<PAGE>
As filed with the Securities and Exchange Commission on July 8, 1998
Registration Statement Nos. 333- , 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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REGISTRATION STATEMENT
on Form S-3 Under
The Securities Act of 1933
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<TABLE>
<S> <C>
PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter) (Exact Name of Registrant as Specified in its Charter)
DELAWARE DELAWARE
(State or Other Jurisdiction of Incorporation or (State or Other Jurisdiction of Incorporation or
Organization) Organization)
94-0358820 94-2878485
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
1950 Stemmons Freeway 1950 Stemmons Freeway
Suite 6001 Suite 6001
Dallas, TX 75207 Dallas, TX 75207
(214) 863-1000 (214) 863-1000
(Address, Including Zip Code and Telephone (Address, Including Zip Code and Telephone
Number, Including Area Code, of Registrant's Number, Including Area Code, of Registrant's
Principal Executive Office) Principal Executive Office)
PAUL A. NUSSBAUM JAMES D. CARREKER
Chairman of the Board and Chief Executive Officer Chairman of the Board and Chief Executive Officer
Patriot American Hospitality, Inc. Wyndham International, Inc.
1950 Stemmons Freeway 1950 Stemmons Freeway
Suite 6001 Suite 6001
Dallas, TX 75207 Dallas, TX 75207
(214) 863-1000 (214) 863-1000
(Name, Address, Including Zip Code and Telephone (Name, Address, Including Zip Code and Telephone
Number, Including Area Code, of Agent for Service) Number, Including Area Code, of Agent for Service)
</TABLE>
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Copies to:
GILBERT G. MENNA, P.C.
KATHRYN I. MURTAGH, ESQ.
Goodwin, Procter & Hoar LLP
Exchange Place Boston, MA 02109-2881
(617) 570-1000
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this registration statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box./ /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box./x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box./ /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Shares Amount Aggregate Aggregate Amount Of
To Be To Be Price Per Offering Registration
Registered Registered Unit (1) Price (1) Fee
<S> <C> <C> <C> <C>
Common Stock, 6,695,000 $22,875 $153,148,125 $45,179
par value $.01 per Shares
share, of Patriot
American Hospitality,
Inc. paired with
Common Stock, par
value $.01 per
share, of Wyndham
International, Inc.
</TABLE>
(1) This estimate is based on the average of the high ($23.50) and low ($22.25)
sales prices on the New York Stock Exchange on July 1, 1998 of
the common stock of Patriot American Hospitality, Inc., which is paired
with and trades as a unit with common stock of Wyndham International, Inc.
This estimate is made pursuant to rule 457(c) under the Securities Act of
1933, as amended, and is made solely for purposes of determining the
registration fee.
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 8, 1998
Patriot American Hospitality, Inc.
6,695,000 Shares of Common Stock
Wyndham International, Inc.
6,695,000 Shares of Common Stock
For purposes of this Prospectus, unless the context otherwise requires, (i)
the term "Corporation" includes Patriot American Hospitality, Inc., a Delaware
corporation, PAH GP, Inc. ("PAH GP"), PAH LP, Inc. ("PAH LP"), each of which is
a Delaware corporation and a wholly-owned subsidiary of Patriot American
Hospitality, Inc., a Delaware corporation, Patriot American Hospitality
Partnership, L.P., a Virginia limited partnership (the "Realty Partnership"),
and their respective subsidiaries, (ii) the term "Operating Company" includes
Wyndham International, Inc. (formerly known as Patriot American Hospitality
Operating Company), a Delaware corporation, and Patriot American Hospitality
Operating Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership" and, together with the Realty Partnership, the "Partnerships"), and
their respective subsidiaries, and (iii) the term "Companies" includes the
Corporation and the Operating Company.
Shares of common stock ("Corporation Common Stock"), $.01 par value, of the
Corporation and shares of common stock ("Operating Company Common Stock"), $.01
par value, of the Operating Company are "paired" and trade as units consisting
of one share of Corporation Common Stock and one share of Operating Company
Common Stock (the "Paired Common Stock"). All of the shares of Paired Common
Stock offered hereby are being registered for the account of certain stockholder
of the Companies named herein (the "Selling Stockholder"). See "Plan of
Distribution" and "Selling Stockholder." The Selling Stockholder, directly or
through agents, dealers or underwriters designated from time to time, may sell
all or a portion of the shares of Paired Common Stock offered hereby from time
to time on terms to be determined at the time of sale. To the extent required,
the specific shares of Paired Common Stock to be sold, the name of the Selling
Stockholder, the respective purchase prices and public offering prices, the
names of any such agent, dealer or underwriter, and any applicable commissions
or discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement. See "Plan of Distribution." The Selling
Stockholder reserves the sole right to accept and, together with such Selling
Stockholder's agents, dealers or underwriters from time to time, to reject, in
whole or in part, any proposed purchase of shares of Paired Common Stock to be
made directly or through agents, dealers or underwriters.
The aggregate proceeds to the Selling Stockholder from the sale of the
shares of Paired Common Stock offered hereby (the "Offering") will be the
purchase price of the shares of Paired Common Stock sold less the aggregate
agents' commissions and underwriters' discounts, if any, and other expenses of
issuance and distribution not borne by the Companies. The Companies will pay
all of the expenses of the Offering other than agents' commissions and
underwriters' discounts with respect to the shares of Paired Common Stock
offered hereby, and transfer taxes, if any. The Companies will not receive any
proceeds from the sale of the shares of Paired Common Stock offered hereby by
the Selling Stockholder.
The Selling Stockholder and any agents, dealers or underwriters that
participate with the Selling Stockholder in the distribution of the shares of
Paired Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), in which case any
commissions received by such agents, dealers or underwriters and any profit on
the resale of the shares of Paired Common Stock purchased by them may be deemed
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for indemnification arrangements between the Companies and the
Selling Stockholder.
The Paired Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "PAH." On July 6, 1998, the reported closing sale
price of the Paired Common Stock on the NYSE was $24.00 per share.
See "Risk Factors" beginning on page 3 for certain factors relevant to an
investment in the shares of Paired Common Stock.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is ______, 1998
<PAGE>
AVAILABLE INFORMATION
The Companies have filed with the Securities and Exchange Commission (the
"SEC" or "Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act, with respect to the Securities. This
Prospectus, which constitutes part of the Registration Statement, omits certain
of the information contained in the Registration Statement and the exhibits
thereto on file with the Commission pursuant to the Securities Act and the rules
and regulations of the Commission thereunder. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Registration Statement, including exhibits thereto, may be
inspected and copies obtained from the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Companies file
information electronically with the Commission, and the Commission maintains a
Web Site that contains reports, proxy and information statements and other
information regarding registrants (including the Companies) that file
electronically with the Commission. The address of the Commission's Web Site is
(http://www.sec.gov).
The Companies are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports and proxy statements and other information
with the Commission. Such reports, proxy statements and other information can
be inspected and copied at the locations described above. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. In addition, reports, proxy and information
statements and other information concerning the Companies can be inspected at
the offices of the New York Stock Exchange (the "NYSE"), 20 Broad Street, New
York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
Corporation and Operating Company (Nos. 001-09319, 001-09320)
1. Annual Report on Form 10-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. for the fiscal year ended December 31, 1997;
2. Quarterly Report on Form 10-Q of Patriot American Hospitality, Inc.
and Wyndham International, Inc. for the three months ended March 31, 1998;
3. Current Reports on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. dated: (i) July 1, 1997 (filed July 11, 1997); (ii)
July 15, 1997 (filed July 21, 1997); (iii) July 22, 1997 (filed July 22, 1997);
(iv) September 17, 1997 (filed September 17, 1997); (v) September 30, 1997, as
amended (filed October 14, 1997 and October 28, 1997); (vi) September 30, l997
(filed November 12, 1997); (vii) December 2, 1997 (filed December 4, 1997);
(viii) December 10, 1997 (filed December 10, 1997); (ix) January 5, 1998 (filed
January 13, 1998); (x) February 9, 1998 (filed February 12, 1998); (xi) March
23, 1998 (filed March 30, 1998); (xii) April 2, 1998 (filed April 8, 1998);
(xiii) April 20, 1998 (filed April 22, 1998); (xiv) May 27, 1998, as amended
(filed May 27, 1998 and May 28, 1998); and (xv) June 2, 1998 (filed June 17,
1998); and
4. The description of the paired shares of Corporation Common Stock and
Operating Company Common Stock contained or incorporated by reference in Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Registration
Statement on Form 8-A, including any amendments thereto.
Patriot American Hospitality, Inc. (Patriot) (No. 001-13898)
1. Current Reports on Form 8-K of Patriot American Hospitality, Inc.,
dated: (i) January 16, 1997, as amended (filed January 31, 1997, February 21,
1997, April 8, 1997, April 9, 1997 and May
<PAGE>
19, 1997); (ii) February 24, 1997 (filed March 3, 1997); (iii) April 14,
1997, as amended (filed April 17, 1997 and April 18, 1997); and (iv) June 6,
1997 (filed June 7, 1997).
All other documents filed with the Commission by the Corporation or the
Operating Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination of
the offering of the Securities are to be incorporated herein by reference and
such documents shall be deemed to be a part hereof from the date of filing of
such documents. Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents. Written requests
should be mailed to 1950 Stemmons Freeway, Suite 6001, Dallas, TX 75207,
Attention: Shareholder Relations (Telephone No. (214) 863-1000).
This Prospectus and the documents incorporated herein by reference contain
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Companies' actual results could differ materially from those
set forth in the forward-looking statements. Certain factors that might cause
such a difference are discussed in the section entitled "Risk Factors" below.
2
<PAGE>
RISK FACTORS
Real Estate Investment Trust Tax Risks
The Corporation operates in a manner designed to permit it to qualify as a
real estate investment trust (a "REIT") under the Internal Revenue Code of 1986,
as amended (the "Code"), but no assurance can be given that the Corporation has
operated or will be able to continue to operate in a manner so as to qualify or
remain so qualified. Qualification as a REIT involves the application of highly
technical and complex provisions of the Code, for which there are only limited
judicial or administrative interpretations. The complexity of these provisions
is greater in the case of a REIT that owns hotels and leases them to an
operating company with which its stock is paired. Qualification as a REIT also
involves the determination of various factual matters and circumstances not
entirely within the Corporation's control. Qualification of the Corporation as
a REIT also generally depends on the REIT qualification of Patriot American
Hospitality, Inc., a Virginia corporation ("Patriot"), for periods prior to July
1, 1997, at which time the Corporation (formerly known as California Jockey
Club) merged with Patriot, with the Corporation being the surviving corporation
(the "Cal Jockey Merger").
If the Corporation fails to qualify as a REIT, the Corporation will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at corporate rates. In addition, unless entitled to
relief under certain statutory provisions and subject to the discussion below
regarding the impact if the Corporation failed to qualify as a REIT in 1983, the
Corporation also will be disqualified from re-electing REIT status for the four
taxable years following the year during which qualification is lost. Failure to
qualify as a REIT would reduce the net earnings of the Corporation available for
distribution to stockholders because of the additional tax liability to the
Corporation for the year or years involved. In addition, distributions would no
longer be required to be made. To the extent that distributions to stockholders
would have been made in anticipation of the Corporation's qualifying as a REIT,
the Corporation might be required to borrow funds or to liquidate certain of its
investments to pay the applicable tax. The failure to qualify as a REIT would
also constitute a default under certain debt obligations of the Corporation.
Exemption from Anti-Pairing Rules; Risks of Adverse Legislation
The Corporation's ability to qualify as a REIT is dependent upon its
continued exemption from the anti-pairing rules of Section 269B(a)(3) of the
Code. Section 269B(a)(3) of the Code would ordinarily prevent a corporation
from qualifying as a REIT if its stock is paired with the stock of a corporation
whose activities are inconsistent with REIT status, such as the Operating
Company. The "grandfathering" rules governing Section 269B generally provide,
however, that Section 269B(a)(3) does not apply to a paired REIT if the REIT and
its paired operating company were paired on June 30, 1983. There are, however,
no judicial or administrative authorities interpreting the application of this
grandfathering rule in the context of a merger into a grandfathered REIT or
otherwise. Moreover, although the Corporation's and the Operating Company's
respective predecessors, California Jockey Club ("Cal Jockey") and Bay Meadows
Operating Company ("Bay Meadows"), were paired on June 30, 1983, if for any
reason Cal Jockey failed to qualify as a REIT in 1983 the benefit of the
grandfathering rule would not be available to the Corporation and the
Corporation would not qualify as a REIT for any taxable year.
The Corporation's exemption from the anti-pairing rules could be lost,
or its ability to utilize the paired structure could be revoked or limited,
as a result of future legislation. In this regard, on March 26, 1998,
William Archer, Chairman of the Ways and Means Committee of the Finance
Committee of the United States House of Representatives, and William W. Roth,
Jr., Chairman of the Finance Committee of the United States Senate,
introduced identical legislation in both the House of Representatives and the
Senate that would freeze the grandfathered status of paired share REITs such
as Patriot. In June 1998, the respective Committees of the House of
Representatives and the Senate recommended including substantially similar
legislation (the "Proposed Legislation") in the final version of the Internal
Revenue Service Restructuring and Reform Act of 1998 (the "IRS Reform Act").
It is anticipated that the President will sign the IRS Reform Act if presented
to him in its present form.
3
<PAGE>
Under the Proposed Legislation, the anti-pairing rules provided in the
Code generally would apply for certain of the REIT qualification requirements
to real property interests acquired directly or indirectly after March 26,
1998 by the Corporation or the Operating Company, or a subsidiary or
partnership in which a 10% or greater interest is owned by the Corporation or
the Operating Company (collectively, the "REIT Group"), unless (i) the real
property interests are acquired pursuant to a written agreement which is
binding on March 26, 1998 and all times thereafter or (ii) the acquisition of
such real property interests was described in a public announcement or in a
filing with the Commission on or before March 26, 1998. In addition, the
Proposed Legislation provides that a property held by the Corporation or the
Operating Company that is not subject to the anti-pairing rules would become
subject to such rules in the event of an improvement placed in service after
December 31, 1999 that changes the use of the property and the cost of which
is greater than 200 percent of (x) the undepreciated cost of the property
(prior to the improvement) or (y) in the case of property acquired where
there is a substituted basis, the fair market value of the property on the
day it was acquired by the Corporation and the Operating Company. There is
an exception for improvements placed in service before January 1, 2004
pursuant to a binding contract in effect as of December 31, 1999 and at all
times thereafter.
The enactment of the Proposed Legislation would generally permit the
Corporation to continue its current method of operations with respect to its
existing assets, including the assets acquired in the Interstate Merger, the
Arcadian Acquisition and the CHCI Merger. However, the legislation would
require Patriot to modify its method of operations with respect to newly
acquired assets. Patriot has been considering various alternatives, including
a possible restructuring of its operations, in response to the legislative
proposals. Patriot intends to take steps to minimize the impact of any
legislation that is enacted. However, if Patriot fails to or is unable to
take such steps, the legislation could have a material adverse effect on the
Companies.
Potential Reallocation of Income
Due to the paired share structure, the Corporation, the Operating Company,
the Realty Partnership, the Operating Partnership, and their respective
subsidiary entities are and will be controlled by the same interests. As a
result, the Internal Revenue Service (the "IRS") could, pursuant to Section 482
of the Code, seek to distribute, apportion or allocate gross income, deductions,
credits or allowances between or among them if it determines that such
distribution, apportionment or allocation is necessary in order to prevent
evasion of taxes or to clearly reflect income. The Corporation would have to
take into account any such adjustments in determining whether it qualified as a
REIT. As a result, such adjustments could affect the Corporation's ability to
qualify as a REIT.
Adverse Effects of REIT Minimum Distribution Requirements
In order to qualify as a REIT, the Corporation is generally required each
year to distribute to its stockholders at least 95% of its taxable income
(excluding any net capital gain). In addition, if the Corporation acquires
assets from a taxable C corporation in a merger or other tax-free transaction
(including the Wyndham Acquisition and the Interstate Merger (as defined
below)), and during the ten-year period following such acquisition the
Corporation disposes of any such assets, then the Corporation will be required
to distribute at
4
<PAGE>
least 95% of the amount of any "built-in gain" attributable to such assets
(determined as of the date of the acquisition of the assets) that the
Corporation recognizes in the disposition, less the amount of any tax paid with
respect to such recognized built-in gain. See "Certain Federal Income Tax
Considerations-- REIT Qualification--Built-In Gain Tax." The Corporation is
subject to a 4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by it with respect to any calendar year are less than the sum
of (i) 85% of its ordinary income for that year, (ii) 95% of its capital gain
net income for that year, and (iii) 100% of its undistributed income from prior
years.
Differences in timing between the recognition of taxable income and the
receipt of cash available for distribution and the seasonality of the hotel
industry could require the Corporation to borrow funds on a short-term basis to
meet the 95% distribution requirement or avoid the nondeductible excise tax.
Distributions by the Companies will be determined by their respective Board
of Directors and depend on a number of factors, including the amount of cash
available for distribution and the financial condition of the Companies, any
decision by either Board of Directors to reinvest funds rather than to
distribute such funds, capital expenditures, the annual distribution
requirements under the REIT provisions of the Code (in the case of the
Corporation) and such other factors as either Board of Directors deems relevant.
For federal income tax purposes, distributions paid to stockholders may consist
of ordinary income, capital gains (in the case of the Corporation), nontaxable
return of capital, or a combination thereof. The Companies will provide
stockholders with annual statements as to the taxability of distributions.
Accumulated Earnings and Profits
On January 5, 1998, the Corporation consummated its acquisition by merger
(the "Wyndham Acquisition") of Wyndham Hotel Corporation ("Wyndham") through
which the Corporation acquired Wyndham's portfolio of owned and leased hotels
and management and franchise agreements. See "The Companies--The
Corporation."
On June 2, 1998, the Corporation consummated its acquisition by merger (the
"Interstate Merger") of Interstate Hotels Company ("Interstate"), through which
the Corporation acquired Interstate's portfolio of owned and leased hotels and
management and franchise agreements.
To maintain its qualification as a REIT subsequent to the Wyndham
Acquisition and the Interstate Merger, the Corporation is required to distribute
with respect to the Corporation's taxable year ending December 31, 1998, the
earnings and profits of Wyndham at the time of the Wyndham Acquisition and the
earnings and profits of Interstate at the time of the Interstate Merger (as
determined for federal income tax purposes). Any such distributions will be
taken into account by the Corporation's U.S. Stockholders (as hereinafter
defined) as ordinary income and will not be eligible for the dividends received
deduction generally available for corporations. See "Certain Federal Income Tax
Considerations--Federal Income Taxation of Holders of Paired Shares."
If the IRS were to determine that Wyndham's or Interstate's actual earnings
and profits exceeded the amount distributed, the Corporation could be
disqualified as a REIT.
Failure to Manage Rapid Growth and Integrate Operations; New Businesses
The Corporation is currently experiencing a period of rapid growth. The
Companies are or will be responsible for the management and operation of several
new businesses, including direct hotel management, branding and franchising and
thoroughbred racing, which were previously not part of the operations of
Patriot. In addition, the Companies may acquire other new businesses in the
future. The integration of departments, systems and procedures presents a
significant management challenge, and the failure to integrate new acquisitions
into existing management and operating structures could have a material adverse
effect on the results of operations and financial condition of the Corporation
and the Operating Company.
5
<PAGE>
Substantial Debt Obligations; No Limits on Indebtedness; Variable Rate Debt
The Companies have obtained an unsecured revolving line of credit that
expires on July 18, 2000 (the "Revolving Credit Facility") and a series of term
loans that expire beginning January 31, 1999 through March 31, 2003 (the "Term
Loans") from certain lenders. As of June 23, 1998, the Companies' combined debt
was approximately $3.6 billion and the Companies' ratio of combined debt to
total market capitalization was approximately 49.1%. The Companies also may
borrow additional amounts from the same or other lenders in the future, may
assume debt in connection with acquisitions, or may issue corporate debt
securities in public or private offerings. The Companies' organizational
documents do not limit the amount of indebtedness the Companies may incur.
Further, substantially all of the Companies' combined debt bears interest at a
variable rate. Economic conditions could result in higher interest rates, which
could increase debt service requirements on variable rate debt and could
adversely affect the Companies' ability to make distributions.
There can be no assurance that the Companies will be able to meet their
debt service obligations and, to the extent that they cannot, the Companies risk
the loss of some or all of their assets, including the hotels. Adverse economic
conditions could cause the terms on which borrowings become available to be
unfavorable. In such circumstances, if the Corporation or the Operating Company
is in need of funds to repay indebtedness in accordance with its terms or
otherwise, it could be required to liquidate one or more investments in
properties at times which may not permit realization of the maximum return on
such investments.
The foregoing risks associated with debt obligations of the Companies may
inhibit the ability of the Companies to raise capital in both the public and
private markets.
Potential Conflicts of Interest Between The Corporation and the Operating
Company
The Corporation and the Operating Company are separate corporate entities
with separate Boards of Directors and executive officers. Although the
Companies have several of the same directors, a majority of the directors and
officers of each of the Corporation and the Operating Company do not serve as
directors or officers of the other company. In addition, the Corporation and
the Operating Company generally have different employees, separate creditors and
are subject to different state law licensing and regulatory requirements. Since
the consummation of the Wyndham Acquisition on January 5, 1998, the Companies
have also had separate Chairmen of the Board and Chief Executive Officers. As a
result, the interests of the Corporation Board and the Operating Company Board
may conflict, and such conflicts may possibly rise to disputes between the
Companies. The Corporation and the Operating Company have entered into the
Cooperation Agreement, dated December 18, 1997, between the Corporation and the
Operating Company (the "Cooperation Agreement"), which the Companies believe
will help decrease the possibility of disagreements. There can be no assurance,
however, that such disagreements will not arise. In addition, there can be no
assurance that the interests of the officers and/or directors of one company who
also serve as officers and/or directors of the other company will not conflict
with their interests as officers and/or directors of such other company or that
their actions as officers and/or directors of one company will not adversely
affect the interests of the other company. Any such disagreements or conflicts
could have a material adverse effect on the results of operations of the
Corporation and the Operating Company.
Dependence on Lessees and Payments under the Participating Leases
The Corporation leases substantially all of its existing hotels to the
Operating Company and to lessees (the "Lessees") pursuant to separate
participating leases (the "Participating Leases"). The Corporation's ability to
make distributions to stockholders depends primarily upon the ability of the
Operating Company or the Lessees to make rent payments under the Participating
Leases (which is dependent primarily on the Operating Company's and the Lessees'
ability to generate sufficient revenues from those hotels which are leased to
them). A failure or delay to make such payments may be caused by reductions in
revenue from such hotels or in the net operating income of the Operating Company
or the Lessees or otherwise. Any failure or delay by the Operating Company or
the Lessees in making rent payments may adversely affect the Corporation's
ability to make distributions to stockholders.
6
<PAGE>
Lack of Control Over Operations of Certain Hotels Leased or Managed by Third
Parties
The Corporation is dependent on the ability of the Operating Company, the
Lessees and the hotel management entities that manage the hotels (the
"Operators") to manage the operations of hotels that are leased or operated by
them. Under the terms of the Participating Leases, the Corporation has the
authority to review annual budgets for the hotels which are leased to the
Lessees and to approve certain items. However, the Corporation is unable to
directly implement strategic business decisions with respect to the setting of
room rates, repositioning of a franchise, redevelopment of food and beverage
operations and certain similar decisions with respect to such hotels.
Hotel Industry Risks
Operating Risks
The primary businesses of the Companies are buying, selling, leasing and
managing hotels, which are subject to operating risks common to the hotel
industry. These risks include, among other things, (i) competition for guests
from other hotels, a number of which may have greater marketing and financial
resources and experience than the Companies and the Lessees, (ii) increases in
operating costs due to inflation and other factors, which increases may not have
been offset in past years, and may not be offset in future years, by increased
room rates, (iii) dependence on business and commercial travelers and tourism,
which business may fluctuate and be seasonal, (iv) increases in energy costs and
other expenses of travel, which may deter travelers and (v) adverse effects of
general and local economic conditions. These factors could adversely affect the
ability of the Lessees and the Operating Company to generate revenues and to
make lease payments and therefore the Corporation's ability to make
distributions to stockholders.
The Companies are also subject to the risk that in connection with the
acquisition of hotels and hotel operating companies it may not be possible to
transfer certain operating licenses, such as food and beverage licenses, to the
Lessees, the Operators or the Operating Company, or to obtain new licenses in a
timely manner in the event such licenses cannot be transferred. Although hotels
can provide alcoholic beverages under interim licenses or licenses obtained
prior to the acquisition of these hotels, there can be no assurance that these
licenses will remain in effect until the Corporation or the Operating Company
obtains new licenses or that new licenses will be obtained. The failure to have
alcoholic beverages licenses or other operating licenses could adversely affect
the ability of the affected Lessees, Operators or the Operating Company to
generate revenues and make lease payments to the Corporation.
Operating Costs and Capital Expenditures; Hotel Renovation
Hotels, in general, have an ongoing need for renovations and other capital
improvements, particularly in older structures, including periodic replacement
or refurbishment of furniture, fixtures and equipment ("F, F & E"). Under the
terms of the Participating Leases, the Corporation is obligated to establish a
reserve to pay the cost of certain capital expenditures at its hotels and pay
for periodic replacement or refurbishment of F, F & E. If capital expenditures
exceed the Corporation's expectations, the additional cost could have an adverse
effect on the Corporation's cash available for distribution. In addition, the
Corporation may acquire hotels where significant renovation is either required
or desirable. Renovation of hotels involves certain risks, including the
possibility of environmental problems, construction cost overruns and delays,
uncertainties as to market demand or deterioration in market demand after
commencement of renovation and the emergence of unanticipated competition from
other hotels.
Competition for Hotel Acquisition Opportunities
The Companies may be competing for investment opportunities with entities
that have substantially greater financial resources. These entities may
generally be able to accept more risk than the Companies can prudently manage,
including risks with respect to the creditworthiness of a hotel operator or the
geographic proximity of its investments. Competition may generally reduce the
number of suitable investment opportunities offered to the Companies and
increase the bargaining power of property owners seeking to sell.
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Additionally, the Companies' ability to acquire additional hotels could be
negatively impacted by the paired share ownership structure because hotel
management companies, franchisees and others who historically approached Patriot
with acquisition opportunities in hopes of establishing lessee or management
relationships may not do so in the future out of concern that the Corporation
will rely primarily on the Operating Company to lease and/or manage the acquired
properties. Such persons may instead provide such acquisition opportunities to
hotel companies that will allow them to manage the properties following the
sale. This could have a negative impact on the Companies' acquisition
activities in the future.
Seasonality
The hotel industry is seasonal in nature. Revenues at certain hotels are
greater in the first and second quarters of a calendar year and at other hotels
in the second and third quarters of a calendar year. Seasonal variations in
revenue at hotels may cause quarterly fluctuations in the operating revenues of
the Operating Company and the lease revenues of the Corporation.
Real Estate Investment Risks
General Risks
The Companies' investments will be subject to varying degrees of risk
generally incidental to the ownership of real property. The underlying value
of the Corporation's real estate investments and the Companies' income and
ability to make distributions to its stockholders will be dependent upon the
ability of the Lessees, the Operators and the Operating Company to operate
the Corporation's hotels in a manner sufficient to maintain or increase
revenues and to generate sufficient income in excess of operating expenses to
make rent payments under their leases with the Corporation. Income from the
Corporation's hotels may be adversely affected by changes in national
economic conditions, changes in local market conditions due to changes in
general or local economic conditions and neighborhood characteristics,
changes in interest rates and in the availability, cost and terms of mortgage
funds, the impact of present or future environmental legislation and
compliance with environmental laws, the ongoing need for capital
improvements, particularly in older structures, changes in real estate tax
rates and other operating expenses, adverse changes in governmental rules and
fiscal policies, adverse changes in zoning laws, civil unrest, acts of God,
including earthquakes and other natural disasters (which may result in
uninsured losses), acts of war and other factors which are beyond the control
of the Companies.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of the
Corporation to vary its portfolio in response to changes in economic and other
conditions will therefore be limited. If the Corporation must sell an
investment, there can be no assurance that the Corporation will be able to
dispose of it in the time period it desires or that the sales price of any
investment will equal or exceed the amount of the Corporation's investment.
Property Taxes
The Companies' hotels and racing facilities are subject to real property
taxes. The real property taxes on hotel properties in which the Corporation
invests as well as the Corporation's racing facilities may increase or decrease
as property tax rates change and as the value of the properties are assessed or
reassessed by taxing authorities. If property taxes increase, the Companies'
ability to make distributions to its stockholders could be adversely affected.
Consents of Ground Lessor Required for Sale of Certain Hotels
Certain of the Corporation's hotels and the land upon which the Bay Meadows
Racecourse (the "Racecourse") is situated are subject to ground leases with
third party lessors. In addition, the Corporation may acquire hotels in the
future that are subject to ground leases. Any proposed sale of a property that
is subject to a ground lease by the Corporation or any proposed assignment of
the Corporation's leasehold interest in the ground lease may require the consent
of third party lessors. As a result, the Corporation may not be able
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to sell, assign, transfer or convey its interest in any such property in the
future absent the consent of such third parties, even if such transaction may be
in the best interests of the stockholders.
Environmental Matters
The operating costs of the Companies may be affected by the obligation to
pay for the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of complying with future legislation. Under
various federal, state and local environmental laws, ordinances and regulations,
a current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances on, under, or
in such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. In addition, the presence of hazardous or toxic substances,
or the failure to remediate such property properly, may adversely affect the
owner's ability to borrow by using such real property as collateral. Persons
who arrange for the transportation, disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment facility, whether or not such facility
is or ever was owned or operated by such person. Certain environmental laws and
common law principles could be used to impose liability for releases of
hazardous materials, including asbestos-containing materials ("ACMs"), into the
environment, and third parties may seek recovery from owners or operators of
real properties for personal injury associated with exposure to released ACMs or
other hazardous materials. Environmental laws may also impose restrictions on
the manner in which a property may be used or transferred or in which businesses
may be operated, and these restrictions may require expenditures. In connection
with the ownership and operation of any of the Corporation's hotels, the
Companies, the Lessees or the Operators may be potentially liable for any such
costs. The cost of defending against claims of liability or remediating
contaminated property and the cost of complying with environmental laws could
materially adversely affect the Corporation's results of operations and
financial condition. Phase I environmental site assessments ("ESAs") have been
conducted at substantially all of the Corporation's hotels and the Racecourse by
qualified independent environmental engineers. The purpose of Phase I ESAs is
to identify potential sources of contamination for which any of the
Corporation's hotels or the Racecourse may be responsible and to assess the
status of environmental regulatory compliance. The ESAs have not revealed any
environmental liability or compliance concerns that the Corporation believes
would have a material adverse effect on its business, assets, results of
operations or liquidity, nor is the Corporation aware of any such liability or
concerns. Nevertheless, it is possible that these ESAs did not reveal all
environmental liabilities or compliance concerns or that material environmental
liabilities or compliance concerns exist of which the Corporation is currently
unaware. The Corporation has not been notified by any governmental authority,
and has no other knowledge of, any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental substances in
connection with any of the hotels or the Racecourse.
Uninsured and Underinsured Losses
Each of the Participating Leases specifies comprehensive insurance to be
maintained on each of the applicable leased hotels, including liability, fire
and extended coverage. The Corporation believes such specified coverage is of
the type and amount customarily obtained for or by an owner of hotels. Leases
for subsequently acquired hotels (including those leased to the Operating
Company) will contain similar provisions. However, there are certain types of
losses, generally of a catastrophic nature, such as earthquakes and floods, that
may be uninsurable or not economically insurable. The Board of Directors and
management of each of the Companies will use their discretion in determining
amounts, coverage limits and deductibility provisions of insurance, with a view
to maintaining appropriate insurance coverage on the investments of the
Corporation or the Operating Company, as the case may be, at a reasonable cost
and on suitable terms. This may result in
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insurance coverage that, in the event of a substantial loss, would not be
sufficient to pay the full current market value or current replacement cost of
the lost investment of the Corporation or the Operating Company, as the case may
be. Inflation, changes in building codes and ordinances, environmental
considerations, and other factors also might make it infeasible to use insurance
proceeds to replace the property after such property has been damaged or
destroyed. Under such circumstances, the insurance proceeds received by the
Corporation or the Operating Company might not be adequate to restore its
economic position with respect to such property.
Acquisition and Development Risks
The Companies currently intend to pursue acquisitions of additional hotels
and hotel operating companies and, under appropriate circumstances, may pursue
development opportunities. Acquisitions entail risks that such acquired hotels
or hotel operating companies will fail to perform in accordance with
expectations and that estimates of the cost of improvements necessary to market,
acquire and operate properties will prove inaccurate as well as general risks
associated with any new real estate or operating company acquisition. In
addition, hotel development is subject to numerous risks, including risks of
construction delays or cost overruns that may increase project costs, new
project commencement risks such as receipt of zoning, occupancy and other
required governmental approvals and permits and the incurrence of development
costs in connection with projects that are not pursued to completion. The fact
that the Corporation generally must distribute 95% of its ordinary taxable
income in order to maintain its qualification as a REIT may limit the
Corporation's ability to rely upon lease income from its hotels or subsequently
acquired properties to finance acquisitions or new developments. As a result,
if debt or equity financing were not available on acceptable terms, further
acquisitions or development activities might be curtailed or the Corporation's
cash available for distribution might be adversely affected.
Dependence on Management Contracts
Management contracts are acquired, terminated, renegotiated or converted to
franchise agreements in the ordinary course of the Companies' business. While,
as of June 23, 1998, the average remaining term of the Companies' management
contracts was approximately 13 years, these management contracts generally may
be terminated by the owner of the hotel property if the hotel manager fails to
meet certain performance standards, if the property is sold to a third party, if
the property owner defaults on indebtedness encumbering the property and/or upon
a foreclosure of the property. Other grounds for termination of the Companies'
upscale hotel management contracts include a hotel owner's election to close a
hotel and certain business combinations involving the Companies in which the
Companies' name or current management team does not survive.
There can be no assurance that the Companies will be able to replace
terminated management contracts, or that the terms of renegotiated or converted
contracts will be as favorable as the terms that existed before such
renegotiation or conversion. The Companies also will be subject to the risk of
deterioration in the financial condition of a hotel owner and such owner's
ability to pay management fees to the Companies. In addition, in certain
circumstances, the Companies may be required to make loans to or capital
investments or advances in hotel properties in connection with management
contracts. A material deterioration in the operating results of one or more of
these hotel properties and/or a loss of the related management contracts could
adversely affect the value of the Companies' investment in such hotel
properties.
Risks of Operating Hotels Under Franchise or Brand Affiliations
Certain of the Corporation's hotels are operated under franchise or brand
affiliations. In addition, hotels in which the Corporation subsequently invests
may be operated pursuant to franchise or brand affiliations. The continuation
of the franchise licenses relating to the franchised hotels (the "Franchise
Licenses") is subject to specified operating standards and other terms and
conditions. The continued use of a brand is generally contingent upon the
continuation of the management agreement related to that hotel with the branded
Operator. Franchisors typically inspect licensed properties periodically to
confirm adherence to operating standards. Action on the part of any of the
Companies, the Lessees or the Operators could result in a breach of such
standards or other terms and conditions of the Franchise Licenses and could
result in the loss or cancellation of a Franchise License. It is possible that
a franchisor could condition the continuation of a Franchise License
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on the completion of capital improvements which the Corporation's Board of
Directors determines are too expensive or otherwise unwarranted in light of
general economic conditions or the operating results or prospects of the
affected hotel. In that event, the Corporation's Board of Directors may elect
to allow the Franchise License to lapse which could under certain circumstance
result in the Corporation incurring significant costs for terminating such
Franchise License. In any case, if a franchise or brand affiliation is
terminated, the Corporation and the Lessee may seek to obtain a suitable
replacement franchise or brand affiliation, or to operate the hotel independent
of a franchise or brand affiliation. The loss of a franchise or brand
affiliation could have a material adverse effect upon the operations or the
underlying value of the hotel covered by the franchise or brand affiliation
because of the loss of associated name recognition, marketing support and
centralized reservation systems provided by the franchisor or brand owner.
Possible Adverse Effects of Failure to Spin-Off Interstate's Third-Party
Hotel Management Business
In connection with the closing of the Interstate Merger, the Companies
entered into a definitive settlement agreement with Marriott International,
Inc. (the "Settlement Agreement"), which among other things, requires the
Companies to spin-off Interstate's third-party hotel management business to
holders of the shares of Paired Common Stock (the "Spin-Off"). Although the
Companies expect to consummate the Spin-Off by September 1998, no assurance
can be given that the Spin-Off will be consummated. If the Companies do not
consummate the Spin-Off within 240 days following the closing of the
Interstate Merger the Companies may be subject to certain penalties under
the terms of the Settlement Agreement.
Price Adjustment Mechanism Risks
Because the Companies must periodically increase their equity base to
maintain financial flexibility and continue with their growth strategy, the
Companies have utilize private placements of equity, in conjunction with a price
adjustment mechanism as a means to raise capital. The Companies have entered
into three price adjustment mechanism agreements with respect to 13.3 million
shares of Paired Common Stock. In the event that the market price for the
Paired Common Stock at the time of settlement is lower than the relative
reference price, the Companies will have to deliver to the counterparties cash
or additional shares of Paired Common Stock, which would have diluting effects
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on the equity stock of the Companies. Additionally, under certain adverse
market conditions the counterparties may have the right to accelerate the
settlement of all or a portion of the obligation under the respective price
adjustment agreement. Such early settlements may force the Companies to issue
shares of Paired Common Stock at a depressed price, which may heighten the
diluting effects. The counterparties may also accelerate the settlement of the
entire transaction upon certain events of default under the Companies'
indebtedness.
THE COMPANIES
The Corporation
The Corporation is a self-administered REIT under the Code. The
Corporation owns interests in a portfolio of hotels, including full service,
resorts, suite hotels, limited service hotels and conference centers. The
portfolio is diversified by franchise and brand affiliation with nationally
recognized hotel companies. A significant number of hotels are franchised
under the Corporation's proprietary brands, including Wyndham Hotels, Wyndham
Hotels and Resorts. Wyndham Gardens, Wyndham Grand Heritage, Summerfield
Suites, Sierra Suites, Carefree, Malmaison and Clubhouse Inns. Other major
franchises include Crowne Plaza, Holiday Inn, Doubletree, Radisson, Ramada,
Hilton, Hyatt, Sheraton, Four Points by Sheraton, Embassy Suites, Marriott,
Marriott Courtyard, Hampton Inn and Grand Bay. The portfolio of hotels serve
major U.S. business centers, including Atlanta, Boston, Chicago, Cleveland,
Dallas, Denver, Houston, Miami, San Francisco, Philadelphia and Seattle. The
portfolio also includes world-class resort hotels as well as hotels in major
tourist destinations, including Scottsdale and Tucson, Arizona; Carmel,
California; Telluride, Colorado; San Juan, Puerto Rico; New Orleans, San
Antonio and San Diego. The portfolio also includes hotels located in Europe,
Canada and the Caribbean. In addition, the Corporation leases land in San
Mateo, California upon which the Racecourse is situated.
As part of their ongoing businesses, the Companies continually engage in
discussions with public and private real estate entities, including, without
limitation, current lessees of the Companies' hotels, regarding possible
portfolio or single asset acquisitions, as well as the acquisition of hotel
leasing and management operations. No assurances can be made that the Companies
will acquire any such acquisition opportunities.
The Corporation conducts a substantial part of its operations through the
Realty Partnership, which owns, directly and through its subsidiaries, the
Corporation's interests in each of its hotels. Through PAH GP and PAH LP, the
Corporation holds the sole general partnership interest and a limited
partnership interest, respectively, in the Realty Partnership.
Since 1983, the shares of Corporation Common Stock have been paired and
have traded together with the shares of Operating Company Common Stock as a
single unit pursuant to a stock pairing agreement. The terms of the stock
pairing agreement are set forth in the Pairing Agreement, dated as of February
17, 1983 and amended from time to time thereafter, by and between the
Corporation and the Operating Company (the "Pairing Agreement"). Since the
Merger, the Paired Common Stock has been listed on the NYSE under the symbol
"PAH."
The Corporation's principal executive offices are located at 1950 Stemmons
Freeway, Suite 6001, Dallas, Texas 75207 and its telephone number at that
location is (214) 863-1000.
The Operating Company
The Corporation leases the majority of its hotels to the Operating
Company. In addition to leasing hotels, the Operating Company provides
management services to other third party owners. The Operating Company also
owns interests in three resort hotels in Puerto Rico and is engaged in the
business of conducting and offering pari-mutuel wagering on thoroughbred
horse racing at the Racecourse. As described above, shares of Operating
Company Common Stock are paired and trade together with the shares of
Corporation Common Stock as a single unit on the NYSE pursuant to the Pairing
Agreement. The Operating Company conducts a substantial portion of all of
its operations through the Operating Partnership, which owns, directly and
through its subsidiaries, the Operating Company's assets. The Operating
Company holds the sole general partnership interest and a limited partnership
interest in the Operating Partnership.
The Operating Company's principal executive offices are located at 1950
Stemmons Freeway, Suite 6001, Dallas, Texas 75207 and its telephone number at
that location is (214) 863-1000.
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DESCRIPTION OF CAPITAL STOCK
The rights of stockholders of the Corporation and the Operating Company are
governed by the Amended and Restated Certificate of Incorporation of the
Corporation (the "Corporation Charter") and the Amended and Restated Certificate
of Incorporation of the Operating Company (the "Operating Company Charter" and,
together with the Corporation Charter, the "Charters") and the Amended and
Restated Bylaws of the Corporation (the "Corporation Bylaws") and the Amended
and Restated Bylaws of the Operating Company (the "Operating Company Bylaws"
and, together with the Corporation Bylaws, the "Bylaws"). The rights of such
stockholders are also governed by the terms of the Pairing Agreement and the
Cooperation Agreement. The following discussion summarizes certain of the key
terms of the Charters, the Bylaws, the Pairing Agreement and the Cooperation
Agreement. This summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the Pairing Agreement, the Cooperation
Agreement, the Charters and the Bylaws.
Under the Charters, each of the Corporation and the Operating Company have
the authority to issue 650,000,000 shares of Corporation Common Stock and
Operating Company Common Stock, respectively, 100,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"), and 750,000,000 shares
of excess stock, par value $.01 per share (the "Excess Stock").
Issuances of shares of Corporation Common Stock, Operating Company Common
Stock and other equity securities of the Corporation and the Operating Company
are subject to the terms and conditions of the Pairing Agreement and the
Cooperation Agreement.
Common Stock
The holders of Common Stock are entitled to one vote per share on all
matters voted on by stockholders, including elections of directors. Except as
otherwise required by law, by the terms of Corporation Series A Preferred Stock
(see discussion below), by the Charters with respect to Excess Stock or as
provided in any resolution adopted by either of the Corporation Board or the
Operating Company Board with respect to any series of Preferred Stock, the
holders of Paired Common Stock exclusively possess all voting power. The
Charters do not provide for cumulative voting in the election of directors.
Subject to the terms of the Corporation Series A Preferred Stock and any
preferential rights of any outstanding series of Preferred Stock and the rights
of holders of Excess Stock, the holders of shares of Paired Common Stock are
entitled to such dividends as may be declared from time to time by the
Corporation Board and the Operating Company Board from funds available for such
purpose, and upon liquidation are entitled to receive pro rata all assets of the
Corporation and the Operating Company available for distribution to such
holders. All shares of Paired Common Stock will, when issued, be fully paid and
nonassessable, and the holders thereof will not have preemptive rights.
Holders of Paired Common Stock have no conversion, sinking fund or
redemption rights, or preemptive rights to subscribe for any securities of the
Corporation or the Operating Company.
Each of the Corporation and the Operating Company intends to furnish its
stockholders with annual reports containing audited consolidated financial
statements and an opinion thereon expressed by an independent public accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information.
Pursuant to the Delaware General Corporation Law (the "DGCL"), a merger
or consolidation involving either of the Corporation or the Operating Company
requires the approval of a majority of the outstanding shares of the
constituent corporation to the transaction entitled to vote on such a matter.
Preferred Stock
Each of the Corporation Board and the Operating Company Board is
authorized, subject to the provisions of the Cooperation Agreement (see
discussion below), to provide for the issuance of shares of Preferred Stock in
one or more series, to establish the number of shares in each series and to fix
the designation, powers, preferences and rights of each such series and the
qualifications, limitations or restrictions thereof. Because
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each of the Corporation Board and the Operating Company Board has the power to
establish the preferences and rights of each class or series of Preferred Stock,
each such Board of Directors may afford the holders of any series or class of
Preferred Stock preferences, powers and rights, voting or otherwise, senior to
the rights of holders of shares of Corporation Common Stock or Operating Company
Common Stock, respectively. The issuance of shares of Preferred Stock could
have the effect of delaying or preventing a change in control of the Corporation
or the Operating Company.
Corporation Series A Preferred Stock
In connection with the Wyndham Acquisition, the Corporation issued
4,860,876 shares of Corporation Series A Preferred Stock to CF Securities, L.P.,
the principal shareholder of Wyndham prior to the Wyndham Acquisition, which
shares have the rights and privileges set forth in the Certificate of
Designation for the Corporation Series A Preferred Stock (the "Certificate of
Designation"). The Corporation Series A Preferred Stock is a series designated
out of the Preferred Stock of the Corporation. The following is a summary of
certain provisions of the Corporation Series A Preferred Stock. This summary
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of the Corporation Charter and the Certificate of
Designation.
Each share of Corporation Series A Preferred Stock is entitled to dividends
when, as and if declared and paid on the shares of Paired Common Stock in an
amount equal to the sum of the dividends paid on a share of Paired Common Stock.
Dividends on the Corporation Series A Preferred Stock will rank pari passu with
dividends on the shares of Paired Common Stock.
The Corporation Series A Preferred Stock is entitled to one vote per share,
voting together as a class with the shares of the Corporation Common Stock, on
any matter submitted for a vote of the stockholders of the Corporation. The
Corporation Series A Preferred Stock is convertible at any time into shares of
Paired Common Stock on a one-for-one basis by the holders thereof, subject to
the Ownership Limit provisions set forth in the Charters. In addition, the
Corporation Series A Preferred Stock is mandatorily convertible at any time and
in any amount upon notice by the Corporation, provided that the amount so
converted will not cause a violation of the Ownership Limit provisions set forth
in the Charters.
Upon a liquidation, dissolution or winding up of the Corporation, each
holder of Corporation Series A Preferred Stock is entitled to receive, on a per
share basis, (i) the Dissolution Preference (as defined below) and (ii) a
ratable share, together with the holders of Corporation Common Stock, in the
assets of the Corporation available for distribution on the Corporation Common
Stock. The term "Dissolution Preference" means, as applicable, either (A) if
the Operating Company has previously been or is simultaneously liquidated,
dissolved or wound up, a preference equal to the amount per share of Operating
Company Common Stock which was or will be received by the holders of Operating
Company Common Stock upon the liquidation, dissolution or winding up of the
Operating Company or (B) if the Operating Company has not previously been or is
not simultaneously liquidated, dissolved or wound up, a preference per share
equal to an amount determined by an independent investment banker selected by
the Corporation Board (with the agreement of the majority holder of the
Corporation Series A Preferred Stock, if there is one at such time) to be equal
to the then current value of a share of Operating Company Common Stock, without
regard to the paired share structure of the Companies. If the Operating Company
has been previously liquidated, dissolved or wound up, then any Dissolution
Preference will accrue interest at the applicable federal rate from the date the
liquidating distributions were made on the Operating Company Common Stock unless
and until paid.
Operating Company Series A Preferred Stock and Series B Preferred Stock
On June 30, 1998, the Operating Company acquired the hospitality-related
business of CHC International, Inc. ("CHCI") through merger (the "CHCI
Merger"). By operation of the CHCI Merger, each issued and outstanding CHCI
share of common stock and certain stock option rights was converted into the
right to receive shares of Operating Company Series A Preferred Stock and
shares of Operating Company Series B Preferred Stock. Generally, each CHCI
stockholder have the right to receive an equal number of shares of Operating
Company Series A Preferred Stock and shares of Operating Company Series B
Preferred Stock.
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Each share of Operating Company Series A Preferred Stock may be
redeemed, at the option of the holder, for cash equal to the value of a share
of the Paired Common Stock at the time of redemption (the "Redemption Value")
at any time following the first anniversary of the closing of the CHCI
Merger. Each share of Operating Company Series B Preferred Stock may also be
redeemed, at the option of the holder, for cash equal to the Redemption
Value; however, such redemption is restricted until the fifth anniversary of
the closing of the CHCI Merger. The Redemption Value may, at Operating
Company's option, be paid by the delivery of one share of the Paired Common
Stock for each share of the Operating Company Preferred Stock redeemed.
Further, if Operating Company fails to comply with certain covenants, the
Operating Company Preferred Stock may be redeemed, at the option of the
holder, for cash or, at Operating Company's option, shares of Paired Common
Stock at the Redemption Value plus a premium. The dividend rate on the shares
of Operating Company Preferred Stock is equivalent to the dividend rate on
the shares of Paired Common Stock. Dividends on Operating Company Series B
Preferred Stock are subject to increase during the five years subsequent to
the closing of the CHCI Merger if the shares are transferred by the original
holder. If the dividends on the Operating Company Preferred Stock are not
paid when due, dividends will instead accrue at the rate of 115% per annum on
a compounded basis. Dividends on the Operating Company Preferred Stock will
be preferential to dividends on shares of Operating Company Common Stock. The
Operating Company Preferred Stock is redeemable at Operating Company's option
at the Redemption Value. Except as required by law, the Operating Company
Preferred Stock will be non-voting.
Upon a liquidation, dissolution, or winding up of Operating Company, the
holders of Operating Company Preferred Stock will be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
Operating Company to the holders of Operating Company Common Stock, any stock
not on a parity with the Operating Company Preferred Stock for liquidation
purposes or any stock ranking junior to the Operating Company Common Stock, an
amount equal to the greater of (i) $23.25, plus all accrued but unpaid
dividends, for each share of Operating Company Preferred Stock then held by
them, and (ii) the amount that a holder of a share of Operating Company
Preferred Stock would have received if such holder held the number of shares of
Operating Company Common Stock equal to the number of such shares of Operating
Company Preferred Stock.
Excess Stock
Upon the violation of certain transfer restrictions contained in the
Charters, shares of any class or series of outstanding capital stock of the
Corporation and the Operating Company (collectively, "Equity Stock") will
automatically be converted into an equal number of shares of Excess Stock of the
Corporation or the Operating Company, as the case may be, and transferred to a
trust (a "Trust"). See "Restrictions on Transfer of Capital Stock." Such shares
of Excess Stock held in trust shall remain outstanding shares of stock of the
Corporation and the Operating Company and shall be held by the trustee of the
Trust (the "Trustee") for the benefit of a charitable beneficiary (a
"Beneficiary"). The Trustee and the Beneficiary shall be designated pursuant to
the terms of the Pairing Agreement. Each share of Excess Stock shall entitle
the holder to the number of votes the holder would have if such share of Excess
Stock was a share of Equity Stock of the same class or series from which such
Excess Stock was converted, on all matters submitted to a vote at any meeting of
stockholders. The Trustee, as record holder of the Excess Stock, shall be
entitled to vote all shares of Excess Stock. Each share of Excess Stock shall
be entitled to the same dividends and distributions (as to timing and amount) as
may be declared by the Corporation Board or the Operating Company Board, as the
case may be, as shares of the class or series of Equity Stock from which such
Excess Stock was converted. The Trustee of the Trust, as record holder of the
shares of the Excess Stock, shall be entitled to receive all dividends and
distributions and shall hold such dividends and distributions in trust for the
benefit of the Beneficiary of the Trust. Upon the sale of the shares of Excess
Stock to either a permitted transferee under the Charters (a "Permitted
Transferee") or to the Corporation or the Operating Company, as the case may be,
such shares of Excess Stock will be automatically converted into an equal number
of shares of Equity Stock of the same class or series from which such Excess
Stock was converted. Pursuant to the Pairing Agreement, the conversion of
Equity Stock of the Corporation or the Operating Company into Excess Stock, or
the conversion of Excess Stock of the Corporation or the Operating Company into
Equity Stock, requires conversion of the corresponding share of the Corporation
or the Operating Company, as the case may be.
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The Pairing Agreement
Under the Pairing Agreement, shares of Corporation Common Stock and
Operating Company Common Stock shall not be transferrable or transferred on the
books of such company unless a simultaneous transfer is made by the same
transferor to the same transferee of an equal number of shares of common stock
of the other company. Neither the Corporation nor the Operating Company may
issue shares of Corporation Common Stock or Operating Company Common Stock, as
the case may be, unless provision has been made for the simultaneous issuance or
transfer to the same person of the same number of shares of common stock of the
other company and for the pairing of such shares. Each certificate issued for
Corporation Common Stock or Operating Company Common Stock must be issued
"back-to-back" with a certificate evidencing the same number of shares of common
stock of the other company. Each certificate must bear a conspicuous legend on
its face referring to the restrictions on ownership and transfer under the
Pairing Agreement. The Pairing Agreement provides that each of the Corporation
and the Operating Company may issue shares of capital stock of any class or
series (other than Corporation Common Stock and Operating Company Common Stock),
irrespective of whether such shares are convertible into shares of Corporation
Common Stock and Operating Company Common Stock, without making provision for
the simultaneous issuance or transfer to the same person of the same number of
shares of that same class or series of capital stock of the other company and
for the pairing of such shares.
In addition, pursuant to the Pairing Agreement, neither the Corporation nor
the Operating Company may declare a stock dividend consisting in whole or in
part of Corporation Common Stock or Operating Company Common Stock, issue any
rights or warrants to purchase any shares of Corporation Common Stock or
Operating Company Common Stock or subdivide, combine or otherwise reclassify the
shares of Corporation Common Stock or Operating Company Common Stock unless the
other company simultaneously takes the same or equivalent action.
Pursuant to the Pairing Agreement, as desired from time to time, but no
less than once each calendar year, the Corporation and the Operating Company are
required to jointly arrange for the determination of the fair market value of
the Operating Company Common Stock outstanding on such valuation date. Such
valuation may be used from time to time by the Corporation and the Operating
Company to change the allocation between the companies of the net proceeds from
any issuance of paired equity. The Pairing Agreement may be terminated by the
Board of Directors of either the Corporation or the Operating Company upon 30
days written notice to the other company that such termination has been approved
by the affirmative vote of the holders of a majority of the outstanding shares
of common stock of the company seeking to terminate the agreement. In the event
the Pairing Agreement is terminated, the Corporation and the Operating Company
have agreed to cooperate to effect a separation of the paired shares of both
companies so as to permit the separate issuance and transfer thereof.
The Cooperation Agreement
Although a paired share structure may result in stockholders of the paired
companies realizing certain economic benefits not realizable by stockholders of
companies not having a paired share structure, each paired company is a separate
corporate entity with a separate Board of Directors and different management
teams. Accordingly, the interests of the Board of Directors and management of
the paired companies may conflict and such conflicts may possibly rise to
disputes between the companies. Prior to the Cal Jockey Merger, Cal Jockey and
Bay Meadows experienced certain disagreements and disputes, some of which
resulted in litigation between the companies. The Corporation and the Operating
Company believe that these disagreements and disputes compromised the ability of
Cal Jockey and Bay Meadows to operate the companies in a manner designed to
maximize the potential economic benefits that could be realized for stockholders
of the paired companies. The Corporation and the Operating Company believe that
to increase the likelihood that the stockholders of the two Companies may fully
realize the economic benefits of the paired share structure, it is in the best
interests of the Companies and their respective stockholders that the risk of
potential conflicts between the two Companies be minimized. Accordingly, the
Corporation and the Operating Company have entered into the Cooperation
Agreement.
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Under the terms of the Cooperation Agreement, the Corporation and
Operating Company are obligated to cooperate to the fullest extent possible
in the conduct of their respective operations and to take all necessary
action to preserve the paired share structure and to maximize the economic
and tax advantages associated therewith. One of the primary objectives of
the Cooperation Agreement is to set forth the understanding of the Companies
that the Corporation shall have the sole right and power to authorize, effect
and control issuances of paired equity (including securities convertible
into paired equity) of the two companies. The Cooperation Agreement provides
for a number of corporate governance mechanisms designed to accomplish this
objective and the other objectives set forth therein. These mechanisms
include (i) the establishment of a cooperation committee that normally
considers and proposes the agenda listing the matters to be considered at any
joint meeting of the Corporation Board and the Operating Company Board, (ii)
the establishment of corporate matters categories and procedures for the
consideration and reconsideration of matters brought before the Corporation
Board and the Operating Company Board, (iii) the establishment of a hotel
acquisitions committee that is to analyze, evaluate and consider potential
acquisitions by the Companies of hotel properties and related assets, (iv)
provisions that govern the sole authority of the Corporation to authorize,
effect and control issuances of paired equity (including securities
convertible into paired equity) of the two companies, and (v) the
establishment of an unpaired equity committee that will have the sole
authority to authorize and approve issuances of unpaired equity by the
Operating Company. Unless earlier terminated at any time by the mutual
consent of the Corporation and the Operating Company, the Cooperation
Agreement will terminate on the date that is 12 months after the date on
which the Pairing Agreement is no longer in effect. In the event of any
termination of the Cooperation Agreement, neither the Corporation nor the
Operating Company (or any of its directors, officers, employees or agents)
will have any liability or further obligation to any other party under the
Cooperation Agreement.
Transfer Agent
The transfer agent and registrar for the Paired Common Stock is American
Stock Transfer & Trust Company of New York, New York.
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RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Corporation to qualify as a REIT under the Code, among other
things, not more than 50% in value of its outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (defined in the Code
to include certain entities) during the last half of a taxable year, and such
capital stock must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months or during a proportionate part of a
shorter taxable year (in each case, other than the first such year). In
addition, the Corporation must meet certain requirements regarding the nature of
its gross income in order to qualify as a REIT. One such requirement is that at
least 75% of the Corporation's gross income for each year must consist of rents
from real property and income from certain other real property investments. The
rents received by Realty Partnership and its subsidiary partnerships from the
Lessees will not qualify as rents from real property if the Corporation owns,
actually or constructively, 10% or more of the ownership interests in any Lessee
within the meaning of Section 856(d)(2)(B) of the Code, the result of which
would be the loss of REIT status for the Corporation. See "Certain Federal
Income Tax Considerations--REIT Qualification."
In order to protect the Corporation against the risk of losing its status
as a REIT and to otherwise protect the Corporation from the consequences of a
concentration of ownership among its stockholders, the Charters provide, subject
to certain exceptions, that no single person (which includes a "group" of
persons) (other than an entity that is either a trust as described in Section
401(a) of the Code and exempt from tax under Section 501(a) of the Code or a
person that is registered under the Investment Company Act of 1940 (a
"Look-Through Entity")) may Beneficially Own or Constructively Own (as those
terms are defined below) in excess of 8.0% of the outstanding shares of any
class or series of Equity Stock of the Corporation or the Operating Company (the
"Ownership Limit"), unless the Ownership Limit is waived by the Board of
Directors of the relevant company in accordance with the Charters. Any transfer
of Equity Stock of the Corporation or the Operating Company that would (i)
result in any person or entity owning, directly or indirectly, shares of Equity
Stock of the Corporation or the Operating Company in excess of the Ownership
Limit, unless the Ownership Limit is waived by the Board of Directors of the
relevant corporation in accordance with the Charters, (ii) result in the capital
stock of the Corporation being beneficially owned (within the meaning of Section
856(a)(5) of the Code) by fewer than 100 persons within the meaning of Section
856(a)(5) of the Code, (iii) result in the Corporation being "closely held"
within the meaning of Section 856(h) of the Code or (iv) cause the Corporation
to own, actually or constructively, 10% or more of the ownership interests in a
tenant of the real property of the Corporation or a subsidiary of the
Corporation within the meaning of Section 856(d)(2)(B) of the Code, shall be
void ab initio, and the intended transferee will acquire no right or interest in
such shares of Equity Stock. For purposes of the Charters, "Beneficial
Ownership" means, with respect to any individual or entity, ownership of shares
of Equity Stock equal to the sum of (i) the shares of Equity Stock directly or
indirectly owned by such individual or entity, (ii) the number of shares of
Equity Stock treated as owned directly or indirectly by such individual or
entity through the application of the constructive ownership rules of Section
544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and (iii) the
number of shares of Equity Stock which such individual or entity is deemed to
beneficially own pursuant to Rule 13d-3 under the Exchange Act. The Charters
provide that pension plans described in Section 401(a) of the Code and mutual
funds registered under the Investment Company Act of 1940 are treated as
Look-Through Entities that are subject to a 9.8% "Look-Through Ownership Limit."
Pension plans and mutual funds are among the entities that are not treated as
holders of stock under the "five or fewer" requirement and the beneficial owners
of such entities will be counted as holders for this purpose. For purposes of
computing the percentage of shares of any class or series of Equity Stock of the
Corporation or the Operating Company Beneficially Owned by any person or entity,
any shares of Equity Stock of the Corporation or the Operating Company which are
deemed to be Beneficially Owned by such person or entity pursuant to Rule 13d-3
of the Exchange Act but which are not outstanding shall be deemed to be
outstanding. The terms "Beneficial Owner," "Beneficially Owns" and
"Beneficially Owned" shall have correlative meanings. Also for purposes of the
Charters, "Constructive Ownership" means ownership of shares of Equity Stock by
an individual or entity who is or would be treated as a direct or indirect owner
of such shares of Equity Stock through the application of Section 318 of the
Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall have correlative
meanings.
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Upon the occurrence of a purported transfer of shares that would result in
a violation of any of the foregoing transfer restrictions, that number of shares
that violate the transfer restrictions shall be automatically converted into an
equal number of shares of Excess Stock and transferred to a Trust for the
benefit of the Beneficiary, effective on the Trading Day (as defined below)
prior to the date of the purported transfer of such shares, and the record
holder of the shares of Equity Stock that are converted into shares of Excess
Stock (a "Prohibited Owner") shall submit such number of shares of Equity Stock
to the Corporation or the Operating Company, as the case may be, for
registration in the name of the Trustee. In the case of Equity Stock that is
paired, upon the conversion of a share of Equity Stock into a share of Excess
Stock, the corresponding paired share of that same class or series of Equity
Stock of the other company shall simultaneously be converted into a share of
Excess Stock; such shares of Excess Stock shall be paired and shall be
simultaneously transferred to a Trust. Upon the occurrence of such a conversion
of shares of any class or series of Equity Stock into an equal number of shares
of Excess Stock, such shares of Equity Stock shall be automatically retired and
canceled, without any action required by the Board of Directors of either of the
Corporation as the Operating Company, and shall thereupon be restored to the
status of authorized but unissued shares of the particular class or series of
Equity Stock from which such Excess Stock was converted and may be reissued as
that particular class or series of Equity Stock.
Shares of Equity Stock that are converted into shares of Excess Stock and
transferred to a Trust shall be held in trust for the exclusive benefit of the
Beneficiary. Shares of Excess Stock will remain issued and outstanding shares
of stock. Each share of Excess Stock shall be entitled to the same dividends
and distributions (as to both timing and amount) as may be declared by the
Corporation Board or the Operating Company Board, as the case may be, as shares
of the class or series of Equity Stock from which such Excess Stock was
converted. The Trustee, as record holder of the shares of Excess Stock, shall
be entitled to receive all dividends and distributions and shall hold all such
dividends or distributions in trust for the benefit of the Beneficiary. The
Prohibited Owner with respect to such shares of Excess Stock shall repay to the
Trust the amount of any dividends or distributions received by it (i) that are
attributable to any shares of Equity Stock that have been converted into shares
of Excess Stock and (ii) the record date of which was on or after the date that
such shares were converted into shares of Excess Stock. The Corporation and the
Operating Company shall take all measures that they determine reasonably
necessary to recover the amount of any such dividend or distribution paid to a
Prohibited Owner, including, if necessary, withholding any portion of future
dividends or distributions payable on shares of Equity Stock beneficially owned
or constructively owned by the person who, but for the restrictions on transfer,
would constructively own or beneficially own the shares of Excess Stock and, as
soon as reasonably practicable following receipt or withholding thereof, shall
pay over to the Trust for the benefit of the Beneficiary the dividends so
received or withheld, as the case may be.
In the event of any voluntary or involuntary liquidation of, or winding up
of, or any distribution of the assets of, the Corporation or the Operating
Company, each holder of shares of Excess Stock shall be entitled to receive,
ratably with each other holder of shares of Equity Stock of the same class or
series from which the Equity Stock was converted, that portion of the assets of
the Corporation or the Operating Company, as the case may be, that is available
for distribution to the holders of such class or series of Equity Stock. The
Trust shall distribute to the Prohibited Owner the amounts received upon such
liquidation, dissolution, or winding up, or distribution; provided, however,
that the Prohibited Owner shall not be entitled to receive amounts in excess of,
in the case of a purported transfer in which the Prohibited Owner gave value for
shares of Equity Stock and which transfer resulted in the conversion of the
shares into shares of Excess Stock, the price per share, if any, such Prohibited
Owner paid for the shares of Equity Stock (which, in the case of Equity Stock
that is paired, shall equal the price paid per share multiplied by the most
recent Valuation Percentage (as defined below)) and, in the case of a
non-transfer event or transfer in which the Prohibited Owner did not give value
for such shares (e.g., if the shares were received through a gift or devise) and
which non-transfer event or transfer, as the case may be, resulted in the
conversion of the shares into shares of Excess Stock, the price per share equal
to the Market Price (as defined below) on the date of such non-transfer event or
transfer. Any remaining amount in such Trust shall be distributed to the
Beneficiary.
Each share of Excess Stock shall entitle the holder to the number of votes
the holder would have, if such share of Excess Stock was a share of Equity Stock
of the same class or series from which such Excess Stock was converted, on all
matters submitted to a vote at any meeting of stockholders. The holders of
shares of
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Excess Stock converted from the same class or series of Equity Stock shall vote
together with the holders of such Equity Stock as a single class on all such
matters. The Trustee, as record holder of the shares of Excess Stock, shall be
entitled to vote all shares of Excess Stock. Any vote taken by a Prohibited
Owner prior to the discovery by the Corporation or the Operating Company, as the
case may be, that the shares of Equity Stock were exchanged for shares of Excess
Stock will be rescinded as void ab initio.
The Trustee shall have the exclusive and absolute right to designate one or
more Permitted Transferees of any and all shares of Excess Stock if the
Corporation or the Operating Company or both, in the case of Excess Stock that
is paired, to exercise its or their option with respect to such shares as
described below; provided, however, that (i) the Permitted Transferee so
designated purchases for valuable consideration (whether in a public or private
sale) the shares of Excess Stock (which, in the case of Excess Stock that is
paired, shall equal the price paid per share multiplied by the most recent
Valuation Percentage) and (ii) the Permitted Transferee so designated may
acquire such shares of Excess Stock without violating any of the aforementioned
transfer restrictions and without such acquisition resulting in the exchange of
such shares of Equity Stock so acquired for shares of Excess Stock and the
transfer of such shares of Excess Stock to a Trust. Upon the designation by the
Trustee of a Permitted Transferee, the Trustee shall cause to be transferred to
the Permitted Transferee that number of shares of Excess Stock of the
Corporation or the Operating Company, as the case may be, acquired by the
Permitted Transferee. Upon such transfer of the shares of Excess Stock to the
Permitted Transferee, such shares of Excess Stock shall be automatically
converted into an equal number of shares of Equity Stock of the same class and
series from which such Excess Stock was converted. In the case of Equity Stock
that is paired, upon the conversion of a share of Excess Stock into a share of
Equity Stock of the same class or series from which such Excess Stock was
converted, the corresponding paired share of Excess Stock of the other company
shall simultaneously be converted into a share of Equity Stock of the same class
or series from which such Excess Stock was converted and such shares of Equity
Stock shall be paired. Upon the occurrence of such a conversion of shares of
Excess Stock into an equal number of shares of Equity Stock, such shares of
Excess Stock shall be automatically retired and canceled, without any action
required by the Corporation Board or the Operating Company Board, and shall
thereupon be restored to the status of authorized but unissued shares of Excess
Stock and may be reissued as such. The Trustee shall (i) cause to be recorded
on the stock transfer books of the Corporation or the Operating Company or both,
in the case of Excess Stock that is paired, that the Permitted Transferee is the
holder of record of such number of shares of Equity Stock and (ii) distribute to
the Beneficiary any and all amounts held with respect to the shares of Excess
Stock after making payment to the Prohibited Owner. If the transfer of shares
of Excess Stock to a purported Permitted Transferee shall violate any of the
aforementioned transfer restrictions including, without limitation, the
Ownership Limit or the Look-Through Ownership Limit, as the case may be, such
transfer shall be void ab initio as to that number of shares of Excess Stock
that cause the violation of any such restriction when such shares are converted
into shares of Equity Stock and the purported Permitted Transferee shall be
deemed to be a Prohibited Owner and shall acquire no rights in such shares of
Excess Stock. Such shares of Equity Stock shall be automatically re-converted
into Excess Stock and transferred to the Trust from which they were originally
sold. Such conversion and transfer to the Trust shall be effective as of the
close of trading on the Trading Day prior to the date of the transfer to the
purported Permitted Transferee and the provisions of the Charters regarding
compensation to a Prohibited Owner shall apply to such shares with respect to
any future transfer of such shares by the Trust.
A Prohibited Owner shall be entitled to receive from the Trustee following
the sale or other disposition of such shares of Excess Stock the lesser of (i)
(a) in the case of a purported transfer in which the Prohibited Owner gave value
for shares of Equity Stock and which transfer resulted in the conversion of such
shares into shares of Excess Stock, the price per share, if any, such Prohibited
Owner paid for the shares of Equity Stock (which, in the case of Excess Stock
that is paired, shall be determined based on the Valuation Percentage) and (b)
in the case of a non-transfer event or transfer in which the Prohibited Owner
did not give value for such shares (e.g., if the shares were received through a
gift or devise) and which non-transfer event or transfer, as the case may be,
resulted in the conversion of such shares into shares of Excess Stock, the price
per share equal to the Market Price on the date of such non-transfer event or
transfer and (ii) the price per share (which, in the case of Excess Stock that
is paired, shall be determined based on the Valuation Percentage) received by
the Trustee from the sale or other disposition of such shares of Excess Stock.
Any amounts received by the Trustee in respect of such shares of Excess Stock
and in excess of such amounts to be paid the Prohibited Owner shall be
distributed to the Beneficiary.
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Shares of Excess Stock shall be deemed to have been offered for sale by a
Trust to the Corporation or the Operating Company or both, in the case of Excess
Stock that is paired, or a designee of such company or companies, at a price per
share equal to the lesser of (i) the price per share (which, in the case of
Excess Stock that is paired, shall be determined based on the Valuation
Percentage) in the transaction that created such shares of Excess Stock (or, in
the case of devise, gift or non-transfer event, the Market Price at the time of
such devise, gift or non-transfer event) or (ii) the Market Price on the date
either company or both companies, in the case of Excess Stock that is paired,
accept such offer. Either company or both companies, in the case of Excess
Stock that is paired, shall have the right to accept such offer for a period of
90 days following the later of (a) the date of the non-transfer event or
purported transfer which results in such shares of Excess Stock or (b) the date
on which either company or both companies, in the case of Excess Stock that is
paired, determine in good faith that a transfer or non-transfer event resulting
in shares of Excess Stock has previously occurred, if either company or both
companies, in the case of Excess Stock that is paired, do not receive a notice
of such transfer or non-transfer event. In the case of Excess Stock that is
paired, neither the Corporation nor the Operating Company shall accept such an
offer with respect to its shares of Excess Stock without the agreement of the
other company to accept such offer with respect to the corresponding shares of
its Excess Stock.
"Market Price" on any date shall mean the average of the Closing Price for
the five consecutive Trading Days ending on such date. "Closing Price" on any
date shall mean the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the NYSE or,
if the shares of Equity Stock are not listed or admitted to trading on the NYSE,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the shares of Equity Stock are listed or admitted to trading or, if the
shares of Equity Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation System
or, if such system is no longer in use, the principal other automated quotation
system that may then be in use or, if the shares of Equity Stock are not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the shares of Equity
Stock. In the case of Equity Stock that is paired, "Market Price" shall mean
the "Market Price" for a share of Paired Common Stock multiplied by a fraction
(expressed as a percentage) determined by dividing the value for such Equity
Stock most recently determined under the Pairing Agreement over the value of a
share of Paired Common Stock most recently determined under the Pairing
Agreement (the "Valuation Percentage"). "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Equity Stock
are listed or admitted to trading is open for the transaction of business or, if
the shares of Equity Stock are not listed or admitted to trading on any national
securities exchange, shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
Any person or entity that acquires or attempts to acquire shares of Equity
Stock in violation of the aforementioned transfer restrictions, or any person or
entity that owned shares of Equity Stock that were transferred to a Trust, shall
immediately give written notice to the Corporation or the Operating Company or
both, in the case of Equity Stock that is paired, of such event and shall
provide such other information as the appropriate company or both companies, as
the case may be, may request to determine the effect, if any, of such violation
on Patriot's status as a REIT.
Each person or entity that is an owner, actually or constructively, of
shares of Equity Stock and each person or entity that (including the stockholder
of record) is holding shares of Equity Stock for such an owner shall provide to
the Corporation or the Operating Company or both, in the case of Equity Stock
that is paired, a written statement or affidavit stating such information as the
appropriate company or both companies, as the case may be, may request to
determine the Corporation status as a REIT and to ensure compliance with the
Ownership Limit or the Look-Through Ownership Limit, as the case may be. In
addition, every person or entity that owns of record, actually or
constructively, more than 5%, or such lower percentages as required pursuant to
regulations under the Code, of the outstanding shares of any class or series of
Equity Stock of the Corporation or the Operating Company shall, within 30 days
after January 1 of each year, provide to the Corporation or the Operating
Company or both , in the case of Equity Stock that is paired, a written
statement
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or affidavit stating the name and address of such owner, the number of shares of
Equity Stock owned, actually or constructively, and a description of how such
shares are held.
All certificates representing shares of Equity Stock shall bear a legend
referring to the aforementioned transfer restrictions. The transfer
restrictions will continue to apply until the Corporation Board determines that
it is no longer in the best interests of the Corporation to attempt to qualify,
or to continue to qualify, as a REIT.
The restrictions on transfer contained in the Charters could have the
effect of discouraging a takeover or other transaction in which holders of some,
or a majority, of shares of Equity Stock might receive a premium from their
shares of Equity Stock over the then prevailing Market Price or which such
holders might believe to be otherwise in their best interest.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain provisions that currently
govern United States federal income tax treatment of the Corporation and its
U.S. Stockholders (as defined below in "--Federal Income Taxation of Holders of
Paired Shares--Taxation of Taxable U.S. Stockholders") as well as certain other
tax considerations for U.S. holders of Paired Common Stock (also referred to
herein as "Paired Shares"). The following discussion is based upon current
provisions of the Code, existing temporary and final regulations thereunder and
current administrative rulings and court decisions, all of which are subject to
change, possibly on a retroactive basis. See "Risk Factors--Real Estate
Investment Trust Tax Risks--Exemption from Anti-Pairing Rules; Risks of Adverse
Legislation" for a discussion of certain legislative proposals that, if enacted,
would alter the tax treatment of the Companies and could jeopardize the
Corporation's ability to qualify as a REIT. No attempt has been made to comment
on all United States federal income tax consequences that may be relevant to
stockholders of the Companies. The tax discussion set forth below is included
for general information only. It is not intended to be, nor should it be
construed to be, legal or tax advice to any particular stockholder of the
Companies. References to the "Corporation" in this section regarding certain
federal income tax considerations include only Patriot American Hospitality,
Inc. and references herein to the "Operating Company" include only Wyndham
International, Inc. unless in either case the context otherwise requires.
THE FOLLOWING DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS
OF SHARES OF CORPORATION COMMON STOCK OR OPERATING COMPANY COMMON STOCK SUBJECT
TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS INSURANCE COMPANIES, FINANCIAL
INSTITUTIONS, BROKER-DEALERS, TAX-EXEMPT ORGANIZATIONS, NON-U.S. STOCKHOLDERS
AND HOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION. STOCKHOLDERS OF THE COMPANIES ARE
URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THEIR SPECIFIC TAX
CONSEQUENCES, INCLUDING ANY STATE, LOCAL OR OTHER TAX CONSEQUENCES.
REIT Qualification
General
If certain detailed conditions imposed by the provisions of the Code are
met, entities such as the Corporation that invest primarily in real estate and
that otherwise would be treated for federal income tax purposes as corporations
generally are not taxed at the corporate level on their "real estate investment
trust taxable income" or net capital gain that is currently distributed to
stockholders. This treatment substantially eliminates the "double taxation" on
earnings (i.e., at both the corporate and stockholder levels) that ordinarily
results from the use of corporations.
The Corporation has been operated in a manner intended to allow it to
qualify as a REIT. The Corporation intends to operate in the future in a
manner so that the Corporation will continue to qualify as a REIT. If the
Corporation fails to qualify as a REIT in any taxable year, the Corporation
will be subject to federal income taxation as if it were a domestic
corporation, and the Corporation's stockholders
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will be taxed in the same manner as stockholders of ordinary corporations. In
this event, the Corporation could be subject to potentially significant tax
liabilities, and the amount of cash available for distribution to stockholders
would be reduced and possibly eliminated. Unless entitled to relief under
certain Code provisions, and subject to the discussion below regarding Section
269B(a)(3) of the Code, the Corporation also would be disqualified from
re-electing REIT status for the four taxable years following the year during
which qualification was lost. Failure of the Corporation's predecessor,
Patriot, to have qualified as a REIT also could cause the Corporation to be
disqualified as a REIT and/or subject the Corporation to significant tax
liabilities.
Goodwin, Procter & Hoar LLP, special tax counsel to the Corporation, has
previously rendered an opinion to the Corporation to the effect that
commencing with the taxable year ending December 31, 1983 to the date of such
opinion, the Corporation has been organized and operated in conformity with the
requirements for qualification and taxation as a REIT under the Code, and that
as of the date of such opinion the Corporation's proposed method of operation
will enable it to continue to meet the requirements for qualification and
taxation as a REIT under the Code. Investors should be aware, however, that
opinions of counsel are not binding upon the IRS or any court. Goodwin, Procter
& Hoar LLP's opinion is based on various assumptions and is conditioned upon
certain representations made by the Corporation on or about the date of such
opinion as to factual matters, including representations regarding the nature of
the Corporation's properties and the future conduct of the Corporation's
business. Any inaccuracy in such assumptions and representations (including as
a result of activities of the Corporation subsequent to the date of the opinion)
could adversely affect this opinion. Qualification and taxation as a REIT
depends upon the Corporation's having met and continuing to meet, through actual
annual operating results, the distribution levels, stock ownership, and other
various qualification tests imposed under the Code. Goodwin, Procter & Hoar LLP
has not reviewed and will not review the Corporation's compliance with those
tests. Moreover, testing the Corporation's compliance with the REIT
qualification requirements involves the application of highly technical and
complex Code provisions for which there are only limited judicial or
administrative interpretations. The complexity of these provisions is greater
in the case of a REIT that owns hotels and leases them to a corporation with
which its stock is paired. See "Risk Factors--Real Estate Investment Trust Tax
Risks." In addition, some of these Code provisions, such as the provisions
regarding the characterization of the Corporation's property as other than
"dealer property," and the characterization of loans by the Corporation as debt
for tax purposes, require factual determinations not susceptible of legal
opinion. The opinion of Goodwin, Procter & Hoar LLP necessarily relies on
representations from the Corporation as to these factual determinations.
Finally, qualification as a REIT also depends on the determination of various
factual matters and circumstances not entirely within the Corporation's control.
Accordingly, no assurance can be given that the Corporation will satisfy the
REIT qualification tests on a continuing basis.
Paired Shares
Section 269B(a)(3) of the Code provides that if the shares of a REIT and a
non-REIT are paired, then the REIT and the non-REIT shall be treated as one
entity for purposes of determining whether either company qualifies as a REIT.
If Section 269B(a)(3) applied to the Corporation and the Operating Company, then
the Corporation then would not be eligible to be taxed as a REIT. Section
269B(a)(3) does not apply, however, if the shares of the REIT and the non-REIT
were paired on June 30, 1983 and the REIT was taxable as a REIT on June 30,
1983. As a result of this grandfathering rule, Section 269B(a)(3) does not
apply to the Corporation. There are, however, no judicial or administrative
authorities interpreting this grandfathering rule in the context of a merger
into a grandfathered REIT or otherwise, and this interpretation, as well as the
opinion of Goodwin, Procter & Hoar LLP regarding the Corporation's qualification
as a REIT, is based solely on the literal language of the statute. Moreover, if
for any reason the Corporation failed to qualify as a REIT in 1983, the benefit
of the grandfathering rule would not be available to the Corporation, and the
Corporation would not qualify as a REIT for any taxable year. Recently proposed
amendments to these grandfathering provisions, if enacted, would severely limit
the Companies' ability to utilize the paired structure to operate hotels and
could adversely affect the Corporation's ability to qualify as a REIT. See
"Risk Factors--Real Estate Investment Trust Tax Risks--Exemption from
Anti-Pairing Rules; Risk of Adverse Legislation."
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Potential Reallocation of Income
Due to the paired share structure, the Companies are controlled by the
same interests. As a result, the IRS could, pursuant to Section 482 of the
Code, seek to distribute, apportion or allocate gross income, deductions,
credits or allowances between or among them if it determines that such
distribution, apportionment or allocation is necessary in order to prevent
evasion of taxes or to clearly reflect income. See "Risk Factors--Real
Estate Investment Trust Tax Risks--Real Estate Investment Trust Tax
Risks--Potential Reallocation of Income."
Built-In Gain Tax
Under certain circumstances, if the Corporation recognizes gain on the
disposition of an asset acquired from a C corporation (including the assets
acquired from Wyndham or Interstate) during the ten-year period beginning on
the date of the acquisition, then to the extent of the asset's "built-in
gain" (i.e., the excess of the fair market value of such asset at the time of
acquisition over its then tax basis), the Corporation will be subject to tax
on such gain at the highest regular corporate rate applicable, pursuant to
Treasury Regulations not yet promulgated. The Corporation would be required
to distribute 95% of the excess of the amount of recognized built-in gain
over the amount of tax paid in order to maintain the Corporation's
qualification as a REIT. The foregoing assumes that the Corporation makes an
election pursuant to IRS Notice 88-19 with respect to the acquisition. If
the election is not made, the aggregate amount of built-in gain with respect
to each of the two mergers would be subject to tax in the year of
acquisition. The Corporation has made and will generally make the election
pursuant to the IRS Notice 88-19 if such election is available.
Classification of the Realty Partnership as a Publicly Traded Partnership
Section 7704 of the Code treats certain "publicly traded partnerships" as
corporations. If the Realty Partnership were taxed as a corporation under these
rules, the Corporation would be disqualified as a REIT. A partnership is a
publicly traded partnership if interests in such partnership are either traded
on an established securities market or are "readily tradable on a secondary
market (or the substantial equivalent thereof)." The Realty Partnership relies
on restrictions on transfers and redemptions of limited partner interests in
order to avoid being taxed as a corporation under Section 7704 of the Code. The
Operating Partnership relies on similar restrictions to avoid taxation as a
corporation. There can be no assurance that efforts to avoid taxation as a
corporation under these provisions have been or will be successful.
Effects of Compliance with REIT Requirements
In general, in order to qualify as a REIT, the Corporation must derive
at least 95% of its gross income from real estate sources and certain passive
investments, and the Corporation must derive at lease 75% of its gross income
from real estate sources. Operating income derived from hotels or a
racetrack does not constitute qualifying income under the REIT requirements.
Accordingly, substantially all of the Corporation's hotels have been leased
to lessees (including the Operating Company). Similarly, the Corporation has
subleased the land underlying the Racecourse and leased the related
improvements to the Operating Company. Rent derived from such leases will be
qualifying income under the REIT requirements, provided several requirements
are satisfied. Among other requirements, a lease may not have the effect of
giving the Corporation a share of the net income of the lessee, and the
amount of personal property leased under the lease must not exceed a defined
low level. In addition, all leases must also qualify as "true" leases for
federal income tax purposes (as opposed to service contracts, joint ventures
or other types of arrangements). There are, however, no controlling Treasury
Regulations, published rulings, or judicial decisions that discuss whether
the Corporation's leases constitute "true" leases. Therefore, there can be
no complete assurance that the IRS will not successfully assert a contrary
position. The Corporation (excluding certain corporate subsidiaries) also
may not provide services, other than customary services and de minimis
non-customary services, to the lessees or their subtenants.
Payments under a lease will not constitute qualifying income for purposes
of the REIT requirements if the Corporation owns, directly or indirectly, 10% or
more of the ownership interests in the relevant lessee. Constructive ownership
rules apply, such that, for instance, the Corporation is deemed to own the
assets of
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stockholders who own 10% or more in value of the stock of the Corporation. The
Charters are therefore designed to prevent a stockholder of the Corporation from
owning Corporation stock or Operating Company stock that would cause the
Corporation to own, actually or constructively, 10% or more of the ownership
interests in a lessee (including the Operating Company and the Operating
Partnership). Thus, the Corporation should never own, actually or
constructively, 10% or more of a lessee. However, because the relevant
constructive ownership rules are broad and it is not possible to monitor
continually direct and indirect transfers of Paired Shares, and because the
charter provisions referred to above may not be effective, no absolute assurance
can be given that such transfers, or other events of which the Corporation has
no knowledge, will not cause the Corporation to own constructively 10% or more
of one or more lessees at some future date.
The Corporation will from time to time engage in activities that generate
nonqualifying income. The Corporation's foreign investments could generate
foreign currency gains which also would not constitute qualifying income. The
Corporation intends to monitor and manage these activities and investments so
that the amount of nonqualifying income does not exceed applicable limits.
There can be no assurance, however, that these efforts will be successful.
The REIT requirements also impose certain asset tests which limit the value
of the non-real estate assets held by the Corporation. The asset tests also
prevent the Corporation from holding 10% or more of the voting securities of a
corporate issuer. The asset tests must be satisfied at the close of each
quarter (or, to the extent not satisfied at the close of the quarter, within the
30-day period following the close of the quarter). Although the Corporation
holds and will continue to hold substantial non-real estate assets, and also
holds or will hold at times voting securities in excess of the 10% limit, the
Corporation intends to manage its assets so that it does not hold assets in
violation of the applicable limits on the relevant testing dates (or the
expiration of applicable cure periods). There can be no assurance, however,
that the IRS will not challenge the Corporation's compliance with these tests.
If the Corporation holds assets in violation of applicable limits, it would be
disqualified as a REIT.
In addition to the considerations discussed above, the REIT requirements
impose a number of other restrictions on the operations of the Corporation.
For example, net income from sales of property sold to customers in the
ordinary course of business (other than inventory acquired by reason of
certain foreclosures) is subject to a 100% tax unless eligible for a certain
safe harbor. Minimum distribution requirements also generally require the
Corporation to distribute each year at least 95% of its taxable income for
the year (excluding any net capital gain). See "Risk Factors--Real Estate
Investment Trust Tax Risks--Adverse Effects of REIT Minimum Distribution
Requirements" and "--Accumulated Earnings and Profits."
Impact of Proposed Tax Legislation
The Corporation's exemption of the anti-pairing rules and its ability to
utilize the paired structure could be revoked or limited as a result of
future legislation. See "Risk Factors--Real Estate Investment Trust Tax
Risks--Exemption from Anti-Pairing Rules; Risks of Adverse Legislation."
There can be no assurance that such legislation or other legislation
affecting REIT qualification or operations will not be enacted, and any such
legislation could have a material effect on the operations of the Companies.
Taxation of the Operating Company; Corporate Subsidiaries
As C corporations under the Code, the Operating Company and its corporate
subsidiaries are subject to United States federal income tax on their taxable
income at corporate rates. Certain corporate subsidiaries of the Corporation
and the Realty Partnership also are subject to federal income tax.
State and Local Taxation
The Companies and their stockholders or partners may be subject to state
and local taxes in various jurisdictions, including those in which it or they
transact business, own property or reside. The state and local tax treatment of
such entities or persons may not conform to the federal income tax consequences
discussed
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above. Consequently, stockholders should consult their own tax advisors
regarding the effect of state and local tax laws on the ownership of Paired
Shares.
Federal Income Taxation of Holders of Paired Shares
Separate Taxation
Notwithstanding that Paired Shares may only be transferred as a unit,
holders of Paired Shares will be treated for United States federal income tax
purposes as holding equal numbers of shares of Corporation Common Stock and of
Operating Company Common Stock. The tax treatment of distributions to
stockholders and of any gain or loss upon sale or other disposition of the
Paired Shares (as well as the amount of gain or loss) must therefore be
determined separately with respect to each share of Corporation Common Stock and
each share of Operating Company Common Stock contained within each Paired Share.
The tax basis and holding period for each share of Corporation Common Stock and
each share of Operating Company Common Stock also must be determined separately.
Upon a taxable sale of a Paired Share, the amount realized should be allocated
between the Corporation Common Stock and the Operating Company Common Stock
based on their then-relative values.
Taxation of Taxable U.S. Stockholders
As used herein, the term "U.S. Stockholder" means a holder of Paired
Shares that for United States federal income tax purposes (A) is (i) a citizen
or resident of the United States, (ii) a corporation, partnership, or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate, the income of which is subject
to United States federal income taxation regardless of its source or (iv) a
trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust and
(B) is not an entity that has a special status under the Code (such as a
tax-exempt organization or a dealer in securities).
As long as the Corporation qualifies as a REIT, distributions made to
the Corporation's taxable U.S. Stockholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by such U.S. Stockholders as ordinary income and will not
be eligible for the dividends received deduction generally available to
corporations. For purposes of determining whether distributions on
Corporation Common Stock are out of current or accumulated earnings and
profits, the earnings and profits of the Corporation will be allocated first
to the Corporation's outstanding preferred stock (if any) and then allocated
to the Corporation's Common Stock. Subject to the discussion below regarding
changes to the capital gains tax rates, distributions that are designated as
capital gain dividends will be taxed as capital gains (to the extent they do
not exceed the Corporation's actual net capital gain for the taxable year)
without regard to the period for which the stockholder has held his or her
Corporation Common Stock. However, corporate stockholders may be required to
treat up to 20% of certain capital gain dividends as ordinary income.
Distributions in excess of current and accumulated earnings and profits will
not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's Corporation Common Stock, but rather will
reduce the adjusted basis of such stock. To the extent that such
distributions in excess of current and accumulated earnings and profits
exceed the adjusted basis of a stockholder's Corporation Common Stock, such
distributions will be included in income as long-term capital gain (or,
subject to certain proposed changes in capital gain holding periods discussed
below, in the case of individuals, trusts and estates, mid-term capital gain
if the Corporation Common Stock has been held for more than 12 months but not
more than 18 months or in the case of all taxpayers short-term capital gain
if the Corporation Common Stock has been held for one year or less) assuming
the shares are a capital asset in the hands of the stockholder. See
"-Proposed Legislation Regarding Capital Gains''. In addition,
any distribution declared by the Corporation in October, November or December
of any year and payable to a stockholder of record on a specified date in any
such month shall be treated as both paid by the Corporation and received by
the stockholder on December 31 of such year, provided that the distribution
is actually paid by the Corporation during January of the following calendar
year.
Distributions from the Operating Company up to the amount of the Operating
Company's current or accumulated earnings and profits (less any earnings and
profits allocable to distributions on any preferred stock of the Operating
Company) will be taken into account by U.S. Stockholders as ordinary income and
generally
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will be eligible for the dividends-received deduction for corporations (subject
to certain limitations). Distributions in excess of the Operating Company's
current and accumulated earnings and profits will not be taxable to a
stockholder to the extent that they do not exceed the adjusted basis of the
stockholder's Operating Company Common Stock, but rather will reduce the
adjusted basis of such Operating Company Common Stock. To the extent that such
distributions exceed the adjusted basis of a stockholder's Operating Company
Common Stock they will be included in income as long-term capital gain (or, in
the case of individuals, trusts and estates, mid-term capital gain if the
Operating Company Common Stock has been held for more than one year but not more
than 18 months or in the case of all taxpayers short-term capital gain if the
Operating Company Common Stock has been held for one year or less) assuming the
shares are a capital asset in the hands of the stockholder.
The Corporation may retain and pay income tax on its net long-term capital
gains recognized during the taxable year. If the Corporation so elects for a
taxable year, its stockholders would include in income as capital gain their
proportionate share of such portion of the Corporation's net capital gains as
the Corporation may designate. Such retained capital gains may be further
designated by the Corporation as 20% rate gain, unrecaptured Section 1250 gain,
or 28% rate gain, as discussed below. Stockholders must account for their share
of such retained capital gains in accordance with such further designation; if
no such further designation is made, the retained capital gains are treated as
28% rate gain. A stockholder would be deemed to have paid its share of the tax
paid by the Corporation, which would be credited or refunded to the stockholder.
The stockholder's basis in its shares of Corporation Common Stock would be
increased by the amount of undistributed capital gains (less the capital gains
tax paid by the Corporation) included in the stockholder's capital gains.
Taxable distributions from the Corporation or the Operating Company and
gain or loss from the disposition of shares of Corporation Common Stock and
Operating Company Common Stock will not be treated as passive activity income
and, therefore, stockholders generally will not be able to apply any passive
activity losses (such as losses from certain types of limited partnerships in
which the stockholder is a limited partner) against such income. In addition,
taxable distributions from the Corporation or the Operating Company generally
will be treated as investment income for purposes of the investment interest
deduction limitations. Capital gain dividends, capital gains (other than
short-term capital gains) from the disposition of Paired Shares and actual or
deemed distributions from either company treated as such, including capital
gains (other than short-term capital gains) recognized on account of nontaxable
distributions in excess of a stockholder's basis or any deemed capital gain
distributions to a Corporation stockholder on account of retained capital gains
of the Corporation, will be treated as investment income for purposes of the
investment interest deduction limitations only if and to the extent the
stockholder so elects, in which case such capital gains will be taxed at
ordinary income rates to the extent of the election. The Corporation and the
Operating Company will notify stockholders after the close of the Companies'
taxable years as to the portions of the distributions attributable to that year
that constitute ordinary income, return of capital, and (in the case of the
Corporation) capital gain. Stockholders may not include in their individual
income tax returns any net operating losses or capital losses of the Corporation
or of the Operating Company.
The Taxpayer Relief Act of 1997 (the "Relief Act") altered the taxation of
capital gain income. Under the Relief Act, individuals, trusts and estates that
hold certain investments for more than 18 months may be taxed at a maximum
long-term capital gain rate of 20% on the sale or exchange of those investments.
Individuals, trusts and estates that hold certain assets for more than one year
but not more than 18 months may be taxed at a maximum mid-term capital gain rate
of 28% on the sale or exchange of those investments. The Relief Act also
provides a maximum rate of 25% for "unrecaptured Section 1250 gain" for
individuals, trusts and estates, special rules for "qualified 5-year gain," as
well as other changes to prior law. The Relief Act allows the IRS to prescribe
regulations on how the Relief Act's new capital gain rates will apply to sales
of capital assets by (or interests in) "pass-thru entities," which include REITs
such as the Corporation. IRS Notice 97-64 sets forth guidance on certain of
these issues pending the release of regulations and provides, among other
things, that a REIT may designate a capital gains dividend as a 20% rate gain
distribution, an unrecaptured Section 1250 gain distribution, or a 28% rate gain
distribution. Absent any such designation, a capital gains dividend will be
treated as a 28% rate gain distribution. In general, the Notice provides that a
REIT must determine the maximum amounts which may be designated in each class of
capital gain dividends as if the REIT were an individual whose ordinary income
is subject to a marginal tax rate of at least 28 percent. Similar rules will
apply in the case of designated retained capital gains (see above discussion).
The Corporation will notify
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stockholders after the close of the Corporation's taxable year as to the
portions of the distributions attributable to that year that constitute ordinary
income, return of capital, and capital gain (and, with respect to capital gain
dividends, the portions constituting 20% rate gain distributions, unrecaptured
Section 1250 gain distributions, and 28% rate gain distributions). The
Corporation also will notify stockholders of the amounts of any designated
retained capital gains (including the amounts thereof constituting 20% rate
gain, unrecaptured Section 1250 gain, and 28% rate gain) and the Corporation's
taxes with respect to any designated retained capital gains. Final regulations
when issued may alter the rules of the temporary regulations. In addition, the
IRS has not prescribed regulations regarding the application of the new rates to
sale of interests in REITs such as the Corporation, and it remains unclear how
the new rules will affect such sales (if at all). Investors are urged to
consult their own tax advisors with respect to the new rules contained in the
Relief Act.
Taxation of Stockholders on the Disposition of Paired Shares
Subject to the discussion above regarding the Relief Act, in general, and
assuming the taxpayer has the same holding period for the Corporation Common
Stock and the Operating Company Common Stock that comprise his or her Paired
Share, any gain or loss realized upon a taxable disposition of Paired Shares by
a stockholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the Paired Shares have been held for more than one year,
(or, in the case of individuals, trusts and estates, mid-term capital gain or
loss if the Paired Shares have been held for more than one year but not more
than 18 months, and long-term capital gain or loss if the Paired Shares have
been held for more than 18 months) and otherwise as short-term capital gain or
loss. In addition, any loss upon a sale or exchange of Corporation Common Stock
by a stockholder who has held such stock for six months or less (after applying
certain holding period rules), will be treated as a long-term capital loss to
the extent of distributions from the Corporation or undistributed capital gains
required to be treated by such stockholder as long-term capital gain. All or a
portion of any loss realized upon a taxable disposition of Paired Shares may be
disallowed if other Paired Shares are purchased within 30 days before or after
the disposition.
Proposed Legislation Regarding Capital Gains
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"IRS Reform Act"), if enacted, would reduce the long-term capital gain
holding period applicable to individuals, estates and certain trusts from 18
months to one year, effective for transactions occurring after January 1,
1998. Such long-term capital gain would continue to be taxed at a maximum 20%
rate, and the category of "mid-term capital gain, or "28% rate gain,"
discussed above, would be eliminated. Section 1250 capital gains would
continue to be taxed at 25%. It is anticipated that the President will
sign the IRS Reform Act of 1998 if presented to him in its current form.
Information Reporting Requirements and Backup Withholding
The Corporation and the Operating Company will each report to their U.S.
Stockholders and the IRS the amount of distributions paid during each calendar
year, and the amount of tax withheld, if any. Under the backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to distributions paid unless such holder (i) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact or (ii) provides a taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholding rules. A stockholder who does
not provide the Corporation and the Operating Company with his, her or its
correct taxpayer identification number also may be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against
the stockholder's income tax liability. In addition, the Corporation may be
required to withhold a portion of capital gain distributions to any stockholders
who fail to certify their non-foreign status to the Corporation.
Taxation of Tax-Exempt Stockholders
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. They are, however, subject
to taxation on their unrelated business taxable income ("UBTI"). Amounts
distributed by the Corporation to Exempt Organizations generally should not
constitute UBTI, nor should dividends paid by the Operating Company generally
constitute UBTI. However, if an Exempt Organization finances its acquisition of
Paired Shares with debt, a portion of its income from the Corporation and the
Operating Company will constitute UBTI pursuant to the "debt-financed property"
rules. Furthermore, social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts, and qualified group legal services
plans that are exempt from taxation under paragraphs (7), (9), (17), and (20),
respectively, section 501(c) of the Code are subject to different UBTI rules,
which generally will require them to characterize distributions from the
Corporation and the Operating Company as UBTI.
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SELLING STOCKHOLDER
This Prospectus relates to the offer and sale from time to time of an
aggregate of 6,695,000 shares of Paired Common Stock (the "Shares") which may
be offered by the Selling Stockholder, PaineWebber Financial Products Inc.
There is no assurance that the Selling Stockholder will sell any or all of
the Shares.
This Prospectus has been prepared pursuant to the Companies' obligations
under the certain Purchase Agreement, dated as of April 6, 1998, by and among
the Corporation, the Operating Company, PaineWebber Incorporated and the
Selling Stockholder (the "Purchase Agreement"). In accordance with the
Purchase Agreement, which contains customary representations and warranties
relating to the Companies, this Prospectus (and the registration statement of
which it is a part) relates to sales of the Shares by the Selling
Stockholder, subject to the terms and conditions set forth in the Purchase
Agreement.
In addition, in the Purchase Agreement the Companies have agreed to
indemnify the Selling Stockholder and any broker or dealer to or through whom
any of the Shares are sold against certain civil liabilities, including
liabilities under the Securities Act, or to contribute to payments the Selling
Stockholder may be required to make in respect thereof.
Because the Selling Stockholder may offer all or a portion of the Shares
pursuant to the offering made hereby, no estimate can be given as to the number
of the Shares that will be held by the Selling Stockholder after completion of
the offering.
The Selling Stockholder and any broker or dealer to or through whom any of
the Shares are sold may be deemed to be underwriters within the meaning of the
Securities Act with respect to the Shares offered hereby, and any profits
realized by the Selling Stockholder or such brokers or dealers may be deemed to
be underwriting commissions. Brokers' commissions and dealers' discounts, taxes
and other selling expenses to be borne by the Selling Stockholder are not
expected to exceed normal selling expenses. The registration of the Shares under
the Securities Act shall not be deemed an admission by the Selling Stockholder
or the Companies that the Selling Stockholder is an underwriter for purposes of
the Securities Act of any Shares offered pursuant to this Prospectus.
As of April 6, 1998, the Companies entered into two agreements with the
Selling Stockholder. In one agreement, pursuant to the Purchase Agreement the
Selling Stockholder purchased 5,150,000 shares of Paired Common Stock (the
"Purchased Shares") from the Companies for a price per share of Paired Common
Stock equal to $27.01125, which reflects a 2% discount to the last reported sale
price of the Paired Common Stock on April 3, 1998. In the other agreement, the
Companies entered into a separate agreement with the Selling Stockholder also
dated April 6, 1998 (the "Price Adjustment Agreement"); pursuant to the Price
Adjustment Agreement, the Selling Stockholder will sell, as directed by the
Companies on or before April 6, 1999, by any one or more of the methods
described under "Plan of Distribution," a sufficient number of the Shares to
achieve net sales proceeds equal to the aggregate market value of the Purchased
Shares on April 3, 1998 ($141,946,875), plus a forward accretion component,
minus an adjustment for the Companies' distribution rate. In addition, the
Selling Stockholder will have the right to cause a sale of all or a portion of
the Shares that are the subject of the Price Adjustment Agreement under certain
market conditions. The precise number of the Shares that will be required to be
sold pursuant to the Price Adjustment Agreement will depend primarily on the
market price of the Paired Common Stock at the time of settlement. If the
number of the Shares so required to be sold is greater than the number of
Purchased Shares as a result of a decrease in the market price of the Paired
Common Stock, the Companies are required to deliver additional shares of Paired
Common Stock to the Selling Stockholder. If the number of the Shares so
required to be sold is less than the number of Purchased Shares as a result of
an increase in the market price of the Paired Common Stock, the Selling
Stockholder will deliver to the Companies shares of Paired Common Stock.
Certain affiliates of the Selling Stockholder, from time to time, provide
investment banking and financial advisory services to the Companies, for which
customary compensation has been paid by the Companies.
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The following table sets forth certain information with respect to the
Selling Stockholder, including the number of shares of Paired Common Stock
beneficially owned by the Selling Stockholder, the number of shares of Paired
Common Stock registered hereby and the percentage of shares of Paired Common
Stock being registered. There can be no assurance that all or any of the shares
of Paired Common Stock offered hereby will be sold. If any are sold, the
Selling Stockholder will receive all of the net proceeds from the sale of its
shares of Paired Common Stock offered hereby.
Number of Shares Number of Shares
of Paired of Paired
Common Stock Owned Common Stock
Selling Stockholder Before the Offering Being Registered (1)
PaineWebber Financial
Products Inc. 5,150,000 6,695,000
- ----------------
(1) As of June 22, 1998, the aggregate number of shares of Paired Common Stock
being registered (6,695,000) represented approximately 4.6% of all
outstanding shares of Paired Common Stock of the Companies.
30
<PAGE>
PLAN OF DISTRIBUTION
The sale or distribution of all or any portion of the Shares may be
effected from time to time by the Selling Stockholder, pledges, transferees and
other successors in interest of the Selling Stockholder, directly, indirectly
through brokers or dealers or in a distribution by one or more underwriters on a
firm commitment or best efforts basis, on the NYSE, in the over-the-counter
market, on any other national securities exchange on which shares of the Paired
Common Stock are listed or traded, in privately negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling Stockholder
may sell its Shares principally to or through a registered broker-dealer that is
an affiliate of the Selling Stockholder. The Companies will not receive any of
the proceeds from the sale of the Shares.
Pursuant to the Price Adjustment Agreement, the methods by which the
Shares may be sold or distributed include the following: (i) an underwritten
fixed-price offering, (ii) a privately negotiated sale involving at least a
block (as defined in Rule 10b-18 under the Exchange Act) of the Shares, (iii) a
sale into the existing trading market for the Paired Shares at other than a
fixed price, on or through the facilities of a national securities exchange or
to or through a market-maker otherwise than on a securities exchange, and (iv)
sales to any distribution reinvestment plan now or hereafter established by the
Companies, or to any agent acting on behalf of such plan, for sale to
participants in such plan. In effecting sales, brokers or dealers engaged by
the Selling Stockholder may arrange for other brokers or dealers to participate.
Any public offering price and any discount or concessions allowed or reallowed
or paid to dealers may be changed from time to time. The Selling Stockholder
may from time to time deliver all or a portion of the Shares to cover a short
sale or sales or upon the exercise, settlement or closing of a call equivalent
position or a put equivalent position. The Selling Stockholder and the
broker-dealers participating in the distribution of the Shares may be deemed
"underwriters" within the meaning of the Securities Act and any profit on the
sale of the Shares by the Selling Stockholder and any commissions received by
any such broker-dealers may be regarded as underwriting commissions under the
Securities Act. Underwriters, brokers, dealers or agents may be entitled, under
agreements with the Companies, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act.
The Companies will pay all reasonable expenses in connection with the
registration of the Shares. The Selling Stockholder will pay any brokerage or
underwriting commissions and taxes of any kind (including, without
limitation, transfer taxes) due to a third party with respect to any
disposition, sale or transfer of the Shares, and legal, accounting and other
expenses incurred by the Selling Stockholder.
In connection with a sale of Paired Common Stock, the following information
will, to the extent then required, be provided in the Prospectus Supplement
relating to such sale or in a post-effective amendment to the registration
statement of which this Prospectus is a part: the Selling Stockholder making a
sale, the number of shares of Paired Common Stock to be sold, the purchase
price, the public offering price, if applicable, the name of any underwriter,
agent or broker-dealer, and any applicable commissions, discounts or other items
constituting compensation to such underwriters, agents or broker-dealers with
respect to the particular sale.
In connection with the sale or distribution of the Shares, the rules of the
Commission permit any underwriter to engage in certain transactions that
stabilize the price of the Paired Common Stock. Such transactions may consist
of bids or purchases for the purpose of pegging, fixing or maintaining the price
of the Paired Common Stock.
If any underwriter creates a short position in the Paired Common Stock in
connection with the sale or distribution of the Shares -- i.e., if the
underwriter sells more shares of Paired Common Stock than are set forth on the
cover page hereof, such underwriter may reduce that short position by purchasing
shares of Paired Common Stock in the open market.
In the case of an underwritten offering of the Shares, any managing
underwriter(s) may also impose a penalty bid on certain underwriters and selling
group members. This means that, if any managing underwriter purchases shares of
Paired Common Stock in the open market to reduce any underwriter's short
position, or
31
<PAGE>
to stabilize the price of the Paired Common Stock, such managing underwriter may
reclaim the amount of the selling concession from any such underwriters and
selling group members who sold those Shares.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
None of the Companies, the Selling Stockholder or any underwriter makes any
representation or prediction as to the direction or magnitude of any effect that
any of the transactions described above may have on the price of the Paired
Common Stock. In addition, none of the Companies, the Selling Stockholder or
any underwriter makes any representation that any underwriter will engage in any
such transaction or that any such transaction, once commenced, will not be
discontinued without notice.
In order to comply with the securities laws of certain states, if
applicable, the shares of Paired Common Stock offered hereby will be sold in
such jurisdictions only through registered or licensed brokers or dealers.
LEGAL MATTERS
Certain legal matters, including the legality of the securities and federal
income tax considerations, have been passed upon for the Corporation and the
Operating Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts, as
corporate, securities and tax counsel.
EXPERTS
The (a) Combined Financial Statements of Patriot American Hospitality, Inc.
(the "Corporation") and Wyndham International, Inc. (the "Operating Company"),
as of December 31, 1997 and 1996 and for the years ended December 31, 1997 and
1996 and the period October 2, 1995 (inception of operations) through December
31, 1995, (b) the Consolidated Financial Statements of the Corporation as of
December 31, 1997 and 1996 and for the years ended December 31, 1997 and 1996
and the period October 2, 1995 (inception of operations) through December 31,
1995 and the related financial statement schedules, and (c) the Consolidated
Financial Statements of the Operating Company as of December 31, 1997 and for
the six months ended December 31, 1997 appearing in the Joint Annual Report on
Form 10-K of Patriot American Hospitality, Inc. and Wyndham International, Inc.
for fiscal year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. The Financial Statements of NorthCoast
Hotels, L.L.C. as of December 31, 1996 and the period April 2, 1996 (inception
of operations) through December 31, 1996 appearing in the Joint Current Report
on Form 8-K of Patriot American Hospitality, Inc. and Patriot American
Hospitality Operating Company dated July 1, 1997, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. The (a) Consolidated Financial
Statements of Resorts Limited Partnership as of and for the years ended December
31, 1996 and 1995, (b) the Financial Statements of CV Ranch Limited Partnership
as of and for the years ended December 31, 1996 and 1995, and (c) the Financial
Statements of Telluride Resort and Spa Limited Partnership as of and for the
years ended December 31, 1996 and 1995, appearing in Patriot's Current Report on
Form 8-K, dated January 16, 1997, as amended (filed January 31, 1997, February
21, 1997, April 8, 1997, April 9, 1997, and May 19, 1997) have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference. The (a) Consolidated
Financial Statements of GAH-II, L.P. as of December 31, 1996 and 1995 and for
the years then ended, (b) the Financial Statements of G.B.H. Joint Venture
(d/b/a Grand Bay Hotel) as of December 31, 1996 and 1995 and for the years then
ended, (c) the Financial Statements of River House Associates (d/b/a Sheraton
Gateway Hotel) as of December 31, 1996 and 1995 and for the years then ended,
and (d) the Financial Statements of W-L Tampa, Ltd. (the Sheraton Grand Hotel)
as of December 31, 1996 and 1995 and for the years then ended, appearing in the
Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and
Patriot American Hospitality Operating Company dated September 30, 1997, as
amended (filed October 14, 1997 and October 28, 1997), have been audited by
Ernst & Young LLP,
32
<PAGE>
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. The (a) Consolidated Financial Statements of
WHG Resorts & Casinos Inc. as of June 30, 1997 and 1996, and for each of the
three years in the period ended June 30, 1997 and the related financial
statement schedule, (b) the Financial Statements of Posadas de San Juan
Associates as of June 30, 1997 and 1996, and for each of the three years in the
period ended June 30, 1997 and the related financial statement schedule, (c) the
Financial Statements of WKA El Con Associates as of June 30, 1997 and 1996, and
for each of the three years in the period ended June 30, 1997, and (d) the
Financial Statements of El Conquistador Partnership L.P. as of March 31, 1997
and 1996, and for each of the three years in the period ended March 31, 1997,
appearing in the Joint Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Wyndham International, Inc. dated April 20, 1998 (filed
April 22, 1998) have been audited by Ernst & Young LLP, independent auditors,
as set forth in their reports thereon included therein and incorporated
herein by reference. Each of the above referenced financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The Combined Financial Statements of Snavely Hotels as of December 31,
1996 and for the year then ended, the Combined Financial Statements of
Minneapolis Hotels as of December 31, 1996 and for the year then ended, and
the combined statement of Direct Revenue and Direct Operating Expenses for
the Met Life Hotels for the year ended December 31, 1996, included in the
Report on Form 8-K dated September 17, 1997, and the Financial Statements of
SCP Inc. as of December 31, 1996 and for the year then ended, included in the
Report on Form 8-K/A No. 1 dated September 30, 1997, the financial statements
of Royal Palace Hotel Associates as of December 31, 1995 and 1996 and for the
years then ended, included in the Joint Current Report on Form 8-K dated
December 10, 1997, incorporated by reference in this Prospectus, and the
consolidated financial statements of Interstate Hotels Company as of December
31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996 included in the Report on Form 8-K dated December 10, 1997,
the financial statements of Sheraton City Centre as of December 31, 1996 and
for the year then ended and the Statement of Direct Revenues and Direct
Operating Expenses for the Wyndham Emerald Plaza for the year ended December
31, 1996, included in the Current Report on Form 8-K dated January 5, 1998,
and (a) the Consolidated Financial Statements Wyndham Hotel Corporation as
of December 31, 1996 and 1997 and for each of the three years in the period
ended December 31, 1997, and (b) the Consolidated Financial Statements of
Interstate Hotels Company as of December 31, 1996 and 1997 and for each of
the three years in the period ended December 31, 1997 included in
Interstate's 1997 Annual Report on Form 10-K dated March 31, 1998 included in
the Current Report on Form 8-K dated April 20, 1998, which is incorporated by
reference herein have been audited by PricewaterhouseCoopers LLP, independent
accountants, as set forth in their reports thereon. Each of the
above-referenced financial statements have been incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
The combined financial statements of the Partnerships of Acquired Hotels as
of December 31, 1996 and 1995 and for each of the two years in the period ended
December 31, 1996, incorporated in this Prospectus by reference from the report
on Form 8-K/A No. 1 dated September 30, 1997 of Patriot American Hospitality,
Inc. and Patriot American Hospitality Operating Company have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The Financial Statements of Historic Hotel Partners of Birmingham Limited
Partnership as of December 31, 1994 and 1995 and for the years then ended, the
Financial Statements of Historic Hotel Partners of Chicago, Limited Partnership
as of December 31, 1996 and for the year then ended, and the Financial
Statements of Historic Hotel Partners of Nashville, Limited Partnership as of
December 31, 1996 and for the year then ended incorporated by reference in this
Prospectus, have been audited by Pannell Kerr Forster PC, independent auditors,
as set forth in their reports thereon. Each of the above-referenced financial
statements have been incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing.
The CHC Lease Partners financial statements as of December 31, 1996 and
1995 and for the year ended December 31, 1996 and the period inception (October
2, 1995) through December 31, 1995, incorporated by reference in this
Prospectus, by reference to the Current Report on Form 8-K dated July 1, 1997,
and the CHC
33
<PAGE>
International, Inc. Hospitality Division financial statements as of November 30,
1997 and 1996 and for each of the years ended November 30, 1995, 1996 and 1997,
incorporated by reference in this Prospectus, by reference to the Current Report
on Form 8-K dated April 20, 1998, have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent certified public accountants, given
on the authority of said firm as experts in auditing and accounting.
The Combined Financial Statements of the Crow Family Hotel Partnerships
as of December 31, 1996, incorporated in this Prospectus by reference from
the Report on Form 8-K/A No. 1 dated September 30, 1997 of Patriot American
Hospitality, Inc. and Patriot American Hospitality Operating Company have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving such reports.
34
<PAGE>
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Companies or any other
person. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Companies since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered Securities to which it
relates.
----------
TABLE OF CONTENTS
Page
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference. . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . .13
Restrictions on Transfers of Capital Stock . . . . . . . . . . . . . . . . .18
Certain Federal Income Tax Considerations. . . . . . . . . . . . . . . . . .22
Selling Stockholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
----------
Patriot American
Hospitality, Inc.
6,695,000 Shares of
Common Stock
Wyndham
International, Inc.
6,695,000 Shares of
Common Stock
----------
PROSPECTUS
----------
__, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
<TABLE>
<CAPTION>
<S> <C>
Registration fee . . . . . . . . . . . .$ 45,179
Printing fees and expenses . . . . . . . 15,000
Legal fees and expenses. . . . . . . . . 50,000
Accounting fees and expenses . . . . . . 30,000
Miscellaneous. . . . . . . . . . . . . . 10,000
Total. . . . . . . . . . . . . . . . . .$ 150,179
</TABLE>
* Fees and expenses are estimated with the exception of the registration fee.
Item 15. Indemnification of Directors and Officers.
Pursuant to Section 145 of the DGCL, each of the Corporation Charter and
the Operating Company Charter includes a provision which eliminates any
personal liability for a director to the Corporation or the Operating Company,
as the case may be, and to the stockholders, for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or the Operating Company, as the
case may be, or to the stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) in connection with certain unlawful dividend payments or stock
redemptions or repurchases or (iv) for any transaction from which such director
derived an improper personal benefit. In addition, the Corporation Charter and
the Operating Company Charter each provide that if the DGCL is amended to
authorize the further elimination or limitation of the personal liability of
directors, then the liability of a director of the Corporation or the Operating
Company shall be eliminated or limited to the fullest extent permitted by the
DGCL, as so amended.
Article VII of each of the Corporation Bylaws and the Operating Company
Bylaws provides for indemnification by the Corporation or the Operating
Company, as the case may be, of their respective officers, directors and the
officers and directors of their respective subsidiaries to the fullest extent
permitted by Section 145 of the DGCL, as amended from time to time and the
Corporation and the Operating Company may, by action of their respective Board
of Directors, indemnify all other persons the Corporation or the Operating
Company may indemnify under the DGCL.
<PAGE>
Item 16. Exhibits.
4.1(1) Agreement (the "Pairing Agreement"), dated February 15, 1983 and as
amended February 18, 1988, between Bay Meadows Operating Company and
California Jockey Club (f/k/a Bay Meadows Realty Enterprises, Inc.),
as amended (incorporated by reference to Exhibit 4.3 to California
Jockey Club's and Bay Meadows Operating Company's Registration
Statement on Form S-2, and to Exhibit 4.2 to California Jockey Club's
and Bay Meadows Operating Company's Annual Report on Form 10-K for
the year ended December 31, 1987 (Nos. 001-09319 and 001-09320).
4.1(2) Amendment No. 2 to the Pairing Agreement (incorporated by reference
to Exhibit 4.2 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Registration Statement on Form S-4 (Nos.
333-39875 and 333-39875-01)).
4.1(3) Amendment No. 3 to the Pairing Agreement (incorporated by reference
on Exhibit 4.3 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Registration Statement on Form S-4 (Nos.
333-44203 and 333-44203-01)).
4.2 Cooperation Agreement, dated December 18, 1997, between Patriot
American Hospitality, Inc. and Wyndham International, Inc.
(incorporated by reference to Exhibit 4.4 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Registration
Statement on Form S-4 (Nos. 333-44203 and 333-44203-01)).
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to legality of securities
being offered.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 and
Exhibit 8.1).
*23.2 Consent of Ernst & Young LLP, Dallas, Texas.
*23.3 Consent of Ernst & Young LLP, Seattle, Washington.
*23.4 Consent of Ernst & Young LLP, Phoenix, Arizona.
*23.5 Consent of Ernst & Young LLP, Miami, Florida.
*23.6 Consent of Ernst & Young LLP, San Juan, Puerto Rico.
*23.7 Consent of PricewaterhouseCoopers LLP, Pittsburgh, Pennsylvania.
*23.8 Consent of PricewaterhouseCoopers LLP, Dallas, Texas.
*23.9 Consent of PricewaterhouseCoopers LLP, Phoenix, Arizona.
*23.10 Consent of PricewaterhouseCoopers LLP, Tampa, Florida.
*23.11 Consent of Pannell Kerr Forster PC, Alexandria, Virginia.
*23.12 Consent of Price Waterhouse LLP, Miami, Florida.
*23.13 Consent of Deloitte & Touche, LLP Houston, Texas.
*23.14 Consent of Arthur Andersen LLP, Dallas, Texas.
24.1 Powers of Attorney (included on signature pages to the Registration
Statement).
*99.1 Purchase Agreement, dated April 6, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc.,
PaineWebber Incorporated and PaineWebber Financial Products Inc.
- ---------------
* Filed herewith
<PAGE>
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication
of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, July 7, 1998.
PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC.
By: /s/ Paul A. Nussbaum /s/ James D. Carreker
------------------------- ---------------------------
Paul A. Nussbaum James D. Carreker
Chairman of the Board, and Chief Chairman of the Board and Chief
Executive Officer Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated, each of whom also constitutes and
appoints Paul A. Nussbaum and John P. Bohlmann and each of them singly, his true
and lawful attorney-in-fact and agent, for him, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement and
to file the same and all exhibits thereto, and any other documents in
connection therewith with the Securities and Exchange Commission, granting unto
each attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intent and purposes as he might or could do in person, hereby ratifying and
confirming all that each attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Paul A. Nussbaum Chairman of the Board of July 7, 1998
- -------------------------- Directors and Chief Executive
Paul A. Nussbaum Officer, Patriot American
Hospitality, Inc. (Principal
Executive Officer)
President, Chief Operating
- -------------------------- Officer and Director, Patriot
William W. Evans III American Hospitality, Inc.
/s/ Lawrence S. Jones Executive Vice President and July 7, 1998
- -------------------------- Treasurer, Patriot American
Lawrence S. Jones Hospitality, Inc. (Principal
Accounting Officer)
/s/ John H. Daniels Director, Patriot American July 7, 1998
- -------------------------- Hospitality, Inc.
John H. Daniels
/s/ John C. Deterding Director, Patriot American July 7, 1998
- -------------------------- Hospitality, Inc.
John C. Deterding
<PAGE>
/s/ Gregory R. Dillon Director, Patriot American July 7, 1998
- -------------------------- Hospitality, Inc.
Gregory R. Dillon
/s/ Arch K. Jacobson Director, Patriot American July 7, 1998
- -------------------------- Hospitality, Inc.
Arch K. Jacobson
/s/ James D. Carreker Director, Patriot American July 7, 1998
- -------------------------- Hospitality, Inc.
James D. Carreker
/s/ Philip J. Ward Director, Patriot American July 7, 1998
- -------------------------- Hospitality, Inc.
Philip J. Ward
/s/ Harlan R. Crow Director, Patriot American July 7, 1998
- -------------------------- Hospitality, Inc.
Harlan R. Crow
Director, Patriot American
- -------------------------- Hospitality, Inc.
Milton Fine
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated, each of whom also constitutes and
appoints Paul A. Nussbaum and John P. Bohlmann and each of them singly, his true
and lawful attorney-in-fact and agent, for him, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement and
to file the same and all exhibits thereto, and any other documents in
connection therewith with the Securities and Exchange commission, granting unto
each attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intent and purposes as he might or could do in person, hereby ratifying and
confirming all that each attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ James D. Carreker Chairman of the Board of July 7, 1998
- -------------------------- Directors and Chief Executive
James D. Carreker Officer, Wyndham International,
Inc. (Principal Executive
Officer)
/s/ Paul A. Nussbaum Director, Wyndham July 7, 1998
- -------------------------- International, Inc.
Paul A. Nussbaum
/s/ Karim Alibhai President, Chief Operating July 7, 1998
- -------------------------- Officer and Director,
Karim Alibhai Wyndham International, Inc.
/s/ Lawrence S. Jones Executive Vice President and July 7, 1998
- -------------------------- Treasurer, Wyndham
Lawrence S. Jones International, Inc.(Principal
Financial Officer and Principal
Accounting Officer)
/s/ Arch K. Jacobson Director, Wyndham July 7, 1998
- -------------------------- International, Inc.
Arch K. Jacobson
/s/ Leonard Boxer Director, Wyndham July 7, 1998
- -------------------------- International, Inc.
Leonard Boxer
/s/ Burton C. Einspruch, M.D. Director, Wyndham July 7, 1998
- -------------------------- International, Inc.
Burton C. Einspruch, M.D.
Director, Wyndham
- -------------------------- International, Inc.
Sherwood Weiser
/s/ James C. Leslie Director, Wyndham July 7, 1998
- -------------------------- International, Inc.
James C. Leslie
/s/ Susan T. Groenteman Director, Wyndham July 7, 1998
- -------------------------- International, Inc.
Susan T. Groenteman
/s/ Rolf E. Ruhfus Director, Wyndham July 7, 1998
- -------------------------- International, Inc.
Rolf E. Ruhfus
<PAGE>
EXHIBIT INDEX
4.1(1) Agreement (the "Pairing Agreement"), dated February 15, 1983 and as
amended February 18, 1988, between Bay Meadows Operating Company and
California Jockey Club (f/k/a Bay Meadows Realty Enterprises, Inc.),
as amended (incorporated by reference to Exhibit 4.3 to California
Jockey Club's and Bay Meadows Operating Company's Registration
Statement on Form S-2, and to Exhibit 4.2 to California Jockey Club's
and Bay Meadows Operating Company's Annual Report on Form 10-K for
the year ended December 31, 1987 (Nos. 001-09319 and 001-09320).
4.1(2) Amendment No. 2 to the Pairing Agreement (incorporated by reference
to Exhibit 4.2 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Registration Statement on Form S-4 (Nos.
333-39875 and 333-39875-01)).
4.1(3) Amendment No. 3 to the Pairing Agreement (incorporated by reference
on Exhibit 4.3 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Registration Statement on Form S-4 (Nos.
333-44203 and 333-44203-01)).
4.2 Cooperation Agreement, dated December 18, 1997, between Patriot
American Hospitality, Inc. and Wyndham International, Inc.
(incorporated by reference to Exhibit 4.4 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Registration
Statement on Form S-4 (Nos. 333-44203 and 333-44203-01)).
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to legality of securities
being offered.
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 and
Exhibit 8.1).
*23.2 Consent of Ernst & Young LLP, Dallas, Texas.
*23.3 Consent of Ernst & Young LLP, Seattle, Washington.
*23.4 Consent of Ernst & Young LLP, Phoenix, Arizona.
*23.5 Consent of Ernst & Young LLP, Miami, Florida.
*23.6 Consent of Ernst & Young LLP, San Juan, Puerto Rico.
*23.7 Consent of PricewaterhouseCoopers LLP, Pittsburgh, Pennsylvania.
*23.8 Consent of PricewaterhouseCoopers LLP, Dallas, Texas.
*23.9 Consent of PricewaterhouseCoopers LLP, Phoenix, Arizona.
*23.10 Consent of PricewaterhouseCoopers LLP, Tampa, Florida.
*23.11 Consent of Pannell Kerr Forster PC, Alexandria, Virginia.
*23.12 Consent of Price Waterhouse LLP, Miami, Florida.
*23.13 Consent of Deloitte & Touche LLP, Houston, Texas.
*23.14 Consent of Arthur Andersen LLP, Dallas, Texas.
24.1 Powers of Attorney (included on signature pages to the Registration
Statement).
*99.1 Purchase Agreement, dated April 6, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc., PaineWebber
Incorporated and PaineWebber Financial Products Inc.
- --------------------
*Filed herewith
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF GOODWIN, PROCTER & HOAR LLP]
July 6, 1998
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75207
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75207
Re: Legality of Securities to be Registered under Registration Statement
on Form S-3
Ladies and Gentlemen:
This opinion is furnished in connection with the registration on Form
S-3 (the "Registration Statement") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), of 6,695,000 additional shares of common stock,
par value $.01 per share, of Patriot American Hospitality, Inc., a Delaware
corporation (the "Corporation"), and 6,695,000 additional shares of common
stock, par value $.01 per share, of Wyndham International, Inc., a Delaware
corporation (the "Operating Company" and, together with the corporation, the
"Companies"), which shares are paired and trade as a single unit (the
"Registration Shares"), to be sold for the account of certain stockholders of
the Companies (the "Selling Stockholders").
In connection with rendering this opinion, we have examined the
Certificate of Incorporation of each of the Companies, as amended to the date
hereof and on file with the Secretary of State of the State of Delaware, the
Bylaws of each of the Companies, such records of the corporate proceedings of
the Companies as we deemed material, the Registration Statement and the
exhibits thereto, and such other certificates, receipts, records and
documents as we considered necessary for the purposes of this opinion. In
our examination, we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted to
us as certified, photostatic or facsimile copies, the authenticity of the
originals of such copies and the authenticity of telephone confirmations of
public officials and others. As to facts material to our opinion, we have
relied upon certificates or telephonic confirmations of public officials and
certificates, documents, statements and other information of the Companies or
representatives or officers thereof.
We are attorneys admitted to practice in the Commonwealth of
Massachusetts. We express no opinion concerning the laws of any jurisdictions
other than the laws of the United States of America and the Delaware General
Corporation Law, and also express no opinion with respect to the blue sky or
securities laws of any state, including Delaware.
Based upon the foregoing, we are of the opinion that under the Delaware
General Corporation Law, pursuant to which the Companies are incorporated,
the Registration Shares being registered for the account of the Selling
Stockholders have been validly issued and are fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us with respect to this
opinion under the heading "Legal Matters" in the Prospectus which is a part
of such Registration Statement.
Very truly yours,
/s/ Goodwin, Procter Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Joint Registration Statement on Form S-3 and the related Prospectus of
Patriot American Hospitality, Inc. and Wyndham International, Inc. (formerly
Patriot American Hospitality Operating Company) for the registration of
6,695,000 shares of paired common stock of the Companies and to the
incorporation by reference therein of our reports (a) dated February 9, 1998
with respect to the Consolidated Financial Statements and financial statement
schedules of Patriot American Hospitality, Inc., the Consolidated Financial
Statements of Wyndham International, Inc. and the Combined Financial
Statements of Patriot American Hospitality, Inc. and Wyndham International,
Inc. included in the 1997 Joint Annual Report on Form 10-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc.; and (b) dated
January 23, 1997 (except for Note 8, as to which the date is September 30,
1997) with respect to the Consolidated Financial Statements of GAH-II, L.P.
for the years ended December 31, 1996 and 1995, included in the Joint Current
Report on Form 8-K of Patriot American Hospitality, Inc. and Patriot American
Hospitality Operating Company dated September 30, 1997, as amended, both filed
with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Dallas, Texas
July 2, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Joint Registration Statement on Form S-3 and the related Prospectus of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) for the registration of 6,695,000 shares
of paired common stock of the Companies and to the incorporation by reference
therein of our report dated March 5, 1997 with respect to the Financial
Statements of NorthCoast Hotels, L.L.C. included in the Joint Current Report on
Form 8-K of Patriot American Hospitality, Inc. and Patriot American Hospitality
Operating Company dated July 1, 1997, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
Seattle, Washington
July 2, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Joint Registration Statement on Form S-3 and the related Prospectus of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) for the registration of 6,695,000 shares
of paired common stock of the Companies and to the incorporation by reference
therein of our reports (a) dated March 14, 1997 with respect to the Consolidated
Financial Statements of Resorts Limited Partnership included in the Current
Report on Form 8-K of Patriot American Hospitality, Inc., dated January 16,
1997, as amended; (b) dated February 13, 1997, with respect to the Financial
Statements of CV Ranch Limited Partnership included in the Current Report on
Form 8-K of Patriot American Hospitality, Inc., dated January 16, 1997, as
amended; and (c) dated February 12, 1997 with respect to the Financial
Statements of Telluride Resort and Spa Limited Partnership included in the
Current Report on Form 8-K of Patriot American Hospitality, Inc., dated January
16, 1997, as amended, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
July 2, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Joint Registration Statement on Form S-3 and the related Prospectus of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) for the registration of 6,695,000 shares
of paired common stock of the Companies and to the incorporation by reference
therein of our reports (a) dated March 13, 1997 (except for the third paragraph
of Note 7, as to which the date is April 2, 1997) with respect to the Financial
Statements of G.B.H. Joint Venture (d/b/a Grand Bay Hotel) for the years ended
December 31, 1995 and 1996; (b) dated September 23, 1997 with respect to the
Financial Statements of River House Associates (d/b/a Sheraton Gateway Hotel)
for the years ended December 31, 1995 and 1996; and (c) dated September 19,1997
with respect to the Financial Statements of W-L Tampa, Ltd. (the Sheraton Grand
Hotel) for the years ended December 31, 1995 and 1996; all of which are included
in the Joint Current Report on Form 8-K/A No.1 of Patriot American Hospitality,
Inc. and Patriot American Hospitality Operating Company dated September 30,
1997, as amended, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Miami, Florida
July 2, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Joint Registration Statement on Form S-3 and the related Prospectus of
Patriot American Hospitality, Inc. and Wyndham International, Inc. (formerly
Patriot American Hospitality Operating Company) for the registration of
6,695,000 shares of paired common stock of the Companies and to the
incorporation by reference therein of our reports (a) dated August 7, 1997
(except for Note 18, as to which the date is September 17, 1997) with respect
to the Consolidated Financial Statements of WHG Resorts & Casinos Inc. and
related financial statement schedule; (b) dated August 7, 1997 with respect
to the financial statements of Posadas de San Juan Associates and related
financial statement schedule; (c) dated August 11, 1997 with respect to the
financial statements of WKA El Con Associates; and (d) dated May 2, 1997 with
respect to the financial statements of El Conquistador Partnership L.P.; all
of which are included in the Joint Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc., dated April 20,
1998, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
San Juan, Puerto Rico
July 2, 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Joint Registration Statement on Form S-3
of Patriot American Hospitality, Inc. and Wyndham International, Inc. of our
reports (i) dated February 12, 1997, except for Note 21, Note 22 and the last
paragraph of Note 2, as to which the date is December 1, 1997, on our audit of
the consolidated financial statements of Interstate Hotels Company as of
December 31, 1995 and 1996, and for the three years in the period ended December
31, 1996 included in the Report on Form 8-K dated December 10, 1997; (ii) dated
February 11, 1998, except for Note 21, as to which the date is March 1, 1998,
and Note 3, as to which the date is March 30, 1998, on our audit of the
consolidated financial statements of Interstate Hotels Company as of December
31, 1996 and 1997, and for the three years in the period ended December 31,
1997, included in the Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Wyndham International, Inc. dated April 20, 1998.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
July 6, 1998
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Joint Registration Statement on Form S-3
of Patriot American Hospitality, Inc. and Wyndham International, Inc. of our
reports (i) dated May 12, 1997, on our audit of the Combined Financial
Statements of the Minneapolis Hotels as of and for the year ended December 31,
1996, included in the Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Patriot American Hospitality Operating Company dated
September 17, 1997; (ii) dated June 27, 1997, on our audit of the Combined
Statement of Direct Revenue and Direct Operating Expenses of the met Life Hotels
for the year ended December 31, 1996, included in the Current Report on Form 8-K
of Patriot American Hospitality, Inc. and Patriot American Hospitality Operating
Company dated September 17, 1997; (iii) dated September 8, 1997, on our audit of
the Combined Financial Statement of the Snavely Hotels as of and for the year
ended December 31, 1996, included on the Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Patriot American Hospitality Operating Company
dated September 17, 1997; (iv) dated December 12, 1997, on our audit of
financial statements of Sheraton City Centre as of and for the year ended
December 31, 1996, included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc. dated January 5,
1998; (v) dated December 12, 1997, on our audit of the Statement of Direct
Revenue and Direct Operating Expenses of Wyndham Emerald Plaza for the year
ended December 31, 1996, included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc. dated January 5, 1998
and (vi) dated February 12, 1998, on our audit of Wyndham Hotel Corporation as
of December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997 included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc. dated April 20, 1998.
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
July 6, 1998
<PAGE>
EXHIBIT 23.9
CONSENT OF INDEPENDENT ACCOUNTANT
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Joint Registration Statement on Form S-3
of Patriot American Hospitality, Inc, and Wyndham International, Inc. of our
report dated March 7, 1997 except for note 12 as to which the date is October 7,
1997 on our audit of the Financial Statements of SCP (Buttes), Inc., as of and
for the year ended December 31, 1996, included in the Current Report on Form
8-K/A No. 1 of Patriot American Hospitality, Inc. and Patriot American
Hospitality Operating Company dated September 30, 1997.
/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
July 6, 1998
<PAGE>
EXHIBIT 23.10
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the Incorporation by reference in the Joint Registration Statement on Form S-3
of Patriot American Hospitality, Inc. and Wyndham International, Inc. of our
report dated January 17, 1997, except for Note 7, as to which the date is
November 25, 1997, on our audit of the financial statements of Royal Palace
Hotel Associates included in the Current Report on Form 8-K of Patriot
Hospitality, Inc. and Patriot American Operating Company dated December 10,
1997.
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
July 6, 1998
<PAGE>
EXHIBIT 23.11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and the
incorporation by reference in the Joint Registration Statement on Form S-3 and
Prospectus of Patriot American Hospitality, Inc. and Wyndham International, Inc.
of our report dated March 1, 1996 on the financial statements of Historic Hotel
Partners of Birmingham, Limited Partnership, our reports dated October 8, 1997
and February 28, 1997 on the financial statements of Historic Hotel Partners of
Chicago Limited Partnership, and our reports dated October 8, 1997 and February
21, 1997 on the financial statements of Historic Hotel Partners of Nashville
Limited Partnership.
/s/ Pannell Kerr Forster PC
Alexandria, Virginia
July 6, 1998
<PAGE>
EXHIBIT 23.12
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Joint Registration Statement on Form S-3 of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) of our reports (a) dated February 27,
1998 relating to the financial statements of CHC International Inc. Hospitality
Division as of November 30, 1996 and 1997 and for each of the years ended
November 30, 1995, 1996 and 1997 which appears in the Current Report on Form 8-K
of Patriot American Hospitality, Inc. and Wyndham International, Inc. dated
April 20, 1998; and (b) dated February 13, 1997, except as to Note 4, which is
as of March 18, 1997, relating to the financial statements of CHC Lease Partners
for the year ended December 31, 1996 and the period inception (October 2, 1995)
through December 31, 1995 which appears in the Current Report on Form 8-K of
Patriot American Hospitality, Inc. and Patriot American Hospitality Operating
Company dated July 1, 1997. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Miami, Florida
June 30, 1998
<PAGE>
EXHIBIT 23.13
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of Patriot American Hospitality, Inc. and Wyndham International,
Inc. (formerly known as Patriot American Hospitality Operating Company) of our
report dated September 30, 1997 (relating to the financial statements of
Partnerships of Acquired Hotels as of December 31,1996 and 1995 and for each of
the two years in the period ended December 31,1996) appearing in the report on
Form 8-K/A No. 1 dated September 30, 1997 of Patriot American Hospitality, Inc.
and Patriot American Hospitality Operating Company and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
July 2, 1998
<PAGE>
EXHIBIT 23.14
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated September 17, 1997, on the combined financial statements of the
Crow Family Hotel Partnerships (and to all references to our Firm), incorporated
by reference into the Joint Registration Statement on Form S-3 of Patriot
American Hospitality, Inc. and Wyndham International, Inc.
/s/ Arthur Andersen LLP
Dallas, Texas
July 6, 1998
<PAGE>
EXHIBIT 99.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of the 6th day of April, 1998, by and
among Patriot American Hospitality, Inc. (the "REIT"), a Delaware corporation,
Wyndham International, Inc., a Delaware Corporation (the "OPCO") (the REIT and
the OPCO, each a "Company" and together the "Companies"), PaineWebber
Incorporated ("PaineWebber"), and PaineWebber Financial Products Inc., as agent
acting for the account of PaineWebber ("PaineWebber Agent" and, collectively
with PaineWebber, the "PaineWebber Parties").
IN CONSIDERATION of the mutual covenants contained in this Purchase
Agreement, the Companies and the PaineWebber Parties hereby agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms and
conditions of this Purchase Agreement, the REIT has authorized the sale to
PaineWebber of 5,150,000 shares of common stock, $.01 par value per share, of
the REIT (the "REIT Shares") and the OPCO has authorized the sale to PaineWebber
of 5,150,000 shares of common stock, $.01 par value per share, of the OPCO (the
"OPCO Shares"), which REIT Shares and OPCO Shares are paired and traded as a
unit consisting of one (1) REIT Share and one (1) OPCO Share (hereinafter each
such paired unit is referred to as a "Paired Share" and the Paired Shares
referred to in this sentence are herein called the "Purchase Shares")). In
addition, the REIT and the OPCO may issue to PaineWebber additional Paired
Shares in settlement of certain of their obligations under that certain Purchase
Price Adjustment Mechanism Agreement (the "Adjustment Agreement"), dated as of
April 6, 1998, between the REIT, the OPCO and PaineWebber (the "Additional
Shares"). The Companies and the PaineWebber Parties agree, to the extent
relevant to their respective business and commercial activities and in the
absence of an administrative determination or judicial ruling to the contrary,
to treat for United States federal income tax and financial accounting purposes
payments and deliveries made under the Adjustment Agreement as adjustments to
the purchase price paid for the Purchase Shares pursuant to Section 2 hereof.
The Purchase Shares and the Additional Shares are hereinafter collectively
called the "Shares."
SECTION 2. Agreement to Sell and Purchase the Purchase Shares. Subject
to the terms and conditions of this Purchase Agreement, on the Closing Date (as
defined in Section 3 hereof), the Companies will sell to PaineWebber the
Purchase Shares for a per Paired Share purchase price equal to 98.00% of the
Closing Price. The "Closing Price" shall equal the closing price reported on
the New York Stock Exchange for a Paired Share on April 3, 1998.
SECTION 3. Delivery of the Purchase Shares at the Closing.
3.1 Closing. The completion of the purchase and sale of the
Purchase Shares (the "Closing") shall occur as soon as practicable on or after
the date hereof on a business day to be agreed upon by the Companies and the
PaineWebber Parties, but in no event later than five business days after the
execution of this Purchase Agreement (hereinafter, the "Closing Date").
<PAGE>
3.2 Conditions. At Closing, the Companies shall deliver to the
PaineWebber Parties one or more stock certificates registered in the name of
PaineWebber representing the number of Purchase Shares set forth in Section 1
above.
The obligation of the Companies to complete the purchase and sale of the
Purchase Shares and deliver such stock certificate(s) to the PaineWebber Parties
at the Closing shall be subject to the following conditions, any one or more of
which may be waived by both of the Companies acting together: (i) receipt by
the Companies of immediately available funds (or other mutually agreed upon form
of payment) in the full amount of the purchase price specified in Section 2 for
the Purchase Shares being purchased hereunder, (ii) the accuracy in all material
respects as of the Closing Date, of the representations and warranties made by
the PaineWebber Parties herein and the fulfillment, in all material respects, of
those undertakings of the PaineWebber Parties to be fulfilled prior to the
Closing, (iii) execution and delivery of the Adjustment Agreement, (iv) receipt
by the Companies of a cross-receipt with respect to the Purchase Shares executed
by PaineWebber Agent on behalf of PaineWebber and (v) receipt by the Companies
of a certificate by an officer or authorized representative of PaineWebber Agent
to the effect that the representations and warranties of the PaineWebber Parties
set forth in Section 5 hereof are true and correct as of the date of this
Agreement and as of the Closing Date.
The obligation of PaineWebber to accept delivery of such stock
certificate(s) and to pay for the Purchase Shares evidenced thereby shall be
subject to the following conditions, any one or more of which may be waived by
the PaineWebber Parties: (i) the accuracy in all material respects, as of the
Closing Date, of the representations and warranties made by the Companies herein
and the fulfillment, in all material respects, of those undertakings of the
Companies to be fulfilled prior to the Closing, (ii) receipt by the PaineWebber
Parties of all opinions, letters and certificates to be delivered by the
Companies pursuant to this Purchase Agreement, (iii) execution and delivery of
the Adjustment Agreement, and (iv) receipt by the PaineWebber Parties of a
cross-receipt with respect to the purchase price for the Purchase Shares
executed by the Companies.
SECTION 4. Representations, Warranties and Covenants of the Companies.
Except as disclosed in the Companies' SEC Filings (as defined below), the REIT
and the OPCO, jointly and severally, hereby represent and warrant to the
PaineWebber Parties, and covenant with the PaineWebber Parties, as follows:
4.1 Organization and Qualification of the Companies. The REIT has
been duly organized and is validly existing as a corporation in good standing
under the laws of Delaware with power and authority to own and lease its
properties and to conduct its business as currently conducted. The REIT is duly
qualified as a corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing or managing of property or the conduct of business, except
where the failure to so qualify would not have a material adverse effect on the
condition, financial or
2
<PAGE>
otherwise, or the earnings, assets, business affairs or business prospects of
the Companies and the Subsidiaries (as defined below) of the Companies
considered as one enterprise. The REIT's existence has not been suspended or
terminated nor have any dissolution, revocation or forfeiture proceedings
regarding the REIT been commenced. The OPCO has been duly organized and is
validly existing as a corporation in good standing under the laws of Delaware
with corporate power and authority to own and lease its properties and to
conduct its business as currently conducted. The OPCO is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing or managing of property or the conduct of business, except
where the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, assets, business affairs or
business prospects of the Companies and the Subsidiaries considered as one
enterprise. The OPCO's existence has not been suspended or terminated nor have
any dissolution, revocation or forfeiture proceedings regarding the OPCO been
commenced. Entities in which the Companies directly or indirectly have at least
a 50% ownership interest are herein referred to as the "Subsidiaries," and each
individually, as a "Subsidiary."
4.2 Organization and Qualification of Subsidiaries. Each of the
Subsidiaries has been duly organized and is validly existing as a corporation,
limited partnership, or limited liability company, as the case may be, in good
standing under the laws of its respective jurisdiction of organization, with
full power and authority to own, lease and operate its properties and to conduct
the business in which it currently is engaged. Each of the Subsidiaries is duly
qualified as a foreign corporation, limited partnership, or limited liability
company, as the case may be, to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except where
the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, assets, business affairs or
business prospects of the Companies and the Subsidiaries considered as one
enterprise. All of the issued and outstanding shares of capital stock of each
of the corporate Subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable. The ownership by the Companies or the
Subsidiaries of the shares of capital stock or limited partnership or equity
interests, as the case may be, of each of the Subsidiaries is as described in
the Companies' SEC Filings.
4.3 Authorized Capital Stock. The REIT has 1.5 billion authorized
shares as of February 9, 1998, consisting of 650 million REIT Shares, par value
$0.01 per share, 750 million shares of excess stock, par value $0.01 per share,
and 100 million shares of preferred stock, par value $0.01 per share ("Patriot
Preferred Stock"). The OPCO has authorized capital stock as of February 9, 1998
of 1.5 billion shares, consisting of 650 million OPCO Shares, par value $0.01
per share, 750 million shares of excess stock, par value $0.01 per share and 100
million shares of preferred stock, par value $0.01 per share. As of February 9,
1998, there were 99,878,341 Paired Shares outstanding, 7,190,091 Paired Shares
were reserved for issuance pursuant to equity plans filed pursuant to the
Companies' SEC Filings (as defined below), and 12,701,170 Paired Shares were
reserved for issuance upon the election by the Companies to
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acquire, in exchange for Paired Shares, units of limited partnership interest in
Patriot American Hospitality Partnership, L.P. and Patriot American Hospitality
Operating Partnership, L.P. tendered by redeeming unit holders. As of February
9, 1998, there were 4,860,876 shares of Patriot Preferred Stock outstanding and
no preferred shares of the OPCO were currently outstanding. The issued and
outstanding Paired Shares of the Companies have been duly authorized and validly
issued, are fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, were not issued 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 Companies' SEC
Filings. Other than as described in the Companies' SEC Filings, the REIT does
not have outstanding any options to purchase, or other rights to subscribe for
or purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the REIT's
stock, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder in the Companies' SEC Filings
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
4.4 Issuance, Sale and Delivery of the Shares. The Purchase
Shares to be sold by the Companies have been duly authorized for issuance and,
when issued, delivered and paid for in the manner set forth in this Purchase
Agreement, will be validly issued, fully paid and non-assessable. The
Additional Shares have been duly authorized and, if and when issued pursuant to
the Adjustment Agreement, will be validly issued, fully paid and non-assessable,
Upon payment of the purchase price and delivery of the Shares in accordance with
this Agreement, PaineWebber will receive good, valid and marketable title to the
Shares, free and clear of all security interests, mortgages, pledges, liens,
encumbrances and claims. No approval of or authorization by the respective
shareholders or boards of directors of the Companies will be required for the
issuance and/or sale of the Shares to be sold by the Companies as contemplated
herein or in the Adjustment Agreement, except such as shall have been obtained
on or before the Closing Date. The issuance and/or sale of the Shares to the
PaineWebber Parties by the Companies pursuant to this Purchase Agreement or the
Adjustment Agreement (as the case may be), the compliance by the Companies with
the other provisions of this Purchase Agreement or the Adjustment Agreement and
the consummation of the other transactions contemplated hereby or thereby do not
require the consent, approval, authorization, registration or qualification of
or with any court, governmental authority or agency, except such as shall have
been obtained on or before the Closing Date or in connection with any Resale
Registration Statement filed with respect to any of the Shares. The Companies
meet and will continue to meet the requirements for use of Form S-3 under the
Securities Act, and the rules and regulations of the U.S. Securities and
Exchange Commission (the "Commission") under the Securities Act (the "1933 Act
Regulations"). The Companies have filed and will file all documents which they
are required to file under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations promulgated thereunder (the "1934
Act Regulations") within the time periods prescribed by the Exchange Act and the
1934 Act Regulations and all such documents (collectively, together with the
Companies' registration statements filed under the Securities Act which have
been declared
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effective since January 1, 1997 and have not been withdrawn, the "Companies' SEC
Filings") comply and will comply in all material respects with the requirements
of the Exchange Act and the 1934 Act Regulations, as applicable, and none of
such documents, when so filed, contained or will contain any untrue statement of
a material fact or omitted or will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. No Resale
Registration Statement filed in respect of any of the Shares, when so filed,
contained or will contain any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4.5 Due Execution, Delivery and Performance by the Company. Each
of the Companies has full right, power and authority to enter into this Purchase
Agreement and the Adjustment Agreement and perform the transactions contemplated
hereby and thereby. This Purchase Agreement and the Adjustment Agreement have
been duly authorized, executed and delivered by the Companies and, upon the
execution and delivery hereof, each of this Agreement and the Adjustment
Agreement will constitute the valid and binding obligation of each Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceedings in
equity or at law) and except as the enforceability of the indemnification
agreements of the Companies in Section 7.5 hereof may be limited by public
policy. The execution and delivery of this Purchase Agreement and the
Adjustment Agreement by the Companies and the consummation of the transactions
and the performance of the obligations herein and therein contemplated will not
violate any provision of the certificate of incorporation, bylaws, or other
organizational documents of the Companies, and will not conflict with, result in
the breach or violation of, or constitute, either by itself or upon notice or
the passage of time or both, a default under any material agreement, mortgage,
deed of trust, credit agreement, lease, franchise, license, indenture, note,
permit or other instrument to which either Company is a party or by which either
Company or its respective properties may be bound or affected, any statute or
any authorization, judgment, decree, order, rule or regulation of any court or
any regulatory body, administrative agency or other governmental body applicable
to either Company or any of its respective properties other than violations,
conflicts, breaches or defaults that individually or in the aggregate would not
have a material adverse effect on the condition, financial or otherwise, or on
the earnings, assets, business affairs or business prospects of the Companies
and the Subsidiaries considered as one enterprise. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and delivery of
this Purchase Agreement, the Adjustment Agreement or the consummation of the
transactions contemplated hereby or thereby, except in connection with the
filing of any Resale Registration Statements pursuant to Section 7 below or for
compliance with the blue sky laws applicable to the offering of the Shares.
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4.6 Accountants. The Companies' independent certified public
accountants, who have expressed their opinion with respect to the Most Recent
Financial Statements (as defined below) are independent accountants as required
by the Securities Act and the 1933 Act Regulations.
4.7 No Defaults. Except as to defaults, violations and breaches
which individually or in the aggregate would not have a material adverse effect
on the condition, financial or otherwise, on the earnings, assets, business
affairs or business prospects of the Companies and the Subsidiaries considered
as one enterprise, none of the Companies or any Subsidiary is in violation or
default of any provision of its declaration of trust, charter or bylaws, or
other organizational documents, and none of the aforementioned parties is in
breach of or default with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, credit agreement, 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.
4.8 No Actions. There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Companies, threatened against or affecting either
Company or any Subsidiary, any real property or improvements thereon owned or
leased by any of either Company or the Subsidiaries, including any property
underlying indebtedness held by the Companies (each, individually, a "Property"
and collectively, the "Properties"), or any officer of either Company or any of
the Subsidiaries that, if determined adversely to either Company or any
Subsidiary, any Property, including any property underlying indebtedness held by
either Company and any of the Subsidiaries, or any such officer or trust
manager, would reasonably be expected to (A) result in any material adverse
change in the condition, financial or otherwise, or in the earnings, assets,
business affairs or business prospects of the Companies and the Subsidiaries
considered as one enterprise or (B) materially and adversely affect the
consummation of the transactions contemplated by this Agreement or the
Adjustment Agreement. There is no pending legal or governmental proceeding to
which either Company or any Subsidiary is a party or of which any of their
respective properties or assets or any property, including any property
underlying indebtedness held by either Company or any of the Subsidiaries, is
the subject, including ordinary routine litigation incidental to the business,
that is, considered in the aggregate, material to the condition, financial or
otherwise, or the earnings, assets, business affairs or business prospects of
the Companies and the Subsidiaries considered as one enterprise.
4.9 Properties. (A) Each Company and the Subsidiaries, as the
case may be, has good and marketable title to all the properties and assets
reflected as owned by such entities in the Most Recent Financial Statements, and
good and marketable title to the improvements, if any, thereon and all other
assets that are required for the effective operation of such real property in
the manner in which they currently are operated; subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except (i) those, if any, reflected in
the Most Recent Financial Statement, or (ii) those which would not have a
material adverse effect on the condition, financial or otherwise, or on the
earnings, assets, business affairs or
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business prospects of or with respect to the Companies and the Subsidiaries
considered as one enterprise, (B) the leases of any real property and buildings
held under lease by either Company or any Subsidiary are in full force and
effect, and such entity is not in default in respect of any of the terms or
provisions of such leases and such entity has not received notice of the
assertion of any claim by anyone adverse to such entity's rights as lessee under
such leases, or affecting or questioning such entity's right to the continued
possession or use of the real property and buildings held under such leases or
of a default under such leases, in each case with such exceptions as would not
have a material adverse impact on the condition, financial or otherwise, or on
the earnings, assets, business affairs or business prospects of or with respect
to the Companies and the Subsidiaries considered as one enterprise; (C) none of
the Companies or any of the Subsidiaries or any tenant of any of the Properties
is in default under any of the leases pursuant to which any of the Companies or
the Subsidiaries, as lessor, leases its Property (and neither of the Companies
knows of any event which, but for the passage of time or the giving of notice,
or both, would constitute a default under any of such leases) other than such
defaults that would not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, assets, business affairs or business
prospects of or with respect to the Companies and the Subsidiaries considered as
one enterprise; (D) no person has an option or right of first refusal to
purchase all or part of any Property or any interest therein, other than such
options or rights of first refusal which would not have a material adverse
effect on the condition, financial or otherwise, or on the earnings, assets,
business affairs or business prospects of or with respect to the Companies and
the Subsidiaries, considered as one enterprise; (E) each of the Properties
complies 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), except for such failures to comply that would not
individually or in the, aggregate have a material adverse impact on the
condition, financial or otherwise, or on the earnings, assets, business affairs
or business prospects of the Companies and the Subsidiaries considered as one
enterprise; and (F) none of the Companies has knowledge of any pending or
threatened condemnation proceedings, zoning change, or other proceeding or
action that will in any manner affect the size of, use of, improvements on,
construction on or access to the Properties, including any property underlying
indebtedness held by either Company or any of the Subsidiaries, except such
proceedings or actions that would not have a material adverse effect on the
condition, financial or otherwise, or on the earnings, assets, business affairs
or business prospects of the Companies and the Subsidiaries considered as one
enterprise.
4.10 REIT Qualification. The REIT qualified as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
Code"), with respect to its taxable years ended December 31, 1995, December 31,
1996 and December 31, 1997, and is organized in conformity with the requirements
for qualification as a real estate investment trust, and its manner of operation
has enabled it to meet the requirements for qualification as a real estate
investment trust as of the date hereof, and its proposed manner of operation
will enable it to meet the requirements for qualification as a real estate
investment trust in the future.
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4.11 No Material Change. Since the date of the Most Recent
Financial Statements, and except as otherwise disclosed in the Companies' SEC
Filings as of the Closing Date, (i) neither Company has incurred any liabilities
or obligations, indirect or contingent, which will have a Material Adverse
Effect or entered into any material verbal or written agreement or other
material transaction which is not in the ordinary course of business (it being
agreed that for purposes of this sentence the REIT's ordinary course of business
shall include the acquisition or disposition, directly or indirectly, of real
estate properties or businesses of a type that may be owned by a "real estate
investment trust" (as defined under the Internal Revenue Code) and the OPCO's
ordinary course of business shall include the acquisition or disposition,
directly or indirectly, of assets or businesses related to or engaged in the
hospitality industry) or which could reasonably be expected to result in a
material reduction in the future earnings of the Companies; (ii) no material
casualty loss or material condemnation or other material adverse event with
respect to any Property or any of the Subsidiaries, has occurred that is
material to the Companies and the Subsidiaries considered as one enterprise;
(iii) none of the Companies, or the Subsidiaries is in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there has not
been any change in the capital stock of either Company or the Subsidiaries
(other than the sale of the Purchase Shares hereunder or those reserved for
issuance pursuant to the Adjustment Agreement, issuances pursuant to the
incentive compensation plans of the Companies), or any increase in the
indebtedness of either Company or the Subsidiaries that is material to such
entities, considered as one enterprise; (v) and except for regular quarterly
dividends or distributions on the REIT Shares or the OPCO Shares, there has been
no dividend or distribution of any kind declared, paid or made by either
Company; and (vi) there has not been any material adverse change in the
condition, financial or otherwise, or in the earnings, assets, business affairs
or business prospects of the Companies and the Subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business.
4.12 Intellectual Property. None of the Companies or the
Subsidiaries is required to own or possess trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations, which
it does not already own or possess to conduct its businesses as now conducted;
and neither Company has knowledge of any material infringement by it of
trademark, trade name rights, patent rights, copyrights, licenses, trade secrets
or other similar rights of others, and has not received any notice that any
claim has been made against the Companies regarding trademark, trade name,
patent, copyright, license, trade secrets or other infringement.
4.13 Compliance. Neither Company has been advised, or has reason
to believe, that either Company or any Subsidiary is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and Federal environmental laws and regulations, except
where failure to be so in compliance would not materially adversely affect the
condition, financial or otherwise, or in the earnings, assets, business affairs
or business prospects of the Companies and the Subsidiaries, considered as one
enterprise.
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4.14 Taxes. The Companies and the Subsidiaries have filed all
material federal, state and foreign income and franchise tax returns which have
been required to be filed and have paid or accrued all taxes shown as due
thereon (except for those taxes which are being contested in good faith through
appropriate proceeding, for which adequate reserves have been established and as
to which the PaineWebber Parties have been notified in writing by the
Companies), and the Companies have no knowledge of any tax deficiency which has
been or might be asserted or threatened against the Companies or the
Subsidiaries which could materially adversely affect the business condition,
financial or otherwise, or in the earnings, assets, business affairs or business
prospects of the Companies and the Subsidiaries, considered as one enterprise.
4.15 Transfer Taxes. On the Closing Date, all stock transfer or
other taxes, if any (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Purchase Shares to be sold to
PaineWebber hereunder will be, or will have been, fully paid or provided for by
the Companies and all laws imposing such taxes will be or will have been fully
complied with.
4.16 Investment Company. None of the Companies or any Subsidiary
is required to register as an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
4.17 Additional Information. The Companies represent and warrant
that the information contained in the following documents, which the Companies
have furnished to the PaineWebber Parties, or will furnish or make available
upon request prior to the Closing, is true and correct in all material respects
as of their respective filing dates:
(a) Joint Annual Report on Form 10-K for the year ended
December 31, 1997, which Joint Annual Report includes the Companies' most
recently available audited financial statements together with the report
thereon of the independent certified public accountants (the "Most Recent
Financial Statements"),
(b) Joint Quarterly Reports on Form 10-Q, as amended if
applicable, for the quarters ended Much 31, 1997, June 30, 1997 and
September 30, 1997;
(c) the Companies' proxy statements on Form 14A relating to
(i) the most recent Annual Meetings of the REIT's Shareholders and the
OPCO's Shareholders and (ii) any Special Meetings of the REIT's
Shareholders and the OPCO's Shareholders which occurred during the 12 month
period prior to the date hereof or for which a meeting date has been fixed
and a proxy statement distributed;
(d) all other documents, if any, filed by or with respect to
the REIT and the OPCO with the Commission since January 1, 1997 pursuant to
Section 13, 15(d) or 16(a) of the Exchange Act; and
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(e) a covenant compliance certification stating that none of
the REIT, the OPCO or the Subsidiaries are in default under any of their
respective credit agreements or other financing arrangements.
4.18 Legal Opinion. At or prior to the Closing, counsel to the
Companies will deliver their legal opinions dated the Closing Date to the
PaineWebber Parties in substantially the form of Exhibit A hereto.
4.19 ERISA. The Companies and the Subsidiaries are in compliance
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended and the rules and regulations promulgated thereunder ("ERISA"),
except for such failures to comply as would not singly or in the aggregate have
a material adverse effect on the condition, financial or otherwise, or on the
earnings, assets, business affairs or business prospects of or with respect to
the Companies and the Subsidiaries, considered as one enterprise. Neither a
Reportable Event (as defined under ERISA) nor a Prohibited Transaction (as
defined under ERISA) has occurred with respect to any Plan (as defined below) of
the Companies and/or their respective affiliates; no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated within the past
five years; to the Companies' knowledge, no circumstance exists which
constitutes grounds under Section 402 of ERISA entitling the Pension Benefit
Guaranty Corporation ("PBGC") to institute proceedings to terminate, or appoint
a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; the Companies and their affiliates have not completely or partially
withdrawn under Section 4201 or 4202 of ERISA from any Multiemployer Plan (as
defined therein); the Companies and their affiliates have met the minimum
funding requirements of Section 412 of the Code and Section 302 of ERISA with
respect to each Plan and there is no unfunded current liability (as defined
below) with respect to any Plan; the Companies and their affiliates have not
incurred any liability to the PBGC under ERISA (other than for the payment of
premiums under Section 4007 of ERISA); no part of the funds to be used by the
Companies in satisfaction of their obligations under this Purchase Agreement or
the Adjustment Agreement constitute "plan assets" of any "employee benefit plan"
within the meaning of ERISA or of any "plan" within the meaning of Section
4957(e)(I) of the Code, as interpreted by the Internal Revenue Service and the
U.S. Department of Labor in rules, regulations, releases and bulletins or as
interpreted under applicable case law. As used below, "Plan" means an "employee
benefit plan" or "plan" as described in Section 3(3) of ERISA; and "unfunded
current liability" has the meaning provided in Section 302(d)(8)(A) of ERISA.
4.20 Environmental Protection. To the knowledge of the Companies,
except as disclosed in the Companies' SEC Filings, none of the Companies or
their affiliates' properties contain any Hazardous Materials that, under any
Environmental Law, (i) would impose liability on the Companies or any affiliate
that is likely to have a material adverse effect on the condition (financial or
other), business, results of operations, or prospects, of the Companies or (ii)
is likely to result in the imposition of a lien on any material asset owned,
directly or indirectly, by the Companies. To the knowledge of the Companies,
neither of the Companies nor any of their affiliates is subject to any existing,
pending or threatened
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investigation or proceeding by any governmental agency or authority with respect
or pursuant to any Environmental Law, except any which, if adversely determined,
would not have a Material Adverse Effect. As used herein, "Environmental Laws"
mean all federal, state, local and foreign environmental, health and safety
laws, codes and ordinances and all rules and regulations promulgated thereunder,
including, without limitation laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment (including, without
limitation, air, surface water, ground water, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, solid, toxic or hazardous substances or wastes; and
"Hazardous Material" includes, without limitation, (i) all substances which are
designated pursuant to Section 311(b)(2)(A) of the Federal Water Pollution
Control Act ("FWPCA"), 33 U.S.C. Section 1251 et seq.; (ii) any element,
compound, mixture, solution, or substance which is designated pursuant to
Section 102 of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.; (iii) any hazardous
waste having the characteristics which are identified under or listed pursuant
to Section 3001 of the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. Section 6901 et seq.; (iv) any toxic pollutant listed under
Section 307(a) of the FWPCA; (v) any hazardous air pollutant which is listed
under Section 112 of the Clean Air Act, 42 U.S.C. Section 7401 et seq.; (vi) any
imminently hazardous chemical substance or mixture with respect to which action
has been taken pursuant to Section 7 of the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq.; and (vii) petroleum, petroleum products,
petroleum by-products, petroleum decomposition by-products, and waste oil.
4.21 Solvency. Immediately following (i) the execution of this
Purchase Agreement and the Adjustment Agreement, (ii) the purchase of the
Purchase Shares pursuant hereto and (iii) the completion of any other
transaction contemplated by this Purchase Agreement and the Adjustment
Agreement, each of the Companies will be solvent and able to pay its debts as
they mature, will have capital sufficient to carry on its business and all
businesses in which it is to engage, and will have assets which will have a
present fair market valuation greater than the amount of all of its liabilities.
This Purchase Agreement and the Adjustment Agreement have been executed and
delivered by the Companies in good faith and in exchange for reasonably
equivalent value. Neither of the Companies intends to incur debts beyond its
ability to pay them as they become due. Each of the Companies' assets and
capital are now, and are expected in the future to be, sufficient to pay the
Companies' ongoing expenses as they are incurred and to discharge all of the
Companies' liabilities in the event that the business of the Companies is
required to be liquidated. The Companies have not entered into this Purchase
Agreement or the Adjustment Agreement or any transaction contemplated hereby or
thereby with an intent to hinder, delay or defraud creditors of any persons or
entity.
4.22 Certificate. A certificate of each Company executed by an
executive officer of such Company, to be dated the Closing Date in form and
substance satisfactory to the PaineWebber Parties to the effect that the
representations and warranties of the Companies set forth in this Section 4 are
true and correct as of the date of this Agreement and as of the
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Closing Date, and such Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied on or
prior to such Closing Date.
4.23 Financial Statements. The Most Recent Financial Statements
(including the notes thereto) present fairly in all material respects the
financial position of the respective entity or entities presented therein at the
respective dates indicated and the results of their operations for the
respective periods specified, and except as otherwise stated in the Most Recent
Financial Statements, said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis.
The supporting schedules included in the Companies' SEC Filings fairly present
in all material respects the information required to be stated therein. The
financial information and data included in the Companies' SEC Filings present
fairly in all material respects the information included therein and have been
prepared on a basis consistent with that of the financial statements included in
the Companies' SEC Filings and the books and records of the respective entities
presented therein. The pro forma financial information included in the
Companies' SEC Filings has been prepared in accordance with the applicable
requirements of Rules 11-01 and 11-02 of Regulation S-X under the Securities Act
and other 1933 Act Regulations and American Institute of Certified Public
Accountants ("AICPA") guidelines with respect to pro forma financial information
and includes all adjustments necessary to present fairly in all material
respects the pro forma financial position of the respective entity or entities
presented therein at the respective dates indicated and the results of their
operations for the respective periods specified. Other than the historical and
pro forma financial statements (and schedule) included therein, no other
historical or pro forma financial statements (or schedules) are required to be
included in the Companies' SEC Filings. Except as reflected or disclosed in the
financial statements included in the Companies' SEC Filings, none of the
Companies or any of the Subsidiaries is subject to any material indebtedness,
obligation, or liability, contingent or otherwise.
4.24 Labor Disputes. No labor dispute with the employees of the
Companies or any Subsidiary exists or, to the knowledge of the Companies is
imminent.
4.25 Regulation M. None of the Companies, the Subsidiaries or, to
the Companies' knowledge, any of their trust managers, directors, officers or
controlling persons, has taken or will take, directly or indirectly, any action
resulting in a material violation of Regulation M under the Exchange Act, or
designed to cause or result under the Exchange Act or otherwise in, or which has
constituted or which reasonably might be expected to constitute, the unlawful
stabilization or manipulation of the price of any security of either Company or
facilitation of the sale or resale of the Shares.
4.26 Regulation U. The Companies represent that the proceeds of
the Purchase Shares will not be used by the Companies, whether immediate,
incidental or ultimate, to buy or carry margin stock as such terms are defined
in Regulation U by the Board of Governors of the Federal Reserve System.
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SECTION 5. Representations, Warranties and Covenants of PaineWebber Agent
or PaineWebber.
5.1 Investment. The PaineWebber Parties represent and warrant to,
and covenant with, the Companies that: (i) the PaineWebber Parties, taking into
account the personnel and resources it can practically bring to bear on the
purchase of the Purchase Shares contemplated hereby, are knowledgeable,
sophisticated and experienced in making, and are qualified to make, decisions
with respect to investments in shares presenting an investment decision like
that involved in the purchase of the Purchase Shares, including investments in
securities issued by the Companies; (ii) PaineWebber is acquiring the number of
Purchase Shares set forth in Section 2 above in the ordinary course of its
business and for its own account for investment (as defined for purposes of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations
thereunder) only and with no present intention of distributing any of such
Purchase Shares or any arrangement or understanding with any other persons
regarding the distribution of such Purchase Shares except pursuant to a
registration statement effective under, or an exemption from the registration
requirements of, the Securities Act (this representation and warranty does not
limit the right of the PaineWebber Parties to sell Shares pursuant to the terms
of the Adjustment Agreement); (iii) neither PaineWebber Party will directly or
indirectly, sell or otherwise dispose of (or solicit any offers to purchase or
otherwise acquire) any of the Purchase Shares except in compliance with the
Securities Act and any applicable state securities or blue sky laws; (iv) each
PaineWebber Party has completed or caused to be completed the Registration
Statement Questionnaire and the Stock Certificate Questionnaire, both attached
hereto as Appendix I, for use in preparation of the Registration Statement and
the answers thereto are true and correct to the best knowledge of PaineWebber as
of the date hereof and will be true and correct to the best knowledge of
PaineWebber as of the effective date of the Resale Registration Statement; (v)
PaineWebber has, in connection with its decision to purchase the number of
Purchase Shares set forth in Section 2 above, relied solely upon the documents
identified in Section 4.17, the information referred to in Section 7.6 and the
representations, warranties and agreements of the Companies contained herein;
(vi) PaineWebber has had access to such additional information, if any,
concerning the Companies as it has considered necessary in connection with their
investment decision to acquire the Purchase Shares; (vii) each of the
PaineWebber Parties is an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act;
and (viii) the PaineWebber Parties understand that until the appropriate Resale
Registration Statement has been declared effective by the Commission, the Shares
will contain a legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANIES'
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COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
5.2 Resale. The PaineWebber Parties acknowledge and agree that in
connection with any transfer of any Shares they will provide to the transfer
agent prompt notice of any Shares sold Pursuant to a Resale Registration
Statement or otherwise transferred in compliance with applicable federal and
state securities laws.
5.3 Due Execution, Delivery and Performance of this Agreement.
The PaineWebber Parties further represent and warrant to, and covenant with, the
Companies that (i) each PaineWebber Party has full right, power, authority and
capacity to enter into this Agreement and to perform its obligations hereunder
and consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and (ii) upon the execution and delivery of this Agreement, this Agreement shall
constitute a valid and binding obligation of the PaineWebber Parties enforceable
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except that the enforcement of the indemnification agreements in Section 7.5
hereof may be limited by public policy.
5.4 Residence of PaineWebber Agent. PaineWebber Agent is
organized in the State of Delaware and has its principal place of business in
the State of New York.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Purchase Agreement,
all covenants, agreements, representations and warranties made by the Companies
and the PaineWebber Parties herein and the certificates for the Shares delivered
pursuant hereto shall survive the execution of this Purchase Agreement, the
Adjustment Agreement, the delivery to PaineWebber Agent of the Purchased Shares
being purchased and the payment therefor and the consummation of any other
transactions contemplated hereby or thereby.
SECTION 7. Registration of the Shares; Compliance with the Securities
Act.
7.1 Registration Procedures and Expenses. The Companies shall:
(a) within 60 days after a written request from the
PaineWebber Parties, which request shall not be made within 30 days of the
Closing Date, prepare and file with the Commission a Resale Registration
Statement (as defined below) covering the resale by the PaineWebber
Parties, from time to time, of the Shares (not to exceed a number of Paired
Shares equal to 130% of the number of Purchase Shares) in any of the
manners specified in the Adjustment Agreement (the "Initial Resale
Registration Statement"), use all best efforts to obtain effectiveness of
the Initial Resale
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Registration Statement and use all reasonable best efforts to obtain
effectiveness of the Initial Registration Statement within 60 days of
filing. If the total number of Shares exceeds the number of Shares covered
by the Initial Resale Registration Statement, then the Companies shall
promptly prepare and file with the Commission such additional Resale
Registration Statement or Statements as shall be necessary to cover the
resale by the PaineWebber Parties of such excess Shares in the same manner
as contemplated by the Initial Registration Statement for the Shares
covered thereby (each, an "Additional Resale Registration Statement");
provided that prior to issuing any such excess Shares to the PaineWebber
Parties, the Companies shall cause such Resale Registration Statement to
have become effective. For purposes of this Purchase Agreement, "Resale
Registration Statement" means the Initial Resale Registration Statement,
any Additional Resale Registration Statement or any other registration
statement under the Securities Act on Form S-3 covering the resale by the
PaineWebber Parties of up to a specified number of Shares, filed and
maintained continuously effective by the Companies pursuant to the
provisions of this Section 7, including the prospectus contained therein
(the "Resale Prospectus"), any amendments and supplements to such
registration statement, including all post-effective amendments thereto,
and all exhibits and all material incorporated by reference into such
registration statement;
(b) use all reasonable best efforts to prevent the issuance
of any order suspending the effectiveness of such Resale Registration
Statement or Resale Prospectus or suspending the qualification (or
exemption from qualification) of any of the Shares in any jurisdiction;
(c) prepare and file with the Commission such amendments and
supplements to each Resale Registration Statement and the Resale Prospectus
as may be reasonably requested by the PaineWebber Parties in order to
accomplish the public resale or other disposition of any Shares in
accordance with the terms of the Adjustment Agreement, or as may be
necessary to keep such Resale Registration Statement effective until the
date on which either (i) the Shares covered thereby have been sold by or on
behalf of the PaineWebber Parties or (ii) the PaineWebber Parties have
advised the Companies that they no longer require that such Resale
Registration Statement remain effective;
(d) furnish to the PaineWebber Parties with respect to the
Shares registered under any Resale Registration Statement such reasonable
number of copies of Resale Prospectuses, including any supplements and
amendments thereto, in order to facilitate the public sale or other
disposition of all or any of the Shares by the PaineWebber Parties;
(e) in order to facilitate the public sale or other
disposition of all or any of the Shares by the PaineWebber Parties, furnish
to the PaineWebber Parties with respect to the Shares registered under any
Resale Registration Statement, in connection with any such public sale or
other disposition, an opinion of counsel to the Companies
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covering the matters set forth on Exhibit B hereto and such other documents
as the PaineWebber Parties may reasonably request (including a comfort
letter from the Companies' independent certified public accountants and a
certificate of bring down of representations and warranties in connection
with sale of Shares under the Resale Registration Statement) (collectively,
the "Resale Closing Documents") (i) upon the effectiveness of the Initial
Resale Registration Statement, (ii) quarterly beginning promptly after the
Companies' filing of the Joint Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 in the case of any continuous offering of
Shares under any Resale Registration Statement, and (iii) in the event the
public sale or other disposition of the Shares is effected through an
underwritten offering or a block trade, as of the date of the closing of
any sale of such Shares or date of pricing with respect to the sale of such
Shares, as applicable upon prior notice from the PaineWebber Parties to the
Companies as to which date applies; provided, however, that the Companies
shall not be required to deliver any Resale Closing Documents in the event
that the aggregate offering price of any Shares offered in an underwritten
offering or a block trade is less than $10,000,000, unless as of the date
of any such underwritten offering or block sale, the Companies have not
made any previous delivery of Resale Closing Documents to the PaineWebber
Parties in connection with any other public sale or other disposition of
the Shares;
(f) use all reasonable best efforts to prevent the happening
of any event that would cause any such Resale Registration Statement to
contain a material misstatement or omission or to be not effective and
continuously useable for resale of the Shares during the period that such
Resale Registration Statement is required to be effective and useable;
provided that this paragraph (f) shall in no way limit the Companies' right
to suspend the right of the PaineWebber Parties to effect sales under the
Resale Registration Statement during any Black-out Period as specified at
Section 7.2(g) below;
(g) file documents required of the Companies for normal blue
sky clearance in states specified in writing by the PaineWebber Parties,
provided, however, that the Companies shall not be required to qualify to
do business or consent to service of process in any jurisdiction in which
it is not now so qualified or has not so consented;
(h) bear all expenses in connection with the procedures in
paragraphs (a) through (h) of this Section 7.1 and Section 7.2(a) and the
registration of the Shares pursuant to each Resale Registration Statement,
which expenses shall not include brokerage or underwriting commissions and
taxes of any kind (including without limitations, transfer bonuses) with
respect to any disposition, sale or transfer of Shares sold by the
PaineWebber Parties and for any legal, accounting and other expenses
incurred by the PaineWebber Parties which expenses shall be borne by the
PaineWebber Parties; and
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(i) promptly file any necessary listing applications or
amendments to existing listing applications to cause any Shares registered
under any Resale Registration Statement to be listed or admitted to
trading, on or prior to the effectiveness of any Resale Registration
Statement, on the New York Stock Exchange or any national stock exchange or
automated quotation system on which the Paired Shares are then listed or
traded.
7.2 Covenants in Connection With Registration.
(a) The Companies hereby covenant with the PaineWebber
Parties that (i) the Companies shall not file any Resale Registration Statement
or Resale Prospectus or any amendment or supplement thereto, unless a copy
thereof shall have been first submitted to the PaineWebber Parties and their
counsel and the PaineWebber Parties and their counsel did not object thereto in
good faith (provided that if there is no objection by either the PaineWebber
Parties or their counsel within two business days of receiving any such
material, there shall be deemed to have been no objection thereto); (ii) the
Companies shall immediately notify the PaineWebber Parties of the issuance by
the Commission of any stop order suspending the effectiveness of such Resale
Registration Statement or the initiation of any proceedings for such purpose;
(iii) the Companies shall make all reasonable best efforts to promptly obtain
the withdrawal of any order suspending the effectiveness of such Resale
Registration Statement at the earliest possible moment; (iv) the Companies shall
immediately notify the PaineWebber Parties of the receipt of any notification
with respect to the suspension of the qualification of the Shares for sale under
the securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such purpose; and (v) the Companies shall immediately notify the
PaineWebber Parties in writing of the happening of any event or the failure of
any event to occur or the existence of any fact or otherwise which results in
any Resale Registration Statement, any amendment or post-effective amendment
thereto, the Resale Prospectus, any prospectus supplement, or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be, stated therein or
necessary to make the statements therein not misleading and promptly shall
prepare, file with the Commission and promptly furnish to the PaineWebber
Parties a reasonable number of copies of a supplement or post-effective
amendment to such Resale Registration Statement or the Resale Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Shares, the Resale
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading.
(b) The PaineWebber Parties shall cooperate with the
Companies in connection with the preparation of the Resale Registration
Statement and shall furnish to the Companies, in a timely manner, all
information in their possession or reasonably obtainable by them, but otherwise
not reasonably obtainable by the Companies, and necessary for inclusion in the
Resale Registration Statement (including, without limitation, information
relating to the ownership by each of them of Paired Shares and the plan of
distribution).
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(c) The PaineWebber Parties shall notify the Companies at
least two business days prior to the earlier of the date on which they intend to
commence effecting any resales of Shares under a Resale Registration Statement
or the date of pricing with respect to the public sale or other disposition of
any Shares under a Resale Registration Statement effected through an
underwritten offering or block trade and if the Companies do not, within such
two day period, advise the PaineWebber Parties of the existence of any facts of
the type referred to in Section 7.2(a) above, then the Companies shall be deemed
to have certified and represented to the PaineWebber Parties that no such facts
then exist and the PaineWebber Parties may rely on such certificate and
representations in making such sales. The preceding sentence shall in no way
limit the Companies' obligations under Section 7.2(a) above.
(d) the Companies shall cooperate with the PaineWebber
Parties to facilitate the timely preparation and delivery of certificates
representing the Shares to be sold under the Resale Registration Statements and
not bearing any restrictive legends and in such denominations and registered in
such names as the PaineWebber Parties may reasonably request at least one
Business Day prior to the closing of any sale of the Shares.
(e) If the method of settlement pursuant to the Adjustment
Agreement is an underwritten offering or block trade of Shares, (i) the
PaineWebber Parties shall have the right to select the managing underwriters or
the executing dealer, as the case may be, who shall be subject to the approval
of the Companies, which approval shall not be unreasonably withheld (it being
understood that PaineWebber Agent is, in any event, reasonably acceptable to the
Companies for this purpose) and (ii) the Companies shall (A) enter into written
agreements (including underwriting agreements) as are customary in underwritten
offerings or block trades, as the case may be; (B) obtain an opinion of counsel
to the Companies and other entities reasonably requested by the underwriters or
the executing dealer, as the case may be, and updates thereof (which may be in
the form of a reliance letter) in form and substance reasonably satisfactory to
the managing underwriters or the executing dealer, as the case may be, and the
PaineWebber Parties addressed to the underwriters or the executing dealer, as
the case may be, and the PaineWebber Parties covering the matters customarily
covered in opinions requested in underwritten offerings or block trades, as the
case may be, and such other matters as may be reasonably requested by such
underwriters or the executing dealer, as the case may be, and the PaineWebber
Parties (it being agreed that the matters to be covered by such opinion may be
subject to customary qualifications and exceptions); (C) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters or the executing dealer, as the case may be, and the
PaineWebber Parties from the independent certified public accountants of the
Companies (and, if necessary, other independent certified public accountants of
any affiliate or Subsidiary of either of the Companies or of any business
acquired by the Companies for which financial statements and financial data are,
or are required to be, included in the Resale Registration Statement) addressed
to each of the underwriters or the executing dealer, as the case may be, and, if
permitted by applicable accounting rules and statements, the PaineWebber
Parties, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings or block trades, as the case may be, and such other matters as may be
reasonably requested by such underwriters or the executing dealer, as the case
may be, in accordance with
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Statement on Auditing Standards No. 72; (D) ensure that any underwriting
agreement contains indemnification provisions and procedures not less favorable
than that included herein (or such other provisions and procedures acceptable to
the PaineWebber Parties and the underwriters) with respect to all parties to be
indemnified pursuant to said section (including, without limitation, the
underwriters and the PaineWebber Parties); and (E) deliver such other documents
as are customarily delivered in connection with closing of underwritten
offerings or block trades, as the case may be.
(f) The Companies will make reasonably available for
inspection by the PaineWebber Parties, any underwriter, agent or broker-dealer
participating in any disposition of Shares such information and corporate
documents as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities for the purposes of applicable law,
and cause the officers of the Companies and their "significant subsidiaries" (as
that term is defined in Regulation S-X) to be available, upon request at least
two business days in advance, to respond to questions relevant to such due
diligence inquiries.
(g) The parties hereby acknowledge and agree that the
Companies may suspend the right of the PaineWebber Parties to effect sales of
the Paired Shares through use of the prospectus forming a part of a Resale
Registration Statement (except as may further be limited in the Adjustment
Agreement) for a period of no more than 90 days (or fewer if the PaineWebber
Parties are notified to that effect by the Companies) in connection with a
public offering or a sale pursuant to Rule 144A under the Securities Act (an
"Offering") of Paired Shares (or shares of capital stock convertible into Paired
Shares) by the Companies (a "Blackout Period"); provided that (i) there shall be
no more than three Blackout Periods during any 12-month period, and (ii) the
total number of days of all Blackout Periods during any 12-month period shall
not exceed 120. The PaineWebber Parties hereby covenant that they will not sell
any Paired Shares pursuant to said prospectus during a Blackout Period which
shall commence at the time the Companies give the PaineWebber Parties written
notice of such Blackout Period; provided further, that no Blackout Period shall
be applicable or in any way restrict the PaineWebber Parties after the Maturity
Date, or after the occurrence of a Cross Default or a Price Decline Termination
Event (as defined in the Adjustment Agreement).
7.3 Extension of Required Effectiveness. In the event that the
Companies shall give any notice required by Section 7.2(a)(v) hereof, the period
during which the Companies are required to keep such Resale Registration
Statement effective and useable shall be extended by the number of days during
the period from and including the date of the giving of such notice to and
including the date when the PaineWebber Parties are advised in writing by the
Companies that the use of the Resale Prospectus may be resumed.
7.4 Transfer of Shares After Registration. The PaineWebber
Parties agree that they will not effect any disposition of the Shares and
PaineWebber agrees that it will not effect any disposition of its right to
purchase the Shares that would constitute a sale within the meaning of the
Securities Act or pursuant to any applicable state securities or blue sky laws
expect as contemplated in each Resale Registration Statement referred to in
Section 7.1 or
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except pursuant to any exemption from the registration requirements of the
Securities Act (including, without limitation, Rule 144 promulgated thereunder
and any successor thereto) and that it will promptly notify the Companies of any
changes in the information set forth in any such Resale Registration Statement
regarding the PaineWebber Parties or its plan of distribution.
7.5 Indemnification. For the purpose of this Section 7.5 only,
the term "Resale Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to any Resale
Registration Statement referred to in Section 7.1.
(a) Indemnification by the Companies. Each of the Companies
agrees, jointly and severally, to indemnify and hold harmless the PaineWebber
Parties and each person, if any, who controls the PaineWebber Parties within the
meaning of Section 15 of the Securities Act, and any director, officer, employee
or affiliate thereof, as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Resale
Registration Statement (or any amendment thereto), including the
information deemed to be part of any Resale Registration Statement pursuant
to Rule 430A(b) of the 1933 Act Regulations, if applicable, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any related Resale Prospectus or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Companies shall not
be required under this subsection (i) to indemnify the PaineWebber Parties
with respect to any loss, liability, claim, damage or expense to the extent
such loss, liability, claim, damage or expense arises out of any untrue
statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Companies by the PaineWebber Parties specifically for inclusion in any
Resale Registration Statement or any related Resale Prospectus;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation or of any investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever for which indemnification is provided under subsection (i)
above, if such settlement is effective with the written consent of the
Companies; and
(iii) against any and all expense whatsoever (including,
without limitation, the fees and other charges of counsel chosen by
PaineWebber) reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceedings by any
governmental agency or body, commenced or
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threatened, or any claim whatsoever for which indemnification is provided
under subsection (i) above, to the extent that any such expense is not paid
under subsection (i) or (ii) above.
(b) Indemnification by the PaineWebber Parties. The
PaineWebber Parties agree to indemnify and hold harmless the Companies, and each
person, if any, who controls the Companies within the meaning of Section 15 of
the Securities Act, and any trust manager, director, officer, employee or
affiliate thereof, against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section
7.5, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in any Resale Registration
Statement (or any amendment thereto) or any related Resale Prospectus (or any
amendment or supplement thereto) in reasonable reliance upon and in conformity
with written information furnished to the Companies by the PaineWebber Parties
specifically for inclusion in any Resale Registration Statement or any related
Resale Prospectus.
(c) Proceedings. Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relive it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by it and
approved by the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the ground that the
named parties to any such action (including any impleaded parties) include both
such indemnified parties and an indemnifying party, and such indemnified parties
reasonably believe that there may be legal defenses available to them which are
different from or in addition to those available to such indemnifying party. If
an indemnifying party assumes the defense of such action, the indemnifying
parties shall not be liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection with such action. In no
event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7.5 (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not
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include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 7.5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(d) Contribution. If the indemnification provided for in
this Section 7.5 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under paragraph (a), (b) or (c) of this Section 7.5 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Companies and the PaineWebber
Parties from the purchase and sale of the Shares or (ii) if the allocation
provided in clause (i) is not permitted by applicable law, in such proportion or
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Companies and the
PaineWebber Parties in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The respective relative benefits
received by the Companies on the one hand and the PaineWebber Parties on the
other shall be deemed to be in the same proportion as the amount paid by the
PaineWebber Parties to the Companies pursuant to this Agreement and the
Adjustment Agreement and the net proceeds retained by the PaineWebber Parties
from the transactions contemplated by this Agreement and the Adjustment
Agreement. The relative fault of the Companies and the PaineWebber Parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or the alleged
omission to state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Companies
or by the PaineWebber Parties and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in paragraph (c) of this Section
7.5 any reasonable legal or other fees or expenses incurred by such party in
connection with investigating or defending any action or claim. The provisions
set forth in paragraph (c) of this Section 7.5 with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this paragraph (d) provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
paragraph (c) for purposes of indemnification. The Companies and the
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PaineWebber Parties agree that it would not be just and equitable if
contribution pursuant to this Section 7.5 were determined solely by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this paragraph (d). Notwithstanding
the provisions of this Section 7.5, the PaineWebber Parties shall not be
required to contribute any amount in excess of the amount by which the aggregate
net proceeds retained by the PaineWebber Parties from the transactions
contemplated hereby and by the Adjustment Agreement exceeds the amount of any
damages that the PaineWebber Parties has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) Relationship Between the REIT and OPCO. The obligations
set forth in this Section 7.5 shall in no way limit the ability of the Companies
to allocate liability between themselves.
7.6 Information Available. So long as any Resale Registration
Statement covering the resale of any shares owned by the PaineWebber Parties is
effective, the Companies will furnish to the PaineWebber Parties:
(a) as soon as practicable after available, one copy of (i)
their Joint Annual Report to Shareholders, (ii) their Joint Annual Report
on Form 10-K, (iii) their joint Quarterly Reports to Shareholders, (iv)
their joint quarterly reports on Form 10-Q, (v) a full copy of the
particular Resale Registration Statement covering the Shares (the
foregoing, in each case, excluding exhibits) and (iv) upon request, any or
all other filings made with the Commission by the Companies; and
(b) upon the reasonable request of the PaineWebber Parties, a
reasonable number of copies of the Resale Prospectuses to supply to any
other party requiring such Resale Prospectuses;
and the Companies, upon the reasonable request of the PaineWebber Parties, will
meet with the PaineWebber Parties or a representative thereof at the Companies'
headquarters to discuss all information relevant for disclosure in such Resale
Registration Statement covering the Shares, subject to appropriate
confidentiality limitations.
7.7 Remedies. The Companies and the PaineWebber Parties
acknowledge that there would be no adequate remedy at law if the Companies fail
to perform any of their obligations under this Section 7, and accordingly agree
that the PaineWebber Parties, in addition to any other remedy to which it may be
entitled at law or in equity, shall be entitled to compel specific performance
of the obligations of the Companies under this Section 7, and the Companies
hereby waive the defense that a remedy at law would be adequate.
7.8 Notice Requirement. The REIT and the OPCO each covenants and
agrees that it will notify the PaineWebber Parties at any time it becomes aware
that as a
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result of a change in the REIT's and the OPCO's capital stock the PaineWebber
Parties beneficially hold more than 4.9% of the REIT's and the OPCO's Paired
Shares.
7.9 Registration Exemptions. For so long as the Companies are
subject to the reporting requirements of Section 13 or 15 of the Exchange Act,
the Companies covenant that they will timely file all reporting required to be
filed by it under the Securities Act and Exchange Act and the rules and
regulations adopted by the Commission thereunder.
SECTION 8. Fees and Expenses.
8.1 Broker's Fees. Other than any fees payable under or in
connection with the Adjustment Agreement, each of the parties hereto represents
that, on the basis of any actions and agreements by it, there are no brokers or
finders entitled to compensation in connection with the sale or issuance of the
Shares to PaineWebber.
8.2 Additional Shares. The Companies will pay to the PaineWebber
Parties an amount equal to $.02 per Additional Share as reimbursement for all
expenses incurred by the PaineWebber Parties in connection with the delivery of
Additional Shares under this Agreement or the Adjustment Agreement.
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified mail, by telegram or telecopy or sent by nationally
recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed or for telecopies, when transmitted and receipt confirmed, and
shall be delivered as addressed as follows:
(a) if to the Companies, to:
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attention: John P. Bohlmann, Esq.
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attention: Carla S. Moreland, Esq.
with copies so mailed to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Gilbert G. Menna, P.C.
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or to such other person at such other place as the
Companies shall designate to PaineWebber Parties in
writing; and
(b) if to PaineWebber Agent or PaineWebber, to:
PaineWebber
PaineWebber Financial Products Inc.
1285 Avenue of the Americas, 19th Floor
New York, NY 10019
Attention: Terrence E. Fancher
Telecopier: (212) 713-7949
with a copy so mailed to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Daniel P. Cunningham, Esq.
Telecopier: (212) 474-3700
SECTION 10. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Companies and the PaineWebber
Parties.
SECTION 11. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 12. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 13. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon (i) the successors of the PaineWebber Parties and
(ii) any assignee or transferee of rights and obligations of the PaineWebber
Parties pursuant to the Adjustment Agreement or this Agreement. A transferee of
the PaineWebber Parties pursuant to the Adjustment Agreement or this Agreement,
and any successor, assignee, or transferee, shall be held subject to all of the
terms of this Agreement. Except as set forth in this Section 13, neither the
Companies nor the PaineWebber Parties may assign any of their respective rights,
or delegate any of their respective duties under this Agreement.
SECTION 14. Governing Law; Jurisdiction.
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14.1 This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof.
14.2 Each of the Companies (i) hereby irrevocably submits to the
jurisdiction of, and agrees that any suit shall be brought in, the state and
federal courts located in the City and County of New York for the purposes of
any suit, action or other proceedings arising out of or based upon this
Agreement of the transactions contemplated hereby and (ii) hereby waives to the
extent not prohibited by applicable law, and agrees not to assert, by way or
motions, as a defense or otherwise, in any such proceeding, any claim that it is
not subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that any such
proceeding brought in one of the above-named courts is brought in an
inconvenient forum, that the venue of any such proceedings brought in one of the
above-named courts is improper, or that this Agreement, or the transactions
contemplated hereby, may not be enforced in or by such court.
SECTION 15. Transfer to Affiliate. Notwithstanding anything herein to the
contrary, PaineWebber may transfer any Paired Shares delivered pursuant to this
Agreement and the Adjustment Agreement to any affiliate of PaineWebber, together
with all of PaineWebber's rights hereunder, provided that (i) such affiliate
shall be an "accredited investor" within the meaning of Rule 501 (a)(1), (2),
(3) or (7) of Regulation D promulgated under the Securities Act, and (ii) such
transfer shall be consistent with the investment representations set forth at
Section 5.1 hereto. In the event of such an assignment such affiliate shall in
all respects be substituted for PaineWebber as a party hereto.
SECTION 16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
SECTION 17. Waiver of Trial by Jury. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE TO JURY TRIAL IN CONNECTION WITH ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ William W. Evans III
----------------------------------
Name: William W. Evans III
Title: President and Chief
Operating Officer
WYNDHAM INTERNATIONAL, INC.
By: /s/ William W. Evans III
----------------------------------
Name: William W. Evans III
Title: Executive Vice President
PAINEWEBBER INCORPORATED
By: /s/ Terrence E. Fancher
----------------------------------
Name: Terrence E. Fancher
Title: Managing Director
PAINEWEBBER FINANCIAL
PRODUCTS INC.
By: /s/ Terrence E. Fancher
----------------------------------
Name: Terrence E. Fancher
Title: Vice President
