SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
HUDSON HOTELS CORPORATION
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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2000
ANNUAL MEETING OF SHAREHOLDERS
-OF-
HUDSON HOTELS CORPORATION
300 BAUSCH & LOMB PLACE
ROCHESTER, NY 14604
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 2000 Annual Meeting of Shareholders of Hudson Hotels Corporation (the
"Company") will be held at The Brookwood Hotel, 800 Pittsford-Victor Road,
Pittsford, New York 14534 on Thursday, September 14, 2000 at 10:00 a.m. local
time, for the following purposes:
1. To elect five (5) directors for a term of one (1) year or until their
successors have been elected and qualified.
2. To consider and act upon a proposal to permit the Board of Directors to
amend the Company's Certificate of Incorporation to effect a reverse stock
split of the Company's issued common stock in which one new share of Common
Stock would be exchanged for every three shares of Common Stock currently
issued and outstanding (the "Reverse Stock Split"), all fractional shares to
be rounded up to the next whole share, all as more fully described in the
accompanying Proxy Statement.
3. To consider and act upon a proposal to amend the Company's 1993 Director's
Stock Option Plan.
4. To consider and act upon a proposal to appoint Bonadio & Co., LLP as the
Company's independent public accountants for the year ending December 31,
2000.
5. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
Information concerning matters to be acted upon at the Annual Meeting is set
forth in the accompanying Proxy Statement.
Shareholders of record at 5:00 p.m. Eastern Daylight Time, on July 18, 2000,
are entitled to notice of and to vote at the meeting. Each shareholder, even
though he or she now plans to attend the meeting, is requested to execute the
enclosed proxy card and return it without delay in the enclosed postage-paid
envelope. Any shareholder present at the meeting may withdraw his or her proxy
in writing and vote personally on each matter brought before the meeting.
By Order of the Board of Directors
Alan S. Lockwood
Secretary
July 31, 2000
2000
ANNUAL MEETING OF SHAREHOLDERS
-OF-
HUDSON HOTELS CORPORATION
300 BAUSCH & LOMB PLACE
ROCHESTER, NY 14604
PROXY STATEMENT
This Proxy Statement (the "Proxy Statement") is furnished to shareholders of
Hudson Hotels Corporation, a New York corporation having its principal executive
offices at 300 Bausch & Lomb Place, Rochester, New York 14604 (the "Company") in
connection with the solicitation of proxies by the Board of Directors of the
Company relating to the 2000 Annual Meeting of shareholders (the "Annual
Meeting") which will be held at the The Brookwood Hotel, 800 Pittsford-Victor
Road, Pittsford, New York 14534 on Thursday, September 14, 2000, at 10:00 a.m.,
local time, and at any and all adjournments of the Annual Meeting.
This Proxy Statement, together with the accompanying form of proxy, was
mailed to shareholders on or about August 4, 2000.
VOTING SECURITIES
As of July 18, 2000, the record date for the Annual Meeting, there were
8,188,569 of the Company's common shares, par value $.001 per share (the "Common
Shares"), issued and outstanding. Only shareholders of record on the books of
the Company at the close of business on July 18, 2000 are entitled to notice of,
and to vote at, the Annual Meeting and at any and all adjournments of the Annual
Meeting. Each such shareholder is entitled to one vote for each Common Share
registered in the name of the shareholder. A majority of the outstanding Common
Shares represented in person or by proxy at the Annual Meeting will constitute a
quorum for the transaction of business.
Under the law of New York, the Company's state of incorporation, abstentions
and broker non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Broker non-votes occur
where a broker holding stock in street name votes the shares on some matters but
not others. Usually, this occurs where brokers have not received instructions
from clients, in which case brokers are permitted to vote on "routine" matters
but not on non-routine matters. The missing votes on non-routine matters are
broker non-votes.
The enclosed proxy, when properly executed and received by the Secretary of
the Company prior to the Annual Meeting, will be voted as therein specified
unless revoked by filing with the Secretary prior to any vote at the Annual
Meeting, a written revocation or a duly executed proxy bearing a later date.
Unless authority to vote for one or more of the director nominees is
specifically withheld according to the instructions, a signed proxy will be
voted FOR the election of the five director nominees named herein. Unless a
proxy is designated as being voted against, or unless a shareholder designates
that the shareholder abstains, a signed proxy will be voted FOR each proposal
described herein. The Board knows of no other matters to be presented at the
Annual Meeting. If any other matter should be presented at the Annual Meeting
upon which a vote properly may be taken, shares represented by all proxies
received by the Board will be voted with respect thereto in accordance with the
judgment of the persons named in the proxies.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by use of the mails, officers and regular employees of the Company,
without extra compensation, may solicit proxies personally, by telephone or
telegraph. The Company has requested persons holding Common Shares in their
names for others or in the names of nominees to forward soliciting material to
the beneficial owners
1
of such Common Shares and the Company will, if requested, reimburse such persons
for their reasonable expenses in so doing.
PRINCIPAL SHAREHOLDERS
The following table sets forth as of July 18, 2000, the name and address of
each director and executive officer who owns shares of Common Stock and each
other person known by the Company to own beneficially more than 5% of the
Company's outstanding shares of Common Stock and the number of shares owned by
all directors and executive officers of the Company, as a group, together with
the respective percentage holdings of each such person.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2) CLASS (1)(2)
- ------------------- --------------------------- ------------
E. Anthony Wilson............................ 1,292,140(3) 14.63%
300 Bausch & Lomb Place
Rochester, New York 14604
Bruce Sahs................................... 155,858(4) 1.87%
300 Bausch & Lomb Place
Rochester, New York 14604
Ralph L. Peek................................ 522,869(5) 6.33%
300 Bausch & Lomb Place
Rochester, New York 14604
Richard C. Fox............................... 211,798(6) 2.58%
20 North Union Street
Rochester, New York 14607
Alan S. Lockwood............................. 34,950(7) 0.43%
7291 Dennisport Lane
Victor, New York 14564
M,L,R&R...................................... 1,538,107(8) 18.23%
300 Willowbrook Office Park
Fairport, New York 14550
LIVA & Co., f/b/o 454,900(9) 5.39%
The Q-Tip Trust of
Jennifer L. Ansley...........................
The Chase Manhattan Bank, N.A.
Rochester, New York
Oppenheimer Convertible Securities Fund...... 1,666,667 20.35%
2 World Trade Center, 34th Floor
New York, New York 10048-0203
All directors and executive officers as a
group (5 persons).......................... 2,083,733(1),(2),(3),(4),(5),(6),(7), 22.98%
- ------------------------
(1) Unless otherwise indicated below, each director, officer and 5% shareholder
has sole voting and investment power with respect to all shares beneficially
owned.
(2) Does not give effect to 668,125 shares reserved for issuance upon the
exercise of outstanding warrants issued to non-affiliates.
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(3) Includes 22,000 shares in trust to Rebecca S. Wilson, Mr. Wilson's daughter.
Includes 161,875 shares issuable upon exercise of outstanding warrants of
the Company, which shares Mr. Wilson has the right to acquire within sixty
(60) days. Includes 102,007 shares owned by Wilson Enterprises, L.P. and
31,875 shares issuable upon exercise of non-qualified stock options granted
to Wilson Enterprises, L.P. of which Mr. Wilson is a general partner, and
which option shares Mr. Wilson has the right to acquire within 60 days. Also
includes an aggregate of 450,000 shares issuable upon exercise of
non-qualified stock options granted to E. Anthony Wilson, which shares
Mr. Wilson has the right to acquire within 60 days. Does not include 950,000
shares issuable upon exercise of the options, which shares have not yet
vested, and 100,000 shares issuable upon exercise of options, which exercise
is conditioned upon the fulfillment of a material performance standard.
(4) Includes an aggregate of 155,000 shares issuable upon exercise of
non-qualified stock options granted to Mr. Sahs, which shares Mr. Sahs has
the right to receive within 60 days. Does not include 150,000 shares
issuable upon exercise of options, which shares have not yet vested.
(5) Includes 127,094 shares owned beneficially and of record by Patricia L.
Peek, wife of Mr. Peek, ownership of which shares Mr. Peek specifically
disclaims. Includes 18,000 shares owned by Kacey L. Peek, Mr. Peek's
daughter under the Uniform Gifts to Minors Act. Includes 102,007 shares by
Wilson Enterprises, L.P. and 31,875 shares issuable upon exercise of a
non-qualified stock option granted to Wilson Enterprises, L.P. of which
Ralph L. Peek is a general partner, and an aggregate of 37,000 shares
issuable upon exercise of non-qualified stock options granted to Ralph L.
Peek, which shares Mr. Peek has the right to acquire within 60 days. Does
not include 100,000 shares issuable upon exercise options, which shares have
not yet vested.
(6) Includes 43,000 shares owned by Wendy's Restaurants of Rochester, Inc. and
40,000 shares owned by JV Renard & Company, Inc. Includes 18,000 shares
issuable upon exercise of a non-qualified stock option granted to Mr. Fox as
a director of the Company, which shares Mr. Fox has the right to acquire
within sixty (60) days; does not include 9,000 shares issuable upon exercise
of the option, which shares have not yet vested.
(7) Includes 18,000 shares issuable upon exercise of a non-qualified stock
option granted to Mr. Lockwood as a director of the Company, which shares
Mr. Lockwood has the right to acquire within sixty (60) days; does not
include 9,000 shares issuable upon exercise of the option, which shares have
not yet vested. Also includes 6,667 shares issuable upon exercise of a
non-qualified stock option granted to 900 Midtown Investments, an investment
partnership whose sole partners are Robert Brown, John Wilson, Richard
Palumbo, Michael Howard, Howard Konar, Catherine Foerster, Sue Jacobson and
Mr. Lockwood, which shares 900 Midtown Investments has the right to acquire
within 60 days.
(8) Includes 1,000,000 shares owned by M, L, R & R, and 250,000 shares issuable
upon exercise of warrants issued to M, L, R & R, which shares
M, L, R & R has the right to acquire within sixty (60) days. Also includes
the following numbers of shares owned individually by the partners of
M, L, R & R: The Marvin Sands Master Trust--19,500; Richard E.
Sands--176,216; Robert S. Sands--45,847; CWC Partnership-I--46,544. Does not
include any shares owned by LIVA & Co. f/b/o the Q-Tip Trust of Jennifer L.
Ansley (Sands), the wife of Richard E. Sands, ownership of which shares
Mr. Sands disclaims. Each of the partners of M, L, R & R disclaims ownership
of three-quarters of the shares owned by M, L, R & R, and of all of the
shares owned individually by any other partner of M, L, R & R.
(9) Includes 247,467 shares issuable upon conversion of the Company's Series A
Preferred Stock, which the Trust has the right to receive within 60 days.
Does not include an aggregate of 39,640 shares held by trusts for the
children of Loren G. Ansley, or 47,256 shares reserved for issuance upon
conversion of 47,256 Series A Preferred Shares held by those trusts.
3
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
As of July 14, 2000 the directors and executive officers of the Company were
as follows:
NAME AGE POSITION
- ---- -------- ----------------------------------
E. Anthony Wilson................. 55 Chairman of the Board of
Directors, President,
Chief Executive Officer,
and Director
Bruce A. Sahs..................... 54 Senior Vice President
Ralph L. Peek..................... 52 Vice President, Treasurer,
Assistant Secretary and Director
Richard C. Fox.................... 53 Director
Alan S. Lockwood.................. 46 Director and Secretary
Ted Filer......................... 35 Director
All directors serve for a term of one year and until their successors are
duly elected. All officers serve at the discretion of the Board of Directors.
Messrs. Wilson, Fox, Peek, Lockwood and Filer are each nominees for the
position of director of the Company to be voted upon at the 2000 Annual Meeting.
For a brief description of their respective business experience during the past
five years please refer to that portion of this Proxy Statement entitled
"Election of Directors." Michael George was a director until he resigned
effective March 1, 2000. A brief description of the business experience of
Mr. Sahs is presented here.
BRUCE A. SAHS
SENIOR VICE PRESIDENT
Mr. Sahs participated in the organization of the Company and served as Chief
Financial Officer from inception through December 1996. From January 1993
through June 1998, Mr. Sahs served as Executive Vice President and Chief
Operating Officer of the Company and as a director. From June 1998 to the
present, Mr. Sahs has served as Senior Vice President. Prior to his employment
with Hudson, Mr. Sahs was a partner in a Rochester based certified public
accounting firm, specializing in hotel and restaurant auditing controls and
management services. Mr. Sahs received his degree from the Rochester Institute
of Technology, is a Certified Public Accountant, as well as a Certified Hotel
Administrator. He is also a member of the New York State Society of Certified
Public Accountants.
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ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company proposes that a Board of Directors consisting of five
(5) directors be elected by the shareholders at the Annual Meeting, each
director to hold office until the next Annual Meeting of shareholders or until
the successor of the director is duly elected and qualified. The number of
directors to be elected has been fixed by the Board of Directors pursuant to the
Company's By-Laws.
The Board of Directors recommends the election of the five (5) nominees
named below. Messrs. Wilson, Peek, Fox and Lockwood were elected as directors at
the Company's 1999 annual meeting of shareholders. Mr. Filer was appointed to
the Board on June 26, 2000 to fill the vacancy created by the resignation of
Michael George. The Board of Directors does not contemplate that any of the
nominees will be unable to serve as a director, but should any such nominee so
notify the Company of the nominee's unavailability prior to the voting of the
proxies, the persons named in the enclosed proxy reserve the right to vote for
such substitute nominee or nominees as they, in their sole discretion, shall
determine.
Unless authority to vote for one or more of the director nominees is
specifically withheld according to the instructions, proxies which are executed
and returned to the Company prior to the Annual Meeting in the enclosed form
will be voted FOR the election of each of the five (5) nominees named below. The
proxy solicited by the Board of Directors will be so voted unless shareholders
specify a contrary choice therein. Directors are elected by a plurality of votes
cast. What follows is certain information relating to each of the nominees for
director:
E. ANTHONY WILSON, age 55, was a co-founder of the Company, has served as
Chairman of the Board since its inception, and as Chief Executive Officer since
January 1993. In 1984 he co-founded Hudson Hotels Corp. which was acquired by
the Company in June 1992. Mr. Wilson has over 25 years experience in the
hospitality and real estate industries as a developer, owner and manager. As
General Partner of Wilson Enterprises, L.P., a real estate development firm in
Rochester, New York, he has developed a significant amount of office, warehouse,
apartments and related facilities for tenants, including Xerox Corporation,
Eastman Kodak, Rochester Telephone Corp., R.T. French, Champion Products, the
United States Government and other national corporations. Mr. Wilson is an
alumnus of the School of Business at Indiana University. He has served as the
Chairperson of the Strong Memorial Hospital Children's Fund, and as a Director
of the Erdle Perforating Corp.
RICHARD C. FOX, age 53, currently owns and operates 91 Wendy's restaurants
and has been a franchisee of Wendy's for 22 years. Mr. Fox's restaurants are
located principally in Rochester, New York, Ft. Wayne and South Bend, Indiana,
Erie, Pennsylvania, Cleveland, Ohio and Buffalo, New York. Mr. Fox is originally
from the Cleveland, Ohio area, is a graduate of Kenyon College and received his
MBA from Harvard Business School in 1971. After graduating from Harvard,
Mr. Fox worked with Price Waterhouse Co. In 1974, he moved to Columbus, Ohio to
become the Financial Vice President of Wendy's International, Inc. He left
Wendy's International, Inc. to become a Wendy's franchise in 1976. Mr. Fox is a
member of the Board of Trustees of the Norman Howard School, the McQuaid Jesuit
High School, St. Thomas More Church, Genesee Country Museum and is a member of
the Board of Directors of Vehicare Corp.
RALPH L. PEEK, age 52, has been involved with the Company and has served as
a Director of the Company since it inception in 1987. As of December 31, 1996
Mr. Peek was named Vice President and Treasurer of the Company. In addition, he
has been a general partner of Wilson Enterprises, L.P. since 1982. Mr. Peek is
also a certified public accountant licensed in the State of New York and
received his degree from the Rochester Institute of Technology.
ALAN S. LOCKWOOD, age 47, is a partner in the law firm of Boylan, Brown,
Code, Vigdor & Wilson, LLP of Rochester, New York, which firm is general counsel
to the Company. Mr. Lockwood specializes in corporate finance and has been
affiliated with Boylan, Brown since 1978. He is a graduate of Cornell University
School of Arts and Sciences and Cornell Law School. Mr. Lockwood has served as
Secretary of the Company since its inception and as a Director since 1999.
5
TED FILER, age 35, is co-founder of Central Auto Auctions, Inc. Over the
past 10 years, Central Auto Exchange has successfully auctioned over 20,000
vehicles a year through its dealer-only auctions. As an owner and former general
manager, Mr. Filer has been instrumental in positioning Central Auto Exchange as
the regional leader in Automobile remarketing in Western New York. For the past
5 years, Mr. Filer has been the co-founder, CEO and director of Origin
Communications Inc. Under Mr. Filer's direction, Origin has grown to nearly
$20 million in annual revenue. Origin is a fully integrated service bureau,
providing customer service support, sales/billing support, and electronic voice
messaging services. Mr. Filer is also a founder and Chairman of the Board of
Gizmo.com, an asset management and lifecycle solutions company which recently
launched it's B2B on-line auction, GizmoAuctions.com, a marketplace for the
exchange and disposition of IT and telephony assets.
None of the Company's directors is a director of any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended, or of any company registered under the Investment Company Act
of 1940, as amended. There is no family relationship among any members of the
Board of Directors or the executive officers or significant employees of the
Company. The Board of Directors met five times during year ended December 31,
1999. Each Director attended 67% or more of the meetings held by the Board of
Directors and the Committees on which the Director served.
At the present time the Company has no Nominating Committee. The Board has a
Compensation Committee whose members in 1999 were Mr. Fox and Mr. Lockwood, and
an Audit Committee whose members in 1999 were Mr. Fox and Mr. Lockwood. The
Audit Committee has the responsibility for recommending the appointment of the
Company's outside auditors, reviewing the scope and results of audits, and
reviewing internal accounting controls and systems. The Compensation Committee
establishes the compensation of the Chief Executive Officer of the Company,
reviews the recommendations of management regarding the compensation of other
executive officers and administers the Company's Stock Option Plans. All
directors and executive officers are elected to serve as directors and executive
officers until the next annual meeting of shareholders of the Company or until
their successors have been elected and qualified.
There are no arrangements or understandings between any director or
executive officer and any other persons pursuant to which any such directors or
executive officers was or is to be selected as a director or nominee for
director.
In September 1993, the Company adopted the 1993 Director Stock Option Plan.
The 1993 Director Stock Option Plan originally authorized the issuance of
options to purchase up to 135,000 shares of Common Stock by Directors pursuant
to the formula set forth in the plan; on June 11, 1998, the Shareholders
authorized the issuance of an additional 81,000 shares pursuant thereto.
Pursuant to the 1993 Director Stock Option Plan, each non-employee director is
granted options to purchase 27,000 shares of the Company's stock, at the closing
price on the date of grant, vesting over three years. Options to purchase 81,000
under the 1993 Director Stock Option Plan were outstanding as of December 31,
1999; none of these options have been exercised.
Non-management directors are paid $1,000 for each board meeting attended and
$500 for each committee meeting attended. Directors who are also full time
employees are not paid directors' fees.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE POLICY. The Company has an
insurance policy for $2,000,000 effective until November 3, 2000 which protects
its officers and directors against losses which certain persons may incur
because of their acts or omissions as officers or directors. The policy is
underwritten by Royal Indemnity Company at a premium of $38,000 per year.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Based solely upon its
review for Forms 3 and 4 year ended December 31, 1999 and in reliance upon
written representations regarding the necessity to file Form 5, and except as
previously reported, the Company has determined that, to the best of its
knowledge, no officer, director or shareholder required to file such form has
failed to do so timely.
6
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation for fiscal 1997, 1998
and 1999 to the Company's Chief Executive Officer, officers who earned in excess
of $100,000 and to all executive officers as a group.
SUMMARY COMPENSATION TABLE
RESTRICTED
NAME OF INDIVIDUAL OR GROUP STOCK AWARDS
AND PRINCIPAL POSITION YEAR CASH COMPENSATION (A) OPTIONS/SARS (#) ($)
- ---------------------- ---- --------------------- ---------------- ------------
E. Anthony Wilson, CEO................. 1999 $ 431,327 0 0
1998 300,146 500,000 0
1997 359,892 50,000 0
Michael George, COO.................... 1999 $ 332,083 0 0
1998 124,819 500,000 $20,000
1997 N/A N/A 0
John M. Sabin, CFO..................... 1999 $ 254,299 0 $19,688
1998 169,704 500,000 20,000
1997 N/A N/A 0
Ralph L. Peek.......................... 1999 $ 111,903 0 0
1998 89,668 0 0
1997 78,685 10,000 0
Taras Kolcio........................... 1999 $ 101,650 0 0
1998 87,135 10,000 0
1997 81,324 10,000 0
All Executive Officers as a Group 1999 $1,328,491 0 $19,688
(6 in 1999; 6 in 1998; 1998 909,960 1,510,000 40,000
4 in 1997)........................... 1997 677,327 80,000
Note: Columnar information required by Item 402(a)(2) has been
omitted for categories where there has been no compensation
awarded to, earned by, or paid to, any of the named
Executives required to be reported in the table during
fiscal 1997, 1998 and 1999.
(a) In addition, the Company provided Messrs. Wilson, George, Sabin and Sahs
with an automobile. Other than the cash compensation set forth in the table,
none of the Executive Officers individually, nor the Executive Officers as a
group, received non-cash benefits having a value exceeding $50,000, or 10%
of their cash compensation.
(b) In 1999, the Company issued to Mr. Sabin 25,000 shares of common stock in
connection with the termination of Mr. Sabin's employment agreement.
7
AGGREGATED OPTION EXERCISES IN 1999 AND
1999 YEAR-END OPTION VALUES
(1)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES VALUE AT FY-END AT FY END
ACQUIRED REALIZED EXERCISABLE EXERCISABLE
NAME ON EXERCISE $ UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- --------------- -------------
E. Anthony Wilson........................... 0 0 450,000/400,000 0/0
Ralph L. Peek............................... 0 0 37,000/0 0/0
Michael George.............................. 0 0 100,000/400,000 0/0
Bruce A. Sahs............................... 0 0 155,000/0 0/0
Taras Kolcio................................ 0 0 28,667/3,333 0/0
- ------------------------
(1) based upon a stock price of $1.00 the closing price on July 18, 2000.
EMPLOYMENT AGREEMENTS
E. Anthony Wilson, Chairman, President and Chief Executive Officer entered
into an Employment Agreement with the Company effective May 1, 1998. The
employment agreement was entered into in contemplation that Hudson Hotels Trust
would also employ each of these executives and share the obligations under the
contracts; however, in the event that Hudson Hotels Trust is unable to fulfill
its obligations, the Company is responsible for all obligations thereunder.
The Employment Agreement has a term of five years, and may be terminated by
the Company for cause (as defined in the Agreements) or upon the death or
disability of the employee. In the event of the disability of Employee or
termination of the Agreement by the Employee for Good Reason, the Employee is
entitled to receive severance equal to one year's base salary, payable over two
years. Good Reason means (i) material change of Employee's duties,
(ii) material breach by the Company, or (iii) voluntary termination by Employee
within ninety (90) days after a Change in Control.
The Employment Agreement sets out the following compensation:
BASE SALARY STOCK OPTIONS(1)
----------- ----------------
E. Anthony Wilson................................... $360,000 500,000
For the purposes of the Agreements, "Change in Control" means the occurrence
of any one of the following events:
(i) (A) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or which contemplates that
all or substantially all of the business and/or assets of the Company,
shall be controlled by another corporation or (B) a recapitalization
(including an exchange of the Company's equity securities by the holders
thereof), in either case, in which any "Person" (as such term is used in
Section 13 (d) and 14 (d) (2) of the Exchange Act), becomes the
beneficial owner (within the meaning of Rule 13d 3 promulgated under the
Exchange Act) of securities of the Company representing more than 50% of
the combined power of the then outstanding securities ordinarily having
the right to vote in the election of directors;
- ------------------------
(1) 100,000 vested immediately; the balance vested over time, subject to
meeting certain performance- based criteria.
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(ii) any sale, lease, exchange or transfer (in one transaction or series of
related transactions) of all or substantially all of the assets of the
Company;
(iii) approval by the shareholders of the Company, of any plan or proposal
for the liquidation or dissolution of the Company, unless such plan or
proposal is abandoned within sixty (60) days following such approval.
(iv) any "Person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act), shall become the beneficial owner of securities of
the Company, representing more than 50% of the combined voting power of
outstanding securities ordinarily having the right to vote in the
election of directors.
(v) more than 50% of the then existing directors of either the Company are
changed at any election of the Board of Directors and such new Board of
Directors asks for the resignation of or terminates the employment of
Employee.
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NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934 THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY
STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING PERFORMANCE GRAPH AND THE REPORT
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
CORPORATE PERFORMANCE GRAPH
The following graph reflects a comparison of the cumulative total return of
the Company's Common Shares from December 31, 1994 through December 31, 1999,
with the Russell 2000 Index and a peer group consisting of public hotel
companies. Comparisons of this sort are required by the Securities and Exchange
Commission and, therefore, are not intended to forecast or be indicative of
possible future performance of the Company's Common Shares. The graph assumes
that $100 was invested on December 31, 1994 in each of the Company's Common
Shares, the Russell 2000 Index and the peer group and that all the dividends
were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG HUDSON HOTELS CORPORATION, THE RUSSELL 2000 INDEX
AND A PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HUDON HOTELS CORPORATION PEER GROUP RUSSELL 2000
12/94 100.00 100.00 100.00
12/95 238.24 92.50 127.49
12/96 138.24 137.50 154.73
12/97 97.06 91.02 203.91
12/98 33.09 40.60 190.76
12/99 16.19 37.12 187.92
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX--
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
10
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
consisting entirely of non-employee directors (Messrs. Fox and Lockwood),
approves all of the policies under which compensation is paid or awarded to the
Company's executive officers.
The Company's executive compensation policy is intended (i) to support the
attainment of the Company's long and short-term strategic and financial
objectives; (ii) to provide a competitive total compensation program that
enables the Company to attract, motivate and retain the key executives needed to
accomplish the Company's goals; (iii) to provide variable compensation
opportunities that are directly related to the performance of the Company;
(iv) to align executive compensation with growth in shareholder value; and
(v) to recognize and reward executives for their contributions and commitment to
the growth and profitability of the Company. The Compensation Committee believes
this policy is generally best accomplished by providing a competitive total
compensation package, a significant portion of which is variable and at risk and
related to established performance goals.
To maintain a competitive level of compensation, the Company and the
Committee utilized the services of an independent compensation consultant during
1998 to analyze compensation data for comparable companies in the hotel business
and to recommend plan designs and guidelines and compensation strategies.
The Company's compensation program for executive officers consists of the
following key elements: base salary and equity-based incentives. Salary is
mainly designed to reward current and past performances. Equity-based incentives
are primarily designed to provide strong incentives for long-term future
performance. The components of the compensation program for executives are
described below.
BASE SALARY: Mr. Wilson's base salary was established pursuant to his
employment contract. Base salaries and increases for other executive officers
are determined by the Chief Executive Officer within the guidelines established
by the Committee and are based upon the officer's current performance,
experience, the scope and complexity of his or her position within the Company
and the external competitive marketplace for comparable positions at peer
companies. Base salaries are designed to be competitive, as compared to salary
levels for equivalent executive positions in comparable companies and are
normally reviewed annually.
EQUITY-BASED INCENTIVES: Stock options are granted to aid in the retention
of key employees and to align the interests of key employees with those of the
shareholders. Stock option grants are discretionary and reflect the current
performance and continuing contribution of the individual to the success of the
Company. The Committee is responsible for determining the individuals to whom
grants should be made, the time of the grants and the number of shares subject
to each option. Stock options are granted with an exercise price equal to the
fair market value of the Company's Common Shares on the date of grant. Any value
received by the executive from an option grant depends completely upon increases
in the price of the Company's Common Shares. Consequently, the full value of an
executive's compensation package cannot be realized unless an appreciation in
the price of the Company's Common Shares occurs over a period of years.
CEO COMPENSATION
An employment agreement was entered into with Mr. Wilson effective May 1,
1998, which established Mr. Wilson's base salary at $360,000. Stock options for
500,000 shares were reserved for grant to Mr. Wilson in 1998 under the Company's
1998 Long-Term Incentive Compensation Plan, of which 100,000 vest immediately
upon the execution of his option agreement and the balance vest over five
(5) years, subject to the satisfaction of various performance goals. See
"EXECUTIVE OFFICER COMPENSATION--Employment Contracts".
11
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code generally limits the corporate
tax deduction for compensation paid to the Named Executive Officers to
$1,000,000 each. However, compensation is exempt from this limit if it qualifies
as "performance-based compensation". The Compensation Committee has carefully
considered the impact of this tax code provision and its normal practice is to
take such action as is necessary to preserve the Company's tax deduction. The
Committee believes that all of the Company's 1999 compensation expense will be
deductible for federal income tax purposes.
Although the Compensation Committee will continue to consider deductibility
under Section 162(m) with respect to future compensation arrangements with
executive officers, deductibility will not be the sole factor used in
determining appropriate levels or methods of compensation. Since Company
objectives may not always be consistent with the requirements for full
deductibility, the Company may enter into compensation arrangements under which
payments are not deductible under Section 162(m). It is not expected that the
compensation of any executive officer will exceed $1,000,000 in fiscal 2000.
Compensation Committee
Richard C. Fox
Alan S. Lockwood
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee consist of Messrs. Fox and
Lockwood. Each member is a non-employee director and does not have any direct or
indirect material interest in or relationship with the Company outside of his
position as director.
12
APPROVAL OF THE AMENDMENT
OF THE COMPANY'S CERTIFICATE
OF INCORPORATION
(PROPOSAL 2)
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
(PROXY ITEM 2)
The Board has unanimously adopted a resolution approving, and recommending
to the Company's stockholders for their approval, a proposal to amend Article
Three of the Company's Certificate of Incorporation authorizing a reverse stock
split of the shares of Common Stock of the Company at a ratio of one-for-three
(the "Reverse Stock Split"), or to abandon the Reverse Stock Split. The form of
the proposed amendment is annexed to this Proxy Statement as Exhibit A (the
"Reverse Stock Split Amendment"). The Reverse Stock Split Amendment will effect
the Reverse Stock Split by reducing the number of outstanding shares of Common
Stock by the ratio of one-for-three, but will not increase the par value of the
Common Stock, and will not change the number of authorized shares of Common
Stock.
REASONS FOR THE REVERSE STOCK SPLIT AMENDMENT:
The Company's Common Stock is currently listed on the Nasdaq Small Cap
Market. The continued listing requirements of the Nasdaq Small Cap Market
require, among other things, that the Common Stock maintain a closing bid price
in excess of $1.00 per share. The Company was advised by Nasdaq on February 11,
2000 that the Company had failed to maintain a minimum bid price of $1.00 per
share, and that it must be in compliance with the $1.00 minimum bid price
requirement for a minimum of ten consecutive trading days immediately prior to
May 11, 2000 or the Company's Common Stock would be delisted on the opening of
business on May 15, 2000.
The Company requested and was granted a hearing before a Nasdaq Listing
Qualifications Panel on June 8, 2000, at which the Company presented its plan
for compliance. On June 28, 2000, the Company supplemented its presentation by
including the Board authorization for the proposed Reverse Stock Split. To
enable the Company to solicit the necessary shareholder approval, the Panel has
granted the Company a temporary listing exception through September 18, 2000.
The Board has determined that the continued listing of the Common Stock on
the Nasdaq Small Cap Market is in the best interests of the Company's
stockholders. If the Common Stock were delisted from the Nasdaq Small Cap
Market, the Board believes that the liquidity in the trading market for the
Common Stock would be significantly decreased which could reduce the trading
price and increase the transaction costs of trading shares of the Common Stock.
The purpose of the Reverse Stock Split is to increase the market price of
the Common Stock. The Board intends to effect a reverse split only if it
believes that a decrease in the number of shares outstanding is likely to
improve the trading price for the Common Stock and improve the likelihood that
the Company will be allowed to maintain its listing on the Nasdaq Small Cap
Market. If the Reverse Stock Split proposal is authorized by the stockholders,
the Board will have the discretion to implement a Reverse Stock Split once
during the next 12 months, or effect no Reverse Stock Split at all. If the
trading price of the Common Stock increases without a Reverse Stock Split, the
Reverse Stock Split may not be necessary. There can be no assurance, however,
that the market price of the Common Stock will rise in proportion to the
reduction in the number of outstanding shares resulting from the Reverse Stock
Split, that the market price of the Post-Split Common Stock can be maintained
above $1.00 or that the Common Stock will not be delisted from the Nasdaq Small
Cap Market for other reasons.
If the stockholders approve the Reverse Stock Split at the meeting, the
Reverse Stock Split will be effected, if at all, only upon a determination by
the Board that the Reverse Stock Split (in an exchange
13
ratio determined by the Board within the limits set forth herein) is in the best
interests of the Company and its stockholders at that time. No further action on
the part of the stockholders will be required to either effect or abandon the
Reverse Stock Split. If no Reverse Stock Split is effected by the first
anniversary of this Annual Meeting of Stockholders, the Board's authority to
effect the Reverse Stock Split will terminate.
POTENTIAL EFFECTS OF THE REVERSE STOCK SPLIT
Pursuant to the Reverse Stock Split, each holder of three shares of Common
Stock, par value $.001 per share ("Old Common Stock"), immediately prior to the
effectiveness of the Reverse Stock Split will become the holder of one share of
Common Stock, par value $.001 per share ("New Common Stock"), after consummation
of the Reverse Stock Split.
Although the Reverse Stock Split will not, by itself, impact the Company's
assets or prospects, the Reverse Stock Split could result in a decrease in the
aggregate market value of the Company's Common Stock. The Board believes that
this risk is outweighed by the benefits of the continued listing of the Common
Stock on the Nasdaq National Market.
If approved, the Reverse Stock Split will result in some shareholders owning
"odd-lots" of less than 100 shares of Common Stock. Brokerage commissions and
other costs of transactions in odd-lots are generally somewhat higher than the
costs of transactions in "round-lots" of even multiples of 100 shares.
SHARES OF COMMON STOCK ISSUED AND OUTSTANDING OR HELD AS TREASURY SHARES
The Company is currently authorized to issue a maximum of 20,000,000 shares
of Common Stock. As of the Record Date, there were 8,188,569 shares of Common
Stock issued and outstanding, or held as treasury shares. Although the number of
authorized shares of Common Stock will not change as a result of the Reverse
Stock Split, the number of shares of Common Stock issued and outstanding, or
held as treasury shares, will be reduced to a number that will be approximately
equal to the number of Common Shares issued and outstanding, or held as treasury
shares, immediately prior to the effectiveness of the Reverse Stock Split,
divided by three.
With the exception of the number of shares issued and outstanding, or held
as treasury shares, the rights and preferences of the shares of Common Stock
prior and subsequent to the Reverse Stock Split will remain the same. After the
effectiveness of the Reverse Stock Split, it is not anticipated that the
financial condition of the Company, the percentage ownership of management, the
number of the Company's stockholders, or any aspect of the Company's business
would materially change as a result of the Reverse Stock Split.
The Common Stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a
result, the Company is subject to the periodic reporting and other requirements
of the Exchange Act. The proposed Reverse Stock Split will not affect the
registration of the Common Stock under the Exchange Act.
WARRANTS, OPTIONS AND SERIES A PREFERRED STOCK
The Company has outstanding various warrants and options exercisable to
acquire up to an aggregate of approximately 8,087,300 shares of Common Stock at
various exercise prices ranging from $0.75 to $8.375. The amount of Common Stock
issuable pursuant to these options and warrants will be reduced to one-third the
previous amounts and the per share exercise prices will be increased by a factor
of three.
The Company also has outstanding 294,723 shares of Series A Preferred Stock
which are convertible into shares of Common Stock at the option of the preferred
stock holders. The number of shares of Common Stock into which the Series A
Preferred stock may be converted will be reduced to one-third the previous
amount.
14
INCREASE OF SHARES OF COMMON STOCK AVAILABLE FOR FUTURE ISSUANCE
As a result of the Reverse Stock Split, there will be a reduction in the
number of shares of Common Stock issued and outstanding, or held as treasury
shares, and an associated increase in the number of authorized shares which
would be unissued and available for future issuance after the Reverse Stock
Split (the "Increased Available Shares"). The Increased Available Shares could
be used for any proper corporate purpose approved by the Board of the Company
including, among others, future financing transactions.
Holders of the Common Stock have no preemptive or other subscription rights.
EFFECTIVENESS OF THE REVERSE STOCK SPLIT
The Reverse Stock Split, if approved by the Company's stockholders, will
become effective (the "Effective Date") upon the filing with the Secretary of
State of the State of New York of a Certificate of Amendment of the Company's
Certificate of Incorporation in substantially the form of the Reverse Stock
Split Amendment attached to this Proxy Statement as Exhibit A. It is expected
that such filing will take place on or shortly after the date of the Annual
Meeting, assuming the stockholders approve the Reverse Stock Split. However, the
exact timing of the filing of such Certificate of Amendment will be determined
by the Board based upon its evaluation as to when such action will be most
advantageous to the Company and its stockholders, and the Board reserves the
right to delay the Reverse Stock Split Amendment for up to twelve months
following stockholder approval thereof. In addition, the Board reserves the
right, notwithstanding stockholder approval and without further action by the
stockholders, to elect not to proceed with the Reverse Stock Split Amendment if,
at any time prior to filing such Reverse Stock Split Amendment, the Board, in
its sole discretion, determines that it is no longer in the best interests of
the Company and its stockholders.
Commencing on the Effective Date, each Old Common Stock certificate will be
deemed for all corporate purposes to evidence ownership of the reduced number of
shares of Common Stock resulting from the Reverse Stock. As soon as practicable
after the Effective Date, stockholders will be notified as to the effectiveness
of the Reverse Stock Split and instructed as to how and when to surrender their
certificates representing shares of Old Common Stock in exchange for
certificates representing shares of New Common Stock. The Company intends to use
American Stock Transfer and Trust Company, Inc. as its exchange agent in
effecting the exchange of certificates following the effectiveness of the
Reverse Stock Split.
FRACTIONAL SHARES
The Company will not issue fractional shares in connection with the Reverse
Stock Split. Instead, any fractional share which results from the Reverse Stock
Split will be rounded up to the next whole share.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizing certain federal income tax consequences
is based on the Internal Revenue Code of 1986, as amended, the applicable
Treasury Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices in effect on the date of this Proxy
Statement. This discussion is for general information only and does not discuss
consequences which may apply to special classes of taxpayers (e.g., non-resident
aliens, broker-dealers or insurance companies). Stockholders are urged to
consult their own tax advisors to determine the particular consequences to them.
The receipt of New Common Stock, including whole shares issued in lieu of
fractional shares, solely in exchange for Old Common Stock will not generally
result in recognition of gain or loss to the stockholders. The adjusted tax
basis of a stockholder's New Common Stock will be the same as the adjusted tax
basis of the shares of Old Common Stock exchanged therefor, and the holding
period of the New Common Stock
15
will include the holding period of the Old Common Stock exchanged therefor. No
gain or loss will be recognized by the Company as a result of the Reverse Stock
Split.
APPRAISAL RIGHTS
No appraisal rights are available under the New York Business Corporation
Law or under the Company's Certificate of Incorporation or By-Laws to any
stockholder who dissents from the proposal to approve the Reverse Stock Split
Agreement. There may exist other rights or actions under state law for
stockholders who are aggrieved by reverse stock splits generally. Although the
nature and extent of such rights or actions are uncertain and may vary depending
upon the facts or circumstances, stockholder challenges to corporate action in
general are related to the fiduciary responsibilities of corporate officers and
directors and to the fairness of corporate transactions.
Approval of the proposal to increase the number of authorized Common Shares
requires the affirmative vote of the holders of a majority of the outstanding
Common Shares entitled to vote at the Annual Meeting. Abstentions and broker
non-votes are not considered votes cast. In the absence of instructions to the
contrary, proxies covering the Common Shares will be voted FOR the amendment..
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
16
AMENDMENT TO 1993 DIRECTOR STOCK OPTION PLAN
(PROPOSAL 3)
GENERAL
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Company's 1993 Director Stock Option Plan to increase the
number of Common Shares available to each director under the 1993 Director Stock
Option Plan in order to enable the Company to continue to attract and retain
qualified candidates for director and to enable the Company's directors to
continue to benefit under the 1993 Director Stock Option Plan. This proposal
will increase the initial grant from 27,000 shares vesting over 3 years, to
45,000 shares vesting over 5 years; it also provides for additional grants of
9,000 shares each on the 5th and each succeeding anniversary date of the
Director's service.
SUMMARY OF TERMS OF THE 1993 DIRECTOR STOCK OPTION PLAN
ADMINISTRATION. The 1993 Director Stock Option Plan was adopted by the
Shareholders on September 29, 1993 to attract the best available individuals to
serve as directors of the Company by encouraging them to acquire or increase
their proprietary interest in the Company. It is administered by the
Compensation Committee of the Board of Directors in accordance with the formula
provided for in the 1993 Director Stock Option Plan. The decisions of the
Compensation Committee concerning the interpretation and construction of any
provisions of the 1993 Director Stock Option Plan or any option granted
thereunder are final.
ELIGIBILITY. The persons eligible to receive options under the 1993
Director Stock Option are all non-employee directors of the Company. Each
non-employee director of the Company currently receives options to purchase
27,000 shares on the date that the individual becomes a director of the Company.
Under this proposal, if approved, each non-employee director would receive
options to purchase 45,000 shares on the date the individual becomes a director;
on the fifth anniversary date of commencing service as a director, and each
anniversary date thereafter, the Director would receive options to purchase an
additional 9,000 shares. If this proposal is approved, Messrs. Filer, Fox and
Lockwood would each immediately receive options to purchase an additional 18,000
shares, at an exercise price equal to the closing price on the date of grant.
STOCK SUBJECT TO OPTIONS. The number of shares of Common Stock subject to
options granted under the 1993 Employee Stock Option Plan is 216,000, of which
options to purchase 108,000 shares have been granted.
EXERCISE PRICE AND TERMS OF THE OPTIONS. The exercise price under each
option shall be equal to the closing price of the Common Stock quoted by the
national securities exchange which is the principal market for the Common Stock
on the last day of trade prior to the authorization of the option grant. The
term of each option is ten (10) years. Options will vest according to the
following schedule: one-fifth of the shares are available for exercise upon
granting; an additional one-fifth become available for exercise on the first,
second, third and fourth anniversary of granting. The shares granted on the
fifth anniversary and thereafter will vest immediately upon grant.
TERMINATION OF SERVICE AS DIRECTOR, DEATH OR DISABILITY OF OPTIONEE. The
1993 Director Stock Option Plan provides that an optionee shall have the right
to exercise the vested portion of any options granted under the 1993 Director
Stock Option Plan only while he is a director of the Company, and for a period
of ninety (90) days following termination of his relationship with the Company
for reasons other than fraud, dishonesty, or disloyalty to the Company. In the
event that an optionee shall die prior to the complete exercise of options
granted to the optionee under the 1993 Director Stock Option Plan, the vested
portion of any such remaining option may be exercised in whole or in part within
ninety (90) days after the date of the optionee's death and then only: (i) by
the optionee's estate or by or on behalf of such person or persons to whom the
optionee's rights pass under the optionee's will or the laws of descent and
distribution; and
17
(ii) prior to expiration of the term of the option. In the event that an
optionee shall become permanently and totally disabled (within the meaning of
Section 22(e)(3) of the Internal Revenue Code) while an director of the Company
and prior to the complete exercise of options granted to the optionee under the
1993 Director Stock Option Plan, the vested portion of any such remaining option
may be exercised in whole or in part within six (6) months following the date
the optionee is determined to have become permanently and totally disabled.
NON-ASSIGNMENT. During the lifetime of any optionee, options issued under
the 1993 Director Stock Option Plan shall not be assignable or transferable by
the optionee, whether voluntarily or by option of law or otherwise.
DISSOLUTION, MERGER OR REORGANIZATION. In the event of: (1) a dissolution
or liquidation of the Company, (2) a merger or consolidation in which the
Company is not the surviving corporation, or (3) another capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, any outstanding options under the 1993 Director Stock Option
Plan shall terminate except: (i) when another corporation shall assume such
options or substitute new options therefore; and (ii) the Compensation Committee
shall have the discretion and power in any such event to determine, and to make
effective provisions therefor, that an optionee may exercise his option for such
number of shares, not exceeding the total number specified by the option, as the
Compensation committee may determine and/or that any outstanding options shall
continue in full force and effect.
ADJUSTMENTS AS TO NUMBER OF SHARES. The aggregate number and kind of shares
available for options under the 1993 Director Stock Option Plan, the number and
kind of shares subject to any outstanding option, and the option price of each
outstanding option shall be proportionately adjusted by the Compensation
Committee for any increase, decrease or change in the total outstanding Common
Stock of the Company resulting from a stock dividend, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or similar transaction
(but not by reason of the issuance or purchase of Common Stock by the Company in
consideration for money, services or property or by reason of the conversion of
convertible stock to Common Stock). Note that if the Reverse Stock Split is
effected, the number of shares to be granted pursuant to the terms of the 1993
Director Stock Option Plan shall be divided by three.
TERM OF THE 1993 DIRECTOR STOCK OPTION PLAN: AMENDMENT AND TERMINATION. The
1993 Director Stock Option Plan took effect on October 1, 1993, and shall remain
in effect until all shares subject to issuance thereunder have been purchased
pursuant to options granted thereunder, provided that all options and rights
granted under the 1993 Director Stock Option Plan must be granted prior to
September 30, 2003. The Board of Directors of the Company, without further
approval of the shareholders of the Company, may at any time suspend or
terminate the 1993 Director Stock Option Plan or may amend it from time to time
in any manner; provided, however, that no amendment shall be effective without
prior approval of the shareholders of the Company which would (i) except in the
case of adjustments authorized under 1993 Director Stock Option Plan, increase
the maximum number of shares which may be issued under the 1993 Director Stock
Option Plan, (ii) change the eligibility requirements for optionees entitled to
receive options under the 1993 Director Stock Option Plan, or (iii) extend the
period for granting options.
TAX CONSEQUENCES. An optionee will not recognize taxable income upon the
grant of a stock option under the 1993 Director Stock Option Plan. When an
optionee exercises such an option, the optionee will recognize taxable
compensation income at the time equal to the difference between the option
exercise price and the fair market value of the stock on the date of exercise.
An optionee will generally have a basis in stock acquired through exercise of an
option under the 1993 Director Stock Option Plan equal to the fair market value
of the stock on the date of exercise. If the optionee subsequently sells the
stock, the gain (which is the difference between the sales price and the
optionee's basis) will be taxed as capital gain in the taxable year in which the
sale occurs. Any compensation income recognized by the optionee upon the
exercise of an option under the 1993 Director Stock Option Plan will be
allowable to the Company as a business deduction at the time it is recognized by
the optionee.
18
Approval of the amendment to the 1993 Director Stock Option Plan requires
the affirmative vote of a majority of votes cast. Abstentions and broker
non-votes are not considered votes cast. In the absence of instructions to the
contrary, proxies covering the Common Shares will be voted FOR the amendment.
The Board of Directors recommends a vote FOR the amendment to the Company's
1993 Director Stock Option Plan.
19
APPROVAL OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 4)
The Board of Directors, upon the recommendation of Audit Committee, has
designated Bonadio & Co., LLP to serve as the Company's principal accountants to
audit the Company's financial statements for the year ending December 31, 2000.
For the year ended December 31, 1999, PricwaterhouseCoopers, LLP served as
the Company's independent public accountants. PricewaterhouseCoopers., LLP
declined to stand for re-election effective April 28, 2000.
The report of PricewaterhouseCoopers, LLP on the financial statements for
the year ended December 31, 1999 originally contained a disclaimer of opinion
due to a condition of default in the Company's debt. The default condition was
resolved on April 14, 2000 and a Form 10K/A was filed on April 25, 2000 in which
the report of PricewaterhouseCoopers, LLP on the financial statements for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or accounting
principle.
In connection with its audits for the two most recent fiscal years and
through April 28, 2000, there have been no disagreements with
PricewaterhouseCoopers, LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of PricewaterhouseCoopers, LLP
would have caused them to make reference thereto in their report on the
financial statements for such years.
The Registrant has requested that PricewaterhouseCoopers, LLP furnish it
with a letter addressed to the SEC stating whether or not it agrees with the
above statements. A copy of such letter, dated May 4, 2000, was filed with the
SEC.
Bonadio & Co., LLP has been engaged by the Company to serve as the Company's
principal accountants to audit its financial statements commencing May 3, 2000.
In connection with the change of accountants, the Company did not consult with
the new accountants regarding either (1) the application of accounting
principles to a specific completed or contemplated transaction, or the type of
audit opinion that might be rendered on the Company's financial statements, or
(2) any disagreements with the Company's prior accountants. However, in
connection with its purchase of the Company's mezzanine debt, RHD Capital
Ventures LLC did engage Bonadio & Co., LLP to perform certain financial due
diligence on the Company in January and February 2000.
The decision to engage Bonadio & Co., LLP was approved by the Audit
Committee of the Board of Directors and by the full Board.
Approval of the auditors requires the affirmative vote of a majority of
votes cast. Abstentions and broker non-votes are not considered votes cast. In
the absence of instructions to the contrary, proxies covering the Common Shares
will be voted FOR the appointment of Bonadio & Co., LLP as the Company's
independent public accountants for the year ending December 31, 2000. If the
shareholders do not appoint Bonadio & Co., LLP, the selection of independent
public account will be made by the Board of Directors, and Bonadio & Co., LLP
may at that time be considered for such appointment.
A representative of Bonadio & Co., LLP is expected to be present at the
Annual Meeting. This representative will be given an opportunity to make a
statement if that person so desires and will be available to respond to
appropriate questions concerning the audit of the Company's financial
statements. It is not anticipated that a representative of
PricewaterhouseCoopers, LLP will be present at the Annual Meeting.
20
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other matters that are to be presented for consideration at the Annual Meeting.
Should any other matter come before the Annual Meeting, however, the persons
named in the enclosed proxy will have discretionary authority to vote all
proxies with respect to any such matter in accordance with their judgment.
Shareholders are requested to date, sign and return the proxy in the
enclosed envelope. If you attend the Annual Meeting, you may revoke your proxy
at that time and vote in person if you so desire; otherwise, your proxy will be
voted for you.
21
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
In order for any shareholder proposal to be included in the Company's Proxy
Statement to be issued in connection with the 2001 Annual Meeting of
Shareholders, such proposal must be received by the Company no later than
February 1, 2001.
THE FINANCIAL STATEMENTS OF THE COMPANY AS THEY APPEARED IN THE ANNUAL
REPORT OF THE COMPANY ON FORM 10-K/A FOR YEAR ENDED DECEMBER 31, 1999, TOGETHER
WITH THE AUDITORS' REPORT, IS INCLUDED WITH THIS PROXY. A COMPLETE COPY OF THE
COMPANY'S FORM 10-K/A FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: HUDSON HOTELS CORPORATION, 300
BAUSCH & LOMB PLACE, ROCHESTER, NEW YORK 14604, ATTENTION: CORPORATE SECRETARY.
BY ORDER OF THE BOARD OF DIRECTORS
Alan S. Lockwood
Secretary
Dated: July 31, 2000
Rochester, New York
22
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
HUDSON HOTELS CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the President and Secretary of Hudson Hotels
Corporation, do hereby certify as follows:
1. The name of the Corporation is Hudson Hotels Corporation. The name under
which the Corporation was formed was Microtel Distribution and Franchising Corp.
2. The Certificate of Incorporation was filed by the Department of State on
June 5, 1987.
3. The Certificate of Incorporation is hereby amended to add paragraph 3.2
as follows:
3.2 REVERSE STOCK SPLIT.
3.2.1 On the Split Effective Date (as defined below), the
Corporation shall effect a one-for-three reverse stock split
pursuant to which every three shares of the Corporation's
Common Stock issued and outstanding or held in treasury will
be automatically converted into one new share of Common
Stock (the "Reverse Stock Split").
3.2.2 The Reverse Stock Split shall be effective as of the close
of business on such date that the Amendment is filed with
the New York Department of State, as determined by the
Corporation's Board of Directors, but in no event later than
September 14, 2001 (the "Split Effective Date").
3.2.3 The Corporation shall not issue fractional shares to the
shareholders entitled to a fractional interest in a share of
Common Stock issued pursuant to the Reverse Stock Split but
shall round each fractional share up to the next whole
number of shares.
3.2.4 On the Split Effective Date, each certificate representing
existing shares of Common Stock will automatically be deemed
for all purposes to evidence ownership of the appropriate
reduced number of new shares of Common Stock without any
action by the shareholder thereof. As soon as practicable
after the Split Effective Date, the Corporation or its agent
shall notify the shareholders and request the surrender of
their certificates for their existing shares with
instructions as to how to receive new certificates and/or
payment for their fractional new share interest.
3.2.5 The shares of Common Stock issued pursuant to the Reverse
Stock Split shall be identical to the shares of Common Stock
they are exchanged for.
4. The Certificate of Amendment was authorized by a vote of the Board of
Directors followed by vote of the holders of a majority of all outstanding
shares entitled to vote thereon at a meeting of shareholders.
23
IN WITNESS WHEREOF, this Certificate has been subscribed this day of
September, 2000 by the undersigned who affirm that the statements made herein
are true under the penalties of perjury.
--------------------------------------
E. Anthony Wilson, President
--------------------------------------
Alan S. Lockwood, Secretary
24
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PROXY
HUDSON HOTELS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints E. Anthony Wilson, Ralph L. Peek, or
either of them with full power of substitution, proxies to vote at the Annual
Meeting of Stockholders of HUDSON HOTELS CORPORATION (the "Company") to be held
on September 14, 2000 at 10:00 a.m., local time, and at any adjournment or
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of common stock of the Company held or owned by the undersigned as
directed on the reverse side of this proxy card, and in their discretion upon
such other matters as may come before the meeting. If no direction is made,
shares will be voted FOR the election of directors named in the proxy and FOR
Proposals 2,3,4 and 5.
(Continued and to be signed on reverse side)
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/X/ Please mark your
votes as in this
example using dark
ink only.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES AND EACH OF THE PROPOSALS LISTED BELOW.
FOR WITHHELD FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS 2. PROPOSAL #2
/ / / / To consider and act upon a proposal to permit the / / / / / /
Nominees: Board of Directors to amend the Company's
E. Anthony Wilson, Ralph L. Peek, Richard C. Fox, Certificate of Incorporation to effect a reverse
Ted Filer, Alan S. Lockwood stock split of the Company's issued common stock in
which one new share of Common Stock would be exchanged
for every three shares of Common Stock currently
issued and outstanding (the "Reverse Stock Split"), all
fractional shares to be rounded up to the next whole
share, all as more fully described in the accompanying
Proxy Statement.
FOR, except vote withheld from the following 3. PROPOSAL #3
nominee(s): To consider and act upon a proposal to amend / / / / / /
the Company's 1993 Director's Stock Option Plan.
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4. PROPOSAL #4
To consider and act upon a proposal to appoint / / / / / /
Bonadio & Co., LLP as the Company's independent
public accountants for the year ending
December 31, 2000.
5. PROPOSAL #5
To transact such other business as may properly come / / / / / /
before the meeting or any adjournment or adjournments
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
Signature(s)__________________________________________ Date:______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, trustee or guardian, please give me the full
title as such.
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