Exhibit 99.1
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
By and among
PATRIOT AMERICAN HOSPITALITY, INC.,
WYNDHAM INTERNATIONAL, INC.,
PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P.,
WYNDHAM INTERNATIONAL OPERATING PARTNERSHIP, L.P.
and
THE INVESTORS NAMED HEREIN
Dated as of February 18, 1999
---------------------------
Series B Convertible Preferred Stock
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
AUTHORIZATION AND SALE OF SHARES
Section 1.1 Authorization............................................................3
Section 1.2 Issuance and Sale of Shares..............................................5
ARTICLE II
CLOSING
Section 2.1 Closing Date.............................................................5
Section 2.2 Further Assurances.......................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
Section 3.1 Organization and Qualification...........................................6
Section 3.2 Subsidiaries.............................................................7
Section 3.3 Capitalization...........................................................7
Section 3.4 Authority...............................................................10
Section 3.5 Consents and Approvals; Non-Contravention...............................12
Section 3.6 Enforceability of Transaction Documents.................................12
Section 3.7 SEC Reports.............................................................13
Section 3.8 Accountants.............................................................13
Section 3.9 Financial Statements....................................................13
Section 3.10 Absence of Certain Material Changes.....................................15
Section 3.11 Actions.................................................................15
Section 3.12 No Undisclosed Liabilities..............................................16
Section 3.13 Investment Company Act..................................................16
Section 3.14 Reporting...............................................................16
Section 3.15 Registration and Qualification..........................................16
Section 3.16 Indebtedness and Certain Other Contracts................................16
Section 3.17 No Defaults.............................................................17
Section 3.18 Violations of Law.......................................................18
i
Section 3.19 Properties..............................................................18
Section 3.20 Intellectual Property...................................................21
Section 3.21 Taxes...................................................................22
Section 3.22 Employee Matters; ERISA.................................................25
Section 3.23 Environmental Matters...................................................27
Section 3.24 Labor Matters...........................................................29
Section 3.25 Year 2000 Compliance....................................................31
Section 3.26 Insurance...............................................................32
Section 3.27 Affiliate Transactions..................................................32
Section 3.28 Delaware General Corporation Law Section 203............................32
Section 3.29 Actions Regarding the Patriot Shareholder Rights Plan...................32
Section 3.30 Brokers and Finders; Transaction Expenses...............................33
Section 3.31 Opinion of Financial Advisor............................................33
Section 3.32 Full Disclosure.........................................................33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Section 4.1 Investment..............................................................34
Section 4.2 Rule 144................................................................35
Section 4.3 Organization of the Investors...........................................35
Section 4.4 Current Ownership.......................................................35
Section 4.5 No Voting Agreements....................................................35
Section 4.6 Authority of the Investors..............................................35
Section 4.7 Non-Contravention.......................................................35
Section 4.8 Brokers and Finders; Transaction Expenses...............................36
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to Each Party's Obligation...................................37
Section 5.2 Conditions to the Investors' Obligation.................................37
Section 5.3 Conditions to the Obligations of the Companies and the Operating
Partnerships...........................................................................41
ii
ARTICLE VI
COVENANTS OF THE COMPANIES
Section 6.1 Conduct of Business Pending the Closing.................................42
Section 6.2 Reporting...............................................................45
Section 6.3 Payment of Expenses.....................................................46
Section 6.4 Availability of Wyndham Common Stock....................................47
Section 6.5 Disclosure Documents; Stockholder and Partner Approvals.................47
Section 6.6 Restructuring Plan......................................................49
Section 6.7 No Solicitation of Competing Transactions...............................49
Section 6.8 Benefit Plans...........................................................51
Section 6.9 No General Solicitation.................................................52
Section 6.10 Preemptive Rights.......................................................52
Section 6.11 Non-Competition and Other Restrictions..................................53
Section 6.12 Access to Information...................................................54
Section 6.13 Rights Offering.........................................................55
Section 6.14 HSR Approval............................................................56
ARTICLE VII
COVENANTS OF THE INVESTORS
Section 7.1 Certain Restrictions....................................................56
Section 7.2 Quorum..................................................................57
Section 7.3 Transfers...............................................................58
Section 7.4 HSR Approval............................................................58
Section 7.5 No Voting Agreements....................................................58
Section 7.6 Board of Director Matters...............................................58
Section 7.7 Compliance with the New Wyndham Certificate and Series B
Certificate of Designation..............................................58
Section 7.8 Confidentiality.........................................................58
ARTICLE VIII
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES
Section 8.1 Restrictive Legend......................................................59
Section 8.2 Notice of Proposed Transfers............................................60
iii
ARTICLE IX
TERMINATION
Section 9.1 Termination.............................................................61
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival of Representations and Warranties..............................61
Section 10.2 Indemnification.........................................................62
Section 10.3 Terms of Indemnification................................................66
ARTICLE XI
MISCELLANEOUS
Section 11.1 Governing Law...........................................................68
Section 11.2 Jurisdiction; Forum; Service of Process; Waiver of Jury Trial...........68
Section 11.3 Successors and Assigns..................................................68
Section 11.4 Effectiveness...........................................................69
Section 11.5 Entire Agreement; Amendment.............................................70
Section 11.6 Notices, Etc............................................................70
Section 11.7 Certain Definitions.....................................................71
Section 11.8 Delays or Omissions.....................................................71
Section 11.9 Counterparts............................................................71
Section 11.10 Severability............................................................71
Section 11.11 Titles and Subtitles....................................................72
Section 11.12 No Public Announcement..................................................72
Section 11.13 Further Actions; Reasonable Efforts.....................................72
Section 11.14 Enforcement of Agreement................................................73
Exhibits
Exhibit A -- Restructuring Plan
Exhibit B -- Form of New Wyndham Certificate
Exhibit C -- Form of New Wyndham By-Laws
iv
Exhibit D -- Form of Wyndham Rights Plan
Exhibit E -- Forms of New Patriot OP Partnership Agreement and New
Wyndham OP Partnership Agreement
Exhibit F -- Form of Certificate of Designation for Series A Convertible
Preferred Stock
Exhibit G -- Form of Certificate of Designation for Series B Convertible Pre
ferred Stock
Exhibit H -- Form of Registration Rights Agreement
v
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made
as of February 18, 1999 by and among Patriot American Hospitality, Inc., a
Delaware corporation ("Patriot"), Wyndham International, Inc., a Delaware
corpora tion ("Wyndham", and together with Patriot, the "Companies"), Patriot
American Hospitality, L.P., a Virginia limited partnership ("Patriot OP"), and
Wyndham International Operating Partnership, L.P., a Delaware limited
partnership ("Wyndham OP" and, together with Patriot OP, the "Operating
Partnerships"), and the parties identified on the signature page hereof as the
Investors (the "Investors").
WHEREAS, subject to the terms and conditions hereof, including
without limitation the Restructuring Plan attached hereto as Exhibit A (the
"Restructuring Plan"), pursuant to which (i) a restructuring of the Companies
and the Operating Partnerships will be implemented upon the completion of which
Wyndham will continue as a public company and Patriot will become a wholly owned
subsidiary of Wyndham, (ii) the pairing and cooperation agreements between
Wyndham and Patriot will be terminated (the "Pairing Termination") and Patriot's
status as a real estate investment trust will be terminated, effective as of
January 0, 0000 (xxx "XXXX Xxxxxxxxxxx"), (xxx) shares of Wyndham's Class A
Common Stock, par value $0.01 per share (the "Wyndham Class A Common Stock"),
will be issued pursuant to the Merger, the Exchange Offers and the Patriot OP
Distribution (as each such term is defined in the Restructuring Plan)
(collectively, the "Restructuring Shares"), (iv) a reverse stock split of the
Wyndham Class A Common Stock will be implemented immediately following the
issuance of the Restructuring Shares (the "Reverse Stock Split") with the effect
that one share of Paired Common Stock (as defined in Section 3.3(c)) immediately
prior to the Merger will become one share of Wyndham Class A Common Stock
immediately following the Merger and the Reverse Stock Split, and (v) the
Companies' and the Operating Partnerships' indebtedness will be restructured
(the "Debt Restructuring"), all as set out in more detail in Section 5.2(k);
WHEREAS, subject to the terms and conditions hereof,
including without limitation the Restructuring Plan, the Certificate of
Incorporation of Wyndham will be amended and restated (the "Wyndham Charter
Amendment") in the form attached hereto as Exhibit B (the "New Wyndham
Certificate"), the By-Laws of Wyndham will be amended and restated in the form
attached hereto as Exhibit C (the "New Wyndham By-Laws"), a Shareholder Rights
Plan of Wyndham
will be adopted substantially in the form attached hereto as Exhibit D (the
"Wyndham Rights Plan"), the Limited Partnership Agreement of Patriot OP (the
"Existing Patriot OP Partnership Agreement") will be amended and restated (the
"Patriot OP Restatement") in the form attached hereto either as Exhibit E-1 or
Exhibit E-2 (the "New Patriot OP Partnership Agreement") and the Limited
Partnership Agreement of Wyndham OP (the "Existing Wyndham OP Partnership
Agreement") will be amended and restated (the "Wyndham OP Restatement") in the
form attached hereto either as Exhibit E-3 or as Exhibit E-4 (the "New Wyndham
OP Partnership Agreement");
WHEREAS, subject to the terms and conditions hereof, Wyndham
may extend the Rights Offering (as defined in Section 6.14) to stockholders of
the Companies and limited partners of the Operating Partnerships pursuant to
which such stockholders and limited partners will be given the opportunity to
purchase an aggregate of up to 3,000,000 shares (the "Rights Offering Shares",
which term shall be deemed to include unless the context otherwise requires
additional Rights Offering Shares that are issued pursuant to the Series A
Certificate of Designation (as defined below)) of Series A Convertible Preferred
Stock, par value $0.01 per share (the "Series A Preferred Stock"), of Wyndham
convertible into shares of Wyndham Class A Common Stock and having the other
terms set forth in the Certificate of Designation attached hereto as Exhibit F
(the "Series A Certificate of Designation"), for an aggregate purchase price of
up to $300,000,000;
WHEREAS, subject to the terms and conditions hereof, Wyndham
will sell and the Investors will purchase (the "Investment") an aggregate of up
to 10,000,000 shares of Series B Convertible Preferred Stock, par value $0.01
per share (the "Series B Preferred Stock"), of Wyndham convertible into shares
of Wyndham Class B Common Stock, par value $0.01 per share (the "Wyndham Class B
Common Stock"), and having the other terms set forth in the Certificate of
Designation attached hereto as Exhibit G (the "Series B Certificate of
Designation"), for an aggregate purchase price of up to $1,000,000,000;
WHEREAS, the Investors will have the benefit of the
registration rights provided for in the Registration Rights Agreement being
executed simultaneously herewith in the form attached hereto as Exhibit H (the
"Registration Rights Agreement");
WHEREAS, the Board of Directors of Patriot has (i) received a
written opinion from its financial advisor that the Investment is fair to the
holders of
2
the common stock, par value $0.01 per share, of Patriot ("Patriot Common Stock")
from a financial point of view, (ii) approved this Agreement, the Restructuring
Plan and the other transactions contemplated by this Agreement to which Patriot
or Patriot OP is a party and (iii) determined to recommend that the stockholders
of Patriot give the Patriot Stockholder Approval (as such term is defined in
Section 5.1(c)), the limited partners of Patriot OP give the Patriot Partnership
Approval (as such term is defined in the Restructuring Plan) and the relevant
securityholders accept the Exchange Offers; and
WHEREAS, the Board of Directors of Wyndham has (i) received a
written opinion from its financial advisor that the Investment is fair to the
holders of the common stock, par value $0.01 per share, of Wyndham ("Wyndham
Common Stock") from a financial point of view, (ii) approved this Agreement, the
Restructuring Plan and the other transactions contemplated by this Agreement to
which Wyndham or Wyndham OP is a party and (iii) determined to recommend that
the stockholders of Wyndham give the Wyndham Stockholder Approval (as such term
is defined in Section 5.1(d)), the limited partners of Wyndham OP give the
Wyndham Partnership Approval (as such term is defined in the Restructuring Plan)
and the relevant securityholders accept the Exchange Offers.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties set forth herein, the parties hereby
agree as follows:
ARTICLE I
AUTHORIZATION AND SALE OF SHARES
Section 1.1 AUTHORIZATION.
(a) Subject to obtaining the Stockholder Approval, Wyndham has
heretofore authorized the issuance and sale to the Investors at the Closing (as
defined in Section 2.1(a)) pursuant to this Agreement of an aggregate of up to
10,000,000 shares of Series B Preferred Stock (the "Shares") and the maximum
number of additional Shares as may be issued as provided in the Series B
Certificate of Designation. Unless the context otherwise requires, references in
this Agreement to the "Shares" shall be deemed to include additional shares of
Series B Preferred Stock that are issued pursuant to the Series B Certificate of
Designation.
3
(b) Subject to any pro rata adjustment pursuant to Section
1.1(c), the number of Shares to be issued and sold to each Investor at the
Closing, and the "Investor Percentage" for such Investor, shall be the amounts
indicated on the signature page opposite such Investor's name on the signature
page hereof; PROVIDED, that each Investor may, upon three business days' notice
to the Companies in writing prior to the Closing, (i) assign its right but not
its obligation to purchase some or all of its Shares hereunder to one or more of
its directors, officers, employees, affiliates and investment funds or customer
accounts which are under the management of the Investors or their affiliates or
to one or more other Investors (collectively, the "Permitted Assignees") or (ii)
assign its right and obligation to purchase some or all of its Shares, with the
Companies' consent (not to be unreasonably withheld or delayed), to another
person, provided that no more than 25% in interest in the aggregate in the
rights and obligations to purchase Shares may be assigned to persons other than
Permitted Assignees prior to or following the Closing (any such assignees being
referred to as "Permitted Third Party Transferees"), and in the event of any
such assignment, the Investor Percentage for such Investor and the assignee
shall be appropriately adjusted and such Investor's and such assignee's
respective rights to receive fees hereunder shall also be adjusted in a similar
manner. Unless the context otherwise requires, references in this Agreement to
"Investors" shall be deemed to include Permitted Assignees and Permitted Third
Party Transferees under this Section 1.1(b), and all of their successors by
operation of law.
(c) If, prior to the Closing, either of the Companies or the
Subsidiaries sell the Identified Assets (as such term is defined in Section
1.1(c) of the letter of the Companies to the Investors to be dated as of the
Effective Date (as defined in Section 11.4) (the "Company Disclosure Letter"))
at or prior to the Closing for net cash proceeds (excluding for purposes of such
calculation any contingent payments to be received by the Companies or their
subsidiaries) in excess of the amounts set forth in Section 1.1(c) of the
Company Disclosure Letter, pursuant to definitive documentation satisfactory to
the Investors, whose consent shall not be unreasonably withheld or delayed
(which documentation shall not in any event include any indemnification or other
contingent payment obligation of the Companies or their subsidiaries which
survives the closing of the sale of such assets), the total number of Shares to
be purchased at the Closing may be reduced by the Companies by an amount equal
to the amount of such excess proceeds divided by 100 and the number of shares to
be purchased by each of the Investors shall be reduced by an amount determined
by multiplying the Investor Percentage for such Investor by the total number of
Shares as so reduced, rounded up to the nearest whole share. The Companies shall
give the Investors not less than 10 business days'
4
written prior notice of any proposed reduction to be implemented pursuant to
this Section 1.1(c), which notice will include a detailed calculation of such
reduction, including of the net cash proceeds received or to be received by the
Companies in connection with the related disposition, certified by the Chief
Financial Officer or Treasurer of the Companies.
Section 1.2 ISSUANCE AND SALE OF SHARES. Upon the terms and
subject to the conditions set forth herein, on the Closing Date, in reliance on
the representations and warranties of the Investors contained herein, Wyndham
will issue and sell to each Investor and, in reliance on the representations and
warranties of the Companies and the Operating Partnerships contained herein,
such Investor will purchase from Wyndham, the number of Shares to be purchased
by such Investor at the Closing pursuant to Section 1.1, for a purchase price of
$100 per Share (the "Purchase Price").
ARTICLE II
CLOSING
Section 2.1 CLOSING DATE. The closing (the "Closing") of the
purchase and sale of the Shares contemplated hereby shall take place on such
date and at such time as agreed to by the Companies and the Investors but in no
event later than one business day following the date of the Stockholder
Approval, subject to satisfaction or waiver of all of the conditions set forth
in Article V (the date of the Closing is hereinafter referred to as the "Closing
Date"). The parties hereto agree that it is their mutual intent for the Closing
Date to occur on or before June 30, 1999, subject to the satisfaction or waiver
of the conditions set forth in Article V. The Closing shall be held at the
offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 919 Third Avenue, New York,
New York, or at such other place as agreed to by the Companies and the
Investors.
Delivery of the Shares to be purchased by each Investor
pursuant to this Agreement shall be made at the Closing by Wyndham delivering to
such Investor, against payment of the Purchase Price therefor, one certificate
representing the appropriate number of Shares (registered in the name of such
Investor), unless at least two business days prior to the Closing Date such
Investor shall have requested that Wyndham deliver more than one certificate
representing Shares, in which event Wyndham will deliver to such Investor the
number of certificates so requested, registered in the Investor's name or the
name of any assignee(s) designated in
5
accordance with Section 1.1. Payment of the Purchase Price for the Shares to be
purchased by each Investor hereunder shall be made or caused to be made by such
Investor to Wyndham by delivery by wire transfer of immediately available funds
equal to the Purchase Price therefor.
Section 2.2 FURTHER ASSURANCES. From time to time following
the Closing, upon the request of any Investor, Wyndham shall execute and
deliver, or cause to be executed and delivered, to such Investor such other
instruments and take such other action as may be reasonably necessary to more
effectively vest in such Investor and put such Investor in possession of the
Shares purchased by such Investor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
As an inducement to the Investors to enter into this Agreement
and to consummate the transactions contemplated hereby, each of the Companies
and the Operating Partnerships, jointly and severally, represents and warrants
to the Investors as follows; PROVIDED that for all purposes of this Agreement no
representation or warranty set forth in this Article III shall fail to be true,
accurate, correct or complete in all material respects by reason of one or more
inaccuracies which individually would give rise to a Loss (as defined in Section
10.2(a)) of less than $50,000:
Section 3.1 ORGANIZATION AND QUALIFICATION. Each of the
Companies and the Subsidiaries (as hereinafter defined) is a corporation,
limited partnership or other legal entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization. Each of the Companies and the Subsidiaries has all requisite
corporate, partnership or other power and authority, and has been duly
authorized by all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits of and from all public,
regulatory or governmental agencies and bodies, to own, lease and operate its
assets and properties and to conduct its business as it is now being conducted
and is duly qualified or licensed to do business and in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its assets and properties makes such qualification or licensing
necessary.
6
Section 3.2 SUBSIDIARIES.
(a) The only direct or indirect subsidiaries of the Companies
are those listed on Section 3.2(a) of the Company Disclosure Letter. Except for
the ownership interests set forth in Section 3.2(a) of the Company Disclosure
Letter, neither of the Companies owns or controls, directly or indirectly, a 30%
or greater capital stock interest in a corporation, a general partnership
interest or a 30% or greater limited partnership interest in a partnership, or a
managing member or a 30% or greater membership interest in a limited liability
company, association or other entity or project. The entities listed on Section
3.2(a) of the Company Disclosure Letter (which include the Operating
Partnerships) are hereinafter referred to as the "Subsidiaries".
(b) Except for the entities listed on Section 3.2(a) or 3.2(b)
of the Company Disclosure Letter, neither of the Companies hold, directly or
indirectly, any equity interest or equity investment in any corporation,
partnership, association or other entity.
(c) Except as set forth in Section 3.2(c) of the Company
Disclosure Letter, all of the issued and outstanding shares of capital stock of
or other equity interests in each Subsidiary have been validly issued, are fully
paid and nonassessable and are owned, directly or indirectly, by the Companies
free and clear of any pledges, liens, claims, encumbrances, security interests,
charges and options of any nature whatsoever ("Liens") and there are no
outstanding subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating any Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
its capital stock or obligating it to grant, extend or enter into any such
agreement or commitment.
Section 3.3 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of
Patriot consists of (i) 650,000,000 shares of Patriot Common Stock, of which
155,524,662 shares are outstanding, (ii) 63,895,403 shares of Patriot Common
Stock are held as collateral for the counterparties to various agreements under
which the Companies or the Subsidiaries are obligated to issue or deliver as
collateral any of their equity
7
securities (the "Forward Equity Contracts"), (iii) 7,754,076 shares of Patriot
Common Stock are subject to outstanding options and other awards pursuant to the
Companies' benefit plans, (iv) 750,000,000 shares of excess stock, par value
$0.01 per share, of which no shares are outstanding, and (v) 100,000,000 shares
of preferred stock, par value $0.01 per share (the "Patriot Preferred Stock"),
of which 10,000,000 shares are designated as Series A Convertible Preferred
Stock (the "Patriot Series A Preferred Stock") (4,860,876 shares of which are
issued and outstanding), 10,000,000 shares are designated as Series B Cumulative
Perpetual Preferred Stock (the "Patriot Series B Preferred Stock") (558,656
shares of which are issued and outstanding) and 2,500,000 shares are designated
as Series X Junior Participating Cumulative Preferred Stock (none of which is
issued and outstanding). As of the date hereof, the authorized capital stock of
Wyndham consists of (i) 650,000,000 shares of Wyndham Common Stock, which term
shall also refer collectively to the Wyndham Class A Common Stock and the
Wyndham Class B Common Stock), of which 155,524,662 shares are outstanding, (ii)
63,895,403 shares of Wyndham Common Stock are held as collateral under the
Forward Equity Contracts, (iii) 7,754,076 shares of Wyndham Common Stock are
subject to outstanding options and other awards pursuant to the Companies'
benefit plans, (iv) 750,000,000 shares of excess stock, par value $0.01 per
share, of which no shares are outstanding, and (v) 100,000,000 shares of
preferred stock, par value $0.01 per share (the "Wyndham Preferred Stock"), of
which 3,000,000 shares are designated as Series A Redeemable Convertible
Preferred Stock (the "Wyndham Series A Preferred Stock") (1,781,173 shares of
which are issued and outstanding) and 3,000,000 shares are designated as Series
B Redeemable Convertible Preferred Stock (the "Wyndham Series B Preferred
Stock") (1,781,181 shares are issued and outstanding). The owners of the Patriot
Preferred Stock and the Wyndham Preferred Stock and the number of shares held by
each of such owners as of the date hereof are listed on Section 3.3(a) of the
Company Disclosure Letter.
(b) A wholly owned subsidiary of Patriot is the sole general
partner of Patriot OP and Wyndham is the sole general partner of Wyndham OP. As
of the date hereof, the issued and outstanding limited partnership interests of
Patriot OP consist of (i) 125,949,649 common units (the "Patriot OP Common
Units") and (ii) 6,185,680 preferred units, 1,324,804 of which are designated as
Class A Preferred Units (the "Patriot OP Class A Preferred Units") and 4,860,876
of which are designated as Class B Preferred Units (the "Patriot OP Class B
Preferred Units" and, together with the Patriot OP Class A Preferred Units and
the Patriot OP Common Units, the "Patriot OP Units"). Section 3.3(b) of the
Company Disclosure Letter sets forth a complete and accurate list by the holder
thereof of the Patriot OP
8
Units held by Patriot or affiliates of Patriot. As of the date hereof, the
issued and outstanding limited partnership interests of Wyndham OP consist of
(i) 123,629,185 common units (the "Wyndham OP Common Units"), and (ii) 2,695,995
preferred units, of which 784,377 units are designated as Class A Preferred
Units (the "Wyndham OP Class A Preferred Units"), 1,324,804 units are designated
as Class B Preferred Units (the "Wyndham OP Class B Preferred Units") and
586,814 units are designated as Class C Preferred Units (the "Wyndham OP Class C
Preferred Units" and, together with the Wyndham OP Common Units, the Wyndham OP
Class A Preferred Units and the Wyndham OP Class B Preferred Units, the "Wyndham
OP Units"). Section 3.3(b) of the Company Disclosure Letter sets forth a
complete and accurate list by the holder thereof of the Wyndham OP Units are
held by Wyndham or affiliates of Wyndham. The owners of the Patriot OP Units and
the Wyndham OP Units and the number of units held by each of such owners as of
the date hereof are listed on Section 3.3(b) of the Company Disclosure Letter.
(c) The outstanding shares of Patriot Common Stock and Wyndham
Common Stock trade together as a unit of one share of Patriot Common Stock and
one share of Wyndham Common Stock (the "Paired Common Stock"). Each of the
outstanding shares of Patriot Series A Preferred Stock and Wyndham Preferred
Stock is convertible into one share of Paired Common Stock. The outstanding
Patriot OP Common Units and Wyndham OP Common Units may only be redeemed by the
holders thereof as a unit of one Patriot OP Common Unit and one Wyndham OP
Common Unit (the "Paired Common Units") and upon the redemption of each Paired
Common Unit the Operating Partnerships may deliver cash or, at their election,
one share of Paired Common Stock. The Patriot OP Class A Preferred Units and the
Wyndham OP Class B Preferred Units may only be redeemed by the holders thereof
as a unit of one Patriot OP Class A Preferred Unit and one Wyndham OP Class B
Preferred Unit (the "Paired Preferred Units") and upon the redemption of each
Paired Preferred Unit the Operating Partnerships may deliver cash or, at their
election, one share of Paired Common Stock. Upon the redemption of each of the
outstanding Wyndham OP Class A Preferred Units and Wyndham OP Class C Preferred
Units (the "Tracking Preferred Units"), the Operating Partnerships may deliver
one share of Paired Common Stock. The shares of Patriot Series A Preferred
Stock, shares of Wyndham Preferred Stock, Paired Common Units, Paired Preferred
Units and Tracking Preferred Units are referred to herein collectively as the
"Paired Common Stock Equivalents." As of the date hereof, there are outstanding
155,524,662 shares of Paired Common Stock (excluding 63,895,403 shares of Paired
Common Stock issued as collateral to the
9
counterparties under the Forward Equity Contracts) and 24,964,936 Paired Common
Stock Equivalents (collectively, the "Outstanding Paired Share Amount").
(d) All of the outstanding shares of capital stock of Patriot
and Wyndham and all of the outstanding Patriot OP Units and Wyndham OP Units are
duly authorized, validly issued, fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, were not issued and
are not now in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities, and conform to the description thereof
in the SEC Reports. Except as set forth in Section 3.3(a) or 3.3(b) or disclosed
in Section 3.3(d) of the Company Disclosure Letter and except for the
transactions contemplated hereby, (i) there are not authorized, issued, reserved
for issuance or outstanding (A) any shares of capital stock, partnership
interests or other voting securities of any of the Companies or the Operating
Partnerships, (B) any securities convertible into or exchangeable or exercisable
for shares of capital stock, partnership interests or other voting securities of
the Companies or the Operating Partnerships, or any obligation of any of the
Companies or the Operating Partnerships to issue any capital stock, partnership
interests or other voting securities of any of the Companies or the Operating
Partnerships, or (C) any warrants, calls, options or other rights to acquire
from any of the Companies or the Operating Partnerships or any obligation of any
of the Companies or the Operating Partnerships to issue, any capital stock,
voting securities or securities convertible into or exchangeable or exercisable
for capital stock or voting securities of any of the Companies or the Operating
Partnerships, and (ii) there are no outstanding obligations of any of the
Companies or the Operating Partnerships to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. Except as set forth in Section 3.3(d) of
the Company Disclosure Letter, none of the Companies or the Subsidiaries is a
party to any agreement restricting the transfer of, relating to the voting of,
requiring registration of, or granting any preemptive or antidilutive rights
with respect to, any securities of the type referred to in the preceding
sentence.
Section 3.4 AUTHORITY.
(a) Each of the Companies, the Operating Partnerships and any
other Subsidiaries party thereto has all necessary corporate or partnership
power and corporate or partnership authority to enter into this Agreement and
the other agreements, documents and instruments to be executed by the Companies,
the Operating Partnerships and such other Subsidiaries, as the case may be, in
10
furtherance of the transactions contemplated hereby, including, without
limitation, the commitment letter, dated as of the date of this Agreement, among
the Companies and the Investors (the "Equity Commitment Letter") and the
agreements, the forms of which are attached hereto as exhibits (such commitment
letter and attached agreements, collectively with this Agreement, the
"Transaction Documents"), and to consummate the transactions contemplated
hereby. Except for the Patriot Stockholder Approval and the Wyndham Stockholder
Approval and the approval of the amendment and restatement of the Existing
Patriot OP Partnership Agreement and the Existing Wyndham OP Partnership
Agreement in the manner contemplated by the Patriot OP Consent Solicitation and
the Wyndham OP Consent Solicitation (each as defined in the Restructuring Plan)
by the limited partners of each of Patriot OP and Wyndham OP holding a majority
of the limited partner interests in accordance with applicable law, which for
such purposes shall exclude limited partnership interests held by Patriot or
Wyndham but not exclude any limited partnership interests held by any other
affiliates of the Companies or the Investors (such approval relating to Patriot
OP shall hereinafter be referred to as the "Patriot Partner Approval" and such
approval relating to Wyndham OP shall hereinafter be referred to as the "Wyndham
Partner Approval") the execution and delivery of the Transaction Documents and
the consummation by the Companies, the Operating Partnerships and such other
Subsidiaries of the transactions contemplated thereby have been duly authorized
by all necessary corporate or partnership action on the part of the Companies,
the Operating Partnerships and such other Subsidiaries. The only component of
the Restructuring Plan for which the approval of the limited partners of Wyndham
or Patriot is required is the amendment and restatement of the Existing Patriot
OP Partnership Agreement and the Existing Wyndham OP Partnership Agreement in
the manner contemplated by the Patriot OP Consent Solicitation and the Wyndham
OP Consent Solicitation.
(b) The Shares, the Rights Offering Shares and the
Restructuring Shares have been duly authorized by Wyndham, and the Shares, the
Rights Offering Shares and the Restructuring Shares, when issued, sold and
delivered in accordance with this Agreement, will be validly issued, fully paid
and nonassessable. The shares of Wyndham Common Stock issuable upon conversion
of the Shares and the Rights Offering Shares have been duly authorized by
Wyndham and, when issued in accordance with the terms of the Shares and the
Rights Offering Shares will be validly issued, fully paid and nonassessable. The
shares of Wyndham Common Stock issuable on conversion of the Shares and the
Rights Offering Shares at the initial conversion price have been reserved for
issuance, and no further approval or authority of the stockholders or the Boards
of Directors under the Delaware General
11
Corporation Law (the "DGCL") or the rules of the New York Stock Exchange (the
"NYSE"), other than the Stockholder Approval, will be required for such issuance
of Wyndham Common Stock. No preemptive rights or other rights to subscribe for
or purchase securities exist with respect to the issuance and sale of the
Shares, the Rights Offering Shares or the Restructuring Shares by Wyndham
pursuant to the Transaction Documents or the issuance of Wyndham Common Stock on
conversion of the Shares or the Rights Offering Shares.
Section 3.5 CONSENTS AND APPROVALS; NON-CONTRAVENTION. Other
than as identified in Section 3.5 of the Company Disclosure Letter, the
execution and delivery by the Companies, the Operating Partnerships and the
Subsidiaries of the Transaction Documents to which they are parties, the
performance of their obligations thereunder and the consummation by them of the
transactions contemplated thereby do not and will not (a) require the consent,
approval, authorization, order, registration, filing, qualification, license or
permit of or with any court or any government agency or body, domestic or
foreign, applicable to any of the Companies or the Subsidiaries or any of their
respective properties or assets, (b) require the consent or approval of any
party other than a court or government agency or body, (c) result in a breach of
any of the terms and provisions of, or constitute a default (or an event which
with notice or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any Lien upon any property or assets of
any of the Companies, the Operating Partnerships or the Subsidiaries pursuant to
any agreement, instrument, franchise, license or permit to which any of the
Companies or any of the Subsidiaries is a party or by which any of the
Companies, the Operating Partnerships or any of the Subsidiaries or their
respective properties or assets may be bound or (d) violate any judgment,
decree, order, statute, rule or regulation of any court or any federal, state,
local or foreign government, court, administrative, regulatory or other
governmental agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority (a "Governmental Entity") or
body applicable to any of the Companies or the Subsidiaries or any of their
respective properties or assets. The execution, delivery and performance of the
Transaction Documents by the Companies, the Operating Partnerships and any other
Subsidiaries party thereto and the consummation of the transactions contemplated
thereby do not and will not violate or conflict with any provision of the
certificate of incorporation or by-laws, partnership agreements or similar
governing documents of the Companies or the Subsidiaries, as currently in
effect.
12
Section 3.6 ENFORCEABILITY OF TRANSACTION DOCUMENTS. This
Agreement has been, and each of the other Transaction Documents to be executed
and delivered by the Companies, the Operating Partnerships or any other
Subsidiaries party thereto pursuant to this Agreement has been or will be, duly
and validly authorized, executed and delivered by the Companies, the Operating
Partnerships and any other Subsidiaries parties to such other Transaction
Documents, and this Agreement is, and such other Transaction Documents when so
executed and delivered will be, valid and binding obligations of the Companies,
the Operating Partnerships and such other Subsidiaries, enforceable against them
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws from time to time affecting the enforcement of creditors' rights generally.
Section 3.7 SEC REPORTS.
(a) Each of the Companies (including Patriot American
Hospitality, Inc., a Virginia corporation, the predecessor of Patriot) has
timely filed all documents required to be filed with the Securities and Exchange
Commission (the "SEC") (collectively, including all exhibits and schedules
thereto and documents incorporated therein by reference, the "SEC Reports"). As
of their respective dates, (i) the SEC Reports complied in all material respects
with the requirements of the Securities Act of 1933, as amended (including the
rules and regulations promulgated thereunder, the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (including the rules and regulations
promulgated thereunder, the "Exchange Act"), as applicable, and (ii) none of the
SEC Reports, or, to the knowledge of the Companies, any press release, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein in order to make the statements contained therein,
in light of the circumstances under which they were made, not misleading.
(b) The Companies and the Subsidiaries are not parties to or
otherwise subject to any contracts or other agreements that were or are required
to be filed as exhibits to, or otherwise disclosed in, the Companies' filings
with the SEC and have not been so filed or disclosed.
Section 3.8 ACCOUNTANTS. Ernst & Young LLP are independent
accountants as required by the Securities Act.
Section 3.9 FINANCIAL STATEMENTS.
13
(a) The combined financial statements of the Companies
included in the SEC Reports (collectively, the "Financial Statements"),
including without limitation the combined financial statements included in the
Annual Report on Form 10-K of the Companies for the year ended December 31, 1997
(the "Form 10-K") and the Quarterly Report on Form 10-Q of the Companies for
the quarter ended September 30, 0000 (xxx "Xxxxx Xxxxxxx 00-X"), complied as to
form, as of their respective dates, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of interim financial statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto)
(collectively, "GAAP") and fairly present the consolidated and combined
financial positions of the Companies and their respective consolidated
subsidiaries as of the dates thereof and the consolidated and combined results
of operations and cash flows for the periods then ended (subject, in the case of
interim financial statements, to normal year-end audit adjustments).
(b) Section 3.9(b)(i) of the Company Disclosure Letter
contains a Statement of Pro Forma 1998 EBITDA for the Companies for the year
ended December 31, 1998, which is comprised of (a) the Companies' unaudited
actual earnings before interest, taxes, depreciation and amortization ("EBITDA")
for the year ended December 31, 1998 and (b) pro forma adjustments necessary to
present the EBITDA of companies acquired in 1998 as though they were acquired on
January 1, 1998, as described in Section 3.9(b)(i) of the Company Disclosure
Letter (the "Statement of EBITDA"). Section 3.9(b)(ii) of the Company Disclosure
Letter contains a Statement of Adjusted Pro Forma 1998 EBITDA for the Companies
for the year ended December 31, 1998 prepared on the same basis as the Statement
of EBITDA, adjusted to show the pro forma effects of planned transactions in
1999, as described in Section 3.9(b)(ii) (the "Planned Transactions") as though
such transactions occurred on January 1, 1998 (the "Adjusted Statement of
EBITDA"). Section 3.9(b)(iii) of the Company Disclosure Letter contains a
December 31, 1998 balance sheet, adjusted to show the pro forma effects of the
Planned Transactions, as described in Section 3.9(b)(iii) of the Company
Disclosure Letter, as though such transactions occurred on December 31, 1998
(the "Pro Forma December 31, 1998 Balance Sheet"). Section 3.9(b)(iv) of the
Company Disclosure Letter contains a projected Statement of EBITDA for the
Companies for each of the four quarters during the year ending December 31,
1999, which shall be used in determining the Companies' management incentive
compensation awards for 1999. The projected Statement of EBITDA reflects the
effects of the Planned Transactions as though such
14
Planned Transactions occurred on January 1, 1999 as described in Section 3.9
(b)(iv) of the Company Disclosure Letter (the "Pro Forma Projected Statement of
EBITDA"). The actual EBITDA and balance sheet information included in the
Statement of EBITDA, the Adjusted Statement of EBITDA and the Pro Forma December
31, 1998 Balance Sheet was prepared from income statements and balance sheets
that were prepared in accordance with GAAP based on the books and records of the
Companies and the Subsidiaries, and to the knowledge of the Companies, presents
fairly the combined financial positions and EBITDA for the Companies and their
respective subsidiaries as of December 31, 1998 and for the year then ended. The
pro forma adjustments to the Statement of EBITDA, the Adjusted Statement of
EBITDA, the Pro Forma December 31, 1998 Balance Sheet and the Pro Forma
Projected Statement of EBITDA were properly prepared on the bases described in
Sections 3.9(b)(i), (ii), (iii) and (iv) of the Company Disclosure Letter. The
projected results of operations for the year ending December 31, 1999 included
in the Pro Forma Projected Statement of EBITDA were prepared in good faith based
on management's best estimates of the combined EBITDA for the Companies for the
year ending December 31, 1999 on the basis described in Section 3.9(b)(iv).
(c) Section 3.9(c) of the Company Disclosure Letter sets forth
a true and complete copy of the capital expenditure budget of the Companies and
the Subsidiaries for the year ending December 31, 1999 (the "Capital Expenditure
Budget").
Section 3.10 ABSENCE OF CERTAIN MATERIAL CHANGES. Except as
disclosed in Section 3.10 of the Company Disclosure Letter, since September 30,
1998, there has been no material adverse change in the business, properties,
prospects, operations, financial condition or results of operations of Patriot,
Wyndham and their respective subsidiaries, taken as a whole (a "Material Adverse
Change"), whether or not arising from transactions in the ordinary course of
business.
Section 3.11 ACTIONS. Except as described in Section 3.11 of
the Company Disclosure Letter, there is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental or other regulatory or
administrative agency or commission, domestic or foreign, to which any of the
Companies or the Subsidiaries is a party or to which any property of any of the
Companies or the Subsidiaries is subject which involves a claim or potential
claim of more than $100,000, and to the knowledge of the Companies and the
Operating Partnerships, there is no valid basis for any such action, suit,
inquiry, proceeding or
15
investigation. None of the Companies or the Subsidiaries is subject to any
judgment, order or decree which could reasonably be expected to result in a
Material Adverse Change.
Section 3.12 NO UNDISCLOSED LIABILITIES. Except (a) as set
forth in the SEC Reports filed prior to the date of this Agreement, (b) as set
forth in Section 3.12 of the Company Disclosure Letter, (c) as incurred in the
ordinary course of the hotel management or hospitality business of the
Companies, (d) for any expenses incurred in connection with transactions
contemplated by this Agreement or (e) for liabilities or obligations relating to
contractual obligations, indebtedness, litigation or other matters which are
covered by other representations and warranties in this Agreement or otherwise
identified in the Company Disclosure Letter, none of the Companies nor any of
the Subsidiaries has any liabilities or obligations (direct or indirect,
contingent or absolute, known or unknown, matured or unmatured), whether arising
out of contract, tort, statute or otherwise ("Liabilities"). The reserves
reflected on the balance sheet dated September 30, 1998 and the balance sheet
dated December 31, 1998 are appropriate and reasonable and have been calculated
in a manner consistent with past practice.
Section 3.13 INVESTMENT COMPANY ACT. None of the Companies nor
any of the Subsidiaries is (i) an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment Company Act of
1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) subject to regulation
under the Federal Power Act or the Interstate Commerce Act.
Section 3.14 REPORTING. Each of the Companies is subject to
Section 13 of the Exchange Act and is in compliance in all material respects
with the provisions of such section.
Section 3.15 REGISTRATION AND QUALIFICATION. Assuming the
accuracy of the representations and warranties made by the Investors set forth
in Article IV hereof, it is not necessary in connection with the offer, sale and
delivery of the Shares to the Investors in the manner contemplated by this
Agreement to register the Shares, or the shares of the Wyndham Common Stock
issuable upon conversion of the Shares, under the Securities Act or the
securities laws of any state thereof.
Section 3.16 INDEBTEDNESS AND CERTAIN OTHER CONTRACTS.
16
(a) Set forth in Section 3.16(a) of the Company Disclosure
Letter is a list of the following:
(i) each agreement or other instrument evidencing
indebtedness for money borrowed (other than intercompany indebtedness),
capitalized leases, guarantees to which the Companies or the Subsidiaries is a
party or security interests of, by or affecting the property of either of the
Companies or any of the Subsidiaries, in each case under which the Companies or
the Subsidiaries are the obligors;
(ii) each contract of sale, purchase agreement,
contribution agreement or other agreement pursuant to which the Companies or the
Subsidiaries have purchased real property or other assets that contains any
continuing obligations of the Companies or their Subsidiaries to make payments
to or on behalf of another entity or to expend sums on improvements, each
agreement prohibiting or restricting the disposition of any such assets, and
each agreement containing any non-competition or non-solicitation provisions or
rights to repurchase or rights of first refusal; and
(iii) each Forward Equity Contract or other instrument
under which the Companies or the Subsidiaries are obligated to issue or deliver
as collateral any of their equity securities.
(b) Section 3.16(b) of the Company Disclosure Letter sets
forth the amount of principal and unpaid interest outstanding under each
agreement or other instrument evidencing indebtedness of the Companies and the
Subsidiaries, if any, that will accelerate or become due or result in a right on
the part of the holder of such indebtedness (with or without due notice or lapse
of time) to require prepayment, redemption or repurchase (i) on or prior to June
30, 1999 or (ii) as a result of the execution of the Transaction Documents or
the consummation of any of the transactions contemplated thereby. Except as set
forth in Section 3.16(b) of the Company Disclosure Letter, there are no other
agreements, arrangements or understandings that would require payments to be
made by any of the Companies or the Subsidiaries as a result of the execution of
the Transaction Documents or the consummation of any of the transactions
contemplated thereby. Except as set forth in Section 3.16(b) of the Company
Disclosure Letter, no indebtedness of the Companies or the Subsidiaries contains
any restriction upon the prepayment of any such indebtedness.
17
Section 3.17 NO DEFAULTS. Except as disclosed in Section 3.17
of the Company Disclosure Letter, none of the Companies or the Subsidiaries is
in violation or default under any provision of its certificate of incorporation,
by-laws, partnership agreement or other organizational documents, or is in
breach of or default with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which it is a party or by which it or any of its
properties are bound; and there does not exist any state of facts which would
constitute an event of default on the part of any of the Companies or the
Subsidiaries as defined in such documents which, with notice or lapse of time or
both, would constitute a default.
Section 3.18 VIOLATIONS OF LAW.
(a) Except as identified in Section 3.18(a) of the Company
Disclosure Letter or otherwise identified in Sections 3.19, 3.20, 3.21, 3.22,
3.23 or 3.24 or in Sections 3.19, 3.20, 3.21, 3.22, 3.23 or 3.24 of the Company
Disclosure Letter, each of the Companies and the Subsidiaries is in compliance
and has complied in all material respects and at all times during the past three
years with all applicable federal, state and local statutes, codes, ordinances,
rules and regulations, judgments, decrees, orders, writs and injunctions of the
United States and all other countries and subdivisions thereof to the extent
applicable, and during such three year period, no notice, charge, claim, action
or assertion has been received by the Companies or the Subsidiaries or has been
filed, commenced or, to the knowledge of the Companies and the Subsidiaries,
threatened against the Companies or the Subsidiaries alleging any violation of
any of the foregoing.
(b) None of the Companies or the Subsidiaries has at any time
(i) made any unlawful contribution to any candidate for domestic or foreign
office or failed to disclose fully any contribution in violation of law or (ii)
made any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
18
Section 3.19 PROPERTIES. Except as disclosed in Section 3.19
of the Company Disclosure Letter:
(a) The Companies, the Subsidiaries and the Joint Ventures (as
defined below) have (i) good and marketable fee simple title to, (ii) good and
valid ground leasehold interests in, and (iii) good and valid capital leasehold
interests in, all the properties (including all improvements thereon) as
indicated in Section 3.19(a) of the Company Disclosure Letter, which properties
constitute all the real estate properties owned in fee, ground leased or held
pursuant to capital leases by the Companies, the Subsidiaries and the Joint
Ventures (the "Owned Properties"). Each outstanding loan secured by one or more
of the Owned Properties (the "Mortgages") is listed opposite the Owned
Properties in Section 3.19(a) of the Company Disclosure Letter, and Section 3.19
(a) of the Company Disclosure Letter lists, individually, the lender, the unpaid
principal amount of the Mortgage and the accrued but unpaid interest, if
delinquent, on the Mortgage. The Owned Properties are not subject to any Lien of
any kind except for the Mortgages or Liens for non-delinquent real estate taxes
or assessments. Section 3.19(a) of the Company Disclosure Letter lists all joint
ventures or other entities that are not Subsidiaries in which the Companies or
the Subsidiaries have an equity ownership interest of at least 30%, and which
own or lease real estate property (the "Joint Ventures"), the Companies' or the
Subsidiaries' respective interests in the Joint Ventures and any commitments any
of the Companies or any of the Subsidiaries may have to make additional
investments or loans to the Joint Ventures.
(b) The leases of any real property (including all
improvements thereon) held under lease, as lessee, by the Companies, the
Subsidiaries or the Joint Ventures (the "Leased Properties") are in full force
and effect, and none of the Companies, the Joint Ventures or the Subsidiaries is
in default in respect of any of the terms or provisions of such leases or has
received notice of the assertion of any claim adverse to its rights as lessee
under such leases, or affecting or questioning its right to the continued
possession or use of the real property and buildings held under such leases or
of a default under such leases. The Leased Properties are listed in Section
3.19(b) of the Company Disclosure Letter and constitute all the real estate
properties leased by the Companies, the Subsidiaries and the Joint Ventures. The
Leased Properties, together with the Owned Properties, are herein referred to as
the "Properties."
(c) Section 3.19(c) of the Company Disclosure Letter lists all
leases (excluding intercompany leases and leases entered into in the ordinary
course
19
of business with third party vendors for space at the Properties (E.G., gift
shop leases)) pursuant to which any of the Companies, the Subsidiaries or the
Joint Ventures, as lessor, leases its Properties (the "Third Party Leases").
None of the Companies, the Subsidiaries, the Joint Ventures or any tenant of any
of the Properties is in default under any of the Third Party Leases (and there
exists no event which, with the lapse of time or giving of notice, or both,
would constitute a default under any of such leases).
(d) Except as disclosed in Section 3.19(d) of the Company
Disclosure Letter, (i) no person has an option or right of first refusal to
purchase all or part of any Properties or any interest therein, (ii) none of the
Companies, the Subsidiaries nor the Joint Ventures has any take out or other
commitments to make, directly or indirectly, investments in, or extend loans in
connection with, any real estate properties and (iii) none of the Companies nor
their respective affiliates are, nor immediately following the Closing shall
they be, subject to any non-competition, geographical restriction or similar
agreement.
(e) Except as disclosed in Section 3.19(e) of the Company
Disclosure Letter, each of the Properties complies in all material respects with
all applicable codes, laws and regulations (including, without limitation,
building and zoning codes, laws and regulations and laws relating to access to
the Properties).
(f) Except as disclosed in Section 3.19(f) of the Company
Disclosure Letter, there are no pending or, to the knowledge of the Companies
and the Subsidiaries threatened condemnation proceedings, zoning changes, or
other proceedings or actions that will in any manner adversely affect the size
of, use of, improvements on, construction on or access to the Properties or any
property underlying indebtedness held by the Companies, the Subsidiaries or the
Joint Ventures, as lender from third party borrowers (the "Owned Mortgages").
The Owned Mortgages constitute all of the indebtedness from third party
borrowers secured by property held by the Companies, the Subsidiaries and the
Joint Ventures and is listed in Section 3.19(f) of the Company Disclosure
Letter, which list sets forth the borrower, outstanding loan amount, underlying
collateral, interest rate and delinquencies, if any, relating thereto.
(g) Except as disclosed in Section 3.19(g) of the Company
Disclosure Letter, (i) there are no structural defects relating to any of the
Properties, (ii) the building systems for the Properties are in good working
order and (iii) there is no physical damage to the Properties, in each case with
such exceptions as would not
20
have a material adverse impact on the operation of the affected Property or
require capital expenditures not provided for in the Capital Expenditure Budget
or otherwise fully and completely covered by insurance.
(h) The Companies, the Subsidiaries or the Joint Ventures have
good title, licenses or leasehold interests in and to all personal property and
other assets that are required for the effective operation of the Properties in
the manner in which they currently are operated. The leases relating to any such
property are in full force and effect, and none of the Companies, the
Subsidiaries or the Joint Ventures is in default in respect of any of the terms
or provisions of such leases or has received notice of the assertion of any
claim adverse to its rights as lessee under such leases, or affecting or
questioning its right to the continued possession or use of such property or of
a default under such leases.
(i) Section 3.19(i) of the Company Disclosure Letter sets
forth (i) a comprehensive list of all management, franchise and similar
agreements wherein the Companies, the Subsidiaries or the Joint Ventures have
contracted with a third party, (ii) the Properties subject to such agreements,
(iii) the term of each of such agreements and (iv) agreed or asserted property
improvement plans with respect to each Property subject to such agreements and
the party responsible therefor. None of the Companies, the Subsidiaries or the
Joint Ventures or any third party of such agreements is in default thereunder
(and there exists no event which, with the lapse of time or giving of notice, or
both, would constitute a default under any of such agreements).
(j) Except as set forth in Section 3.19(j) of the Company
Disclosure Letter, none of the Companies, the Subsidiaries or the Joint Ventures
has entered into any contract, letter of intent, other agreement or instrument
or listing arrangement to purchase, sell or invest in, or to lend or borrow
money in connection with, real property, companies, partnerships, limited
liability companies or other entities, whether or not such real property and
entities are currently owned by the Companies, the Subsidiaries or the Joint
Ventures.
(k) Section 3.19(k) of the Company Disclosure Letter sets
forth (i) each Property that is subject to divestiture pursuant to the terms of
any agreement to which the Companies, the Subsidiaries or the Joint Ventures are
parties, including without limitation the Settlement Agreement, dated as of May
27, 1998, among Marriott International, Inc., Interstate Hotels Corporation,
Interstate Hotels Company, Patriot and Wyndham, as amended through the date of
this Agreement,
21
including for such purposes the proposed amendments described in Section 3.19(k)
of the Company Disclosure Letter (the "Marriott Settlement Agreement"), and the
material terms of such divestiture and (ii) any taxes or indemnification
obligations for which the Companies, the Subsidiaries or the Joint Ventures will
be responsible by reason of each divestiture identified under clause (i).
Section 3.20 INTELLECTUAL PROPERTY. Set forth in Section 3.20
of the Company Disclosure Letter is a list of each trademark, trade name,
patent, copyright or other similar right that is owned by the Companies or the
Subsidiaries and each license or other agreement under which the Companies or
the Subsidiaries have valid rights to use trademarks, trade names, patents,
copyrights or other similar rights that are owned by others. Except as disclosed
in Section 3.20 of the Company Disclosure Letter, the Companies and the
Subsidiaries have sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals and governmental authorizations to conduct their businesses
as now conducted; and none of the Companies or the Subsidiaries has knowledge of
any infringement by it of any trademark, trade name, patent, copyright, license,
trade secret or other similar rights of others, and there is no claim being made
against either of the Companies or any of their Subsidiaries regarding
trademark, trade name, patent, copyright, license, trade secret or other
infringement.
Section 3.21 TAXES. Except as set forth in Section 3.21 of the
Company Disclosure Letter:
(a) Each of the Companies and the Subsidiaries has timely
filed (or there has been filed on its behalf) all Tax Returns required to be
filed by it under applicable law, and all such Tax Returns were and are true,
complete and correct in all material respects. Except to the extent adequately
reserved for in accordance with GAAP and reflected on the balance sheets of the
Companies dated December 31, 1998, all Taxes due and payable by the Companies or
any of the Subsidiaries have been timely paid in full.
(b) There are no Tax Liens upon the assets of any of the
Companies or the Subsidiaries except Liens for Taxes not yet due.
(c) Each of the Companies and the Subsidiaries has complied
with the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), relating to the withholding of Taxes, as well as similar provisions
under any other
22
laws, and have, within the time and in the manner prescribed by law, withheld,
collected and paid over to the proper governmental authorities all amounts
required.
(d) No audits or other administrative proceedings or court
proceedings are presently pending or, to the knowledge of the Companies,
asserted with regard to any Taxes or Tax Returns of the Companies or any of the
Subsidiaries.
(e) None of the Companies or any of the Subsidiaries has
received a written ruling of a taxing authority relating to Taxes or entered
into a written and legally binding agreement with a taxing authority relating to
Taxes with any taxing authority.
(f) None of the Companies or the Subsidiaries has requested
any extension of time within which to file any Tax Return, which Tax Return has
not since been filed, and the statute of limitations for the assessment of
federal, state, local and foreign income Taxes has expired for all applicable
returns of the Companies and any of the Subsidiaries or those returns have been
examined by the appropriate taxing authorities for all periods.
(g) None of the Subsidiaries has agreed to and is required to
make any adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision) by reason of any change in any accounting method of such Subsidiary,
and there is no application pending with any taxing authority requesting
permission for any changes in any accounting method of any of the Subsidiaries.
To the knowledge of the Companies, the Internal Revenue Service (the "IRS") has
not proposed any such adjustment or change in accounting method.
(h) Neither Wyndham nor any of its Subsidiaries has filed, as
a common parent corporation of an affiliated group (within the meaning of
1504(a) of the Code), a consolidated return for federal income tax purposes on
behalf of itself and those Includible Subsidiaries (as described in Section
3.21(h) of the Company Disclosure Letter). None of the Subsidiaries are or have
ever been subject to the provisions of Section 1503(f) of the Code.
(i) Other than as set forth in Section 3.21(i) of the Company
Disclosure Letter, none of the Companies or any of the Subsidiaries is a party
to any agreement providing for the allocation or sharing of Taxes or
indemnification by the Companies or the Subsidiaries of any other person in
respect of Taxes. Section
23
3.21(i) of the Company Disclosure Letter contains a brief description of the
terms of any such agreements.
(j) None of the Companies or any of the Subsidiaries is a
party to any agreement, contract, or arrangement that would result, individually
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code.
(k) To the knowledge of the Companies, none of the Companies
or any of the Subsidiaries has or ever had any income which is includible in
computing the taxable income of a United States person (as determined under
Section 7701 of the Code) under Section 951 of the Code. To the knowledge of the
Companies, none of the Companies or any of the Subsidiaries is or has ever been
a Passive Foreign Investment Company within the meaning of Section 1297 of the
Code. To the knowledge of the Companies, none of the Companies or any of the
Subsidiaries are or have ever been a Personal Holding Company within the meaning
of Section 542 of the Code. To the knowledge of the Companies, there are no gain
recognition agreements, within the meaning of Treasury Regulation 1.367(a)-8 or
any predecessor provision, between the Companies or any of the Subsidiaries, on
one hand, and a stockholder of the Companies, on the other. There is no pending
or, to the knowledge of the Companies, threatened action, proceeding or
investigation by any taxing authority for assessment or collection of Taxes with
respect to the Companies or any of the Subsidiaries in any jurisdiction where
the Companies or the Subsidiaries has not filed a Tax Return. All dealings and
arrangements between and among the Companies and each Subsidiary and among the
Subsidiaries are at arm's length and consistent with arm's length dealings and
arrangements between or among unrelated, uncontrolled taxpayers.
(l) Commencing with its first taxable year ended December 31,
1983 and continuing through and including December 31, 1998, Patriot has been
organized, operated and duly qualified as a Real Estate Investment Trust (a
"REIT") under Section 856 of the Code. The Operating Partnerships and each other
Subsidiary which is a partnership, joint venture or limited liability company
has been treated since its formation and continues to be treated for federal
income tax purposes as a partnership and not as a corporation or as an
association taxable as a corporation.
(m) Xxxxxxxx Hospitality Group, Inc., as operator of the El
Conquistador Hotel, the Condado Plaza Hotel and the Hotel San Xxxx, El
24
Conquistador Partnership, L.P., owner of the El Conquistador Hotel, Xxxxxxx de
San Xxxx Associates, owner of the Hotel San Xxxx, and Xxxxxxx de Puerto Rico
Associates, Inc., owner of the Condado Plaza are each qualified and will
continue to qualify under the Puerto Rico Tourism Development Act of 1993 for
(i) the 90% exemption on (A) municipal and Commonwealth taxes on personal and
real property, (B) license fees, excise taxes and other municipal taxes, (C)
income taxes on income derived from its tourist activity (not including casino
operations) and reinvestment thereof in said activities, income from the
investment of funds deposited in depository institutions as provided in section
2(l) of the regulations, (D) gain on sale of all of the assets used in the
tourist activity and (E) gain on the sale of stock or a partnership interests,
(ii) the 100% exemption on municipal construction excise taxes, and (iii) the
100% exemption on use or consumption taxes, for the taxable periods listed in
Section 3.21(m) of the Company Disclosure Letter.
(n) As used in this Section 3.21, (i) the term "Taxes" means
any federal, state, county, local or foreign taxes, charges, fees, levies or
other assessments, including all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom duties,
severance or withholding taxes or charges imposed by any Governmental Entity,
and includes any interest and penalties (civil or criminal) on or additions to
any such taxes, and (ii) the term "Tax Return" means a report, return or other
information required to be supplied to a Governmental Entity with respect to
Taxes including, where permitted or required, combined or consolidated returns
for any group of entities that includes the Companies or any of the
Subsidiaries.
Section 3.22 EMPLOYEE MATTERS; ERISA. Except as set forth in
Section 3.22 of the Company Disclosure Letter:
(a) Section 3.22(a) of the Company Disclosure Letter
contains a true and complete list of each written material employee benefit
plan, policy or agreement covering employees, former employees or directors
of any of the Companies or the Subsidiaries or their beneficiaries, or
providing benefits to such persons in respect of services provided to any
such entity, including without limitation any employee benefit plans within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and any employment, retention, severance or
change in control agreement, in each case that is sponsored, maintained or
contributed to or required to be contributed to by the
25
Companies or the Subsidiaries or by any trade or business,
whether or not incorporated (an "ERISA Affiliate") that, together with either
Patriot or Wyndham or any of the Subsidiaries, would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA (collectively, the
"Benefit Plans"). Other than as set forth in Section 3.22(a) of the Company
Disclosure Letter, since December 31, 1997, there have been no new plans adopted
nor changes, additions or modification to any Benefit Plan. As of the date
hereof, none of the Companies or the Subsidiaries has any plans to adopt,
change, add or modify any Benefit Plan.
(b) All material contributions and other payments required to
have been made by any of the Companies or any of the Subsidiaries to any Benefit
Plan (or to any person pursuant to the terms thereof) have been made or the
amount of such payment or contribution obligation has been reflected in the
financial statements in the Third Quarter 10-Q.
(c) Each of the Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) or Section 501(c)(9) of the Code has been
determined by the IRS to be so qualified, and no circumstances exist that could
reasonably be expected to result in the revocation of any such determination.
Each of the Companies and the Subsidiaries and any ERISA Affiliate is in
compliance in all material respects with, and each of the Benefit Plans is and
has been operated in all material respects in compliance with, all applicable
laws, rules and regulations governing such plan, including, without limitation,
ERISA and the Code. Each Benefit Plan intended to provide for the deferral of
income, the reduction of salary or other compensation, or to afford other income
tax benefits, complies with the requirements of the applicable provisions of the
Code or other laws, rules and regulations required to provide such income tax
benefits. No prohibited transactions (as defined in Section 406 or 407 of ERISA
or Section 4975 of the Code) have occurred for which a statutory exemption is
not available with respect to any Benefit Plan, and which could give rise to
liability on the part of the Companies, any of the Subsidiaries, any ERISA
Affiliate, any Benefit Plan, or any fiduciary, party in interest or disqualified
person with respect thereto that would be material to either of the Companies or
would be material to either of the Companies if it were its liability.
(d) With respect to the Benefit Plans, individually and in the
aggregate, no event has occurred, there does not now exist any condition or set
of circumstances, that could subject the Companies, any of the Subsidiaries or
any ERISA Affiliate to any material liability arising under the Code, ERISA or
any other applicable law, or under any indemnity agreement to which the
Companies, any of
26
the Subsidiaries or any ERISA Affiliate is a party, excluding liability relating
to benefit claims and funding obligations payable in the ordinary course.
(e) Other than continuation coverage required to be provided
under Section 4980B of the Code or Part 6 of Title I of ERISA or otherwise as
provided by state law, none of the Benefit Plans that are "welfare plans,"
within the meaning of Section 3(1) of ERISA, provides for any benefits with
respect to current or former employees for periods extending beyond their
retirement or other termination of service
(f) All amounts payable under the Benefit Plans are deductible
for federal income tax purposes. The consummation of the transactions
contemplated by the Transaction Documents will not, either alone or in
combination with another event undertaken by any of the Companies or the
Subsidiaries prior to the date hereof, (i) entitle any current or former
employee, agent, independent contractor or officer of the Companies or their
subsidiaries to severance pay, unemployment compensation or any other payment,
(ii) accelerate the time of payment or vesting or increase the amount of
compensation due any such employee, officer, agent or independent contractor, or
(iii) constitute a "change in control" under any Benefit Plan, and each of the
Companies and the Subsidiaries has taken all required actions to effect the
foregoing.
Section 3.23 ENVIRONMENTAL MATTERS. Except as set forth in
Section 3.23 of the Company Disclosure Letter:
(a) Each of the Companies, the Subsidiaries and the Joint
Ventures has been and is in material compliance with all applicable
Environmental Laws (as defined in Section 3.23(g)) and none of the Companies,
the Subsidiaries or the Joint Ventures has received any written communication
from any person or governmental authority that alleges that any of the
Companies, the Subsidiaries or the Joint Ventures has not been and is not in
compliance with applicable Environmental Laws. Compliance with all applicable
Environmental Laws will not require the Companies, the Subsidiaries or the Joint
Ventures to incur costs materially in excess of amounts reserved against in the
financial statements in the Third Quarter 10-Q or in excess of amounts budgeted
for such compliance as specifically reflected in the Capital Expenditure Budget
during the periods covered by the Third Quarter 10-Q or the Capital Expenditure
Budget, as the case may be.
(b) Each of the Companies, the Subsidiaries and the Joint
27
Ventures has obtained or has applied for all environmental, health and safety
permits and governmental authorizations (collectively, the "Environmental
Permits") necessary for the conduct of their operations, and all such
Environmental Permits are in effect or, where applicable, a renewal application
has been timely filed and is pending agency approval, and each of the Companies,
the Subsidiaries and the Joint Ventures has been and is in material compliance
with all terms and conditions of all such Environmental Permits.
(c) There is no Environmental Claim (as defined in Section
3.23(g)) pending (i) against the Companies, the Subsidiaries or the Joint
Ventures, (ii) against any person or entity whose liability for any
Environmental Claim either of the Companies, the Subsidiaries or the Joint
Ventures has retained or assumed either contractually or by operation of law, or
(iii) against any real or personal property or operations which the Companies,
the Subsidiaries or the Joint Ventures own, lease or manage, in whole or in
part.
(d) There have been no Releases (as defined in Section
3.23(g)) of any Hazardous Material (as defined in Section 3.23(g)) that could
reasonably form the basis of any Environmental Claim against any of the
Companies, the Subsidiaries or the Joint Ventures or against any person or
entity whose liability for any Environmental Claim any of the Companies, the
Subsidiaries or the Joint Ventures has retained or assumed either contractually
or by operation of law.
(e) No remediation of Releases has occurred on any property
owned, leased or managed by the Companies, the Subsidiaries or the Joint
Ventures that could result in the assertion or creation of a Lien on said
property by any governmental body pursuant to an applicable Environmental Law,
nor has any such assertion of a Lien been made with respect thereto.
(f) To the knowledge of the Companies or the Operating
Partnerships, there are no past, present or anticipated future events,
conditions, circumstances, activities, practices, incidents, actions, or plans
relating to the Companies, the Subsidiaries or the Joint Ventures that may
interfere with or prevent compliance or continued compliance with applicable
Environmental Laws or which may give rise to any liability under the
Environmental Laws, or otherwise form the basis of any Environmental Claim.
(g) As used in this Section 3.23:
28
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, orders, claims, Liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity (including any governmental
authority) alleging potential liability (including, without limitation,
potential responsibility for or liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs, remediation costs,
natural resources damages, property damages, personal injury, bodily injury,
wrongful death or penalties) arising out of, based on or resulting from (A) the
presence, Release or threatened Release of any Hazardous Materials at any
location, whether or not owned, operated, leased or managed by any of the
Companies or the Subsidiaries; or (B) circumstances that form the basis of any
violation or alleged violation of any Environmental Law.
(ii) "Environmental Laws" means all federal, state
and local laws, rules and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or protection of human health and safety,
including, without limitation, laws and regulations relating to Releases or
threatened Releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum
or petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls ("PCBs"); (B) any chemicals, materials or substances which are now
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," or words of similar
import under any Environmental Law and (C) any other chemical, material,
substance or waste, exposure to which is now prohibited, limited or regulated
under any Environmental Law in a jurisdiction in which the Companies or any of
the Subsidiaries operate.
(iv) "Release" means any spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal or leaching into the
atmosphere, soil, surface water or groundwater.
29
(h) The Companies have heretofore delivered to the Investors a
list of all the environmental reports in the last five years relating to any of
the properties currently or formerly owned, leased or managed by any of the
Companies, the Subsidiaries or the Joint Ventures, and have delivered or made
available to the Investors for review copies of said environmental reports.
Section 3.24 LABOR MATTERS. Except as set forth in Section
3.24 of the Company Disclosure Letter: (i) none of the Companies or the
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization; (ii) to knowledge of the Companies and the Operating Partnerships,
no union claims to represent the employees of any of the Companies or the
Subsidiaries; (iii) none of the employees of any of the Companies or the
Subsidiaries is represented by any labor organization and the Companies have no
knowledge of any current union organizing activities among the employees of the
Companies or any of the Subsidiaries, nor does any question concerning
representation exist concerning such employees; (iv) none of the Companies nor
any of the Subsidiaries is the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it to bargain with any
labor organization as to wages or conditions of employment; (v) there is no
strike, work stoppage, lockout or other labor dispute involving any of the
Companies or the Subsidiaries pending or threatened; (vi) no action, suit,
complaint, charge, arbitration, inquiry, proceeding or investigation by or
before any Governmental Entity brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of its employees is pending or, to the knowledge of the
Companies, threatened against any of the Companies or the Subsidiaries; (vii) to
the knowledge of the Companies, no grievance is threatened against any of the
Companies or the Subsidiaries; (viii) none of the Companies nor any of the
Subsidiaries is a party to, or otherwise bound by, any consent decree with, or
citation by, any Governmental Entity relating to employees or employment
practices; (ix) there are no written personnel policies, rules or procedures
applicable to employees of any of the Companies or the Subsidiaries, other than
those set forth in Section 3.24 of the Company Disclosure Letter, true and
correct copies of which have heretofore been delivered to the Investors; (x) the
Companies and the Subsidiaries are, and have at all times been, in material
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation; (xi) since the enactment of the Worker Adjustment
and Retraining
30
Notification Act (the "WARN Act"), none of the Companies or the Subsidiaries has
effectuated (A) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of any of the Companies or the Subsidiaries; or (B) a
"mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of any of the Companies or the Subsidiaries, in either case, other than
in substantial compliance with the WARN Act; nor has any of the Companies or the
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state, local or foreign law or regulation; and (xii) none of the
Companies nor any of the Subsidiaries is aware that it has any liability or
potential liability under the Multi-Employer Pension Plan Act.
Section 3.25 YEAR 2000 COMPLIANCE.
(a) Each of the Companies, the Operating Partnerships and the
Subsidiaries has (i) completed a review and assessment of all areas within its
business and operations that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by the Companies or
the Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timetable addressing the Year 2000 Problem on a
timely basis (the "Year 2000 Plan"), a true and complete copy of which is
attached to Section 3.25 of the Company Disclosure Letter, and (iii) to date
implemented the Year 2000 Plan in accordance with the timetable and the
expenditures set forth in the Year 2000 Plan. The Companies have inquired as to
the Year 2000 compliance of service contractors and suppliers and other third
parties with whom they conduct business and, to their knowledge, the effect of
the Year 2000 Problem on such third parties would not reasonably be expected to
adversely affect the Companies.
(b) All computer software, computer firmware, computer
hardware (whether general or special purpose), and other similar or related
items of automated, computerized, and/or software systems, that are used or
relied on by the Companies, the Operating Partnerships or by any of the
Subsidiaries in the conduct of their respective businesses will, on a timely
basis, be able to perform properly date-sensitive functions for all dates before
and after January 1, 2000 (that is, be "Year 2000 Compliant"). The costs of all
assessment, remediation, testing and integration related to the Year 2000 Plan
for becoming Year 2000 Compliant will not exceed the amounts as set forth in the
Year 2000 Plan.
31
(c) All of the products and services sold, licensed, rendered,
or otherwise provided by the Companies, the Operating Partnerships or by any of
their Subsidiaries in the conduct of their respective businesses will be Year
2000 Compliant and none of the Companies, the Operating Partnerships nor any of
their Subsidiaries is and shall be subject to claims or liabilities arising from
their failure to do so.
(d) Except as set forth in Section 3.25(d) of the Company
Disclosure Letter, none of the Companies, the Operating Partnerships nor any of
their Subsidiaries has made other representations or warranties regarding the
ability of any product or service sold, licensed, rendered or otherwise provided
by any of them to be Year 2000 Compliant.
Section 3.26 INSURANCE. Each of the Companies and the
Subsidiaries maintains primary, excess and umbrella insurance of types and
amounts customary for its business against general liability, fire, workers'
compensation, products liability, theft, damage, destruction, acts of vandalism
and all other risks customarily insured against, all of which insurance is in
full force and effect and with respect to property insurance for assets for
which it is customary to have replacement cost coverage or there are coinsurance
provisions, the amount of such insurance is sufficient to provide for such
coverage or to prevent the application of the coinsurance provision.
Section 3.27 AFFILIATE TRANSACTIONS.
(a) Except as set forth in Section 3.27(a) of the Company
Disclosure Letter, there is no transaction and no transaction is now proposed,
to which the Companies or the Subsidiaries is or is to be a party in which any
current stockholder (holding in excess of 5% of the Companies' common stock or
any securities convertible into or exchangeable for such common stock), general
partner, limited partner (holding in excess of 5% of the limited partnership
interests), director or executive officer of the Companies or the Subsidiaries
has a direct or indirect interest.
(b) Messrs. Xxxxxxxx, Xxxxxx and Xxxxxxx hold the only equity
interests in the Crown Plaza/Ravinia and Wyndham Wyndwatch/Happauge not owned by
the Companies. Messrs. Xxxxxxxx and Xxxxxx have agreed to recontribute such
interests to the Companies in cancellation of the promissory notes between them
and the Companies entered into in connection with the organization of the
32
entities holding such properties. After giving effect to such recontributions,
the Companies will have a controlling voting interest and a 99-2/3% economic
interest in the Crown Plaza/Ravinia and Wyndham Wyndwatch/Happauge.
Section 3.28 DELAWARE GENERAL CORPORATION LAW SECTION 203. The
Boards of Directors have taken such action as necessary to approve for purposes
of Section 203 of the DGCL the Transaction Documents and the transactions
contemplated thereby.
Section 3.29 ACTIONS REGARDING THE PATRIOT SHAREHOLDER RIGHTS
PLAN. Patriot has taken all actions necessary to amend the Patriot Rights Plan
as necessary to ensure that the Transaction Documents and the consummation of
any of the transactions contemplated thereby will not result in the distribution
of separate rights certificates or the occurrence of a "Distribution Date" under
the Patriot Rights Plan.
Section 3.30 BROKERS AND FINDERS; TRANSACTION EXPENSES.
(a) No agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by the Transaction Documents, except for the firms identified in
Section 3.30(a) of the Company Disclosure Letter, complete and accurate copies
of whose engagement letters have been provided to the Investors and will not be
amended, without the consent of the Investors, to (i) increase the fees and
expenses payable thereunder or (ii) extend the period for which services are to
be performed beyond the Closing Date.
(b) Section 3.30(b) of the Company Disclosure Letter sets
forth a good faith estimate by the Companies of fees and expenses (excluding
those expenses of the Investors reimbursable by the Companies, the "Transaction
Expenses"), by professional firm (for each such firm that has fees and expenses
in excess of $1,000,000) and by category of the transaction, that have been paid
by the Companies since September 30, 1998 or the Companies anticipate will be
payable by the Companies or the Subsidiaries in connection with the transactions
contemplated by this Agreement, the Companies' review and consideration of
alternative transactions, the restructuring of the Companies' consolidated
indebtedness, the Forward Equity Contracts and proposed or completed
acquisitions or divestitures.
33
Section 3.31 OPINION OF FINANCIAL ADVISOR. The Companies have
received the opinion of Xxxxxx Xxxxxxx & Co. Incorporated (the "Financial
Advisor"), dated the date hereof, to the effect that the Investment is fair,
from a financial point of view, to the holders of Patriot Common Stock and the
holders of Wyndham Common Stock.
Section 3.32 FULL DISCLOSURE. To the knowledge of the
Companies, the Companies have not failed to disclose to the Investors any facts
material to the business, properties, prospects, operations, financial condition
or results of operations of Patriot, Wyndham and their respective subsidiaries,
taken as a whole. To the knowledge of the Companies, no representation or
warranty by any of the Companies or the Operating Partnerships contained in this
Agreement and no statement contained in any document (including historical
financial statements and the Company Disclosure Letter), certificate or other
writing furnished or to be furnished by any of the Companies or the Operating
Partnerships to the Investors or any of its representatives pursuant to the
provisions hereof or in connection with the transactions, contains or will
contain any untrue statement of material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was made,
in order to make the statements herein or therein not misleading. This Section
3.32 shall not apply to financial projections made by the Companies.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
As an inducement to the Companies and the Operating
Partnerships to enter into this Agreement and to consummate the transactions
contemplated hereby, each Investor, severally but not jointly with the other
Investors, hereby represents and warrants to the Companies and the Operating
Partnerships as follows; PROVIDED that for all purposes of this Agreement no
representation or warranty set forth in this Article IV shall fail to be true
and complete or to have been breached in all material respects by reason of one
or more inaccuracies which individually would give rise to a Loss of less than
$50,000:
Section 4.1 INVESTMENT.
(a) Each Investor is acquiring Shares and the shares of
Wyndham Common Stock issuable upon conversion of such Shares for investment for
its own account, and not with a view to any distribution thereof in violation of
the securities
34
laws. Each Investor understands that such Shares and the shares of Wyndham
Common Stock issuable upon conversion of such Shares have not been registered
under the Securities Act by reason of specific exemptions therefrom which depend
upon, among other things, the bona fide nature of the investment intent and the
accuracy of the Investor's representations as expressed herein.
(b) Each Investor's financial condition and investments are
such that it is in a position to hold such Shares and the shares of Wyndham
Common Stock issuable upon conversion of such Shares for an indefinite period,
bear the economic risks of the investment and withstand the complete loss of the
investment. Each Investor has extensive knowledge and experience in financial
and business matters and has the capability to evaluate the merits and risks of
such Shares and the shares of Wyndham Common Stock issuable upon conversion of
such Shares. Each Investor qualifies as an "accredited investor" as such term is
defined in Section 2(15) of the Securities Act and Regulation D promulgated
thereunder.
Section 4.2 RULE 144. Each Investor acknowledges that the
Shares to be purchased by the Investors and the shares of Wyndham Common Stock
issuable upon conversion of the Shares must be held indefinitely unless
subsequently registered under the Securities Act or any applicable state
securities laws or unless exemptions from such registrations are available. Each
Investor is aware of the provisions of Rule 144 promulgated under the Securities
Act which permit limited resale of securities purchased in a private placement
subject to the satisfaction of certain conditions.
Section 4.3 ORGANIZATION OF THE INVESTORS. Each Investor is
duly organized and validly existing under the laws of the jurisdiction of its
organization.
Section 4.4 CURRENT OWNERSHIP. Except as set forth on Section
4.4 of the letter of the Investors to the Companies to be dated as of the
Effective Date (the "Investor Disclosure Letter"), as of the date hereof, each
Investor represents that it does not beneficially own any capital stock of the
Companies or any partnership interests in the Operating Partnerships.
Section 4.5 NO VOTING AGREEMENTS. Except as disclosed in
Section 4.5 of the Investor Disclosure Letter, the Investors have not entered
into any voting agreement relating to the Shares prior to the date hereof.
Section 4.6 AUTHORITY OF THE INVESTORS.
35
(a) Each Investor has the power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated hereby and
to comply with the terms, conditions and provisions hereof.
(b) The execution, delivery and performance of this Agreement
by each Investor has been duly authorized and approved by such Investor and does
not require any further authorization or consent of such Investor or its
beneficial owners. This Agreement is the legal, valid and binding agreement of
the Investor, enforceable against the Investor in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws from time to time
affecting the enforcement of creditors' rights generally.
Section 4.7 NON-CONTRAVENTION. The execution, delivery and
performance of this Agreement by the Investors and the consummation of any of
the transactions contemplated hereby by the Investors will not (a) conflict with
or result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
Lien, charge or encumbrance upon any property or assets of the Investors
pursuant to any agreement, instrument, franchise, license or permit to which the
Investors are a party or by which any of its properties or assets may be bound
or (b) violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
applicable to each Investor or any of its properties or assets, other than such
breaches, defaults or violations that are not reasonably expected to impair the
ability of each Investor to consummate the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement by each
Investor and the consummation of the transactions contemplated hereby by each
Investor does not and will not violate or conflict with any provision of the
organizational documents of such Investor, as currently in effect. Except for
filings under the HSR Act, no consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court or
any government agency or body applicable to the Investors is required for the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
Section 4.8 BROKERS AND FINDERS; TRANSACTION EXPENSES.
(a) No agent, broker, investment banker, financial advisor or
other
36
firm or person is or will be entitled to any broker's or finder's fee or any
other commission or similar fee in connection with any of the transactions
contemplated by the Transaction Documents, except for Bear, Xxxxxxx & Co.
Inc., a complete and accurate copy of whose engagement letter has been
provided to the Companies and will not be amended, without the consent of the
Companies, to (i) increase the fees or epenses payable thereunder or (ii)
extend the period for which services are to be performed beyond the Closing
Date.
(b) Section 4.8(b) of the Investor Disclosure Letter sets
forth a good faith estimate by the Investors of the Transaction Expenses, by
professional firm (for each such firm that has fees and expenses in excess of
$1,000,000) and by category of the transaction, that have been paid by the
Investors since September 30, 1998 or the Investors anticipate will be payable
by the Investors in connection with the transactions contemplated by this
Agreement.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The
respective obligation of each party to consummate the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions:
(a) HSR APPROVAL. The applicable waiting period (and any
extension thereof) under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), relating to the transactions contemplated by
the Transaction Documents shall have been terminated or shall have expired.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction (collectively, "Restraints") preventing consummation of
any of the transactions contemplated hereby shall be in effect.
(c) PATRIOT STOCKHOLDER APPROVAL. The approval of holders of
the requisite number of the shares of Patriot Common Stock outstanding on the
record date (the "Record Date") for the Stockholders Meeting (as defined in
Section 6.5(a)(ii)) shall have been received for (i) the Merger and (ii) the
Pairing Termination, in accordance with the requirements of the DGCL and the
rules of the
37
NYSE (the "Patriot Stockholder Approval").
(d) WYNDHAM STOCKHOLDER APPROVAL. The approval of holders
of the requisite number of the shares of Wyndham Common Stock outstanding on
the Record Date for the Stockholders Meeting shall have been received for (i)
the issuance of the Shares, the Restructuring Shares and the shares of
Wyndham Common Stock issuable upon conversion of the Shares, (ii) the Pairing
Termination, and (iii) the Wyndham Charter Amendment, in accordance with the
requirements of the DGCL and the rules of the NYSE (the "Wyndham Stockholder
Approval").
Section 5.2 CONDITIONS TO THE INVESTORS' OBLIGATION. The
obligation of each of the Investors to consummate the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of each of the Companies and the Operating Partnerships set forth
in this Agreement, in the aggregate, shall be true and complete in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date, as if made at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date) and each of the Companies and
the Operating Partnerships shall have delivered to the Investors at the Closing
a certificate signed by its Chief Executive Officer and Chief Financial Officer
or Treasurer, dated the Closing Date, in form and substance reasonably
satisfactory to the Investors, to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS. The Companies and the
Operating Partnerships shall have performed in all material respects all
obligations required to be performed by any of them under this Agreement at or
prior to the Closing and each of the Companies and the Operating Partnerships
shall have delivered to the Investors at the Closing a certificate signed by its
Chief Executive Officer and Chief Financial Officer or Treasurer, dated the
Closing Date, in form and substance reasonably satisfactory to the Investors, to
the foregoing effect.
(c) MATERIAL ADVERSE CHANGE. Since September 30, 1998, there
shall not have occurred any event that could reasonably be expected to have a
Material Adverse Change (or development that is reasonably likely to result in
any Material Adverse Change) and each of the Companies and the Operating
Partnerships shall have delivered to the Investors at the Closing a certificate
signed by its Chief Executive Officer, dated the Closing Date, in form and
substance
38
reasonably satisfactory to the Investors, to the foregoing effect.
(d) PROJECTED EBITDA. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") of the Companies and their consolidated
subsidiaries, as adjusted for the items described in Section 5.2(d) of the
Company Disclosure Letter ("Adjusted EBITDA"), shall be set forth in a
certificate, dated the Closing Date, delivered to the Investors and signed by
the Chief Executive Officer of Wyndham. Adjusted EBITDA shall have been at least
the indicated amounts for the indicated periods in Section 5.2(d) of the Company
Disclosure Letter. For purposes of this Section 5.2(d), EBITDA and Adjusted
EDITDA shall be calculated in accordance with Section 5.2(d) of the Company
Disclosure Letter on a prorated basis which shall be measured through either (i)
the end of the calendar month immediately preceding the month in which the
Closing occurs if the Closing occurs following the 20th day of any calendar
month or (ii) the end of the second calendar month preceding the month in which
the Closing occurs if the Closing occurs on or prior to the 20th day of any
calendar month.
(e) RECEIPT OF CONSENTS. The Companies shall have obtained the
consents contemplated by Section 5.2(e) of the Company Disclosure Letter and a
copy of each such consent or evidence thereof reasonably satisfactory to the
Investors shall have been provided to the Investors at or prior to the Closing.
In obtaining such consents and amendments, the Companies, the Operating
Partnerships and the Subsidiaries shall have complied with Section 11.13.
(f) CAPITAL EXPENDITURE BUDGET. The Companies shall have made
on a timely basis the expenditures set forth under the caption "Maintenance
Capital Expenditures" in the Capital Expenditure Budget.
(g) YEAR 2000 COMPLIANCE. The Companies shall have delivered
to the Investors a certificate, dated the Closing Date and signed by the Chief
Executive Officer of Wyndham, to the effect that (i) the central reservation
system comprised of the facilities and systems set forth on Section 5.2(g)(i) of
the Company Disclosure Letter (the "Central Reservation System") is Year 2000
Compliant and (ii) with respect to all other facilities or systems identified on
Section 5.2(g)(ii) of the Company Disclosure Letter, as of the Closing Date, the
Year 2000 Plan has been implemented, and such plan's other enumerated
performance goals have been substantially achieved, in accordance with the
timetable as set forth on Schedule 5.2(g)(ii) of the Company Disclosure Letter;
excluding solely for purposes of this Section 5.2(g) any adverse developments to
the extent attributable to the failure of
39
third parties which have the effect, subsequent to the mailing of the Disclosure
Document in connection with the Stockholders' Meeting, of causing the Companies
to fail to satisfy this condition.
(h) RESTRUCTURING PLAN. The Restructuring Plan shall have been
completed in accordance with its terms.
(i) MARRIOTT SETTLEMENT AGREEMENT. The Companies shall have
completed the divestiture of the third party hotel management business
previously conducted by Interstate Hotels Corporation in accordance with the
Marriott Settlement Agreement (including any extension to the term thereof and
any other amendment, in each case approved in advance by the Investors), without
incurring any penalties, fees or damages thereunder for failure to complete such
divestiture in a timely fashion or modifying the transactions contemplated
thereby without the consent of the Investors; PROVIDED, that the Investors shall
respond within five business days following their receipt of any request by the
Companies to obtain the Investors' consent to any proposed modification of the
Marriott Settlement Agreement under this Section 5.2(i), and provided further
that the Investors shall be deemed to have consented to any amendment which has
the sole effect of extending the completion of such divestiture until not later
than June 20, 1999.
(j) "PROJECT D" DIVESTITURE. Either (i) the Companies shall
have completed the divestiture of the "Project D" assets in accordance with the
Purchase and Sale Agreement, dated December 15, 1998 and amended December 22,
1998, January 31, 1999, February 5, 1999, February 10, 1999 and as of February
15, 1999 (the "Project D Agreement"), among Patriot, Patriot OP and PW Holding
I, LLC, without incurring any penalties, fees or damages thereunder for failure
to complete such divestiture in a timely fashion or modifying the transactions
contemplated thereby without the consent of the Investors; PROVIDED, that the
Investors shall respond within five business days following their receipt of any
request by the Companies to obtain the Investors' consent to any proposed
modification of the Project D Agreement under this Section 5.2(j), or (ii) the
divestiture of such assets shall not have been completed due to a failure of the
conditions thereto which failure is not caused by a breach by the Companies.
(k) FINANCING. The Companies shall have entered into
definitive agreements with respect to (i) a new $1.8 billion senior bank
facility (the "Bank Facility") substantially on the terms set forth in the
commitment letter, dated as of February 19, 1999, among The Chase Manhattan Bank
("Chase"), Chase Securities,
40
Inc. ("CSI") and Patriot and without giving effect to any "market flex"
provisions contained in such commitment letter (other than with respect to the
re-allocation of commitments (without reduction of the total amount of the Bank
Facility and the IRL Facility described below) and the increases in pricing
solely to the extent agreed therein) and (ii) $650 million of fully underwritten
increasing rate loans (the "IRL Facility"), substantially on the terms set forth
in the commitment letter, dated as of February 19, 1999, among Chase, CSI, Bear,
Xxxxxxx & Co. Inc. ("Bear Xxxxxxx"), The Bear Xxxxxxx Companies Inc. ("BSC") and
Patriot, all such definitive agreements to be in forms reasonably acceptable to
the Investors and without giving effect to any "market flex" provisions
contained in such commitment letter (other than with respect to the
re-allocation of commitments (without reduction of the total amount of the Bank
Facility and the IRL Facility described below) and the increases in pricing
solely to the extent agreed therein); PROVIDED, that the IRL Facility may be
replaced in whole or in part by the issuance of debt securities (the "Debt
Securities"), the aggregate amount of which may exceed the original amount of
the IRL Facility, substantially on the terms set forth in the engagement letter,
dated as of February 19, 1999, among CSI, Bear Xxxxxxx, Patriot and Wyndham,
with all definitive agreements (including the Debt Securities) to be in forms
reasonably acceptable to the Investors. The initial fundings under such
facilities shall have occurred and the proceeds of such fundings, together with
the proceeds from the issuance of the Shares, shall have been applied as
specified in such commitment letters. At the time of the Closing, the Companies
will have outstanding the full amount of mortgage debt permitted under the Bank
Facility and the IRLs.
(l) NYSE LISTING. The Restructuring Shares and the shares of
Wyndham Class A Common Stock issuable upon conversion of the Shares shall have
been approved for listing on the NYSE, subject to official notice of issuance.
(m) OPINIONS OF COUNSEL. The Investors shall have received at
the Closing opinions dated the Closing Date of counsel to the Companies, in form
and substance reasonably satisfactory to the Investors taking into account, if
such counsel so desires, the ABA Guidelines regarding legal opinions, covering
the matters set forth in Schedule 5.2(m) of the Company Disclosure Letter.
Section 5.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANIES AND
THE OPERATING PARTNERSHIPS. The respective obligation of the Companies and the
Operating Partnerships to consummate the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Closing of each of the
following conditions:
41
(a) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Investors set forth in this Agreement shall be true and
complete in all material respects, in each case as of the date of this Agreement
and as of the Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such date).
(b) PERFORMANCE OF OBLIGATIONS. The Investors shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing.
(c) OFFICERS' CERTIFICATES. Each of the Investors shall have
delivered to the Companies a certificate signed by an executive officer of such
Investor, dated the Closing Date, in form and substance reasonably satisfactory
to the Companies, to the effect that (i) as of the date hereof and as of the
Closing Date, the representations and warranties of such Investor set forth in
this Agreement, in the aggregate, are true and complete in all material respects
and (ii) the obligations of such Investor to be performed hereunder on or prior
to the Closing Date have been performed in all material respects.
(d) OPINION OF COUNSEL. The Companies shall have received at
the Closing opinions dated the Closing Date of counsel to the Investors, in form
and substance reasonably satisfactory to the Companies taking into account, if
such counsel so desires, the ABA Guidelines regarding legal opinions, covering
the matters set forth in Schedule 5.3(d) of the Investor Disclosure Letter.
ARTICLE VI
COVENANTS OF THE COMPANIES
As an inducement to the Investors to enter into this Agreement
and to consummate the transactions contemplated hereby, the Companies and the
Operating Partnerships hereby covenant with the Investors as follows:
Section 6.1 CONDUCT OF BUSINESS PENDING THE CLOSING.
(a) Except as set forth in Section 6.1 of the Company
Disclosure Letter or as otherwise expressly contemplated by this Agreement or as
consented to by the Investors in writing, during the period from the date of
this Agreement through and including the Closing Date, the Companies and the
Operating
42
Partnerships shall, and shall cause the Subsidiaries to, carry on
their respective businesses in the ordinary course consistent with past practice
and in compliance in all material respects with all applicable laws and
regulations and, to the extent consistent therewith, shall use reasonable
efforts to preserve intact their current business organizations, use reasonable
efforts to keep available the services of their current officers and other
employees and use reasonable efforts to preserve their relationships with those
persons having business dealings with them. Without limiting the generality of
the foregoing, except as set forth in Section 6.1 of the Company Disclosure
Letter or as otherwise expressly contemplated by this Agreement, including
without limitation the Restructuring Plan, or as consented to by the Investors
in writing, during the period from the date of this Agreement
through the Closing Date, the Companies and the Operating Partnerships shall
not, and shall not permit any of the Subsidiaries to:
(i) other than dividends and distributions by a
direct or indirect wholly owned Subsidiary to the Companies or one of their
wholly owned Subsidiaries, (A) declare, set aside or pay any dividends (payable
in cash, stock, property or otherwise) on, make any other distributions in
respect of, or enter into any agreement with respect to the voting of, any of
its capital stock or partnership or other equity interests, (B) split, combine
or reclassify any of its capital stock or partnership or other equity interests
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or partnership or
other equity interests, or (C) purchase, redeem or otherwise acquire any capital
stock or partnership or other equity interests in the Companies or any of the
Subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities, PROVIDED that the Companies may
redeem partnership units in Patriot OP and Wyndham OP to the extent required
under the applicable limited partnership agreement, provided that any such
redemption is effected solely with shares of Paired Common Stock (unless
otherwise agreed to in writing by the Investors);
(ii) other than issuances of shares of Paired Common
Stock pursuant to the terms of Paired Share Equivalents or Options (as defined
in Section 6.8(a)) outstanding as of the date of this Agreement and disclosed
pursuant to this Agreement, issue, deliver, sell, pledge or otherwise encumber
or subject to any Lien any of its shares of capital stock or partnership or
other equity interests or any other voting securities or any securities
convertible into, exercisable for or exchangeable with, or any rights, warrants
or options to acquire, any such shares, voting securities or convertible
securities;
43
(iii) amend its certificate of incorporation,
by-laws, partnership agreement or other comparable organizational documents or
amend the Patriot Rights Plan;
(iv) acquire any business (whether by merger,
consolidation, purchase of assets or otherwise) or acquire any equity interest
in any person not an affiliate (whether through a purchase of stock,
establishment of a joint venture or otherwise);
(v) other than as identified in Section 6.1(a)(v) of
the Company Disclosure Letter, (A) sell, lease, exchange, license, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of any of its
real properties or other assets, (B) enter into any new franchise agreements
with the Companies or any Subsidiary as the franchisor, (C) enter into any new
joint ventures or similar projects, or (D) enter into any new development
projects;
(vi) change its methods of accounting (or underlying
assumptions) in effect at December 31, 1997, except as required by changes in
GAAP or law or regulation or as disclosed in the SEC Reports filed prior to the
date of this Agreement, or change any of its methods of reporting income and
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns of the Companies for the taxable
years ended December 31, 1997, except as required by changes in law or
regulation;
(vii) create, renew, amend, terminate or cancel, or
take any other action that could reasonably be expected to result in the
creation, renewal, amendment, termination or cancellation of any agreement or
instrument that is material to the Companies and their respective subsidiaries,
taken as a whole;
(viii) incur any indebtedness for borrowed money;
(ix) enter into any new capital or take out
commitments or increase any existing capital or take out commitments (except as
set forth in the Capital Expenditure Budget);
(x) other than with respect to the individual
previously disclosed to the Investors, but only to the extent previously
approved by the Investors in writing and except as set forth on Section 3.22(a)
of the Company Disclosure Letter, (A) grant to any current or former director,
executive officer or other key
44
employee of the Companies or any Subsidiary any increase in compensation, bonus
or other benefits (other than increases in base salary in the ordinary course of
business consistent with past practice or arising due to a promotion or other
change in status and consistent with generally applicable compensation
practices), (B) grant to any such current or former director, executive officer
or other employee any increase in severance or termination pay, (C) amend or
adopt any employment, deferred compensation, consulting, severance, termination
or indemnification agreement with any such current or former director, executive
officer or employee, (D) amend, adopt or terminate any Benefit Plan, except as
may be required to retain qualification of any such plan under Section 401(a) of
the Code or (E) make any additions or changes to the Companies' senior
management at the level of divisional President or higher;
(xi) except pursuant to agreements or arrangements in
effect on the date hereof or as otherwise contemplated by this Agreement which
have been disclosed in Section 6.1 of the Company Disclosure Letter, pay, loan
or advance any amount to, or sell, transfer or lease any properties or assets
(real, personal or mixed, tangible or intangible) to, or purchase any properties
or assets, or enter into any agreement or arrangement with, any of its officers
or directors or any affiliate or the immediate family members or associates of
any of its officers or directors, other than payment of compensation at current
salary, incentive compensation and bonuses and other than properly authorized
business expenses in the ordinary course of business, in each case consistent
with past practice;
(xii) settle or compromise any pending or threatened
suit, action or claim (A) asserted by one or more stockholders of the Companies
or the Subsidiaries or one or more limited partners of the Operating
Partnerships, (B) that involves amounts, individually in or in the aggregate, in
excess of $100,000 net of insurance or (C) which relates to the transactions
contemplated by the Transaction Documents (excluding the obtaining of any
consents under the Restructuring Plan);
(xiii) permit any material insurance policy naming
the Companies or any Subsidiary as a beneficiary or a loss payable payee to be
canceled or terminated;
(xiv) enter into or amend in a manner adverse to the
Investors any new agreement which has a non-competition, geographical
restriction or similar covenant; or
45
(xv) authorize, or commit or agree to take, any of
the foregoing actions.
(b) Without limiting the foregoing, the Companies and the
Operating Partnerships shall, and shall cause the Subsidiaries to, (i) make the
expenditures set forth under the caption "Maintenance Capital Expenditures" in
the Capital Expenditure Budget, and (ii) implement the performance goals in
accordance with the timetable set forth in Section 5.2(g)(ii) of the Company
Disclosure Letter.
Section 6.2 REPORTING. The Companies shall, so long as the
Shares or the shares of Wyndham Common Stock issuable upon conversion thereof
are outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act, file reports and other information with the
SEC under Section 13 or 15(d) of the Exchange Act.
Section 6.3 PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Companies and the
Operating Partnerships hereby agree, jointly and severally, (i) to pay all costs
and expenses incident to the performance of the obligations of the Companies and
the Operating Partnerships hereunder, including those in connection with (A) the
issuance, transfer and delivery of the Shares or the shares of Wyndham Common
Stock issuable upon conversion thereof to the Investors, including any transfer
or similar taxes payable with respect thereto, (B) the qualification of the
Shares or the shares of Wyndham Common Stock issuable upon conversion thereof
under state or foreign securities or Blue Sky laws, (C) the cost of printing the
certificates for the Shares or the shares of Wyndham Common Stock issuable upon
conversion thereof and (D) the costs and charges of any transfer agent,
registrar, trustee or fiscal paying agent, and (ii) to promptly pay, upon the
Closing or the termination of this Agreement (other than as set forth in Section
6.3(c)), all out-of-pocket costs and expenses up to an aggregate of $25 million
(including any such payments made to the Investors prior to the date hereof or
through the Closing Date), including fees and expenses of advisors, accountants,
attorneys, consultants and other parties whom the Investors have engaged to
assist them in connection with a possible investment in the Companies, incurred
by the Investors in connection with the evaluation, negotiation and consummation
of this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby or incurred by them in connection with any
litigation that relates to the transactions contemplated by this Agreement.
46
(b) Without limiting the foregoing, the Companies shall pay
the Investors, as reimbursement of their out-of-pocket costs and expenses, (i)
$2,500,000 on the Effective Date, except to the extent that the Companies
provide evidence reasonably satisfactory to the Investors demonstrating that the
Companies have paid such amount prior to the date of this Agreement and (ii)
$7,500,000 as soon as practicable following the date of this Agreement using the
first proceeds from mortgage indebtedness of the Companies or the Subsidiaries
received after the Effective Date.
(c) Each of the following obligations is independent of and
not limited in any way by the Companies' or the Operating Partnerships'
obligations in respect of any of the other following obligations: (i) the
payment obligation under Section 6.3(a); (ii) the reimbursement of $2.5 million
of the Investors' costs and expenses that the Companies have heretofore
reimbursed or are reimbursing on the Effective Date (as defined below) of this
Agreement; (iii) the separate fees that are payable pursuant to the Equity
Commitment Letter; (iv) the separate fee that may become payable pursuant to
Section 6.7; and (v) the Companies' and the Operating Partnerships'
indemnification obligations under Section 10.2 and any adjustment to the
conversion price of the Shares pursuant to the Series B Certificate of
Designation.
Section 6.4 AVAILABILITY OF WYNDHAM COMMON STOCK. Wyndham
shall at all times reserve and keep available out of its authorized but unissued
common stock, for the purpose of effecting the conversion of the Shares, the
full number of shares of Wyndham Common Stock then issuable upon the conversion
of the Shares. Wyndham will, from time to time, in accordance with the laws of
the State of Delaware, increase the authorized amount of Wyndham Common Stock if
at any time the number of shares of Wyndham Common Stock remaining unissued and
available for issuance shall be insufficient to permit conversion of the Shares.
Section 6.5 DISCLOSURE DOCUMENTS; STOCKHOLDER AND PARTNER
APPROVALS.
(a) Each of Patriot and Wyndham shall, in accordance with
applicable law and its Certificate of Incorporation and By-Laws:
(i) promptly file with the SEC confidential (to the
extent required to be so filed and permitted by law), preliminary copies of the
disclosure documents to be sent to securityholders in connection with the
transactions
47
contemplated by this Agreement (the "Disclosure Documents") and use its
reasonable efforts to obtain the clearance by the SEC of those Disclosure
Documents requiring clearance by the SEC as promptly as practicable thereafter;
(ii) promptly and duly call, give notice of, convene
and hold not later than 50 calendar days following the clearance of the
Disclosure Documents by the SEC a meeting of its stockholders for the purpose of
obtaining the Patriot Stockholder Approval and the Wyndham Stockholder Approval
(each, a "Stockholders Meeting");
(iii) except to the extent such Board of Directors
determines in good faith, after consultation with outside counsel, that contrary
action is required by such Board of Directors' fiduciary duties under applicable
law, recommend the Patriot Stockholder Approval in the case of Patriot, the
Wyndham Stockholder Approval in the case of Wyndham, the Patriot Partner
Approval in the case of Patriot OP, the Wyndham Partner Approval in the case of
Wyndham OP and the acceptance by stockholders and limited partners of the
Exchange Offers, and include in the Disclosure Documents such recommendations
and the written opinion of the Financial Advisor that the financial
consideration to be received upon the sale of the Series B Preferred Stock is
fair, from a financial point of view, to the stockholders of the Companies, and
take all lawful action to solicit such approvals and acceptances; and
(iv) as promptly as practicable following the
clearance by the SEC of the Disclosure Documents requiring such clearance cause
the definitive Disclosure Documents to be mailed to its stockholders and the
limited partners of the Operating Partnerships.
(b) The Companies may, prior to the mailing of the Disclosure
Documents to stockholders in connection with the Stockholders' Meeting, deliver
to the Investors an updated Company Disclosure Letter dated as of the date
thereof (the "Updated Company Disclosure Letter") which supplements the Company
Disclosure Letter to reference all items that would have been required to be
disclosed in the Company Disclosure Letter had they been known at the time of
execution and delivery of this Agreement. Within 10 business days following
receipt of the Updated Company Disclosure Letter, the Investors will notify the
Companies whether the Investors believe that a Material Adverse Change has
occurred based on the information that has been provided to the Investors in the
Updated Company Disclosure Letter. Under no circumstances shall such a
notification of the Investors'
48
determination affect in any way the Investors' right to assert that the
condition set forth in Section 5.2(a) or 5.2(c) has not been satisfied and shall
not affect in any way the Investors' rights to indemnification pursuant to
Section 10.2. In making their determination as to whether the condition set
forth in Section 5.2(a) or 5.2(c) has not been satisfied for purposes of this
Section 6.5(b), the Investors shall be deemed to have relied solely on the
information provided in the Company Disclosure Letter and the Updated Company
Disclosure Letter and to have knowledge only of the events or items set forth on
the Company Disclosure Letter and the Updated Company Disclosure Letter, if any.
Under no circumstance shall the Investors be held liable for any notification
given pursuant to this Section 6.5(b), including without limitation in a
circumstance where a contrary determination is made by the Investors at or prior
to the Closing.
(c) The Companies shall use reasonable efforts to ensure that
the Disclosure Documents (including without limitation any SEC Reports
incorporated by reference therein), the Exchange Offers, the Patriot OP Consent
Solicitation and the Wyndham OP Consent Solicitation shall comply with all
applicable federal or other securities laws, except that the Companies shall
have no obligation as to information provided by the Investors.
(d) The filing with the SEC, or the transmission to any of the
Companies' securityholders, of any Disclosure Document, or any amendment
thereof, relating to the transactions contemplated by this Agreement shall be
subject to the prior approval of the Investors and their counsel, which approval
shall not be unreasonably withheld or delayed.
Section 6.6 RESTRUCTURING PLAN. At or prior to the Closing,
the Companies shall use reasonable efforts to take all actions necessary to
effect the actions set forth in the Restructuring Plan.
Section 6.7 NO SOLICITATION OF COMPETING TRANSACTIONS.
(a) Except as expressly permitted in writing by the Investors,
the Companies shall not, nor shall they authorize or permit any of the
Subsidiaries or any of the Companies' or the Subsidiaries' directors, officers,
employees, representatives, agents and advisors (including any investment
banker, financial advisor, attorney, accountant or other representative retained
by any of them), directly or indirectly, to (i) solicit, initiate, encourage
(including by way of furnishing nonpublic information), respond to (other than
by bare statement, without any further detail or
49
explanation, that they are not permitted to respond), or take any other action
designed to facilitate, any inquiries or the making of any proposal with respect
to any merger, consolidation, transfer of substantial assets, sale or exchange
of shares or similar transaction (except as set forth in Section 6.7 of the
Company Disclosure Letter) (collectively, a "Competing Transaction"), (ii)
participate in any substantive discussions or negotiations regarding any
Competing Transaction or (iii) enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Competing Transaction. Upon execution of this Agreement, the Companies and the
Subsidiaries shall immediately cease any existing activities, discussions or
negotiations with any parties heretofore conducted with respect to any of the
foregoing. Notwithstanding the foregoing, the Companies will not be precluded
from providing information to, or discussing, negotiating and executing
agreements with, any person or entity that makes a written proposal pursuant to
which such other person or entity would (i) make a significant equity investment
in the Companies, (ii) acquire all or a substantial portion of the assets of the
Companies or (iii) acquire the Companies, if and to the extent that the Boards
of Directors of the Companies reasonably determine in good faith (after
consultation with outside counsel) that they are required to do so by their
fiduciary duties.
(b) The Companies shall promptly (but in any event within 24
hours) advise the Investors in writing of any inquiries, discussions,
negotiations, proposals or requests for information received on or after the
date of this Agreement relating to any Competing Transaction, the material terms
and conditions thereof and the identity of the person making such request or
Competing Transaction. The Companies shall promptly advise the Investors of any
development relating to any inquiries, discussions, negotiations, proposals or
requests for information relating to a Competing Transaction, whether the
original inquiries, discussions, negotiations, proposals or requests for
information occurred before, on or after the date of this Agreement.
(c) If, prior to the Closing or during the 180-day period
following any termination of this Agreement, either of the Companies or any
Subsidiary enters into any other agreement or agreements with a third party (a
"Third Party"), without the prior consent of the Investors, providing for the
issuance of equity or other securities convertible into or exchangeable or
exercisable for equity, in one or a series of transactions, with aggregate net
proceeds of at least $50 million or providing for or contemplating any merger,
consolidation, transfer of substantial assets, any tender or exchange offer to
acquire securities of the Companies or similar transaction involving the
Companies (a "Third Party Agreement"), and the
50
Companies shall have not have consummated the transactions contemplated hereby
other than solely by reason of the Investors being unwilling to proceed with the
Closing notwithstanding that the conditions to their obligations set forth in
Article V have been satisfied, the Companies agree to pay to the Investors
within five business days after the entry by either of the Companies or any
Subsidiary into any Third Party Agreement, in addition to any amounts otherwise
provided hereunder, an aggregate amount (the "Breakup Fee") in cash equal to $30
million; PROVIDED, that, if the Third Party is (a) Hilton Hotels Corporation
("Hilton"), (b) any subsidiary or affiliate of Hilton, (c) any financial advisor
or financing source of Hilton or a subsidiary or affiliate thereof working on
behalf of, or with, Hilton in connection with the transactions contemplated by a
Third Party Agreement or (d) any entity that has an agreement, arrangement or
understanding with Hilton or any of the foregoing, or any group including any of
the foregoing, which agreement, arrangement or understanding provides for work
on behalf of, or with, Hilton in connection with the transactions contemplated
by a Third Party Agreement, the Third Party Agreement shall be deemed to include
not only those agreements set forth above but also any agreement contemplating
an asset purchase from or provision of financing to or financial support in
favor of the Companies and the Breakup Fee shall be an amount in cash equal to
$50 million; and provided further that the term "Third Party Agreement" shall
not include any agreement that provides solely for the sale of any
of the assets listed on Section 6.7(c) of the Company Disclosure Letter. The
Breakup Fee shall be paid as liquidated damages to the various Investors in
accordance with their respective Investor Percentages. The Companies agree that
(i) actual damages relating to the foregoing are impossible to determine with
certainty and (ii) such sum is a reasonable estimate of the Investors' damages
(and shall be deemed when paid, together with the payment of the fees
contemplated by the Equity Commitment Letter and the reimbursement of expenses
pursuant to Section 6.3, to have fully reimbursed the Investors for all such
damages) arising from lost opportunities, executive time and other causes.
Section 6.8 BENEFIT PLANS.
(a) Each option ("Option") granted under the Stock Incentive
Plans (as defined below) or granted pursuant to the stock option agreements
covered by the Form S-8 Registration Statement (File No. 333-41927) filed with
the SEC on December 10, 1997 to acquire shares of the Paired Common Stock that
is outstanding immediately prior to the Closing Date, shall, after giving effect
to the Merger and the Reverse Stock Split, become and represent an option to
acquire the same number of shares of Wyndham Class A Common Stock at the same
exercise
51
price per share of Wyndham Common Stock; PROVIDED, HOWEVER, that in the
case of any Option to which Section 421 of the Code applies by reason of its
qualification as an incentive stock option under Section 422 of the Code, the
conversion formula shall be adjusted if necessary to comply with Section 424(a)
of the Code. Except as provided above, each Option shall be exercisable upon the
same terms and conditions as were applicable to the Option immediately prior to
the Closing Date. "Stock Incentive Plans" means the Wyndham International, Inc.
1997 Stock Incentive Plan, the Patriot American Hospitality, Inc. 1997 Stock
Incentive Plan, the Patriot American Hospitality, Inc. 1995 Stock Incentive
Plan, the Wyndham Hotel Corporation Amended and Restated 1996 Long Term
Incentive Plan, the Cal Jockey Incentive Plan, the Bay Xxxxxxx Operating Company
1988 Stock Option Plan and the Patriot American Hospitality, Inc. Non-Employee
Directors' Incentive Plan.
(b) Each other outstanding award made pursuant to the Stock
Incentive Plans which provide for grants of equity-based awards in respect of
shares of Paired Common Stock (the "Other Awards") shall be amended or converted
into a similar equity-based award solely in respect of shares of Wyndham Common
Stock, with such appropriate adjustments to the terms of such Other Awards to
preserve the value inherent therein with no detrimental effects on the holders
thereof.
(c) Prior to the Closing Date, the Companies shall amend the
terms of each of the Stock Incentive Plans, to the extent necessary or
appropriate, to give effect to the provisions of this Section 6.8 and to reflect
the transactions contemplated by the Transaction Documents.
(d) Prior to the Closing Date, the Companies shall (i) amend
the Patriot American Hospitality/Wyndham International Employee Savings and
Retirement Plan (the "Savings Plan") to provide that the investment alternative
to invest in shares of Paired Common Stock shall become an investment
alternative to invest in shares of Wyndham Common Stock and (ii) take all such
action necessary to effectuate any such amendments.
(e) Prior to the Closing Date, the Companies shall use their
reasonable efforts to amend the agreements listed in Section 6.8(e) of the
Company Disclosure Letter to remove from such agreements the requirement that
the Companies establish and fund "rabbi trusts" to satisfy obligations of the
Companies under such agreements (the "Rabbi Trust Amendments").
52
Section 6.9 NO GENERAL SOLICITATION. None of the Companies,
their affiliates (as defined in Rule 501(b) under the Securities Act) or any
person acting on their behalf will offer to sell, sell or solicit any offer to
buy the Shares by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act that would require the registration of the Shares under
the Securities Act unless the Shares are so registered.
Section 6.10 PREEMPTIVE RIGHTS. Until the fifth anniversary of
the Closing Date, for so long as the Investors own Shares or Wyndham Common
Stock acquired upon conversion of Shares or pursuant to this Section 6.10
together representing or convertible into more than 15% of the fully diluted
shares of Wyndham Common Stock, they shall have a preemptive right after the
Closing Date, upon any issuance after the Closing Date of Wyndham Common Stock
(other than those issued upon the conversion, exercise or exchange of any
securities convertible into, exercisable for or exchangeable with Wyndham Common
Stock) or securities which are issued after the date hereof convertible into,
exercisable for or exchangeable with Wyndham Common Stock (including any Patriot
OP Units or Wyndham OP Units redeemable for Wyndham Common Stock issued after
the date hereof but excluding any shares issued upon conversion of Series A
Preferred Stock, Series B Preferred Stock or Class B Common Stock), to purchase
the same percentage of such securities as the percentage of the outstanding
Wyndham Common Stock (including for such purpose shares issuable upon conversion
of the Shares and the Rights Offering Shares) then held by the Investors
(assuming for such purpose the full conversion of all Shares then held by the
Investors, including any Shares issued to the Investors as dividends on the
Shares, and any Shares issuable to the Investors as a dividend on the Shares for
the dividend period in which the Investors' ownership is measured, prorated for
the number of days elapsed during such period); PROVIDED that to the extent that
one or more of the Investors do not exercise such preemptive rights in full, the
unexercised portion of such Investors' preemptive rights shall be allocated
among the other Investors pro rata in accordance with the number of the shares
of Wyndham Common Stock (including any shares issuable upon conversion of the
Shares) then held by them. In connection with this preemptive right, Wyndham
shall provide written notice to each Investor within ten business days following
the end of each fiscal quarter of Wyndham of all issuances by Wyndham or its
Subsidiaries giving rise to preemptive rights during such fiscal quarter and the
Investors shall provide written notice to Wyndham of the extent to which they
are exercising their preemptive rights and their interest in exercising
53
preemptive rights that are not being exercised by other Investors and close any
transaction relating to the exercise of preemptive rights hereunder on the 20th
business day following receipt of such notice by Wyndham. Any preemptive right
not exercised by the end of such period will expire, lapse and be of no effect.
This Section 6.10 will not apply to the Rights Offering or to any other equity
issuance by Wyndham during the six month period following the Closing.
Section 6.11 NON-COMPETITION AND OTHER RESTRICTIONS. From and
after the Closing, for so long as the Investors beneficially own an aggregate of
5% of the outstanding shares of Wyndham Common Stock (including shares of
Wyndham Common Stock issuable upon conversion of Shares and Rights Offering
Shares), Wyndham shall not, and shall not permit the Subsidiaries to, without
the approval of a majority of the Class B Directors (as defined in the New
Wyndham Certificate), enter into or amend any new agreement which has a
non-competition, geographical restriction or similar covenant that will apply to
and restrict the activities of any of the Investors.
Section 6.12 ACCESS TO INFORMATION.
(a) The Companies and the Operating Partnerships shall, and
shall cause the Subsidiaries to, afford to each Investor (including for such
purposes only those Permitted Third Party Transferees with an investment in the
Companies of at least $20 million) and to the officers, employees, accountants,
counsel, financial advisors and other representatives of such Investor,
reasonable access during normal business hours from the date hereof until and
after the Closing to all the properties, books, contracts, commitments,
personnel, reports and records of or relating to the Companies or the
Subsidiaries, and the Companies and the Operating Partnerships shall, and shall
cause the Subsidiaries to, furnish promptly to the Investors, any financing
source identified by the Investors in connection with the transactions
contemplated hereby and to any other person that the Investor may reasonably
request (i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities laws, (ii) such weekly, monthly, quarterly, annual and other
operating reports, financial reporting packages and other operational and/or
financial information sent to management or the Board of Directors of the
Companies or to the banks with whom the Companies and the Subsidiaries maintain
credit facilities or lines of credit and (iii) all other information concerning
its business, properties and personnel as the Investors may reasonably request.
54
(b) In addition to the foregoing, the Companies and the
Operating Partnership shall, and shall cause the Subsidiaries to, permit the
Investors to monitor the status of the Year 2000 Plan in the following manner,
without limitation, by: (i) providing semi-monthly updates to the designated
representatives of the Investors on the progress of the Year 2000 Plan
(including the amount of expenditures made on such plan to that date), (ii)
notifying the Investors of whether the Companies or any of the Subsidiaries
intend to deviate in any material respects from the Year 2000 Plan, (iii) if a
deviation from the Year 2000 Plan is contemplated, consulting with designated
representatives of the Investors to determine if such deviation is in the best
interest of the Companies, and (iv) coordinating with the Investors and their
representatives to develop modifications, if any, to the Year 2000 Plan. For
purposes of this Section 6.12(b), the Investors' designated representatives
shall be such persons as the Investors shall identify to the Companies.
(c) No review pursuant to this Section 6.12 shall subject the
Investors or their representatives or agents to any responsibility for the
Companies' compliance or failure to comply with the Year 2000 Plan or affect any
representation or warranty given by the Companies or the Operating Partnerships
hereunder.
Section 6.13 RIGHTS OFFERING. If and when so determined
following the Closing by the vote of a majority of the Class A Directors and
Class C Directors (each as defined in the New Wyndham Certificate), voting
together, Wyndham may conduct a single rights offering (the "Rights Offering")
in which the holders of the Wyndham Class A Common Stock and if the approvals to
the Patriot OP Consent Solicitation and the Wyndham OP Consent Solicitation are
received, the Patriot OP Units and the Wyndham OP Units (collectively, the
"Eligible Holders") will be eligible to participate, provided that the record
date for the Rights Offering (the "Record Date") shall be established and
announced in accordance with the applicable provisions of Rule 10b-17
promulgated under the Exchange Act and the applicable rules of the NYSE and the
Rights Offering may not be consummated any later than 170 days following the
Closing Date. In the Rights Offering, the Eligible Holders will be offered
transferable rights to purchase for cash at par up to $300 million in Series A
Preferred Stock with an issuance date on the date of consummation of the closing
of the Rights Offering; provided, however, that if the Companies shall have sold
the Identified Assets prior to or at the closing of the Rights Offering for net
cash proceeds in excess of the amounts set forth in Section 1.1(c) of the
Company Disclosure Letter and shall apply such excess proceeds (i) to reduce the
number of Shares in accordance with Section 1.1(c) or (ii) to redeem the Shares
in accordance with the Series B Certificate of Designation, then the maximum
55
offering amount of the Rights Offering shall be reduced by the amount of such
excess proceeds. The rights to purchase shall be allocated among the Eligible
Holders pro rata based on the respective numbers of shares of Wyndham Class A
Common Stock held by such Eligible Holders on the Record Date or that would be
received by such Eligible Holder upon redemption of the Patriot OP Units or
Wyndham OP Units held by them on the Record Date (rounded down in the case of
fractional shares of Series A Preferred Stock to the nearest whole number of
shares) and shall not be reallocated in the event that not all Eligible Holders
exercise their right to purchase in full. The Rights Offering will provide that
any exercise thereof is irrevocable. The Companies will use reasonable efforts
to ensure that the Rights Offering will be conducted in compliance with all
applicable securities laws. Unless otherwise determined by the vote of a
majority of the Class A Directors and the Class C Directors, voting together,
the shares of Series A Preferred Stock shall be listed on the NYSE, the NASDAQ
National Market System or other national securities exchange, subject to
satisfying the eligibility requirements thereof.
Section 6.14 HSR APPROVAL. Wyndham shall cooperate with each
Investor in obtaining as soon as practicable all necessary governmental consents
and approvals, including without limitation, termination or expiration of the
waiting period under the HSR Act.
ARTICLE VII
COVENANTS OF THE INVESTORS
Section 7.1 CERTAIN RESTRICTIONS.
(a) Each of the Investors, severally but not jointly,
covenants with the Companies that, for a period commencing on the Closing and
continuing through the sixth anniversary of the Closing, such Investors will
not, directly or indirectly, through one or more intermediaries or otherwise,
purchase, acquire, own or hold any shares of Wyndham Common Stock or any
securities which are convertible into or exchangeable or exercisable for Wyndham
Common Stock (excluding any shares that are owned by the Investors as of the
date hereof as set forth on Section 7.1(a) of the Investor Disclosure Letter),
unless such shares or securities were purchased or acquired in a purchase or
acquisition which (i) is made directly from Wyndham in a transaction which is
approved in advance by vote of a majority of the Class A Directors and Class C
Directors, voting together, including without limitation under
56
Section 6.10, or from another Investor, (ii) is a dividend on the Shares or a
conversion of the Shares, (iii) is made pursuant to the Rights Offering or upon
conversion of the Rights Offering Shares acquired pursuant thereto, (iv) is made
by one or more affiliates of any Investor over whom such Investor does not
control investment or voting decisions and such Investor does not hold over 50%
of the outstanding voting power of such affiliate, or (v) is of non-voting
preferred stock of the Companies; PROVIDED, HOWEVER, that notwithstanding
anything to the contrary contained herein, the foregoing restriction shall not
be deemed to be violated or applicable if the numbers of shares of Wyndham
Common Stock or securities which are convertible into or exchangeable or
exercisable for Wyndham Common Stock beneficially owned directly or indirectly
through one or more intermediaries or otherwise, in the aggregate, by the
Investors is increased solely as a result of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of Wyndham or any other action taken solely by Wyndham.
Notwithstanding the foregoing, (x) any Investor, Permitted Assignee or Permitted
Third Party Transferee, or any of their respective affiliates may, to the extent
not prohibited by law, acquire Wyndham's publicly-traded securities in the
ordinary course of their regular market-making activities, if any, or engage in
business as investment advisors or broker-dealers for the accounts of their
customers (such activities, "Ordinary Trading Activities"), and (y) any
individual who is an employee, partner or stockholder of any of the Investors
may purchase shares of Wyndham Common Stock for his or her individual account
(held for investment purposes), provided that at no time shall any such
individual acquire beneficial ownership of in excess of 100,000 shares of
Wyndham Common Stock, including shares of Wyndham Common Stock issuable upon
conversion, exchange or exercise of securities which are convertible into or
exchangeable or exercisable for shares of Wyndham Common Stock (subject to
equitable adjustment in the event of a stock split or reclassification of the
Wyndham Common Stock), exclusive of shares identified in Section 7.1(a) of the
Investor Disclosure Letter or which may otherwise be acquired consistent with
this Section 7.1.
(b) Each of the Investors, severally but not jointly,
covenants with the Companies that such Investor will not (i) make any public
announcement (except as required by law in respect of actions permitted hereby)
or proposal or offer whatsoever (including, but not limited to, any
"solicitation" of "proxies" as such terms are defined or used in Regulation 14A
of the Exchange Act) with respect to, (x) any form of business combination or
similar or other extraordinary transaction involving the Companies or any
affiliate thereof, including, without limitation, a merger, tender or exchange
offer or liquidation of the Companies' assets, or (y) any
57
form of restructuring, recapitalization or similar transaction with respect to
the Companies or any affiliate thereof or (ii) make any proposal to seek
representation on the Board of Directors or otherwise to seek to control or
influence the management, Board of Directors or policies of Wyndham or any
affiliate thereof.
(c) Within five business days following a written request
therefor by Wyndham, each Investor shall notify Wyndham in writing of the number
of shares of each class or series of capital stock of Wyndham beneficially owned
by such Investor and such Investor's Permitted Assignees, as well as in each
case the nature of such beneficial ownership.
Section 7.2 QUORUM. Each of the Investors covenants that, for
so long as the Investors beneficially own a sufficient number of shares of the
Series B Preferred Stock and the Wyndham Class B Common Stock to have the right
to designate at least two directors to the Board of Directors of Wyndham, such
Investor will be present in person or represented by proxy with respect to all
securities of Wyndham beneficially owned by such Investor at any duly called
meeting of the stockholders of Wyndham for the purpose of constituting a quorum
for the transaction of business.
Section 7.3 TRANSFERS. The Investors covenant with the
Companies that the Investors will not, individually or in the aggregate,
transfer or attempt to transfer more than 25% of the Shares to one or more
Permitted Third Party Transferees (such percentage to include any Shares
previously transferred to any Permitted Third Party Transferee prior to the
Closing Date under Section 1.1); PROVIDED, that the Investors shall not be
restricted from any transfer or attempted transfer pursuant to which Shares are
converted into Series A Preferred Stock or any other conversion of Shares.
Section 7.4 HSR APPROVAL. The Investors shall cooperate with
the Companies in obtaining as soon as practicable all necessary governmental
consents and approvals, including without limitation, termination or expiration
of the waiting period under the HSR Act.
Section 7.5 NO VOTING AGREEMENTS. The Investors covenant with
the Companies that, for so long as the Investors beneficially own a sufficient
number of shares of Wyndham Common Stock to have the right to designate any
directors to the Board of Directors of Wyndham, the Investors will not enter
into any voting agreement relating to the Shares, except with respect to the
allocation, election and
58
removal of directors of the Board of Directors of Wyndham.
Section 7.6 BOARD OF DIRECTOR MATTERS. The Investors agree
that no individual Investor will nominate or select, or have the right to
nominate or select, more than five directors to the Board of Directors of
Wyndham.
Section 7.7 COMPLIANCE WITH THE NEW WYNDHAM CERTIFICATE AND
SERIES B CERTIFICATE OF DESIGNATION. Each Investor agrees, severally but not
jointly, to comply with the provisions of, and to perform their obligations set
forth in the New Wyndham Certificate and the Series B Certificate of
Designation, including without limitation, their voting obligations set forth
therein, whether or not any such provision is valid.
Section 7.8 CONFIDENTIALITY. During the period from the date
of this Agreement through and including the Closing Date, each of the Investors
covenants with the Companies that any of the information furnished or otherwise
obtained, directly or indirectly, by such Investor, its directors, officers,
partners, employees, agents or representatives including, without limitation,
attorneys, accountants, partners, experts and consultants (collectively,
"Representatives") and all reports, analysis, compilations, data, studies or
other documents prepared by such Investor or its Representatives containing or
based, in whole or in part, on any such furnished information (collectively, the
"Information") will be kept strictly confidential and will not, without the
prior written consent of the Companies, be disclosed to any other individual,
corporation, partnership, joint venture, trust or association in any manner
whatsoever, in whole or in part and will not be used for n in connection with
the Restructuring and the purchase and sale of Shares described herein; provided
that if any Investor determines, based on the advice of counsel, that it is
legally obligated to release the Information, such Investor may do so after
notice to and consultation with the Companies.
ARTICLE VIII
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES
Section 8.1 RESTRICTIVE LEGEND. Each certificate representing
(a) the Shares, (b) shares of Series A Preferred Stock or Wyndham Common Stock
issuable upon conversion of any Shares, and (c) any other securities issued in
respect of the Shares or Wyndham Common Stock issued upon conversion of any
Shares
59
upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event (each of the foregoing securities in clauses (a) through (c) being
referred to herein as "Restricted Securities"), shall (unless otherwise
permitted by the provisions of Section 8.2) be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to the legend
required under any applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR EXEMPTION
THEREFROM UNDER SAID ACT OR LAWS. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SHARES AND THEIR TRANSFER MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY. PURSUANT TO SUCH AGREEMENT, CERTAIN
TRANSFERS MAY NOT BE MADE UNLESS AT THE TIME OF SUCH TRANSFER ONE OR
MORE DIRECTORS OF THE COMPANY APPOINTED PURSUANT TO SUCH AGREEMENT
SUBMIT THEIR RESIGNATION FROM THE BOARD OF DIRECTORS.
Wyndham will promptly, upon request, remove any such legend when no longer
required by the terms of this Agreement or by applicable law.
Section 8.2 NOTICE OF PROPOSED TRANSFERS. Prior to any
proposed transfer of any Restricted Securities, unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
each Investor shall give written notice to Wyndham of its intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall be accompanied by either
(a) a written opinion of legal counsel (who shall be reasonably satisfactory to
Wyndham) addressed to Wyndham and reasonably satisfactory to Wyndham to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act or (b) a "no action" letter from
the SEC to the effect that the transfer of such securities without registration
will not result in a recommendation by the staff of the SEC that action be taken
with respect thereto, whereupon, in each case, such Investor shall be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice
60
delivered by such Investor to Wyndham. Unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, each
certificate to be issued to evidence the Restricted Securities transferred as
herein provided shall bear the appropriate restrictive legend set forth in
Section 8.1 except that such certificate shall not bear such restrictive legend
if, (i) in the opinion of counsel for such Investor, such legend is not required
in order to establish compliance with any provisions of the Securities Act, (ii)
a period of at least one year has elapsed since the later of the date the
Restricted Securities were acquired from Wyndham or from an affiliate of
Wyndham, and such Investor represents to Wyndham that it is not an affiliate of
Wyndham and has not been an affiliate during the preceding three months and
shall not become an affiliate of Wyndham without resubmitting the Restricted
Securities for reimposition of the legend, or (iii) the Restricted Securities
have been sold pursuant to Rule 144(k) under the Securities Act and the
certificate is accompanied by a representation by the Investor that it is not an
affiliate of Wyndham, has not been an affiliate during the three-month period
prior to the sale and has held the Restricted Securities for more than two
years.
ARTICLE IX
TERMINATION
Section 9.1 TERMINATION. Notwithstanding anything contained
herein to the contrary, this Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual written consent of the Investors and the
Companies;
(b) by the Investors or the Companies if the Closing has not
occurred on or before July 31, 1999 and this Agreement has not previously been
terminated; PROVIDED, that the right to terminate the Agreement under this
Section 9.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Investors or the Companies if, at the Stockholders
Meeting, the Stockholder Approval is not obtained.
In the event that this Agreement shall be terminated pursuant
to this
61
Article IX, all further obligations of the parties under this Agreement, other
than the obligations set forth in Article X and Sections 6.3, 6.7(c) and Article
XI, shall be terminated without further liability of any party to any other
party, provided that nothing herein shall relieve any party from liability for
its willful breach of this Agreement.
ARTICLE X
INDEMNIFICATION
Section 10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Companies, the Operating Partnerships and
the Investors contained herein, including the Company Disclosure Letter, or any
certificate or instrument delivered in connection herewith at or prior to the
Closing shall survive the Closing (even if the damaged party knew or had reason
to know of any misrepresentation or breach of warranty at the time of Closing)
until, through and including the 90th day following the filing by Wyndham of a
Form 10-K containing the audited consolidated financial statements of Wyndham
for the fiscal year ending December 31, 1999 (the "Cut-off Date"); PROVIDED,
HOWEVER, that (a) the representations and warranties set forth in Sections 3.1,
3.4, 4.3 and 4.4 shall survive indefinitely, and (b) the representations and
warranties set forth in Section 3.21 shall survive until 90 days following the
expiration of the applicable statute of limitations (giving effect to any
extensions thereof). The parties' respective covenants and agreements set forth
herein shall survive indefinitely unless otherwise set forth therein or herein
(except for those set forth in Sections 6.1, 6.5, 6.6, 6.7, 6.8, 6.9 and 6.14,
each of which will survive until the Cut-off Date). The Closing shall not be
deemed in any way to constitute a waiver by any party of any powers, rights or
remedies it may have with respect to any obligations of the other parties
hereunder, including without limitation with respect to any misrepresentation or
breach of warranty known to such party at the time of the Closing. No claim
shall be made with respect to any representation, warranty, covenant or
agreement after it ceases to survive except that in the event that any member of
the Investor Indemnified Group (as defined below) (i) receives notice of or
identifies any matter which provides a reasonable basis for a claim to
indemnification hereunder within the applicable period provided in this Section
10.1, and (ii) provides notice to the Companies of the receipt of such notice or
of the matter so identified, and such claim shall not have been finally resolved
before the expiration of the applicable period referred to in this Section 10.1,
any representation, warranty, covenant or agreement that is the basis for such
claim shall continue to survive with respect to such claim and shall remain a
62
basis for indemnity as to such claim until such claim is finally resolved.
Section 10.2 INDEMNIFICATION.
(a) For purposes of this Agreement, "Losses" shall mean all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, diminution in value, costs and expenses (net of insurance
reimbursement actually received by the Companies after taking into account any
related deductibles and premium increases and net of any tax benefit (such as
additional deductions due to increased liability for interest) from the payment
or from the related underlying liability with respect to which the payment is
made), including without limitation interest, penalties and attorneys' fees and
expenses, asserted against, resulting to, or imposed upon or incurred by the
Companies or the Investor Indemnified Group, or any member thereof, directly or
indirectly, by reason of, relative to, or resulting from any inaccuracy of any
representation or warranty (without taking into account any qualification as to
materiality in such representations or warranties) or any breach or violation of
any covenant or agreement of the Companies, the Operating Partnerships or any
Subsidiary contained in the Transaction Documents or any certificate or other
document delivered by the Companies or the Operating Partnerships in connection
with the Closing, including, without limitation, any claims relating to the
Companies, the Operating Partnerships, the Subsidiaries or any properties
(former or current) owned, leased or managed by any of the foregoing.
Notwithstanding the foregoing, Losses relating to one or more inaccuracies of
any representation or warranty (but not with respect to any breach of any
covenant or agreement) which would give rise individually to a Loss of less than
$50,000 shall be deemed not to be a Loss for which indemnification is required
under this Section 10.2, except to the extent it is a Covered Loss (each such
Loss a "De Minimis Exclusion").
Without limiting the foregoing, Losses shall include, without
limitation, (i) amounts incurred by the Companies or the Operating Partnerships
as compared to the Companies' or the Operating Partnerships' business,
properties, prospects, operations, financial condition or results of operation
as represented and warranted pursuant to Article III, (ii) amounts expended by
the Companies to attain Year 2000 Compliance in excess of the amounts provided
for in the Year 2000 Plan, (iii) payments made or required to be made (other
than (A) commitment fees payable to the Investors or to the parties to the Bank
Facility, (B) indebtedness to be repaid or refinanced in connection with the
transactions contemplated hereby and (C) professional fees incurred in
connection with the transactions contemplated hereby) to third parties as a
result of the consummation of the transactions contemplated
63
hereby, including without limitation payments made to third parties in order to
obtain the consent of any party to the transactions contemplated hereby or
amendments or terminations of existing agreements as contemplated by this
Agreement and payments required to be made to third parties as a result of the
failure to obtain the consent of any party as a result of the consummation of
the transactions contemplated by the Transaction Documents or the amendment or
termination of any existing agreement, whether or not the Investors were aware
of any such consent, amendment or termination, (iv) if the number of shares of
Wyndham Common Stock outstanding after effecting the Restructuring Plan exceeds
the Outstanding Paired Share Amount (but before giving effect to the issuance of
the Shares and the Rights Offering Shares), the fair market value of the shares
of Wyndham Common Stock constituting such excess, (v) payments made to the
holders of Series B Preferred Stock of Patriot in redemption of their shares in
excess of the stated amount of such shares, (vi) payments made in connection
with the defense, settlement or disposition of any suit, action, claim or
proceeding commenced by a current or former stockholder of the Companies or
current or former limited partner of the Operating Partnerships arising out of
or related to (A) this Agreement or the transactions contemplated hereby,
whether arising before or after the Closing, and (B) any action or failure to
act by the Companies or the Subsidiaries at or prior to the Closing (including
without limitation in connection with any registration rights, redemption rights
or similar agreement), whether asserted before or after the Closing (the amounts
set forth in clauses (iii), (iv), (v) and (vi) being referred to as "Covered
Losses"), and (vii) if the Management Agreement, dated as of May 10, 1995, as
amended, with respect to the Xxxxxxx Xxxxxxx (the "Xxxxxxx Management Contract")
shall be terminated prior to May 10, 2004 pursuant to Section 12.2(2)(ii) of the
Anatole Management Agreement (a "Covered Anatole Termination"), $1.25 million
per fiscal quarter for each full or partial three month period (prorated for the
number of days elapsed in any partial three month period) remaining in such
period following the Covered Anatole Termination. The fair market value of the
amount of diminutions of the earnings stream for, or other value of, real estate
assets, other property or contracts, and the amount of increased expenditures,
including without limitation for Year 2000 Compliance, reflagging costs and
property improvement plans or programs required from third parties, will be
taken into account in determining Losses.
(b) (i) The Companies and the Operating Partnerships hereby
agree, jointly and severally, to indemnify, defend and hold harmless the
Investors and their respective directors, officers, employees, affiliates and
associates (the "Investor Indemnified Group") from and against any and all
Losses; provided, however, that (i)
64
any indemnification in respect of breaches of representations and warranties
shall be operative and effective only to the extent the amount of all Losses, in
the aggregate, relating thereto, exceed $20 million (the "First Basket") and
(ii) any indemnification in respect of Covered Losses shall be operative and
effective only to the extent that such Covered Losses, in the aggregate, exceed
$25 million (the "Second Basket"); PROVIDED, FURTHER, that (i) indemnification
in respect of Losses relating to a Covered Anatole Termination will not be
subject to the First Basket or the Second Basket and (ii) indemnification in
respect of Losses relating to breaches of covenants and agreements will not be
subject to the First Basket or the Second Basket or subject to the Cap (as
defined below). In the event that Losses in excess of the Second Basket have
been incurred, the Companies and the Operating Partnerships may, at their
election, choose to allocate the unused portion of the First Basket to increase
the Second Basket by an amount not to exceed the unused amount of the First
Basket. Required indemnification payments by the Companies to the Investors
under this Section 10.2(b)(i) with respect to Losses described in Section
10.2(a) shall not exceed $150 million (the "Cap") (other than with respect to
payments expressly excluded from the Cap). The application of all
indemnification payments under this Section 10.2 toward the Cap (other than with
respect to payments that are expressly excluded from the Cap, which shall not be
so applied), shall equal the product of (i) the amount of Loss with respect to
each such indemnification payment and (ii) a fraction, (A) the numerator of
which is another fraction, (x) the numerator of which is the difference between
(I) 1,000,000,000 and (II) the product of (X) the number of shares of Series B
Preferred Stock redeemed in the Rights Offering (which in no event shall be
greater than 3,000,000) and (Y) the Stated Amount (as defined in the Series B
Certificate of Designation), and (y) the denominator of which shall be 8.59, and
(B) the denominator of which is 283,440,377. Notwithstanding the foregoing, no
further indemnification payments under this Section 10.2 shall be due or payable
at such time as the cumulative amount of such indemnification payments paid and
applied toward the Cap pursuant to the foregoing formula equals the lesser of
(i) $150 million and (ii) $155.7 million times a fraction, (A) the numerator of
which is the difference between (x) 10,000,000 and (y) the number of shares of
Series A Preferred Stock outstanding immediately following the closing of the
Rights Offering (which in no event shall be greater than 3,000,000), and the (B)
denominator of which shall be 10,000,000.
(ii) The Companies and the Operating Partnerships hereby
agree, jointly and severally, to indemnify, defend and hold harmless the
Investor Indemnified Group from and against any and all Losses specifically
defined for purposes of this Section 10.2(b)(ii) relating to (A) the entry by
the Companies or any
65
Subsidiary into a closing agreement with, or the issuance of a ruling by, the
IRS related to the hotel listed in Section 3.21(l) of the Company Disclosure
Letter in connection with Patriot's organization, operation or qualification as
a REIT for the year ended December 31, 1998, if such Losses exceed $2 million;
and/or (B) other than failures that are effectively cured by the closing
agreement referred to in clause (A) above, any failure of Patriot to be duly
organized, operated and qualified as a REIT for the taxable year ended December
31, 1998 if such failure is related to or results from the hotel or the
operations of the hotel listed in Section 3.21(l) of the Company Disclosure
Letter. For purposes of this Section 10.2(b)(ii), Losses shall include without
limitation payment of taxes and related penalties and interest, shall not be
reduced for any De Minimus Exclusion and shall not require any inaccuracy of any
representation or warranty or any breach or violation of any covenant or
agreement. The indemnification provided under this Section 10.2(b)(ii) shall be
determined without regard to the First Basket or the Second Basket and will not
be subject to the Cap.
(c) The Companies' obligations to make payments pursuant to
this Section 10.2 shall be satisfied as an adjustment to the conversion price of
the Shares as provided in Section 8(b)(iii) of the Series B Certificate of
Designation; PROVIDED, that any payments in respect of a Covered Anatole
Termination shall be satisfied in cash and may not be satisfied through a
conversion price adjustment.
(d) To the extent that the conversion price of the Shares is
to be adjusted pursuant to this Section 10.2, such adjustment shall be made in
accordance with the Series B Certificate of Designation.
(e) In the event that any counterparties to the Forward Equity
Contracts sell shares released as collateral under the Forward Equity Contracts
after December 31, 1998 (the "Forward Equity Contract Shares") with net proceeds
to the Companies of less than $8.75 per share, Losses shall be deemed to include
the difference between $8.75 and the weighted average price at which Forward
Equity Contract Shares were credited, multiplied by the number of shares so
released. The Losses set forth in this Section 10.2(e) shall not be subject to
the First Basket or the Second Basket or subject to the Cap.
(f) The rights and remedies of the Investors with respect to
the representations and warranties of the Companies and the Operating
Partnerships, including without limitation the matters referred to in this
Section 10.2, are limited to their rights under this Article X, and the
Investors shall have no independent or other
66
rights or remedies with respect thereto, including without limitation the right
of rescission.
Section 10.3 TERMS OF INDEMNIFICATION. The obligations and
liabilities of the Companies and the Operating Partnerships with respect to
Claims by third parties will be subject to the following terms and conditions:
(a) the Investors will give the Companies prompt notice of any
Claims asserted against, resulting to, imposed upon or incurred by the
Investors, directly or indirectly, and the Companies will undertake the defense
thereof by representatives of their own choosing which are reasonably
satisfactory to the Investors; PROVIDED, that the failure of the Investors to
give notice as provided in this Section 10.3 shall not relieve the Companies and
the Operating Partnerships of their obligations under this Article X, except to
the extent that such failure has materially and adversely affected the rights of
the Companies;
(b) if within a reasonable time after notice of any Claim, the
Companies fail to defend, the Investors will have the right to undertake the
defense, compromise or settlement of such Claims on behalf of and for the
account and at the risk of the Companies, subject to the right of the Companies
to assume the defense of such Claim at any time prior to settlement, compromise
or final determination thereof;
(c) if there is a reasonable probability that a Claim may
materially and adversely affect an Investor other than as a result of money
damages or other money payments, such Investor will have the right at its own
expense to defend (provided that the indemnifying party shall continue to
control the defense and the indemnified party shall have the right to
participate in such defense), or co-defend, such Claim;
(d) with respect to any Claim to which any Investor is
specifically named, the Companies on one hand and any Investor on the other will
not, without the prior written consent of the other, settle or compromise any
Claim or consent to entry of any judgment relating to any such Claim;
(e) with respect to any Claim asserted against an Investor,
such Investor will have the right to employ one counsel of its choice in each
applicable jurisdiction (if more than one jurisdiction is involved) to represent
such Investor if, in such Investor's counsel's reasonable judgment, a conflict
of interest between such
67
Investor and the indemnifying party exists in respect of such Claim, and in that
event the fees and expenses of such separate counsel, with respect to such
Claim, shall be paid by such indemnifying party; and
(f) the Companies will provide the Investors reasonable access
to all records and documents of the Companies relating to any Claim.
ARTICLE XI
MISCELLANEOUS
Section 11.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT
GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES THEREOF).
Section 11.2 JURISDICTION; FORUM; SERVICE OF PROCESS; WAIVER
OF JURY TRIAL. With respect to any suit, action or proceeding ("Proceeding")
arising out of or relating to this Agreement each of the Companies, the
Operating Partnerships and the Investors (including without limitation their
Permitted Assignees and Permitted Third Party Transferees) hereby irrevocably:
(a) submits to the exclusive jurisdiction of the United States
District Court for the Southern District of New York, the United States District
Court for the District of Delaware, or any state court located in the State of
Delaware, County of Newcastle (the "Selected Courts") and waives any objection
to venue being laid in the Selected Courts whether based on the grounds of FORUM
NON CONVENIENS or otherwise;
(b) consents to service of process in any Proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, or
by recognized international express carrier or delivery service, to the
Companies, the Operating Partnerships or the Investors at their respective
addresses referred to in Section 11.6 hereof; PROVIDED, HOWEVER, that nothing
herein shall affect the right of any party hereto to serve process in any other
manner permitted by law; and
(c) waives, to the fullest extent permitted by law, any right
it may have to a trial by jury in any Proceeding.
68
Section 11.3 SUCCESSORS AND ASSIGNS. Except as otherwise
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors by operation of law and permitted assigns of the
parties hereto. No assignment of this Agreement may be made by any party at any
time, whether or not by operation of law, without the other parties' prior
written consent, except that each Investor may assign any of its rights
hereunder to one or more of its Permitted Assignees or Permitted Third Party
Transferees or to the other Investors or any of their Permitted Assignees or
Permitted Third Party Transferees without the Companies' consent provided that
such other Investor or Permitted Assignee or Permitted Third Party Transferees
expressly agrees in writing with the Companies to assume all of the assigning
Investor's obligations hereunder; PROVIDED, that any transfer of Shares
permitted hereunder, other than to a Permitted Assignee or Permitted Third Party
Transferee of an Investor or to the other Investors, shall not entitle the
transferee to the rights of the transferring Investor under this Agreement other
than the registration rights pursuant to the Registration Rights Agreement.
Section 11.4 EFFECTIVENESS. On or prior to February 22, 1999,
the Companies will provide to the Investors a complete and accurate copy of the
definitive Company Disclosure Letter and the Investors will provide to the
Companies a complete and accurate copy of the definitive Investor Disclosure
Letter. For purposes of this Section 11.4, the "Review Deadline" shall mean (i)
11:59 p.m., Eastern Standard Time, on February 27, 1999 if the definitive
Company Disclosure Letter is delivered to counsel to the Investors prior to 9:00
a.m., Eastern Standard Time, on February 22, 1999 and (ii) 12:00 p.m., Eastern
Standard Time, on February 28, 1999 if the definitive Company Disclosure Letter
is delivered to counsel to the Investors after 9:00 a.m. but prior to 5:00 p.m.,
Eastern Standard Time, on February 22, 1999. This Agreement, the Registration
Rights Agreement and the Equity Commitment Letter shall become effective and
binding on the Investors and the Companies only if at or prior to the Review
Deadline (a) the Investors notify the Companies in writing that the definitive
Company Disclosure Letter is acceptable to them, (b) the Investors notify the
Companies in writing that the Investors have entered into separate transaction
support agreements with each of Xxxxx Xxxxxxx, Xxxxxx Xxxx, Xxxxxx Xxxx, Xxxx
Xxxxxx and Xxxxxxxx Xxxxxx evidencing the support of such individuals as
stockholders of the Companies and/or limited partners of the Operating
Partnerships for the transactions contemplated by this Agreement and (c) the
Investors shall have received reimbursement for $2.5 million of their expenses
to date in compliance with Section 6.3(b). The first date on which the
requirements of each of clauses (a), (b) and (c) of the previous sentence are
met shall be the "Effective Date"; PROVIDED, that, at their election, upon
written notice to the
69
Companies at or prior to the Review Deadline, the Investors may deem the
Effective Date to occur if only the requirements of clause (a), or clauses (a)
and (b), or clauses (a) and (c) are met within such period. The intent of this
Section 11.4 is that the Effective Date shall not occur unless the Investors and
the Companies have agreed on a definitive Company Disclosure Letter, and, in all
such events, any such agreement must have occurred (if at all) at or prior to
the Review Deadline. Notwithstanding the foregoing, the provisions of paragraph
2 of the Letter of Intent, dated as of December 15, 1998 and amended through the
date of this Agreement (the "Letter of Intent"), among the Companies and the
Investors shall continue in full force and effect until (i) 11:59 p.m., Eastern
Standard Time, on February 28, 1999 or (ii) if earlier, the Effective Date.
Unless and until the Effective Date shall have occurred, the provisions of
paragraph 3 of the Letter of Intent shall survive and continue in full force and
effect. If the Effective Date shall not occur, the provisions of paragraph 3 of
the Letter of Intent shall survive and continue in full force and effect.
Section 11.5 ENTIRE AGREEMENT; AMENDMENT. Other than as
provided in Section 11.4, this Agreement and the other Transaction Documents
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof, and except as provided in Section 11.4, the
Letter of Intent shall not survive the execution of this Agreement. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Companies and by Investors who have made commitments to purchase
at least two-thirds of the Shares. Notwithstanding the foregoing, any amendment,
waiver or other modification to this Agreement that would adversely affect any
Investor may be effected only with the approval of all of the Investors.
Section 11.6 NOTICES, ETC. All notices and other
communications provided for or permitted hereunder shall be made in writing by
hand delivery, telex, telecopier, or any courier guaranteeing overnight delivery
(i) if to the Investor, at the most current address given by the Investor to the
Companies by means of a notice given in accordance with the provisions of this
Section 11.5, which address initially is, with respect to the Investor as of the
date hereof, the address set forth next to Investor's name on the signature
pages hereof, with a copy to Xxxxxxx X. Xxxx, Esq., telecopier number (212)
735-2000, and with respect to each Investor who becomes such after the date
hereof, the address of such Investor in the stock records of the Companies, and
(ii) if to the Companies or the Operating Partnerships, at 0000 Xxxxxxxx
Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, telecopier number (214) 863-
70
1527, Attention: General Counsel, with a copy to Xxxxxxx X. Xxxxx, P.C.,
telecopier number (000) 000-0000. All such notices and communications shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt is confirmed,
if telecopied; and on the next business day, if timely delivered to a courier
guaranteeing overnight delivery.
Section 11.7 CERTAIN DEFINITIONS. As used herein, the
following terms shall have the meanings set forth below:
(a) "knowledge of the Companies" shall mean the knowledge of
any director or executive officer of the Companies and those individuals
identified on Section 11.7(a) of the Company Disclosure Letter, after due
inquiry;
(b) "beneficial ownership" shall have the meaning as such term
is used in Rule 13d-3 promulgated under the Exchange Act; and
(c) unless otherwise specified herein, references throughout
this Agreement to the "consent" of the Investors shall mean the consent of the
Investors who have made commitments to purchase at least two-thirds of the
Shares.
Section 11.8 DELAYS OR OMISSIONS. Except as expressly provided
herein, no delay or omission to exercise any right, power or remedy accruing to
the Companies, the Operating Partnerships or the Investors upon any breach or
default of any party under this Agreement, shall impair any such right, power or
remedy of the Companies, the Operating Partnerships or the Investors nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of the Companies, the
Operating Partnerships or the Investors of any breach or default under this
Agreement, or any waiver on the part of any such party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to the Companies, the Operating
Partnerships or the Investors shall be cumulative and not alternative.
Section 11.9 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which may be executed by only one of the
71
parties hereto, each of which shall be enforceable against the party
actuallyexecuting such counterpart, and all of which together shall constitute
one instrument.
Section 11.10 SEVERABILITY. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provisions; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
Section 11.11 TITLES AND SUBTITLES. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. The terms "affiliate"
and "associate" shall have the meanings ascribed to them in Rule 12b-2
promulgated under the Exchange Act.
Section 11.12 NO PUBLIC ANNOUNCEMENT. None of the Companies,
the Operating Partnerships, the Subsidiaries or the Investors shall make any
press release, public announcement or filing with any Governmental Entity
concerning the transactions contemplated by the Transaction Documents, except as
and to the extent that any such party shall be obligated to make any such
disclosure by this Agreement, by law or by the NYSE and then only after
consultation with the other regarding the basis of such obligation and the
content of such press release, public announcement or filing or as the parties
shall mutually agree. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by the Transaction
Documents shall be in the form heretofore agreed to by the parties.
Section 11.13 FURTHER ACTIONS; REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions hereof, each
of the parties agrees to use its reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by the Transaction Documents, including without
limitation (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from governmental or regulatory entities and the making
of all necessary registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
72
lawsuits or other legal proceedings, whether judicial or administrative,
challenging any of the Transaction Documents or the consummation of the
transactions contemplated thereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity or
any Restraint vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, the Transaction Documents; PROVIDED
that, in connection with the foregoing, the Companies and the Subsidiaries shall
reimburse the Investors for any costs and expenses incurred by them in
connection with the foregoing.
(b) In connection with and without limiting the foregoing, the
parties shall use reasonable efforts (i) to take all action necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to the Transaction Documents or any of the other transactions
contemplated hereby or thereby and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Transaction Documents or any
other transaction contemplated thereby, to take all action necessary to ensure
that the transactions contemplated by the Transaction Documents may be
consummated as promptly as practicable on the terms contemplated thereby and
otherwise to minimize the effect of such statute or regulation on the
transactions contemplated by the Transaction Documents.
Section 11.14 ENFORCEMENT OF AGREEMENT. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with its specific
terms or was otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions and other equitable remedies to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any of the Selected Courts, this being in addition to any
other remedy to which they are entitled at law or in equity. Any requirements
for the securing or posting of any bond with respect to such remedy are hereby
waived by each of the parties hereto.
73
IN WITNESS WHEREOF, each of the undersigned has caused the
foregoing Agreement to be executed under seal by one of its duly authorized
officers as of the date first above written.
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/Xxxx X. Xxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title:Chairman and Chief Executive Officer
Address: 0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
WYNDHAM INTERNATIONAL, INC.
By: /s/Xxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title:Chairman and Chief Executive Officer
Address: 0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
PATRIOT AMERICAN HOSPITALITY
PARTNERSHIP, L.P.
By: PAH GP, INC., its General Partner
By: /s/Xxxx X. Xxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title:Chairman and Chief Executive Officer
Address: 0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
WYNDHAM INTERNATIONAL OPERATING
PARTNERSHIP, L.P.
By: Wyndham International, Inc., its General
Partner
By: /s/Xxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title:Chairman and Chief Executive Officer
Address: 0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
[Remainder of page intentionally left blank]
INVESTORS:
APOLLO REAL ESTATE
INVESTMENT FUND III, L.P.
By: Apollo Real Estate Advisors III, L.P.,
its General Partner
By: Apollo Real Estate Capital
Advisors III, Inc., its General Partner
By: /s/Xxxxxxx Xxxxxxxxxxxxx
------------------------------------------
Name: Xxxxxxx Xxxxxxxxxxxxx
Title:Vice President
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors, IV, L.P., its General
Partner
By: Apollo Capital Management IV, Inc.,
its General Partner
By: /s/ Xxxx Xxxxx
------------------------------------------
Name: Xxxx Xxxxx
Title: Vice President, Apollo Capital Mgmt., Inc.
Address: 1301 Avenue of the Americas
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Number of Shares to Be Purchased: 4,750,000
Investor Percentage: 47.5
XXXXXX X. XXX EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC
By:/s/Xxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Managing Director
Address: 00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Number of Shares to Be Purchased: 3,243,632
Investor Percentage: 32.43632
XXXXXX X. XXX FOREIGN FUND IV, L.P.
By: THL Equity Advisors IV, LLC
By:/s/Xxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Managing Director
Address: 00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Number of Shares to Be Purchased: 1,179,915
Investor Percentage: 1.179915
XXXXXX X. XXX CHARITABLE
INVESTMENT L.P.
By: THL Equity Advisors IV, LLC
By: /s/Xxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Managing Director
Address: 00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Number of Shares to Be Purchased: 19,275
Investor Percentage: 0.19275
THL-CCI LIMITED PARTNERSHIP
By: THL Equity Advisors IV, LLC
By: /s/Xxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Managing Director
Address: 00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Number of Shares to Be Purchased: 12,529,330
Investor Percentage: 12.529330
BEACON CAPITAL PARTNERS, L.P.
By: Beacon Capital Partners, Inc., its General
Partner
By: /s/Xxxx X. Xxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Senior Vice President
Address: 0 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Number of Shares to Be Purchased: 1,500,000
Investor Percentage: 15
STRATEGIC REAL ESTATE INVESTMENTS I,
L.L.C.
By: /s/Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Manager
Address: 0000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Number of Shares to Be Purchased: 250,000
Investor Percentage: 2.5
