee Interest
and Equity Interest now existing and any future rights to receive additional
Management Fee Interest and Equity Interest for new Projects and Watermark is
desirous of selling such Management Fee Interest and Equity Interest to
Hospitality.
<PAGE>
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 agree that the following shall
constitute the agreement among the parties:
1. Assets To Be Sold. Hospitality shall purchase and acquire from
Watermark, and Watermark shall sell, transfer and assign to Hospitality, the
following described property:
a. Management Fee Interest. All of Watermark's right, title
and interest in and to the Management Fee Interest currently outstanding and
outlined on Schedule A and future Management Fee interests.
b. Equity Interest. All of Watermark's right, title and
interest in and to the Equity Interest currently outstanding and outlined on
Schedule A and future Management Fee Interests in existing Projects and any
Equity Interest that may arise in connection with the Joint Venture Agreement.
c. Other Management Fees. All of Watermark's right, title and
interest in and to fees received in connection with its management related
services currently outstanding and outlined on Schedule A and future Management
Fee interests.
2. Purchase Price. Hospitality shall pay to Watermark One Million Five
Hundred Thousand and no/100 Dollars ($1,500,000.00) (the "Purchase Price") less
any amounts advanced to or Watermark by Hospitality prior to the date of this
Agreement, including One Hundred Fifty Thousand Dollars ($150,000.00) paid to
Watermark on February 9, 1998.
3. Payment of Purchase Price. Hospitality shall pay the full amount of
the Purchase Price to Watermark, in periodic amounts, at the time and equal to
the amounts received by Hospitality in respect of the Management Fee Interest,
the Equity Interest and other related
-2-
<PAGE>
management fees earned by Watermark with the outstanding balance of the Purchase
Price becoming due and payable to Hospitality on February 23, 2001 (the "Final
Payment Date"). In the event the total of the periodic amounts received by
February 23, 2001, by Hospitality in respect of the Management Fee Interest, the
Equity Interest and other related management fees earned by Watermark is less
than the Purchase Price, then the Purchase Price shall be adjusted to such
lesser total amount ("Adjusted Purchase Price") and, Hospitality shall be
reimbursed the difference between the Purchase Price and the Adjusted Purchase
Price.
4. Representations And Warranties Of Watermark. Watermark represents
and warrants as of the date of this Agreement and at closing that:
a. Limited Liability Status. Watermark is a limited liability
company, duly organized, validly existing and in good standing under the laws of
Delaware, has an requisite power and authority to consummate the transactions
contemplated by this Agreement and has by proper company proceedings duly
authorized execution and delivery of this Agreement and the consummation of an
transactions contemplated herein.
5. Representations And Warranties Of Hospitality. Hospitality
represents and warrants as of the date of this Agreement and at closing that:
a. Corporate Status. Hospitality is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, has an requisite power and authority to consummate the transactions
contemplated by this Agreement, and has by proper corporate proceedings duly
authorized the execution and delivery of this Agreement in the consummation of
all transactions contemplated herein.
-3-
<PAGE>
b. Compliance. The execution, delivery and performance of this
Agreement will not result in any violation of, or be in conflict with any term
or provision of any charter, code, bylaw, judgment, decree, statute, ruling,
regulation or instrument applicable to Hospitality, and there is no such term or
provision which materially adversely effects, or in the future may, to the best
of its belief, materially adversely effect its business, prospects or condition,
financial or otherwise, or any of its properties or assets.
6. Survival Of Representations and Warranties. All representations and
warranties contained herein, or made in another writing, by the parties in
connection with the transactions contemplated hereby, shall be true and correct
at the closing.
7. Closing Date. The closing of the sale shall take place on February
23, 1998, or any other date that the parties mutually agree upon. The closing of
the sale shall take place on the closing date at Hospitality's offices, 450 Park
Avenue, Suite 2603, New York, New York 10022, or any other place that the
parties mutually agree upon.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
9. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, and delivered or mailed by certified mail:
a. If to Watermark, at its offices at 77 West Wacker Drive,
Suite 4120, Chicago, Illinois 60601, or at any other address furnished to
Hospitality by Watermark in writing; or
b. If to Hospitality, at its offices at 450 Park Avenue, Suite
2603, New York, New York 10022, or at any other address furnished to Watermark
by Hospitality in writing.
-4-
<PAGE>
10. Binding Effect. This Agreement shall be binding upon and inure to
the benefits of the parties hereto and their respective successors and assigns.
11. Headings. Headings in this Agreement are for reference and
convenience only and shall not be used to interpret or construe its provisions.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Time of Essence. Time is of the essence of this Agreement.
14. Entire Agreement; Modification. This Agreement supersedes all prior
agreements and constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof. It may not be amended or modified except
by instrument executed by the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
in their respective corporate names by their respective principals on the day
and year first written above.
HOSPITALITY WORLDWIDE SERVICES, INC.,
a New York corporation
By: /s/ Howard G. Anders
-------------------------------------
Its: Executive Vice President
WATERMARK INVESTMENTS LIMITED, LLC.,
a Delaware limited liability company
By: /s/ Laurence M. Friedberg
-------------------------------------
Its: Treasurer
-5-
<PAGE>
TERMINATION AGREEMENT (the "Agreement"), dated September 30,
1999, between Hospitality Worldwide Services, Inc., a New York
corporation ("HWS"), and Watermark Investments Limited, LLC, a
Delaware limited liability company ("Watermark").
--------------------------------------------------------------
HWS purchased all of Watermark's interest in that certain
Agreement to Joint Venture (the "Apollo Agreement"), dated May 12, 1997, by and
among Watermark, HWS and Apollo Real Estate Advisors II, L.P., a Delaware
limited partnership, including the Management Fee Interest and the Equity
Interest (each as defined in the Apollo Agreement); and
HWS and Watermark have determined that it is in their mutual
interests to terminate their relationship and all agreements including, to the
extent valid, the Agreement, dated February 23, 1998 between HWS and Watermark,
upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Termination Payment. At the Closing (as hereinafter
defined), Watermark shall pay to HWS the sum of $885,000 in immediately
available funds by wire transfer to an account of HWS specified in writing by
HWS (the "Termination Payment").
2. Closing. The closing of the transactions contemplated by
this Agreement shall occur immediately after the 1999 Annual Meeting of
Shareholders of HWS (the "Annual Meeting") or such other date and time as may be
mutually agreed upon by the parties hereto (the "Closing").
3. Conditions to Watermark's Obligation. The obligation of
Watermark to make the Termination Payment at the Closing is subject to the
satisfaction or waiver by Watermark of the following conditions:
(a) Press Release. HWS shall have issued a press
release substantially in the form of Exhibit A attached hereto.
(b) Hospitality Restoration and Builders. HWS, within
30 days of the date hereof, shall have offered to sell certain assets of its
wholly-owned subsidiary, Hospitality Restoration and Builders, Inc., a New York
corporation, to Alan Friedberg and Guillermo Montero pursuant to a Purchase and
Sale Agreement with terms and conditions determined by the Board of Directors of
HWS, in its sole discretion.
(c) Repricing of Derivative Securities. The Board,
prior to the mailing of its proxy statement to shareholders for the Annual
Meeting, shall have voted on whether to reprice all existing options to purchase
shares of HWS' Common Stock, $.01 par value per share.
-6-
<PAGE>
(d) Website. HWS shall have launched its website,
using the URL address www.hotelworks.com or another similar URL address no later
than November 15, 1999.
4. Representations and Warranties of HWS. HWS hereby
represents, warrants and agrees, as of the date of this Agreement as follows:
(a) it has full legal right, power and authority to
execute, deliver and perform this Agreement and consummate the transactions
contemplated hereby;
(b) it has obtained all necessary consents and
approvals to enter into this Agreement and perform the transactions contemplated
hereby; and
(c) upon the execution and delivery of this Agreement
by Watermark, this Agreement constitutes the valid, legal and binding obligation
of HWS enforceable against HWS in accordance with its terms.
5. Representations and Warranties Watermark. Watermark hereby
represents, warrants and agrees, as of the date of this Agreement and as of the
Closing, as follows:
(a) it has full legal right, power and authority to
execute, deliver and perform this Agreement and consummate the transactions
contemplated hereby;
(b) it has obtained all necessary consents and
approvals to enter into this Agreement and perform the transactions contemplated
hereby; and
(c) Upon the execution and delivery of this Agreement
by HWS, this Agreement shall constitute the valid, legal and binding obligations
of Watermark, enforceable against Watermark in accordance with its terms.
6. Release by HWS of Watermark. Upon receipt of the
Termination Payment by HWS (if this Agreement has not previously been terminated
pursuant to Section 8). HWS on behalf of itself and its affiliates, successors
and assigns (the "HWS Releasors"), hereby release and discharge Watermark, its
subsidiaries and affiliates, and its directors, officers, employees, agents,
consultants and their successors and assigns (together, the "Watermark
Releasees") from all actions, causes of action, suits, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialities, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
executions, claims, and demands whatsoever, in low or equity, which against
Watermark Releasees, the HWS Releasors ever had, now have or hereafter can,
shall or may have relating to the acquisition of Watermark's interest in the
Apollo Agreement from the beginning of the world to the date of this Agreement.
7. Release by Watermark of HWS. Upon receipt of the
Termination Payment by HWS (if this Agreement has not previously been terminated
pursuant to Section 8), Watermark
-8-
<PAGE>
on behalf of itself and its affiliates, successors and assigns (the "Watermark
Releasors"), hereby re;leases and discharges HWS, its subsidiaries and
affiliates, and its directors, officers, employees, agents, consultants and its
successors and assigns (together the "HWS Releasees") from all actions, causes
of action, suits, debts, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, claims, and demands
whatsoever, in law or equity, which against the HWS Releasees, the Watermark
Releasors ever had, now have or hereafter can, shall or may have relating to the
acquisition of Watermark's interest in the Apollo Agreement from the beginning
of the world to the date of this Agreement.
8. Termination Right. Any time two business days following the
Annual Meeting and prior to receipt of the Termination Payment by HWS, HWS
shall, at its option, have the right to terminate this Agreement. Upon such
termination, this Agreement shall be of no further force or effect except for
Section 11, which shall survive the termination.
9. Unconditional Guarantee. Robert Berman personally and
unconditionally guarantees the obligations of Watermark under this Agreement.
10. Independent Directors and Chief Executive Officer. The
nominee for the board seat being vacated by Scott Kaniewski, when filled, shall
be a person who is not (i) currently a partner in any business with any present
member of the Company's Board of Directors (each a "Board Member"), (ii)
currently employed by the same business as any Board Member, or (iii) related to
any Board Member. HWS shall use reasonable efforts to locate such a nominee who
has experience with e-commerce. The nominee for the board seat currently held by
Robert Berman and the person hired to serve as the Chief Executive Officer of
the Company in place of interim Chief Executive Officer Douglas Parker, shall be
a person who is not (i) currently a partner in any business with any Board
Member, (ii) currently employed by the same business as any Board Member, or
(iii) related to any Board Member.
11. No Admission. In the event that this Agreement is
terminated pursuant to Section 8, nothing in this Agreement shall be interpreted
to constitute a waiver by HWS of any claims against any party that the
acquisition of Watermark's interest in the Apollo Agreement was a breach of
fiduciary duty, ultra vires and a violation of law, and HWS explicitly reserves
its right to seek recission of that transaction as well as any other legal or
equitable remedies.
12. Expenses. Each party to this Agreement agrees to bear
their own expenses relating to the negotiation, preparation and execution of
this Agreement. In the event of any litigation between the parties hereto
seeking damages as a result of an alleged breach of this Agreement, the
prevailing party, as determined by final, non-appealable order of a court of
competent jurisdiction, shall be entitled to recover its reasonable legal fees
and expenses incurred in connection with such litigation.
-9-
<PAGE>
13. Severability. If any provision of this Agreement shall be
held invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner render invalid or
unenforceable any other provisions of this Agreement.
14. Consent to Jurisdiction. Each of the parties hereto hereby
irrevocably submits to the exclusive jurisdiction of the State and Federal
courts located in New York County, New York, for the purposes of any action or
proceeding (each a "Claim") arising out of or relating to this Agreement and
hereby waives, and agrees not to assert in any such action or proceeding that it
is not personally subject to the jurisdiction of the Court, that such Claim is
brought in an inconvenient forum or that the venue is proper. Each of the
parties hereto consents to process being served in any such Claim by mailing a
copy thereof by certified mail, return receipt requested (with a copy to be sent
by facsimile, which shall not constitute service) to the address in effect for
notices to it under this Agreement and agrees that such service upon receipt of
such Claim (other than by facsimile) shall constituted good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve legal process in any other manner permitted by law.
15. Governing Law. This Agreement and the rights and duties of
the parties hereto shall be governed by and construed in accordance with the
internal laws of the State of New York, without regard to principles of
conflicts of law.
16. Amendments and Waivers to be in Writing. This Agreement
may not be amended, modified or changed, and none of the terms, covenants,
representations, warranties or conditions hereof may be waived, except by a
written instrument signed by the party against whom enforcement of any change or
modification is sought, or in the case of a waiver, by the party waiving
compliance. The failure of any party at any time to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
same.
17. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
when personally delivered on a business day during normal business hours at the
address or number designated below or (b) on the business day following the date
of mailing by overnight courier, fully prepaid, addressed to such address,
whichever shall first occur. The addresses for such communications shall be:
If to Watermark:
926 Fifth Avenue
New York, 10021
Attn: Mr. Robert Berman
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
-10-
<PAGE>
New York, New York 10004
Attn: Andrew Bernstein, Esq.
If to HWS:
Hospitality Worldwide Services, Inc.
450 Park Avenue
New York, New York 10022
Attn: Mr. Douglas Parker
With a copy to:
Covington & Burling
1330 Avenue of the Americas
New York, New York 10019
Attn: David W. Haller, Esq.
Any party hereto may from time to time change its address for
notices under this Section 15 by giving notice of such changed address to the
other parties hereto.
18. Headings. The headings herein are for convenience only, do
not constitutes a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
19. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
20. Counterparts; Facsimile. This Agreement may be executed in
as many counterparts as may be deemed necessary or convenient, and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all of which such counterparts shall
constitute but one and the same agreement. Facsimile signatures to this
Agreement shall be deemed genuine and original.
21. Assignment. Neither this Agreement nor any rights
hereunder may be assigned by any party to this Agreement in whole or in part,
without the prior written consent of all the other parties.
22. Entire Agreement. This Agreement constitutes the entire
understandings of the parties hereto and supersedes all prior agreements or
understandings with respect to the subject matter contained herein.
-11-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement first written above.
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /s/ Douglas Parker
------------------------------------
Name: Douglas Parker
Title: President
WATERMARK INVESTMENTS LIMITED, LLC
By: /s/ Robert Berman
------------------------------------
Name: Robert Berman
Title: Managing Director
/s/ Robert Berman
---------------------------------------
Robert Berman
-12-
TERMINATION AGREEMENT, dated as of September 30, 1999, between
Hospitality Worldwide Services, Inc., a New York corporation (the
"Company"), and Robert Berman (the "Executive")
The company and the Executive are parties to certain Employment
Agreement, dated January 1, 1998, between the Company and the Executive (the
"Employment Agreement").
The parties hereby agree as follows:
1. Effective immediately, the Employment Agreement shall terminate and
shall be of no further force or effect for Section 9, 10, 11 and 12 of the
Employment Agreement that shall survive its termination, and the Executive is
hereby released from any future obligations under the Employment Agreement
except for Section 9, 10, 11 and 12.
2. The Executive shall, without compensation, remain in his capacity as
Chairman, with such powers and authority as determined by the Company's Board of
Directors, until his successor is identified.
3. The Executive hereby acknowledges that the Company has fulfilled all
of its obligations under the Employment Agreement and hereby released and waives
all claims against the Company, its officers, directors and affiliates under the
Employment Agreement.
4. This Agreement shall be governed and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
laws.
5. This Agreement constitutes the entire understandings of the parties
hereto and supersedes all prior agreements or understandings with respect to the
subject matter contained herein.
6. This Agreement may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above.
HOSPITALITY WORLDWIDE SERVICES, INC.
By /s/ Douglas Parker
---------------------------------
Name: Douglas Parker
Title: President
/s/ Robert Berman
------------------------------------
Robert Berman
-2-
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 1st day of
September, 1999 (the "Effective Date") by and between John Wilkens (the
"Employee") and Hospitality Worldwide Services, Inc., a corporation organized
and existing under the laws of New York (the "Company").
RECITALS
A. The Company desires to engage the Employee to serve as an Executive
and Financial Officer; and
B. The Employee desires to be employed by the Company in such capacity
and to assume the duties and responsibilities set forth in this Agreement; and
C. The Company and the Employee have agreed on the terms and conditions
of such employment, and wish to reduce their agreement to writing herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and the mutual
promises set forth below, the parties hereto agree to as follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company hereby employs the Employee as an Executive and Financial
Officer and the Employee hereby accepts such employment and agrees to perform
the duties and to accept the responsibilities described herein. The Employee
shall at all times carry out his duties hereunder diligently, honestly, in good
faith, in accordance with all applicable laws, and with due regard to his
fiduciary duties to the Company and its shareholders. The Company shall, in
connection with the Employee's employment, comply with all applicable federal
and state laws preventing discrimination against any employee because of race,
color, religion, sex, national origin, age, handicap, or veteran status.
2. Duties and Responsibilities.
(a) The Employee shall perform all the duties and accept all the
responsibilities incidental to the position of Executive and Financial Officer
of the Company, including those that may be assigned to him by the President and
Board of Directors of the Company. The Employee shall devote his best efforts
and his full working time to perform his duties and shall use his best efforts
to promote the business interests of the Company. The Employee shall not work
either on a part-time or independent contractor basis for any other business or
enterprise during the term of this Agreement without the prior written consent
of the Board of Directors.
<PAGE>
The Employee shall at all times perform his duties in a manner that is in the
best interests of the Company.
(b) The Employee's principal place of work shall be the Company's
officer in Coral Gables, Florida. The Employee shall undertake such
business-related travel as is necessary for the fulfillment of his duties and
responsibilities hereunder.
3. Compensation.
(a) In consideration of the services to be rendered by the Employee
hereunder, the Company shall pay to the Employee an annual salary (the "Salary")
of $184,000. The Salary shall be payable in equal installments on a periodic
basis consistent with the Company's practice for payment of salaries to its
other executive employees.
(b) The Salary shall be increased on each anniversary of the Effective
Date by an amount equal to the percentage increase, during the twelve-month
period preceding such anniversary date, in the Consumer Price Index for All
Urban Consumers.
4. Expenses. The Company, in accordance with such rules and practices
as it may establish, shall pay or reimburse the Employee for all reasonable and
necessary business expenses incurred in connection with the performance by the
Employee of his duties under this Agreement.
5. Benefits and Other Payments.
(a) (i) The Employee shall receive all employee benefits,
including, but not limited to, health care, provided by the Company to its other
executive employees. The Employee shall be entitled to (A) four weeks paid
vacation per year, and (B) sick leave in accordance with the policies
established by the Company applicable generally to its other executive
employees.
(ii) The Company shall purchase and maintain in force
during the term of this Agreement a contract of term life insurance on the life
of the Employee with a death benefit of $500,000.00. The Employee shall have the
right to designate the beneficiary.
(b) (i) (A) The Company will pay directly or reimburse the
Employee the reasonable expenses incurred by him in moving from the New York
City area to the South Florida area, including transportation expenses for the
Employee and his family and moving family household items.
(B) The payments and reimbursements contemplated at
section 5(b)(i)(A) above shall be made only presentation to the Company of
receipts, invoices, bills or other documents reasonably satisfactory to the
Company.
2
<PAGE>
(ii) The Company shall make a one-time payment to the
Employee of $25,000.00 to compensate him for the costs, direct and indirect, of
moving to South Florida that are not paid or reimbursed under section 5(b)(i)
above. The Employee shall not be required to account to the Company for the
payment contemplated by this section 5(b)(ii).
(d) (i) If prior to termination of this Agreement, there
should be a "Change of Control", as defined in section 5(d)(ii) below, and
thereafter (A) this Agreement should be terminated by the Company for any reason
other than Just Cause or (B) the Employee is placed in any position of lesser
stature than that of Executive and Financial Officer of the Company; is assigned
duties inconsistent with Executive and Financial Officer or duties which, if
performed, would result in a significant change in the nature or scope of
powers, authority, functions or duties inherent in such position on the date
hereof; is assigned performance requirements or working conditions which are at
variance with the performance requirements and working conditions in effect
immediately prior to the Change of Control; or is accorded treatment on a
general basis that is in derogation of his status as Executive and Financial
Officer; (C) the Company breaches its duties under sections 3 or 5 of this
Agreement; or (D) the Company requires the Employee to perform his principal
duties for the Company outside South Florida or such other area at which the
Employee performed his duties immediately prior to the Change of Control; then
the Employee may terminate this Agreement and upon such termination, the Company
will pay to Employee, as liquidated damages, a lump sum cash payment equal to
two times Salary.
(ii) "Change of Control" shall be deemed to have taken
place if (A) any person, including a group, becomes the beneficial owner of
shares of the Company having 50% or more of the total number of votes that may
be cast for the election of Directors of the Company; or (B) there occurs any
cash tender or exchange offer for shares of the Company; merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions, and as a result of or in connection with any such
event persons who were directors of the Company before the event shall cease to
constitute a majority of the Board of Directors of the Company or any successor
to the Company. As used herein, the terms "person" and "beneficial owner" have
the same meaning as such terms under Section 13(d) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations hereunder.
6. Term and Termination.
(a) This Agreement shall become effective as of September 1,
1999 and shall terminate on August 31, 2002.
(b) The Company shall have the right to terminate this
Agreement at any time for "Just Cause" upon written notice to the Employee, and
such termination shall be effective upon delivery of such notice. For purposes
of this Agreement, "Just Cause" shall mean a material breach of this Agreement
by the Employee, any act of dishonesty or fraud committed by Employee (other
than by reason of the death of the Employee), misappropriation of funds of the
3
<PAGE>
Company, willful and deliberate malfeasance, gross negligence, or any act
substantially impeding the Employee's ability to perform his duties in the best
interests of the Company.
(c) If this Agreement is terminated for Just Cause by the
Company, or is terminated by the Employee prior to the date of expiration of the
term, the Employee shall be entitled to receive any unpaid Salary accrued to the
date of such termination plus any unpaid expense reimbursement.
7. Confidentiality. The Employee shall not, during the period of his
employment hereunder or at any time thereafter, unless specifically authorized
by a resolution of the Board of Directors of the Company, use or disclose to any
person or entity, any confidential or secret information with respect to the
business or affairs of the Company, or any of its affiliates, including any
information concerning customers or prospective customers of the Company or its
affiliates, unless such information becomes generally available to the public
(and only after it becomes so available). The Employee agrees that he will hold
all such information in a fiduciary capacity for the benefit of the Company and
its affiliates and shareholders.
8. Freedom to Contract. The Employee represents and warrants to the
Company that he is not a party to nor is he bound by any agreement or law that
prohibits his execution of this Agreement, his acceptance of employment by the
Company, or his performance of his duties and obligations hereunder. The
Company's obligations hereunder are subject to the condition that the Employee
is not in violation of, nor a party to, any employment or other agreement
restricting his right or ability to be employed by the Company or to serve in
the capacity designated hereby.
9. Arbitration. The parties hereto agree that any controversy or claim
arising out of or relating to this Agreement and Employee's employment hereunder
shall be referred to and finally resolved by arbitration in Miami-Date, Florida
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The expenses of arbitration shall be
shared equally between the parties. This Section 9 shall not in any way limit
the right of the Company to obtain provisional remedies for violations of
Section 6 or 7 of this Agreement pending the outcome of arbitration proceedings.
10. Notice. All notices, consents, approvals, requests, instructions
and other communications required by or related to this Agreement shall be in
writing and shall be delivered personally or shall be sent by registered or
certified mail, return receipt requested, or by facsimile transmission, to the
receiving party at the following address and communication numbers:
4
<PAGE>
If to the Company: Hospitality Worldwide Services, Inc.
201 Alhambra Circle
Coral Gables, FL 33134
Attn: Douglas Parker, President
Facsimile: 305-774-3035
Telephone: 305-774-4040
with a copy to: Samuel C. Ullman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
Suite 4000
Miami, FL 33131
Facsimile: 305-577-7001
Telephone: 305-577-7080
If to the Employee: John Wilkens
____________________________
____________________________
____________________________
11. Assignment. Neither party may assign its rights or delegate its
obligations hereunder without the prior written consent of the other party
hereto.
12. Miscellaneous.
(a) Payments by the Employer pursuant to this Agreement shall
be subject to tax withholding as required by law.
(b) This Agreement sets forth the full and complete
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes any prior agreement, oral or written, between the parties
hereto with respect to the subject matter hereof.
(c) This Agreement may be amended or supplemented at any time
only by written instrument executed by the Company and the Employee.
(d) Each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by applicable law. Should any
term or provision of this Agreement be held invalid, illegal or unenforceable,
the remainder of this Agreement, including the application of such term to the
extent not invalid, illegal or unenforceable, shall not be affected thereby, and
this Agreement shall be interpreted as if such term or provision, to the extent
invalid, illegal or unenforceable, did not exist.
5
<PAGE>
(e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Florida.
(f) No waiver of any provision of this Agreement by either
party hereto shall be effective unless executed in writing or constitute a
waiver of any other provision hereof.
(g) The headings in this Agreement are for convenience of
reference only and shall not be considered as part of this Agreement or limit or
otherwise affect the meaning hereof.
(h) This Agreement may be executed and delivered, including
execution and delivery by facsimile transmission, in counterparts, each of which
shall be deemed an original and both of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date first set forth above.
HOSPITALITY WORLDWIDE SERVICES, INC.
By:/s/ Douglas Parker
--------------------------------------------
Douglas Parker, President
By:/s/ John Wilkens
--------------------------------------------
John Wilkens
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED September 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS, NOTES, THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 6,862
<SECURITIES> 0
<RECEIVABLES> 31,328
<ALLOWANCES> 1,234
<INVENTORY> 0
<CURRENT-ASSETS> 62,269
<PP&E> 7,018
<DEPRECIATION> 1,679
<TOTAL-ASSETS> 81,057
<CURRENT-LIABILITIES> 67,569
<BONDS> 2,492
0
1,000
<COMMON> 142
<OTHER-SE> 9,854
<TOTAL-LIABILITY-AND-EQUITY> 81,057
<SALES> 165,339
<TOTAL-REVENUES> 165,339
<CGS> 154,799
<TOTAL-COSTS> 181,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 618
<INCOME-PRETAX> (16,672)
<INCOME-TAX> 285
<INCOME-CONTINUING> (16,957)
<DISCONTINUED> (30,415)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (47,372)
<EPS-BASIC> (1.28)
<EPS-DILUTED> 0
</TABLE>
