<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ JOINT QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
<TABLE>
<S> <C>
COMMISSION FILE NUMBER 1-9319 COMMISSION FILE NUMBER 1-9320
PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC.
- -------------------------------------------- --------------------------------------------
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
</TABLE>
<TABLE>
<S> <C> <C> <C>
DELAWARE 94-0358820 DELAWARE 94-2878485
- ---------------------- ---------------------- ---------------------- ----------------------
(State or other (I.R.S. Employer (State or other (I.R.S. Employer
jurisdiction of Identification No.) jurisdiction of Identification No.)
incorporation or incorporation or
organization) organization)
1950 STEMMONS FREEWAY, 1950 STEMMONS FREEWAY,
SUITE 6001 SUITE 6001
DALLAS, TEXAS 75207 DALLAS, TEXAS 75207
- ---------------------- ---------------------- ---------------------- ----------------------
(Address of principal (Zip Code) (Address of principal (Zip Code)
executive offices) executive offices)
</TABLE>
<TABLE>
<S> <C>
(214) 863-1000 (214) 863-1000
- ------------------------------------------- -------------------------------------------
(Registrant's telephone number, including (Registrant's telephone number, including
area code) area code)
N/A N/A
- ------------------------------------------- -------------------------------------------
(Former name, former address and former (Former name, former address and former
fiscal year, fiscal year,
if changed since last report) if changed since last report)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The number of shares outstanding of each registrant's classes of common
stock, par value $.01 per share, as of the close of business on August 10, 1998,
was as follows:
<TABLE>
<CAPTION>
REGISTRANT NUMBER OF SHARES
- --------------------------------------------- ---------------------------------------------
<S> <C>
Patriot American Hospitality, Inc. 145,653,306
Wyndham International, Inc. 145,653,306
</TABLE>
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
INDEX
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS:
COMBINED PATRIOT AMERICAN HOSPITALITY, INC. AND WYNDHAM INTERNATIONAL, INC.:
Condensed Combined Balance Sheets as of June 30, 1998 (unaudited) and December 31, 1997.................. 3
Condensed Combined Statements of Operations for the three months ended June 30, 1998 and 1997 and the six
months ended June 30, 1998 and 1997 (unaudited)........................................................ 4
Condensed Combined Statements of Cash Flows for the six months ended June 30, 1998 and 1997
(unaudited)............................................................................................ 5
PATRIOT AMERICAN HOSPITALITY, INC.:
Condensed Consolidated Balance Sheets as of June 30, 1998 (unaudited) and December 31, 1997.............. 6
Condensed Consolidated Statements of Operations for the three months ended June 30, 1998 and 1997 and the
six months ended June 30, 1998 and 1997 (unaudited).................................................... 7
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997
(unaudited)............................................................................................ 8
WYNDHAM INTERNATIONAL, INC.:
Condensed Consolidated Balance Sheet as of June 30, 1998 (unaudited) and December 31, 1997............... 9
Condensed Consolidated Statement of Operations for the three months ended June 30, 1998 and the six
months ended June 30, 1998 (unaudited)................................................................. 10
Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 1998 (unaudited)........ 11
Notes to Condensed Financial Statements as of June 30, 1998 (unaudited).................................... 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................................................. 53
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.......................................................... 54
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................ 54
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Exhibits................................................................................................. 55
Reports on Form 8-K...................................................................................... 56
SIGNATURES................................................................................................. 57
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Investment in real estate and related improvements and land held for development, net
of accumulated depreciation of $146,143 in 1998 and $68,805 in 1997................. $5,649,655 $2,044,649
Cash and cash equivalents............................................................. 138,248 42,431
Restricted cash....................................................................... 25,233 5,005
Accounts and lease revenue receivable................................................. 223,432 57,046
Investment in unconsolidated subsidiaries............................................. 108,738 11,802
Mortgage notes and other receivables from unconsolidated subsidiaries................. 72,175 76,419
Other mortgage notes and other receivables............................................ 43,855 12,983
Management contracts, net of accumulated amortization of $5,756 in 1998 and $1,574 in
1997................................................................................ 196,174 20,879
Leaseholds, net of accumulated amortization of $1,505 in 1998......................... 149,161 --
Trade names and franchise costs, net of accumulated amortization of $2,960 in 1998 and
$122 in 1997........................................................................ 138,432 11,166
Goodwill, net of accumulated amortization of $9,717 in 1998 and $1,851 in 1997........ 530,755 126,007
Deferred expenses, net of accumulated amortization of $12,406 in 1998 and $2,097 in
1997................................................................................ 99,861 21,417
Deferred acquisition costs............................................................ 11,092 52,500
Inventories........................................................................... 25,829 10,450
Other assets.......................................................................... 105,419 15,099
----------- ------------
Total assets........................................................................ $7,518,059 $2,507,853
----------- ------------
----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings under line of credit facility, term loans, mortgage notes and capital
leases.............................................................................. $3,692,387 $1,112,709
Accounts payable and accrued expenses................................................. 332,305 78,468
Dividends and distributions payable................................................... 155 27,636
Deposits.............................................................................. 21,539 12,423
Due to unconsolidated subsidiaries.................................................... 7,609 7,304
Deferred income taxes................................................................. 108,221 9,550
Minority interest in the Operating Partnerships....................................... 280,210 220,177
Minority interest in consolidated subsidiaries........................................ 247,749 49,694
Commitment and contingencies..........................................................
Shareholders' Equity:
Preferred stock, $0.01 par value, authorized: 100,000,000 shares each; shares issued
and outstanding: 8,423,230 shares in 1998......................................... 84 --
Excess stock (paired shares), $0.01 par value, authorized: 750,000,000 shares each;
no shares issued and outstanding.................................................. -- --
Common stock (paired shares), $0.01 par value, authorized: 650,000,000 shares each;
issued and outstanding: 144,957,723 shares in 1998 and 73,276,716 shares in
1997.............................................................................. 2,899 1,466
Additional paid in capital.......................................................... 2,971,856 1,070,973
Receivable from shareholders and affiliates......................................... (15,855) --
Unearned stock compensation, net of accumulated amortization of $8,778 in 1998 and
$5,825 in 1997.................................................................... (15,551) (13,116)
Unrealized loss on securities available for sale.................................... (621) --
Unrealized foreign exchange gain.................................................... 10 --
Distributions in excess of retained earnings........................................ (114,938) (69,431)
----------- ------------
Total shareholders' equity........................................................ 2,827,884 989,892
----------- ------------
Total liabilities and shareholders' equity........................................ $7,518,059 $2,507,853
----------- ------------
----------- ------------
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---------- --------- ---------- ---------
Revenue:
Hotel revenue.................................................... $ 422,010 $ 36,973 $ 712,653 $ 71,986
Lease revenue.................................................... 13,505 -- 34,070 --
Racecourse facility revenue...................................... 1,942 -- 24,991 --
Management fee and service fee income............................ 22,982 -- 36,821 --
Interest and other income........................................ 5,024 757 6,734 1,132
---------- --------- ---------- ---------
Total revenue.................................................. 465,463 37,730 815,269 73,118
---------- --------- ---------- ---------
Expenses:
Hotel expenses................................................... 299,021 4,103 499,874 7,649
Racecourse facility operations................................... 2,673 -- 20,857 --
General and administrative....................................... 20,502 2,299 37,808 5,081
Interest expense................................................. 53,494 9,523 89,451 17,328
Cost of acquiring leaseholds..................................... 57,062 -- 57,062 --
Depreciation and amortization.................................... 51,326 9,510 86,929 18,006
---------- --------- ---------- ---------
Total expenses................................................. 484,078 25,435 791,981 48,064
---------- --------- ---------- ---------
Operating income (loss)............................................ (18,615) 12,295 23,288 25,054
Equity in earnings of unconsolidated subsidiaries................ 2,293 2,072 5,487 3,093
---------- --------- ---------- ---------
Income (loss) before income tax provision, minority interests and
extraordinary item............................................... (16,322) 14,367 28,775 28,147
Income tax provision............................................. (932) -- (4,490) --
---------- --------- ---------- ---------
Income (loss) before minority interests and extraordinary item..... (17,254) 14,367 24,285 28,147
Minority interest in the Operating Partnerships.................. 4,501 (2,302) 1,447 (4,534)
Minority interest in consolidated subsidiaries................... (1,658) (247) (3,014) (447)
---------- --------- ---------- ---------
Income (loss) before extraordinary item............................ (14,411) 11,818 22,718 23,166
Extraordinary loss from early extinguishment of debt, net of
minority interest.............................................. (11,843) -- (30,560) --
---------- --------- ---------- ---------
Net income (loss).................................................. $ (26,254) $ 11,818 $ (7,842) $ 23,166
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Basic earnings per common Paired Share:
Income (loss) before extraordinary item.......................... $ (0.13) $ 0.27 $ 0.19 $ 0.54
Extraordinary loss............................................... $ (0.10) $ -- $ (0.27) $ --
---------- --------- ---------- ---------
Net income (loss) per common Paired Share...................... $ (0.23) $ 0.27 $ (0.08) $ 0.54
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Diluted earnings per common Paired Share:
Income (loss) before extraordinary item.......................... $ (0.13) $ 0.26 $ 0.19 $ 0.52
Extraordinary loss............................................... $ (0.10) $ -- $ (0.26) $ --
---------- --------- ---------- ---------
Net income (loss) per common Paired Share...................... $ (0.23) $ 0.26 $ (0.07) $ 0.52
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
---------------------
<S> <C> <C>
1998 1997
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................................................... $ (7,842) $ 23,166
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation.......................................................................... 67,999 17,949
Amortization of unearned stock compensation........................................... 3,144 1,927
Amortization of deferred loan costs................................................... 8,877 770
Amortization of management contracts and trade names.................................. 8,228 --
Amortization of goodwill and other assets............................................. 10,702 129
Cost of acquiring leaseholds.......................................................... 55,638 --
Net payments collected from unconsolidated subsidiaries............................... 7,754 1,674
Issuance of stock for bonuses and directors' fee...................................... 880 --
Equity in earnings of unconsolidated subsidiaries..................................... (5,487) (3,093)
Minority interest in income of Operating Partnerships................................. (1,447) 4,534
Minority interest in income of consolidated subsidiaries.............................. 3,014 447
Deferred income taxes................................................................. (1,591) --
Extraordinary loss from early extinguishment of debt.................................. 30,560 --
Changes in assets and liabilities:
Accounts and lease revenue receivable and other assets.............................. (41,641) (7,269)
Inventories......................................................................... (1,171) --
Accounts payable and other accrued expenses......................................... 22,845 (1,484)
---------- ---------
Net cash provided by operating activities......................................... 160,462 38,750
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of hotel properties and related working capital assets...................... (1,338,475) (242,625)
Improvements and additions to hotel properties.......................................... (109,374) (33,636)
Cash received in acquisition of hotel leases............................................ 98,312 --
Acquisition of management contracts..................................................... (10,365) --
Collections on other notes receivable................................................... 4,118 --
Increase in restricted cash accounts.................................................... (4,102) (2,015)
Deferred acquisition costs.............................................................. (28,197) (7,744)
Investment in unconsolidated subsidiaries............................................... (1,369) (1,574)
Investment in mortgage and other notes receivable....................................... (3,549) (30,035)
Other................................................................................... (495) --
---------- ---------
Net cash used in investing activities............................................. (1,393,496) (317,629)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit facility, term loans, mortgage notes and capital lease
obligations........................................................................... 2,447,542 354,854
Repay borrowings under line of credit facility and other debt........................... (1,297,209) (13,388)
Payment of deferred loan costs.......................................................... (29,704) (7,358)
Proceeds from issuance of common stock.................................................. 277,020 56
Payment of offering costs............................................................... (3,586) --
Contributions received from minority interest in consolidated subsidiaries.............. 3,768 3,608
Collections on notes receivable from shareholders and affiliates........................ 2,999 --
Payments to redeem OP Units............................................................. -- (14,441)
Dividends and distributions paid........................................................ (71,937) (44,017)
Other................................................................................... (42) (79)
---------- ---------
Net cash provided by financing activities......................................... 1,328,851 279,235
---------- ---------
Net increase in cash and cash equivalents................................................. 95,817 356
Cash and cash equivalents at beginning of period.......................................... 42,431 4,146
---------- ---------
Cash and cash equivalents at end of period................................................ $ 138,248 $ 4,502
---------- ---------
---------- ---------
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Investment in real estate and related improvements and land held for development, net
of accumulated depreciation of $125,952 in 1998 and $67,501 in 1997................. $5,045,844 $2,016,267
Cash and cash equivalents............................................................. 42,970 15,355
Restricted cash....................................................................... 22,580 5,005
Accounts and lease revenue receivable................................................. 15,982 14,458
Investment in unconsolidated subsidiaries............................................. 916,989 11,802
Mortgage notes and other receivables from unconsolidated subsidiaries................. 72,175 76,419
Subscription Notes receivable from Wyndham............................................ 133,669 --
Notes and other amounts receivable from Wyndham....................................... 141,209 42,946
Other notes receivable................................................................ 18,750 --
Investment in leaseholds, net of accumulated amortization of $1,428................... 130,659 --
Trade names, net of accumulated amortization of $261.................................. 9,302 --
Goodwill, net of accumulated amortization of $2,549 in 1998 and $1,257 in 1997........ 95,357 87,999
Deferred expenses, net of accumulated amortization of $11,272 in 1998 and $2,097 in
1997................................................................................ 55,030 21,417
Deferred acquisition costs............................................................ 7,442 21,374
Inventories........................................................................... 1,242 1,306
Other assets.......................................................................... 66,279 6,757
----------- ------------
Total assets...................................................................... $6,775,479 $2,321,105
----------- ------------
----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings under line of credit facility, term loans, mortgage notes and capital
leases.............................................................................. $3,454,686 $1,112,709
Subscription Notes payable to Wyndham................................................. 73,408 12,875
Notes and other amounts payable to Wyndham............................................ 51,133 --
Accounts payable and accrued expenses................................................. 96,115 28,151
Dividends and distributions payable................................................... 13 27,185
Deferred lease revenue................................................................ 5,681 --
Due to unconsolidated subsidiaries.................................................... 7,609 7,304
Minority interest in Patriot Partnership.............................................. 233,677 174,640
Minority interest in consolidated subsidiaries........................................ 232,644 49,214
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value; authorized: 100,000,000 shares; shares issued and
outstanding: 4,860,876 in 1998.................................................... 48 --
Excess stock, $0.01 par value; authorized: 750,000,000 shares; no shares issued and
outstanding....................................................................... -- --
Common stock, $0.01 par value; authorized: 650,000,000 shares; shares issued and
outstanding: 144,957,723 shares in 1998 and 73,276,716 shares in 1997............. 1,450 733
Additional paid in capital.......................................................... 2,724,724 990,821
Receivable from shareholders........................................................ (14,813) --
Unearned stock compensation, net of accumulated amortization of $8,485 in 1998 and
$5,825 in 1997.................................................................... (11,398) (13,116)
Unrealized foreign exchange gain.................................................... 20 --
Distributions in excess of retained earnings........................................ (79,518) (69,411)
----------- ------------
Total shareholders' equity........................................................ 2,620,513 909,027
----------- ------------
Total liabilities and shareholders' equity........................................ $6,775,479 $2,321,105
----------- ------------
----------- ------------
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenue:
Lease revenue.................................................... $ 135,002 $ 36,973 $ 244,651 $ 71,986
Interest and other income........................................ 5,255 757 8,771 1,132
---------- --------- ---------- ---------
Total revenue.................................................. 140,257 37,730 253,422 73,118
---------- --------- ---------- ---------
Expenses:
Real estate and personal property taxes and casualty insurance... 13,301 3,765 25,224 6,966
Ground lease expense............................................. 13,609 338 20,167 683
General and administrative....................................... 4,719 2,299 10,002 5,081
Interest expense................................................. 50,777 9,523 85,027 17,328
Cost of acquiring leaseholds..................................... 4,339 -- 4,339 --
Depreciation and amortization.................................... 41,196 9,510 61,693 18,006
---------- --------- ---------- ---------
Total expenses................................................. 127,941 25,435 206,452 48,064
---------- --------- ---------- ---------
Operating income................................................... 12,316 12,295 46,970 25,054
Equity in earnings of unconsolidated subsidiaries................ 15,656 2,072 19,248 3,093
---------- --------- ---------- ---------
Income before income tax provision, minority interests and
extraordinary item............................................... 27,972 14,367 66,218 28,147
Income tax provision............................................. (35) -- (406) --
---------- --------- ---------- ---------
Income before minority interests and extraordinary item............ 27,937 14,367 65,812 28,147
Minority interest in Patriot Partnership......................... (2,140) (2,302) (5,268) (4,534)
Minority interest in consolidated subsidiaries................... (1,895) (247) (2,428) (447)
---------- --------- ---------- ---------
Income before extraordinary item................................... 23,902 11,818 58,116 23,166
Extraordinary loss from early extinguishment of debt, net of
minority interest.............................................. (11,843) -- (30,560) --
---------- --------- ---------- ---------
Net income......................................................... $ 12,059 $ 11,818 $ 27,556 $ 23,166
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Basic earnings per common share:
Income before extraordinary item................................. $ 0.18 $ 0.27 $ 0.51 $ 0.54
Extraordinary loss............................................... (0.10) -- (0.28) --
---------- --------- ---------- ---------
Net income per common share...................................... $ 0.08 $ 0.27 $ 0.23 $ 0.54
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Diluted earnings per common share:
Income before extraordinary item................................. $ 0.18 $ 0.26 $ 0.49 $ 0.52
Extraordinary loss............................................... (0.09) -- (0.26) --
---------- --------- ---------- ---------
Net income per common share...................................... $ 0.09 $ 0.26 $ 0.23 $ 0.52
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
See notes to condensed financial statements.
7
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
<S> <C> <C>
1998 1997
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................................. $ 27,556 $ 23,166
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation.......................................................................... 58,472 17,949
Amortization of unearned stock compensation........................................... 2,660 1,927
Amortization of deferred loan costs................................................... 8,877 770
Amortization of trade names........................................................... 261 --
Amortization of goodwill and other assets............................................. 2,960 129
Cost of acquiring leaseholds.......................................................... 3,000 --
Net payments collected from unconsolidated subsidiaries............................... 7,754 1,674
Issuance of stock for bonuses and directors' fee...................................... 675 --
Equity in earnings of unconsolidated subsidiaries..................................... (19,248) (3,093)
Minority interest in income of Patriot Partnership.................................... 5,268 4,534
Minority interest in income of consolidated subsidiaries.............................. 2,428 447
Extraordinary loss from early extinguishment of debt.................................. 30,560 --
Changes in assets and liabilities:
Accounts and lease revenue receivable and other assets................................ (49,856) (7,269)
Due from Wyndham...................................................................... 1,688 --
Inventory............................................................................. 64 --
Accounts payable and other accrued expenses........................................... 42,061 (1,484)
---------- ---------
Net cash provided by operating activities........................................... 125,180 38,750
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of hotel properties and related working capital assets...................... (1,925,156) (242,625)
Improvements and additions to hotel properties.......................................... (96,109) (33,636)
Cash received upon acquisition of hotel assets.......................................... 9,932 --
Collections on other notes receivable................................................... 4,000 --
Increase in restricted cash accounts.................................................... (3,879) (2,015)
Deferred acquisition costs.............................................................. (3,714) (7,744)
Investment in unconsolidated subsidiaries............................................... -- (1,574)
Investment in mortgage and other notes receivable....................................... (1,305) (30,035)
Other................................................................................... 63 --
---------- ---------
Net cash used in investing activities............................................... (2,016,168) (317,629)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit facility, term loans, mortgage notes and capital lease
obligations........................................................................... 2,447,542 354,854
Repay borrowings under line of credit facility and other debt........................... (683,662) (13,388)
Payment of deferred loan costs.......................................................... (29,704) (7,358)
Principal payments on subscription notes payable to Wyndham............................. (12,875) --
Proceeds from issuance of common stock.................................................. 264,663 56
Payment of offering costs............................................................... (3,450) --
Contributions received from minority interest in consolidated subsidiaries.............. 3,768 3,608
Collections on notes receivable from shareholders....................................... 2,999 --
Payments to redeem OP Units............................................................. -- (14,441)
Dividends and distributions paid........................................................ (70,636) (44,017)
Other................................................................................... (42) (79)
---------- ---------
Net cash provided by financing activities........................................... 1,918,603 279,235
---------- ---------
Net increase in cash and cash equivalents................................................. 27,615 356
Cash and cash equivalents at beginning of period.......................................... 15,355 4,146
---------- ---------
Cash and cash equivalents at end of period................................................ $ 42,970 $ 4,502
---------- ---------
---------- ---------
</TABLE>
See notes to condensed financial statements.
8
<PAGE>
WYNDHAM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 95,278 $ 27,076
Restricted cash..................................................................... 2,653 --
Accounts receivable................................................................. 207,450 46,340
Notes and other receivables from Patriot............................................ 26,953 12,875
Inventories......................................................................... 24,587 9,144
Prepaid expenses and other current assets........................................... 27,004 5,227
----------- -------------
Total current assets.............................................................. 383,925 100,662
Investment in real estate and related improvements, net of accumulated depreciation of
$20,191 in 1998 and $1,304 in 1997.................................................. 604,239 28,382
Investments in unconsolidated subsidiaries............................................ 69,408 --
Subscription Notes receivable from Patriot............................................ 73,408 --
Notes and other receivables from Patriot.............................................. 24,180 --
Mortgage notes and other receivables.................................................. 25,105 12,983
Management contract costs, net of accumulated amortization of $5,756 in 1998 and
$1,574 in 1997...................................................................... 196,174 20,879
Leasehold costs, net of accumulated amortization of $77............................... 18,502 --
Trade names and franchise costs, net of accumulated amortization of $2,802 in 1998 and
$122 in 1997........................................................................ 129,130 11,166
Deferred acquisition costs............................................................ 3,650 31,126
Goodwill, net of accumulated amortization of $7,168 in 1998 and $594 in 1997.......... 435,398 38,008
Deferred expenses, net of accumulated amortization of $1,134.......................... 44,831 --
Other assets.......................................................................... 12,136 8,882
----------- -------------
Total assets...................................................................... $2,020,086 $ 252,088
----------- -------------
----------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................................... $ 236,189 $ 50,317
Dividends and distributions payable................................................. 142 451
Participating lease payments payable to Patriot..................................... 47,910 9,519
Deposits............................................................................ 21,540 12,423
Notes and other amounts payable to Patriot.......................................... 70,570 42,946
Current portion of mortgage notes and capital lease obligations..................... 25,050 --
----------- -------------
Total current liabilities......................................................... 401,401 115,656
Subscription Notes payable to Patriot................................................. 133,669 --
Notes and other amounts payable to Patriot............................................ 22,729 --
Mortgage notes payable and capital lease obligations.................................. 212,651 --
Deferred income taxes................................................................. 108,221 9,550
Minority interest in Wyndham Partnership.............................................. 46,533 45,537
Minority interest in consolidated subsidiaries........................................ 892,764 480
Commitments and contingencies.........................................................
Shareholders' equity:
Preferred stock, $0.01 par value; authorized: 100,000,000 shares; shares issued and
outstanding: 3,562,354 in 1998.................................................... 36 --
Excess stock, $0.01 par value; authorized: 750,000,000 shares; no shares issued and
outstanding....................................................................... -- --
Common stock, $0.01 par value; authorized: 650,000,000 shares; issued and
outstanding: 144,957,723 shares in 1998 and 73,276,716 shares in 1997............. 1,449 733
Additional paid in capital.......................................................... 247,132 80,152
Receivable from shareholders and affiliates......................................... (1,042) --
Unearned executive compensation, net of accumulated amortization of $484............ (4,153) --
Unrealized loss on securities available for sale.................................... (621) --
Unrealized foreign exchange loss.................................................... (10) --
Retained earnings/(deficit)........................................................... (40,673) (20)
----------- -------------
Total shareholders' equity........................................................ 202,118 80,865
----------- -------------
Total liabilities and shareholders' equity........................................ $2,020,086 $ 252,088
----------- -------------
----------- -------------
</TABLE>
See notes to condensed financial statements.
9
<PAGE>
WYNDHAM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1998 1998
------------- -----------
<S> <C> <C>
Revenue:
Hotel revenue....................................................................... $ 422,010 $ 712,653
Racecourse facility revenue......................................................... 1,942 24,991
Management fee and service fee income............................................... 23,144 37,249
Interest and other income........................................................... 5,151 7,337
------------- -----------
Total revenue..................................................................... 452,247 782,230
------------- -----------
Expenses:
Hotel expenses...................................................................... 272,111 454,483
Racecourse facility operations...................................................... 2,673 20,857
General and administrative.......................................................... 15,783 27,806
Interest expense.................................................................... 8,099 13,798
Cost of acquiring leaseholds........................................................ 52,723 52,723
Depreciation and amortization....................................................... 10,130 25,236
Lease payments...................................................................... 127,178 216,262
------------- -----------
Total expenses.................................................................... 488,697 811,165
------------- -----------
Operating loss........................................................................ (36,450) (28,935)
Equity in earnings of unconsolidated subsidiaries................................... 294 2,014
------------- -----------
Loss before income tax provision and minority interests............................... (36,156) (26,921)
Income tax provision................................................................ (897) (4,084)
------------- -----------
Loss before minority interests........................................................ (37,053) (31,005)
Minority interest in Wyndham Partnership............................................ 6,641 6,715
Minority interest in consolidated subsidiaries...................................... (13,420) (16,361)
------------- -----------
Net loss.............................................................................. $ (43,832) $ (40,651)
------------- -----------
------------- -----------
Basic loss per common share........................................................... $ (0.36) $ (0.37)
------------- -----------
------------- -----------
Diluted loss per common share......................................................... $ (0.36) $ (0.37)
------------- -----------
------------- -----------
</TABLE>
See notes to condensed financial statements.
10
<PAGE>
WYNDHAM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1998
---------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................................ $ (40,651)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation.................................................................................. 9,527
Amortization of unearned stock compensation................................................... 484
Amortization of management contracts and trade names.......................................... 7,967
Amortization of goodwill...................................................................... 7,742
Issuance of stock for directors' fees and bonus............................................... 205
Cost of acquiring leaseholds.................................................................. 52,638
Deferred income taxes......................................................................... (1,591)
Equity in earnings of unconsolidated subsidiaries............................................. (2,014)
Minority interest in income of Wyndham Partnership............................................ (6,715)
Minority interest in income of consolidated subsidiaries...................................... 16,361
Changes in assets and liabilities:
Accounts receivable and prepaid expenses and other assets..................................... (23,806)
Other receivables from Patriot................................................................ (1,688)
Inventories................................................................................... (1,235)
Accounts payable and other accrued expenses................................................... (13,536)
Participating lease payments payable to Patriot............................................... 32,022
---------------
Net cash provided by operating activities................................................. 35,710
---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of hotel properties and related working capital assets.............................. (19,795)
Improvements and additions to hotel properties.................................................. (13,693)
Increase in restricted cash account............................................................. (223)
Acquisition of management contracts............................................................. (10,365)
Deferred acquisition costs...................................................................... (24,483)
Cash received upon acquisition of hotel leases.................................................. 88,380
Investment in other notes receivable............................................................ (2,244)
Collections on other notes receivable........................................................... 118
Investment in unconsolidated subsidiaries....................................................... (1,369)
Other........................................................................................... (558)
---------------
Net cash provided by investing activities................................................. 15,768
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of assumed debt....................................................................... (612,742)
Payment of capital lease obligations............................................................ (805)
Proceeds from issuance of common stock.......................................................... 12,357
Payment of offering costs....................................................................... (136)
Collections on Subscription Notes............................................................... 12,875
Contributions received from minority interest in consolidated subsidiaries...................... 606,476
Distributions paid.............................................................................. (1,301)
---------------
Net cash provided by financing activities................................................. 16,724
---------------
Net increase in cash and cash equivalents......................................................... 68,202
Cash and cash equivalents at beginning of period.................................................. 27,076
---------------
Cash and cash equivalents at end of period........................................................ $ 95,278
---------------
---------------
</TABLE>
See notes to condensed financial statements.
11
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION:
The entity formerly known as Patriot American Hospitality, Inc.
(collectively with its subsidiaries, "Old Patriot"), a Virginia corporation, was
formed April 17, 1995 as a self-administered real estate investment trust
("REIT") for the purpose of acquiring equity interests in hotel properties. On
October 2, 1995, Old Patriot completed an initial public offering of shares of
its common stock and commenced operations.
On July 1, 1997, Old Patriot merged with and into California Jockey Club
("Cal Jockey"), with Cal Jockey being the surviving legal entity (the "Cal
Jockey Merger"). Cal Jockey's shares of common stock are paired and trade
together with the shares of common stock of Bay Meadows Operating Company ("Bay
Meadows") as a single unit pursuant to a stock pairing arrangement. In
connection with the Cal Jockey Merger, Cal Jockey changed its name to "Patriot
American Hospitality, Inc." ("Patriot") and Bay Meadows changed its name to
"Patriot American Hospitality Operating Company." In January 1998, as a result
of the merger of Wyndham Hotel Corporation with and into Patriot as discussed
below, Patriot American Hospitality Operating Company changed its name to
"Wyndham International, Inc." and is referred to herein, collectively with its
subsidiaries, as "Wyndham." The term "Companies" as used herein includes
Patriot, Wyndham and their respective subsidiaries. Patriot and Wyndham are both
Delaware corporations.
The Cal Jockey Merger was accounted for as a reverse acquisition whereby Cal
Jockey was considered to be the acquired company for accounting purposes.
Consequently, the historical financial information of Old Patriot became the
historical financial information for Patriot. For accounting purposes, Wyndham
commenced its operations concurrent with the closing of the Cal Jockey Merger on
July 1, 1997.
The shares of common stock of Patriot are paired and trade together with the
shares of common stock of Wyndham as a single unit pursuant to a stock pairing
arrangement. These units, consisting of one share of common stock of Patriot
paired with one share of common stock of Wyndham, are referred to herein as
"Paired Shares." The term "Patriot Companies" as used herein includes Patriot,
Wyndham and their respective subsidiaries.
A substantial portion of the assets of Patriot are held by Patriot American
Hospitality Partnership, L.P. (the "Patriot Partnership"). Patriot contributed
such assets to the Patriot Partnership in exchange for units of limited
partnership interest ("OP Units") of the Patriot Partnership. In addition, a
substantial portion of the assets of Wyndham are held by Wyndham International
Operating Partnership, L.P. (the "Wyndham Partnership," formerly known as
Patriot American Hospitality Operating Partnership, L.P.). Wyndham contributed
such assets to the Wyndham Partnership in exchange for OP Units of the Wyndham
Partnership. Collectively, the Wyndham Partnership and the Patriot Partnership
are referred to herein as the "Operating Partnerships."
Patriot, through its wholly owned subsidiary, PAH GP, Inc., is the sole
general partner and the holder of a 1.0% general partnership interest in the
Patriot Partnership. In addition, Patriot, through its wholly owned subsidiary,
PAH LP, Inc., owns an approximate 88.7% limited partnership interest in the
Patriot Partnership as of June 30, 1998. Wyndham owns a 1.0% general partnership
interest and an approximate 87.6% limited partnership interest in the Wyndham
Partnership.
12
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION: (CONTINUED)
At June 30, 1998, Patriot and Wyndham, through the Operating Partnerships
and other subsidiaries, owned interests in 183 hotels with an aggregate of over
44,300 guest rooms and leased 122 hotels from third parties with over 15,700
rooms. In addition, Wyndham manages 174 hotels with over 42,700 guest rooms and
franchises 9 hotels with over 2,300 rooms. Patriot leases 214 of its hotels to
Wyndham and 14 of Patriot's hotels are leased to third party lessees (the
"Lessees") who are responsible for operating the hotels. Generally, these leases
provide for the payment of the greater of base or participating rent, plus
certain additional charges, as applicable (the "Participating Leases"). The
Lessees, in turn, have entered into separate agreements with hotel management
entities (the "Operators") to manage the hotels.
Seventy-seven of the Companies' hotels are owned by special purpose entities
(the "Non-Controlled Subsidiaries"). Patriot owns approximately a 99% non-voting
interest and Wyndham owns approximately a 1% controlling voting interest in each
of the Non-Controlled Subsidiaries. Therefore, the operating results of the
Non-Controlled Subsidiaries are combined with those of Wyndham for financial
reporting purposes. Patriot accounts for its investment in the Non-Controlled
Subsidiaries using the equity method of accounting.
PRINCIPLES OF CONSOLIDATION
The unaudited separate consolidated financial statements include the
accounts of Patriot and Wyndham, their respective wholly owned subsidiaries and
the partnerships, corporations and limited liability companies in which Patriot
or Wyndham owns a controlling interest. The unaudited separate consolidated
financial statements of Patriot and Wyndham have also been combined for purposes
of financial statement presentation. All significant intercompany accounts and
transactions have been eliminated.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. For further information, refer to the consolidated financial statements
and footnotes thereto included in Patriot's and Wyndham's Joint Annual Report on
Form 10-K for the year ended December 31, 1997. Certain prior year amounts have
been reclassified to conform to current period presentation.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("Statement 130"),
"Reporting Comprehensive Income" which establishes standards for reporting and
display of comprehensive income and its components. The Companies have adopted
Statement 130 beginning with their interim financial statements for the first
quarter of 1998. Management believes that they do not have material items that
would require presentation in a separate statement of comprehensive income.
13
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION: (CONTINUED)
BUSINESS SEGMENTS
In June 1997, FASB issued Statement of Financial Accounting Standards No.
131 ("Statement 131"), "Disclosures About Segments of an Enterprise and Related
Information" which specifies revised guidelines for determining an entity's
operating segments and the type and level of financial information to be
disclosed. Statement 131 is effective for fiscal years beginning after December
15, 1997, but need not be applied to interim financial statements in the initial
year of its application. Management believes this statement will result in
expanded disclosure for the financial statements.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, FASB issued Statement of Financial Accounting Standards No.
133 ("Statement 133"), "Accounting for Derivative Instruments and Hedging
Activities," which is required to be adopted in years beginning after June 15,
1999. The Companies expect to adopt Statement 133 effective January 1, 2000.
Statement 133 will require the Companies to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings, or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
Management has not yet determined what the effect of Statement 133 will be on
the earnings and financial position of the Companies.
PARTICIPATING LEASE REVENUE RECOGNITION
In May 1998, the Financial Accounting Standards Board's Emerging Issues Task
Force issued EITF number 98-9, "Accounting for Contingent Rent in Interim
Financial Periods ("EITF 98-9"). EITF 98-9 provides that a lessor shall defer
recognition of contingent rental income in interim periods until specified
targets that trigger the contingent income are met. Management has reviewed the
terms of its Participating Leases and has determined that the provisions of EITF
98-9 will impact Patriot's current revenue recognition on an interim basis, but
will have no impact on Patriot's annual participating rent revenue or interim
cash flow from its Participating Leases. Patriot has adopted the provisions of
EITF 98-9 and elected to apply the provisions of the new pronouncement on a
prospective basis.
Generally, Patriot's Participating Leases provide for the payment of the
greater of (i) a fixed base rent or (ii) participating rent, based on the
revenue of the hotels, plus certain additional charges, as applicable. The
Participating Leases contain annual revenue thresholds used to calculate the
various tiers of participating rent which are prorated on a monthly basis to
determine monthly participating rent payments. The provisions of EITF 98-9 call
for straight-line recognition of the annual base rent throughout the year and
for the deferral of any additional lease amounts collected or due from the
Lessees until such amounts exceed the annual revenue thresholds. This will
generally result in base rent being recognized in the first and second quarters
and participating rents already collected or due from the Lessees being deferred
and then recognized in the third and fourth quarters due to the structure of
Patriot's Participating Leases and
14
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION: (CONTINUED)
the seasonality of the hotel operations. The effect of the change was to defer
recognition of $5,681 of lease revenue during the quarter ended June 30, 1998.
2. HOTELS AND OTHER BUSINESSES ACQUIRED:
HOTEL INVESTMENTS PURCHASED
During the first half of 1998, Patriot, through the Patriot Partnership and
its subsidiaries, invested approximately $234,116 in the acquisition of four
hotels with a total of over 1,700 guest rooms and the Golden Door Spa. These
acquisitions were financed primarily with funds drawn on Patriot's revolving
credit facility, the issuance of 53,989 OP Units of the Operating Partnerships
valued at approximately $1,496, the issuance of 390,335 Paired Shares valued at
approximately $10,000 and the assumption of mortgage debt in the amount of
approximately $80,074. In addition, Patriot acquired an office building that
will be converted into a hotel for approximately $33,900.
BUSINESS COMBINATIONS
WYNDHAM HOTEL CORPORATION--On January 5, 1998, Wyndham Hotel Corporation
("Old Wyndham") merged with and into Patriot, with Patriot being the surviving
corporation (the "Wyndham Merger").
Patriot, as a result of the Wyndham Merger, acquired ownership of ten
Wyndham hotels and 14 ClubHouse hotels and leased such hotels to Wyndham.
Thirteen of the 14 hotel leases assumed by Patriot were sub-leased to Wyndham.
Old Wyndham's remaining 52 management and franchise contracts (excluding 16
hotels that Old Wyndham managed that are owned by Patriot), the Wyndham and
ClubHouse proprietary brand names, and the Wyndham hotel management company were
transferred to certain of the Non-Controlled Subsidiaries The total purchase
consideration for the Wyndham Merger of approximately $982,000 consisted of
21,594,137 Paired Shares and 4,860,876 shares of Series A Convertible Preferred
Stock of Patriot (which are convertible on a one-for-one basis into Paired
Shares), cash of approximately $339,000 to repay debt and pay Old Wyndham
shareholders who elected to receive cash (which was financed with funds drawn on
Patriot's revolving credit facility) and the assumption of approximately $59,063
in debt.
In April 1998, the Companies issued an aggregate 240,437 Paired Shares
valued at approximately $5,347 in settlement of certain purchase price
adjustment arrangements related to Old Wyndham's acquisition of ClubHouse
Hotels, Inc.
WHG CASINOS & RESORTS, INC. AND RELATED TRANSACTIONS--On January 16, 1998, a
subsidiary of Wyndham merged with and into WHG Casinos & Resorts Inc. ("WHG"),
with WHG being the surviving corporation (the "WHG Merger"). As a result of the
WHG Merger, Wyndham acquired the 570-room Condado Plaza Hotel & Casino, a 50%
interest in the partnership that owns the 389-room El San Juan Hotel & Casino
and a 23.3% interest in the partnership that owns the 751-room El Conquistador
Resort & Country Club (the "El Conquistador"), all of which are located in
Puerto Rico. In addition, Wyndham acquired a 62% interest in Williams
Hospitality Group, Inc., the management company for the three hotels and the Las
Casitas Village at the El Conquistador. A total of 5,004,690 Paired Shares were
issued in connection with
15
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
2. HOTELS AND OTHER BUSINESSES ACQUIRED: (CONTINUED)
the WHG Merger and approximately $21,300 of debt was assumed, resulting in total
purchase consideration of approximately $159,400.
Effective March 1, 1998, Patriot acquired from unaffiliated third parties a
40% interest in the El San Juan Hotel & Casino, an aggregate 68.62% equity
interest in the El Conquistador and a 38% interest in Williams Hospitality
Group, Inc. for approximately $31,000 in cash and issuance of 1,818,182 Paired
Shares valued at approximately $49,227 (collectively, these transactions and the
WHG Merger are referred to herein as the "WHG Transactions"). Wyndham owns the
controlling general partner interest in the partnerships that own the El San
Juan Hotel & Casino and the El Conquistador. Wyndham also holds voting control
of Williams Hospitality Group, Inc. Therefore, the operating results of these
entities have been consolidated with those of Wyndham for financial reporting
purposes. As a result, approximately $188,922 of debt related to the
partnerships that own the El San Juan Hotel & Casino and the El Conquistador has
also been reflected in Wyndham's consolidated balance sheet. Patriot accounts
for its investment in these entities using the equity method of accounting.
ARCADIAN INTERNATIONAL LIMITED--On April 6, 1998, Patriot announced the
completion of its acquisition of all of the issued and to-be-issued shares of
Arcadian International Limited ("Arcadian," formerly known as Arcadian
International Plc) for 60 pence per share. Including the exercise of all
outstanding options to purchase shares, the assumption of debt and the
acquisition of the remaining shares in the Malmaison Group, the total
transaction cost was approximately L185,900 (approximately $308,700 U.S. based
on exchange rates at the time of closing). As a result of the transaction,
Patriot acquired ten owned hotels located throughout England; one owned hotel in
Jersey; five owned and managed Malmaison Hotels; two resorts under development
in Tuscany, Italy and Paris, France; and the proprietary Malmaison brand name.
Patriot also acquired Arcadian's 50% partnership interest in the redevelopment
of the luxury Great Eastern Hotel in London, to be branded as a flagship Wyndham
Hotel and operated by Wyndham once the development has been completed.
Collectively, the transactions described above are referred to herein as the
"Arcadian Acquisition."
In connection with the Arcadian Acquisition, Patriot entered into a
short-term financing agreement on April 15, 1998 with Paine Webber Real Estate
Securities, Inc. ("Paine Webber Real Estate") whereby Paine Webber Real Estate
loaned Patriot $160,000 through April 15, 1999, at a rate equal to the borrowing
rate on Patriot's Revolving Credit Facility. In addition, Patriot assumed
approximately $112,600 of debt in connection with the Arcadian Acquisition.
INTERSTATE HOTELS COMPANY--On June 2, 1998, pursuant to an Agreement and
Plan of Merger dated as of December 2, 1997, as thereafter amended, (the
"Interstate Merger Agreement") between Patriot, Wyndham and Interstate Hotels
Company ("Interstate"), Interstate merged with and into Patriot with Patriot
being the surviving company (the "Interstate Merger"). Pursuant to the
Interstate Merger Agreement, stockholders of Interstate could elect to convert
each of their shares of Interstate common stock into the right to receive either
(i) $37.50 in cash (the "Cash Consideration"), subject to proration in certain
circumstances, or (ii) a number of Paired Shares of Patriot and Wyndham common
stock based on an exchange ratio of 1.341 Paired Shares for each share of
Interstate common stock not exchanged for cash (the "Interstate Exchange
Ratio").
16
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
2. HOTELS AND OTHER BUSINESSES ACQUIRED: (CONTINUED)
As a result of the Interstate Merger, Patriot acquired controlling interest
in, or ownership of, 42 hotels representing over 12,000 rooms; leases for 84
hotels representing over 10,100 rooms and management or service agreements for
82 hotels representing over 20,400 rooms located throughout the United States
and in Canada, the Caribbean and Russia.
The total purchase consideration for the Interstate Merger of approximately
$2,086,812 consisted of 28,825,875 Paired Shares, cash of approximately $525,385
to pay Interstate shareholders who elected to receive cash, approximately
$787,117 in debt assumed or refinanced by Patriot and approximately $73,351 to
pay other transaction-related costs. In addition, Interstate shareholders
received rights to receive a cash distribution of $0.429 on each share of
Interstate common stock that was converted into Paired Shares, aggregating
approximately $9,138.
On May 27, 1998, the Companies and Interstate entered into a settlement
agreement (the "Settlement Agreement") with Marriott International, Inc.
("Marriott") which addressed certain claims asserted by Marriott in connection
with Patriot's then-proposed merger with Interstate. The Settlement Agreement
provided for the dismissal of litigation brought by Marriott and allowed
Patriot's merger with Interstate to close on June 2, 1998.
In addition to dismissal of the Marriott litigation, the Settlement
Agreement provides for three principal transactions: (i) the re-branding of ten
Marriott hotels formerly under the Wyndham name, (ii) the assumption by Marriott
of the management of ten Marriott hotels formerly managed by Interstate for the
remaining term of the Marriott franchise agreement, and (iii) the divestiture by
the Companies by November 30, 1998 (subject to extension upon payment of certain
fees by the Companies) of the third-party management business that was operated
by Interstate (the "Spin-off").
SF HOTEL COMPANY, L.P.--On June 5, 1998, Patriot, through the Patriot
Partnership, acquired all of the partnership interests in SF Hotel Company, L.P.
("Summerfield") for approximately $298,915 (the "Summerfield Acquisition"). The
total purchase consideration for the Summerfield Acquisition consisted of
approximately 3,223,795 OP Units of the Operating Partnerships, 1,397,281 Paired
Shares, cash of approximately $165,514 and assumption of debt in the amount of
approximately $17,083. In addition, the purchase price is subject to future
adjustment based on (i) the market price of the Paired Shares through the end of
1998 and (ii) achievement of certain performance criteria through 2001 for seven
hotels that are currently under development. As a result of the Summerfield
Acquisition, Patriot acquired four Summerfield Suites-Registered Trademark-
hotels, leasehold and management interests in 24 Summerfield
Suites-Registered Trademark-, Sierra Suites-Registered Trademark- and Sunrise
Suites hotels and management contracts and franchise interests for 12 additional
Summerfield Suites-Registered Trademark- and Sierra Suites-Registered Trademark-
hotels. Patriot has leased or sub-leased such hotels to Wyndham. In addition,
Patriot acquired the development contracts for several additional hotels.
CHC INTERNATIONAL--On June 30, 1998, pursuant to an Agreement and Plan of
Merger dated as of September 30, 1997 (the "CHCI Merger Agreement") between
Patriot, Wyndham and CHC International ("CHCI"), the hospitality-related
businesses of CHCI merged with and into Wyndham with Wyndham being the surviving
company (the "CHCI Merger"). CHCI's gaming operations were transferred to a new
legal entity prior to the CHCI Merger and such operations were not a part of the
transaction. As a result of the CHCI Merger, Wyndham, through its subsidiaries,
acquired the remaining 50% investment interest in
17
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
2. HOTELS AND OTHER BUSINESSES ACQUIRED: (CONTINUED)
GAH-II, L.P. ("GAH"), the remaining 17 leases and 16 of the associated
management contracts related to the Patriot hotels leased by CHC Lease Partners,
8 third-party management contracts, two third-party asset management contracts,
the Grand Bay proprietary brand name and certain other hospitality management
assets. The aggregate purchase price of the 17 leasehold interests was
approximately $52,723, which is reflected as a cost of acquiring leaseholds in
the accompanying statements of operations of Wyndham.
By operation of the CHCI Merger, all the issued and outstanding shares of
common stock, par value $0.005 per share, of CHCI ("CHCI Shares") and certain
stock option rights were exchanged for an aggregate of 1,781,173 shares of
Series A Redeemable Convertible Preferred Stock, par value $0.01 per share of
Wyndham (the "Wyndham Series A Preferred Stock") and 1,781,181 shares of Series
B Redeemable Convertible Preferred Stock, par value $0.01 per share, of Wyndham
(the "Wyndham Series B Preferred Stock"). In addition, Wyndham assumed CHCI's
outstanding debt in the amount of approximately $16,600.
In addition, on September 30, 2000 and September 30, 2002, Wyndham may be
obligated to pay the CHCI stockholders and a subsidiary of Wyndham may be
obligated to pay a Gencom-related entity additional consideration, in each case
based upon the performance of certain specified assets.
OTHER
During the second quarter of 1998, Patriot re-acquired the leasehold
interests for three of its hotels from two of the Lessees for an aggregate
purchase price of approximately $4,339, which is reflected as a cost of
acquiring leaseholds in the accompanying statements of operations of Patriot.
The Companies issued 118,112 Paired Shares valued at $3,000 and paid cash of
$637 to Metro Hotels Leasing Corporation and paid cash of $702 to NorthCoast
Hotels, L.L.C. in connection with the transaction. Patriot has leased the hotels
to Wyndham.
3. SUBSCRIPTION NOTES:
In order to effect the issuance of the paired shares of common stock and OP
Units which were issued in connection with certain of the Companies' mergers and
other acquisition transactions, Patriot and Wyndham have issued promissory notes
to fund issuance of Paired Shares and OP Units (the "Subscription Notes").
In connection with the issuance of Paired Shares in the Wyndham Merger,
Patriot issued Subscription Notes payable to Wyndham in the aggregate amount of
$30,535. These Subscription Notes bear interest at a rate of LIBOR plus 1% per
annum and mature January 31, 2001.
In connection with the issuance of Paired Shares in the WHG Merger, Wyndham
issued Subscription Notes payable to Patriot in the aggregate amount of
$133,669. These Subscription Notes bear interest at a rate of 8.7% per annum and
mature in January 2001.
In connection with the issuance of Paired Shares and OP Units of the
Operating Partnerships in the Summerfield Acquisition, Patriot issued
Subscription Notes payable to Wyndham in the aggregate amount of $5,816. These
Subscription Notes bear interest at a rate of 8.7% per annum and mature in
January 2001.
18
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
3. SUBSCRIPTION NOTES: (CONTINUED)
In connection with the issuance of Paired Shares in the Interstate Merger,
Patriot issued Subscription Notes payable to Wyndham in the aggregate amount of
$34,591. These Subscription Notes bear interest at a rate of 8.7% per annum and
mature in January 2001.
4. REVOLVING CREDIT FACILITY, TERM LOANS AND OTHER MORTGAGE DEBT:
In connection with the Interstate Merger, the Companies closed on the
commitment from The Chase Manhattan Bank and Chase Securities, Inc. and
PaineWebber Real Estate Securities, Inc. to increase Patriot's existing credit
facilities to an aggregate of $2,700,000 (an increase of $1,450,000 from the
prior $1,250,000 credit package). The increased credit facilities include the
$900,000 Revolving Credit Facility and a series of term loans in the aggregate
amount of up to $1,800,000 (the "Term Loans"). Proceeds from the increased
credit facilities were used to fund the cash portion of the Interstate Merger
consideration, as well as to refinance certain outstanding indebtedness of the
Patriot Companies. In addition, the increased credit facilities will be used to
fund future acquisitions and for general working capital purposes. Interest
rates will be based on the Companies' leverage ratio and may vary from 1.5% to
2.5% over LIBOR. Patriot incurred approximately $27,405 in loan fees and other
expenses associated with this financing arrangement.
The Companies entered into a fourth interest rate swap arrangement during
the first quarter of 1998 to swap floating rate LIBOR-based interest rates for a
fixed rate interest amount as a hedge against $125,000 of the outstanding
balance on the Companies' revolving credit facility. The interest rate swap
fixes the LIBOR portion of the revolving credit facility interest rate at
5.5575% per annum through November 2002. If the actual LIBOR rate is less than
the specified fixed interest rate, Patriot is obligated to pay the differential
interest amount, such amount being recorded as incremental interest expense. If
the LIBOR is greater than the specified fixed interest rate, the differential
interest amount is refunded to Patriot.
In June 1998, the Companies entered into a fifth interest rate swap
arrangement as a hedge against $250,000 of the outstanding balance on the
Companies' variable rate debt. The interest rate swap provides for a fixed LIBOR
rate of 5.8425% per annum through June 2003. If the actual LIBOR rate is less
than the specified fixed interest rate, Patriot is obligated to pay the
differential interest amount, such amount being recorded as incremental interest
expense. If the LIBOR is greater than the specified fixed interest rate, the
differential interest amount is refunded to Patriot.
Additionally, in connection with the Interstate Merger, Patriot assumed four
interest rate hedge contracts: an interest rate cap that limits LIBOR to 6% on
up to $105,000 of indebtedness through June 1999; an interest rate cap that
limits LIBOR to 6% on up to $222,100 of indebtedness through October 1998; an
interest rate cap that limits LIBOR to 7% on up to $208,750 of indebtedness from
October 1998 through October 1999; and an interest rate swap that provides for a
fixed LIBOR rate of 5.8% on $72,000 of indebtedness through December 2000.
19
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
5. COMPUTATION OF EARNINGS PER SHARE:
Basic and diluted earnings per share have been computed as follows:
COMBINED
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
---------------------- --------------------
<S> <C> <C> <C> <C>
BASIC DILUTED BASIC DILUTED
---------- ---------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Income (loss) before extraordinary item............................. $ (14,411) $ (14,411) $ 11,818 $ 11,818
Preferred stock dividends........................................... (1,555) (1,555) -- --
---------- ---------- --------- ---------
Income (loss) available to common stockholders...................... (15,966) (15,966) 11,818 11,818
Extraordinary loss.................................................. (11,843) (11,843) -- --
---------- ---------- --------- ---------
Net income (loss) available to common stockholders.................. $ (27,809) $ (27,809) $ 11,818 $ 11,818
---------- ---------- --------- ---------
---------- ---------- --------- ---------
Weighted average number of Paired Shares outstanding................ 122,745 122,745 43,323 43,323
---------- ---------
---------- ---------
Dilutive securities:
Effect of unvested stock grants................................... -- 927
Dilutive options to purchase Paired Shares........................ -- 720
Dilutive effect of price adjustment arrangements.................. -- --
Dilutive convertible preferred shares............................. -- --
---------- ---------
122,745 44,970
---------- ---------
---------- ---------
Earnings per Paired Share:
Income (loss) before extraordinary item........................... $ (0.13) $ (0.13) $ 0.27 $ 0.26
Extraordinary loss................................................ (0.10) (0.10) -- --
---------- ---------- --------- ---------
Net income (loss)................................................. $ (0.23) $ (0.23) $ 0.27 $ 0.26
---------- ---------- --------- ---------
---------- ---------- --------- ---------
</TABLE>
20
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
5. COMPUTATION OF EARNINGS PER SHARE: (CONTINUED)
COMBINED (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
BASIC DILUTED BASIC DILUTED
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Income before extraordinary item...................................... $ 22,718 $ 22,718 $ 23,166 $ 23,166
Preferred stock dividends............................................. (1,555) -- -- --
--------- --------- --------- ---------
Income available to common stockholders............................... 21,163 22,718 23,166 23,166
Extraordinary loss.................................................... (30,560) (30,560) -- --
--------- --------- --------- ---------
Net income (loss) available to common stockholders.................... $ (9,397) $ (7,842) $ 23,166 $ 23,166
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of Paired Shares outstanding.................. 111,182 111,182 43,256 43,256
--------- ---------
--------- ---------
Dilutive securities:
Effect of unvested stock grants..................................... 888 742
Dilutive options to purchase Paired Shares.......................... 1,688 769
Dilutive effect of price adjustment arrangements.................... 279 --
Dilutive convertible preferred shares............................... 4,746 --
--------- ---------
118,783 44,767
--------- ---------
--------- ---------
Earnings per Paired Share:
Income before extraordinary item.................................... $ 0.19 $ 0.19 $ 0.54 $ 0.52
Extraordinary loss.................................................. (0.27) (0.26) -- --
--------- --------- --------- ---------
Net income (loss)................................................... $ (0.08) $ (0.07) $ 0.54 $ 0.52
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
21
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
5. COMPUTATION OF EARNINGS PER SHARE: (CONTINUED)
PATRIOT
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
BASIC DILUTED BASIC DILUTED
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Income before extraordinary item...................................... $ 23,902 $ 23,902 $ 11,818 $ 11,818
Preferred stock dividends............................................. (1,555) -- -- --
--------- --------- --------- ---------
Income available to common stockholders............................... 22,347 23,902 11,818 11,818
Extraordinary loss.................................................... (11,843) (11,843) -- --
--------- --------- --------- ---------
Net income available to common stockholders........................... $ 10,504 $ 12,059 $ 11,818 $ 11,818
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of common shares outstanding.................. 122,745 122,745 43,323 43,323
--------- ---------
--------- ---------
Dilutive securities:
Effect of unvested stock grants..................................... 849 927
Dilutive options to purchase common shares.......................... 1,368 720
Dilutive effect of price adjustment arrangements.................... 555 --
Dilutive convertible preferred shares............................... 4,900 --
--------- ---------
130,417 44,970
--------- ---------
--------- ---------
Earnings per share:
Income before extraordinary item.................................... $ 0.18 $ 0.18 $ 0.27 $ 0.26
Extraordinary loss.................................................. (0.10) (0.09) -- --
--------- --------- --------- ---------
Net income.......................................................... $ 0.08 $ 0.09 $ 0.27 $ 0.26
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
22
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
5. COMPUTATION OF EARNINGS PER SHARE: (CONTINUED)
PATRIOT (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
BASIC DILUTED BASIC DILUTED
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Income before extraordinary item...................................... $ 58,116 $ 58,116 $ 23,166 $ 23,166
Preferred stock dividends............................................. (1,555) -- -- --
--------- --------- --------- ---------
Income available to common stockholders............................... 56,561 58,116 23,166 23,166
Extraordinary loss.................................................... (30,560) (30,560) -- --
--------- --------- --------- ---------
Net income available to common stockholders........................... $ 26,001 $ 27,556 $ 23,166 $ 23,166
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of common shares outstanding.................. 111,182 111,182 43,256 43,256
--------- ---------
--------- ---------
Dilutive securities:
Effect of unvested stock grants..................................... 888 742
Dilutive options to purchase common shares.......................... 1,688 769
Dilutive effect of price adjustment arrangements.................... 279 --
Dilutive convertible preferred shares............................... 4,746 --
--------- ---------
118,783 44,767
--------- ---------
--------- ---------
Earnings per share:
Income before extraordinary item.................................... $ 0.51 $ 0.49 $ 0.54 $ 0.52
Extraordinary loss.................................................. (0.28) (0.26) -- --
--------- --------- --------- ---------
Net income.......................................................... $ 0.23 $ 0.23 $ 0.54 $ 0.52
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
23
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
5. COMPUTATION OF EARNINGS PER SHARE: (CONTINUED)
WYNDHAM
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
---------------------- ----------------------
<S> <C> <C> <C> <C>
BASIC DILUTED BASIC DILUTED
---------- ---------- ---------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net loss.......................................................... $ (43,832) $ (43,832) $ (40,651) $ (40,651)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of common shares outstanding.............. 122,745 122,745 111,182 111,182
---------- ----------
---------- ----------
Dilutive securities:
Effect of unvested stock grants................................. -- --
Dilutive options to purchase common shares...................... -- --
Dilutive effect of price adjustment arrangements................ -- --
Dilutive convertible preferred shares........................... -- --
---------- ----------
122,745 111,182
---------- ----------
---------- ----------
Net loss per share.............................................. $ (0.36) $ (0.36) $ (0.37) $ (0.37)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
6. COMMITMENTS AND CONTINGENCIES:
The Companies have entered into transactions with three counterparties
involving the sale of an aggregate of 13,300,000 shares of Paired Common Stock,
with related purchase price adjustment mechanisms ("Price Adjustment
Mechanisms"), as described below.
NMS TRANSACTION. On February 26, 1998, the Companies entered into
transactions with NMS Services, Inc., a subsidiary of NationsBank Corporation
(together with its successor, NationsBanc Mortgage Capital Corporation, "NMS").
Pursuant to the terms of a Purchase Agreement dated as of February 26, 1998 (the
"NMS Purchase Agreement"), NMS purchased 4,900,000 shares of Paired Common Stock
(the "Initial NMS Shares") from the Companies at a purchase price of $24.8625
per share (which reflected a 2.5% discount from $25.50, the last reported sale
price of the Paired Common Stock on February 25, 1998) for net proceeds of
approximately $121,800.
In connection with the issuance of the Initial NMS Shares, the Companies
entered into a Purchase Price Adjustment Mechanism, dated as of February 26,
1998, with NMS (as amended on August 14, 1998, effective February 26, 1998, the
"NMS Price Adjustment Mechanism"). Pursuant to the NMS Price Adjustment
Mechanism, the Companies have agreed to purchase on or before February 25, 1999,
in one or more transactions (each an "NMS Settlement"), from NMS a number of
shares of Paired Common Stock equal to the number of Initial NMS Shares, at a
per paired share price equal to $25.50 plus a forward accretion representing an
imputed return at LIBOR plus 150 basis points, minus an adjustment to reflect
distributions on shares of the Paired Common Stock (the "NMS Forward Price").
The forward accretion component represents a guaranteed rate of return to NMS.
The shares of Paired Common Stock to be
24
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
6. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
delivered to or by NMS may consist of shares of Paired Common Stock acquired
under the NMS Purchase Agreement or otherwise.
The Companies may effect an NMS Settlement by (i) delivering to NMS shares
of Paired Common Stock (the "NMS Settlement Shares") equal in value (valued at
the dollar volume weighted average price for shares of the Paired Common Stock
(as calculated pursuant to the NMS Price Adjustment Mechanism) over a specific
period of time (the "NMS Unwind Price")) to the NMS Forward Price at the time of
such NMS Settlement times the number of shares subject to such NMS Settlement
(the "NMS Settlement Amount") in exchange for such number of shares of Paired
Common Stock, (ii) delivering to (or, in the event the NMS Unwind Price is
greater than the NMS Forward Price, receiving from) NMS a number of shares of
Paired Common Stock equal to the difference between the number of NMS Settlement
Shares and the number of shares subject to such NMS Settlement, or (iii)
delivering to NMS cash equal to the NMS Settlement Amount in exchange for a
number of shares of Paired Common Stock equal to the number of shares subject to
such NMS Settlement. If the Companies pay a settlement price in shares of Paired
Common Stock, they must also pay a placement fee equal to 2% of the NMS
Settlement Amount. The NMS Price Adjustment Mechanism provides that shares may
be delivered in settlement only if (i) the Companies have on file with the
Securities and Exchange Commission ("SEC") an effective registration statement
covering the resale by NMS of the shares to be delivered, (ii) the NMS Unwind
Price on the date of such settlement is greater than or equal to $20.00 and
(iii) no Mandatory NMS Unwind Event (as defined below) has occurred and is
continuing. If such conditions are not met, the Companies generally must deliver
cash equal to the NMS Settlement Amount.
Under the NMS Price Adjustment Mechanism, on November 26, 1998 (the "NMS
Interim Settlement Date"), if the dollar volume weighted average price for
shares of the Paired Common Stock on the trading day immediately preceding the
Interim Settlement Date (the "NMS Reset Price") is lower than the NMS Forward
Price calculated as of the NMS Interim Settlement Date, the Companies must
deliver to NMS a number of shares of Paired Common Stock (the "NMS Interim
Settlement Shares") equal in value (valued at the NMS Reset Price) to the
product of (i) the difference between the NMS Forward Price and the NMS Reset
Price times (ii) the number of the shares subject to the NMS Price Adjustment
Mechanism (the "NMS Interim Settlement Amount"). If NMS Interim Settlement
Shares are delivered by the Companies to NMS (other than as collateral), then
(i) the Companies must pay a placement fee equal to 2% of the product of the NMS
Unwind Price and the number of shares so delivered, and (ii) the NMS Forward
Price will be reduced by the quotient of (A) the NMS Unwind Price times the
number of the NMS Interim Settlement Shares, divided by (B) the number of the
shares of Paired Common Stock then subject to the Price Adjustment Mechanism.
The NMS Price Adjustment Mechanism provides that NMS Interim Settlement Shares
may be delivered only if the Companies have an effective registration statement
on file with the SEC covering the resale by NMS of the shares to be so
delivered. If an effective registration statement is not on file, the Companies
must instead deliver cash collateral equal to the NMS Interim Settlement Amount.
In connection with the amendment to the NMS Price Adjustment Mechanism, the
Companies delivered 2,375,000 shares of Paired Common Stock as collateral to
NMS. The Companies previously delivered $179 as collateral to NMS.
25
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
6. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
On or after October 15, 1998, if the dollar volume weighted average price of
the Paired Common Stock for any two consecutive trading days does not equal or
exceed certain amounts (the "NMS Unwind Thresholds"), NMS has the right to force
a partial or complete settlement under the NMS Price Adjustment Mechanism. The
NMS Unwind Thresholds are $20.00 (33% settlement), $18.75 (67%) and $17.25
(100%). Moreover, NMS has the right to force a complete settlement under the NMS
Price Adjustment Mechanism upon the occurrence of any of the following (each a
"Mandatory NMS Unwind Event"): (i) default of the Companies with respect to
certain indebtedness, (ii) declaration by the Companies of bankruptcy or
insolvency or failure to post sufficient cash collateral, (iii) failure of the
Companies to have caused a registration statement covering the resale of the
shares of Paired Common Stock received by NMS under the NMS Purchase Agreement
and NMS Price Adjustment Mechanism to become effective on or before October 15,
1998, or (iv) the sale or refinancing by the Companies of certain properties in
which the net proceeds of such sale or refinancing (up to the amount necessary
to effect a complete cash settlement) are not applied to a cash settlement under
the NMS Price Adjustment Mechanism. Finally, the NMS Price Adjustment Mechanism
provides that, upon the consummation of the sale or refinancing of certain
properties by the Companies with a third party, the Companies must apply the net
proceeds to the extent necessary to effect a complete cash settlement under the
NMS Price Adjustment Mechanism. The Companies have agreed to use all
commercially reasonable efforts to effect such sale or refinancing.
PAINEWEBBER TRANSACTION. On April 6, 1998, the Companies entered into
transactions with PaineWebber Incorporated ("PaineWebber") and PaineWebber
Financial Products, Inc. ("PWFS" and, together with PaineWebber, the
"PaineWebber Parties"). Pursuant to the terms of a Purchase Agreement dated as
of April 6, 1998 (the "PaineWebber Purchase Agreement"), PaineWebber purchased
5,150,000 shares of Paired Common Stock (the "Initial PaineWebber Shares") from
the Companies at a purchase price of $27.01125 per share, which reflected a 2%
discount to the last reported sale price of the Paired Common Stock on April 3,
1998, for net proceeds of approximately $139,100.
In connection with the issuance of the Initial PaineWebber Shares, the
Companies entered into a Purchase Price Adjustment Mechanism Agreement, dated as
of April 6, 1998, with PWFS (as amended on August 14, 1998, the "PaineWebber
Price Adjustment Agreement"). Pursuant to the PaineWebber Price Adjustment
Agreement, before October 15, 1998, PWFS may agree with the Companies at any
time (or, on any of June 30, 1998 or September 30, 1998 (each a "PW Reset
Date"), the Companies may cause PWFS) to sell some or all of the Initial
PaineWebber Shares through one or more specified methods (in each case a "PW
Settlement"). At each PW Settlement, the purchase price of the Initial
PaineWebber Shares subject to the PW Settlement is adjusted based upon the
difference between (i) the proceeds (net of a negotiated resale spread or
underwriting discount) received by PWFS from the sale of the shares of Paired
Common Stock and (ii) a reference price (the "Reference Price") equal to the
closing price for a share of Paired Common Stock on April 3, 1998 plus a forward
accretion reflecting an imputed return at LIBOR plus 140 basis points, minus an
adjustment to reflect distributions on the Initial PaineWebber Shares prior to
the date of such PW Settlement (such difference, the "PW Price Difference"). If
the PW Price Difference is positive, PWFS is obligated to deliver shares of
Paired Common Stock or cash to the Companies equal in value to the aggregate PW
Price Difference. If the PW Price Difference is negative,
26
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
6. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
the Companies are obligated to deliver additional shares of Paired Common Stock
equal in value (net of a negotiated resale spread or underwriting discount, as
the case may be) to the aggregate PW Price Difference to PWFS. The PaineWebber
Price Adjustment Agreement provides that shares may be delivered in settlement
only if the Companies have on file with the SEC an effective registration
statement covering the resale by PWFS of the shares to be delivered.
In addition, within five business days following a PW Settlement or each PW
Reset Date, if the Reference Price times the number of shares subject to the
PaineWebber Price Adjustment exceeds the product of the closing price of the
Paired Common Stock as of such relevant date times the number of shares subject
to the PaineWebber Price Adjustment Agreement by more than $5,000 (such excess
amount, the "Collateral Amount"), the Companies are required to deliver to PWFS
a number of shares of Paired Common Stock (the "Collateral Shares") equal in
value (valued at the closing price of the Paired Common Stock on the relevant
date) to the Collateral Amount; provided, that if the resale by PWFS of the
shares to be so delivered is not covered by an effective registration statement,
then the Companies must, at their option, deliver to PWFS, either (i) a number
of Collateral Shares equal in value to 125% of the Collateral Amount or (ii)
cash collateral equal to the Collateral Amount. The number of Collateral Shares
and/or amount of cash collateral held by PWFS will be adjusted every other week.
There can be no assurance that a registration statement with respect to any
Collateral Shares will be declared and remain effective. On July 8, 1998, the
Companies delivered 600,954 shares of Paired Common Stock as Collateral Shares
to PWFS. In connection with the Amendment to the PaineWebber Price Adjustment
Agreement, the Companies delivered 2,347,218 shares of Paired Common Stock as
Collateral Shares to PWFS.
If the closing price of the Paired Common Stock on any trading day does not
equal or exceed $16.00, PWFS has the right to force a complete settlement under
the PaineWebber Price Adjustment Agreement. PWFS also has the right to force a
complete settlement under the PaineWebber Price Adjustment Agreement if the
Companies (i) are in default with respect to certain specified indebtedness of
the Companies, (ii) effect an early settlement, unwind or liquidation of any
transaction similar to the transaction with PWFS, or (iii) fail to deliver to
PWFS on or before September 30, 1998, an effective registration statement
covering the sale of the shares of Paired Common Stock delivered to PWFS.
UBS TRANSACTION. On December 31, 1997, the Companies entered into
transactions with UBS Limited and Union Bank of Switzerland, London Branch
(together with its successor, UBS AG, London Branch, "UBS" and, together with
Warburg Dillon Read, LLC, the successor to UBS Limited, the "UBS Parties").
Pursuant to the terms of a Purchase Agreement dated as of December 31, 1997 (the
"UBS Purchase Agreement"), UBS Limited purchased 3,250,000 shares of Paired
Common Stock (the "Initial UBS Shares") from the Companies at a purchase price
of $28.8125 per share (the last reported sale price of the Paired Common Stock
on December 30, 1997) for approximately $91,800 in net proceeds. UBS received
from the Companies a placement fee of 2%, or approximately $1,900.
In connection with the issuance of the Initial UBS Shares, the Companies
entered into a Forward Stock Contract, dated as of December 31, 1997, with UBS
(as amended on August 14, 1998, the "Forward Stock Contract"). Pursuant to the
Forward Stock Contract, the Companies have agreed to purchase on or before
October 15, 1998, in one or more transactions (each a "UBS Settlement"), from
UBS a number of
27
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
6. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
shares of Paired Common Stock equal to the number of Initial UBS Shares, at a
per paired share price equal to $28.8125 plus a forward accretion reflecting an
imputed return at LIBOR plus 140 basis points, minus an adjustment to reflect
distributions on shares of the Paired Common Stock (the "UBS Forward Price").
The forward accretion component represents a guaranteed rate of return to UBS.
The shares of Paired Common Stock to be delivered to or by UBS may consist of
shares of Paired Common Stock acquired under the UBS Purchase Agreement or
otherwise.
The Companies may effect a UBS Settlement by (i) delivering to UBS shares of
Paired Common Stock (the "UBS Settlement Shares") equal in value (valued at the
daily average closing price for shares of the Paired Common Stock over a
specific period of time (the "UBS Unwind Price")) to the UBS Forward Price at
the time of such UBS Settlement times the number of shares of Paired Common
Stock subject to such UBS Settlement (the "UBS Settlement Amount") in exchange
for such number of shares, (ii) delivering to (or, in the event the UBS Unwind
Price is greater than the UBS Forward Price, receiving from) UBS a number of
shares of Paired Common Stock equal to the difference between the number of the
UBS Settlement Shares and the number of shares subject to such UBS Settlement,
or (iii) delivering to UBS cash equal to the UBS Settlement Amount in exchange
for the shares subject to such UBS Settlement. If the Companies make a UBS
Settlement in shares of Paired Common Stock, they must also pay to UBS (i) an
unwind accretion fee (payable in cash or shares) equal to 50% of the UBS
Settlement Amount times the imputed return of LIBOR plus 140 basis points over
the period designated for such UBS Settlement and (ii) a placement fee equal to
0.50% of the UBS Settlement Amount. The Forward Stock Contract provides that
shares may be delivered in settlement only if the Companies have on file with
the SEC an effective registration statement covering the resale by UBS of the
shares to be delivered. If an effective registration statement is not on file,
the Companies generally must deliver cash equal to the UBS Settlement Amount,
except that in the case of a mandatory early settlement (discussed below), the
Companies may deliver unregistered shares of Paired Common Stock in an amount
necessary to guarantee that UBS will receive the UBS Settlement Amount in
private resales of such shares.
The Forward Stock Contract provides that on each of March 31, 1998, June 30,
1998 and September 30, 1998 (each a "UBS Interim Settlement Date"), if the
closing price for shares of the Paired Common Stock on the trading day
immediately preceding such UBS Interim Settlement Date (the "UBS Reset Price")
is lower than the UBS Forward Price calculated as of the UBS Interim Settlement
Date, the Companies are required to deliver to UBS cash collateral equal to the
product of (i) the difference between the UBS Forward Price and the UBS Reset
Price, times (ii) the number of shares subject to the Forward Stock Contract
(the "UBS Interim Settlement Amount"). With the prior written consent of UBS,
the Companies may elect to deliver to UBS a number of shares of Paired Common
Stock (the "UBS Interim Settlement Shares") equal in value (valued at the UBS
Reset Price) to 125% of the UBS Interim Settlement Amount. The amount of cash
collateral or number of shares so held will be adjusted every other week. As of
June 30, 1998, the Companies had delivered an aggregate of approximately $6,539
as cash collateral to UBS (as of August 11, 1998, the cash collateral balance
with UBS was approximately $35,626).
28
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
6. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
If the average closing price of the Paired Common Stock for any two
consecutive trading days does not equal or exceed $16.00 (the "UBS Unwind
Threshold"), UBS has the right to force a complete settlement under the Forward
Stock Contract. UBS also has the right to force a complete settlement under the
Forward Stock Contract if the Companies (i) are in default with respect to
certain financial covenants under the Forward Stock Contract, (ii) are in
default under the Companies' credit facility with Chase Manhattan Bank, (iii)
are in default with respect to certain specified indebtedness of the Companies,
(iv) declare bankruptcy or become insolvent or fail to post sufficient cash
collateral, (v) effect an early settlement, unwind or liquidation of any
transaction similar to the transaction with UBS, or (vi) fail to deliver to UBS,
on or before September 30, 1998, an effective registration statement covering
the sale of the shares of Paired Common Stock delivered to UBS.
7. RELATED PARTY TRANSACTIONS:
In connection with the CHCI Merger, Mr. Karim Alibhai, President and Chief
Operating Officer of Wyndham, received 156,863 OP Units of the Operating
Partnerships valued at approximately $5,000 and entities affiliated with Mr.
Alibhai received 85,600 shares of Wyndham Series A Preferred Stock and 85,600
shares of Wyndham Series B Preferred Stock with an aggregate value of
approximately $3,980. These units and shares were issued in consideration of Mr.
Alibhai's ownership interests in CHCI and its affiliates. In addition, Mr.
Sherwood M. Weiser, a director of Wyndham, received 394,397 shares of Wyndham
Series A Preferred Stock and 394,398 shares of Wyndham Series B Preferred Stock
valued at $18,182 in connection with CHCI Merger as consideration for his
ownership interest in CHCI and its affiliates.
8. INCOME TAXES:
As a result of the Wyndham Merger, the WHG Merger and the Interstate Merger,
Wyndham recorded a deferred tax liability totaling $108,221. The deferred tax
liability represents the tax effects of differences between the fair values and
the tax bases of identifiable assets acquired and liabilities assumed in
connection with the transactions.
9. CASH DIVIDENDS DECLARED:
On May 4, 1998, Patriot declared a dividend of $0.32 per share for the first
quarter of 1998. The dividend was paid on or about May 29, 1998 to shareholders
of record on May 20, 1998.
10. PRO FORMA FINANCIAL INFORMATION:
The following unaudited separate and combined pro forma results of
operations of Patriot and Wyndham are presented as if the 488 hotels owned,
leased, managed or franchised by the Companies as of June 30, 1998, had been
acquired on January 1, 1997. Such acquisition transactions include: (i) the Cal
Jockey Merger, the Wyndham Merger, the Interstate Merger and the CHCI Merger and
the related transactions; (ii) the closing on the commitment for the Revolving
Credit Facility and Term Loans; (iii) the acquisition of Grand Heritage Hotels,
Inc. and other Grand Heritage subisidiaries; (iv) the Arcadian
29
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
10. PRO FORMA FINANCIAL INFORMATION: (CONTINUED)
Acquisition and the Summerfield Acquisition; (v) the WHG Transactions; and (vi)
the private placements of equity securities and public offering of the
Companies' common stock which occurred during the first half of 1998 and during
1997. The following unaudited pro forma financial information is not necessarily
indicative of what actual results of operations of Patriot and Wyndham would
have been assuming such transactions had been completed as of January 1, 1997,
nor do they purport to represent the results of operations for future periods.
PATRIOT AND WYNDHAM
COMBINED PRO FORMA RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
<S> <C> <C>
1998 1997
------------ ------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Total revenue................................................................ $ 1,323,360 $ 1,087,741
Net (loss) income (1)........................................................ (10,349) 10,814
Basic earnings per Paired Share.............................................. $ (0.07) $ 0.08
------------ ------------
------------ ------------
Diluted earnings per Paired Share............................................ $ (0.07) $ 0.07
------------ ------------
------------ ------------
Weighted average number of Paired Shares and Paired Share equivalents
outstanding:
Basic...................................................................... 137,470 137,470
------------ ------------
------------ ------------
Diluted.................................................................... 137,470 148,721
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) Combined pro forma net loss for the six months ended June 30, 1998 includes
costs to acquire leaseholds, a non-recurring expense, in the amount of
$57,062 that was reported by the Companies.
30
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
10. PRO FORMA FINANCIAL INFORMATION: (CONTINUED)
PATRIOT
CONSOLIDATED PRO FORMA RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH
31,
----------------------
<S> <C> <C>
1998 1997
---------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Total revenue.................................................................. $ 386,052 $ 303,677
Net income(1).................................................................. 50,293 4,298
Basic earnings per share....................................................... $ 0.37 $ 0.03
---------- ----------
---------- ----------
Diluted earnings per share..................................................... $ 0.34 $ 0.03
---------- ----------
---------- ----------
Weighted average number of common shares and common share equivalents
outstanding:
Basic........................................................................ 137,470 137,470
---------- ----------
---------- ----------
Diluted...................................................................... 148,721 148,721
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) Combined pro forma net loss for the six months ended June 30, 1998 includes
costs to acquire leaseholds, a non-recurring expense, in the amount of
$4,339 that was reported by Patriot.
WYNDHAM
CONSOLIDATED PRO FORMA RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
<S> <C> <C>
1998 1997
------------ ------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Total revenue................................................................ $ 1,367,555 $ 1,084,986
Net (loss) income(1)......................................................... (60,214) 6,516
Basic (loss) income per share................................................ $ (0.44) $ 0.05
------------ ------------
------------ ------------
Diluted (loss) income per share.............................................. $ (0.44) $ 0.04
------------ ------------
------------ ------------
Weighted average number of common shares and common share equivalents
outstanding:
Basic...................................................................... 137,470 137,470
------------ ------------
------------ ------------
Diluted.................................................................... 137,470 148,721
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) Consolidated pro forma net loss for the six months ended June 30, 1998
includes costs to acquire leaseholds, a non-recurring expense, in the amount
of $52,723 that was reported by Wyndham.
31
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--
JUNE 30, 1998 (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
11. SUBSEQUENT EVENTS:
On July 28, 1998, Patriot declared a dividend of $0.32 per share for the
second quarter of 1998. The dividend is payable on or about August 20, 1998 to
shareholders of record on August 10, 1998.
In July 1998, Wyndham acquired an approximate 50% limited partnership
interest in a partnership with affiliates of Don Shula's Steakhouses, Inc. for
$1,500 in cash and 156,272 preferred units of limited partnership interest of
Wyndham Partnership. Wyndham entered into this joint venture arrangement to
expand the Shula's Steak House brand as a food and beverage amenity in certain
of Patriot's hotels.
On July 13, 1998, Patriot acquired the remaining minority interests held by
a third party in the entities that own the El Conquistador and the El San Juan
Hotel & Casino located in Puerto Rico for a total purchase price of $3,990.
In addition, during July 1998, the Companies refinanced certain debt related
to the El Conquistador and the Condado Plaza Hotel & Casino. Proceeds of
$145,000 from the refinancing were used to repay outstanding indebtedness of
approximately $139,350, to pay legal and closing costs and to establish certain
reserves, including interest reserves, required by the loan agreements. The
loans are secured by mortgages on the properties, bear interest at a rate of
LIBOR plus 2.25% and mature in December 1998.
32
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Companies' Joint Annual Report on Form 10-K for the
year ended December 31, 1997.
Certain statements in this Form 10-Q constitute "forward-looking statements"
as that term is defined under the Private Securities Litigation Reform Act of
1995 (the "Act"). The words "believe", "expect", "anticipate", "intend",
"estimate" and other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements and to note that they speak only as of the date
hereof. Although forward-looking statements reflect management's good faith
beliefs, reliance should not be placed on forward-looking statements because
they involve known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievement of the Companies to differ
materially from anticipated future results, performance or achievements
expressed or implied by such forward-looking statements. The Companies undertake
no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise. Certain
factors that might cause a difference include, but are not limited to, risks
associated with the Companies' rapid growth and its ability to integrate its
existing operations, departments and systems with those acquired in the Wyndham
Merger, the WHG Merger, the Arcadian Acquisition, the Summerfield Acquisition,
the Interstate Merger and the CHCI Merger and other transactions; risks
associated with the recent adoption of certain legislation and regulations
affecting the Companies' paired share structure; Patriot's dependence upon
rental payments from Wyndham and the Lessees for substantially all of Patriot's
income and the dependence upon the abilities of Wyndham, the Lessees and the
Operators (as such terms are defined herein) to manage the hotels; risks
associated with the hotel industry and real estate markets in general; and risks
associated with debt financing.
THE COMPANIES
At June 30, 1998, Patriot and Wyndham, directly or through the Operating
Partnerships and other subsidiaries, owned interests in 183 hotels totaling over
44,300 rooms and leased 122 hotels from third parties totaling over 15,700
rooms. In addition, Wyndham managed 174 hotels with over 42,700 rooms for third
party owners and franchised nine hotels under the Wyndham, Summerfield or
ClubHouse brands. The hotels are diversified by franchise or brand affiliation
and serve primarily major U.S. business centers. In addition to hotels catering
primarily to business travelers, the Companies' portfolio includes world-class
resort hotels and prominent hotels in major tourist destinations.
Patriot leases 214 of its owned or leased hotels to Wyndham and 14 of
Patriot's hotels are leased to third party lessees (the "Lessees") who are
responsible for operating the hotels. Generally, these leases provide for the
payment of the greater of base or participating rent, plus certain additional
charges, as applicable (the "Participating Leases"). The Lessees, in turn, have
entered into separate agreements with hotel management entities (the
"Operators") to manage the hotels.
Seventy-seven of the Companies' hotels are owned or leased by special
purpose entities (the "Non-Controlled Subsidiaries"). Patriot owns an
approximate 99% non-voting interest and Wyndham owns an approximate 1%
controlling voting interest in each of the Non-Controlled Subsidiaries.
Therefore, the operating results of the Non-Controlled Subsidiaries are combined
with those of Wyndham for financial reporting purposes. Patriot accounts for its
investment in the Non-Controlled Subsidiaries using the equity method of
accounting.
In addition to leasing and managing hotels, Wyndham is also engaged in the
business of conducting and offering pari-mutuel wagering on thoroughbred horse
racing at the Bay Meadows Racecourse (the "Racecourse").
33
<PAGE>
HOTELS AND OTHER BUSINESSES ACQUIRED
WYNDHAM HOTEL CORPORATION
On January 5, 1998, pursuant to the Agreement and Plan of Merger dated as of
April 14, 1997, as thereafter amended, (the "Wyndham Merger Agreement") between
Patriot, Wyndham and Wyndham Hotel Corporation ("Old Wyndham"), Old Wyndham
merged with and into Patriot, with Patriot being the surviving corporation (the
"Wyndham Merger").
Patriot, as a result of the Wyndham Merger, acquired ownership of ten
Wyndham hotels and 14 Clubhouse hotels and leased such hotels to Wyndham.
Thirteen of the 14 hotel leases assumed by Patriot were sub-leased to Wyndham.
Old Wyndham's remaining 52 management and franchise contracts (excluding 16
hotels that Old Wyndham managed that are owned by Patriot), the Wyndham and
ClubHouse proprietary brand names, and the Wyndham hotel management company were
transferred to corporate subsidiaries of Patriot (collectively, the
"Non-Controlled Subsidiaries"). Patriot owns a 99% non-voting interest and
Wyndham owns the 1% controlling voting interest in each of the Non-Controlled
Subsidiaries. Therefore, the operating results of the Non-Controlled
Subsidiaries have been combined with those of Wyndham for financial reporting
purposes. Patriot accounts for its investment in the Non-Controlled Subsidiaries
using the equity method of accounting. The total purchase consideration for the
Wyndham Merger of approximately $982 million consisted of 21,594,137 Paired
Shares and 4,860,876 shares of Series A Convertible Preferred Stock of Patriot
(which are convertible on a one-for-one basis into Paired Shares), cash of
approximately $339 million to repay debt and pay Old Wyndham shareholders who
elected to receive cash (which was financed with funds drawn on the Companies'
revolving credit facility (the "Revolving Credit Facility"), and the assumption
of approximately $59 million in debt.
WHG CASINOS & RESORTS, INC. AND RELATED TRANSACTIONS
On January 16, 1998, pursuant to the Agreement and Plan of Merger dated as
of September 30, 1997 (the "WHG Merger Agreement) between Patriot, Wyndham and
WHG Casinos & Resorts Inc. ("WHG"), a subsidiary of Wyndham merged with and into
WHG, with WHG being the surviving corporation (the "WHG Merger"). As a result of
the WHG Merger, Wyndham acquired the 570-room Condado Plaza Hotel & Casino, a
50% interest in the partnership that owns the 389-room El San Juan Hotel &
Casino and a 23.3% interest in the partnership that owns the 751-room El
Conquistador Resort & Country Club (the "El Conquistador"), all of which are
located in Puerto Rico. In addition, Wyndham acquired a 62% interest in Williams
Hospitality Group, Inc., the management company for the three hotels and the Las
Casitas Village at the El Conquistador. A total of 5,004,690 Paired Shares were
issued in connection with the WHG Merger and approximately $21.3 million of debt
was assumed, resulting in total purchase consideration of approximately $159.4
million.
Effective March 1, 1998, Patriot acquired from unaffiliated third parties a
40% interest in the El San Juan Hotel & Casino, an aggregate 68.62% equity
interest in the El Conquistador and a 38% interest in Williams Hospitality
Group, Inc. for approximately $31 million in cash and issuance of 1,818,182
Paired Shares valued at approximately $49.2 million (collectively, these
transactions and the WHG Merger are referred to herein as the "WHG
Transactions"). Wyndham owns the controlling general partner interest in the
partnerships that own the El San Juan Hotel & Casino and the El Conquistador.
Wyndham also holds voting control of Williams Hospitality Group, Inc. Therefore,
the operating results of these entities have been combined with those of Wyndham
for financial reporting purposes. As a result, approximately $188.9 million of
debt related to the partnerships that own the El San Juan Hotel & Casino and the
El Conquistador has also been reflected in Wyndham's consolidated balance sheet.
Patriot accounts for its investment in these entities using the equity method of
accounting.
34
<PAGE>
ARCADIAN INTERNATIONAL LIMITED
On April 6, 1998, Patriot announced the completion of its acquisition of all
of the issued and to-be-issued shares of Arcadian International Limited
("Arcadian," formerly known as Arcadian International Plc) for 60 pence per
share. Including the exercise of all outstanding options to purchase shares, the
assumption of debt and the acquisition of the remaining shares in the Malmaison
Group, the total transaction cost was approximately L185.9 million
(approximately $308.7 million U.S. based on exchange rates at the time of
closing). As a result of the transaction, Patriot acquired ten owned hotels
located throughout England; one owned hotel in Jersey; five owned and managed
Malmaison Hotels; two resorts under development in Tuscany, Italy and Paris,
France; and the proprietary Malmaison brand name. Patriot also acquired
Arcadian's 50% partnership interest in the redevelopment of the luxury Great
Eastern Hotel in London, to be branded as a flagship Wyndham Hotel and operated
by Wyndham once the development has been completed. Collectively, the
transactions described above are referred to herein as the "Arcadian
Acquisition."
In connection with the Arcadian Acquisition, Patriot entered into a
short-term financing agreement on April 15, 1998 with Paine Webber Real Estate
Securities, Inc. ("Paine Webber Real Estate") whereby Paine Webber Real Estate
loaned Patriot $160 million through April 15, 1999, at a rate equal to the
borrowing rate on Patriot's Revolving Credit Facility. In addition, Patriot
assumed approximately $112.6 million of debt in connection with the Arcadian
Acquisition.
INTERSTATE HOTELS COMPANY
On June 2, 1998, pursuant to an Agreement and Plan of Merger dated as of
December 2, 1997, as thereafter amended, (the "Interstate Merger Agreement")
between Patriot, Wyndham and Interstate Hotels Company ("Interstate"),
Interstate merged with and into Patriot with Patriot being the surviving company
(the "Interstate Merger"). Pursuant to the Interstate Merger Agreement,
stockholders of Interstate could elect to convert each of their shares of
Interstate common stock into the right to receive either (i) $37.50 in cash (the
"Cash Consideration"), subject to proration in certain circumstances, or (ii) a
number of Paired Shares of Patriot and Wyndham common stock based on an exchange
ratio of 1.341 Paired Shares for each share of Interstate common stock not
exchanged for cash (the "Interstate Exchange Ratio").
As a result of the Interstate Merger, Patriot acquired controlling interest
in, or ownership of, 42 hotels representing over 12,000 rooms; leases for 84
hotels representing over 10,100 rooms and management or service agreements for
82 hotels representing over 20,400 rooms located throughout the United States
and in Canada, the Caribbean and Russia.
The total purchase consideration for the Interstate Merger of approximately
$2.1 billion consisted of 28,825,875 Paired Shares, cash of approximately $525.4
million to pay Interstate shareholders who elected to receive cash,
approximately $787.1 million in debt assumed or refinanced by Patriot and
approximately $73.4 million to pay other transaction-related costs. In addition,
Interstate shareholders received rights to receive a cash distribution of $0.429
on each share of Interstate common stock that was converted into Paired Shares,
aggregating approximately $9.1 million.
In connection with the Interstate Merger, the Patriot Companies closed on
the commitment from The Chase Manhattan Bank and Chase Securities, Inc. and
PaineWebber Real Estate Securities, Inc. to increase Patriot's existing credit
facilities to an aggregate of $2.7 billion (an increase of $1.45 billion from
the prior $1.25 billion credit package). The increased credit facilities include
the $900 million Revolving Credit Facility and a series of term loans in the
aggregate amount of up to $1.8 billion (the "Term Loans"). Proceeds from the
increased credit facilities were used to fund the cash portion of the Interstate
Merger consideration, as well as to refinance certain outstanding indebtedness
of the Patriot Companies. In addition, the increased credit facilities will be
used to fund future acquisitions and for general working capital purposes.
Interest rates will be based on the Patriot Companies' leverage ratio and may
vary from
35
<PAGE>
1.5% to 2.5% over LIBOR. Patriot incurred approximately $27.4 million in loan
fees and other expenses associated with this financing arrangement.
On May 27, 1998, the Companies and Interstate entered into a settlement
agreement (the "Settlement Agreement") with Marriott International, Inc.
("Marriott") which addressed certain claims asserted by Marriott in connection
with Patriot's then proposed merger with Interstate. The Settlement Agreement
provided for the dismissal of litigation brought by Marriott and allowed
Patriot's merger with Interstate to close on June 2, 1998. See "Part II: Other
Information -- Item 1. Legal Proceedings -- Marriott Settlement" for a detailed
description of the Settlement Agreement.
SF HOTEL COMPANY, L.P.
On June 5, 1998, Patriot, through the Patriot Partnership, acquired all of
the partnership interests in SF Hotel Company, L.P. ("Summerfield") for
approximately $298.9 million (the "Summerfield Acquisition"). The total purchase
consideration for the Summerfield Acquisition consisted of approximately
3,223,795 OP Units of the Operating Partnerships, 1,397,281 Paired Shares, cash
of approximately $165.5 million and assumption of debt in the amount of
approximately $17.1 million. In addition, the purchase price is subject to
future adjustment based on (i) the market price of the Paired Shares through the
end of 1998 and (ii) achievement of certain performance criteria through 2001
for seven hotels that are currently under development. As a result of the
Summerfield Acquisition, Patriot acquired four Summerfield
Suites-Registered Trademark- hotels, leasehold and management interests in 24
Summerfield Suites-Registered Trademark-, Sierra Suites-Registered Trademark-
and Sunrise Suites hotels and management contracts and franchise interests for
12 additional Summerfield Suites-Registered Trademark- and Sierra
Suites-Registered Trademark- hotels. Patriot has leased or sub-leased such
hotels to Wyndham. In addition, Patriot acquired the development contracts for
several additional hotels.
CHC INTERNATIONAL
On June 30, 1998, pursuant to an Agreement and Plan of Merger dated as of
September 30, 1997 (the "CHCI Merger Agreement") between Patriot, Wyndham and
CHC International ("CHCI"), the hospitality-related businesses of CHCI merged
with and into Wyndham with Wyndham being the surviving company (the "CHCI
Merger"). CHCI's gaming operations were transferred to a new legal entity prior
to the CHCI Merger and such operations were not a part of the transaction. As a
result of the CHCI Merger, Wyndham, through its subsidiaries, acquired the
remaining 50% investment interest in GAH-II, L.P. ("GAH"), the remaining 17
leases and 16 of the associated management contracts related to the Patriot
hotels leased by CHC Lease Partners, 8 third-party management contracts, two
third-party asset management contracts contracts, the Grand Bay proprietary
brand name and certain other hospitality management assets.
By operation of the CHCI Merger, all the issued and outstanding shares of
common stock, par value $0.005 per share, of CHCI ("CHCI Shares") and certain
stock option rights were exchanged for an aggregate of 1,781,173 shares of
Series A Redeemable Convertible Preferred Stock, par value $0.01 per share of
Wyndham (the "Wyndham Series A Preferred Stock") and 1,781,181 shares of Series
B Redeemable Convertible Preferred Stock, par value $0.01 per share, of Wyndham
(the "Wyndham Series B Preferred Stock"). In addition, Wyndham assumed CHCI's
outstanding debt in the amount of approximately $16.6 million.
In addition, on September 30, 2000 and September 30, 2002, Wyndham may be
obligated to pay the CHCI stockholders and a subsidiary of Wyndham may be
obligated to pay a Gencom-related entity additional consideration, in each case
based upon the performance of certain specified assets.
OTHER ACQUISITIONS
In addition, during the six months ended June 30, 1998, Patriot acquired
investments in five hotels for approximately $234.1 million. These acquisitions
were financed primarily with funds drawn on the
36
<PAGE>
Companies' revolving credit facility, the issuance of 53,989 OP Units of the
Operating Partnerships valued at approximately $1.5 million, the issuance of
390,335 Paired Shares valued at approximately $10 million, and the assumption of
other mortgage debt in the amount of approximately $80.1 million. In addition,
Patriot acquired an office building that will be converted into a hotel for
approximately $33.9 million.
SALES OF PAIRED COMMON STOCK WITH PRICE ADJUSTMENT MECHANISMS
The Companies have entered into transactions with three counterparties
involving the sale of an aggregate of 13.3 million shares of Paired Common
Stock, with related purchase price adjustment mechanisms ("Price Adjustment
Mechanisms"), as described below.
NMS TRANSACTION. On February 26, 1998, the Companies entered into
transactions with NMS Services, Inc., a subsidiary of NationsBank Corporation
(together with its successor, NationsBanc Mortgage Capital Corporation, "NMS").
Pursuant to the terms of a Purchase Agreement dated as of February 26, 1998 (the
"NMS Purchase Agreement"), NMS purchased 4,900,000 shares of Paired Common Stock
(the "Initial NMS Shares") from the Companies at a purchase price of $24.8625
per share (which reflected a 2.5% discount from $25.50, the last reported sale
price of the Paired Common Stock on February 25, 1998) for net proceeds of
approximately $121.8 million.
In connection with the issuance of the Initial NMS Shares, the Companies
entered into a Purchase Price Adjustment Mechanism, dated as of February 26,
1998, with NMS (as amended on August 14, 1998, effective February 26, 1998, the
"NMS Price Adjustment Mechanism"). Pursuant to the NMS Price Adjustment
Mechanism, the Companies have agreed to purchase on or before February 25, 1999,
in one or more transactions (each an "NMS Settlement"), from NMS a number of
shares of Paired Common Stock equal to the number of Initial NMS Shares, at a
per paired share price equal to $25.50 plus a forward accretion representing an
imputed return at LIBOR plus 150 basis points, minus an adjustment to reflect
distributions on shares of the Paired Common Stock (the "NMS Forward Price").
The forward accretion component represents a guaranteed rate of return to NMS.
The shares of Paired Common Stock to be delivered to or by NMS may consist of
shares of Paired Common Stock acquired under the NMS Purchase Agreement or
otherwise.
The Companies may effect an NMS Settlement by (i) delivering to NMS shares
of Paired Common Stock (the "NMS Settlement Shares") equal in value (valued at
the dollar volume weighted average price for shares of the Paired Common Stock
(as calculated pursuant to the NMS Price Adjustment Mechanism) over a specific
period of time (the "NMS Unwind Price")) to the NMS Forward Price at the time of
such NMS Settlement times the number of shares subject to such NMS Settlement
(the "NMS Settlement Amount") in exchange for such number of shares of Paired
Common Stock, (ii) delivering to (or, in the event the NMS Unwind Price is
greater than the NMS Forward Price, receiving from) NMS a number of shares of
Paired Common Stock equal to the difference between the number of NMS Settlement
Shares and the number of shares subject to such NMS Settlement, or (iii)
delivering to NMS cash equal to the NMS Settlement Amount in exchange for a
number of shares of Paired Common Stock equal to the number of shares subject to
such NMS Settlement. If the Companies pay a settlement price in shares of Paired
Common Stock, they must also pay a placement fee equal to 2% of the NMS
Settlement Amount. The NMS Price Adjustment Mechanism provides that shares may
be delivered in settlement only if (i) the Companies have on file with the
Securities and Exchange Commission ("SEC") an effective registration statement
covering the resale by NMS of the shares to be delivered, (ii) the NMS Unwind
Price on the date of such settlement is greater than or equal to $20.00 and
(iii) no Mandatory NMS Unwind Event (as defined below) has occurred and is
continuing. There can be no assurance that a registration statement with respect
to such shares will be declared and remain effective or that any of the other
conditions to a stock settlement will be met. See "--Potential Dilution and
Liquidity Effects of the Purchase Price Adjustment Mechanisms." If such
conditions are not met, the Companies generally must deliver cash equal to the
NMS Settlement Amount.
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Under the NMS Price Adjustment Mechanism, on November 26, 1998 (the "NMS
Interim Settlement Date"), if the dollar volume weighted average price for
shares of the Paired Common Stock on the trading day immediately preceding the
Interim Settlement Date (the "NMS Reset Price") is lower than the NMS Forward
Price calculated as of the NMS Interim Settlement Date, the Companies must
deliver to NMS a number of shares of Paired Common Stock (the "NMS Interim
Settlement Shares") equal in value (valued at the NMS Reset Price) to the
product of (i) the difference between the NMS Forward Price and the NMS Reset
Price times (ii) the number of the shares subject to the NMS Price Adjustment
Mechanism (the "NMS Interim Settlement Amount"). If NMS Interim Settlement
Shares are delivered by the Companies to NMS (other than as collateral), then
(i) the Companies must pay a placement fee equal to 2% of the product of the NMS
Unwind Price and the number of shares so delivered, and (ii) the NMS Forward
Price will be reduced by the quotient of (A) the NMS Unwind Price times the
number of the NMS Interim Settlement Shares, divided by (B) the number of the
shares of Paired Common Stock then subject to the Price Adjustment Mechanism.
The NMS Price Adjustment Mechanism provides that NMS Interim Settlement Shares
may be delivered only if the Companies have an effective registration statement
on file with the SEC covering the resale by NMS of the shares to be so
delivered. If an effective registration statement is not on file, the Companies
must instead deliver cash collateral equal to the NMS Interim Settlement Amount.
There can be no assurance that a registration statement with respect to such
shares will be declared and remain effective. See "--Potential Dilution and
Liquidity Effects of the Purchase Price Adjustment Mechanisms." In connection
with the amendment to the NMS Price Adjustment Mechanism, the Companies
delivered 2,375,000 shares of Paired Common Stock as collateral to NMS. The
Companies previously delivered $179,000 as collateral to NMS.
On or after October 15, 1998, if the dollar volume weighted average price of
the Paired Common Stock for any two consecutive trading days does not equal or
exceed certain amounts (the "NMS Unwind Thresholds"), NMS has the right to force
a partial or complete settlement under the NMS Price Adjustment Mechanism. The
NMS Unwind Thresholds are $20.00 (33% settlement), $18.75 (67%) and $17.25
(100%). Moreover, NMS has the right to force a complete settlement under the NMS
Price Adjustment Mechanism upon the occurrence of any of the following (each a
"Mandatory NMS Unwind Event"): (i) default of the Companies with respect to
certain indebtedness, (ii) declaration by the Companies of bankruptcy or
insolvency or failure to post sufficient cash collateral, (iii) failure of the
Companies to have caused a registration statement covering the resale of the
shares of Paired Common Stock received by NMS under the NMS Purchase Agreement
and NMS Price Adjustment Mechanism to become effective on or before October 15,
1998, or (iv) the sale or refinancing by the Companies of certain properties in
which the net proceeds of such sale or refinancing (up to the amount necessary
to effect a complete cash settlement) are not applied to a cash settlement under
the NMS Price Adjustment Mechanism. Finally, the NMS Price Adjustment Mechanism
provides that, upon the consummation of the sale or refinancing of certain
properties by the Companies with a third party, the Companies must apply the net
proceeds to the extent necessary to effect a complete cash settlement under the
NMS Price Adjustment Mechanism. The Companies have agreed to use all
commercially reasonable efforts to effect such sale or refinancing.
PAINEWEBBER TRANSACTION. On April 6, 1998, the Companies entered into
transactions with PaineWebber Incorporated ("PaineWebber") and PaineWebber
Financial Products, Inc. ("PWFS" and, together with PaineWebber, the
"PaineWebber Parties"). Pursuant to the terms of a Purchase Agreement dated as
of April 6, 1998 (the "PaineWebber Purchase Agreement"), PaineWebber purchased
5,150,000 shares of Paired Common Stock (the "Initial PaineWebber Shares") from
the Companies at a purchase price of $27.01125 per share, which reflected a 2%
discount to the last reported sale price of the Paired Common Stock on April 3,
1998, for net proceeds of approximately $139.1 million.
In connection with the issuance of the Initial PaineWebber Shares, the
Companies entered into a Purchase Price Adjustment Mechanism Agreement, dated as
of April 6, 1998, with PWFS (as amended on August 14, 1998, the "PaineWebber
Price Adjustment Agreement"). Pursuant to the PaineWebber Price
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Adjustment Agreement, before October 15, 1998, PWFS may agree with the Companies
at any time (or, on any of June 30, 1998 or September 30, 1998 (each a "PW Reset
Date"), the Companies may cause PWFS) to sell some or all of the Initial
PaineWebber Shares through one or more specified methods (in each case a "PW
Settlement"). At each PW Settlement, the purchase price of the Initial
PaineWebber Shares subject to the PW Settlement is adjusted based upon the
difference between (i) the proceeds (net of a negotiated resale spread or
underwriting discount) received by PWFS from the sale of the shares of Paired
Common Stock and (ii) a reference price (the "Reference Price") equal to the
closing price for a share of Paired Common Stock on April 3, 1998 plus a forward
accretion reflecting an imputed return at LIBOR plus 140 basis points, minus an
adjustment to reflect distributions on the Initial PaineWebber Shares prior to
the date of such PW Settlement (such difference, the "PW Price Difference"). If
the PW Price Difference is positive, PWFS is obligated to deliver shares of
Paired Common Stock or cash to the Companies equal in value to the aggregate PW
Price Difference. If the PW Price Difference is negative, the Companies are
obligated to deliver additional shares of Paired Common Stock equal in value
(net of a negotiated resale spread or underwriting discount, as the case may be)
to the aggregate PW Price Difference to PWFS. The PaineWebber Price Adjustment
Agreement provides that shares may be delivered in settlement only if the
Companies have on file with the SEC an effective registration statement covering
the resale by PWFS of the shares to be delivered. There can be no assurance that
a registration statement with respect to such shares will be declared and remain
effective. See "--Potential Dilution and Liquidity Effects of the Purchase Price
Adjustment Mechanisms."
In addition, within five business days following a PW Settlement or each PW
Reset Date, if the Reference Price times the number of shares subject to the
PaineWebber Price Adjustment exceeds the product of the closing price of the
Paired Common Stock as of such relevant date times the number of shares subject
to the PaineWebber Price Adjustment Agreement by more than $5,000,000 (such
excess amount, the "Collateral Amount"), the Companies are required to deliver
to PWFS a number of shares of Paired Common Stock (the "Collateral Shares")
equal in value (valued at the closing price of the Paired Common Stock on the
relevant date) to the Collateral Amount; provided, that if the resale by PWFS of
the shares to be so delivered is not covered by an effective registration
statement, then the Companies must, at their option, deliver to PWFS, either (i)
a number of Collateral Shares equal in value to 125% of the Collateral Amount or
(ii) cash collateral equal to the Collateral Amount. The number of Collateral
Shares and/or amount of cash collateral held by PWFS will be adjusted every
other week. There can be no assurance that a registration statement with respect
to any Collateral Shares will be declared and remain effective. See "--Potential
Dilution and Liquidity Effects of the Purchase Price Adjustment Mechanisms." On
July 8, 1998, the Companies delivered 600,954 shares of Paired Common Stock as
Collateral Shares to PWFS. In connection with the Amendment to the PaineWebber
Price Adjustment Agreement, the Companies delivered 2,347,218 shares of Paired
Common Stock as Collateral Shares to PWFS.
If the closing price of the Paired Common Stock on any trading day does not
equal or exceed $16.00, PWFS has the right to force a complete settlement under
the PaineWebber Price Adjustment Agreement. PWFS also has the right to force a
complete settlement under the PaineWebber Price Adjustment Agreement if the
Companies (i) are in default with respect to certain specified indebtedness of
the Companies, (ii) effect an early settlement, unwind or liquidation of any
transaction similar to the transaction with PWFS, or (iii) fail to deliver to
PWFS on or before September 30, 1998, an effective registration statement
covering the sale of the shares of Paired Common Stock delivered to PWFS.
UBS TRANSACTION. On December 31, 1997, the Companies entered into
transactions with UBS Limited and Union Bank of Switzerland, London Branch
(together with its successor, UBS AG, London Branch, "UBS" and, together with
Warburg Dillon Read, LLC, the successor to UBS Limited, the "UBS Parties").
Pursuant to the terms of a Purchase Agreement dated as of December 31, 1997 (the
"UBS Purchase Agreement"), UBS Limited purchased 3,250,000 shares of Paired
Common Stock (the "Initial UBS Shares") from the Companies at a purchase price
of $28.8125 per share (the last reported sale price
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of the Paired Common Stock on December 30, 1997) for approximately $91.8 million
in net proceeds. UBS received from the Companies a placement fee of 2%, or
approximately $1.9 million.
In connection with the issuance of the Initial UBS Shares, the Companies
entered into a Forward Stock Contract, dated as of December 31, 1997, with UBS
(as amended on August 14, 1998, the "Forward Stock Contract"). Pursuant to the
Forward Stock Contract, the Companies have agreed to purchase on or before
October 15, 1998, in one or more transactions (each a "UBS Settlement"), from
UBS a number of shares of Paired Common Stock equal to the number of Initial UBS
Shares, at a per paired share price equal to $28.8125 plus a forward accretion
reflecting an imputed return at LIBOR plus 140 basis points, minus an adjustment
to reflect distributions on shares of the Paired Common Stock (the "UBS Forward
Price"). The forward accretion component represents a guaranteed rate of return
to UBS. The shares of Paired Common Stock to be delivered to or by UBS may
consist of shares of Paired Common Stock acquired under the UBS Purchase
Agreement or otherwise.
The Companies may effect a UBS Settlement by (i) delivering to UBS shares of
Paired Common Stock (the "UBS Settlement Shares") equal in value (valued at the
daily average closing price for shares of the Paired Common Stock over a
specific period of time (the "UBS Unwind Price")) to the UBS Forward Price at
the time of such UBS Settlement times the number of shares of Paired Common
Stock subject to such UBS Settlement (the "UBS Settlement Amount") in exchange
for such number of shares, (ii) delivering to (or, in the event the UBS Unwind
Price is greater than the UBS Forward Price, receiving from) UBS a number of
shares of Paired Common Stock equal to the difference between the number of the
UBS Settlement Shares and the number of shares subject to such UBS Settlement,
or (iii) delivering to UBS cash equal to the UBS Settlement Amount in exchange
for the shares subject to such UBS Settlement. If the Companies make a UBS
Settlement in shares of Paired Common Stock, they must also pay to UBS (i) an
unwind accretion fee (payable in cash or shares) equal to 50% of the UBS
Settlement Amount times the imputed return of LIBOR plus 140 basis points over
the period designated for such UBS Settlement and (ii) a placement fee equal to
0.50% of the UBS Settlement Amount. The Forward Stock Contract provides that
shares may be delivered in settlement only if the Companies have on file with
the SEC an effective registration statement covering the resale by UBS of the
shares to be delivered. If an effective registration statement is not on file,
the Companies generally must deliver cash equal to the UBS Settlement Amount,
except that in the case of a mandatory early settlement (discussed below), the
Companies may deliver unregistered shares of Paired Common Stock in an amount
necessary to guarantee that UBS will receive the UBS Settlement Amount in
private resales of such shares. There can be no assurance that a registration
statement with respect to settlement shares will be declared and remain
effective. See "--Potential Dilution and Liquidity Effects of the Purchase Price
Adjustment Mechanisms."
The Forward Stock Contract provides that on each of March 31, 1998, June 30,
1998 and September 30, 1998 (each a "UBS Interim Settlement Date"), if the
closing price for shares of the Paired Common Stock on the trading day
immediately preceding such UBS Interim Settlement Date (the "UBS Reset Price")
is lower than the UBS Forward Price calculated as of the UBS Interim Settlement
Date, the Companies are required to deliver to UBS cash collateral equal to the
product of (i) the difference between the UBS Forward Price and the UBS Reset
Price, times (ii) the number of shares subject to the Forward Stock Contract
(the "UBS Interim Settlement Amount"). With the prior written consent of UBS,
the Companies may elect to deliver to UBS a number of shares of Paired Common
Stock (the "UBS Interim Settlement Shares") equal in value (valued at the UBS
Reset Price) to 125% of the UBS Interim Settlement Amount. The amount of cash
collateral or number of shares so held will be adjusted every other week. To
date, the Companies have delivered an aggregate of approximately $35.6 million
as cash collateral to UBS. See "--Potential Dilution and Liquidity Effects of
the Purchase Price Adjustment Mechanisms."
If the average closing price of the Paired Common Stock for any two
consecutive trading days does not equal or exceed $16.00 (the "UBS Unwind
Threshold"), UBS has the right to force a complete settlement under the Forward
Stock Contract. UBS also has the right to force a complete settlement under
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the Forward Stock Contract if the Companies (i) are in default with respect to
certain financial covenants under the Forward Stock Contract, (ii) are in
default under the Corporation's credit facility with Chase Manhattan Bank, (iii)
are in default with respect to certain specified indebtedness of the Companies,
(iv) declare bankruptcy or become insolvent or fail to post sufficient cash
collateral, (v) effect an early settlement, unwind or liquidation of any
transaction similar to the transaction with UBS, or (vi) fail to deliver to UBS,
on or before September 30, 1998, an effective registration statement covering
the sale of the shares of Paired Common Stock delivered to UBS.
POTENTIAL DILUTION AND LIQUIDITY EFFECTS OF THE PRICE ADJUSTMENT
MECHANISMS. If the reset price or unwind price (in the case of the UBS and NMS
transactions) or the market price (in the case of the PWFS transaction) of the
Paired Common Stock is less than the applicable forward price or reference price
on a given settlement date or interim settlement or reset date, the Companies
will be obligated to deliver cash or additional shares of Paired Common Stock to
effect such settlement, interim settlement or reset. Delivery of cash would
adversely affect the Companies' liquidity, and delivery of shares would have
dilutive effects on the capital stock of the Companies. Moreover, settlement
(whether by reason of a drop in the price of the Paired Common Stock or
otherwise) may force the Companies to issue shares of Paired Common Stock at a
depressed price, which may heighten the dilutive effects on the capital stock of
the Companies. The dilutive effect of a stock settlement and the adverse
liquidity effect of a cash settlement increase significantly as the market price
of the Paired Common Stock declines below the applicable forward price or
reference price. Furthermore, under certain circumstances, the Companies may
settle in shares of Paired Common Stock only if an effective registration
statement covering such shares is on file. There can be no assurance that a
registration statement with respect to any such shares will be declared and
remain effective. If the Companies settled all three transactions on August 14,
1998, they would be obligated to deliver to the counterparties a total of
approximately $331.5 million in cash (net of cash currently held as collateral
by the counterparties) and would receive from the counterparties a total of 13.3
million shares of Paired Common Stock plus all shares of Paired Common Stock
then held as collateral by the counterparties.
PARTICIPATING LEASE REVENUE RECOGNITION
In May 1998, the Financial Accounting Standards Board's Emerging Issues Task
Force issued EITF number 98-9, "Accounting for Contingent Rent in Interim
Financial Periods ("EITF 98-9"). EITF 98-9 provides that a lessor shall defer
recognition of contingent rental income in interim periods until specified
targets that trigger the contingent income are met. Management has reviewed the
terms of its Participating Leases and has determined that the provisions of EITF
98-9 will impact Patriot's current revenue recognition on an interim basis, but
will have no impact on Patriot's annual participating rent revenue or interim
cash flow from its Participating Leases. Patriot has adopted the provisions of
EITF 98-9 and elected to apply the provisions of the new pronouncement on a
prospective basis.
PATRIOT AMERICAN HOSPITALITY, INC.
RESULTS OF OPERATIONS: QUARTER ENDED JUNE 30, 1998 COMPARED WITH QUARTER ENDED
JUNE 30, 1997
Patriot's lease revenue from the Lessees (including Wyndham) for the quarter
ended June 30, 1998, increased 265% from $36,973,000 in 1997 to $135,002,000 in
1998. This increase is primarily due to the acquisition of 174 hotel properties
during the past twelve months. Patriot owned or leased 228 hotel properties as
of June 30, 1998. Additionally, for the three months ended June 30, 1998,
Patriot reported $1,377,000 of lease revenue related to the sub-lease of the
Racecourse facility and land to Wyndham. Interest and other income increased
from $757,000 in 1997 to $5,255,000 in 1998 which is primarily attributable to
additional investments in Subscription Notes and other notes receivable from
Wyndham and interest and dividend income earned on cash investments. Interest
and other income for the three months ended June 30, 1998 includes $3,278,000 of
interest income related to notes receivable from Wyndham.
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Generally, Patriot's Participating Leases provide for the payment of the
greater of (i) a fixed base rent or (ii) participating rent, based on the
revenue of the hotels, plus certain additional charges, as applicable. The
Participating Leases contain annual revenue thresholds used to calculate the
various tiers of participating rent which are prorated on a monthly basis to
determine monthly participating rent payments. The provisions of EITF 98-9 call
for straight-line recognition of the annual base rent throughout the year and
for the deferral of any additional lease amounts collected or due from the
Lessees until such amounts exceed the annual revenue thresholds. This will
generally result in base rent being recognized in the first and second quarters
and participating rents already collected or due from the Lessees being deferred
and then recognized in the third and fourth quarters due to the structure of
Patriot's Participating Leases and the seasonality of the hotel operations.
Patriot elected to adopt the provisions of EITF 98-9 beginning in May 1998. The
effect of the change was to defer recognition of $5,681 of lease revenue during
the quarter ended June 30, 1998.
For the three months ended June 30, 1998 as compared to the same period for
1997, Patriot experienced significant increases in expenses as a result of the
acquisition of hotels discussed above.
Real estate and personal property taxes and casualty insurance were
$13,300,000 for the three months ended June 30, 1998, compared to $3,765,000 for
the three months ended June 30, 1997.
Ground lease expense increased from $338,000 to $13,609,000 for the three
months ended June 30, 1997 compared to the same period in 1998 as a result of
acquisition of properties subject to existing ground leases, including
$1,194,000 related to the Racecourse land lease with an affiliate of
PaineWebber, Inc.
General and administrative expenses were $4,719,000 for the three months
ended June 30, 1998, compared to $2,299,000 for 1997. This increase is primarily
attributable to Patriot's tremendous growth over the past year through mergers
and acquisitions. General and administrative expenses include the amortization
of unearned stock compensation of $1,324,000 for 1998 and $1,306,000 for 1997.
Additionally, Patriot incurred expenses of $237,000 in 1998 associated with
evaluating properties and companies to be acquired which were ultimately not
purchased, compared to $87,000 for 1997.
Interest expense for the three months ended June 30, 1998 was $50,777,000
compared to $9,523,000 in 1997. Patriot's outstanding debt obligations as of
June 30, 1998 and 1997 were approximately $3.5 billion and $584.3 million,
respectively. The primary components of interest expense for the three months
ended June 30, 1998 are $32,429,000 of interest related to the revolving credit
facility and term loans, $6,373,000 of interest on mortgage notes, $5,374,000 of
amortization of deferred financing costs and $9,017,000 of other interest
related to other miscellaneous notes, capital lease obligations and commitments
payable. Interest expense for the three months ended June 30, 1997 consists
primarily of $9,087,000 of interest on Patriot's old line of credit facility and
mortgage note balances outstanding and $436,000 of amortization of deferred
financing costs. Additionally, Patriot capitalized interest totaling $2,416,000
and $869,000 for the three months ended June 30, 1998 and 1997, respectively,
associated with major renovations of certain hotel properties.
In connection with Patriot's acquisition of three leasehold interests for
hotels that Patriot owns and leased to certain of the Lessees, Patriot
recognized expense of $4,339,000 related to the cost of acquiring these
leaseholds.
Depreciation and amortization expense was $41,196,000 for the three months
ended June 30, 1998 compared to $9,510,000 for the same period in 1997.
Patriot's share of income from unconsolidated subsidiaries was $15,656,000
for the second quarter of 1998 compared to $2,072,000 for the second quarter of
1997.
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Minority interest share of income in the Patriot Partnership was $2,140,000
and $2,302,000 for the three months ended June 30, 1998 and 1997, respectively.
Minority interest share of income in Patriot's other consolidated subsidiaries
was $1,895,000 for the second quarter of 1998 and $247,000 for the second
quarter of 1997.
Patriot repaid certain debt obligations of Interstate and Summerfield in
connection with the Interstate Merger and the Summerfield Acquisition which
closed during the quarter. As a result, Patriot incurred certain prepayment
penalties and wrote off the remaining balance of unamortized deferred financing
costs associated with such debt in the aggregate amount of $11,843,000.
As a result, net income was $12,059,000 for the three months ended June 30,
1998 and $11,818,000 for the three months ended June 30, 1997.
RESULTS OF OPERATIONS: SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS
ENDED JUNE 30, 1997
Patriot's lease revenue from the Lessees (including Wyndham) for the six
months ended June 30, 1998, increased 240% from $71,986,000 in 1997 to
$244,651,000 in 1998. This increase is primarily due to the acquisition of 174
hotel properties during the past twelve months. Additionally, for the six months
ended June 30, 1998, Patriot reported $2,787,000 of lease revenue related to the
sub-lease of the Racecourse facility and land to Wyndham. Interest and other
income increased from $1,132,000 in 1997 to $8,771,000 in 1998 which is
primarily attributable to investments in Subscription Notes and other notes
receivable from Wyndham and interest and dividend income earned on cash
investments. Interest and other income for the six months ended June 30, 1998
includes $6,028,000 of interest income related to notes receivable from Wyndham.
As discussed above, Patriot elected to adopt the provisions of EITF 98-9
(which provides new guidance for accounting procedures to be applied when
accounting for participating lease income) beginning in May 1998. The effect of
the change was to defer recognition of $5,681 of lease revenue during the six
months ended June 30, 1998. The provisions of EITF 98-9 call for straight-line
recognition of the annual base rent throughout the year and for the deferral of
any additional lease amounts collected or due from the Lessees until such
amounts exceed the annual revenue thresholds. This will generally result in base
rent being recognized in the first and second quarters and participating rents
already collected or due from the Lessees being deferred and then recognized in
the third and fourth quarters due to the structure of Patriot's Participating
Leases and the seasonality of the hotel operations.
For the six months ended June 30, 1998 as compared to the same period for
1997, Patriot experienced significant increases in expenses as a result of the
acquisition of hotels discussed above.
Real estate and personal property taxes and casualty insurance were
$25,224,000 for the six months ended June 30, 1998, compared to $6,966,000 for
the six months ended June 30, 1997.
Ground lease expense increased from $683,000 to $20,167,000 for the six
months ended June 30, 1997 compared to the same period in 1998 as a result of
acquisition of properties subject to existing ground leases, including
$2,363,000 related to the Racecourse land lease with an affiliate of
PaineWebber, Inc.
General and administrative expenses were $10,002,000 for the six months
ended June 30, 1998, compared to $5,081,000 for 1997. This increase is primarily
attributable to Patriot's tremendous growth over the past year through mergers
and acquisitions. General and administrative expenses include the amortization
of unearned stock compensation of $2,660,000 for 1998 and $1,927,000 for 1997.
Additionally, Patriot incurred expenses of $550,000 in 1998 associated with
evaluating properties and companies to be acquired which were ultimately not
purchased, compared to $655,000 for 1997.
Interest expense for the six months ended June 30, 1998 was $85,027,000
compared to $17,328,000 in 1997. Patriot's outstanding debt obligations as of
June 30, 1998 and 1997 were approximately $3.5 billion and $584.3 million,
respectively. The primary components of interest expense for the six months
ended
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June 30, 1998 are $54,987,000 of interest related to the revolving credit
facility and term loans, $14,316,000 of interest on mortgage notes, $8,876,000
of amortization of deferred financing costs and $11,459,000 of other interest
related to other miscellaneous notes, capital lease obligations and commitments
payable. Interest expense for the six months ended June 30, 1997 consists
primarily of $16,564,000 of interest on Patriot's old line of credit facility
and mortgage note balances outstanding and $764,000 of amortization of deferred
financing costs. Additionally, Patriot capitalized interest totaling $4,611,000
and $951,000 for the six months ended June 30, 1998 and 1997, respectively,
associated with major renovations of certain hotel properties.
In connection with Patriot's acquisition of three leasehold interests for
hotels that Patriot owns and leased to certain of the Lessees, Patriot
recognized expense of $4,339,000 related to the cost of acquiring these
leaseholds.
Depreciation and amortization expense was $61,693,000 for the six months
ended June 30, 1998 compared to $18,006,000 for the same period in 1997.
Patriot's share of income from unconsolidated subsidiaries was $19,248,000
for the first half of 1998 compared to $3,093,000 for 1997.
Minority interest share of income in the Patriot Partnership was $5,268,000
and $4,534,000 for the six months ended June 30, 1998 and 1997, respectively.
Minority interest share of income in Patriot's other consolidated subsidiaries
was $2,428,000 for the first half of 1998 and $447,000 for 1997.
Patriot repaid certain debt obligations of Old Wyndham, Interstate and
Summerfield in connection with the Wyndham Merger, the Interstate Merger and the
Summerfield Acquisition. As a result, Patriot incurred certain prepayment
penalties and wrote off the remaining balance of unamortized deferred financing
costs associated with such debt in the aggregate amount of $30,560,000.
As a result, net income was $27,556,000 for the six months ended June 30,
1998 and $23,166,000 for the six months ended June 30, 1997.
WYNDHAM INTERNATIONAL, INC.
As of June 30, 1998, Wyndham leased 214 hotels from Patriot, managing 202 of
those hotels, and managed 174 hotels for third parties. In addition, Wyndham
operated the Bay Meadows Racecourse. Subsequent to the Cal Jockey Merger in July
1997, the major portion of the revenues of Wyndham and Patriot have been derived
from the leasing and operation of hotels.
RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1998
For the three months ended June 30, 1998, Wyndham (including its
consolidated subsidiaries) had room revenues of $261,126,000 from the 289 hotels
it operated during the period. Food and beverage and telephone and other
revenues were $140,681,000 for the period. In addition, Wyndham reported
management fee and service fee income of $23,144,000 for the three months ended
June 30, 1998. Interest and other income for the period included $1,247,000 of
interest income related to the Subscription Notes and other notes receivable
from Patriot.
Lease payments paid to Patriot pursuant to the Participating Leases, other
hotel sub-leases and the Racecourse facility lease were $127,178,000 for the
second quarter of 1998. Hotel operating expenses were $272,111,000 for the
period.
General and administrative expenses were $15,783,000 for the period and
consist primarily of salaries and wages of personnel.
44
<PAGE>
Interest expense of $8,099,000 for the second quarter of 1998 is primarily
attributable to debt obligations related to the three hotels acquired in the WHG
Merger. The amount also includes $3,278,000 of interest expense related to the
Subscription Notes and other notes payable to Patriot.
In connection with the CHCI Merger, Wyndham acquired 17 leasehold interests
for hotels that Patriot owns. As a result, Wyndham recognized expense of
$52,723,000 related to the cost of acquiring these leaseholds.
Total revenues from the Racecourse facility operations were $1,942,000 for
the three months ended June 30, 1998. Expenses associated with the Racecourse
operations were $2,673,000 for the three months ended June 30, 1998. There were
no live racing days conducted during the quarter.
Minority interest's share of losses associated with the Wyndham Partnership
was $6,641,000 for the three months ended June 30, 1998. Minority interest's
share of income in Wyndham's other consolidated subsidiaries was $13,420,000 in
1998.
As a result, the net loss was $43,832,000 for the three months ended June
30, 1998.
RESULTS OF OPERATIONS: SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1998, Wyndham (including its consolidated
subsidiaries) had room revenues of $439,157,000 from the 289 hotels it operated
during the period. Food and beverage and telephone and other revenues were
$236,463,000 for the period. In addition, Wyndham reported management fee and
service fee income of $37,248,000 for the six months ended June 30, 1998.
Interest and other income for the period included $2,363,000 of interest income
related to the Subscription Notes and other notes receivable from Patriot.
Lease payments paid to Patriot pursuant to the Participating Leases, other
hotel sub-leases and the Racecourse facility lease were $216,262,000 for the
first half of 1998. Hotel operating expenses were $454,483,000 for the period.
General and administrative expenses were $27,806,000 for the period and
consist primarily of salaries and wages of personnel.
Interest expense of $13,798,000 for the first half of 1998 is primarily
attributable to debt obligations related to the three hotels acquired in the WHG
Merger. The amount also includes $6,028,000 of interest expense related to the
Subscription Notes and other notes payable to Patriot.
In connection with the CHCI Merger, Wyndham acquired 17 leasehold interests
for hotels that Patriot owns. As a result, Wyndham recognized expense of
$52,723,000 related to the cost of acquiring these leaseholds.
Total revenues from the Racecourse facility operations were $24,991,000 for
the six months ended June 30, 1998. Expenses associated with the Racecourse
operations were $20,857,000 for the six months ended June 30, 1998. The
Racecourse operated for 50 live racing days during the six months ended June 30,
1998.
Minority interest's share of losses associated with the Wyndham Partnership
was $6,715,000 for the six months ended June 30, 1998. Minority interest's share
of income in Wyndham's other consolidated subsidiaries was $16,361,000 in 1998.
As a result, the net loss was $40,651,000 for the six months ended June 30,
1998.
45
<PAGE>
STATISTICAL INFORMATION
Second quarter 1998 operating performance across the Companies' owned
portfolio improved over the second quarter of 1997, as reflected in a 7.5%
increase in revenue per available room ("RevPAR"), a 5.8% increase in average
daily rate ("ADR"), and an improvement of 1.6% in occupancy.
Similarly, second quarter 1998 operating performance across Wyndham's
comparable branded portfolio of owned and managed hotels (hotels in the
portfolio for one full common fiscal quarter in both periods presented) improved
over the 1997 second quarter, as reflected in a 10.2% increase in RevPAR, an
8.5% increase in ADR, and a 1.5% improvement in occupancy.
The Wyndham-branded comparable portfolio was led by strong growth in the
Resort division, which posted a 37.4% increase in RevPAR, as several recently
renovated properties contributed to the improved performance against weak 1997
results. The Garden division also experienced strong performance, with an 8.3%
RevPAR increase driven by improved results at hotels added in the past 18
months. During the second quarter of 1998, Patriot converted 10 hotels,
representing approximately 2,200 rooms, to the Wyndham brand; nine of these
properties were former Grand Heritage properties, now branded as Wyndham Grand
Heritage Hotels, a new product line within the Wyndham family.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OCCUPANCY ADR REVPAR
-------------------- -------------------- --------------------
<CAPTION>
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
The Companies' owned hotels................................... 75.9% 74.7% $ 107.08 $ 101.20 $ 81.30 $ 75.60
Wyndham-brand comparable portfolio............................ 73.5% 72.4% $ 106.93 $ 98.54 $ 78.59 $ 71.33
</TABLE>
For the six months ended June 30, 1998, the Companies' owned portfolio also
improved over the comparable period in 1997, as reflected in an 8.1% increase in
RevPAR, a 5.9% increase in ADR, and an improvement of 2.1% in occupancy.
Similarly, operating performance across Wyndham's comparable branded
portfolio of owned and managed hotels for the six-month period improved over
last year, as reflected in an 11.2% increase in RevPAR, an 8.1% increase in ADR,
and an improvement of 2.9% in occupancy.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OCCUPANCY ADR REVPAR
-------------------- -------------------- --------------------
<CAPTION>
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
The Companies' owned hotels................................... 73.5% 72.0% $ 110.86 $ 104.70 $ 81.51 $ 75.38
Wyndham-brand comparable portfolio............................ 71.6% 69.6% $ 109.36 $ 101.12 $ 78.25 $ 70.39
</TABLE>
COMBINED LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
The Companies' principal source of cash to fund operating expenses and
distributions to stockholders is cash flow provided by operating activities.
Patriot's principal source of revenue is rent payments from the Lessees and
Wyndham under the Participating Leases. Wyndham's principal source of cash flow
is from the operation of the hotels that it leases and/or manages. The Lessees'
and Wyndham's ability to make the rent payments to Patriot is dependent upon
their ability to efficiently manage the hotels and generate sufficient cash flow
from operation of the hotels.
Combined cash and cash equivalents as of June 30, 1998 were $163.5 million,
including capital improvement reserves of $25.2 million. Combined cash flows
from operating activities of the Companies were $160.5 million for the first
half of 1998, which represent a combination of the collection of rents under
Participating Leases with third party Lessees and cash flows generated by the
hotels operated by Wyndham.
46
<PAGE>
Cash and cash equivalents for Patriot as of June 30, 1997 was $9.0 million,
including capital improvement reserves of $4.5 million. Cash flows from
operating activities of Patriot were $38.5 million for the first half of 1997,
which primarily represent the collection of rents under Participating Leases.
CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
During the first half of 1998, the Companies experienced a period of rapid
growth, acquiring an aggregate of $4.5 billion of hotel properties and
management companies. These transactions included the Wyndham Merger, the WHG
Merger, the Arcadian Acquisition, the Interstate Merger, the Summerfield
Acquisition, the CHCI Merger, and the acquisition of four additional hotel
properties and the Golden Door Spa. These transactions were funded with a
combination of an aggregate of approximately $1.4 billion in cash (primarily
drawn from the Companies' Revolving Credit Facility and Term Loans), issuance of
and assumption of other debt aggregating approximately $1.4 billion and the
issuance of an aggregate of approximately $1.7 billion of equity securities.
Combined cash flows used in investing activities of the Companies were $1.4
billion for the six months ended June 30, 1998, resulting primarily from the
acquisition of hotel properties and management companies, renovation
expenditures at certain hotels, as well as cash deposited on collateral under
one of the Price Adjustment Mechanisms. Combined cash flows from investing
activities of $1.3 billion for the six months ended June 30, 1998 were primarily
related to borrowings on the Revolving Credit Facility and mortgage notes, and
net proceeds from private placements of equity securities, net of payments of
dividends and distributions.
Patriot's cash flows used in investing activities were $315.3 million for
the six months ended June 30, 1997, resulting primarily from the acquisition of
hotel properties. Cash flows from Patriot's financing activities of $279.2
million for the six months ended June 30, 1997 were primarily related to
borrowings on Patriot's previous line of credit facility, net of payments of
dividends and distributions.
As of June 30, 1998, Patriot had approximately $841.1 million outstanding
under its Revolving Credit Facility and $1.8 billion outstanding on its Term
Loans. As of June 30, 1998, the Companies also had over $1.1 billion of mortgage
and other debt outstanding, resulting in total indebtedness of approximately
$3.7 billion. As of June 30, 1998, the Companies had approximately $34.5 million
of availability under the Revolving Credit Facility in addition to cash on hand.
Patriot has entered into the transactions with three counterparties
involving the sale of an aggregate of 13.3 million shares of Paired Common
Stock, with related Purchase Price Adjustments Mechanisms. The terms of the
Purchase Price Adjustment Mechanisms require the Companies to issue additional
shares of Paired Common Stock or pay a cash settlement amount from time to time
based upon the difference between the respective index prices and the respective
forward prices, multiplied by the principal amount. For a description of the
potential dilution and liquidity effects of the Purchase Price Adjustment
Mechanisms, see "--Sale of Paired Common Stock with Price Adjustment
Mechanisms."
Expenses related to the rapid pace of acquisitions during the first six
months of 1998, coupled with the Companies' operating expenses and capital
expenditures and development programs, have resulted in Patriot being fully
drawn of all available funds under the existing Revolving Credit Facility as of
August 14, 1998. Management believes that the Companies have borrowing capacity
in addition to the Revolving Credit Facility and is currently negotiating to
obtain additional bank financing to fund working capital and other current cash
requirements. The Companies are also evaluating additional sources of capital,
including, without limitation, refinancing existing indebtedness, issuing
additional equity securities or debt, and divesting certain non-core,
non-proprietarily branded hotel assets to fund other capital requirements. No
assurances can be made regarding the availability or terms of additional sources
of capital in the future. Additionally, if the Companies are unable to secure
additional sources of financing in the future, no assurances can be made that a
future lack of financing sources would not have a material adverse effect on the
Companies' financial condition and results of operations.
47
<PAGE>
RENOVATIONS AND CAPITAL IMPROVEMENTS
During the first half of 1998, the Companies invested approximately $70
million to renovate or re-brand hotels. Pursuant to certain of the Participating
Leases, Patriot is obligated to establish a reserve for each such hotel for
capital improvements, including the periodic replacement or refurbishment of
furniture, fixtures and equipment ("FF&E"). The aggregate amount of such
reserves averages 4.0% of total revenue, with the amount of such reserve with
respect to each hotel based upon projected capital requirements of such hotel.
Management believes such amounts are sufficient to fund recurring capital
expenditures for the hotels. Capital expenditures, exclusive of renovations, may
exceed these reserves in a single year.
The Companies attempt to schedule renovations and improvements during
traditionally lower occupancy periods in an effort to minimize disruption to the
hotel's operations. Therefore, management does not believe such renovations and
capital improvements will have a material effect on the results of operations of
the hotels. Capital expenditures will be financed through capital expenditure
reserves, the revolving credit facility or other financing sources or with
working capital.
LEGISLATION AFFECTING THE PAIRED SHARE STRUCTURE
Patriot'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 Internal
Revenue Code of 1986, as amended (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 Wyndham. The "grandfathering" rules governing Section 296B
generally provide, however, that Section 296B(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 this
"grandfathering" rule in the context of a merger into a grandfathered REIT or
otherwise. Moreover, although Patriot's and Wyndham's respective predecessors,
Cal Jockey and 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 grand fathering
rule would not be available to Patriot and Patriot would not qualify as a REIT
for any taxable year.
Patriot'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, legislation to freeze the grandfathered
status of paired share REITS such as Patriot was included in the Internal
Revenue Service Restructuring and Reform Act of 1998 (the "IRS Reform Act of
1998"), which was signed into law by the President on July 22, 1998.
Under the IRS Reform Act of 1998, the anti-pairing rules generally apply to
real property interests acquired after March 26, 1998 by Patriot and Wyndham, or
a subsidiary or partnership in which a 10% or greater interest is owned by
Patriot or Wyndham (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 were described in a public announcement or in a filing with
the Securities and Exchange Commission on or before March 26, 1998. In addition,
the grandfathered status of any property under the foregoing rules will be lost
if the rent on a lease entered into or renewed after March 26, 1998, with
respect to such property exceeds an arm's-length rate. The IRS Reform Act of
1998 also provides that a property held by Patriot or Wyndham 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 Patriot and Wyndham. 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.
48
<PAGE>
The IRS Reform Act of 1998 generally permits Patriot to continue its current
method of operations with respect to its existing assets, including the assets
acquired in the Interstate Merger, the Arcadian Acquisition, the Summerfield
Acquisition and the CHI 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
recapitalization or restructuring of its operations, in response to the
legislation. However, if Patriot fails to or is unable to take such steps, the
legislation could have a material adverse effect on the future growth of
Patriot. There can be no assurance that other legislation affecting REIT
qualification will not be enacted. Any such legislation could have a material
adverse effect on the Companies.
INFLATION
Operators of hotels in general possess the ability to adjust room rates
quickly. However, competitive pressures may limit Wyndham's and the Lessees'
ability to raise room rates in the face of inflation.
SEASONALITY
The hotel industry is seasonal in nature. Revenues for certain of Patriot's
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 the hotels may cause quarterly fluctuations in the
Companies' revenues.
YEAR 2000 COMPLIANCE
The Companies recognize the importance of minimizing the number and
seriousness of any disruptions that may occur as a result of Year 2000 and have
adopted an extensive compliance program. The Companies are completing the
inventory of their information technology and other electronic assets (such as,
but not limited to, automated time clocks, point-of-sale, non-information
technology systems, including embedded systems that operate security systems,
phone systems, energy management systems and other systems) used in the
Companies' businesses that may be affected by Year 2000 issues and the related
assessment of those assets' Year 2000 compliance. The Companies have completed
their assessment of their primary information technology infrastructure and
expect to complete the inventory and assessment of substantially all of their
Hotels, other than Hotels acquired in the Arcadian Acquisition and the
Interstate Merger, by September 15, 1998. The Companies are beginning the
inventory and assessment of the systems used in the operation of the Hotels
acquired in the Arcadian Acquisition and the Interstate Merger and expect to
complete that assessment in the fourth quarter of this year. In addition, 78 of
the owners of hotels managed by Wyndham but not owned by Patriot and tenants of
hotels owned by Patriot but not leased or operated by Wyndham have indicated
they intend to effect their own compliance programs. To the Companies'
knowledge, the owners of 27 hotels which are managed by Wyndham have not
undertaken any compliance efforts as of this date.
The Company is also surveying its vendors and service providers that are
critical to the Companies' businesses to determine whether they are Year 2000
compliant. The Companies expect that these surveys will be completed in the
fourth quarter of 1998, but cannot guarantee that all vendors or service
providers will comply with the Companies' surveys, and therefore the Companies
may not be able to determine Year 2000 compliance of those vendors or service
providers. At that time, the Companies will determine the extent to which the
Companies will be able to replace non-compliant vendors. Due to the lack of an
alternative source, there may be instances in which the Companies will have no
alternative but to remain with non-compliant vendors or service providers.
The Companies are presently negotiating with the vendor that is expected to
perform the remediation of the Companies' systems. The scope and cost of this
work is not yet known until the inventory and assessment phase is completed.
49
<PAGE>
The Companies believe that their reprogramming, upgrading and systems
replacements will be implemented and tested by June 30, 1999. The Companies
believe that this should provide adequate time to further correct any problems
that did not surface during the implementation and testing for those systems.
In addition to those systems within the Companies' control and the control
of its vendors and suppliers, there are other systems that could have an impact
on the Companies' businesses and which may not be Year 2000 compliant by January
1, 2000. These systems could affect the operations of the air traffic control
system and airlines or other segments of the lodging and travel industries, or
the economy and travel generally. In addition, these systems could affect the
Hotels owned by third parties but managed by Wyndham or the third parties that
lease Hotels owned by Patriot which are implementing their own compliance
programs. These systems are outside of the Companies' control or influence and
their compliance may not be verified by the Companies. However, these systems
could adversely affect the Companies' financial condition or results of
operation.
If the Companies are not successful in implementing their Year 2000
compliance plan, the Companies may suffer a material adverse impact on their
consolidated results of operations and financial condition. Because of the
importance of addressing the Year 2000 problem, the Companies expect to develop
contingency plans if they determine that the compliance plans will not be
implemented by June 30, 1999.
To date, the Companies have expended $600,000 in connection with the
inventory and assessment of their information technology and other electronic
assets. The Companies presently expect to expend an additional $1.2 million to
complete the inventory and assessment phase of the compliance program.
FUNDS FROM OPERATIONS
Combined Funds from Operations of the Companies (as defined and computed
below) was $88.3 million for the three months ended June 30, 1998 and $24.5
million for the three months ended June 30, 1997. Combined Funds from Operations
was $163.9 million for the six months ended June 30, 1998 and $47.4 million for
the six months ended June 30, 1997.
Management considers Funds from Operations to be a key measure of REIT
performance. Funds from Operations represents net income (loss) (computed in
accordance with generally accepted accounting principles), excluding gains (or
losses) from debt restructuring or sales of property, plus depreciation of real
property, amortization of goodwill and amortization of management contracts and
trade names, and after adjustments for unconsolidated partnerships, joint
ventures and corporations. Adjustments for Patriot's unconsolidated subsidiaries
are calculated to reflect Funds from Operations on the same basis. The Companies
have also made certain adjustments to Funds from Operations for real estate
related amortization. Funds from Operations should not be considered as an
alternative to net income or other measurements under generally accepted
accounting principles as an indicator of operating performance or to cash flows
from operating, investing or financing activities as a measure of liquidity.
Funds from Operations does not reflect working capital changes, cash
expenditures for capital improvements or principal payments on indebtedness.
50
<PAGE>
The following reconciliation of net (loss) income to Funds from Operations
illustrates the difference between the two measures of operating performance for
the three months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
---------------------
<S> <C> <C>
1998 1997
---------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Net (loss) income.......................................................................... $ (26,254) $ 11,818
Add:
Extraordinary loss from extinguishment of debt........................................... 11,843 --
Minority interest in the Operating Partnerships.......................................... (4,501) 2,302
Depreciation of buildings and improvements and furniture, fixtures and equipment......... 39,296 9,480
Amortization of goodwill and other assets................................................ 5,313 22
Amortization of management contracts and trade names..................................... 4,983 --
Amortization of capitalized lease costs.................................................. 1,505 36
Cost of acquiring leaseholds............................................................. 57,062 --
Adjustment for Funds from Operations of unconsolidated subsidiaries:
Equity in earnings of unconsolidated subsidiaries........................................ (2,293) (2,072)
Funds from Operations of unconsolidated subsidiaries..................................... 3,436 2,923
Adjustment for minority interest share of Funds from Operations of other consolidated
subsidiaries:
Minority interest in earnings of consolidated subsidiaries............................... 1,658 --
Minority interest in Funds from Operations of consolidated subsidiaries.................. (3,700) --
---------- ---------
Funds from Operations...................................................................... $ 88,348 $ 24,509
---------- ---------
---------- ---------
Weighted average shares and OP Units outstanding:
Basic.................................................................................... 135,770 51,967
---------- ---------
---------- ---------
Diluted.................................................................................. 143,442 53,614
---------- ---------
---------- ---------
</TABLE>
51
<PAGE>
The following reconciliation of net (loss) income to Funds from Operations
illustrates the difference between the two measures of operating performance for
the six months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
<S> <C> <C>
1998 1997
---------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Net (loss) income.......................................................................... $ (7,842) $ 23,166
Add:
Extraordinary loss from extinguishment of debt........................................... 30,560 --
Minority interest in the Operating Partnerships.......................................... (1,447) 4,534
Depreciation of buildings and improvements and furniture, fixtures and equipment......... 66,961 17,947
Amortization of goodwill and other assets................................................ 9,181 44
Amortization of management contracts and trade names..................................... 8,228 --
Amortization of capitalized lease costs.................................................. 1,505 72
Cost of acquiring leaseholds............................................................. 57,062 --
Adjustment for Funds from Operations of unconsolidated subsidiaries:
Equity in earnings of unconsolidated subsidiaries........................................ (5,486) (3,093)
Funds from Operations of unconsolidated subsidiaries..................................... 7,661 4,762
Adjustment for minority interest share of Funds from Operations of other consolidated
subsidiaries:
Minority interest in earnings of consolidated subsidiaries............................... 3,014 --
Minority interest in Funds from Operations of consolidated subsidiaries.................. (5,534) --
---------- ---------
Funds from Operations...................................................................... $ 163,863 $ 47,432
---------- ---------
---------- ---------
Weighted average shares and OP Units outstanding:
Basic.................................................................................... 124,102 51,824
---------- ---------
---------- ---------
Diluted.................................................................................. 131,703 53,335
---------- ---------
---------- ---------
</TABLE>
52
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
MARRIOTT SETTLEMENT
On May 27, 1998, the Companies and Interstate Hotels Company ("Interstate")
entered into a settlement agreement (the "Settlement Agreement") with Marriott
International, Inc. ("Marriott") which addressed certain claims asserted by
Marriott in connection with Patriot's then proposed merger with Interstate. The
Settlement Agreement provided for the dismissal of litigation brought by
Marriott and allowed Patriot's merger with Interstate to close on June 2, 1998.
In addition to dismissal of the Marriott litigation, the Settlement
Agreement provides for three principal transactions: (i) the re-branding of ten
Marriott hotels under the Wyndham name, (ii) the assumption by Marriott of the
management of ten Marriott hotels formerly managed by Interstate for the
remaining term of the Marriott franchise agreement, and (iii) the divestiture by
the Companies by November 30, 1998 (subject to extension upon payment of certain
fees by the Companies) of the third-party management business which was operated
by Interstate (the "Spin-off"). The ten Marriott hotels are expected to be
converted to the Wyndham brand over the next approximately 15 months.
In the event that the Spin-off is completed after November 30, 1998,
Marriott will be entitled to receive 110% of the fees otherwise due under the
submanagement agreements with respect to the ten hotels Marriott will manage
pursuant to the submanagement arrangement described above. In addition, if the
SEC Filing is not made by November 30, 1998 or the Spin-off is not completed by
January 28, 1999, the Companies will be subject to additional penalties. These
additional penalties include the right on the part of Marriott to purchase,
subject to third-party consents, the hotels to be submanaged by Marriott and six
additional Marriott hotels owned by the Companies at their then appraised
values. Moreover, the Companies, subject to any defenses they may have, would
owe Marriott liquidated damages with respect to the hotels converted to the
Wyndham brand, those to be submanaged by Marriott, and the six additional
Marriott hotels Marriott would have the option to purchase. The Companies also
anticipate that Marriott would require third-party owners of the Companies'
Marriott-branded hotels to choose an alternative manager for their hotels. As a
result, each respective hotel would either: (i) lose the Marriott brand, at
which time the Companies would have to compensate Marriott for any lost
franchise fees or (ii) terminate the management contract with the Companies and
enter into a contract with an alternative manager. The Companies would owe
liquidated damages on any third-party Marriott-franchised hotel which chooses to
convert its brand.
DISMISSAL OF WYNDHAM STOCKHOLDERS' LITIGATION
On April 14, 1997, an action styled KWALBRUN V. JAMES D. CARREKER, ET AL.,
was filed in the Delaware Court of Chancery in and for New Castle County,
purportedly as a class action on behalf of the Old Wyndham stockholders, against
Old Wyndham, Patriot and the members of the Board of Directors of Old Wyndham
(the "Wyndham Stockholders' Litigation"). The Complaint alleged that the Old
Wyndham Board of Directors breached its fiduciary duties owed to Old Wyndham's
public stockholders in connection with the Board of Directors' approval of the
Wyndham Merger. Subsequent to the mailing of Patriot's and Old Wyndham's Joint
Proxy Statement/Prospectus on or about November 10, 1997 (the "Joint Proxy
Statement/Prospectus"), the Defendants entered into arms' length negotiations
that resulted in an agreement, dated November 21, 1997, as amended, to settle
the Wyndham Stockholders' Litigation (the "Memorandum of Understanding"). The
Memorandum of Understanding set forth the principal bases for the settlement
which, among other things, included: (i) the agreement by Old Wyndham to provide
the updated fairness opinion of Smith Barney Inc., financial advisor to Old
Wyndham, and (ii) certain other disclosures in Patriot's and Old Wyndham's Joint
Proxy Statement/Prospectus Supplement mailed on or about December 10, 1997,
including (a) additional disclosures relating to the discounted cash flow
analyses
53
<PAGE>
performed by Merrill Lynch, Pierce, Fenner & Smith Incorporated and (b)
financial statements for both Old Wyndham and Patriot as of September 30, 1997.
The Memorandum of Understanding and the proposed settlement were contingent upon
execution of an appropriate and satisfactory Stipulation and Agreement of
Compromise, Settlement and Release (the "Stipulation") and related documents,
and the approval of the Delaware Court of Chancery. The parties to the
Memorandum of Understanding entered into the formal Stipulation on March 30,
1998 and the Delaware Court of Chancery entered an Order and Final Judgment on
June 17, 1998 approving the Stipulation and dismissing the Wyndham Stockholders'
Litigation with prejudice. The Delaware Court of Chancery awarded attorneys'
fees and expenses to plaintiff's counsel in the aggregate amount of $350,000.00,
which sum is to be paid by the defendants as provided in the Stipulation.
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
Since March 31, 1998, the Companies have issued equity securities in private
placements in reliance on an exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended, in the amounts and for the consideration
set forth below.
In April 1998, the Companies issued 5,150,000 Paired Shares to a financial
institution for aggregate consideration of approximately $141.9 million in cash.
The sale of the Paired Shares is subject to a price adjustment agreement which
matures in April 1999.
In May 1998, in connection with the acquisition of the Golden Door Spa in
Escondido, California, the Companies issued 390,335 Paired Shares valued at
approximately $10 million to one of the sellers.
In June 1998, in connection with the Summerfield Acquisition, the Companies
issued 1,397,281 Paired Shares valued at approximately $35.2 million and
3,223,795 units of limited partnership interest in each of the Patriot
Partnership and the Wyndham Partnership valued at approximately $81.1 million to
certain of the former owners of Summerfield.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Patriot and Wyndham each convened special meetings of their stockholders on
March 30, 1998, which meetings were subsequently adjourned to April 2, 1998 (the
"Special Stockholders Meetings"), to consider and vote upon a proposal to
approve the Agreement and Plan of Merger, dated December 2, 1997, by and among
Interstate Hotels Company, Patriot and Wyndham (the "Interstate Merger
Agreement"). On April 2, 1998, the votes of stockholders were submitted at the
Patriot and Wyndham Special Stockholders Meetings. For each of Patriot and
Wyndham, 63,483,644 shares were voted in favor of the Interstate Merger
Agreement; 112,606 shares were voted against the Interstate Merger Agreement;
and abstentions were recorded with respect to 269,293 shares.
54
<PAGE>
Patriot held its annual meeting of stockholders on May 28, 1998, to elect
three directors to serve until 2001. Patriot's stockholders elected the
following individuals to serve as directors for additional terms:
<TABLE>
<CAPTION>
NAME VOTES FOR WITHHOLD
- ------------------------------ ------------- ---------
<S> <C> <C>
Paul A. Nussbaum.............. 77,651,439 247,906
Harlan R. Crow................ 77,704,598 194,747
John C. Deterding............. 77,704,419 194,926
</TABLE>
Wyndham held its annual meeting of stockholders on May 28, 1998, to elect
three directors to serve until 2001. Wyndham's stockholders elected the
following individuals to serve as directors for additional terms:
<TABLE>
<CAPTION>
NAME VOTES FOR WITHHOLD
- ------------------------------ ------------- ---------
<S> <C> <C>
James D. Carreker............. 74,048,041 228,808
Russ Lyon, Jr................. 74,094,633 182,216
Sherwood M. Weiser............ 74,091,374 185,475
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------
<C> <S>
10.1 Amended and Restated Credit Agreement, dated as of June 2, 1998, among Patriot American
Hospitality, Inc., Patriot American Hospitality Partnership, L.P., The Chase Manhattan Bank,
PaineWebber Real Estate Securities, Inc. and various lenders identified therein (filed
herewith).
10.2 Purchase Agreement, dated as of April 6, 1998, by and among Patriot American Hospitality,
Inc., Wyndham International, Inc., PaineWebber Incorporated and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 99.1 to Patriot's and Wyndham's
Registration Statement on Form S-3 filed July 8, 1998 (Nos. 333-58705 and 333-58705-01)).
10.3 Purchase Price Adjustment Mechanism Agreement, dated as of April 6, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc., PaineWebber Incorporated and
PaineWebber Financial Products, Inc. (filed herewith).
10.4 Letter Agreement, dated August 14, 1998, by and among Patriot American Hospitality, Inc.;
Wyndham International, Inc. and PaineWebber Financial Products, Inc. (filed herewith).
10.5 Purchase Agreement, dated as of February 26, 1998, by and among Patriot American Hospitality,
Inc., Wyndham International, Inc., and NMS Services, Inc. (filed herewith).
10.6 Purchase Price Adjustment Mechanism, dated as of February 26, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc., and NMS Services, Inc. (filed
herewith).
10.7 Amendment to Agreements, dated as of August 14, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and NationsBanc Mortgage Capital Corporation
(filed herewith).
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------
<C> <S>
10.8 Purchase Agreement, dated as of December 31, 1997, by and among Patriot American Hospitality,
Inc., Patriot American Hospitality Operating Company, UBS Limited and Union Bank of
Switzerland (filed herewith).
10.9 Forward Stock Contract, dated as of December 31, 1997, by and among Patriot American
Hospitality, Inc., Patriot American Hospitality Operating Company and Union Bank of
Switzerland (filed herewith).
10.10 Letter Agreement, dated as of August 14, 1998, by and among Patriot American Hospitality,
Inc., Wyndham International, Inc. and UBS AG, London Branch (filed herewith).
27.1 Financial Data Schedule -- Patriot (filed herewith).
27.2 Financial Data Schedule -- Wyndham (filed herewith).
</TABLE>
(b) Reports on Form 8-K:
(i) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc.
and Wyndham International, Inc. dated April 2, 1998 (Nos. 001-09319 and
001-09320 filed April 8, 1998) reporting under Item 5 current
developments regarding the Marriott Litigation and the consummation of
the acquisition of Arcadian International Limited.
(ii) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc.
and Wyndham International, Inc. dated April 20, 1998 (Nos. 001-09319
and 001-09320 filed April 22, 1998) reporting under Item 5 mergers and
other acquisitions subsequent to December 31, 1997.
(iii) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc.
and Wyndham International, Inc. dated May 27, 1998, as amended (Nos.
001-09319 and 001-09320 filed May 27, 1998 and May 28, 1998) reporting
under Item 5 the agreement in principle to settle the Marriott
Litigation.
(iv) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc.
and Wyndham International, Inc. dated June 2, 1998 (Nos. 001-09319 and
001-09320 filed June 17, 1998) reporting under Item 2 the Interstate
Merger and the Summerfield Acquisition.
56
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.
DATED: August 14, 1998
<TABLE>
<S> <C>
PATRIOT AMERICAN HOSPITALITY, INC.
/S/ LAWRENCE S. JONES
------------------------------------------
Lawrence S. Jones
EXECUTIVE VICE PRESIDENT AND TREASURER
(AUTHORIZED OFFICER AND PRINCIPAL
ACCOUNTING AND FINANCIAL OFFICER)
WYNDHAM INTERNATIONAL, INC.
/S/ LAWRENCE S. JONES
------------------------------------------
Lawrence S. Jones
EXECUTIVE VICE PRESIDENT AND TREASURER
(AUTHORIZED OFFICER AND PRINCIPAL
ACCOUNTING AND FINANCIAL OFFICER)
</TABLE>
57
<PAGE>
Exhibit 10.1
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
among
PATRIOT AMERICAN HOSPITALITY, INC.,
PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P.,
VARIOUS LENDERS,
CHASE SECURITIES INC.,
as Arranger,
CREDIT LYONNAIS NEW YORK BRANCH,
as Documentation Agent,
CITIBANK, N.A.,
as Documentation Agent,
BANKERS TRUST COMPANY,
as Documentation Agent,
PAINE WEBBER REAL ESTATE SECURITIES INC.,
as Arranger and Syndication Agent,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
-----------------------------------
Dated as of July 18, 1997
and
Amended and Restated as of December 16, 1997
and
further Amended and Restated as of June 2, 1998
-----------------------------------
$2,700,000,000
<PAGE>
================================================================================
-2-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 18, 1997,
amended and restated as of December 16, 1997 and further amended and restated as
of June 2, 1998, among PATRIOT AMERICAN HOSPITALITY, INC., a Delaware
corporation ("Patriot REIT"), PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P., a
Virginia limited partnership ("Patriot OP", and together with Patriot REIT, the
"Borrowers" and each individually a "Borrower"), the Lenders party hereto from
time to time, PAINE WEBBER REAL ESTATE SECURITIES INC. ("Paine Webber") and
CHASE SECURITIES INC. ("CSI"), as Arrangers, PAINE WEBBER, as Syndication Agent
and THE CHASE MANHATTAN BANK ("Chase"), as Administrative Agent (all capitalized
terms used herein and defined in Section 11 are used herein as therein defined).
W I T N E S S E T H :
WHEREAS, Patriot REIT, Patriot OP, the Original Revolver Lenders,
Chase and Paine Webber are parties to an Amended and Restated Credit Agreement,
dated as of July 18, 1997 and amended and restated as of December 16, 1997 (as
the same has been amended, modified or supplemented to, but not including, the
Restatement Effective Date, the "Original Revolving Credit Agreement"); and
WHEREAS, Patriot REIT, Patriot OP, the Original Term Lenders, Chase
and Paine Webber are parties to a Term Loan Agreement, dated as of December 16,
1997 (as the same has been amended, modified or supplemented to, but not
including, the Restatement Effective Date, the "Original Term Loan Agreement",
and together with the Original Revolving Credit Agreement, the "Original Credit
Agreements"); and
WHEREAS, the parties hereto wish to amend and restate each of the
Original Credit Agreements in the form of this Agreement to, inter alia, add
Patriot REIT as an additional Borrower under the credit facilities evidenced by
the Original Credit Agreements and provide the financing for the Interstate
Transaction and other acquisitions on the terms and subject to the conditions
provided herein and make available to the Borrowers on a joint and several basis
the respective credit facilities provided for herein;
NOW, THEREFORE, the parties hereto agree that each of the Original
Credit Agreements shall be and hereby is amended and restated in its entirety as
follows:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. (a) Subject to and upon the terms and conditions
set forth herein, each RL Lender severally agrees, at any time and from time to
time on and after the Original Revolver Effective Date and prior to the
Revolving Loan Maturity Date, to make a revolving loan or revolving loans (each,
a "Revolving Loan" and, collectively, the "Revolving Loans") to the respective
Borrower (or, if prior to the Restatement Effective Date, to Patriot OP pursuant
to the Original Revolving Credit Agreement), which Revolving Loans (i) shall, at
the option of the Borrower, be incurred and maintained as, and/or converted
into, Base Rate Loans or Eurodollar Loans, provided that, except as otherwise
specifically provided in Section 1.10(b), all
<PAGE>
Revolving Loans comprising the same Borrowing shall at all times be of the same
Type, (ii) may be repaid and reborrowed at any time in accordance with the
provisions hereof, (iii) shall not exceed for any Lender at any time outstanding
that aggregate principal amount which, when added to the product of (x) such
Lender's Adjusted RL Percentage and (y) the sum of (I) the aggregate amount of
all Letter of Credit Outstandings at such time (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) and (II) the aggregate
principal amount of all Swingline Loans (exclusive of Swingline Loans which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) then outstanding, equals the Revolving
Loan Commitment of such Lender at such time and (iv) shall not exceed for all
Lenders at any time outstanding that aggregate principal amount which, when
added to (x) the amount of all Letter of Credit Outstandings at such time
(exclusive of Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of Revolving
Loans) and (y) the aggregate principal amount of all Swingline Loans (exclusive
of Swingline Loans which are repaid with the proceeds of, and simultaneously
with the incurrence of, the respective incurrence of Revolving Loans) then
outstanding, equals the Adjusted Total Revolving Loan Commitment at such time.
Notwithstanding the foregoing, (i) the Borrowers shall not be permitted to incur
Revolving Loans, the proceeds of which are used for working capital purposes
("W/C Loans") in aggregate principal amount which, when added to (x) the amount
of all Letter of Credit Outstandings at such time (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) and (y) the aggregate
principal amount of all Swingline Loans (exclusive of Swingline Loans which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) then outstanding, would exceed 10% of
the Adjusted Total Revolving Loan Commitment then in effect and (ii) the Total
Unutilized Revolving Loan Commitment on the Restatement Effective Date, after
giving effect to the incurrence of all Loans under this Agreement on such date,
shall be at least $250,000,000. After the Restatement Effective Date, all
Revolving Loans shall constitute the joint and several obligations of the
Borrowers.
(b) Subject to and upon the terms and conditions set forth herein,
each Original Term Lender severally agrees to continue, on the Restatement
Effective Date, the Original Term Loans made by such Original Term Lenders to
Patriot OP pursuant to the Original Term Loan Agreement and outstanding on the
Restatement Effective Date (immediately prior to giving effect thereto) as term
loans (each, a "Tranche I Term Loan" and, collectively, the "Tranche I Term
Loans") to the Borrowers hereunder, which Tranche I Term Loans (i) shall, at the
option of the Borrowers, be incurred and maintained as, and/or converted into,
Base Rate Loans or Eurodollar Loans, provided that except as otherwise
specifically provided in Section 1.10(b), all Tranche I Term Loans comprising
the same Borrowing shall at all times be of the same Type and (ii) shall not
exceed for any Lender, in initial principal amount, that amount which equals the
aggregate outstanding principal amount of the Original Term Loans made by such
Lender and outstanding on the Restatement Effective Date (immediately prior to
giving effect thereto) as set forth on Schedule I. Once repaid, Tranche I Term
Loans incurred hereunder may not be reborrowed. After the Restatement Effective
Date, all Tranche I Term Loans shall constitute the joint and several
obligations of the Borrowers.
-2-
<PAGE>
(c) Subject to and upon the terms and conditions set forth herein,
each Lender with a Tranche II Term Loan Commitment severally agrees to make on
the Restatement Effective Date a term loan or term loans (each a "Tranche II
Term Loan" and, collectively, the Tranche II Term Loans") to the respective
Borrower, which Tranche II Term Loans (i) shall, at the option of the Borrowers,
be incurred and maintained as, and/or converted into, Base Rate Loans or
Eurodollar Loans, provided that (x) except as otherwise specifically provided in
Section 1.10(b) all Tranche II Term Loans comprising the same Borrowing shall at
all times be of the same Type and (y) unless the Administrative Agent has
determined that the Syndication Date has occurred (at which time this clause (y)
shall no longer be applicable), all Borrowings of Tranche II Term Loans to be
maintained as Eurodollar Loans incurred prior to the 90th day after the
Restatement Effective Date may only have an Interest Period of seven days or one
month and (I) in case of Interest Periods of one month, may only be made (A) on
a single date on or after the Restatement Effective Date and on or before the
sixth Business Day following the Restatement Effective Date, (B) on the last day
of the Interest Period of the first set of such Borrowings described in clause
(A) above and on the last day of the Interest Period of the second set of such
Borrowings described in clause (B) above and (II) in the case of Interest
Periods of seven days, must be scheduled such that no Interest Period in respect
thereof shall be outstanding on the date the one month Interest Periods
described in clause (I) above terminate, and (ii) shall not exceed for any
Lender, in initial principal amount, that amount which equals the Tranche II
Term Loan Commitment of such Lender on such date (before giving effect to any
reductions thereto on such date pursuant to Section 3.03(b)(i) but after giving
effect to any reductions thereto on or prior to such date pursuant to Section
3.03(b)(ii)). Once repaid, Tranche II Term Loans incurred hereunder may not be
reborrowed. All Tranche II Term Loans shall constitute the joint and several
obligations of the Borrowers.
(d) Subject to and upon the terms and conditions set forth herein,
each Lender with a Tranche III Term Loan Commitment severally agrees to make on
the Restatement Effective Date a term loan or term loans (each, a "Tranche III
Term Loan" and, collectively, the "Tranche III Term Loans") to the respective
Borrower, which Tranche III Term Loans (i) shall, at the option of the
Borrowers, be incurred and maintained as, and/or converted into, Base Rate Loans
or Eurodollar Loans, provided that (x) except as otherwise specifically provided
in Section 1.10(b) all Tranche III Term Loans comprising the same Borrowing
shall at all times be of the same Type and (y) unless the Administrative Agent
has determined that the Syndication Date has occurred (at which time this clause
(y) shall no longer be applicable), all Borrowings of Tranche III Term Loans to
be maintained as Eurodollar Loans incurred prior to the 90th day after the
Restatement Effective Date may only have an Interest Period of seven days or one
month and (I) in case of Interest Periods of one month, may only be made (A) on
a single date on or after the Restatement Effective Date and on or before the
sixth Business Day following the Restatement Effective Date, (B) on the last day
of the Interest Period of the first set of such Borrowings described in clause
(A) above and on the last day of the Interest Period of the second set of such
Borrowings described in clause (B) above and (II) in the case of Interest
Periods of seven days, must be scheduled such that no Interest Period in respect
thereof shall be outstanding on the date the one month Interest Periods
described in clause (I) above terminate, and (ii) shall not exceed for any
Lender, in initial aggregate principal amount, that amount which equals the
Tranche III Term Loan Commitment of such Lender on such date (before giving
effect to any reductions
-3-
<PAGE>
thereto on such date pursuant to Section 3.03(c)(i) but after giving effect to
any reductions thereto on or prior to such date pursuant to Section
3.03(c)(ii)). Once repaid, Tranche III Term Loans incurred hereunder may not be
reborrowed. All Tranche III Terms Loans shall constitute the joint and several
obligations of the Borrowers.
(e) Subject to and upon the terms and conditions set forth herein,
each Lender with a Tranche B Term Loan Commitment severally agrees, to make on
the Restatement Effective Date a term loan or term loans (each, a "Tranche B
Term Loan" and, collectively, the "Tranche B Term Loans") to the respective
Borrower, which Tranche B Term Loans (i) shall, at the option of the Borrowers,
be incurred and maintained as, and/or converted into, Base Rate Loans or
Eurodollar Loans, provided that (x) except as otherwise specifically provided in
Section 1.10(b), all Tranche B Term Loans comprising the same Borrowing shall at
all times be of the same Type and (y) unless the Administrative Agent has
determined that the Syndication Date has occurred (at which time this clause (y)
shall no longer be applicable), all Borrowings of Tranche B Term Loans to be
maintained as Eurodollar Loans incurred prior to the 90th day after the
Restatement Effective Date may only have an Interest Period of seven days or one
month and (I) in case of Interest Periods of one month, may only be made (A) on
a single date on or after the Restatement Effective Date and on or before the
sixth Business Day following the Restatement Effective Date, (B) on the last day
of the Interest Period of the first set of such Borrowings described in clause
(A) above and on the last day of the Interest Period of the second set of such
Borrowings described in clause (B) above and (II) in the case of Interest
Periods of seven days, must be scheduled such that no Interest Period in respect
thereof shall be outstanding on the date the one month Interest Periods
described in clause (I) above terminate, and (ii) shall not exceed, for any
Lender, in initial principal amount, that amount which equals the Tranche B Term
Loan Commitment of such Lender on such date (before giving effect to any
reductions thereto on such date pursuant to Section 3.03(d)(i) but after giving
effect to any reductions thereto pursuant to Section 3.03(d)(ii)). Once repaid,
Tranche B Term Loans incurred hereunder may not be reborrowed. All Tranche B
Term Loans shall constitute the joint and several obligations of the Borrowers.
(f) Subject to and upon the terms and conditions set forth herein, the
Swingline Lender in its individual capacity agrees to make at any time and from
time to time on and after the Restatement Effective Date and prior to the
Swingline Expiry Date, a revolving loan or revolving loans (each, a "Swingline
Loan" and, collectively, the "Swingline Loans") to the respective Borrower,
which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii)
may be repaid and reborrowed in accordance with the provisions hereof, (iii)
shall not exceed in aggregate principal amount at any time outstanding, when
combined with the aggregate principal amount of all Revolving Loans made by
Non-Defaulting Lenders then outstanding and the Letter of Credit Outstandings at
such time, an amount equal to the Adjusted Total Revolving Loan Commitment at
such time (after giving effect to any reductions to the Adjusted Total Revolving
Loan Commitment on such date) and (iv) shall not exceed at any time outstanding,
the lesser of (a) the amount which, when added to the amount of all Letter of
Credit Outstandings at such time (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) and the aggregate principal amount of all W/C
Loans outstanding at such time, would exceed 10% of the
-4-
<PAGE>
Adjusted Total Revolving Loan Commitment then in effect, and (b) the Maximum
Swingline Amount. All Swingline Loans shall constitute the joint and several
obligations of the Borrowers.
The Swingline Lender shall not be obligated to make any Swingline
Loans at a time when a Lender Default exists unless the Swingline Lender has
entered into arrangements satisfactory to it and the Borrowers to eliminate the
Swingline Lender's risk with respect to the Defaulting Lender's or Lenders'
participation in such Swingline Loans, including by cash collateralizing such
Defaulting Lender's or Lenders' RL Percentage of the outstanding Swingline
Loans. The Swingline Lender will not make a Swingline Loan after it has received
written notice from either Borrower or the Required Lenders stating that a
Default or an Event of Default exists until such time as the Swingline Lender
shall have received a written notice of (i) rescission of such notice from the
party or parties originally delivering the same or (ii) a waiver of such Default
or Event of Default from the Required Lenders.
(g) On any Business Day, the Swingline Lender may, in its sole
discretion, give notice to the RL Lenders that its outstanding Swingline Loans
shall be funded with a Borrowing of Revolving Loans (provided that such notice
shall be deemed to have been automatically given upon the occurrence of a
Default or an Event of Default under Section 10 or upon the exercise of any of
the remedies provided in Section 10), in which case a Borrowing of Revolving
Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all RL
Lenders (without giving effect to any reductions thereto pursuant to the last
paragraph of Section 10) pro rata based on each RL Lender's Adjusted RL
Percentage (determined before giving effect to any termination of the Revolving
Loan Commitments pursuant to Section 10) and the proceeds thereof shall be
applied directly to the Swingline Lender to repay the Swingline Lender for such
outstanding Swingline Loans. Each RL Lender hereby irrevocably agrees to make
Revolving Loans upon one Business Day's notice pursuant to each Mandatory
Borrowing in the amount and in the manner specified in the preceding sentence
and on the date specified in writing by the Swingline Lender notwithstanding (i)
the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing
Amount otherwise required hereunder, (ii) whether any conditions specified in
Sections 5 or 6 are then satisfied, (iii) whether a Default or an Event of
Default then exists, (iv) the date of such Mandatory Borrowing and (v) the
amount of the Total Revolving Loan Commitment or the Adjusted Total Revolving
Loan Commitment at such time. In the event that any Mandatory Borrowing cannot
for any reason be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the Bankruptcy
Code with respect to either Borrower), then each RL Lender (other than the
Swingline Lender) hereby agrees that it shall forthwith purchase (as of the date
the Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrowers on or after such date and prior to such
purchase) from the Swingline Lender such participations in the outstanding
Swingline Loans as shall be necessary to cause such RL Lenders to share in such
Swingline Loans ratably based upon their respective Adjusted RL Percentages
(determined before giving effect to any termination of the Revolving Loan
Commitments pursuant to the last paragraph of Section 10), provided that (x) all
interest payable on the Swingline Loans shall be for the account of the
Swingline Lender until the date as of which the respective participation is
required to be purchased and, to the extent attributable to the
-5-
<PAGE>
purchased participation, shall be payable to the participant from and after such
date and (y) at the time any purchase of participations pursuant to this
sentence is actually made, the purchasing RL Lender shall be required to pay the
Swingline Lender interest on the principal amount of participation purchased for
each day from and including the day upon which the Mandatory Borrowing would
otherwise have occurred to but excluding the date of payment for such
participation, at the rate otherwise applicable to Revolving Loans maintained as
Base Rate Loans hereunder for each day thereafter.
1.02 Minimum Borrowing Amounts. The aggregate principal amount of each
Borrowing of Loans under a respective Tranche shall not be less than the Minimum
Borrowing Amount applicable to such Tranche, provided that Mandatory Borrowings
shall be made in the amounts required by Section 1.01(g). More than one
Borrowing may occur on the same date, but at no time shall there be outstanding
more than fifteen Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever either Borrower desires to
incur a Borrowing hereunder (excluding Borrowings of Swingline Loans), such
Borrower shall give the Administrative Agent at its Notice Office at least one
Business Day's prior written notice (or telephonic notice promptly confirmed in
writing) of each Base Rate Loan and at least three Business Days' (or, in the
case of Loans made on the Restatement Effective Date, two Business Days') prior
written notice (or telephonic notice promptly confirmed in writing) of each
Eurodollar Loan to be made hereunder, provided that any such notice shall be
deemed to have been given on a certain day only if given before 11:00 A.M. (New
York time) in the case of a Borrowing of Eurodollar Loans and 12:00 Noon (New
York time) in the case of a Borrowing of Base Rate Loans on such day. Each such
written notice or written confirmation of telephonic notice (each a "Notice of
Borrowing"), except as otherwise expressly provided in Section 1.10, shall be
given by such Borrower in the form of Exhibit A, completed to specify (i) the
name of such Borrower or Borrowers, (ii) the aggregate principal amount of the
Loans to be incurred pursuant to such Borrowing, (iii) the date of such
Borrowing (which shall be a Business Day), (iv) whether the Loans being made
pursuant to such Borrowing shall constitute Tranche I Term Loans, Tranche II
Term Loans, Tranche III Term Loans, Tranche B Term Loans or Revolving Loans and
(v) whether the Loans being made pursuant to such Borrowing are to be initially
maintained as Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the
initial Interest Period to be applicable thereto. The Administrative Agent shall
promptly give each Lender which is required to make Loans of the Tranche
specified in the respective Notice of Borrowing, notice of such proposed
Borrowing, of such Lender's proportionate share thereof and of the other matters
required by the immediately preceding sentence to be specified in the Notice of
Borrowing.
(b)(i) Whenever either Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give the Swingline Lender not later than
12:00 Noon (New York time) on the date that a Swingline Loan is to be made,
written notice or telephonic notice promptly confirmed in writing of each
Swingline Loan to be made hereunder. Each such notice shall specify in each case
(A) the date of Borrowing (which shall be a Business Day) and (B) the aggregate
principal amount of the Swingline Loans to be made pursuant to such Borrowing.
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(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(g), with each Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of the Mandatory Borrowings as set forth in
Section 1.01(g).
(c) Without in any way limiting the obligation of any Borrower to
confirm in writing any telephonic notice of any Borrowing of Loans, the
Administrative Agent or the Swingline Lender, as the case may be, may act
without liability upon the basis of telephonic notice of such Borrowing,
believed by the Administrative Agent or the Swingline Lender, as the case may
be, in good faith to be from an Authorized Officer of such Borrower prior to
receipt of written confirmation. In each such case, the Borrowers hereby waives
the right to dispute the Administrative Agent's and the Swingline Lender's
record of the terms of such telephonic notice of such Borrowing of Loans.
1.04 Disbursement of Funds. No later than 1:00 P.M. (New York time) on
the date specified in each Notice of Borrowing (or (x) in the case of Swingline
Loans, not later than 2:00 P.M. (New York time) on the date specified pursuant
to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(g)), each
Lender with a Commitment of the respective Tranche will disburse its pro rata
portion of each Borrowing requested to be made on such date (or in the case of
Swingline Loans, the Swingline Lender shall make available the full amount
thereof). All such amounts shall be disbursed in Dollars and in immediately
available funds at the Payment Office of the Administrative Agent, and the
Administrative Agent will promptly disburse to the respective Borrower or
Borrowers at the Payment Office in Dollars and in immediately available funds,
the aggregate of the amounts so made available by the Lenders. Unless the
Administrative Agent shall have been notified by any Lender prior to the date of
Borrowing that such Lender does not intend to disburse to the Administrative
Agent such Lender's portion of any Borrowing to be made on such date, the
Administrative Agent may assume that such Lender has disbursed such amount to
the Administrative Agent on such date of Borrowing and the Administrative Agent
may, in reliance upon such assumption, disburse to the respective Borrower or
Borrowers a corresponding amount. If such corresponding amount is not in fact
disbursed to the Administrative Agent by such Lender, the Administrative Agent
shall be entitled to recover such corresponding amount on demand from such
Lender. If such Lender does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent shall promptly
notify the Borrowers and the Borrowers shall pay within one Business Day, on a
joint and several basis, such corresponding amount to the Administrative Agent.
The Administrative Agent shall also be entitled to recover on demand from such
Lender or the Borrowers, on a joint and several basis, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
respective Borrower until the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (i) if recovered from such
Lender, at the overnight Federal Funds Rate and (ii) if recovered from a
Borrower, the rate of interest applicable to the respective Borrowing, as
determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be
deemed to relieve any Lender from its obligation to make Loans hereunder or to
prejudice any rights which either Borrower may have against any Lender as a
result of any failure by such Lender to make Loans hereunder.
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1.05 Notes. (a) Each Borrower's obligation to pay the principal of,
and interest on, the Loans made by each Lender shall be evidenced (i) if Tranche
I Term Loans, by a promissory note duly executed and delivered by the Borrowers
substantially in the form of Exhibit B-1 with blanks appropriately completed in
conformity herewith (each, a "Tranche I Term Note" and, collectively, the
"Tranche I Term Notes"), (ii) if Tranche II Term Loans, by a promissory note
duly executed and delivered by the Borrowers substantially in the form of
Exhibit B-2 with blanks appropriately completed in conformity herewith (each, a
"Tranche II Term Note" and, collectively, the "Tranche II Term Notes"), (iii) if
Tranche III Term Loans, by a promissory note duly executed and delivered by the
Borrowers substantially in the form of Exhibit B-3 with blanks appropriately
completed in conformity herewith (each, a "Tranche III Term Note" and,
collectively, the "Tranche III Term Notes), (iv) if Tranche B Term Loans, by a
promissory note duly executed and delivered by the Borrowers substantially in
the form of Exhibit B-4 with blanks appropriately completed in conformity
herewith (each, a "Tranche B Term Note" and, collectively, the "Tranche B Term
Notes"), (v) if Revolving Loans, by a promissory note duly executed and
delivered by the Borrowers substantially in the form of Exhibit B-5, with blanks
appropriately completed in conformity herewith (each, a "Revolving Note" and,
collectively, the "Revolving Notes") and (vi) if Swingline Loans, by a
promissory note duly executed and delivered by the Borrowers substantially in
the form of Exhibit B-6, with blanks appropriately completed in conformity
herewith (the "Swingline Note").
(b) The Tranche I Term Note issued to each Tranche I Term Lender shall
(i) be executed by each Borrower, (ii) be payable to the order of such Tranche I
Term Lender and be dated the Restatement Effective Date (or, in the case of
Tranche I Term Notes issued after the Restatement Effective Date, be dated the
date of the issuance thereof), (iii) be in a stated principal amount equal to
the outstanding principal amount of the Tranche I Term Loan continued by such
Tranche I Term Lender on the Restatement Effective Date (or, in the case of
Tranche I Term Notes issued after the Restatement Effective Date, be in a stated
principal amount equal to the outstanding principal amount of the Tranche I Term
Loan of such Tranche I Term Lender on the date of the issuance thereof) and be
payable in the principal amount of Tranche I Term Loans evidenced thereby, (iv)
mature on the Tranche I Term Loan Maturity Date, (v) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment and mandatory repayment as provided in Sections 4.01 and
4.02 and (vii) be entitled to the benefits of this Agreement and the other
Credit Documents.
(c) The Tranche II Term Note issued to each Lender with a Tranche II
Term Loan Commitment shall (i) be executed by each Borrower, (ii) be payable to
the order of such Tranche II Term Lender and be dated the Restatement Effective
Date (or, in the case of Tranche II Term Notes issued after the Restatement
Effective Date, be dated the date of the issuance thereof), (iii) be in a stated
principal amount equal to the Tranche II Term Loan Commitment of such Lender on
the Restatement Effective Date (or, in the case of Tranche II Term Notes issued
after the Restatement Effective Date, be in a stated principal amount equal to
the outstanding principal amount of the Tranche II Term Loan of such Lender on
the date of the issuance thereof) and be payable in the principal amount of
Tranche II Term Loans evidenced thereby, (iv) mature on the Tranche II Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
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Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment and mandatory
repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(d) The Tranche III Term Note issued to each Lender with a Tranche III
Term Loan Commitment shall (i) be executed by each Borrower, (ii) be payable to
the order of such Lender and be dated the Restatement Effective Date (or, in the
case of Tranche III Term Notes issued after the Restatement Effective Date, be
dated the date of the issuance thereof), (iii) be in a stated principal amount
equal to the Tranche III Term Loan Commitment of such Lender on the Restatement
Effective Date (or, in the case of Tranche III Term Notes issued after the
Restatement Effective Date, be in a stated principal amount equal to the
outstanding principal amount of the Tranche III Term Loan of such Lender on the
date of the issuance thereof) and be payable in the principal amount of Tranche
III Term Loans evidenced thereby, (iv) mature on the Tranche III Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment and mandatory
repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(e) The Tranche B Term Note issued to each Lender with a Tranche B
Term Loan Commitment shall (i) be executed by each Borrower, (ii) be payable to
the order of such Lender and be dated the Restatement Effective Date (or, in the
case of Tranche B Term Notes issued after the Restatement Effective Date, be
dated the date of the issuance thereof), (iii) be in a stated principal amount
equal to the Tranche B Term Loan Commitment of such Lender on the Restatement
Effective Date (or, in the case of Tranche B Term Notes issued after the
Restatement Effective Date, be in a stated principal amount equal to the
outstanding principal amount of the Tranche B Term Loan of such Lender on the
date of the issuance thereof) and be payable in the principal amount of Tranche
B Term Loans evidenced thereby, (iv) mature on the Tranche B Term Loan Maturity
Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to voluntary prepayment and mandatory
repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(f) The Revolving Note issued to each RL Lender shall (i) be executed
by each Borrower, (ii) be payable to the order of such RL Lender and be dated
the Restatement Effective Date (or, in the case of Revolving Notes issued after
the Restatement Effective Date, be dated the date of the issuance thereof),
(iii) be in a stated principal amount equal to the Revolving Loan Commitment of
such RL Lender and be payable in the principal amount of the Revolving Loans
evidenced thereby, (iv) mature on the Revolving Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby,
(vi) be subject to voluntary prepayment and mandatory repayment as provided in
Sections 4.01 and 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
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(g) The Swingline Note issued to the Swingline Lender shall (i) be
executed by each Borrower, (ii) be payable to the order of the Swingline Lender
and be dated the Restatement Effective Date (or, in the case of any Swingline
Note issued after the Restatement Effective Date, be dated the date of the
issuance thereof), (iii) be in a stated principal amount equal to the Maximum
Swingline Amount and be payable in the principal amount of the outstanding
Swingline Loans evidenced thereby from time to time, (iv) mature on the
Swingline Expiry Date, (v) bear interest as provided in the appropriate clause
of Section 1.08 in respect of the Base Rate Loans evidenced thereby and (vi) be
entitled to the benefits of this Agreement and the other Credit Documents.
(h) Each Lender will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes properly endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation or any error in any such notation or endorsement shall not affect
the Borrowers' obligations to the holder from time to time of each Note in
respect of such Loans.
1.06 Conversions. Each Borrower shall have the option to convert, on
any Business Day occurring on or after the Restatement Effective Date, all or a
portion at least equal to the applicable Minimum Borrowing Amount of the
outstanding principal amount of Loans (other than Swingline Loans which shall at
all times be maintained as Base Rate Loans) made pursuant to one or more
Borrowings of one or more Types of Loans under a single Tranche into a Borrowing
or Borrowings of another Type of Loan under such Tranche; provided that (i)
except as otherwise provided in Section 1.10(b) or unless the Borrowers pay all
breakage costs and other amounts owing to each Lender pursuant to Section 1.11
concurrently with any such conversion, Eurodollar Loans may be converted into
Base Rate Loans only on the last day of an Interest Period applicable to the
Loans being converted, and no partial conversion of a Borrowing of Eurodollar
Loans shall reduce the outstanding principal amount of the Eurodollar Loans made
pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable
thereto, (ii) Base Rate Loans may only be converted into Eurodollar Loans if no
Event of Default is in existence on the date of the conversion, (iii) no
conversion pursuant to this Section 1.06 shall result in a greater number of
Borrowings of Eurodollar Loans than is permitted under Section 1.02, (iv) unless
the Administrative Agent shall have determined that the Syndication Date has
occurred (at which time this clause (iv) shall no longer be applicable), Tranche
II Term Loans, Tranche III Term Loans and Tranche B Term Loans converted into
Eurodollar Loans prior to the 90th day after the Restatement Effective Date may
only have an Interest Period of one month or seven days and may only be
converted such that all Interest Periods in respect thereof shall end on the
dates required under Section 1.01(c)(i)(y), (d)(i)(y) and (e)(i)(y) and (v)
Swingline Loans may not be converted pursuant to this Section 1.06. Each such
conversion shall be effected by the Borrower by giving the Administrative Agent
at its Notice Office, prior to 11:00 A.M. (New York time), at least three
Business Days' (or one Business Day's in the case of a conversion into Base Rate
Loans) prior written notice (or telephonic notice promptly confirmed in writing)
(each, a "Notice of Conversion") specifying the Loans to be so converted, the
Borrowing(s) pursuant to which the Loans were made and, if to be converted into
a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Administrative Agent shall give each
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Lender prompt notice of any such proposed conversion affecting any of its Loans.
Upon any such conversion, the proceeds thereof will be deemed to be applied
directly on the day of such conversion to prepay the outstanding principal
amount of the Loans being converted.
1.07 Pro Rata Borrowings. All Borrowings of Tranche II Term Loans,
Tranche III Term Loans, Tranche B Term Loans and Revolving Loans under this
Agreement shall be incurred from the Lenders pro rata on the basis of such
Lenders' Tranche II Term Loan Commitments, Tranche III Term Loan Commitments,
Tranche B Term Loan Commitments or Revolving Loan Commitments, as the case may
be; provided that all Borrowings of Revolving Loans made pursuant to a Mandatory
Borrowing shall be incurred from the RL Lenders pro rata on the basis of their
Adjusted RL Percentages. It is understood that no Lender shall be responsible
for any default by any other Lender of its obligation to make Loans hereunder
and that each Lender shall be obligated to make the Loans to be made by it
hereunder, regardless of the failure of any other Lender to fulfill its
commitments hereunder.
1.08 Interest. (a) Each Borrower agrees to pay, on a joint and several
basis, interest in respect of the unpaid principal amount of each Base Rate Loan
from the date the proceeds thereof are made available to the Borrowers until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall be equal to the sum of
the Applicable Margin plus the Base Rate in effect from time to time.
(b) Each Borrower agrees to pay, on a joint and several basis,
interest in respect of the unpaid principal amount of each Eurodollar Loan from
the date the proceeds thereof are made available to the Borrowers until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such
Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate
Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum
which shall, during each Interest Period applicable thereto, be equal to the sum
of the Applicable Margin plus the Eurodollar Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the rate which
is the greater of (i) 2% in excess of the rate then borne by such Loans (without
giving effect to any increase in the rate borne by such Loans as a result of the
operation of this clause (c)) and (ii) the Base Rate then in effect plus 4%, in
each case with such interest to be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Base Rate Loan, monthly in arrears on the tenth day of each
calendar month, (ii) in respect of each Eurodollar Loan, on the tenth day of
each calendar month and (iii) in respect of each Loan, on any repayment or
prepayment (on the amount repaid or prepaid), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Administrative Agent
shall determine the Eurodollar Rate for each Interest Period applicable to
Eurodollar Loans and shall
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promptly notify the respective Borrower and the Lenders thereof. Each such
determination shall, absent manifest error, be final and conclusive and binding
on all parties hereto.
1.09 Interest Periods. At the time a Borrower gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, any Eurodollar Loan (in the case of the initial Interest Period applicable
thereto) or on the third Business Day prior to the expiration of an Interest
Period applicable to such Eurodollar Loan (in the case of any subsequent
Interest Period), such Borrower shall have the right to elect, by giving the
Administrative Agent notice thereof, the interest period (each an "Interest
Period") applicable to such Eurodollar Loan, which Interest Period shall, at the
option of such Borrower, be a seven day period or one month period prior to the
Syndication Date, and thereafter be a one, two, three or six-month period,
provided that:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including the date of
any conversion thereto from a Loan of a different Type) and each Interest Period
occurring thereafter in respect of such Eurodollar Loan shall commence on the
day on which the next preceding Interest Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins on a
day for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided, however, that if any Interest Period for a Eurodollar
Loan would otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period may be selected at any time when an Event of
Default is then in existence;
(vi) no Interest Period for a Borrowing of any Tranche of Loans shall
be selected which extends beyond the respective Maturity Date for such Tranche
of Loans; and
(vii) no Interest Period in respect of any Borrowing of Tranche B Term
Loans shall be selected which extends beyond any date upon which a mandatory
repayment of such Tranche B Term Loans will be required to be made under Section
4.02(b) if the aggregate principal amount of Tranche B Term Loans, which have
Interest Periods which will expire after such date will be in excess of the
aggregate principle amount of Tranche B Term Loans then outstanding less the
aggregate amount of such required prepayment.
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If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the respective Borrower has failed to elect, or
is not permitted to elect, a new Interest Period to be applicable to such
Eurodollar Loans as provided above, such Borrower shall be deemed to have
elected to convert such Eurodollar Loans into Base Rate Loans effective as of
the expiration date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that any
Lender shall have determined in good faith (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto but,
with respect to clause (i) below, may be made only by the Administrative Agent):
(i) on any Interest Determination Date that, by reason of any changes
arising after the Restatement Effective Date affecting the interbank Eurodollar
market, adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to any
Eurodollar Loan because of (x) any change since the date of this Agreement in
any applicable law or governmental rule, regulation, order, guideline or request
(whether or not having the force of law) or in the interpretation or
administration thereof and including the introduction of any new law or
governmental rule, regulation, order, guideline or request, such as, for
example, but not limited to: (A) a change in the basis of taxation of payment to
any Lender of the principal of or interest on such Eurodollar Loan or any other
amounts payable hereunder (except for changes in the rate of tax on, or
determined by reference to, the net income or net profits of such Lender, or any
franchise tax, in either case pursuant to the laws of the jurisdiction in which
such Lender is organized or in which such Lender's principal office or
applicable lending office is located or any subdivision thereof or therein), or
(B) a change in official reserve require ments, but, in all events, excluding
any change in reserve requirements included in the computation of the Eurodollar
Rate and/or (y) other circumstances since the date of this Agreement affecting
the interbank Eurodollar market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule, regulation or
order, (y) impossible by compliance by any Lender in good faith with any
governmental request (whether or not having force of law) or (z) impracticable
as a result of a contingency occurring after the date of this Agreement which
materially and adversely affects the interbank Eurodollar market;
then, and in any such event, such Lender (or the Administrative Agent, in the
case of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the respective Borrower and, except in the case of clause (i) above,
to the Administrative Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each of the other Lenders).
Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer
be available until such time as the Administrative Agent notifies such Borrower
and the Lenders that the circumstances giving rise to such notice by the
Administrative Agent no longer exist, and any
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Notice of Borrowing or Notice of Conversion given by a Borrower with respect to
Eurodollar Loans which have not yet been incurred (including by way of
conversion) shall be deemed rescinded by such Borrower, (y) in the case of
clause (ii) above, such Borrower shall pay to such Lender, five Business Days
after written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Lender in its sole discretion shall determine) as shall be required to
compensate such Lender for such increased costs or reductions in amounts
received or receivable hereunder (a written notice as to the additional amounts
owed to such Lender, showing the basis for the calculation thereof, submitted to
such Borrower by such Lender in good faith shall, absent manifest error, be
final and conclusive and binding on all the parties hereto) and (z) in the case
of clause (iii) above, such Borrower shall take one of the actions specified in
Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law. Each of the Administrative Agent and each Lender agrees
that if it gives notice to the respective Borrower of any of the events
described in clause (i) or (ii) above, it shall promptly notify such Borrower
and, in the case of any such Lender, the Administrative Agent, if such event
ceases to exist. If any such event described in clause (iii) above ceases to
exist as to a Lender, the obligations of such Lender to make Eurodollar Loans
and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions
contained herein shall be reinstated. In addition, if the Administrative Agent
gives notice to the respective Borrower that the events described in clause (i)
above cease to exist, then the obligations of the Lenders to make Eurodollar
Loans and to convert Base Rate Loans into Eurodollar Loans on the terms and
conditions contained herein (but subject to clause (iii) above) shall also be
reinstated.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the respective Borrower
may (and in the case of a Eurodollar Loan affected by the circumstances
described in Section 1.10(a)(iii), such Borrower shall) either (x) if the
affected Eurodollar Loan is then being made initially or pursuant to a
conversion, cancel the respective Borrowing by giving the Administrative Agent
telephonic notice (confirmed in writing) on the same date that such Borrower was
notified by the affected Lender or the Administrative Agent pursuant to Section
1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding,
upon at least three Business Days' written notice to the Administrative Agent,
require the affected Lender to convert such Eurodollar Loan into a Base Rate
Loan, provided that, if more than one Lender is affected at any time, then all
affected Lenders must be treated the same pursuant to this Section 1.10(b).
(c) If at any time any Lender determines in good faith that, after the
Restatement Effective Date, the introduction of or any change in any applicable
law or governmental rule, regulation, order, guideline, directive or request
(whether or not having the force of law and including, without limitation, those
announced or published prior to the Restatement Effective Date) concerning
capital adequacy, or any change in interpretation or administration thereof by
any governmental authority, central bank or comparable agency, will have the
effect of increasing the amount of capital required or expected to be maintained
by such Lender or any corporation controlling such Lender based on the existence
of such Lender's Commitments hereunder or its obligations hereunder, then the
Borrowers shall pay (and shall be jointly and severally obligated to pay) to
such Lender, five Business Days after such Lender's written
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demand therefor, such additional amounts as shall be required to compensate such
Lender or such other corporation for the increased cost to such Lender or such
other corporation or the reduction in the rate of return to such Lender or such
other corporation as a result of such increase of capital allocable to the
existence of such Lender's commitment or obligations hereunder. In determining
such additional amounts, each Lender will act reasonably and in good faith and
will use averaging and attribution methods which are reasonable, provided that
such Lender's reasonable good faith determination of compensation owing under
this Section 1.10(c) shall, absent manifest error, be final and conclusive and
binding on all the parties hereto. Each Lender, upon determining that any
additional amounts will be payable pursuant to this Section 1.10(c), will give
prompt written notice thereof to the Borrowers, which notice shall show the
basis for calculation of such additional amounts. In addition, each such Lender,
upon determining that the circumstances giving rise to the payment of additional
amounts pursuant to this Section 1.10(c) cease to exist, will give prompt
written notice thereof to the Borrowers.
1.11 Compensation. The Borrowers shall, on a joint and several basis,
compensate each Lender, upon its written request (which request shall set forth
the basis for requesting such compensation), for all reasonable losses, expenses
and liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Lender to fund its Eurodollar Loans but excluding any loss of
anticipated profit) which such Lender may sustain: (i) if for any reason (other
than a default by such Lender or the Administrative Agent) a Borrowing of, or
conversion from or into, Eurodollar Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion (whether or not
withdrawn by the respective Borrower or deemed withdrawn pursuant to Section
1.10(a)); (ii) if any repayment (including any repayment made pursuant to
Section 4.01 or 4.02 or as a result of an acceleration of the Loans pursuant to
Section 10) or conversion of any Eurodollar Loans occurs on a date which is not
the last day of an Interest Period with respect thereto; (iii) if any prepayment
of any Eurodollar Loans is not made on any date specified in a notice of
prepayment given by the respective Borrower; or (iv) as a consequence of (x) any
other default by any Borrower to repay the Loans when required by the terms of
this Agreement or any Note held by such Lender or (y) any election made pursuant
to Section 1.10(b).
1.12 Change of Lending Office. Each Lender agrees that on the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to such
Lender, it will, if requested by any Borrower, use reasonable efforts (subject
to overall policy considerations of such Lender) to designate another lending
office for any Loans or Letters of Credit affected by such event, provided that
such designation is made on such terms that such Lender and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding or reducing the consequence of the event giving rise to the operation
of such Section. Nothing in this Section 1.12 shall affect or postpone any of
the obligations of any Borrower or the right of any Lender provided in Sections
1.10, 2.05 and 4.04.
1.13 Replacement of Lenders. (a) (x) If any Lender (i) becomes a
Defaulting Lender or otherwise defaults in its obligations to make Loans or fund
Unpaid Drawings or (ii)
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refuses to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Lenders as provided in Section 13.12(b) or (y) upon the occurrence of
any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section
1.10(c), Section 2.05 or Section 4.04 with respect to any Lender which results
in such Lender charging to the Borrowers increased costs in excess of those
being generally charged by the other Lenders, the Borrowers shall have the
right, if no Default or Event of Default will exist immediately after giving
effect to the respective replacement, to either replace such Lender (the
"Replaced Lender") with one or more other Eligible Transferee or Transferees,
none of whom shall constitute a Defaulting Lender at the time of such
replacement (collectively, the "Replacement Lender") reasonably acceptable to
the Administrative Agent or, at the option of the Borrowers, to replace only (a)
the Revolving Loan Commitment (and outstandings pursuant thereto) of the
Replaced Lender with an identical Revolving Loan Commitment provided by the
Replacement Lender or (b) in the case of a replacement as provided in Section
13.12(b) where the consent of the respective Lender is required with respect to
less than all Tranches of its Loans or Commitments, the Commitments and/or
outstanding Term Loans of such Lender in respect of each Tranche where the
consent of such Lender would otherwise be individually required, with identical
Commitments and/or Loans of the respective Tranche provided by the Replacement
Lender; provided that (i) at the time of any replacement pursuant to this
Section 1.13, the Replaced Lender and the Replacement Lender shall enter into
one or more Assignment and Assumption Agreements pursuant to Section 13.04(b)
(and with all fees payable pursuant to said Section 13.04(b) to be paid by the
Replacement Lender) pursuant to which the Replacement Lender shall acquire all
of the Commitments and outstanding Loans (or, in the case of the replacement of
only (a) the Revolving Loan Commitment, the Revolving Loan Commitment and
outstanding Revolving Loans or (b) the outstanding Term Loans of one or more
Tranches, the outstanding Term Loans of the respective Tranche or Tranches) of,
and in each case (except for the replacement of only the outstanding Term Loans
of one or more Tranches of the respective Lender) participations in Letters of
Credit by, the Replaced Lender and, in connection therewith, shall pay to (x)
the Replaced Lender in respect thereof an amount equal to the sum (without
duplication) of (1) an amount equal to the principal of, and all accrued
interest on, all outstanding Loans (or, in the case of the replacement of only
(I) the Revolving Loan Commitment, the outstanding Revolving Loans or (II) the
Term Loans of one or more Tranches, the outstanding Term Loans of such Tranche
or Tranches) of the Replaced Lender together with all then unpaid interest with
respect thereto at such time, (2) except in the case of the replacement of only
the outstanding Term Loans of one or more Tranches of a Replaced Lender, an
amount equal to all Unpaid Drawings that have been funded by (and not reimbursed
to) such Replaced Lender, together with all then unpaid interest with respect
thereto at such time and (3) an amount equal to all accrued, but theretofore
unpaid, Fees owing to the Replaced Lender (but only with respect to the relevant
Tranche, in the case of the replacement of less than all Tranches of Loans then
held by the respective Replaced Lender) pursuant to Section 3.01 and (y) except
in the case of the replacement of only the outstanding Term Loans of one or more
Tranches of a Replaced Lender, the respective Issuing Lender an amount equal to
such Replaced Lender's Adjusted RL Percentage of any Unpaid Drawing (which at
such time remains an Unpaid Drawing) to the extent such amount was not
theretofore funded by such Replaced Lender, and (ii) all obligations of the
Borrowers owing to the Replaced Lender (other than those (a) specifically
described in clause (i) above of this proviso in respect of which the assignment
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purchase price has been, or is concurrently being, paid or (b) relating to any
Tranche of Loans and/or Commitments of the respective Replaced Lender which will
remain outstanding after giving effect to the respective replacement) shall be
paid in full to such Replaced Lender concurrently with such replacement.
(b) Upon the execution of the respective Assignment and Assumption
Agreements, the payment of amounts referred to in clauses (i) and (ii) of the
proviso of Section 1.13(a) and, if so requested by the Replacement Lender,
delivery to the Replacement Lender of the appropriate Note or Notes executed by
each Borrower, (x) the Replacement Lender shall become a Lender hereunder and,
unless the respective Replaced Lender continues to have outstanding Term Loans
or a Revolving Loan Commitment hereunder, the Replaced Lender shall cease to
constitute a Lender hereunder, except with respect to indemnification provisions
under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05,
4.04, 12.06, 13.01 and 13.06), which shall survive as to such Replaced Lender
and (y) in the case of a replacement of a Defaulting Lender with a
Non-Defaulting Lender, the Adjusted RL Percentages of the Lenders shall be
automatically adjusted at such time to give effect to such replacement (and to
give effect to the replacement of a Defaulting Lender with one or more
Non-Defaulting Lenders). Upon the Replaced Lender ceasing to be a Lender
hereunder, such Replaced Lender agrees to promptly return to the Borrowers the
Note or Notes theretofore delivered to such Replaced Lender pursuant to this
Agreement marked "cancelled", or if such Replaced Lender has lost or cannot find
such Note or Notes, such Replaced Lender will execute and deliver to the
Borrowers a customary lost note and indemnity agreement in form and substance
reasonably satisfactory to the Borrowers.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, any Borrower may request that any Issuing Lender
issue, at any time and from time to time on and after the Restatement Effective
Date and prior to the Revolving Loan Maturity Date, for the account of such
Borrower and for the benefit of any holder (or any trustee, agent or other
similar representative for any such holders) of L/C Supportable Obligations, an
irrevocable standby letter of credit, in a form customarily used by such Issuing
Lender or in such other form as has been approved by such Issuing Lender, such
approval not to be unreasonably withheld or delayed (each such standby letter of
credit, a "Letter of Credit") in support of such L/C Supportable Obligations. On
the Restatement Effective Date, all Original Letters of Credit shall be deemed
to have been issued under this Agreement and shall for all purposes constitute
"Letters of Credit" hereunder.
(b) Subject to the terms and conditions contained herein, the
Administrative Agent hereby agrees that it will (and at a Borrower's request
each other Issuing Lender may, at its option, agree that it will), at any time
and from time to time on or after the Restatement Effective Date and prior to
the Revolving Loan Maturity Date, following its receipt of the respective Letter
of Credit Request, issue for the account of the respective Borrower one or more
Letters of Credit in support of such L/C Supportable Obligations of such
Borrower or any of its Subsidiaries as is permitted to remain outstanding
without giving rise to a Default or Event of Default hereunder,
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provided that the respective Issuing Lender shall be under no obligation to
issue any Letter of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing Lender
from issuing such Letter of Credit or any requirement of law applicable to such
Issuing Lender or any request or directive (whether or not having the force of
law) from any governmental authority with jurisdiction over such Issuing Lender
shall prohibit, or request that such Issuing Lender refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular or shall
impose upon such Issuing Lender with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which such Issuing Lender is
not otherwise compensated) not in effect on the date hereof, or any unreimbursed
loss, cost or expense which was not applicable, in effect or known to such
Issuing Lender as of the date hereof and which such Issuing Lender in good faith
deems material to it; or
(ii) such Issuing Lender shall have received notice from any Lender
prior to the issuance of such Letter of Credit of the type described in the
second sentence of Section 2.02(b).
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) and the aggregate
principal amount of all Revolving Loans made by the Non-Defaulting Lenders and
then outstanding and all Swingline Loans then outstanding, would exceed the
Adjusted Total Revolving Loan Commitment at such time, (ii) each Letter of
Credit shall be denominated in Dollars, (iii) each Letter of Credit shall by its
terms terminate on or before the earlier of (A) the date which occurs 12 months
after the date of the issuance thereof (although any such Letter of Credit may
be automatically extendable for successive periods of up to 12 months, but not
beyond the tenth Business Day prior to the Revolving Loan Maturity Date, on
terms acceptable to the Issuing Lender thereof) and (B) the tenth Business Day
prior to the Revolving Loan Maturity Date, (iv) the Stated Amount of each Letter
of Credit upon issuance shall be not less than $100,000 or such lesser amount as
is acceptable to the respective Issuing Lender and (v) no Letter of Credit shall
be issued the Stated Amount of which, when added to (A) the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit), (B) the aggregate
principal amount of all Swingline Loans (exclusive of Swingline Loans which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) then outstanding, and (C) the
aggregate principal amount of all W/C Loans outstanding at such time, would
exceed 10% of the Adjusted Total Revolving Loan Commitment then in effect.
Notwithstanding anything to the contrary contained in this Agreement, in the
event that a Lender Default exists, the respective Issuing Lender shall not be
required to issue any Letter of Credit unless such Issuing Lender has entered
into an arrangement satisfactory to it and the respective Borrower to eliminate
such Issuing Lender's risk with respect to the participation in Letters of
Credit by the Defaulting Lender or Lenders, including by cash collateralizing
such Defaulting Lender's or Lenders' Percentage of the Letter of Credit
Outstandings.
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2.02 Letter of Credit Requests. (a) Whenever a Borrower desires that a
Letter of Credit be issued for its account, such Borrower shall give the
Administrative Agent and the respective Issuing Lender at least three Business
Days' (or such shorter period as is acceptable to the respective Issuing Lender)
written notice thereof. Each notice shall be in the form of Exhibit C (each a
"Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the respective Borrower that such Letter of
Credit may be issued in accordance with, and will not violate the requirements
of, Section 2.01(c). Unless the respective Issuing Lender has received notice
from any Lender before it issues a Letter of Credit that one or more of the
conditions specified in Section 5 or Section 6, as applicable, are not then
satisfied, or that the issuance of such Letter of Credit would violate Section
2.01(c), then such Issuing Lender may issue the requested Letter of Credit for
the account of the respective Borrower in accordance with such Issuing Lender's
usual and customary practices. Upon the issuance of any Letter of Credit, such
Issuing Lender shall promptly notify each Lender of such issuance and such
notice shall be accompanied by a copy of the issued Letter of Credit.
2.03 Letter of Credit Participations. (a) Immediately upon the
issuance by any Issuing Lender of any Letter of Credit, such Issuing Lender
shall be deemed to have sold and transferred to each RL Lender, other than such
Issuing Lender (each such RL Lender, in its capacity under this Section 2.03, a
"Participant"), and each such Participant shall be deemed irrevocably and
unconditionally to have purchased and received from such Issuing Lender, without
recourse or warranty, an undivided interest and participation, to the extent of
such Participant's Adjusted RL Percentage, in such Letter of Credit, each
drawing made thereunder and the obligations of the relevant Borrower under this
Agreement with respect thereto (excluding the Facing Fee), and any security
therefor or guaranty pertaining thereto. Upon any change in the Revolving Loan
Commitments or the Adjusted RL Percentages of the RL Lenders pursuant to Section
1.13 or 13.04, it is hereby agreed that, with respect to all outstanding Letters
of Credit and Unpaid Drawings, there shall be an automatic adjustment to the
participations pursuant to this Section 2.03 to reflect the new Adjusted RL
Percentages of the assignor and assignee Lender or of all RL Lenders, as the
case may be.
(b) In determining whether to pay under any Letter of Credit, the
respective Issuing Lender shall have no obligation relative to the other Lenders
other than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and that they appear to comply on
their face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by any Issuing Lender under or in connection with any Letter
of Credit, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for such Issuing Lender any resulting liability to
any Borrower or any Lender.
(c) In the event that any Issuing Lender makes any payment under any
Letter of Credit and the respective Borrower shall not have reimbursed such
amount in full to such Issuing Lender pursuant to Section 2.04(a), such Issuing
Lender shall promptly notify the Administrative Agent, which shall promptly
notify each Participant, of such failure, and each Participant shall promptly
and unconditionally pay to such Issuing Lender the amount of such Participant's
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Adjusted RL Percentage of such unreimbursed payment in Dollars and same day
funds. If the Administrative Agent so notifies any Participant prior to 11:00
A.M. (New York time) on any Business Day, such Participant shall make available
such funds to such Issuing Lender on such Business Day. If and to the extent
such Participant shall not have so made its Adjusted RL Percentage of the amount
of such payment available to such Issuing Lender, such Participant agrees to pay
to such Issuing Lender, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to such
Issuing Lender at the overnight Federal Funds Rate. The failure of any
Participant to make available to such Issuing Lender its Adjusted RL Percentage
of any payment under any Letter of Credit shall not relieve any other
Participant of its obligation hereunder to make available to such Issuing Lender
its Adjusted RL Percentage of any payment under any Letter of Credit on the date
required, as specified above, but no Participant shall be responsible for the
failure of any other Participant to make available to such Issuing Lender such
other Participant's Adjusted RL Percentage of any such payment.
(d) Whenever any Issuing Lender receives a payment of a reimbursement
obligation as to which it has received any payments from the Participants
pursuant to clause (c) above, such Issuing Lender shall forward such payment to
the Administrative Agent, which in turn shall distribute to each Participant
which has paid its Adjusted RL Percentage thereof, in Dollars and in same day
funds, an amount equal to such Participant's share (based upon the proportionate
aggregate amount originally funded by such Participant to the aggregate amount
funded by all Participants) of the principal amount of such reimbursement
obligation and interest thereon accruing after the purchase of the respective
participations.
(e) Upon the request of any Participant, each Issuing Lender shall
furnish to such Participant copies of any Letter of Credit issued by it and such
other documentation as may reasonably be requested by such Participant.
(f) The obligations of the Participants to make payments to each
Issuing Lender with respect to Letters of Credit issued by it shall be
irrevocable and, except as provided in Section 2.03(b), not subject to any
qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any of
the other Credit Documents;
(ii) the existence of any claim, setoff, defense or other right which
the respective Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, any Issuing Lender, any Participant, or any other Person,
whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including any
underlying transaction between the respective Borrower and the beneficiary named
in any such Letter of Credit);
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(iii) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.04 Agreement to Repay Letter of Credit Drawings. (a) Each Borrower
hereby agrees to reimburse the respective Issuing Lender, by making payment to
the Administrative Agent in immediately available funds at the Payment Office,
for any drawing (each, a "Drawing") made by it under any Letter of Credit (each
such Drawing until reimbursed, an "Unpaid Drawing"), no later than four Business
Days after the date of such Drawing, with interest on the amount of such
Drawing, to the extent not reimbursed prior to 12:00 Noon (New York time) on the
date of such Drawing, from and including the date of such Drawing to but
excluding the date such Issuing Lender was reimbursed by any Borrower therefor
at a rate per annum which shall be the Base Rate in effect from time to time
plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans;
provided, however, to the extent such amounts are not reimbursed prior to 12:00
Noon (New York time) on the seventh Business Day following such Drawing,
interest shall thereafter accrue on the amount (and until reimbursed by any
Borrower) at a rate per annum which shall be the Base Rate in effect from time
to time plus 4%, in each such case, with interest to be payable on demand. The
respective Issuing Lender shall give the respective Borrower prompt written
notice of each Drawing under any Letter of Credit, provided that the failure to
give any such notice shall in no way affect, impair or diminish any Borrower's
obligations hereunder.
(b) The obligations of each Borrower under this Section 2.04 to
reimburse the respective Issuing Lender with respect to Drawings (including
interest thereon) shall constitute the joint and several obligations of the
Borrowers and shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which any Borrower may have or have had against any Lender (including in its
capacity as an Issuing Lender or as a Participant), or any nonapplication or
misapplication by the beneficiary of the proceeds of such Drawing, the
respective Issuing Lender's only obligation to any Borrower being to confirm
that any documents required to be delivered under such Letter of Credit appear
to have been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by any Issuing Lender under or in connection with any Letter of Credit if taken
or omitted in the absence of gross negligence or willful misconduct, shall not
create for such Issuing Lender any resulting liability to any Borrower.
2.05 Increased Costs. If at any time after the Restatement Effective
Date, the introduction of or any change in any applicable law, rule, regulation,
order, guideline or request or in the interpretation or administration thereof
by any governmental authority charged with the interpretation or administration
thereof, or compliance by any Issuing Lender or any Participant
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with any request or directive by any such authority (whether or not having the
force of law), or any change in generally accepted accounting principles, shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against letters of credit issued by any Issuing
Lender or participated in by any Participant, or (ii) impose on any Issuing
Lender or any Participant any other conditions relating, directly or indirectly,
to this Agreement or any Letter of Credit; and the result of any of the
foregoing is to increase the cost to any Issuing Lender or any Participant of
issuing, maintaining or participating in any Letter of Credit, or reduce the
amount of any sum received or receivable by any Issuing Lender or any
Participant hereunder or reduce the rate of return on its capital with respect
to Letters of Credit (except for changes in the rate of tax on, or determined by
reference to, the net income or profits of such Issuing Lender or such
Participant, or any franchise tax, in either case pursuant to the laws of the
United States of America, the jurisdiction in which it is organized or in which
its principal office or applicable lending office is located or any subdivision
thereof or therein), but without duplication of any amounts payable in respect
of Taxes pursuant to Section 4.04(a), then, five Business Days after written
demand to the respective Borrower by such Issuing Lender or any Participant (a
copy of which demand shall be sent by such Issuing Lender or such Participant to
the Administrative Agent), such Borrower shall pay to such Issuing Lender or
such Participant such additional amount or amounts as will compensate such
Lender for such increased cost or reduction in the amount receivable or
reduction on the rate of return on its capital, and all such payment obligations
of the relevant Borrower shall constitute the joint and several obligations of
the Borrowers. Any Issuing Lender or any Participant, upon determining that any
additional amounts will be payable pursuant to this Section 2.05, will give
prompt written notice thereof to the respective Borrower, which notice shall
include a certificate submitted to such Borrower by such Issuing Lender or such
Participant (a copy of which certificate shall be sent by such Issuing Lender or
such Participant to the Administrative Agent), setting forth in reasonable
detail the basis for and the calculation of such additional amount or amounts
necessary to compensate such Issuing Lender or such Participant. The certificate
required to be delivered pursuant to this Section 2.05 shall, if delivered in
good faith and absent manifest error, be final and conclusive and binding on the
respective Borrower.
SECTION 3. Fees; Reductions of Commitment.
3.01 Fees. (a) The Borrowers jointly and severally agree to pay to the
Administrative Agent for distribution to each Non-Defaulting Lender with a
Revolving Loan Commitment, a commitment fee (the "Commitment Fee") for the
period from the Restatement Effective Date to but excluding the Revolving Loan
Maturity Date (or until such earlier date as the Total Revolving Loan Commitment
shall have been terminated), computed at a rate for each day equal to the
Applicable Margin on the daily average Unutilized Revolving Loan Commitment of
such Non-Defaulting Lender. Accrued Commitment Fees shall be due and payable
quarterly in arrears on the tenth day of each January, April, July and October,
on the date of any reduction of the Total Unutilized Revolving Loan Commitment
pursuant to Section 3.02 and on the Revolving Loan Maturity Date or such earlier
date upon which the Total Revolving Loan Commitment is terminated.
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(b) The Borrowers jointly and severally agree to pay to the
Administrative Agent for distribution to each Non-Defaulting Lender with a
Revolving Loan Commitment (based on their respective Adjusted RL Percentages) a
fee in respect of each Letter of Credit issued hereunder (the "Letter of Credit
Fee"), for the period from and including the date of issuance of such Letter of
Credit to and including the termination of such Letter of Credit, computed at a
rate per annum equal to the Applicable Margin then in effect for Revolving Loans
maintained as Eurodollar Loans on the daily average Stated Amount of such Letter
of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in
arrears on the tenth day of each January, April, July and October and upon the
first day on or after the termination of the Total Revolving Loan Commitment
upon which no Letters of Credit remain outstanding.
(c) The Borrowers jointly and severally agree to pay to the respective
Issuing Lender, for its own account, a facing fee in respect of each Letter of
Credit issued by it hereunder (the "Facing Fee") for the period from and
including the date of issuance of such Letter of Credit to and including the
termination of such Letter of Credit, computed at a rate equal to 0.125% per
annum of the daily average Stated Amount of such Letter of Credit. Accrued
Facing Fees shall be due and payable quarterly in arrears on the tenth day of
each January, April, July and October and on the date upon which such Letter of
Credit has been terminated in accordance with its terms.
(d) The Borrowers jointly and severally agree to pay, upon each
drawing under, issuance of, or amendment to, any Letter of Credit, such amount
as shall at the time of such event be the administrative charge which the
respective Issuing Lender is generally imposing in connection with such
occurrence with respect to letters of credit.
(e) The Borrowers jointly and severally agree to pay to each of the
Arrangers, for their own account, such other fees as have been agreed to in
writing by any Borrower with the Arrangers.
3.02 Voluntary Termination of Commitments. Upon at least three
Business Days' prior written notice to the Administrative Agent at its Notice
Office (which notice the Administrative Agent shall promptly transmit to each of
the Lenders), either Borrower shall have the right, at any time or from time to
time, without premium or penalty, to terminate or partially reduce the Total
Unutilized Revolving Loan Commitment, in integral multiples of $1,000,000;
provided that (x) each such reduction shall apply proportionately to permanently
reduce the Revolving Loan Commitment of each RL Lender and (y) no reduction to
the Total Unutilized Revolving Loan Commitment shall be in an amount which would
cause the Revolving Loan Commitment of any RL Bank to be reduced (as required by
the preceding clause (x)) by an amount which exceeds the remainder of (A) the
Unutilized Revolving Loan Commitment of such RL Bank as in effect immediately
before giving effect to such reduction minus (B) such RL Bank's Adjusted RL
Percentage of the aggregate principal amount of Swingline Loans then
outstanding.
3.03 Mandatory Termination and Reduction of Commitments. (a) The Total
New Commitments (and the Tranche II Term Loan Commitment, the Tranche III Term
Loan
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Commitment and the Tranche B Term Loan Commitment of each Lender) shall
terminate in their entirety on June 5, 1998 and each of the Original Credit
Agreements shall continue in effect unless the Restatement Effective Date shall
have occurred on or prior to such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Tranche II Term Loan Commitment (and the Tranche
II Term Loan Commitment of each Lender) shall (i) terminate in its entirety on
the Restatement Effective Date (after giving effect to the making of the Tranche
II Term Loans on such date) and (ii) prior to the termination of the Total
Tranche II Term Loan Commitment as provided in clause (i) above, be reduced from
time to time to the extent required by Section 4.02.
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Tranche III Term Loan Commitment (and the
Tranche III Term Loan Commitment of each Lender) shall (i) terminate in its
entirety on the Restatement Effective Date (after giving effect to the making of
the Tranche III Term Loans on such date) and (ii) prior to the termination of
the Total Tranche III Term Loan Commitment as provided in clause (i) above, be
reduced from time to time to the extent required by Section 4.02.
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Tranche B Term Loan Commitment (and the Tranche
B Term Loan Commitment of each Lender) shall (i) terminate in its entirety on
the Restatement Effective Date (after giving effect to the making of the Tranche
B Term Loans on such date) and (ii) prior to the termination of the Total
Tranche B Term Loan Commitment as provided in clause (i) above, be reduced from
time to time to the extent required by Section 4.02.
(e) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each RL Lender) shall terminate in its entirety on the
Revolving Loan Maturity Date.
(f) Each reduction to the Total Tranche II Term Loan Commitment, the
Total Tranche III Term Loan Commitment, the Total Tranche B Term Loan Commitment
and the Total Revolving Loan Commitment pursuant to this Section 3.03 (or
pursuant to Section 4.02) shall be applied proportionately to reduce the Tranche
I Term Loan Commitment, the Tranche II Term Loan Commitment, the Tranche III
Term Loan Commitment, the Tranche B Term Loan Commitment or the Revolving Loan
Commitment, as the case may be, of each Lender with such a Commitment.
Notwithstanding the foregoing, so long as the Tranche II Term Loan Commitment or
Tranche III Term Loan Commitment remain outstanding, each Lender with a Tranche
B Term Loan Commitment may refuse all or any portion of any reduction of its
Tranche B Term Loan Commitment pursuant to Section 4.02(c) or (d), in which case
all commitment reductions so refused shall be applied pro rata to reduce the
Tranche II Term Loan Commitment and Tranche III Term Loan Commitment, as the
case may be, of each Lender with such a Commitment.
SECTION 4. Prepayments; Payments; Taxes.
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4.01 Voluntary Prepayments. Each Borrower shall have the right to
prepay the Loans and the right to allocate such prepayments to Revolving Loans,
Swingline Loans, Tranche I Term Loans, Tranche II Term Loans, Tranche III Term
Loans and/or Tranche B Term Loans as such Borrower elects, without premium or
penalty, in whole or in part at any time and from time to time on the following
terms and conditions: (i) such Borrower shall give the Administrative Agent
prior to 12:00 Noon (New York time) at its Notice Office (x) at least one
Business Day's prior written notice (or telephonic notice promptly confirmed in
writing) of such Borrower's intent to prepay Base Rate Loans and (y) at least
three Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) of such Borrower's intent to prepay Eurodollar Loans, the
amount of such prepayment and the Types of Loans to be prepaid and, in the case
of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which
made, which notice (other than any notice to prepay Swingline Loans) the
Administrative Agent shall promptly transmit to each of the Lenders; (ii) each
prepayment of Loans shall be in an aggregate principal amount of at least
$1,000,000, provided that if any partial prepayment of Eurodollar Loans made
pursuant to any Borrowing shall reduce the outstanding Eurodollar Loans made
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
applicable thereto, then such Borrowing may not be continued as a Borrowing of
Eurodollar Loans and any election of an Interest Period with respect thereto
given by the relevant Borrower shall have no force or effect; (iii) each
prepayment in respect of any Loans made pursuant to a Borrowing shall be applied
pro rata among the Lenders which made such Loans, provided that in connection
with any prepayment of Loans pursuant to this Section 4.01(a), such prepayment
shall not be applied to any Loans of a Defaulting Lender; (iv) each prepayment
of Term Loans pursuant to this Section 4.01 shall be applied to the Tranche I
Term Loans, Tranche II Term Loans, Tranche III Term Loans and Tranche B Term
Loans on a pro rata basis (based upon the then outstanding principal amount of
such loans), provided, that notwithstanding the foregoing, so long as Tranche I
Term Loans, Tranche II Term Loans or Tranche III Term Loans remain outstanding,
each Lender with Tranche B Term Loans outstanding may refuse all or any portion
of such prepayment allocable to it pursuant to this Section 4.01, in which case
all prepayments so refused shall be applied to prepay the Tranche I Term Loans,
the Tranche II Term Loans and Tranche III Term Loans then outstanding on a pro
rata basis; and (v) each prepayment of principal of Tranche B Term Loans
pursuant to this Section 4.01 shall be applied to reduce the then remaining
Scheduled Repayments of such Tranche in direct order of maturity (based upon the
then remaining principal amounts of the Scheduled Repayments of such Tranche
after giving effect to all prior reductions thereto).
4.02 Mandatory Repayments and Cash Collateralization. (a)(i) On any
day on which the sum of (x) the aggregate outstanding principal amount of the
Revolving Loans made by Non-Defaulting Lenders and Swingline Loans (after giving
effect to all other repayments thereof on such date) and (y) the Letter of
Credit Outstandings on such date exceeds the Adjusted Total Revolving Loan
Commitment as then in effect, the Borrowers shall prepay principal of Swingline
Loans, and if no Swingline Loans are or remain outstanding, Revolving Loans of
Non-Defaulting Lenders in an amount equal to such excess. If, after giving
effect to the prepayment or repayment of all outstanding Swingline Loans and all
outstanding Revolving Loans of Non-Defaulting Lenders, the aggregate amount of
the Letter of Credit Outstandings exceeds the Adjusted Total Revolving Loan
Commitment as then in effect, the Borrowers shall
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on a joint and several basis pay to the Administrative Agent at the Payment
Office on such date an amount of cash or Cash Equivalents equal to the amount of
such excess (up to a maximum amount equal to the Letter of Credit Outstandings
at such time), such cash or Cash Equivalents to be held as security for all
obligations of the Borrowers to Non-Defaulting Lenders hereunder in a cash
collateral account to be established by the Administrative Agent.
(ii) On any day on which the aggregate outstanding principal amount of
the Revolving Loans made by any Defaulting Lender exceeds the Revolving Loan
Commitment of such Defaulting Lender, the Borrowers shall on a joint and several
basis prepay principal of Revolving Loans of such Defaulting Lender in an amount
equal to such excess.
(b) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on the tenth day following each date
set forth below (other than the Tranche B Term Loan Maturity Date, on which date
such amounts will be owed immediately), the Borrowers shall be required to repay
that principal amount of Tranche B Term Loans, to the extent then outstanding,
as is set forth opposite such date (each such repayment, as the same may be
reduced as provided in Sections 4.01 and 4.02(e), a "Scheduled Repayment"):
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<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
June 30, 1998 $250,000
September 30, 1998 $250,000
December 31, 1998 $250,000
March 31, 1999 $250,000
June 30, 1999 $250,000
September 30, 1999 $250,000
December 31, 1999 $250,000
March 31, 2000 $250,000
June 30, 2000 $250,000
September 30, 2000 $250,000
December 31, 2000 $250,000
March 31, 2001 $250,000
June 30, 2001 $250,000
September 30, 2001 $250,000
December 31, 2001 $250,000
March 31, 2002 $250,000
June 30, 2002 $250,000
September 30, 2002 $250,000
December 31, 2002 $250,000
Tranche B Term Loan Maturity Date $595,250,000
------------
</TABLE>
(c) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the
Restatement Effective Date upon which any Borrower, any Guarantor or any of
their respective Subsidiaries receives Net Sale Proceeds from any Asset Sale, an
amount equal to the Applicable Prepayment Percentage of the Net Sale Proceeds
from such Asset Sale shall be applied as a mandatory repayment in accordance
with the requirements of Sections 4.02(e) and (f); provided that (x) with
respect to no more than $550,000,000 in the aggregate of such Net Sale Proceeds
received by any Borrower, any Guarantor or any of their respective Subsidiaries
in connection with an Asset Sale of Non-Strategic Assets, such Net Sale Proceeds
shall not give rise to a mandatory repayment on such date to the extent that no
Default or Event of Default then exists and such Net Sale Proceeds are used or
contractually committed to be used to purchase assets used or to be used in the
businesses permitted pursuant to Section 9.01 (including, without limitation
(but only to the extent permitted by Section 9.04), the purchase of the capital
stock of a Person engaged in such businesses) within 195 days following the date
of receipt of such Net Sale Proceeds from such Asset Sale and (y) (i) if all or
any portion of such Net Sale Proceeds are not so used (or contractually
committed to be used) within such 195-day period, such remaining portion shall
be applied on the last day of such period as a mandatory repayment as provided
above and (ii) if all or any portion of such Net Sale Proceeds are not so used
within such 195-day period referred to in clause (i) of this clause (y) because
such amount is contractually committed to be used and
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subsequent to such date such contract is terminated or expires without being
extended and without such portion being so used, such remaining portion shall be
applied on the date of such ter mination or expiration as a mandatory repayment
as provided above.
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date on or after the
Restatement Effective Date on which any Borrower, any Guarantor or any of their
respective Subsidiaries receives any cash proceeds from any incurrence of
Indebtedness (other than (w) Indebtedness permitted to be incurred pursuant to
Section 9.05(iii) as in effect on the Restatement Effective Date, (x)
Indebtedness of the Borrowers, the Guarantors and their respective Subsidiaries
representing purchase money Indebtedness secured by Liens permitted pursuant to
Section 9.06(xii), (y) intercompany Indebtedness to the extent permitted under
Section 9.04(ii), and (z) Indebtedness incurred pursuant to the construction
and/or major renovation of any Hotel) an amount equal to the Applicable
Prepayment Percentage of the Net Cash Proceeds of the respective incurrence of
Indebtedness shall be applied as a mandatory repayment in accordance with the
requirements of Sections 4.02(e) and (f).
(e) Each amount required to be applied pursuant to Sections 4.02(c)
and (d) in accordance with this Section 4.02(e) shall be applied (i) first, to
repay the outstanding principal amount of Tranche I Term Loans, (ii) second, to
the extent in excess of amounts required to be applied pursuant to preceding
clause (i), to repay the outstanding principal amount of Tranche II Term Loans,
(iii) third, to the extent in excess of the amounts required to be applied
pursuant to preceding clauses (i) and (ii), to repay the outstanding principal
amount of Tranche III Term Loans, and (iv) fourth, to the extent in excess of
the amounts required to be applied pursuant to preceding clauses (i), (ii) and
(iii), to repay the outstanding principal amount of Tranche B Term Loans. All
repayments of outstanding Tranche B Term Loans pursuant to Section 4.02(c) or
(d) shall be applied to reduce the then remaining Scheduled Repayments of such
Tranche on a pro rata basis (based upon the then remaining Scheduled Repayments
of such Tranche or after giving effect to all prior reductions thereto).
(f) With respect to each repayment of Loans required by this Section
4.02, either Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings of the respective Tranche pursuant to which made,
provided that: (i) repayments of Eurodollar Loans pursuant to this Section 4.02
may only be made on the last day of an Interest Period applicable thereto unless
(x) all Eurodollar Loans of the respective Tranche with Interest Periods ending
on such date of required repayment and all Base Rate Loans of the respective
Tranche have been paid in full and/or (y) concurrently with such repayment, the
Borrowers pay all breakage costs and other amounts owing to each Lender pursuant
to Section 1.11; (ii) if any repayment of Eurodollar Loans made pursuant to a
single Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to
such Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto, such Borrowing shall be converted at the end of the then current
Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of
any Tranche of Loans made pursuant to a Borrowing shall be applied pro rata
among such Tranche of Loans. In the absence of a designation by any Borrower as
described in the preceding sentence, the Administrative Agent
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shall, subject to the above, make such designation in its sole discretion.
Notwithstanding the foregoing provisions of this Section 4.02(f), if at any time
the mandatory prepayment of Term Loans pursuant to Section 4.02 above would
result, after giving effect to the procedures set forth above, in the Borrowers
incurring breakage costs under Section 1.11 as a result of Eurodollar Loans
being prepaid other than on the last day of an Interest Period applicable
thereto (the "Affected Eurodollar Loans"), then the Borrowers may in their sole
discretion initially deposit a portion (up to 100%) of the amounts that
otherwise would have been paid in respect of the Affected Eurodollar Loans with
the Administrative Agent (which deposit must be equal in amount to the amount of
the Affected Eurodollar Loans not immediately prepaid) to be held as security
for the obligations of the Borrowers hereunder pursuant to a cash collateral
agreement to be entered into in form and substance reasonably satisfactory to
the Administrative Agent and shall provide for investments satisfactory to the
Administrative Agent and the Borrowers, with such cash collateral to be directly
applied upon the first occurrence (or occurrences) thereafter of the last day of
an Interest Period applicable to the relevant Term Loans that are Eurodollar
Loans (or such earlier date or dates as shall be requested by the Borrowers), to
repay an aggregate principal amount of such Term Loans equal to the Affected
Eurodollar Loans not initially prepaid pursuant to this sentence.
Notwithstanding anything to the contrary contained in the immediately preceding
sentence, all amounts deposited as cash collateral pursuant to the immediately
preceding sentence shall be held for the sole benefit of the Lenders whose Loans
would otherwise have been immediately prepaid with the amounts deposited upon
the taking of any action by the Administrative Agent or the Lenders pursuant to
the remedial provisions of Section 10 any amounts held as cash collateral
pursuant to this Section 4.02(f) shall, subject to the requirements of
applicable law, be immediately applied to the Loans.
(g) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be
repaid in full on the respective Maturity Date for such Loans.
4.03 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note (other than
interest payments deducted from the Operating Account pursuant to Section 8.14)
shall be made to the Administrative Agent for the account of the Lender or
Lenders entitled thereto not later than 12:00 Noon (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Payment Office of the Administrative Agent. Any payments under this Agreement or
under any Note which are made later than 12:00 Noon (New York Time) shall be
deemed to have been made on the next succeeding Business Day. Whenever any
payment to be made hereunder or under any Note shall be stated to be due on a
day which is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest shall be payable at the applicable rate during such extension.
4.04 Net Payments; Taxes. (a) All payments made by any Borrower
hereunder or under any Note will be made without reduction on account of any
setoff, counterclaim or other defense. Except as provided in Section 4.04(b),
all such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties,
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fees, assessments or other charges of whatever nature now or hereafter imposed
by any jurisdiction or by any political subdivision or taxing authority thereof
or therein with respect to such payments (but excluding any tax imposed on or
measured by the net income or net profits of a Lender, or any franchise tax, in
either case pursuant to the laws of the jurisdiction in which it is organized or
the jurisdiction in which the principal office or applicable lending office of
such Lender is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect to such non-excluded taxes,
levies, imposts, duties, fees or other charges (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). Each Borrower will furnish to the Administrative Agent
within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by such
Borrower. Except as provided in Section 4.04(b), the Borrowers agree to
indemnify and hold harmless each Lender on a joint and several basis, and
reimburse such Lender upon its written request, for the amount of any Taxes so
levied or imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrowers
and the Administrative Agent on or prior to the Restatement Effective Date, or
in the case of a Lender that is an assignee or transferee of an interest under
this Agreement pursuant to Section 1.13 or 13.04 (unless the respective Lender
was already a Lender hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Lender, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor or additional forms) certifying to such Lender's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or (ii)
if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit D (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y)
two accurate and complete original signed copies of Internal Revenue Service
Form W-8 (or successor or additional forms) certifying to such Lender's
entitlement to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this Agreement and under any
Note. In addition, each Lender agrees that from time to time after the
Restatement Effective Date, when a lapse in time or change in circumstances
renders the previous certification obsolete or inaccurate in any material
respect, such Lender will promptly deliver to the Borrowers and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001 (or successor or additional forms),
or Form W-8 (or successor or additional forms) and a Section 4.04(b)(ii)
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Lender to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement and any Note, or it shall immediately notify the
Borrowers and the Administrative Agent of its inability to deliver any such Form
or Certificate, in which case such Lender shall not be required to deliver any
such Form or Certificate pursuant to this Section 4.04(b). Notwithstanding
anything to the contrary contained in Section 4.04(a), but subject to Section
13.04(b) and the immediately succeeding sentence, (x) the Borrowers shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
income or similar taxes imposed by the United States (or
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any political subdivision or taxing authority thereof or therein) from interest,
Fees or other amounts payable hereunder for the account of any Lender which is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for U.S. Federal income tax purposes to the extent that such Lender
has not provided to the Borrowers U.S. Internal Revenue Service Forms that
establish a complete exemption from such deduction or withholding and (y) the
Borrowers shall not be obligated pursuant to Section 4.04(a) to gross-up
payments to be made to a Lender in respect of income or similar taxes imposed by
the United States if (I) such Lender has not provided to the Borrowers the
Internal Revenue Service Forms required to be provided to the Borrowers pursuant
to this Section 4.04(b) or (II) in the case of a payment, other than interest,
to a Lender described in clause (ii) above, to the extent that such Forms do not
establish a complete exemption from withholding of such taxes. Notwithstanding
anything to the contrary contained in the preceding sentence or elsewhere in
this Section 4.04 and except as set forth in Section 13.04(b), each Borrower
agrees to pay additional amounts and to indemnify each Lender in the manner set
forth in Section 4.04(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any Taxes deducted or
withheld by it as described in the immediately preceding sentence as a result of
any changes after the Restatement Effective Date in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or with holding of such Taxes.
SECTION 5. Conditions Precedent to Restatement Effective Date. The
occurrence of the Restatement Effective Date pursuant to Section 13.10, and the
obligation of each Lender to continue and/or make Loans hereunder, and the
obligation of each Issuing Lender to issue Letters of Credit hereunder, in each
case on the Restatement Effective Date, are subject at the time of the
occurrence of the Restatement Effective Date to the satisfaction of the
following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Restatement
Effective Date, (i) this Agreement shall have been executed and delivered as
provided in Section 13.10 and (ii) there shall have been delivered to the
Administrative Agent for the account of each of the Lenders the appropriate
Tranche I Term Note, Tranche II Term Note, Tranche III Term Note, Tranche B Term
Note and/or Revolving Note executed by each Borrower, and to the Swingline
Lender the Swingline Note executed by each Borrower, in each case in the amount,
maturity and as otherwise provided herein.
5.02 Fees, etc. On the Restatement Effective Date, the Borrowers shall
have paid to the Arrangers and the Lenders all costs, fees and expenses
(including, without limitation, legal fees and expenses and all fees owing under
the Original Credit Agreements) payable to the Arrangers and the Lenders to the
extent then due.
5.03 Opinions of Counsel. On the Restatement Effective Date, the
Administrative Agent shall have received from counsel to the Credit Parties, an
opinion or opinions addressed to each of the Arrangers, the Collateral Agent and
each of the Lenders and dated the Restatement Effective Date covering the
matters set forth in Exhibit E and such other matters incident to the
transactions contemplated herein as the Administrative Agent may reasonably
request.
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5.04 Trust, Corporate, Limited Liability Company and Partnership
Documents; Proceedings; etc. (a) On the Restatement Effective Date, the
Administrative Agent shall have received a certificate, dated the Restatement
Effective Date, signed by the Secretary or an Assistant Secretary of each Credit
Party (or from the Secretary or an Assistant Secretary of the general partner of
each Credit Party that is a partnership), in the form of Exhibit F with
appropriate insertions, together with copies of the declaration of trust, the
certificate of incorporation and by-laws, limited liability company agreement or
other organizational documents (including partnership agreements and
certificates of partnership) of each such Credit Party and the resolutions of
each Credit Party referred to in such certificate, and the foregoing shall be
reasonably acceptable to the Administrative Agent.
(b) On the Restatement Effective Date, all trust, corporate, limited
liability company, partnership and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this Agreement
and the other Credit Documents shall be reasonably satisfactory in form and
substance to the Administrative Agent and the Required Lenders, and the
Administrative Agent shall have received all information and copies of all
documents and papers, including records of corporate and partnership
proceedings, governmental approvals, good standing certificates and bring-down
telegrams, if any, which the Administrative Agent may have reasonably requested
in connection therewith, such documents and papers where appropriate to be
certified by proper trust, corporate, limited liability company, partnership or
governmental authorities.
5.05 Amended and Restated Affiliate Guaranty. On the Restatement
Effective Date, each Person which is a Guarantor on such date shall have duly
authorized, executed and delivered a guaranty in the form of Exhibit G (as
modified, amended or supplemented from time to time, the "Amended and Restated
Affiliate Guaranty").
5.06 Pledge Agreement. On the Restatement Effective Date, each Pledgor
Credit Party shall have duly authorized, executed and delivered a Pledge
Agreement in the form of Exhibit H (as modified, supplemented or amended from
time to time, the "Pledge Agreement") covering all of such Pledgor Credit
Party's present and future Collateral, and shall have delivered to the
Collateral Agent, as pledgee, all such Collateral pursuant to and in the manner
provided by the Pledge Agreement, together with evidence that such other actions
have been taken as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests purported to be
created by the Pledge Agreement (including, without limitation, in the case of
partnership interests to be pledged, within 90 days after the Restatement
Effective Date, evidence that each pledged partnership has duly recorded the
security interest created by the Pledge Agreement on the partnership books and
records of such pledged partnership).
5.07 Adverse Change; Approvals. (a) On the Restatement Effective Date,
nothing shall have occurred (and the Lenders shall have become aware of no
facts, conditions or other information not previously known) which the
Administrative Agent or the Required Lenders believe would reasonably be
expected to have (i) a material adverse effect on the rights or remedies of the
Administrative Agent or the Lenders, or on the ability of any Credit Party to
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perform its respective obligations to the Administrative Agent and the Lenders
or (ii) a Material Adverse Effect.
(b) On or prior to the Restatement Effective Date, all necessary
governmental (domestic and foreign) and third party approvals (if any) in
connection with the making of the Loans and the transactions contemplated by the
Credit Documents and otherwise referred to herein or therein shall have been
obtained and remain in effect, and all applicable waiting periods shall have
expired without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon the making of
the Loans and the transactions con templated by the Credit Documents.
Additionally, there shall not exist any judgment, order, injunction or other
restraint issued or filed or a hearing seeking injunctive relief or other
restraint pending or notified prohibiting or imposing materially adverse
conditions upon the making of the Loans or the transactions contemplated by the
Credit Documents.
5.08 Litigation. Except as set forth on Schedule III, on the
Restatement Effective Date, no litigation by any entity (private or
governmental) shall be pending or, to the Best Knowledge of each Borrower,
threatened (i) with respect to the making of the Loans or the Credit Documents
or any documentation executed in connection therewith or (ii) which the
Administrative Agent or the Required Lenders believe would reasonably be
expected to have a Materially Adverse Effect.
5.09 Consummation of Interstate Transaction. On or prior to the
Restatement Effective Date, (i) there shall have been delivered to the
Administrative Agent a true and correct copy of the Interstate Merger Agreement,
certified by such by an appropriate officer of either Borrower, which shall be
in the form previously provided to the Administrative Agent with such
amendments, modifications and waivers as shall be in form and substance
satisfactory to the Arrangers, (ii) the Interstate Transaction, including all of
the terms and conditions thereof, shall have been duly approved by the requisite
boards of directors and (if required by applicable law) the requisite
shareholders of Patriot REIT, Wyndham and Interstate Hotels Corporation, and the
Interstate Transaction Documents shall have been duly executed and delivered by
the parties thereto and be in full force and effect, (iii) the representations
and warranties set forth in the Interstate Transaction Documents shall be true
and correct in all material respects as if made on and as of the Restatement
Effective Date, (iv) each of the conditions precedent to the consummation of the
Interstate Transaction as set forth in the Interstate Transaction Documents
shall have been satisfied, and not waived except with the consent of each
Arranger (not to be unreasonably withheld), to the satisfaction of each
Arranger, (v) all Liens or Indebtedness to be incurred or assumed in connection
with the Interstate Transaction shall otherwise be permitted under this
Agreement, and (vi) the Interstate Transaction shall have been consummated in
accordance with the Interstate Transaction Documents and all applicable law.
5.10 Solvency Certificate; Insurance Certificates. On or prior to the
Restatement Effective Date, there shall have been delivered to the
Administrative Agent:
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(a) a solvency certificate in the form of Exhibit I, addressed to each
of the Arrangers and each of the Lenders and dated the Restatement Effective
Date from an Authorized Financial Officer of Patriot REIT; and
(b) certificates of insurance complying with the requirements of
Section 8.03 for the business and properties of the Borrowers and the
Guarantors, in scope, form and substance reasonably satisfactory to the
Administrative Agent and the Required Lenders.
5.11 Pro Forma Balance Sheets; Projections. On the Restatement
Effective Date, the Arrangers shall have received unaudited pro forma
consolidated balance sheets dated December 31, 1997 and the projections dated
the Restatement Effective Date (the "Projections") in each case of Patriot REIT
and its Subsidiaries and of Wyndham and its Subsidiaries, prepared in a format
consistent with the financial statements referred to in Section 7.05(a), after
giving effect to the transactions contem plated hereby, which consolidated
balance sheets and Projections shall be in form and substance reasonably
satisfactory to the Arrangers and the Required Lenders.
5.12 Original Credit Agreements; etc. On the Restatement Effective
Date, (i) unless otherwise agreed by the Administrative Agent and the Borrowers,
each Original Lender shall have surrendered to the Administrative Agent for
cancellation the promissory notes issued to it pursuant to the Original Credit
Agreements, (ii) each Original Lender shall have continued its Original Loans as
contemplated by Section 1.01, (iii) the Borrowers shall have paid all accrued
and unpaid interest and fees then owing under the Original Credit Agreements
through the Restatement Effective Date, and (iv) the Administrative Agent shall
have received evidence in form, scope and substance satisfactory to it that the
matters set forth in this Section 5.12 have been satisfied on such date.
SECTION 6. Conditions Precedent to All Credit Events. The obligation
of each Lender to make Loans (including any Loans made on the Restatement
Effective Date but excluding Mandatory Borrowings made thereafter, which shall
be made as provided in Section 1.01(g)), and the obligation of an Issuing Lender
to issue any Letter of Credit, is subject, at the time of each such Credit Event
(except as hereinafter indicated), to the satisfaction of the following
conditions:
6.01 No Default; Representations and Warranties. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of the making of such Credit Event (it
being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date).
6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the
making of each Loan (excluding Swingline Loans and Mandatory Loans), the
Administrative Agent shall have received a Notice of Borrowing meeting the
requirements of Section 1.03(a). Prior to the
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making of any Swingline Loan, the Swingline Lender shall have received the
notice required by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Administrative
Agent and the respective Issuing Lender shall have received a Letter of Credit
Request meeting the requirements of Section 2.02.
The occurrence of the Restatement Effective Date and the acceptance of
the proceeds of each Credit Event shall constitute a representation and warranty
by each Borrower to each of the Arrangers and each of the Lenders that all the
conditions specified in Section 5 and in this Section 6 and applicable to the
Restatement Effective Date and/or such Credit Event, as the case may be, exist
as of that time (except to the extent that any of the conditions specified in
Section 5 or in this Section 6 are required to be satisfactory to or determined
by any Lender, the Required Lenders and/or the Administrative Agent or otherwise
expressly calls for a subjective determination to be made by any Lender, the
Required Lenders and/or the Administrative Agent). All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Administrative Agent at the Notice Office for the account of each of the
Lenders and, except for the Notes, in sufficient counterparts or copies for each
of the Lenders and shall be in form and substance reasonably satisfactory to the
Arrangers.
SECTION 7. Representations and Warranties. In order to induce the
Lenders to enter into this Agreement and to make the Loans, and issue (or
participate in) the Letters of Credit as provided herein, each Borrower makes
the following representations and warranties, all of which shall survive the
execution and delivery of this Agreement and the Notes and the making of the
Loans and the issuance of the Letters of Credit, with the occurrence of the
Restatement Effective Date and the incurrence of each Loan and the issuance of
each Letter of Credit on or after the Restatement Effective Date being deemed to
constitute a representation and warranty that the matters specified in this
Section 7 are true and correct on and as of the Restatement Effective Date and
true and correct in all material respects on the date of each such Credit Event
thereafter (it being understood and agreed that any representation or warranty
which by its terms is made as of a specified date shall be required to be true
and correct in all material respects only as of such specified date). To the
extent any Borrower makes any representation or warranty hereunder with respect
to any Guarantor or any Subsidiary of such Guarantor which is not a Subsidiary
of such Borrower, as the case may be, or is not controlled by such Borrower, as
the case may be, such representations and warranties are made as to the Best
Knowledge of such Borrower, including taking into account all statements,
representations and warranties made by such Person in any Credit Document.
7.01. Trust, Corporate, Limited Liability Company and Partnership
Status. Each Borrower, each Guarantor, and each of their respective Subsidiaries
(i) is a duly organized and validly existing real estate investment trust,
corporation, partnership or limited liability company, as the case may be, in
good standing (if applicable) under the laws of the jurisdiction of its
organization, (ii) has the trust, corporate, partnership or limited liability
company power and authority, as the case may be, to own its property and assets
and to transact the business in
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which it is engaged and presently proposes to engage and (iii) is duly qualified
and is authorized to do business and is in good standing in each jurisdiction
where the conduct of its business requires such qualifications except for
failures to be so qualified and in good standing which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
7.02 Trust, Corporate, Limited Liability Company or Partnership Power
and Authority. Patriot REIT, Wyndham, each Domestic Subsidiary which is a Credit
Party or a Pledgor Credit Party and, to the Best Knowledge of each such
Subsidiary, each Foreign Subsidiary which is a Credit Party or a Pledgor Credit
Party has the trust, corporate, partnership or limited liability company power
and authority, as the case may be, to execute, deliver and perform the terms and
provisions of each of the Credit Documents to which it is a party and has taken
all necessary trust, corporate, partnership or limited liability company action,
as the case may be, to authorize the execution, delivery and performance by it
of each of such Credit Documents. Patriot REIT, Wyndham, each Domestic
Subsidiary which is a Credit Party or a Pledgor Credit Party and, to the Best
Knowledge of any such Subsidiary, each Foreign Subsidiary which is a Credit
Party or a Pledgor Credit Party has duly executed and delivered each of the
Credit Documents to which it is a party, and each of such Credit Documents
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
7.03 No Violation. Neither the execution, delivery or performance by
Patriot REIT, Wyndham, any Domestic Subsidiary which is a Credit Party or
Pledgor Credit Party and, to the Best Knowledge of any such Subsidiary, any
Foreign Subsidiary which is a Credit Party, of the Credit Documents to which it
is a party, nor compliance by it with the terms and provisions thereof, (i) will
contravene any provision of any applicable law, statute, rule or regulation or
any applicable order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the properties or assets of any Borrower, any Guarantor or
any of their respective Subsidiaries, pursuant to the terms of any indenture,
mortgage, deed of trust, credit agreement or loan agreement, or any other
material agreement, contract or instrument, to which any Borrower, any Guarantor
or any of their respective Subsidiaries, is a party or by which it or any of its
property or assets is bound or to which it may be subject or (iii) will violate
any provision of the declaration of trust, certificate of incorporation,
partnership agreement, certificate of partnership, limited liability company
agreement or by-laws, as the case may be, of any Borrower, any Guarantor or any
of their respective Subsidiaries.
7.04 Governmental Approvals. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made and which remain in full force and
effect), or exemption by, any governmental
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or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, (i) the execution, delivery and
performance of any Credit Document or (ii) the legality, validity, binding
effect or enforceability of any such Credit Document, in each case by Patriot
REIT, Wyndham, each Domestic Subsidiary which is a Credit Party or Pledgor
Credit Party and, to the Best Knowledge of any such Subsidiary, any Foreign
Subsidiary which is a Credit Party or Pledgor Credit Party.
7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. (a) (i) The unaudited income statements for
Patriot REIT and Wyndham and their Subsidiaries prepared on a Company Combined
Basis for each of (x) the three-month period ended on December 31, 1997 and (y)
the latest nine-month period ended on December 31, 1997 and (ii) the pro forma
balance sheet of Patriot REIT and Wyndham and their Subsidiaries prepared on a
Company Combined Basis at December 31, 1997 and the pro forma combined income
statements for the latest nine-month period ended December 31, 1997 each present
fairly the historical financial results of Patriot REIT and Wyndham and their
Subsidiaries. All information (other than projections) furnished to the Lenders
prior to the Restatement Effective Date with respect to Patriot REIT and Wyndham
and their Subsidiaries is true and accurate in all material respects and not
incomplete by omitting to state any fact necessary to make such information not
misleading in any material respect. Since December 31, 1997, there have been no
events or changes which would reasonably be expected to have a Material Adverse
Effect.
(b) On and as of the Restatement Effective Date and on the date on
which each Loan is made, on a Pro Forma Basis after giving effect to all
Indebtedness (including the Loans) being incurred or assumed by each Credit
Party in connection therewith, (x) the sum of the assets, at a fair valuation,
of the Borrowers and the Guarantors (taken as a whole) and each Borrower (on a
stand-alone basis) will exceed their respective debts, (y) the Borrowers and the
Guarantors (taken as a whole) and each Borrower (on a stand-alone basis) have
not incurred and do not intend to incur, and do not believe that they will
incur, debts beyond their ability to pay such debts as such debts mature and (z)
the Borrowers and the Guarantors (taken as a whole) and each Borrower (on a
stand-alone basis) shall not have unreasonably small capital with which to
conduct their respective businesses. For purposes of this Section 7.05(b) "debt"
means any liability on a claim, and "claim" means (i) right to payment whether
or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured or (ii) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
(c) Except as fully disclosed or reflected in the financial statements
delivered pursuant to Section 7.05(a), there were as of the Restatement
Effective Date no liabilities or obligations with respect to any Borrower or any
Guarantor or any of their respective Subsidiaries, of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, either individually or in aggregate, would be material to the Borrowers
and the Guarantors taken as a whole. As of the Restatement Effective Date, the
Senior Management of each Borrower has no knowledge of any basis for the
assertion against it
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of any liability or obligation of any nature that is not fully disclosed in the
financial statements delivered pursuant to Section 7.05(a) which would
reasonably be expected to be material to the Borrowers and the Guarantors taken
as a whole.
(d) On and as of the Restatement Effective Date, the Projections,
including those prepared on a combined basis for the Borrowers and the
Guarantors delivered to the Arrangers and the Lenders prior to the Restatement
Effective Date have been prepared on a basis consistent with the financial
statements referred to in Section 7.05(a) (other than as set forth or presented
in such Projections), and there are no statements or conclusions in any of the
Projections which are based upon or include information known to the Senior
Management of either Borrower to be misleading in any material respect. On the
Restatement Effective Date, the Senior Management of each Borrower believed that
the Projections were reasonable; it being recognized by the Lenders that
projections (including the Projections) as to future results are not to be
viewed as facts and that the actual results for the period or periods covered by
such projections may differ from the projected results.
7.06 Litigation. Except as set forth on Schedule III, there are no
actions, suits or proceedings pending or, to the Best Knowledge of either
Borrower, threatened (i) with respect to any Credit Document or (ii) that would
reasonably be expected to have a Material Adverse Effect.
7.07 True and Complete Disclosure. All factual information (taken as a
whole) furnished by or on behalf of any Borrower, any Guarantor or any of their
respective Subsidiaries, in writing to the Administrative Agent or any Lender
(including, without limitation, all information contained in the Credit
Documents but excluding projections) for purposes of or in connection with this
Agreement, the other Credit Documents or any transaction contemplated herein or
therein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any Borrower, any Guarantor or any of their
respective Subsidiaries, in writing to the Administrative Agent or any Lender
will be, to the Best Knowledge of each Borrower, true and accurate in all
material respects on the date as of which such information is dated or certified
and, to the Best Knowledge of each Borrower, not incomplete by omitting to state
any fact necessary to make such information (taken as a whole) not misleading in
any material respect at such time in light of the circumstances under which such
information was provided (subject, in the case of any information referred to in
Section 7.05, to the qualifications (if any) set forth in Section 7.05 with
respect to any such information).
7.08 Use of Proceeds; Margin Regulations. (a) The proceeds of the
Tranche II Term Loans, Tranche III Term Loans and Tranche B Term Loans shall be
used by the Borrowers, subject to the other restrictions set forth in this
Agreement, to fund the Interstate Transaction and related fees and expenses. The
proceeds of the Revolving Loans shall be used by the Borrowers, and to the
extent permitted under this Agreement, their Subsidiaries, to fund (i)
acquisitions of properties, assets and businesses, investments, capital
expenditures and expenditures for furniture, fixtures and equipment in
Hospitality/Leisure-Related Businesses, and (ii) general working capital needs
of the Borrowers; provided, however, that the sum of (x) all W/C Loans, (y) the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
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repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) and (z) the aggregate principal amount
of all Swingline Loans (exclusive of Swingline Loans which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) shall not exceed 10% of the Adjusted Total
Revolving Loan Commitment then in effect at any one time.
(b) No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock. Neither the making of any Loan nor the use of the
proceeds thereof nor the occurrence of any other Credit Event will violate or be
inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
7.09 Tax Returns and Payments. Each Borrower, each Guarantor and each
of their respective Subsidiaries, has timely filed or caused to be timely filed,
on the due dates thereof or within applicable grace periods, with the
appropriate taxing authority, all Federal income tax returns and other returns,
statements, forms and reports for taxes (the "Returns") required to be filed by
or with respect to the income, properties or operations of the Borrowers, the
Guarantors, and/or each of their respective Subsidiaries, as the case may be,
except where the failure to file such Returns (other than Federal income tax
returns of Patriot REIT and Wyndham, which must be filed in any event) would not
be reasonably expected to have a Material Adverse Effect. The Returns accurately
reflect to the Best Knowledge of each Borrower in all material respects (subject
to any right to contest tax liabilities in good faith) all liability for taxes
of the Borrowers, the Guarantors and each of their respective Subsidiaries, for
the periods covered thereby. Each Borrower, each Guarantor and each of their
respective Subsidiaries has paid all material taxes payable by them other than
taxes which are not delinquent, and other than those contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles. There is no material action, suit, proceeding,
investigation, audit, or claim now pending or, to the Best Knowledge of each
Borrower, threatened by any authority regarding (i) Patriot REIT's qualification
as a real estate investment trust or (ii) any taxes relating to any Borrower,
any of the Guarantors or any of their respective Subsidiaries, the result of
which in the case of this clause (ii) would be reasonably expected to have a
Material Adverse Effect.
7.10 Compliance with ERISA. Each Plan that is a single employer plan
as defined in Section 4001(a)(15) of ERISA (a "Single Employer Plan") is in
substantial compliance with ERISA and the Code; no Reportable Event has occurred
with respect to a Single Employer Plan; no Single Employer Plan is insolvent or
in reorganization; to the Best Knowledge of each Borrower, no Multiemployer Plan
is insolvent or in reorganization; no Single Employer Plan has an Unfunded
Current Liability; no Single Employer Plan which is subject to Section 412 of
the Code or Section 302 of ERISA has an accumulated funding deficiency, within
the meaning of such Sections of the Code or ERISA, or has applied for or
received an extension of any amortization period within the meaning of Section
412 of the Code or Sections 303 or 304 of ERISA; all contributions required to
be made by either Borrower or any of its respective Subsidiaries or any ERISA
Affiliate with respect to a Plan and a Foreign Pension Plan have been timely
made; neither Borrower nor any of its Subsidiaries nor any ERISA Affiliate has
incurred
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any material liability to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971, 4975 or 4980 of the Code or reasonably expects to
incur any material liability (including any indirect, contingent, or secondary
liability) under any of the foregoing Sections with respect to any Plan; no
proceedings have been instituted to terminate or appoint a trustee to administer
any Single Employer Plan; to the Best Knowledge of each Borrower, no proceedings
have been instituted to terminate or appoint a trustee to administer any
Multiemployer Plan; no condition exists which presents a reasonably likely risk
to either Borrower or any of its Subsidiaries or any ERISA Affiliate of
incurring a material liability to or on account of a Single Employer Plan
pursuant to the foregoing provisions of ERISA and the Code; to the Best
Knowledge of each Borrower, no condition exists which presents a reasonably
likely risk to any Borrower or any of its Subsidiaries or any ERISA Affiliate of
incurring any material liability to or on account of a Multiemployer Plan
pursuant to the foregoing provisions of ERISA and the Code; based solely upon
information as may be requested by, and provided to either Borrower by the
sponsors of the Multiemployer Plans, the Senior Management of each Borrower
believes that the aggregate liabilities of each Borrower and its respective
Subsidiaries and ERISA Affiliates to all Multiemployer Plans in the event of a
complete withdrawal therefrom, as of the close of the most recent fiscal year of
each such Plan ended prior to the date hereof, would not be reasonably likely to
have a Material Adverse Effect; each group health plan (as defined in Section
607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered
employees or former employees of any Borrower or any of its Subsidiaries or any
ERISA Affiliate has at all times been operated in substantial compliance with
the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of
the Code; no lien imposed under the Code or ERISA on the assets of any Borrower
or any of its Subsidiaries or any ERISA Affiliate exists or, to the Best
Knowledge of each Borrower, is likely to arise on account of any Plan; and the
Borrowers and the Guarantors may cease contributions to or terminate each
employee benefit plan maintained by any of them (if any) without incurring any
material liability.
7.11 Real Properties. (a) Each Borrower, each Guarantor and each of
their respective Subsidiaries, has good and marketable fee simple absolute title
to all material Real Property purported to be owned by them, and has good and
marketable title to, or valid leasehold interests in, all other material Real
Property purported to be leased by them, on any date on which this
representation and warranty is made or deemed made including all material Real
Property reflected in the consolidated balance sheets of Patriot REIT, referred
to in Section 7.05(a) and in the pro forma balance sheet referred to in Section
5.11 (except as sold or otherwise disposed of since the date of such balance
sheets in the ordinary course of business), free and clear of all Liens, other
than Permitted Liens. Schedule IV contains a true and complete list of each
Hotel owned or leased by the Borrowers, the Guarantors or any of their
respective Subsidiaries on the Restatement Effective Date, and the type of
interest therein held by such Borrower, any such Guarantor or any of their
respective Subsidiaries.
(b) All material Real Property leased on the Restatement Effective
Date by any Borrower, any Guarantor or any of their respective Subsidiaries, is
listed on Schedule IV. To the Best Knowledge of each Borrower, each of such
leases is valid and enforceable in accordance with its terms and is in full
force and effect in all material respects. The Borrowers shall have
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delivered within 90 days after the Restatement Effective Date to the
Administrative Agent true and complete copies of each of such material leases
and all material documents affecting the rights or obligations of any Borrower,
any Guarantor or any of their respective Subsidiaries which is a party thereto,
including, without limitation, any non-disturbance and recognition agreements,
subordination agreements, attornment agreements and agreements regarding the
term or rental of any of the leases. None of the Borrowers, the Guarantors or
their respective Subsidiaries, nor, to the Best Knowledge of each Borrower, any
other party to any such lease is in default of its obligations thereunder or has
delivered or received any notice of default under any such lease, nor has any
event occurred which, with the giving of notice, the passage of time or both,
would constitute a default under any such lease, except for defaults which would
not reasonably be expected to have a Material Adverse Effect.
7.12 Subsidiaries. On the Restatement Effective Date, all Subsidiaries
and Unconsolidated Entities of Patriot REIT and Wyndham shall be as set forth on
Schedule V, and the ownership interests therein shall be as set forth on
Schedule V.
7.13 Compliance with Statutes, etc. (a) Each Borrower, each Guarantor,
and each of their respective Subsidiaries is in compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls), except such noncompliances as would not reasonably be expected to
have a Material Adverse Effect.
(b)(i) To the Best Knowledge of each Borrower, each Hotel complies in
all material respects with all Legal Requirements, (ii) all material consents,
licenses (including liquor licenses), certificates and permits required by all
Legal Requirements for the operation of each Hotel have been obtained and are in
full force and effect and (iii) all utility services and facilities necessary
for the operation of each Hotel are available at such Hotel, except such
non-compliances or failures to comply, obtain or have in full force and effect
and available as would not reasonably be expected to have a Material Adverse
Effect.
7.14 Investment Company Act. Neither Borrower nor any Guarantor or any
of their respective Subsidiaries is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
7.15 Public Utility Holding Company Act. Neither Borrower nor any
Guarantor or any of their respective Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
7.16 Environmental Matters. (a) To the Best Knowledge of each
Borrower, each Guarantor and each of their respective Subsidiaries, all
applicable Environmental Laws and the requirements of any permits issued under
such Environmental Laws have been complied
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with. To the Best Knowledge of each Borrower, there are no pending or threatened
Environmental Claims against any Borrower, any Guarantor or any of their
respective Subsidiaries or any Real Property owned or operated by any Borrower,
any Guarantor or any of their respective Subsidiaries. To the Best Knowledge of
each Borrower, there are no facts, circumstances, conditions or occurrences on
any Real Property owned or operated by any Borrower, any Guarantor or any of
their respective Subsidiaries, or on any property adjoining or in the vicinity
of any such Real Property that would reasonably be expected (i) to form the
basis of an Environmental Claim against any Borrower, any Guarantor or any of
their respective Subsidiaries, or any such Real Property or (ii) to cause any
such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by any Borrower, any
Guarantor or any of their respective Subsidiaries, under any applicable
Environmental Law.
(b) To the Best Knowledge of each Borrower, Hazardous Materials have
not at any time been generated, used, treated or stored on, or transported to or
from, or Released on or from, any Real Property owned or operated by any
Borrower, any Guarantor or any of their respective Subsidiaries, except in
compliance with all applicable Environmental Laws and reasonably required in
connection with the operation, use and maintenance of any such Real Property by
such Borrower's, such Guarantor's, or such Subsidiary's business.
(c) Notwithstanding anything to the contrary in this Section 7.16, the
representations made in this Section 7.16 shall only be untrue if the aggregate
effect of all Environmental Claims, restrictions, failures and noncompliance of
the types described above would reasonably be expected to have a Material
Adverse Effect.
7.17 Labor Relations. None of the Borrowers, any of the Guarantors or
any of their respective Subsidiaries is engaged in any unfair labor practice
that would reasonably be expected to have a Material Adverse Effect. To the Best
Knowledge of each Borrower, there is (i) no unfair labor practice complaint
pending or threatened against any Borrower, any Guarantor or any of their
respective Subsidiaries before the National Labor Relations Board and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending or threatened against
any of them, or (ii) no strike, labor dispute, slowdown or stoppage is pending
or threatened against any Borrower, any Guarantor or any of their respective
Subsidiaries, in each case with respect to the Hotels, except with respect to
any matter specified in clause (i) or (ii) above such as would not reasonably be
expected to have a Material Adverse Effect.
7.18 Intellectual Property. Each Borrower, each Guarantor and each of
their respective Subsidiaries owns or has the right or ability to use all
trademarks, permits, service marks, trade names, licenses and franchises which
are material and necessary for the conduct of its respective businesses.
7.19 Indebtedness. Schedule VI sets forth a true and complete list of
all Indebtedness (other than intercompany Indebtedness) in excess of $2,500,000
of the Borrowers, the Guarantors and their respective Subsidiaries as of the
Restatement Effective Date and
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intended to remain outstanding after such date (excluding the Loans, the
"Existing Indebtedness"), in each case showing the aggregate principal amount
thereof and the name of the respective borrower and any other entity which
directly or indirectly guaranteed such debt.
7.20 Ground Leases. Each ground lease with respect to any Hotel which
is located on a Leasehold is in full force and effect and no party thereto has
denied or disaffirmed any of its material obligations thereunder or has
defaulted (beyond applicable cure and notice periods) in the due performance or
observance of any material term, covenant or agreement on its part to be
performed or observed pursuant thereto, except in the case of any ground leases
such denials, disaffirmations and defaults as would not reasonably be expected
to have a Material Adverse Effect.
7.21 Status as REIT. Patriot REIT is organized in conformity with the
requirements for qualification as a real estate investment trust under the Code.
Patriot REIT has met all of the requirements for qualification as a real estate
investment trust under the Code for its Fiscal Year ended December 31, 1997.
Patriot REIT is in a position to qualify for its current Fiscal Year as a real
estate investment trust under the Code and its proposed methods of operation
will enable it to so qualify.
7.22 Operators. Each Affiliated Operator, and to the Best Knowledge of
each Borrower, each Third Party Operator, has full power and authority and the
legal right to own, lease (or sublease), manage and operate (as applicable) the
properties it operates and to conduct the business in which it is currently
engaged with respect to any Real Property owned or leased by any Borrower, any
Guarantor, or any of their respective Subsidiaries, except in the case of the
operation by Third Party Operators of Hotels such failures as would not
reasonably be expected to have a Material Adverse Effect.
7.23 Security Interests. On and after the Restatement Effective Date,
the Pledge Agreement creates (or after the execution and delivery thereof will
create), as security for the Obligations, a valid and enforceable perfected
security interest in and Lien on all of the Collateral, superior to and prior to
the rights of all third Persons, and subject to no other Liens (except that the
Collateral may be subject to the Liens permitted under Section 9.06), in favor
of the Collateral Agent. No filings or recordings are required in order to
perfect the security interests created under the Pledge Agreement except for
filings or recordings required in connection with such Pledge Agreement which
shall have been made, or shall have been executed and delivered and a provision
for filing shall have been made, on or prior to the execution and delivery
thereof as contemplated by Section 8.11.
SECTION 8. Affirmative Covenants. Each Borrower hereby covenants and
agrees that on and after the Restatement Effective Date and until the Total
Commitment and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other obligations incurred
hereunder and thereunder, are paid in full:
8.01 Information Covenants. The Borrowers will furnish to the
Administrative Agent (with sufficient copies for each of the Lenders, which the
Administrative Agent will promptly forward to each of the Lenders):
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(a) Quarterly Financial Statements. Within 45 days after the end of
each Fiscal Quarter, (i) the consolidated balance sheet of Patriot REIT and
Wyndham and their Subsidiaries calculated on a Company Combined Basis, as at the
end of such quarterly accounting period, (ii) the related consolidated state
ments of income for such quarterly accounting period and for the elapsed portion
of the fiscal year ended with the last day of such quarterly accounting period
and (iii) the related consolidated statements of cash flows for such quarterly
accounting period and for the elapsed portion of the fiscal year ended with the
last day of such quarterly accounting period, in each case setting forth
comparative figures for the corresponding fiscal periods in the prior fiscal
year, all of which shall be in reasonable detail and certified by an Authorized
Financial Officer of Patriot REIT that, to the best of such officer's knowledge
after due inquiry, they fairly present the financial condition of Patriot REIT
and its Subsidiaries and of Wyndham and its Subsidiaries, as of the dates
indicated and the results of their operations and changes in their cash flows
for the periods indicated, subject to normal year-end audit adjustments.
(b) Annual Financial Statements. Within 90 days after the end of each
Fiscal Year, the consolidated balance sheet of Patriot REIT and Wyndham and
their Subsidiaries calculated on a Company Combined Basis, as at the end of such
fiscal year and the related consolidated statements of income and shareholders'
equity and of cash flows for such fiscal year setting forth com parative figures
for the preceding fiscal year and certified by Ernst & Young, any other "Big
Six" independent certified public accounting firm or such other independent
certified public accountants of recognized national standing reasonably
acceptable to the Administrative Agent, whose opinion shall not be qualified as
to the scope of audit or as to the status of Patriot REIT or Wyndham as a going
concern.
(c) Budgets. Prior to the beginning of each Fiscal Year, budgets
(including, in any event, budgeted statements of cash flow and budgeted debt and
cash balances) for such Fiscal Year prepared in detail, with respect to Patriot
REIT and its Subsidiaries and of Wyndham and its Subsidiaries, accompanied by a
statement of an Authorized Financial Officer of Patriot REIT to the effect that,
to such officer's Best Knowledge, the budget is a reasonable estimate of the
period covered thereby, it being recognized by the Lenders that budgets as to
future results are not to be viewed as facts and that the actual results for the
period or periods covered by such budgets may differ from the budgeted results.
(d) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 8.01(a) and (b), a certificate of
an Authorized Financial Officer of Patriot REIT to the effect that, to the best
of such officer's actual knowledge, no Default or Event of Default has occurred
and is continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which certificate shall be
in the form of Exhibit J, shall set forth the calculations required to establish
whether the Borrowers were in compliance with the provisions of Sections 8.12,
9.03, 9.04, 9.05, 9.06, 9.08 through 9.12, inclusive at the end of such fiscal
quarter or year, as the case may be, and with respect to certificates delivered
with the financial statements required to be delivered pursuant to Section
8.01(a), shall set forth the amount of any Net Sale Proceeds received from any
Asset Sale occurring during such fiscal quarter.
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(e) Notice of Default or Litigation. Promptly, and in any event within
five Business Days after the Senior Management of any Borrower or any of the
Guarantors obtains actual knowledge of (i) the occurrence of any event which
constitutes a Default or an Event of Default, (ii) any litigation or
governmental investigation or proceeding pending or threatened in writing (x)
against any Borrower, any Guarantor or any of their respective Subsidiaries
which would reasonably be expected to have a Material Adverse Effect, (y) with
respect to any material Indebtedness of any Borrower, any Guarantor or any of
their respective Subsidiaries or (z) with respect to any Credit Document and
(iii) any other action or condition or event which would reasonably be expected
to have a Material Adverse Effect, a certificate of an Authorized Financial
Officer of either Borrower specifying (A) the nature and period of existence of
any such claimed Default, Event of Default, condition or event, (B) the notice
given or action taken by such Person in connection therewith, and (C) what
action the Borrowers have taken, is taking and proposes to take with respect
thereto.
(f) Management Letters. Promptly after the Borrowers' or Wyndham's
receipt thereof, a copy of any "management letter" received by such Borrower or
Wyndham from its certified public accountants and the management's responses
thereto.
(g) Other Reports and Filings. Promptly, and without duplication of
any documents or information delivered pursuant to another clause of this
Section 8.01, copies of all financial information, proxy materials and other
information and reports, if any, which any Borrower, any Guarantor or any of
their respective Subsidiaries shall file with the Securities and Exchange
Commission or any successor thereto (the "SEC") (other than preliminary filings
made with the SEC).
(h) Environmental Matters. Promptly upon, and in any event within ten
Business Days after the Senior Management of any Borrower or any Guarantor
obtaining actual knowledge thereof, notice of one or more of the following
environmental matters:
(i) any pending or threatened material Environmental Claim against any
Borrower, any Guarantor, or any of their respective Subsidiaries or any Real
Property owned or operated by any Borrower, any Guarantor, or any of their
respective Subsidiaries;
(ii) any condition or occurrence on or arising from any Real Property
owned or operated by any Borrower, any Guarantor or any of their respective
Subsidiaries that (a) results in non-compliance by any Borrower, any Guarantor
or any of their respective Subsidiaries in any material respect with any
applicable Environmental Law or (b) would reasonably be expected to form the
basis of a material Environmental Claim against any Borrower, any Guarantor or
any of their respective Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property owned or
operated by any Borrower, any Guarantor or any of their respective Subsidiaries
that would reasonably be expected to cause such Real Property to be subject to
any material restrictions on the ownership, occupancy, use or transferability by
any Borrower, any Guarantor or any of their respective Subsidiaries of such Real
Property under any Environmental Law; and
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(iv) the taking of any removal or remedial action in response to the
actual or alleged presence of any Hazardous Material on any Real Property
relating to any material liability owned or operated by any Borrower, any
Guarantor or any of their respective Subsidiaries as required by any
Environmental Law or any governmental or other administrative agency.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and such Borrower's, such Guarantor's or such Subsidiary's response or
proposed response thereto. In addition, any Borrower, any Guarantor and any
of their respective Subsidiaries will provide the Administrative Agent with
copies of all material communications with any government or governmental
agency relating to Environmental Laws, all material communications with any
Person relating to Environmental Claims, and such detailed reports of any
Environmental Claim as may reasonably be requested by the Administrative
Agent or any Lender.
(i) Annual Meetings with Lenders. At the request of the Administrative
Agent or the Required Lenders, the Borrowers shall, at least once during each
fiscal year of Patriot REIT, hold a meeting (at a mutually agreeable location
and time) with all of the Lenders at which meeting the financial results of the
previous fiscal year and the financial condition of the Borrowers and the
budgets presented for the current Fiscal Year shall be reviewed, with each
Lender bearing its own travel, lodging, food and other costs associated with
attending any such meeting.
(j) Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to the Borrowers, the Guarantors
or their respective Subsidiaries as the Administrative Agent or any Lender
(through the Administrative Agent) may reasonably request.
8.02 Books, Records and Inspections. Each Borrower will, and will
cause each of its Subsidiaries, each Guarantor and its Subsidiaries to, keep
proper books of record and account in which full, true and correct entries in
conformity with generally accepted accounting principles and all requirements of
law shall be made of all dealings and transactions in relation to its business
and activities. Each Borrower will cause each of its respective Subsidiaries,
each Guarantor and its Subsidiaries to, permit officers and designated
representatives of the Administrative Agent, unless a Default or Event of
Default is then in existence or discovered during such inspection, in which case
such visit shall be at the expense of the Borrowers) or any Lender (at such
Lender's expense) to visit and inspect, during regular business hours on
reasonable advance notice and under guidance of officers of such Borrower or
such Guarantor, or their respective Subsidiaries, any of the properties of any
Borrower, any Guarantor or any of their respective Subsidiaries, and to examine
the books of account of any Borrower, any Guarantor or any of their respective
Subsidiaries, and discuss the affairs, finances and accounts of any Borrower,
any Guarantor or any of their respective Subsidiaries with, and be advised as to
the same by, its and their Authorized Financial Officers and independent
accountants, all at such
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reasonable times and intervals and to such reasonable extent as the
Administrative Agent or any Lender may reasonably request.
8.03 Maintenance of Property; Insurance. Each Borrower will, and will
cause each of their respective Subsidiaries to, keep all property owned or
leased by such Person and necessary in its business in good working order and
condition in accordance with industry standards (ordinary wear and tear
excepted). Each Borrower will, and will cause each Guarantor and each of their
respective Subsidiaries to maintain insurance with responsible and reputable
insurance companies or associations and in such amounts and against at least
such risks as is consistent and in accordance with industry practice and furnish
to the Administrative Agent, upon written request, full information as to the
insurance carried. Such insurance shall include physical damage insurance on all
real and personal property (whether now owned or hereafter acquired) on an all
risk basis, covering the full repair and replacement costs of all such property
and business interruption insurance for the actual loss sustained.
8.04 Corporate Franchises. Each Borrower will, and will cause each of
its Subsidiaries, each Guarantor and its Subsidiaries to, do or cause to be
done, all things necessary to preserve and keep in full force and effect its
existence and its material rights, franchises, licenses and patents; provided,
however, that nothing in this Section 8.04 shall prevent (i) any of the
transactions permitted in accordance with Section 9.02 or (ii) the taking or
failing to take of any action with respect to the foregoing by any Borrower, any
Guarantor or any of their respective Subsidiaries which would not reasonably be
expected to have a Material Adverse Effect.
8.05 Compliance with Statutes, etc. Each Borrower will, and will cause
each of its Subsidiaries, each Guarantor and its Subsidiaries to, comply with
all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property, except
such noncompliances as would not reasonably be expected to have a Material
Adverse Effect.
8.06 Compliance with Environmental Laws. (a) Each Borrower will, and
will cause each of its Subsidiaries, each Guarantor and its Subsidiaries to,
comply in all material respects with all Environmental Laws applicable to the
ownership or use of its Real Property now or hereafter owned or operated by any
Borrower, any Guarantor or any of their respective Subsidiaries, will promptly
pay or cause to be paid all costs and expenses incurred in connection with such
compliance, and will keep or cause to be kept all such Real Property free and
clear of any Liens imposed pursuant to such Environmental Laws. None of any
Borrower, any Guarantor or any of their respective Subsidiaries will generate,
use, treat, store, Release or dispose of, or permit the generation, use,
treatment, storage, Release or disposal of Hazardous Materials on any Real
Property now or hereafter owned or operated by such Borrower, such Guarantor or
such Subsidiary, or transport or permit the transportation of Hazardous
Materials to or from any such Real Property except for Hazardous Materials used
or stored at any such Real Properties in compliance with all applicable
Environmental Laws and reasonably required in connection with the operation, use
and maintenance of any such Real Property, except where the failure to so
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comply in respect of the matters described in this clause (a) as would not
reasonably be expected to have a Material Adverse Effect.
(b) At the written request of the Administrative Agent or the Required
Lenders, which request shall specify in reasonable detail the basis therefor, at
any time and from time to time after (i) the Obligations have been declared due
and payable pursuant to Section 10, (ii) the Administrative Agent receives
notice under Section 8.01(h) of any event for which notice is required to be
delivered for any Real Property or (iii) any Borrower, any Guarantor or any of
their respective Subsidiaries is not in compliance with Section 8.06(a) with
respect to any Real Property and the Borrowers will provide, at their sole cost
and expense, an environmental site assessment report concerning any such
affected Real Property now or hereafter owned or operated by any Borrower, any
Guarantor or any of their respective Subsidiaries, prepared by an environmental
consulting firm reasonably approved by the Administrative Agent, indicating the
presence or absence of Hazardous Materials and the potential cost of any removal
or remedial action in connection with any Hazardous Materials on such Real
Property. If the Borrowers fail to provide the same within 90 days after such
request was made, the Administrative Agent may order the same, and the Borrowers
shall grant and hereby grant, to the Administrative Agent and the Lenders and
their agents access to such Real Property and specifically grant the
Administrative Agent and the Lenders an irrevocable non-exclusive license,
subject to the rights of tenants, to undertake such an assessment, all at the
Borrowers' expense.
8.07 ERISA. Within 15 Business Days after any Borrower, any of their
respective Subsidiaries or any ERISA Affiliate knows or has reason to know of
the occurrence of any of the following, the Borrowers will deliver to the
Administrative Agent and each Lender a certificate of an Authorized Financial
Officer of either Borrower setting forth details as to such occurrence and the
action, if any, that such Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by the Borrower, the Subsidiary, the ERISA
Affiliate, the PBGC, a Plan participant or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency, under the meaning of Section 412 of the Code or Section 302 of
ERISA, has been incurred or an application may reasonably be expected to be or
has been made to the Secretary of the Treasury for a waiver or modification of
the minimum funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code or Section
303 or 304 of ERISA with respect to a Single Employer Plan; that any
contribution required to be made by Borrower, any of its Subsidiaries or any
ERISA Affiliate to a Single Employer Plan or Foreign Pension Plan has not been
made within 30 Business Days of the date same is due; that a Single Employer
Plan has been or may reasonably be expected to be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Single
Employer Plan has an Unfunded Current Liability giving rise to a lien on the
assets of any Borrower, any of its Subsidiaries or any ERISA Affiliate under
ERISA or the Code; that proceedings may reasonably be expected to be or have
been instituted to terminate or appoint a trustee to administer a Single
Employer Plan; that a proceeding has been instituted against any Borrower, any
of its Subsidiaries or any ERISA Affiliate pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Plan; that any Borrower, any of its
Subsidiaries or any ERISA Affiliate will or may reasonably be expected to incur
or has incurred any material
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liability (including any indirect, contingent, or secondary liability) to or on
account of the termination of or withdrawal from a Plan under Section 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under
Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or
502(l) of ERISA or with respect to a group health plan (as defined in Section
607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 498-B of the
Code; or that any Borrower or any of its Subsidiaries may incur any material
liability pursuant to any employee welfare benefit plan (as defined in Section
3(1) of ERISA) that provides benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or any employee
pension benefit plan (as defined in Section 3(2) of ERISA). The respective
Borrower will deliver to the Administrative Agent with sufficient copies for
each Lender (i) a complete copy of the annual report (Form 5500) of each Single
Employer Plan (including, to the extent required, the related financial and
actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed by them with the
Internal Revenue Service and (ii) copies of any records, documents or other
information that must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA. In addition to any certificates or notices delivered
to the Administrative Agent pursuant to the first sentence hereof, copies of
annual reports and any material notices received by any Borrower, any of its
Subsidiaries or any ERISA Affiliate with respect to any Single Employer Plan or
Foreign Pension Plan shall be delivered to the Administrative Agent (with
sufficient copies for each Lender) no later than 15 Business Days after the date
such report has been filed with the Internal Revenue Service or such notice has
been received by the Borrower, the Subsidiary or the ERISA Affiliate, as
applicable.
8.08 End of Fiscal Years; Fiscal Quarters. Each Borrower will cause
(i) each of its, and each of its Subsidiaries' (other than PAH Windwatch
Partners or PAH Windwatch, LLC, so long as the Hotel owned by such Person is
managed by a Third Party Operator), each Guarantor's and each of its
Subsidiaries' Fiscal Years to end on December 31 and (ii) each of its
Subsidiaries' (other than PAH Windwatch Partners or PAH Windwatch, LLC, so long
as the Hotel owned by such Person is managed by a Third Party Operator), each
Guarantor's and each of its Subsidiaries' Fiscal Quarters to end on March 31,
June 30, September 30 and December 31.
8.09 Performance of Obligations. Each Borrower will cause each of its
Subsidiaries, each Guarantor and its Subsidiaries to, perform all of its
obligations under the terms of each Management Agreement, ground lease and each
mortgage, deed of trust, indenture, loan agreement or credit agreement and each
other material agreement, contract or instrument by which it or any Real
Property is bound, except such non-performances as would not reasonably be
expected to have a Material Adverse Effect.
8.10 Payment of Taxes. Each Borrower will cause each of its
Subsidiaries, each Guarantor and its Subsidiaries to pay and discharge all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to the date
on which any penalties attach thereto, and all lawful claims for sums that have
become due and payable which, if unpaid, might become a lien or charge upon any
properties of any Borrower, any Guarantor or any of their respective
Subsidiaries; provided that none of any Borrower, any Guarantor or any of their
respective Subsidiaries shall be required to
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pay any such tax, assessment, charge, levy or claim (i) which is being contested
in good faith and by proper proceedings if it has maintained adequate reserves
with respect thereto in accordance with generally accepted accounting principles
or (ii) the failure to pay which would not be reasonably expected to have a
Material Adverse Effect.
8.11 Further Assurances. (a) Each Borrower will, and will cause each
Guarantor and each of their respective Wholly-Owned Subsidiaries to, at the
expense of the Borrowers, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the Collateral covered by
the Pledge Agreement as the Collateral Agent may reasonably require.
Furthermore, the Borrowers shall cause to be delivered to the Collateral Agent
such opinions of counsel and other related documents as may be reasonably
requested by the Collateral Agent to assure itself that this Section 8.11 has
been complied with.
(b) Each of the Credit Parties agrees that each action required above
by this Section 8.11 shall be completed as soon as possible, but in no event
later than 90 days after such action is either requested to be taken by the
Administrative Agent, the Collateral Agent or the Required Lenders or required
to be taken by the Borrowers, the Guarantors or their respective Subsidiaries
pursuant to the terms of this Section 8.11.
8.12 FF&E Reserves. (i) Within 30 days after the Restatement Effective
Date, the respective Borrower, Guarantor or the respective Subsidiary of such
person shall have established FF&E Reserves on its books and records with
respect to Hotels owned or leased pursuant to a ground lease on the Restatement
Effective Date and (ii) within 45 days after each acquisition of a Hotel, a
Borrower or a Guarantor shall have established an FF&E Reserve on its books and
records with respect to such Hotel.
8.13 REIT Requirements. Patriot REIT shall operate its business at all
times so as to satisfy all requirements necessary to qualify as a real estate
investment trust under Sections 856 through 860 of the Code. Patriot REIT will
maintain adequate records so as to comply with all record-keeping requirements
relating to the qualification of Patriot REIT as a real estate investment trust
as required by the Code and applicable regulations of the Department of the
Treasury promulgated thereunder and will properly prepare and timely file with
the IRS all returns and reports required thereby. Patriot REIT will request from
its shareholders all shareholder information required by the Code and applicable
regulations of the Department of Treasury promulgated thereunder.
8.14 Maintenance of Operating Account. The Borrowers shall at all
times maintain a demand deposit account held by the Administrative Agent (the
"Operating Account") and shall cause funds to be deposited therein in an amount
sufficient to permit the Administrative Agent to automatically deduct therefrom
(and the Borrowers hereby irrevocably authorize the Administrative Agent to so
deduct) the interest payments, any administrative agency fee, the
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Commitment Fees, the Letter of Credit Fees and the Facing Fees at 12:00 P.M.
on the tenth day of each month in which each such fee is due.
8.15 Interest Rate Protection. The Borrowers will, or will cause the
Guarantors or their respective Subsidiaries to, as the case may be, enter into
or maintain Interest Rate Protection Agreements reasonably satisfactory to the
Administrative Agent, sufficient to ensure that (i) on and after the Restatement
Effective Date to but excluding October 3, 1998, 30% and (ii) from such date
until the Revolving Loan Maturity Date, 35%, in each case of Total Indebtedness
outstanding at any time shall at all times be covered by such Interest Rate
Protection Agreements or shall have a fixed rate of interest reasonably
satisfactory to the Administrative Agent.
8.16 Foreign Subsidiaries Security. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrowers acceptable to the Arrangers does not within 90 days after a request
from the Arrangers deliver to the Administrative Agent evidence, in form and
substance satisfactory to the Arrangers, with respect to any Foreign Subsidiary
which has not already had all of its stock, partnership interests or limited
liability company interests, as the case may be, which are owned by any Pledgor
Credit Party, pledged pursuant to the Pledge Agreement that a pledge of 66-2/3%
or more of the total combined voting power of all classes of capital stock,
partnership interests or limited liability company interests, as the case may
be, of such Foreign Subsidiary entitled to vote, would cause the undistributed
earnings of such Foreign Subsidiary as determined for Federal income tax
purposes to be treated as a deemed dividend to such Foreign Subsidiary's United
States parent for Federal income tax purposes, then, unless the Arrangers in
their reasonable discretion otherwise agree, that portion of such Foreign
Subsidiary's outstanding capital stock, partnership interests or limited
liability company interests which is owned by an Pledgor Credit Party and not
theretofore pledged pursuant to the Pledge Agreement shall be pledged to the
Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge
Agreement (or another pledge agreement in substantially similar form, if needed)
to the extent that the entering into such Pledge Agreement is permitted by the
laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 8.16 to be in form and substance reasonable
satisfactory to the Arrangers.
SECTION 9. Negative Covenants. Each Borrower covenants and agrees that
on and after the Restatement Effective Date and until the Total Commitment and
all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings,
together with interest, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full:
9.01 Line of Business. Each Borrower will not, and will not permit any
of its Subsidiaries or any of the Guarantors or their Subsidiaries to, engage
(directly or indirectly) in any business other than Hospitality/Leisure-Related
Businesses.
9.02 Consolidation, Merger, etc. Each Borrower will not, and will not
permit any of its Subsidiaries to, or any of the Guarantors or any of their
Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any
transaction of merger or consolidation, or sell or
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dispose of all or substantially all of the assets of the Borrowers, the
Guarantors and their respective Subsidiaries taken as a whole, or agree to do
any of the foregoing at any future time, except that the following shall be
permitted:
(i) Investments may be made to the extent permitted by Section 9.04;
(ii) (a) the Credit Parties may merge or consolidate with, liquidate
into, or transfer all or any portion of their assets to or among one another,
(b) any Subsidiary of any Credit Party may merge or consolidate with, liquidate
into, or transfer all or any portion of their assets to any Credit Party, so
long as such Credit Party is the surviving entity and (c) any Subsidiary of
Patriot REIT or Wyndham which is not a Credit Party may transfer all or any
portion of its assets to another Subsidiary of Patriot REIT or Wyndham which is
not a Credit Party, in each case so long as any security interests granted to
the Collateral Agent for the benefit of the Secured Creditors pursuant to the
Pledge Agreement so transferred shall remain perfected and in full force and
effect or as otherwise agreed to by the Collateral Agent; and
(iii) The Borrowers, the Guarantors and their respective Subsidiaries
may consummate the Interstate Transaction pursuant to the Interstate Transaction
Documents.
9.03 Dividends. Unless otherwise required in order for Patriot REIT to
maintain its status as a real estate investment trust in accordance with the
written advice of independent counsel, Patriot REIT shall not declare or pay any
Dividends on its Stock or Stock Equivalents or any other Dividends; provided,
that, notwithstanding the foregoing, (i) during any period of four consecutive
Fiscal Quarters, Patriot REIT may pay Dividends for such period in an aggregate
amount not to exceed the greater of (x) 90% of the Adjusted Funds From
Operations, (y) 100% of Cash Available for Distribution and (z) the minimum
amount necessary to maintain tax status as a real estate investment trust and
(ii) if no Event of Default then exists or would arise therefrom, Patriot REIT
may pay Dividends in excess of the amounts permitted under clause (i) above, but
only to the extent necessary to avoid the incurrence of federal, state or local
income or excise tax liability.
9.04 Investments. Each Borrower will not, and will not permit any of
its Subsidiaries or any Guarantor or any of its Subsidiaries to, directly or
indirectly, lend money or credit or make advances to any Person, or purchase or
acquire any Stock, Stock Equivalents, obligations or securities of, or any other
interest in, or make any capital contribution to, any other Person (each of the
foregoing an "Investment"), including Investments existing on the Restatement
Effective Date, except that the following shall be permitted:
(i) The Borrowers, the Guarantors and their respective Subsidiaries
may acquire and hold accounts receivables owing to any of them, if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary terms;
(ii) The Borrowers, Wyndham and their respective Subsidiaries may make
intercompany loans and contributions among one another; provided that any such
Indebtedness incurred after the Restatement Effective Date of a Credit Party to
a Non-Credit Party Subsidiary
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shall be subordinated to the obligations of such Credit Party hereunder or under
the other Credit Documents;
(iii) The Borrowers, the Guarantors and their respective Subsidiaries
may make and/or hold Investments in their respective Wholly-Owned Subsidiaries,
other Subsidiaries, Joint Ventures and Unconsolidated Entities engaged in
Hospitality/Leisure-Related Businesses so long as the following investment
restrictions are met:
(A) the sum of all Investments in Joint Ventures (valued at
cost) shall not exceed $450,000,000, excluding (i)
Investments in Joint Ventures to the extent such Investments
are held or contractually committed to as of the Restatement
Effective Date, (ii) Investments in Joint Ventures which are
Guarantors and (iii) Investments made after the Restatement
Effective Date in Joint Ventures which the Arrangers have
designated Non-Credit Party Subsidiaries to the extent the
Arrangers have, at the time of such designation, also
designated them to be treated as Guarantors for purposes of
this Section 9.04(iii)(A);
(B) the sum of all Investments (valued at cost) attributable to
Mortgage Notes shall not exceed $250,000,000;
(C) the sum of all Investments (valued at cost) attributable to
Limited Service Hotels shall not exceed $250,000,000;
(D) the sum of all Investments (valued at cost) attributable to
Extended Stay Hotels shall not exceed $750,000,000; and
(E) the sum of all Investments (valued at cost) attributable to
unimproved land and/or to New Construction shall not exceed
$800,000,000, excluding Investments in Joint Ventures in
which the Borrowers, the Guarantors and their respective
Subsidiaries own, individually or in the aggregate, less
than a 20% equity interest.
If any Investment may be categorized as qualifying under more than one
of the investment restrictions listed in clauses (A) through (E) above, except
as otherwise provided in clause (E) above, such Investment shall be counted
against each of the investment restriction limits for which it qualifies without
regard to the number of such restrictions for which such Investment may qualify.
9.05 Certain Indebtedness Obligations. Each Borrower will not, and
will not permit any of the Guarantors or any of their respective Subsidiaries
to, contract, create, incur, assume or suffer to exist any:
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(i) Indebtedness under Interest Rate Protection Agreements other than
such Indebtedness entered into in compliance with Section 8.15, and such other
non-speculative Interest Rate Protection Agreements which may be entered into
from time to time by the Borrowers, the Guarantors or their respective
Subsidiaries and which the Borrowers in good faith believe will provide
protection against fluctuations in interest rates with respect to outstanding
floating rate Indebtedness then outstanding, and permitted to remain
outstanding, pursuant to the other provisions of this Section 9.05;
(ii) Indebtedness under Derivatives Obligations other than any
Indebtedness under Derivatives Obligations which are permitted under Section
9.12 and which are not speculative in nature; and
(iii) Indebtedness of any Borrower, any Guarantor or any of their
respective Subsidiaries secured by a mortgage, deed of trust, deed to secure
debt or other similar instrument placed on any Real Property owned or leased by
such Borrower, Guarantor or Subsidiary other than such Indebtedness with respect
to which the initial loan to value ratio for any property or group of related
properties subject to a single financing (valued by the Borrowers on a
reasonable basis) relating to such Indebtedness is greater than or equal to 50%.
9.06 Liens. Each Borrower will not, and will not permit any Guarantor
or any of their respective Subsidiaries to, create, incur, assume or suffer to
exist any Lien upon or with respect to any property or assets of any kind (real
or personal, tangible or intangible) of any Borrower, any Guarantor or any of
their respective Subsidiaries, whether now owned or hereafter acquired, or sell
any such property or assets subject to an understanding or agreement, contingent
or otherwise, to repurchase such property or assets (including sales of accounts
receivable or notes with recourse to any Borrower, any Guarantor or any of their
respective Subsidiaries) or assign any right to receive income, except for the
following (collectively, the "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or governmental
charges or levies being contested in good faith and by appropriate proceedings
for which adequate reserves have been established in accordance with GAAP;
(ii) Liens in respect of property or assets of any Borrower, any
Guarantor or any of their respective Subsidiaries imposed by law which were
incurred in the ordinary course of business and which have not arisen to secure
Indebtedness for borrowed money, such as carriers', warehousemen's and
mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in
the ordinary course of business, and which either (x) do not in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of any Borrower, any
Guarantor or any of their respective Subsidiaries or (y) are being contested in
good faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or asset subject to such Lien;
(iii) Liens created by or pursuant to this Agreement and the Pledge
Agreement;
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(iv) Liens in existence on the Restatement Effective Date which are
listed, and the property subject thereto described, in Schedule VII, including
extensions or renewals thereof;
(v) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 10.09, provided
that the amount of cash and property (determined on a fair market value basis)
deposited or delivered to secure the respective judgment or decree or subject to
attachment shall not exceed $10,000,000 at any time;
(vi) Liens (other than any Lien imposed by ERISA) (x) incurred or
deposits made in the ordinary course of business of the Borrowers, the
Guarantors and their respective Subsidiaries in connection with workers'
compensation, unemployment insurance and other types of social security, (y) to
secure the performance by the Borrowers, the Guarantors and their respective
Subsidiaries of tenders, statutory obligations (other than excise taxes),
surety, stay, customs and appeal bonds, statutory bonds, bids, leases,
government contracts, trade contracts, performance and return of money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money) or (z) to secure the performance by the Borrowers, the Guarantors and
their respective Subsidiaries of leases of Real Property, to the extent incurred
or made in the ordinary course of business consistent with past practices;
(vii) licenses, sublicenses, leases or subleases entered into in the
ordinary course of business not interfering in any material respect with the
business of any Borrower, any Guarantor or any of their respective Subsidiaries;
(viii) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances, in each case
not securing Indebtedness and not interfering in any material respect with the
ordinary conduct of the business of any Borrower, any Guarantor or any of their
respective Subsidiaries;
(ix) Liens arising from precautionary UCC financing statements
regarding operating leases;
(x) Liens created pursuant to Capital Leases, provided that (x) such
Liens only serve to secure the payment of Indebtedness arising under such
Capitalized Lease Obligation and (y) the Lien encumbering the asset giving rise
to the Capitalized Lease Obligation does not encumber any other asset of any
Borrower, any Guarantor or any of their respective Subsidiaries (other than
other assets subject to Capitalized Lease Obligations owing to the same Person
as such Capitalized Lease Obligation);
(xi) Permitted Encumbrances;
(xii) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price (or financing of
the purchase price within 90 days after the respective purchase) of assets
acquired after the Restatement Effective Date, provided that (i) any such Liens
attach only to the assets so purchased, upgrades thereon and, if the asset so
purchased is an upgrade, the original asset itself (and such other assets
financed by the same financing source) and (ii) the Indebtedness (other than
Indebtedness incurred from the
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same financing source to purchase other assets and excluding Indebtedness
representing obligations to pay installation and delivery charges for the
property so purchased) secured by any such Lien does not exceed 100%, nor is
less than 65%, of the lesser of the fair market value or the purchase price of
the property being purchased at the time of the incurrence of such Indebtedness;
and
(xiii) Liens on property or assets acquired pursuant to an acquisition
of assets or property, or on property or assets of a Subsidiary of any Borrower
or Guarantor in existence at the time such Subsidiary is acquired pursuant to
such an acquisition, provided that such Liens are not incurred in connection
with, or in contemplation or anticipation of, such an acquisition and do not
attach to any other asset of any Borrower, any Guarantor or any of their
respective Subsidiaries; and
(xiv) Liens not otherwise permitted by the foregoing clauses (i)
through (xiii) to the extent attaching to properties and assets with an
aggregate fair market value not in excess of, and securing aggregate liabilities
at any time outstanding not in excess of, 5% of tangible net assets, valued on
an undepreciated cost basis, of the Borrowers, the Guarantors and their
Subsidiaries calculated on a Company Combined Basis.
9.07 Transactions with Affiliates. Each Borrower will not, and will
not permit any of its Subsidiaries to, or any of the Guarantors or any of their
Subsidiaries to enter into any transaction or series of related transactions
with any Affiliate, other than in the ordinary course of business and on terms
and conditions substantially as favorable to such Person as would reasonably be
obtained by such Person at that time in a comparable arm's-length transaction
with a Person other than an Affiliate, except that:
(i) intercompany transactions may be entered into to the extent
permitted by Section 9.02;
(ii) Dividends may be paid to the extent provided in Section 9.03;
(iii) Investments may be made to the extent permitted by Section 9.04;
and
(iv) the Borrowers and the Guarantors may enter into the Operating
Leases, ground leases and other intercompany contracts in the ordinary course of
business and pay the rentals, fees and other costs and expenses thereunder.
9.08 Total Interest Coverage. Each Borrower will not permit the Total
Interest Coverage Ratio to be less than (x) for any Test Period ending prior to
December 31, 1999, 2.25:1.0 and (y) for any Test Period ending on or after
December 31, 1999, 2.50:1.0.
9.09 Fixed Charge Coverage. Each Borrower will not permit the Fixed
Charge Coverage Ratio to be less than (x) for any Test Period ending prior to
December 31, 1999, 1.75:1.0 and (y) for any Test Period ending on or after
December 31, 1999, 2.0:1.0.
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9.10 Tangible Net Worth. Each Borrower will not permit Tangible Net
Worth at any time to be less than Minimum Tangible Net Worth.
9.11 Limitations on Indebtedness. (a) In addition to the other
restrictions on Indebtedness set forth in this Section 9.11, each Borrower shall
not permit the Leverage Ratio to exceed (x) at any time prior to December 31,
1998, 5.5:1.0, (y) at any time on or after December 31, 1998 and prior to June
30, 1999, 5.0:1.0 and (z) at any time on or after June 30, 1999, 4.5:1.0.
(b) In addition to the other restrictions on Indebtedness set forth in
this Section 9.11, each Borrower shall not permit the Secured Indebtedness Ratio
to exceed 2.5:1.0 at any time.
(c) In addition to the other restrictions on Indebtedness set forth in
this Section 9.11, each Borrower shall not permit Total Recourse Secured
Indebtedness to exceed the sum of (x) the amount of such Indebtedness
outstanding on the Restatement Effective Date (and extensions, renewals and
refinancings thereof) plus (y) $200,000,000. Additionally, in no event shall any
Borrower, any Guarantor or any of their respective Subsidiaries incur any
Recourse Secured Indebtedness after the Restatement Effective Date where the
loan to value ratio for any property or group of related properties subject to a
single financing (based on the value shown in the most recent Approved Appraisal
of the assets secured thereby) relating thereto exceeds 65%.
9.12 Derivatives Obligations. Each Borrower will not, and will not
permit any Guarantor or any of their respective Subsidiaries to, contract,
create, incur, assume or suffer to exist any Derivatives Obligations, except:
(i) Interest Rate Protection Agreements may be entered into by the
Borrowers, the Guarantors and their respective Subsidiaries;
(ii) Other Hedging Agreements may be entered into by the Borrowers,
the Guarantors and their respective Subsidiaries, so long as such Other Hedging
Agreements are for bona fide foreign exchange currency hedging purposes and are
not speculative in nature; and
(iii) Permitted Equity Swaps; provided that with respect to the
Permitted Equity Swaps in existence on the Restatement Effective Date, Patriot
REIT may exercise its option to settle no more than $200,000,000 in the
aggregate of such Permitted Equity Swaps in cash.
9.13 Limitation on Certain Restrictions. Each Borrower will not, and
will not permit any Guarantor or any of their respective Subsidiaries or any
Unconsolidated Entity to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any such Person to (a) pay dividends or make any other distributions
on its capital stock or any other interest or participation in its profits owned
by any Borrower or any Guarantor or any of their respective Subsidiaries, or pay
any Indebtedness owed to any Borrower, any Guarantor or any of their respective
Subsidiaries, (b) make loans or advances to any Borrower or Guarantor or any of
their respective Subsidiaries or (c) transfer any
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of its properties or assets to any Borrower or Guarantor or any of their
respective Subsidiaries or grant liens or security interests thereon, except in
each case for such encumbrances or restrictions existing under or by reason of
(i) applicable law, (ii) this Agreement and the other Credit Documents, (iii)
customary provisions relating to Indebtedness or lease obligations to the extent
restricting (A) the transfer, assignability or the granting of liens, (B) the
making of loans or advances or (C) the paying of Dividends or the making of
other distributions, (iv) commercially reasonable restrictions in the
organizational documents of any such entity which do not prohibit such entity
from disposing or realizing the value of, any Hotel owned by it, or the Stock or
other form of ownership of any kind, and which (A) limit generally the amount of
Indebtedness which may be incurred by such entity, (B) limit the amounts of
obligations secured by Liens or (C) limit the transferability or assignability
of assets, (v) restrictions on transferability or assignability in respect to
ground leases, and (vi) restrictions created in connection with the issuance of
the preferred stock for the benefit of the holders thereof in connection with
the CHC Acquisition (or similar restrictions (or restrictions which are more
favorable to the Lenders) relating to preferred stock issued in connection with
other acquisitions). It is understood and agreed that any asset that is
Unencumbered shall be deemed not in violation of this Section 9.14.
9.14 Limitation on Creation of Subsidiaries. The Borrowers will not,
and will not permit any Guarantor or any of their respective Subsidiaries to,
establish, create or acquire any additional Subsidiaries, except that the
Borrowers, the Guarantors and their respective Subsidiaries shall be permitted
to establish, create or acquire Subsidiaries, so long as (i) 100% of the capital
stock, partnership interests or limited liability company interests of any new
Domestic Subsidiary which is owned by any Pledgor Credit Party (or all capital
stock, partnership interests or limited liability company interests of any new
Foreign Subsidiary which is owned by any Pledgor Credit Party, except that not
more than 65% of the voting stock or interests of any such Foreign Subsidiary
shall be required to be so pledged) is, upon the creation, establishment or
acquisition of any such new Subsidiary, pledged pursuant to the Pledge Agreement
and the certificates representing such stock, partnership interests or limited
liability company interests, together with undated stock or other powers duly
executed in blank, are delivered to the Collateral Agent, (ii) any new Domestic
Subsidiary (other than any such new Domestic Subsidiary which is reasonably
designated by the Arrangers, at the time of the creation, establishment or
acquisition of such new Subsidiary, as a Non-Credit Party Subsidiary) executes a
counterpart of the Guaranty and (iii) there is delivered to the Administrative
Agent upon the creation, establishment or acquisition of any such new Subsidiary
(other than any such new Subsidiary which is reasonably designated by the
Arrangers, at the time of the creation, establishment or acquisition of such new
Subsidiary, as a Non-Credit Party Subsidiary) such certificates and documents in
respect of such new Subsidiary as would be required under Section 5.04 had such
Subsidiary been a Credit Party in existence on the Restatement Effective Date.
SECTION 10. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
10.01 Payments. The Borrowers shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default, and such default
shall continue unremedied for three or more Business Days, in the payment when
due of any Unpaid Drawings or interest
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on any Loan or Note, or any Fees or any other amounts owing hereunder or under
any other Credit Document; or
10.02 Representations, etc. Any representation, warranty or statement
made by any Credit Party herein or in any other Credit Document or in any
certificate delivered pursuant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made; or
10.03 Covenants. Any Credit Party shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(e)(i), Section 8.08 or Section 9 or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement (other than as provided in Section 10.01) and such
default shall continue unremedied for a period of 30 days after written notice
to any Borrower by the Administrative Agent or the Required Lenders; or
10.04 Default Under Other Agreements. (i) Any Borrower, any Guarantor,
or any of their respective Subsidiaries shall (x) default in any payment of any
Indebtedness (other than the Obligations or any Non-Recourse Indebtedness)
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness was created or (y) default in the observance or
performance of any agreement or condition relating to any Indebtedness (other
than the Obligations or any Non-Recourse Indebtedness) or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause (determined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity or (ii) any Indebtedness
(other than the Obligations or any Non-Recourse Indebtedness) of any Borrower,
any Guarantor, or any of their respective Subsidiaries shall be declared to be
due and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; provided that it
shall not be a Default or an Event of Default under clauses (i) or (ii) of this
Section 10.04 unless the aggregate outstanding principal amount of all such
Indebtedness as described in such clauses (i) and (ii) is at least $10,000,000;
or
10.05 Bankruptcy, etc. Any Borrower, any Guarantor or any of their
respective Subsidiaries shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against any Borrower, any Guarantor, or any of their respective
Subsidiaries and the petition is not controverted within 60 days, or is not
dismissed within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of any Borrower, any Guarantor or any of their
respective Subsidiaries or any Borrower, any Guarantor or any of their
respective Subsidiaries commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to any Borrower, any Guarantor or any of their respective
Subsidiaries, or there is commenced against
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any Borrower, any Guarantor or any of their respective Subsidiaries any such
proceeding which remains undismissed for a period of 60 days, or any Borrower,
any Guarantor or any of their respective Subsidiaries is adjudicated insolvent
or bankrupt; or any order of relief or other order approving any such case or
proceeding is entered and is not vacated or stayed within 60 days; or any
Borrower, any Guarantor or any of their respective Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; any
Borrower, any Guarantor or any of their respective Subsidiaries makes a general
assignment for the benefit of creditors; or any trust, partnership and/or
corporate action is taken by any Borrower, any Guarantor or any of their
respective Subsidiaries for the purpose of effecting any of the foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof under Section 412 of the
Code or Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation 4043.61 (without regard to subparagraph (b)(1)
thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or
.68 or PBGC Regulation Section 4043 shall be reasonably expected to occur with
respect to such Plan within the following 30 days, any Plan shall have had or is
likely to have a trustee appointed to administer such Plan, any Plan is, shall
have been or is likely to be terminated or to be the subject of termination
proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a
contribution required to be made by any Borrower, any of its Subsidiaries or any
ERISA Affiliate to a Plan or a Foreign Pension Plan has not been timely made,
any Borrower or any of its Subsidiaries or ERISA Affiliates has incurred or is
likely to incur a liability to or on account of a Plan under Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971, 4975 or 4980 of the Code or on account of a group
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the
Code) under Section 4980B of the Code, or any Borrower or any of its
Subsidiaries or ERISA Affiliates has incurred or is likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as defined in Section
3(1) of ERISA) that provide benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or employee pension
benefit plans (as defined in Section 3(2) of ERISA) or Foreign Pension Plans;
(b) there shall result from any such event or events the imposition of a lien,
the granting of a security interest, or a liability or a material risk of
incurring a liability; and (c) such lien, security interest or liability,
individually and/or in the aggregate, will have a Material Adverse Effect; or
10.07 REIT Status. Patriot REIT shall cease, for any reason, to
maintain its status as a real estate investment trust under Sections 856 through
860 of the Code; or
10.08 Guaranties. The Amended and Restated Affiliate Guaranty shall
cease to be in full force or effect as to any Guarantor (except as expressly
provided in the Amended and Restated Affiliate Guaranty), or any Guarantor or
Person acting by or on behalf of such
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Guarantor shall deny or disaffirm such Guarantor's obligations under its
Guaranty or any Guarantor Event of Default shall occur; or
10.09 Judgments. One or more judgments or decrees shall be entered
against the Borrower, any of the Guarantors or any of their respective
Subsidiaries involving in the aggregate for the Borrower, the Guarantors and
their respective Subsidiaries a liability (not paid or not fully covered by a
reputable and solvent insurance company) and such judgments and decrees either
shall be final and non-appealable or shall not be vacated, discharged or stayed
or bonded pending appeal for any period of 60 consecutive days, and the
aggregate amount not covered by a reputable and solvent insurance company of all
such judgments exceeds $10,000,000; or
10.10 Change of Control. A Change of Control shall occur; or
10.11 General Partner Status. Patriot REIT or a Wholly-Owned
Subsidiary of Patriot REIT shall cease at any time to be the sole general
partner of Patriot OP; or
10.12 Security Documents. (a) The Pledge Agreement shall cease to be
in full force and effect in all material respects, or shall cease to give the
Collateral Agent the Liens, rights, powers and privileges purported to be
created thereby in favor of the Collateral Agent, superior to and prior to the
rights of all third Persons (except as permitted by Section 9.06), and subject
to no other Liens (except as permitted by Section 9.06), or (b) any Credit Party
shall default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to the Pledge
Agreement and such default shall continue beyond any cure or grace period
specifically applicable thereto pursuant to the terms of the Pledge Agreement;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent, upon the written request of
the Required Lenders, shall by written notice to either Borrower, take any or
all of the following actions, without prejudice to the rights of the
Administrative Agent, any Lender or the holder of any Note to enforce its claims
against any Credit Party (provided, that, if an Event of Default specified in
Section 10.05 shall occur with respect to either Borrower, the result which
would occur upon the giving of written notice by the Administrative Agent to
either Borrower as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitments terminated, whereupon all of the Commitments of each Lender shall
forthwith terminate immediately and any Commitment Fee shall forthwith become
due and payable without any other notice of any kind; (ii) declare the principal
of and any accrued interest in respect of all Loans and the Notes and all
Obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Credit Party; (iii)
enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or
all of the Liens and security interests created pursuant to the Pledge
Agreement; (iv) terminate any Letter of Credit which may be terminated in
accordance with its terms; and (v) apply any cash collateral held pursuant to
this agreement to the payment of Obligations.
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SECTION 11. Definitions and Accounting Terms.
11.01 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Acceptable Financial Information" shall mean financial information
which is audited, reviewed by accountants or in a form which is acceptable to
the Administrative Agent.
"Adjusted Funds From Operations" shall mean, for any period, Patriot
REIT Net Income plus (a) the sum of the following amounts for such period to the
extent and on the same basis included in the determination of Patriot REIT Net
Income: (i) depreciation expense, (ii) amortization expense and other non-cash
charges with respect to real estate assets for such period, (iii) losses from
Asset Sales, losses resulting from restructuring of Indebtedness and other
extraordinary losses, and (iv) minority interests attributable to Patriot OP
Units; less (b) the sum of the following amounts for such period to the extent
and on the same basis included in the determination of Patriot REIT Net Income:
(i) gains from sales or dispositions of assets, gains resulting from
restructuring of Indebtedness and other extraordinary gains, and (ii) the
applicable shares of net income of Patriot REIT's and its Subsidiaries'
Unconsolidated Entities; plus (c) Patriot REIT's and its Subsidiaries'
Allocation Percentage of funds from operations (determined in a manner
consistent with this definition of Adjusted Funds From Operations) of Patriot
REIT's and its Subsidiaries' Unconsolidated Entities.
"Adjusted RL Percentage" shall mean (x) at a time when no Lender
Default exists, for each Lender, such Lender's RL Percentage and (y) at a time
when a Lender Default exists (i) for each Lender that is a Defaulting Lender,
zero and (ii) for each Lender that is a Non-Defaulting Lender, the percentage
determined by dividing such Lender's Revolving Loan Commitment at such time by
the Adjusted Total Revolving Loan Commitment at such time, it being understood
that all references herein to Revolving Loan Commitments and the Adjusted Total
Revolving Loan Commitment at a time when the Total Revolving Loan Commitment or
Adjusted Total Revolving Loan Commitment, as the case may be, has been
terminated shall be references to the Revolving Loan Commitments or Adjusted
Total Revolving Loan Commitment, as the case may be, in effect immediately prior
to such termination, provided that (A) no Lender's Adjusted RL Percentage shall
change upon the occurrence of a Lender Default from that in effect immediately
prior to such Lender Default if after giving effect to such Lender Default, and
any repayment of Revolving Loans and Swingline Loans at such time pursuant to
Section 4.02(a) or otherwise, the sum of (i) the aggregate outstanding principal
amount of Revolving Loans of all Non-Defaulting Lenders plus (ii) the aggregate
outstanding principal amount of Swingline Loans plus (iii) the Letter of Credit
Outstandings, exceed the Adjusted Total Revolving Loan Commitment; (B) the
changes to the Adjusted RL Percentage that would have become effective upon the
occurrence of a Lender Default but that did not become effective as a result of
the preceding clause (A) shall become effective on the first date after the
occurrence of the relevant Lender Default on which the sum of (i) the aggregate
outstanding principal amount of the Revolving Loans of all Non-Defaulting
Lenders plus (ii) the aggregate outstanding principal amount of Swingline Loans
plus (iii) the Letter of Credit Outstandings is equal to or
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less than the Adjusted Total Revolving Loan Commitment; and (C) if (i) a
Non-Defaulting Bank's Adjusted RL Percentage is changed pursuant to the
preceding clause (B) and (ii) any repayment of such Lender's Revolving Loans, or
of Unpaid Drawings with respect to Letters of Credit or of Swingline Loans, that
were made during the period commencing after the date of the relevant Lender
Default and ending on the date of such change to its Adjusted RL Percentage must
be returned to the Borrower as a preferential or similar payment in any
bankruptcy or similar proceeding of the Borrower, then the change to such
Non-Defaulting Lender's Adjusted RL Percentage effected pursuant to said clause
(B) shall be reduced to that positive change, if any, as would have been made to
its Adjusted Percentage if (x) such repayments had not been made and (y) the
maximum change to its Adjusted Percentage would have resulted in the sum of the
outstanding principal of Revolving Loans made by such Lender plus such Lender's
new Adjusted Percentage of the outstanding principal amount of Swingline Loans
and of Letter of Credit Outstandings equaling such Lender's Revolving Loan
Commitment at such time.
"Adjusted Total Revolving Loan Commitment" shall mean at any time the
Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of
all Defaulting Lenders.
"Administrative Agent" shall mean Chase, in its capacity as
Administrative Agent for the Lenders hereunder, and shall include any successor
to the Administrative Agent appointed pursuant to Section 12.09.
"Affected Eurodollar Loans" shall have the meaning provided in Section
4.02(f).
"Affiliate" shall mean, with respect to any Person, any other Person
(i) directly or indirectly controlling (including, but not limited to, all
directors, officers and partners of such Person) controlled by, or under direct
or indirect common control with, such Person or (ii) that directly or indirectly
owns more than 5% of any class of the voting securities or capital stock of or
equity interests in such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Affiliated Operating Lease" shall mean an Operating Lease with an
Affiliated Operator substantially in the form delivered to, and found acceptable
by, the Administrative Agent.
"Affiliated Operator" shall mean a lessee under an Operating Lease
which is (i) Wyndham or (ii) a Subsidiary of Patriot REIT or Wyndham.
"Agents" shall have the meaning set forth in Section 12.01 of this
Agreement.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
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"Allocation Percentage" shall mean, (i) with respect to any Borrower
or any Wholly-Owned Subsidiary of any Borrower, 100% and (ii) for any other
Person, with respect to such Person's Subsidiaries and Unconsolidated Entities,
the percentage ownership interest of such Person in such Subsidiary or
Unconsolidated Entity, respectively, provided that, for purposes of determining
any Person's Allocation Percentage of the Indebtedness of a Subsidiary or
Unconsolidated Entity for which such Person is a general partner, such Person's
Allocation Percentage with respect to such Subsidiary or Unconsolidated Entity
shall be the percentage of the general partner interests owned by such Person in
such Subsidiary or Unconsolidated Entity with respect to any Indebtedness for
which recourse may be made against any general partner of such Subsidiary or
Unconsolidated Entity.
"Amended and Restated Affiliate Guaranty" shall have the meaning
provided in Section 5.05.
"Applicable Margin" shall mean, with respect to each Tranche I Term
Loan, Tranche II Term Loan, Tranche III Term Loan, Tranche B Term Loan,
Revolving Loan, Swingline Loan and Commitment Fee at any date, the applicable
percentage per annum set forth below based upon the Status then in effect, it
being understood that (x)(A) from the Restatement Effective Date through May 15,
1998, the Applicable Margin shall be based on the Status applicable on the
Restatement Effective Date, (B) if on any date Level I Status through Level IV
Status is then in effect, the Applicable Margin for all Loans except Tranche B
Term Loans (for which the Applicable Margin shall always be based upon Level V
Status through Level IX Status without regard to clause (x) in the definitions
of each such Status) shall be based on the Status in effect on such date, (C) if
Level I Status through Level IV Status is not then in effect, and in any event
in the case of Tranche B Term Loans, the Applicable Margin shall be based on the
Status in effect on the 45th day following the end of each Fiscal Quarter, and
such Applicable Margin shall be set until the Status is redetermined pursuant to
this clause (C) or, with respect to all Loans other than Tranche B Term Loans,
until Level I Status through Level IV Status is in existence, and (D) from
November 1, 1998 until the Tranche I Term Loan Maturity Date, the Applicable
Margin for Tranche I Term Loans shall be (a) the applicable percentage per annum
set forth below based upon the Status then in effect, plus (b) 0.25% and (y) the
Applicable Margin for (i) Base Rate Loans shall be the percentage set forth
under the column "Base Rate Loans", (ii) Eurodollar Rate Loans shall be the
percentage set forth under the column "Eurodollar Rate Loans", and (iii) the
Commitment Fee shall be the percentage set forth under the column "Commitment
Fee":
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<TABLE>
<CAPTION>
Revolving Loans, Swingline
Loans and
Tranche I, II, III Term Loans Tranche B Term Loans
----------------------------- --------------------
Base Rate Eurodollar Base Rate Eurodollar
Loans Rate Loans Loans Rate Loans Commitment Fee
----- ---------- ----- ---------- --------------
<S> <C> <C> <C> <C> <C>
Level I 0% 1.00% -- -- 0.125%
Status
Level II 0% 1.125% -- -- 0.15%
Status
Level III 0% 1.25% -- -- 0.15%
Status
Level IV 0% 1.375% -- -- 0.20%
Status
Level V 0% 1.50% 0.50% 2.00% 0.20%
Status
Level VI 0.20% 1.70% 0.50% 2.00% 0.25%
Status
Level VII 0.35% 1.85% 0.75% 2.25% 0.30%
Status
Level VIII 0.50% 2.00% 0.75% 2.25% 0.35%
Status
Level IX 0.75% 2.25% 1.00% 2.50% 0.40%
Status
</TABLE>
"Applicable Prepayment Percentage" shall mean, at any time, (i) 100%,
provided that if at any time the Leverage Ratio is equal to or less than
4.50:1.00, the Applicable Prepayment Percentage shall instead be 0%.
Notwithstanding anything to the contrary in this definition, at any time an
Event of Default is then in existence, the Applicable Prepayment Percentage
shall be 100%.
"Approved Appraisal" shall mean a FIRREA appraisal prepared by an MAI
`ppraiser reasonably satisfactory to the Administrative Agent.
"Approved Fund" shall mean any fund that invests in commercial loans
and has total assets under management in excess of $100,000,000.
"Approved Lender" shall have the meaning provided in the definition of
"Cash Equivalents."
"Appurtenant Rights" shall mean (i) all easements, rights of way or
use, rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and
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benefits at any time belonging or pertaining to each Hotel or the improvements
thereon, including, without limitation, the use of any streets, ways, alleys,
vaults or strips of land adjoining, abutting, adjacent or contiguous to such
Hotel and (ii) all permits, licenses and rights, whether or not of record,
appurtenant to such Hotel.
"Arranger" shall mean each of Paine Webber Real Estate Securities Inc.
and Chase Securities Inc.
"Asset Encumbrance" shall mean the placement of any Lien, claim or
encumbrance on any Hotel or any other assets, or group of related assets of any
Borrower, any Guarantor or any of their respective Subsidiaries or
Unconsolidated Entities.
"Asset Sale" shall mean any sale, conveyance, transfer, assignment,
lease or other disposition (including, without limitation, by merger or
consolidation, and dispositions or transfers arising out of, or in connection
with, a Recovery Event) by any Borrower, any Guarantor or any of their
respective Subsidiaries or Unconsolidated Entities to any Person (other than to
any Borrower, any Guarantor or any of their respective Subsidiaries or
Unconsolidated Entities) of any Stock (other than new issuances of Stock) of any
of its Subsidiaries, any Stock Equivalents (other than new issuances of Stock
Equivalents) of any of its Subsidiaries or any Hotel or any other assets, or
group of related assets, in each case other than (i) sales, dispositions and
transfers of obsolete personal property and FF&E, and (ii) other sales,
dispositions and transfers which generate net proceeds and/or other
consideration the fair market value of which is less than $1,000,000 in the
aggregate in any Fiscal Year of the Borrowers.
"Assignment and Assumption Agreement" shall mean an Assignment and
Assumption Agreement substantially in the form of Exhibit K (appropriately
completed).
"Authorized Financial Officer" of any Credit Party shall mean any of
the Chairman, President, Chief Financial Officer, the Treasurer or the Chief
Accounting Officer of such Credit Party, or in the case of Patriot OP, the
Authorized Financial Officer of the general partner of Patriot OP.
"Authorized Officer" of any Credit Party shall mean any of the
President, any Authorized Financial Officer or any Vice-President of such Credit
Party or any other officer of such Credit Party which is designated in writing
to the Administrative Agent by any of the foregoing officers of such Credit
Party as being authorized to give such notices under this Agreement.
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" at any time shall mean the higher of (i) the rate of
interest announced publicly by Chase at its principal office, from time to time,
as Chase's base rate and (ii) the sum (adjusted to the nearest 1/8 of 1% or, if
there is no nearest 1/8 of 1%, to the next higher 1/8 of 1%) of (x) 1/2 of 1%
per annum plus (y) the Federal Funds Rate.
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<PAGE>
"Base Rate Loan" shall mean each Loan designated or deemed designated
as such by the Borrower at the time of the incurrence thereof or conversion
thereto.
"Best Knowledge" shall mean, with respect to any Person, the actual
knowledge of any member of the Senior Management of such Person.
"Borrower" shall have the meaning set forth in the first paragraph of
this Agreement.
"Borrowing" shall mean the borrowing of one Type of Loan of a single
Tranche from all the Lenders (other than any Lender which has not funded its
share of a Borrowing in accordance with this Agreement) having Commitments of
the respective Tranche (or from the Swingline Lender in the case of Swingline
Loans) on a given date (or resulting from a conversion or conversions on such
date) having in the case of Eurodollar Loans the same Interest Period, provided
that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered
part of the related Borrowing of Eurodollar Loans. It is understood that there
may be more than one Borrowing outstanding pursuant to a given Tranche.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day except Saturday, Sunday and any day which shall be
in New York City a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in the New York interbank Eurodollar market.
"Calculation Period" shall mean the period of four consecutive
Fiscal Quarters last ended before the date of the respective event or incurrence
which requires calculations to be made on a Pro Forma Basis.
"Capital Lease", as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" of any Person shall mean all
obligations under Capital Leases of such Person or any of its Subsidiaries, in
each case taken at the amount thereof accounted for as liabilities in accordance
with GAAP.
"Cash Available for Distribution" shall mean, for any period (i)
Adjusted Funds From Operations less (ii) the FF&E Reserves with respect to
Patriot REIT, its Subsidiaries and Unconsolidated Entities, multiplied by the
applicable Allocation Percentage.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (ii) U.S.
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dollar denominated time deposits, certificates of deposit and bankers
acceptances of (x) any Lender or (y) any bank whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof (any such bank or Lender, an "Approved
Lender"), in each case with maturities of not more than six months from the date
of acquisition, (iii) commercial paper issued by any Approved Lender or by the
parent company of any Approved Lender and commercial paper issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody's, or guaranteed by any industrial company with
a long term unsecured debt rating of at least A or A2, or the equivalent of each
thereof, from S&P or Moody's, as the case may be, and in each case maturing
within six months after the date of acquisition, (iv) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within six months from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either S&P or
Moody's, (v) proceeds from the sale of any asset of any Borrower, any Guarantor
or any of their respective Subsidiaries held in trust by any Approved Lender or
other Person satisfactory to the Administrative Agent for not more than six
months in connection with a proposed like-kind transaction under Section 1031 of
the Code and (vi) investments in money market funds substantially all the assets
of which are comprised of securities of the types described in clauses (i)
through (iv) above.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.CA. Section 9601 et seq.
"Change of Control" shall mean any of the following events: (i) the
failure of Patriot REIT, or a Wholly-Owned Subsidiary of Patriot REIT, to be the
sole general partner of Patriot OP; (ii) the acquisition, directly or
indirectly, by any one "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) of more than 30% of the common stock of Patriot REIT;
or (iii) during any period of 24 consecutive calendar months after the
Restatement Effective Date, individuals who at the beginning of such period
constituted the Board of Directors of Patriot REIT (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders or members, as the case may be, of Patriot REIT was
approved by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of such Board of Directors then in office; provided, that no Change of
Control shall be deemed to have occurred as a result of the Interstate
Transaction.
"Chase" shall mean The Chase Manhattan Bank, in its individual
capacity.
"CHC Acquisition" shall mean the acquisition by Patriot REIT and its
Affiliates of Carnival Hotel Corporation, Inc. and its Affiliates, including
without limitation the transactions contemplated pursuant to a certain Agreement
and Plan of Merger by and among Patriot REIT, Patriot OP and CHC International,
Inc.
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<PAGE>
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder. Section references to
the Code are to the Code, as in effect at the date of this Agreement, and to any
subsequent provision of the Code, amendatory thereof, supplemental thereto or
substituted therefor.
"Collateral" shall mean all of the Collateral as defined in the Pledge
Agreement.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Secured Creditors.
"Commitment" shall mean any of the commitments of any Lender, i.e.,
whether the Tranche II Term Loan Commitment, Tranche III Term Loan Commitment,
Tranche B Term Loan Commitment or Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Company Combined Basis" shall mean, with respect to any financial
statement, that such statement is calculated on a consolidated basis for each of
Patriot REIT and its Subsidiaries and Wyndham and its Subsidiaries and that such
calculations are then combined in accordance with GAAP.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee (including, without
limitation, as a result of such Person being a general partner of the other
Person, unless the underlying obligation is expressly made non-recourse as to
such general partner) any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof in the manner of a guaranty; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
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"Credit Documents" shall mean this Agreement, each Note, the Amended
and Restated Affiliate Guaranty and the Pledge Agreement.
"Credit Event" shall mean the making of any Loan (other than a
Revolving Loan made pursuant to a Mandatory Borrowing) or the issuance of any
Letter of Credit.
"Credit Party" shall mean each Borrower and each Guarantor.
"CSI" shall mean Chase Securities Inc., in its individual capacity.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to which a
Lender Default is in effect.
"Determination Date" shall have the meaning provided in the definition
of Pro Forma Basis.
"Derivatives Obligations" of any Person means all Interest Rate
Protection Agreements and all other obligations of such Person in respect of any
interest rate swap transaction, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
"Dividends" with respect to any Person shall mean that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
or partners or authorized or made any other distribution, payment or delivery of
property (other than common stock of such Person) or cash to its stockholders or
partners as such, or redeemed, retired, purchased or otherwise acquired,
directly or indirectly, for a consideration any shares of any class of its
capital stock or any partnership interests outstanding on or after the
Restatement Effective Date (or any options or warrants issued by such Person
with respect to its capital stock or partnership interest), or set aside any
funds for any of the foregoing purposes, or shall have permitted any of its
Subsidiaries to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock or any partnership interests of such Person
outstanding on or after the Restatement Effective Date (or any options or
warrants issued by such Person with respect to its capital stock or partnership
interest).
"Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States.
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"Domestic Subsidiary" shall mean each Subsidiary of Patriot REIT or
Wyndham, as the case may be, incorporated or organized in the United States or
any State or territory thereof.
"Drawing" shall have the meaning provided in Section 2.04(a).
"EBITDA" shall mean, for any Person for any period, the net income of
such Person for such period, plus (a) the sum of the following amounts of such
Person for such period determined in conformity with GAAP to the extent included
in the determination of such net income: (i) depreciation expense, (ii)
amortization expense and other non-cash charges, (iii) interest expense, (iv)
income tax expense, (v) extraordinary losses (and other losses on Asset Sales
not otherwise included in extraordinary losses determined in conformity with
GAAP) and (vi) minority interests attributable to the OP Units, less (b)
extraordinary gains of such Person determined in conformity with GAAP to the
extent included in the determination of such net income (and other gains on
sales or other dispositions or assets not otherwise included in extraordinary
gains determined in conformity with GAAP).
"Eligible Transferee" shall mean (i) a commercial bank or Federal
savings bank organized under the laws of the United States, or any State
thereof, and having total assets in excess of $5,000,000,000; (ii) a commercial
bank organized under the laws of any other country which is a member of the
OECD, or a political subdivision of any such country, and having total assets in
excess of $5,000,000,000, provided that such bank is acting through a branch or
agency located in the country in which it is organized or another country which
is also a member of the OECD or the Cayman Islands; (iii) the central bank of
any country which is a member of the OECD; corporation organized under the laws
of the United States, or any State thereof, and having total assets in excess of
$3,000,000,000; (iv) an insurance company organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$5,000,000,000; (v) any Lender; (vi) any Affiliate of any Lender or any Approved
Fund; and (vii) any Person other than an Affiliate of a Credit Party, in each
case acceptable (a) to the Administrative Agent, and (b) provided no Default or
Event of Default exists, to the Borrower, which acceptance will not be
unreasonably withheld, conditioned or delayed.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any Environmental Law (hereafter "Claims") or any permit issued
under any such law, including, without limitation, (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy and rule of common
law now or hereafter in effect and in each case as
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amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment relating to
the environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.CA. Section 2601 et seq., the Clean Air Act, 42 U.S.CA. Section 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.CA. Section 3803 et seq.; the Oil
Pollution Act of 1990, 33 U.S.CA. Section 2701 et seq.; the Emergency Planning
and the Community Right-to-Know Act of 1986, 42 U.S.CA. Section 11001 et seq.,
the Hazardous Material Transportation Act, 49 U.S.CA. Section 1801 et seq. and
the Occupational Safety and Health Act, 29 U.S.CA. Section 651 et seq. (to the
extent it regulates occupational exposure to Hazardous Materials); and any
state and local or foreign counterparts or equivalents, in each case as
amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with any Borrower, any Guarantor or any Subsidiary of
any such Person would be deemed to be a "single employer" within the meaning of
Section 414(b),(c), (m) or (o) of the Code.
"Eurodollar Loan" shall mean each Loan designated as such by the
respective Borrower at the time of the incurrence thereof or conversion thereto.
"Eurodollar Rate" means, for any Interest Period, an interest rate per
annum equal to the rate per annum obtained by multiplying (a) a rate per annum
equal to the rate for U.S. dollar deposits with maturities comparable to such
Interest Period which appears on Telerate Page 3750 as of 11:00 a.m., London
time, two (2) Business Days prior to the commencement of such Interest Period,
provided, however, that if such rate does not appear on Telerate Page 3750, the
"Eurodollar Rate" applicable to a particular Interest Period shall mean a rate
per annum equal to the rate at which U.S. dollar deposits in an amount
approximately equal to the Principal Balance (or the portion thereof which will
bear interest at a rate determined by reference to the Eurodollar Rate during
the Interest Period to which such Eurodollar Rate is applicable in accordance
with the provisions hereof), and with maturities comparable to the last day of
the Interest Period with respect to which such Eurodollar Rate is applicable,
are offered in immediately available funds in the London Interbank Market to the
London office of Chase by leading banks in the Eurodollar market at 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of the Interest
Period to which such Eurodollar Rate is applicable, by (b) a fraction (expressed
as a decimal) the numerator of which shall be the number one and the denominator
of which shall be the number one minus the Eurodollar Rate Reserve Percentage
for such Interest Period.
"Eurodollar Rate Reserve Percentage" for any Interest Period means the
aggregate reserve percentages (expressed as a decimal) from time to time
established by the Board of
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Governors of the Federal Reserve System of the United States and any other
banking authority to which any of the Lenders are now or hereafter subject,
including, but not limited to any reserve on Eurocurrency Liabilities as defined
in Regulation D of the Board of Governors of the Federal Reserve System of the
United States at the ratios provided in such Regulation from time to time, it
being agreed that any portion of the Principal Balance bearing interest at a
rate determined by reference to the Eurodollar Rate shall be deemed to
constitute Eurocurrency Liabilities, as defined by such Regulation, and it being
further agreed that such Eurocurrency Liabilities shall be deemed to be subject
to such reserve requirements without benefit of or credit for prorations,
exceptions or offsets that may be available to any of the Lenders from time to
time under such Regulation and irrespective of whether such Lender actually
maintains all or any portion of such reserve.
"Event of Default" shall have the meaning provided in Section 10.
"Excluded Unconsolidated Entity" shall mean any Person which would be
an Unconsolidated Entity (without giving effect to the parenthetical in the
definition thereof) designated as an Excluded Unconsolidated Entity by written
notice from either Borrower to the Administrative Agent so long as (i) the
maximum liability of the Borrowers, the Guarantors, their respective
Subsidiaries and the Unconsolidated Entities to or on the behalf of such
Excluded Unconsolidated Entity is limited to the Investments made, or to be made
by such Person in compliance with all the limitations on such Investments under
this Agreement, in such Excluded Unconsolidated Entity and (ii) the obligations
of such Excluded Unconsolidated Entity are otherwise without recourse (other
than claims in respect of customary indemnities and non-recourse covenants) to
the Borrowers, the Guarantors, their respective Subsidiaries and the
Unconsolidated Entities, and/or any of their respective assets.
"Existing Indebtedness" shall have the meaning provided in Section
7.19.
"Extended-Stay Hotel" shall mean a Hotel which may reasonably be
categorized as one which (i) primarily services guests needing accommodations
for a period of five days or longer, (ii) offers limited or no food or beverage
facilities or meeting space, (iii) offers services and facilities designed to
appeal to longer-term residents, such as grocery shopping and laundry services,
(iv) offers some type of kitchen facility, and (v) quotes rates on a weekly or
monthly basis (e.g., hotels operated as Residence Inns by Marriott, Homewood
Suites, Candlewood Suites and Suburban Lodges).
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
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"Fees" shall mean all amounts payable pursuant to or referred to in
Section 3.01.
"FF&E" shall mean, with respect to any Hotel, any furniture, fixtures
and equipment, including any beds, lamps, bedding, tables, chairs, sofas,
curtains, carpeting, smoke detectors, mini bars, paintings, decorations,
televisions, telephones, radios, desks, dressers, towels, bathroom equipment,
heating, cooling, lighting, laundry, incinerating, loading, swimming pool,
landscaping, garage and power equipment, machinery, engines, vehicles, fire
prevention, refrigerating, ventilating and communications apparatus, carts,
dollies, elevators, escalators, kitchen appliances, restaurant equipment,
computers, reservation systems, software, cash registers, switchboards, cleaning
equipment or any other items of furniture, fixtures and equipment typically used
in hotel properties (including furniture, fixtures and equipment used in guest
rooms, lobbies and common areas).
"FF&E Reserve" shall mean, with respect to any Hotel for any period,
the actual reserve required under the Operating Lease for such Hotel, provided
that if the Operating Lease does not create contractual FF&E obligations, or
such Hotel is not subject to an Operating Lease, the FF&E Reserve for such Hotel
shall be a reserve equal to 4% of Gross Revenues from such Hotel for such
period.
"Fiscal Quarter" shall mean each fiscal quarter of the respective
Borrower ending on March 31, June 30, September 30 and December 31 of each
calendar year.
"Fiscal Year" shall mean each fiscal year of the respective Borrower
ending on December 31 of each calendar year.
"Fixed Charge Coverage Ratio" shall mean, for any Test Period, the
ratio of (i) Total Adjusted EBITDA for such Test Period plus EBITDA of each
Excluded Unconsolidated Entity multiplied by the applicable Allocation
Percentage to (ii) the sum of (v) Total Interest Expense for such Test Period,
(w) all scheduled principal amortization payments (excluding final payments due
at maturity) on Total Indebtedness made during such Test Period, (x) preferred
stock dividends (excluding dividends in respect of preferred stock issued in
connection with the CHC Acquisition or other acquisitions to the extent such
dividends are paid on a non-fixed basis which is the functional equivalent of
paying dividends in respect of the common stock of Patriot REIT (or on a basis
which is more favorable to the Lenders)) accrued by Patriot REIT or Wyndham
during such Test Period, (y) interest expense (including capitalized interest)
and scheduled principal amortization payments (excluding final payments due at
maturity) on Indebtedness of Excluded Unconsolidated Entities multiplied by the
applicable Allocation Percentage and (z) 4% of Gross Revenues during such Test
Period received from each Hotel owned or leased pursuant to a ground lease by
any Borrower, any Guarantor or any of their respective Subsidiaries.
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by any Borrower or any one or
more of its Affiliates primarily for the benefit of employees of any Borrower or
such Affiliates residing outside the United States of America, which plan, fund
or other similar program provides, or results in, retirement income, a deferral
of
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income in contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code, and as to which
plan any Borrower or any Guarantor has any material liability.
"Foreign Subsidiary" shall mean each Subsidiary of any Borrower or
Guarantor other than a Domestic Subsidiary.
"Forward Purchase Obligations" shall mean obligations to purchase
Hotels and related property upon the completion of construction or renovation
thereof, or upon the occurrence of another future contingency (excluding
obligations under purchase, sale and acquisition agreements entered into in the
ordinary course of business).
"Full-Service Hotel" shall mean a Hotel (including an all-suites
Hotel) which may reasonably be categorized as one which offers customary food
and beverage facilities and room service.
"GAAP" shall have the meaning provided in Section 13.07(a).
"Gross Revenues" shall mean all revenues derived from the operation of
Hospitality/Leisure-Related Businesses.
"Guaranteed Obligations" shall mean all obligations of each Borrower
to each Lender for the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of the principal and interest on each
Note issued by any Borrower to such Lender, and Loans made, under this Agreement
and all reimbursement obligations and Unpaid Drawings with respect to Letters of
Credit, together with all the other obligations and liabilities (including,
without limitation, indemnities, fees and interest thereon) of any Borrower to
such Lender now existing or hereafter incurred under, arising out of or in
connection with the Agreement or any other Credit Document and the due
performance and compliance with all the terms, conditions and agreements
contained in the Credit Documents by the Borrower.
"Guarantor" shall mean (i) on the Restatement Effective Date, each
Domestic Subsidiary of Patriot REIT in existence on the Restatement Effective
Date other than Patriot OP and any other Subsidiary listed on Schedule VIII and
designated a "Non-Credit Party Subsidiary" therein, (ii) on the Restatement
Effective Date, Wyndham and each of its Domestic Subsidiaries in existence on
the Restatement Effective Date other than any Subsidiary listed on Schedule VIII
and designated a "Non-Credit Party Subsidiary" therein and (iii) at any time,
any other Domestic Subsidiary of Patriot REIT or Wyndham created or acquired
after the Restatement Effective Date excluding any Subsidiary reasonably
designated by the Arrangers to be a Non-Credit Party Subsidiary.
"Guarantor Event of Default" shall have the meaning provided in the
Amended and Restated Affiliate Guaranty.
"Guaranty" shall mean the Amended and Restated Affiliate Guaranty.
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"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect under any applicable Environmental Law.
"Hospitality/Leisure-Related Business" shall mean the hotel, resort,
extended stay lodging, other hospitality, vacation or timeshare business or any
casino (but only if part of a Hotel and not as a stand-alone or primary
business), senior living (excluding congregate care) or recreational business
and other businesses incidental to, or in support of such business, including
without limitation, (i) developing, managing, operating, improving or acquiring
lodging facilities, restaurants and other food-service facilities, golf
facilities or other entertainment facilities or club, convention or meeting
facilities and marketing services or reservation systems related thereto, and
(ii) acquiring, developing, managing or improving any real estate ancillary or
connected to any hotel, resort, extended stay lodging, other hospitality-related
business, casino (but only if a part of a Hotel and not as a stand-alone or
primary business), senior living (excluding congregate care) or recreational
business or reservation system constructed, leased, owned, managed or operated
(or proposed to be constructed, leased, owned, managed or operated) by the
Borrowers, the Guarantors or any of their Subsidiaries at any time; provided,
that the operation of a horse racing facility and pari-mutuel wagering in the
manner so operated on the Restatement Effective Date shall be permitted.
"Hotel" shall mean any Real Property (including Improvements thereon
and any retail, golf, tennis, spa or other resort amenities appurtenant thereto)
comprising an operating facility offering hotel or lodging services.
"Improvements" shall mean all buildings, structures, fixtures, tenant
improvements and other improvements of every kind and description now or
hereafter located in or on or attached to any Real Property, including all
building materials, water, sanitary and storm sewers, drainage, electricity,
steam, gas, telephone and other utility facilities, parking areas, roads,
driveways, walks and other site improvements; and all additions and betterments
thereto and all renewals, substitutions and replacements thereof.
"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property
(including Forward Purchase Obligations) or services, (ii) the maximum amount
available to be drawn under all letters of credit issued for the account of such
Person and all unpaid drawings in respect of such letters of credit, (iii) all
Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or
(vii) of this definition secured by any Lien on any property owned by such
Person, whether or not such Indebtedness has been assumed by such Person, (iv)
the aggregate amount required to be capitalized in accordance with GAAP under
leases under which such Person is the lessee, (v) all obligations of
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such person to pay a specified purchase price for goods or services, whether or
not delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all
Contingent Obligations of such Person, and (vii) all obligations under any
Interest Rate Protection Agreement or under any similar type of agreement or
arrangement; provided, that Indebtedness shall not include (a) trade payables
incurred in the ordinary course of business, (b) operating lease obligations
(including, without limitation, the lessee's obligations under (i) the eleven
(11) Lease Agreements dated as of May 2, 1996 and/or May 3, 1996 originally
between HPTWN Corporation, as lessor, and Garden Hotel Associates Two LP, as
lessee (subsequently assigned to GHALP Corporation, as lessee), (ii) the Lease
dated as of January 8, 1997 originally between HPTSLC Corporation, as lessor,
and WHC Salt Lake City Corporation, as lessee, and (iii) any other operating
lease pursuant to which any Borrower, any Guarantor or any of their respective
Subsidiaries or Unconsolidated Entities, as lessee, leases all or any portion of
a Hotel from the holder of a superior interest in such Hotel, as lessor), (c)
short term notes evidencing earnest money deposits until delivered to the payee
and (d) at the time of determination of outstanding Indebtedness at any time,
the aggregate amount of Forward Purchase Obligations not in excess of
$400,000,000 then outstanding.
"Independent Hotel" shall mean a Hotel which is not associated or
designated to become associated within six months of such designation with a
nationally or regionally recognized hotel or resort brand or franchise or hotel
membership organization encompassing at least 5 Hotels, provided, that
notwithstanding the foregoing, Hotels operating under any of the names of Grand
Heritage, Carefree, and to the extent the right to use or ownership is acquired,
West Coast, Homegate, Club House, Grand Bay, Registry and Carnival shall not be
considered Independent Hotels.
"Intangible Asset" shall mean, with respect to any Person, a
long-lived asset that is useful in the operations of such Person, that is not
directly used in revenue generation and is not held for sale, and is without
physical qualities, including but not limited to patents, copyrights and
goodwill, but excluding capitalized costs associated with the acquisition of
brand names, franchises and trademarks, franchise agreements and management
agreements.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement, interest rate floor agreement or other similar agreement
or arrangement.
"Interstate Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of December 2, 1997, by and among Interstate Hotels Company,
Patriot REIT and Patriot American Hospitality Operating Company.
"Interstate Transaction" shall mean the transaction by which the
Interstate Hotels Company will merge with and into Patriot REIT with Patriot
REIT being the surviving entity
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pursuant to the Interstate Merger Agreement and related stockholders agreement
entered into by Patriot REIT dated December 2, 1997.
"Interstate Transaction Documents" shall mean the Interstate Merger
Agreement and all other documents and agreements entered into in connection with
the consummation of the Interstate Transaction.
"Investment" shall have the meaning provided in Section 9.04.
"Issuing Lender" shall mean the Administrative Agent and any Lender
which at the request of the respective Borrower and with the consent of the
Administrative Agent agrees, in such Lender's sole discretion, to become an
Issuing Lender for the purpose of issuing Letter of Credit pursuant to Section
2.
"Joint Venture" shall mean any Person, other than an individual or a
Wholly-Owned Subsidiary of Patriot REIT or Wyndham, in which Patriot REIT or
Wyndham or a Subsidiary of Patriot REIT or Wyndham holds or acquires an
ownership interest (whether by way of capital stock, partnership or limited
liability company interest, or other evidence of ownership).
"L/C Supportable Obligations" shall mean (i) obligations of the
Borrowers, the Guarantors, or any of their respective Subsidiaries or of any
Joint Venture incurred in the ordinary course of business with respect to
insurance obligations and workers' compensation, surety bonds and other similar
statutory obligations, (ii) earnest money or performance obligations in respect
of acquisitions permitted pursuant to the terms of this Agreement and (iii) such
other obligations of the Borrowers, the Guarantors, or any of their respective
Subsidiaries or of any Joint Venture as are permitted to exist pursuant to the
terms of this Agreement.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under any lease or
license of land, improvements and/or fixture.
"Legal Requirements" shall mean all Federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting each Hotel, the
improvements on such Hotel or the demolition, construction, use or alteration
thereof, whether now or hereafter enacted and in force, including any that
require repairs, modifications or alterations in or to such Hotel or in any
way limit the use and enjoyment thereof (including all building, zoning and
fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. Section
12101 et seq. and any other similar Federal, state or local laws or ordinances
and the regulations promulgated thereunder) and any that may relate to
environmental requirements (including all Environmental Laws), and all
permits, certificates of occupancy, licenses, authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
affecting such Hotel, the Appurtenant Rights and any easements, licenses or
other agreements entered respect to such Hotel.
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"Lender" shall mean each financial institution listed on Schedule I
and any Person which becomes a "Lender" hereunder pursuant to Sections 1.13
and/or 13.04(b).
"Lender Default" shall mean (i) the refusal (which has not been
retracted) of a Lender to make available its portion of any Borrowing or to fund
its portion of any unreimbursed payment under Section 2.03(c) or (ii) a Lender
having notified in writing any Borrower and/or the Administrative Agent that it
does not intend to comply with its obligations under Section 1.01 or Section 2,
in each case for any reason including, without limitation, as a result of any
takeover of such Lender by any regulatory authority or agency.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the sum of
(i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Leverage Ratio" shall mean, on any date, the ratio of (i) Total
Indebtedness on such date to (ii) Total Adjusted EBITDA for the Test Period most
recently ended on or prior to such date. All calculation of the Leverage Ratio
shall be made on a Pro Forma Basis.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other) or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing and excluding any
equipment operating leases and any precautionary filings related thereto).
"Limited-Service Hotel" shall mean a Hotel which may reasonably be
categorized as one which (i) offers either no, or very limited, meeting space
and food and beverage facilities such as restaurants, lounges and catering
facilities, (ii) may be described as a "rooms-only" property, and (iii) does not
have amenities such as bell-service, health spas or entertainment facilities
(e.g., hotels operated as Hampton Inns, Comfort Inns, La Quinta Inns and Red
Roof Inns). For the purpose of this agreement, Limited-Service Hotels shall not
include Hotels where the majority of rentable rooms are suites and the average
daily room rate over the preceding 12 months was $80 or more.
"Loan" shall mean each Tranche I Term Loan, each Tranche II Term Loan,
each Tranche III Term Loan, each Tranche B Term Loan, each Revolving Loan and
each Swingline Loan.
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"Majority Lenders" of any Tranche shall mean those Non-Defaulting
Lenders which constitute the Required Lenders under, and as defined in, this
Agreement if all outstanding Obligations of the other Tranches under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated.
"Management Agreement" shall mean any agreement pursuant to which any
Hotel is managed, operated, franchised or licensed and which (i) with respect to
the management or operation of such Hotel, is between any Borrower, any
Guarantor or any of their respective Subsidiaries on one hand and the Operator
of such Hotel on the other hand, and (ii) with respect to the franchising or
licensing of such Hotel, is in favor of any Borrower, any Guarantor or the
Operator of such Hotel and which permits the use of hotel system trademarks,
trade names and any related rights in connection with the ownership or operation
of such Hotel.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(g) of this Agreement.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, operations, property or condition (financial or otherwise) of the
Borrowers, the Guarantors, and their respective Subsidiaries, taken as a whole.
"Maturity Date" shall mean, with respect to any Tranche of Loans, the
Tranche I Term Loan Maturity Date, the Tranche II Term Loan Maturity Date, the
Tranche III Term Loan Maturity Date, the Tranche B Term Loan Maturity Date, the
Revolving Loan Maturity Date or the Swingline Expiry Date, as the case may be.
"Maximum Swingline Amount" shall mean $10,000,000.
"Minimum Borrowing Amount" shall mean, (i) for Revolving Loans,
$1,000,000, (ii) for Term Loans, $1,000,000, and (iii) for Swingline Loans,
$500,000.
"Minimum Tangible Net Worth" shall mean, at any time, the sum of (a)
75% of Tangible Net Worth as of the Restatement Effective Date plus (b) 60% of
the aggregate net proceeds received by any Borrower or any Guarantor after the
Restatement Effective Date in connection with any issuance of Stock, Stock
Equivalents or any OP Units, in each case to any Person other than any Borrower
or any Guarantor.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage Note" shall mean a duly authorized, executed and delivered
promissory note, which promissory note (i) is secured by a first priority
mortgage lien encumbering a Hotel that is owned or leased pursuant to a ground
lease by the obligor under such promissory note, (ii) is not in default beyond
applicable notice and cure periods, (iii) bears cash interest after the
Restatement Effective Date at minimum rate of at least 7% per annum and is
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payable at least quarterly and (iv) is not an obligation of the Borrower, any
Guarantor, any of their Subsidiaries or any Unconsolidated Entity.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA subject to Title IV of ERISA.
"Net Cash Proceeds" shall mean for any event requiring a reduction of
the Total Revolving Loan Commitment and/or repayment of Term Loans pursuant to
Section 3.03 or 4.02, as the case may be, the gross cash proceeds (including any
cash received by way of deferred payment pursuant to a promissory note,
receivable or otherwise, but only as and when received) received from such
event, net of reasonable transaction costs (including, as applicable, any
underwriting, brokerage or other customary commissions and reasonable legal,
advisory and other fees and expenses associated therewith) received from any
such event.
"Net Sale Proceeds" shall mean for any Asset Sale, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from any Asset Sale, net of (i) reasonable transaction costs
(including, without limitation, any underwriting, brokerage or other customary
selling commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses, associated therewith) and payments of
unassumed liabilities relating to the assets sold at the time of, or within 90
days after, the date of such sale, (ii) the amount of such gross cash proceeds
required to be used to repay any Indebtedness (other than Indebtedness of the
Lenders pursuant to this Agreement) which is secured by any of the respective
assets which were sold, and (iii) the estimated marginal increase in income
taxes which will be payable by Patriot REIT's or Wyndham's consolidated group
with respect to the fiscal year in which the sale occurs or deferred payment is
received as a result of such sale; provided, however, that such gross proceeds
shall not include any portion of such gross cash proceeds which the Borrowers
determine in good faith should be reserved for post-closing adjustments
(including indemnification payments) (to the extent the Borrower delivers to the
Lenders a certificate signed by an Authorized Financial Officer of such Borrower
officer as to such determination), it being understood and agreed that on the
day that all such post-closing adjustments have been determined (which shall not
be later than one year following the date of the respective Asset Sale), the
amount (if any) by which the reserved amount in respect of such sale or
disposition exceeds the actual post-closing adjustments payable by any Borrower,
any Guarantor or any of their respective Subsidiaries shall constitute Net Sale
Proceeds on such date received by any Borrower, any Guarantor and/or any of
their respective Subsidiaries from such sale, lease, transfer or other
disposition. The parties hereto acknowledge and agree that Net Sale Proceeds
shall not include any trade-in-credits or purchase price reductions received by
any Borrower, any Guarantor or any of their respective Subsidiaries in
connection with an exchange of equipment for replacement equipment that is the
functional equivalent of such exchanged equipment.
"New Construction" shall mean any of the following: (i) the
construction of any new Hotels, (ii) any conversion of any property to Hotel
use, or (iii) the addition of rooms to any
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Hotel which requires such Hotel to shut down for any period of time or which
increases the number of rooms of such Hotel by 50% or more.
"New Lender" shall mean each of the Persons Listed on Schedule I that
is not an Original Lender.
"Non-Credit Party Subsidiary" shall mean, (i) with respect to any
Subsidiary of the Borrowers or the Guarantors in existence on the Restatement
Effective Date, each Subsidiary listed on Schedule VIII hereto and designated as
a Non-Credit Party Subsidiary therein, and (ii) with respect to any Subsidiary
of the Borrowers or Guarantors acquired or created after the Restatement
Effective Date, each Subsidiary which the Arrangers reasonably determine, at the
time of such acquisition or creation, to be excluded from the requirement of
becoming a Guarantor under Section 9.14.
"Non-Defaulting Lender" shall mean and include each Lender other than
a Defaulting Lender.
"Non-Pledgor Credit Party Subsidiary" shall mean (i) with respect to
any Subsidiary of the Borrowers or the Guarantors in existence on the
Restatement Effective Date, each Subsidiary listed on Schedule VIII hereto and
designated as a Non-Pledgor Credit Party Subsidiary therein, and (ii) with
respect to any Subsidiary acquired or created after the Restatement Effective
Date, each Subsidiary which the Arrangers reasonably determine at the time of
such acquisition, to be excluded from the requirement of becoming a Pledgor
Credit Party under Section 9.14.
"Non-Recourse Indebtedness" shall mean Indebtedness with respect to
which no portion is guaranteed by, and no recourse claim (other than claims in
respect of customary indemnities and non-recourse carveouts) can be made
against, any Borrower, any Guarantor or any of their respective Subsidiaries.
"Non-Strategic Assets" shall mean any Hotel which is not branded under
a proprietary brand of Patriot REIT or Wyndham, except that the Wyndham Franklin
Plaza shall be included in this definition of Non-Strategic Assets.
"Note" shall mean each Tranche I Term Note, each Tranche II Term Note,
each Tranche III Term Note, each Tranche B Term Note, each Revolving Note and
the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03(a).
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
located at 380 Madison Avenue, 10th Floor, New York, New York 10017, Attention:
Fred Hammer, with a copy to One Chase Manhattan Plaza, Agency Plus, 8th Floor,
New York, New York 10081, Attention:
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Daniella Cassognol, or such other office as the Administrative Agent may
hereafter designate in writing as such to the other parties hereto.
"Obligations" shall mean all amounts owing to the Administrative
Agent, any Arranger or any Lender pursuant to the terms of this Agreement or any
other Credit Document.
"OECD" shall mean the Organization for Economic Cooperation and
Development.
"OP Units" shall mean and include Patriot OP Units and Wyndham
Partnership OP Units.
"Operating Account" shall have the meaning provided in Section 8.14.
"Operating Lease" shall mean a lease or sublease relating to all or
substantially all of any Hotel, between any Borrower, any Guarantor or any of
their respective Subsidiaries or Unconsolidated Entities, as lessor, and an
Operator, substantially in the form approved by the Administrative Agent.
"Operator" shall mean and include each Affiliated Operator and each
Third Party Operator.
"Original Credit Agreements" shall have the meaning provided in the
second WHEREAS clause of this Agreement.
"Original Lenders" shall mean the Original Revolver Lenders and the
Original Term Lenders.
"Original Letters of Credit" shall mean the letters of credit
previously issued under the Original Revolving Credit Agreement and listed on
Schedule IX hereto.
"Original Loans" shall mean the "Loans" under, and as defined in, the
Original Credit Agreements.
"Original Revolver Effective Date" shall mean the Effective Date
under, and as defined in, the Original Revolving Credit Agreement.
"Original Revolver Lenders" shall mean each Person which was a Lender
under, and as defined in, the Original Revolving Credit Agreement.
"Original Revolving Credit Agreement" shall have the meaning provided
in the first WHEREAS clause of this Agreement.
"Original Term Lenders" shall mean each Person which was a Lender
under, and as defined in, the Original Term Loan Agreement.
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"Original Term Loan Agreement" shall have the meaning provided in the
second WHEREAS clause of this Agreement.
"Original Term Loans" shall mean the Loans under, and as defined in,
the Original Term Loan Agreement.
"Other Hedging Agreement" shall mean foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values.
"Paine Webber" shall mean Paine Webber Real Estate Securities Inc. in
its individual capacity.
"Participant" shall have the meaning provided in Section 2.03(a).
"Patriot OP" shall have the meaning set forth in the first paragraph
of this Agreement.
"Patriot OP Units" shall mean the partnership units of Patriot OP.
"Patriot REIT" shall have the meaning set forth in the first paragraph
of this Agreement.
"Patriot REIT Net Income" shall mean (i) net income of Patriot REIT,
determined on a consolidated basis in accordance with GAAP, plus (ii) to the
extent not accounted for in clause (i), net income of each of Patriot REIT's
Unconsolidated Entities times the applicable Allocation Percentage.
"Payment Office" shall mean the office of the Administrative Agent
located at 380 Madison Avenue, New York, New York 10017, or such other office as
the Administrative Agent may hereafter designate in writing as such to the other
parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Encumbrances" shall mean (i) those liens, encumbrances and
other matters affecting title to any Real Property and found reasonably
acceptable by the Administrative Agent, (ii) as to any particular Real Property
at any time, such easements, encroachments, covenants, rights of way, minor
defects, irregularities or encumbrances on title which could not reasonably be
expected to materially impair such Real Property for the purpose for which it is
held by the mortgagor thereof, or the lien held by the Collateral Agent, (iii)
zoning and other municipal ordinances which are not violated in any material
respect by the existing improvements and the present use made by the mortgagor
thereof of the premises, (iv) general real estate taxes and assessments not yet
delinquent, and (v) such other similar items as the Administrative Agent may
consent to (such consent not to be unreasonably withheld).
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"Permitted Equity Swaps" shall mean all agreements which are
satisfactory to each of the Arrangers and are substantially similar to the
equity stock agreements to which Patriot REIT is a party on the Restatement
Effective Date, copies of which have been provided to the Administrative Agent;
provided, that all such equity stock agreements entered into after the
Restatement Effective Date shall be Permitted Equity Swaps only to the extent
such agreements by their terms may only be settled in stock.
"Permitted Liens" shall have the meaning provided in Section 9.06.
"Person" shall mean any individual, partnership, limited liability
company, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or any of its Subsidiaries or ERISA
Affiliates, and each such plan for the five-year period immediately following
the latest date on which the Borrower or any of its Subsidiaries or ERISA
Affiliates maintained, contributed to or had an obligation to contribute to such
plan.
"Pledge Agreement" shall have the meaning as provided in Section 5.06
of this Agreement.
"Pledgor Credit Party" shall mean (i) on the Restatement Effective
Date, Patriot REIT and each of its Domestic Subsidiaries in existence on the
Restatement Effective Date other than any Subsidiary listed on Schedule VIII and
designated a "Non-Pledgor Credit Party Subsidiary" therein, (ii) on the
Restatement Effective Date, Wyndham and each of its Domestic Subsidiaries in
existence on the Restatement Effective Date other than any Subsidiary listed on
Schedule VIII and designated a "Non-Pledgor Credit Party Subsidiary" therein,
and (iii) at any time, any other Domestic Subsidiary of Patriot REIT or Wyndham
created or acquired after the Restatement Effective Date excluding any
Subsidiary reasonably designated by the Arrangers to be a Non-Pledgor Credit
Party Subsidiary.
"Pricing Leverage Ratio" shall mean the ratio, for any Test Period, of
(i) the Total Indebtedness for such Test Period to (ii) Total Adjusted EBITDA
for such Test Period, calculated on a Pro Forma Basis.
"Principal Balance" shall mean the outstanding principal amount of the
Loans.
"Pro Forma Basis" shall mean, with respect to any incurrence of
Indebtedness, issuance of preferred stock by Patriot REIT or Wyndham or
acquisition of a Hotel (or the equity interest of the Person or Persons owning
such Hotel), the calculation of the consolidated results of the Borrowers, the
Guarantors and their respective Subsidiaries otherwise determined in accordance
with this Agreement as if the respective Indebtedness, issuance of preferred
stock or acquisition (and all other Indebtedness incurred, other preferred stock
issued or other such acquisition effected during the respective Calculation
Period or thereafter and on or prior to the date of determination) (each such
date, a "Determination Date") had been effected on the first
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day of the respective Calculation Period; provided that all such calculations
shall take into account the following assumptions:
(i) pro forma effect shall be given to (1) any Indebtedness incurred
or preferred stock issued subsequent to the end of the Calculation Period and
prior to the date of determination, (2) any Indebtedness incurred or preferred
stock issued during such period to the extent such Indebtedness or preferred
stock is outstanding at the date of determination and (3) any Indebtedness to be
incurred or preferred stock to be issued on the date of determination, in each
case as if such Indebtedness had been incurred or such preferred stock had been
issued on the first day of such Calculation Period and after giving effect to
the application of the proceeds thereof;
(ii) interest expense attributable to interest on any Indebtedness
(whether existing or being incurred) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation (taking into
account any Interest Rate Protection Agreement applicable to such Indebtedness
if such Interest Rate Protection Agreement has a remaining term in excess of 12
months) had been the applicable rate for the entire period;
(iii) except as provided in preceding clause (ii), there shall be
excluded from interest expense any interest expense related to any amount of
Indebtedness that was outstanding during such Calculation Period or thereafter
but that is not outstanding or is to be permanently repaid on the date of
determination;
(iv) there shall be excluded from preferred stock dividends any
preferred stock dividends related to any preferred stock issued or outstanding
during such Calculation Period or thereafter but that is not outstanding or is
to be redeemed on the date of determination; and
(v) pro forma effect shall be given to all sales and acquisitions of
Hotels that occur during such Calculation Period or thereafter and on or prior
to the Determination Date (including any Indebtedness assumed or acquired in
connection therewith) as if they had occurred on the first day of such
Calculation Period, provided that in connection with any such acquisitions, pro
forma effect (for periods prior to such acquisition) shall be given to the
management fees payable pursuant to the respective Management Agreement as if
such management fees had been payable throughout the Calculation Period.
"Projections" shall have the meaning provided in Section 5.11.
"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. Section 6901 et seq.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recourse Secured Indebtedness" shall mean Indebtedness which is
secured or collateralized by any asset of, and all or a portion of which is
guaranteed by, or for which a recourse claim (other than claims in respect of
customary indemnities and non-recourse
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carveouts) may be made against, any Borrower, any Guarantor or any of their
respective Subsidiaries or Unconsolidated Entities, excluding any such
Indebtedness existing on the Restatement Effective Date not to exceed
$100,000,000 in aggregate principal amount .
"Recovery Event" shall mean the receipt by any Borrower, any Guarantor
or any of their respective Subsidiaries of any insurance or condemnation
proceeds payable (i) by reason of theft, physical destruction or damage or any
other similar event with respect to any properties or assets of any Borrower,
any Guarantor or any of their respective Subsidiaries, (ii) by reason of any
condemnation, taking, seizing or similar event with respect to any properties or
assets of any Borrower, any Guarantor or any of their respective Subsidiaries
and (iii) under any policy of insurance required to be maintained under Section
8.03.
"Register" shall have the meaning provided in Section 13.16.
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and
X, respectively, of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor to all or a portion thereof.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing or migration into the environment.
"Replaced Lender" shall have the meaning provided in Section 1.13.
"Replacement Lender" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Single Employer Plan other than those events as to which
the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of
PBGC Regulation Section 4043.
"Required Lenders" shall mean Non-Defaulting Lenders, the sum of whose
outstanding Term Loans (or, if prior to the Restatement Effective Date, Term
Loan Commitments) and Revolving Loan Commitments (or after the termination
thereof, outstanding Revolving Loans and Adjusted RL Percentage of Swingline
Loans and Letter of Credit Outstandings) represent an amount greater than 50% of
the sum of all outstanding Term Loans (or, if prior to the Restatement Effective
Date, Term Loan Commitments) of Non-Defaulting Lenders and the Adjusted Total
Revolving Loan Commitment (or after the termination thereof, the sum of the then
total outstanding Revolving Loans of Non-Defaulting Lenders and the aggregate
Adjusted RL Percentages of all Non-Defaulting Lenders of the total outstanding
Swingline Loans and Letter of Credit Outstandings at such time).
"Restatement Effective Date" shall have the meaning provided in
Section 13.10
"Returns" shall have the meaning provided in Section 7.09.
"Revolving Loan" shall have the meaning provided in Section 1.01(a).
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"Revolving Loan Commitment" shall mean, for each RL Lender, the amount
set forth opposite such Lender's name in Schedule I hereto directly below the
column entitled "Revolving Loan Commitment," as same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted
from time to time as a result of assignments to or from such Lender pursuant to
Section 1.13 or 13.04(b).
"Revolving Loan Maturity Date" shall mean July 18, 2000.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"RL Lender" shall mean at any time each Lender with a Revolving Loan
Commitment or with outstanding Revolving Loans.
"RL Percentage" of any Lender at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Lender at such time and the denominator of which is the Total
Revolving Loan Commitment at such time, provided that if the RL Percentage of
any Lender is to be determined after the Total Revolving Loan Commitment has
been terminated, then the RL Percentages of the Lenders shall be determined
immediately prior (and without giving effect) to such termination.
"S&P" shall mean Standard & Poor's Ratings Services.
"Scheduled Repayment" shall have the meaning provided in Section
4.02(b).
"SEC" shall have the meaning provided in Section 8.01(g).
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b).
"Secured Creditors" shall have the meaning provided in the Pledge
Agreement.
"Secured Indebtedness Ratio" shall mean, on any date, the ratio of (i)
Total Secured Indebtedness on such date to (ii) Total Adjusted EBITDA for the
Test Period most recently ended on or prior to such date. All calculations of
the Secured Indebtedness Ratio shall be made on a Pro Forma Basis.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Senior Management" shall mean with respect to any Person, any of the
Chairman of the Board of Directors, the President, the Chief Financial Officer
and the Treasurer of such Person, provided, that the Senior Management of the
Borrowers and Wyndham shall in any event include Paul A. Nussbaum, James D.
Carreker, William W. Evans, III and Lawrence Jones for so long as such
individuals are employed by any Borrower or any Guarantor.
"Single Employer Plan" shall have the meaning set forth in Section
7.10.
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"Stated Amount" of each Letter of Credit shall, at any time, mean the
maximum amount available to be drawn thereunder (in each case determined without
regard to whether any conditions to drawing could then be met).
"Status" shall mean the existence of Level I Status, Level II Status,
Level III Status, Level IV Status, Level V Status, Level VI Status, Level VII
Status, Level VIII Status or Level IX Status, as the case may be;
"Level I Status" exists on any date if, on such date, Patriot REIT has
received and maintained a long-term senior unsecured actual or implied debt
rating of A- or better from S&P or A3 or better from Moody's;
"Level II Status" exists on any date if, on such date, Patriot REIT
has received and maintained a long-term senior unsecured actual or implied debt
rating of BBB+ from S&P or Baa1 from Moody's; and
"Level III Status" exists on any date if, on such date, Patriot REIT
has received and maintained a long-term senior unsecured actual or implied debt
rating of BBB from S&P or Baa2 from Moody's;
"Level IV Status" exists on any date if, on such date, Patriot REIT
has received and maintained a long-term senior unsecured actual or implied debt
rating of BBB- from S&P or Baa3 from Moody's;
"Level V Status" exists on any date if, on such date (x) none of Level
I Status through Level IV Status exist and (y) the Pricing Leverage Ratio is
less than 3.5:1.0;
"Level VI Status" exists on any date if, on such date (x) none of
Level I Status through Level IV Status exist and (y) the Pricing Leverage Ratio
is equal to or greater than 3.5:1.0 but less than 4.0:1.0;
"Level VII Status" exists on any date if, on such date (x) none of
Level I Status through Level IV Status exist and (y) the Pricing Leverage Ratio
is equal to or greater than 4.0:1.0 but less than 4.5:1.0;
"Level VIII Status" exists on any date if, on such date (x) none of
Level I Status through Level IV Status exist and (y) the Pricing Leverage Ratio
is equal to or greater than 4.5:1.0 but less than 5.0:1.0;
"Level IX Status" exists on any date if, on such date (x) none of
Level I Status through Level IV Status exist and (y) the Pricing Leverage Ratio
is equal to or greater than 5.0:1.0;
provided that (i) if S&P and/or Moody's shall cease to issue ratings of debt
securities of real estate investment trusts generally, then the Administrative
Agent and the Borrowers shall negotiate in good faith to agree upon a substitute
rating agency or agencies (and to correlate the
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system of ratings of each substitute rating agency with that of the rating
agency for which it is substituting) and (a) until such substitute rating agency
or agencies are agreed upon, Status shall be determined on the basis of the
rating assigned by the other rating agency (or, if both S&P and Moody's shall
have so ceased to issue such ratings, on the basis of the Status in effect
immediately prior thereto) and (b) after such substitute rating agency or
agencies are agreed upon, Status shall be determined on the basis of the rating
assigned by the other rating agency and such substitute rating agency or the two
substitute rating agencies, as the case may be; (ii) if the long term senior
unsecured actual or implied debt ratings of Patriot REIT by S&P and Moody's are
not equivalent, the higher rating will apply for the purposes of determining
Status; and (iii) if the long term senior unsecured actual or implied debt
ratings of Patriot REIT by S&P and Moody's are two or more Levels apart, the
rating one Level below the higher rating will apply for the purposes of
determining Status.
"Stock" shall mean shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or non-voting, and
includes, without limitation, common stock and preferred stock.
"Stock Equivalents" shall mean all securities (other than Stock)
convertible into or exchangeable for Stock and all warrants, options or other
rights to purchase or subscribe for any stock, whether or not presently
convertible, exchangeable or exercisable.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time.
"Syndication Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the Syndication
Agent appointed pursuant to Section 12.09.
"Syndication Date" shall mean that date upon which the Administrative
Agent determines in its sole discretion (and notifies the Borrowers) that the
primary syndication (and resultant addition of institutions as Lenders pursuant
to Section 13.04) has been completed.
"Swingline Expiry Date" shall mean the date which is two Business Days
prior to the Revolving Loan Maturity Date.
"Swingline Lender" shall mean Chase.
"Swingline Loan" shall have the meaning provided in Section 1.01(f).
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"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Tangible Net Worth" shall mean, without duplication, (a) the sum of
(i) the shareholders' equity of Patriot REIT and Wyndham on a combined basis in
accordance with GAAP, and (ii) the value of all OP Units owned by Persons other
than Patriot REIT or Wyndham, or Wholly-Owned Subsidiaries thereof minus (b) the
sum of all Intangible Assets (net of accumulated amortization) of the Borrowers
and the Guarantors, each as shown on the balance sheets of Patriot REIT and
Wyndham on a Company Combined Basis as of such date.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall mean each Tranche I Term Loan, Tranche II Term Loan,
Tranche III Term Loan and Tranche B Term Loan.
"Term Loan Commitment" shall mean each Tranche II Term Loan
Commitment, Tranche III Term Loan Commitment and Tranche B Term Loan Commitment,
with the Term Loan Commitment of any Lender at any time to equal the sum of its
Tranche II Term Loan Commitment, Tranche III Term Loan Commitment and Tranche B
Term Loan Commitment as then in effect.
"Test Period" shall mean (i) for any determination (other than a
determination of the Total Interest Coverage Ratio or the Fixed Charge Coverage
Ratio, which determinations shall in all cases be made pursuant to clause (ii)
of this definition) made on and prior to March 31, 1999, the four consecutive
Fiscal Quarters then last ended calculated on a Pro Forma Basis on the last day
of such Test Period (in each case taken as one accounting period), and (ii) for
any determination made thereafter, the four consecutive Fiscal Quarters then
last ended, in each case taken as one accounting period.
"Third Party Operating Lease" shall mean an Operating Lease with a
Third Party Operator or an Affiliate of such Person and which Operating Lease is
satisfactory to the Administrative Agent with respect to (i) the term thereof,
(ii) the rent and fees payable thereunder, (iii) the termination rights
thereunder and (iv) the lessee thereunder (including the ability of such Person
to assign its obligations).
"Third Party Operator" shall mean either a lessee under an Operating
Lease or an Affiliate of such Person which operates the respective Hotel, which
is not Patriot REIT, Wyndham or any of their respective Subsidiaries.
"Total Adjusted EBITDA" shall mean, for any period, the product of (a)
EBITDA of Patriot REIT and its Subsidiaries and Unconsolidated Entities and
Joint Ventures, Wyndham and its Subsidiaries and Unconsolidated Entities and
Joint Ventures, all on a combined basis in accordance with GAAP for such period
(b) multiplied, in the case of each such Person, by the Allocation Percentage
applicable to such Person; provided, that if the Allocation Percentage
applicable to such Person is less than 20%, then, notwithstanding anything to
the contrary contained in this definition, the portion of Total Adjusted EBITDA
attributable to such Person
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shall be the amount of such Person's EBITDA actually received by a Credit Party
during such period.
"Total Commitment" shall mean, at any time, the sum of the Commitments
of each of the Lenders.
"Total Indebtedness" shall mean the sum (without duplication) of all
Indebtedness of the Borrowers and the Guarantors, plus the Allocation Percentage
of Indebtedness of all of the respective Subsidiaries and Unconsolidated
Entities of such Persons, determined on a Company Combined Basis (adjusted to
exclude the portion of Indebtedness of Subsidiaries and Unconsolidated Entities
in excess of the Allocation Percentages of such Persons' Indebtedness);
provided, that if the Allocation Percentage applicable to such Subsidiary or
Unconsolidated Entity is less than 20%, then, notwithstanding anything to the
contrary contained in this definition, none of the Indebtedness of such
Subsidiary or Unconsolidated Entity which is non-recourse to any Borrower or
Guarantor shall be included in Total Indebtedness.
"Total Interest Coverage Ratio" shall mean, for any Test Period, the
ratio of (i) Total Adjusted EBITDA for such Test Period to (ii) Total Interest
Expense for such Test Period.
"Total Interest Expense" shall mean the sum of the total interest
expense in respect of Total Indebtedness for such period determined in
conformity with GAAP.
"Total New Commitments" shall mean, at any time, the sum of the
Tranche II Term Loan Commitments, the Tranche III Term Loan Commitments and the
Tranche B Term Loan Commitments of each of the Lenders.
"Total Recourse Secured Indebtedness" shall mean any portion of Total
Secured Indebtedness all or any portion of which is guaranteed by, or for which
a recourse claim (other than claims in respect of customary indemnities and
non-recourse carveouts) can be made against the Borrowers, the Guarantors and
their respective Subsidiaries and Unconsolidated Entities.
"Total Revolving Loan Commitment" shall mean, at any time, the sum of
the Revolving Loan Commitments of each of the Lenders.
"Total Secured Indebtedness" shall mean for any period any portion of
Total Indebtedness, excluding the Obligations under this Agreement, which is
secured or collateralized by any asset of the obligor thereunder.
"Total Term Loan Commitment" shall mean, at any time, the sum of the
Total Tranche II Term Loan Commitment, Total Tranche III Term Loan Commitment
and Total Tranche B Term Loan Commitment.
"Total Tranche II Term Loan Commitment" shall mean, at any time, the
sum of the Tranche II Term Loan Commitments of each of the Lenders.
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"Total Tranche III Term Loan Commitment" shall mean, at any time, the
sum of the Tranche III Term Loan Commitments of each of the Lenders.
"Total Tranche B Term Loan Commitment" shall mean, at any time, the
sum of the Tranche B Term Loan Commitments of each of the Lenders.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment, less (y) the sum of the aggregate principal amount of Revolving
Loans and Swingline Loans then outstanding plus the then aggregate amount of
Letter of Credit Outstandings.
"Tranche" shall mean the respective facility and commitments utilized
in making Loans hereunder, with there being six separate Tranches, i.e., Tranche
I Term Loans, Tranche II Term Loans, Tranche III Term Loans, Tranche B Term
Loans, Revolving Loans and Swingline Loans.
"Tranche I Term Lenders" shall mean (i) on or prior to the Restatement
Effective Date, the Original Term Lenders, and (ii) after the Restatement
Effective Date, each Lender with
Tranche I Term Loans outstanding hereunder.
"Tranche I Term Loan" shall have the meaning provided in Section
1.01(b).
"Tranche I Term Loan Maturity Date" shall mean January 31, 1999.
"Tranche I Term Note" shall have the meaning provided in Section
1.05(a).
"Tranche II Term Loan" shall have the meaning provided in Section
1.01(c).
"Tranche II Term Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule I hereto directly below
the column entitled "Tranche II Term Loan Commitment", as same may be (x)
reduced from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y)
adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 1.13 or 13.04(b).
"Tranche II Term Loan Maturity Date" shall mean March 31, 1999.
"Tranche II Term Note" shall have the meaning provided in Section
1.05(a).
"Tranche III Term Loan" shall have the meaning provided in Section
1.01(d).
"Tranche III Term Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule I hereto directly below
the column entitled "Tranche III Term Loan Commitment", as same may be (x)
reduced from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y)
adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 1.13 or 13.04(b).
"Trance III Term Loan Maturity Date" shall mean March 31, 2000.
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"Tranche III Term Note" shall have the meaning provided in Section
1.05(a).
"Tranche B Term Loan" shall have the meaning provided in Section
1.01(e).
"Tranche B Term Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule I hereto directly below
the column entitled "Tranche B Term Loan Commitment", as same may be (x) reduced
from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to Section
1.13 or 13.04(b).
"Tranche B Term Loan Maturity Date" shall mean March 31, 2003.
"Tranche B Term Note" shall have the meaning provided in Section
1.05(a).
"Treasury Regulation" shall mean regulations promulgated under the
Code.
"Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unconsolidated Entity" shall mean, with respect to any Person, at any
date, any other Person (excluding any Excluded Unconsolidated Entity) in whom
such Person holds an Investment, and whose financial results would not be
consolidated under GAAP with the financial results of such Person on the
consolidated financial statements of such Person, if such statements were
prepared as of such date.
"Unencumbered" shall mean, with respect to any Hotel, Operating Lease
or to Management Agreements, other management agreements, franchise agreements
or time share agreements, at any date of determination, the circumstance that
such Hotel or such agreement, as the case may be, on such date:
(a) is not subject to any Liens (including restrictions on
transferability or assignability, other than commercially reasonable
restrictions in the organizational documents of any Subsidiary of a
Borrower or Guarantor which do not prohibit such Subsidiary from disposing
or realizing the value of, any Hotel owned by it, or the Stock or other
form of ownership of any kind (including any such Lien or restriction
imposed by (i) any agreement governing Indebtedness, and (ii) the
organizational documents of any Borrower, any Guarantor or any of their
respective Subsidiaries)) other than Permitted Liens, and, in the case of
any ground lease (to the extent permitted by the definition thereof),
restrictions on transferability or assignability in respect of such ground
lease;
(b) (x) is not subject to any agreement (including (i) any agreement
governing Indebtedness, and (ii) if applicable, the organizational
documents of any Borrower, any
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Guarantor or any of their respective Subsidiaries) which prohibits or
limits the ability of such Person to create, incur, assume or suffer to
exist any Lien upon such Hotel or such agreement, as the case may be, other
than Permitted Liens (excluding any agreement or organizational document
(x) which limits generally the amount of Indebtedness which may be incurred
by such Person or (y) which limits the amount of obligations secured by
Liens upon such Hotel in a manner which would not prohibit a Lien securing
Obligations in an amount equal to such Person's pro rata share of the value
of such Hotel); and
(c) is not subject to any agreement (including any agreement governing
Indebtedness) which entitles any Person to the benefit of any Lien, other
than Permitted Liens, on such Hotel or such agreement, as the case may be,
or would entitle any Person to the benefit of any such Lien upon the
occurrence of any contingency (including, without limitation, pursuant to
an "equal and ratable" clause).
For the purposes of this Agreement, any Hotel owned by a Guarantor or a
Subsidiary of a Borrower or Guarantor shall not be deemed to be Unencumbered
unless both (i) such Hotel and (ii) all Stock or other form of ownership owned
directly or indirectly by either Borrower in such Subsidiary or Guarantor, is
Unencumbered.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawing" shall have the meaning provided in Section 2.04(a).
"Unutilized Revolving Loan Commitment" with respect to any RL Lender,
at any time, shall mean such RL Lender's Revolving Loan Commitment at such time
less the sum of (i) the aggregate outstanding principal amount of Revolving
Loans made by such RL Lender and (ii) such RL Lender's Adjusted RL Percentage of
the Letter of Credit Outstandings in respect of Letters of Credit issued under
this Agreement.
"W/C Loans" shall have the meaning provided in Section 1.01(a).
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person (ii) any partnership, limited liability company,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time
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and (iii) any Subsidiary of Patriot REIT or Wyndham shall also be considered a
Wholly-Owned Subsidiary of each such Person if (x) 100% of such Subsidiary's
capital stock (other than director's qualifying shares) is at the time owned by
both such Persons and/or one or more Wholly-Owned Subsidiaries of such Persons
and (y) if such Subsidiary is a partnership, limited liability company,
association, joint venture or any other noncorporate entity, both such Persons
and/or one or more Wholly-Owned Subsidiaries of such Persons have a 100% equity
interest in such Subsidiary at such time.
"Wyndham" shall mean Wyndham International, Inc., a Delaware
corporation.
"Wyndham Partnership" shall mean Patriot American Hospitality
Operating Partnership, L.P., a Delaware limited partnership.
"Wyndham Partnership OP Units" shall mean the partnership units of
Wyndham Partnership.
SECTION 12. The Agents.
12.01 Appointment. The Lenders hereby designate Chase as
Administrative Agent to act as specified herein and in the other Credit
Documents (for purposes of this Section 12, the term "Administrative Agent"
shall mean Chase in its capacity as Administrative Agent hereunder and
Collateral Agent pursuant to the Pledge Agreement). The Lenders hereby designate
Paine Webber as Syndication Agent to act as specified herein and in the other
Credit Documents. Chase and Paine Webber are together referred to in such
capacities as the Agents (which for purposes hereof shall also include CSI and
Paine Webber in their capacity as Arrangers). Each Lender hereby irrevocably
authorizes, and each holder of any Note by the acceptance of such Note shall be
deemed irrevocably to authorize, any Agent to take such action on its behalf
under the provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of such Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. Each Agent may perform any of
its duties hereunder by or through its respective officers, directors, agents,
employees or affiliates.
12.02 Nature of Duties. No Agent shall have any duties or
responsibilities except those expressly set forth in this Agreement and in the
other Credit Documents. Neither any Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, unless caused by its gross negligence or
willful misconduct. The duties of each Agent shall be mechanical and
administrative in nature; no Agent shall have by reason of this Agreement or any
other Credit Document a fiduciary relationship in respect of any Lender or the
holder of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
any Agent any obligations in respect of this Agreement or any other Credit
Document except as expressly set forth herein or therein.
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12.03 Lack of Reliance on the Agents. Independently and without
reliance upon any Agent, each Lender and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent in vestigation of the financial condition and affairs of each Credit
Party and each of their Subsidiaries in connection with the making and the
continuance of the Loans, participation in Letters of Credit and the taking or
not taking of any action in con nection herewith and (ii) its own appraisal of
the creditworthiness of each Credit Party and each of their Subsidiaries and,
except as expressly provided in this Agreement, no Agent shall have any duty or
responsibility, either initially or on a continuing basis, to provide any Lender
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or
issuance of Letters of Credit or at any time or times thereafter. No Agent shall
be responsible to any Lender or the holder of any Note for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of any Credit Party or any of its
Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document, or the financial condition of any Credit
Party or any of its Subsidiaries or the existence or possible existence of any
Default or Event of Default.
12.04 Certain Rights of the Agents. If any Agent shall request
instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until such Agent shall have received instructions from the
Required Lenders; and such Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, no Lender or the holder
of any Note shall have any right of action whatsoever against any Agent as a
result of such Agent acting or refraining from acting hereunder or under any
other Credit Document in accordance with the instructions of the Required
Lenders.
12.05 Reliance. Each Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that such Agent believed to be the proper Person, and, with respect
to all legal matters pertaining to this Agreement and any other Credit Document
and its duties hereunder and thereunder, upon advice of counsel selected by such
Agent (which may be counsel for the Borrowers or any other Credit Party).
12.06 Indemnification. To the extent any Agent is not reimbursed and
indemnified by the Borrowers, the Lenders will reimburse and indemnify such
Agent, in proportion to their respective "percentages" as used in determining
the Required Lenders, for and against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on, asserted
against or incurred by such Agent in performing its respective duties hereunder
or under any other Credit Document, in any way relating to or arising out of
this Agreement or any other
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Credit Document; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.
12.07 Each Agent in its Individual Capacity. With respect to its
obligation to make Loans under this Agreement, each Agent shall have the rights
and powers specified herein for a "Lender" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Lenders," "Required Lenders," "holders of Notes" or any similar terms
shall, unless the context clearly otherwise indicates, include each Agent in its
individual capacity. Each Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any Credit
Party or any Affiliate of any Credit Party as if they were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrowers or any other Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Lenders.
12.08 Holders. Each Agent may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with such Agent. Any request, authority or consent of any Person who,
at the time of making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.
12.09 Removal of or Resignation by Either of the Agents. (a) The
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Credit Documents at any time by giving
20 Business Days' prior written notice to the Borrowers and the Lenders. Such
resignation shall take effect upon the appointment of a successor Administrative
Agent pursuant to clauses (b) and (c) below or as otherwise provided below.
Furthermore, in the event that at any time the Administrative Agent assigns its
entire interest as a Lender hereunder to an Eligible Transferee as permitted by
Section 13.04(b) hereof, which Eligible Transferee is not an Affiliate of the
Administrative Agent, then the Administrative Agent shall offer to resign as
Administrative Agent, which resignation shall become effective only if (i) the
Required Lenders accept such resignation in writing within 20 Business Days
after it has been tendered by the Administrative Agent, and (ii) so long as
there exists no Event of Default at such time, any Borrower has given its
consent with respect to the proposed successor Administrative Agent. If the
Required Lenders do not timely accept such resignation, then the resignation
offer shall be deemed withdrawn and the Administrative Agent shall continue as
the Administrative Agent pursuant to the terms hereof unless the Administrative
Agent has indicated in its notice that said resignation is intended to be
irrevocable, in which case such resignation shall take effect upon the
appointment of a successor Administrative Agent pursuant to clauses (b) and (c)
below or as otherwise provided below. Each Agent may resign from the performance
of all of its other functions and duties hereunder and/or under the other Credit
Documents at any time by giving notice to any Borrower, the Administrative Agent
and the Lenders. Such resignation shall take effect upon delivery of such
notice. Furthermore, the Administrative Agent may be removed by the Required
Lenders in the event that it has
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committed a willful breach of, or was grossly negligent in the performance of,
its material obligations hereunder.
(b) Upon any such notice of resignation by the Administrative Agent,
the Required Lenders shall appoint a successor Administrative Agent hereunder or
thereunder who shall be a commercial bank or trust company reasonably acceptable
to the Borrowers.
(c) If a successor Administrative Agent shall not have been so
appointed within such 20 Business Day period, the Administrative Agent, with the
consent of the Borrower, shall then appoint a successor Administrative Agent who
shall serve as Administrative Agent hereunder or thereunder until such time, if
any, as the Required Lenders appoint a successor Administrative Agent as
provided above.
(d) If no successor Administrative Agent has been appointed pursuant
to clause (b) or (c) above by the 25th Business Day after the date such notice
of resignation was given by the Administrative Agent, the Administrative Agent's
resignation shall become effective and the Agents (if one or more so agrees), or
if there are no Agents or no Agent so agrees, then the Required Lenders, shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under any other Credit Document until such time, if any, as the Required Lenders
appoint a successor Administrative Agent as provided above.
SECTION 13. Miscellaneous.
13.01 Payment of Expenses, etc. (a) Each Borrower agrees that it
shall, on a joint and several basis: (i) whether or not the transactions
contemplated herein are consummated, and subject to the obligations of the
Lender or the Arrangers to pay their own costs and expenses set forth in Section
8.02, pay all reasonable out-of-pocket costs and expenses of the Arrangers
(including, without limitation, the reasonable fees and disbursements of White &
Case LLP and, to the extent reasonably necessary, local counsel and
environmental, engineering, real estate and insurance independent consultants
retained by the Administrative Agent) in connection with the preparation, exe
cution, delivery and performance of this Agreement and the other Credit
Documents and the documents and instruments referred to herein and therein, any
amendment, waiver or consent relating hereto or thereto, of the Arrangers in
connection with their primary syndication efforts with respect to this Agreement
(except to the extent the Borrowers and the Arrangers otherwise agree) and, upon
the occurrence and during the continuance of an Event of Default, the reasonable
costs and expenses of each of the Lenders in connection with the enforcement of
this Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Arrangers and, following an Event of
Default, for each of the Lenders); (ii) pay and hold each of the Lenders
harmless from and against any and all present and future stamp, excise and other
similar taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iii) indemnify each Agent, each Arranger, the
Collateral Agent, each Issuing Lender and each Lender, and each of their
respective officers, directors,
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employees, representatives and agents from and hold each of them harmless
against any and all liabilities, obligations (including removal or remedial
actions), losses, damages, penalties, claims, actions, judgments, suits, costs,
expenses and disbursements (including reasonable attorneys' and consultants'
fees and disbursements) incurred by, imposed on or assessed against any of them
as a result of, or arising out of, or in any way related to, or by reason of,
(a) any investigation, litigation or other proceeding (whether or not such
Arranger or any Lender is a party thereto) related to the entering into and/or
performance of this Agreement or any other Credit Document or the use of any
Letter of Credit or the proceeds of any Loans hereunder or the consummation of
any transactions contemplated herein or in any other Credit Document or the
exercise of any of their rights or remedies provided herein or in the other
Credit Documents, or (b) the actual or alleged presence of Hazardous Materials
in the air, surface water or groundwater or on the surface or subsurface of any
Real Property owned or at any time operated by any Credit Party or any of its
Subsidiaries, the Release, generation, storage, transportation, handling or
disposal of Hazardous Materials at any location, whether or not owned or
operated by any Credit Party or any of its Subsidiaries, the non-compliance of
any Real Property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any Real
Property, or any Environmental Claim asserted against any Credit Party, any of
its Subsidiaries or any Real Property owned or at any time operated by any
Credit Party or any of its Subsidiaries, including, in each case, without
limitation, the reasonable fees and disbursements of counsel and other
consultants incurred in connection with any such investigation, litigation or
other proceeding (but excluding any losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified). To the extent that the undertaking
to indemnify, pay or hold harmless any Arranger or any Lender set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Borrowers shall jointly and severally make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
(b) Notwithstanding anything in paragraph (a) to the contrary,
promptly after receipt by an indemnified person of notice of any loss, claim,
damage or liability or the commencement or threat of any action or proceeding,
such indemnified person shall, if a claim in respect thereof is to be made by
such indemnified person against either Borrower pursuant to this Section 13.01,
notify either Borrower in writing of the loss, claim, damage or liability or the
commencement or threat of the action or proceeding; provided, however, that the
failure to notify either Borrower shall not relieve either Borrower from any
liability which it may have under this paragraph except to the extent that it
has been materially prejudiced by such failure and, provided further, that the
failure to notify either Borrower shall not relieve it from any liability which
it may have to an indemnified person otherwise than under the indemnification
provisions of this Section 13.01. If any such claim, action or proceeding shall
be brought or threatened against an indemnified person, and such indemnified
person shall notify either Borrower thereof, the Borrowers shall be entitled to
participate therein and, to the extent that the Borrowers wish, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified person.
In the event the Borrowers assume the defense of an indemnified person, neither
Borrower may thereafter dispute its liability hereunder for any liability the
defense of which the Borrowers have assumed which may be imposed upon an
indemnified person in connection with such claim,
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action or proceeding; provided, however, the Borrowers shall give prompt notice
of any election to assume or not assume the defense of any claim, action or
proceeding. After notice from such Borrower to such indemnified person of its
election to assume the defense of such claim, action or proceeding, the
Borrowers shall not be liable to such indemnified person under this Section
13.01 for any legal or other expenses subsequently incurred by such indemnified
person in connection with the defense thereof except as provided in the
following sentence. The indemnified person shall have the right to employ
separate counsel with respect to any such claim, action or proceeding and to
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such indemnified person unless: (i) the employment
thereof has been specifically authorized by a Borrower in writing; or (ii) with
respect to such claim, action or proceeding there is, in the reasonable opinion
of the Arrangers, a material issue relevant to the business of the Arrangers or
there is in the opinion of independent counsel, a conflict concerning any
material issue between the position of the Borrowers and such indemnified
person, in which case if such indemnified person notifies a Borrower in writing
that such indemnified person elects to employ separate counsel at the expense of
the Borrowers, the Borrowers shall not have the right to assume the defense of
such claim, action or proceeding on behalf of such indemnified person; provided,
however, that unless an actual or potential conflict exists between two or more
indemnified persons, the Borrowers shall not be required to pay the fees and
disbursements of more than one separate counsel for all indemnified persons.
Nothing set forth herein is intended to or shall impair the right of any
indemnified person to retain separate counsel at its own expense. Without the
prior written consent of such indemnified person, neither the Borrowers nor any
of their affiliates will settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding in respect of
which indemnification may be sought hereunder (whether or not any indemnified
person is an actual or potential party to such claim, action or proceeding) the
defense of which has been assumed by the Borrowers in accordance with the terms
of this Section 13.01 unless (a) the Borrowers shall have given each such
indemnified person reasonable prior written notice thereof and used all
reasonable efforts, after consultation with such indemnified person, to obtain
an unconditional release of such indemnified person and each other indemnified
person from all liability arising out of such claim, action, suit or
proceedings, or (b) the Borrowers reaffirm in writing their indemnity
obligations hereunder. As long as the Borrowers have complied with their
obligations to defend and indemnify hereunder, they shall not be liable
hereunder for any settlement made by such indemnified person or any other
indemnified person without the Borrowers' consent.
13.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Lender is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Lender (including,
without limitation, by branches and agencies of such Lender wherever located) to
or for the credit or the account of any Credit Party against and on account of
the Obligations and liabilities of such Credit Party to such Lender under this
Agreement or under any of the other Credit Documents, including, without
limitation, all
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interests in Obligations purchased by such Lender pursuant to Section 13.06(b),
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or not
such Lender shall have made any demand hereunder and although said Obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
13.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to any Borrower, at
such Borrower's address specified opposite its signature below; if to any
Arranger or Lender, at its address specified opposite its name on Schedule II;
if to the Administrative Agent, at its Notice Office; and if to the Syndication
Agent, at its address specified opposite its name below; or, as to any Borrower
or any Arranger, at such other address as shall be designated by such party in a
written notice to the other parties hereto and, as to each Lender, at such other
address as shall be designated by such Lender in a written notice to either
Borrower and the Administrative Agent. All such notices and communications
shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by
overnight courier, be effective when deposited in the mails, delivered to the
telegraph company, cable company or overnight courier, as the case may be, or
sent by telex or telecopier, except that notices and communications to the
Arrangers and the Borrowers shall not be effective until received by the
Arrangers or the Borrowers, as the case may be.
13.04 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, each Borrower may not assign
or transfer any of its rights, obligations or interest hereunder or under any
other Credit Document without the prior written consent of the Lenders and,
provided further, that, although any Lender may transfer, assign or grant
participations in its rights hereunder, such Lender shall remain a "Lender" for
all purposes hereunder (and may not transfer or assign all or any portion of its
Commitments hereunder except as provided in Section 13.04(b)) and the
transferee, assignee or participant, as the case may be, shall not constitute a
"Lender" hereunder and, provided further, that no Lender shall transfer or grant
any participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except to
the extent such amendment or waiver would (i) extend the final scheduled
maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is
not extended beyond the Revolving Loan Maturity Date) in which such participant
is participating, or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount thereof,
or increase the amount of the participant's participation over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment or of a
mandatory repayment of Loans shall not constitute a change in the terms of such
participation, and that an increase in any Commitment or Loan shall be permitted
without the consent of any participant if the participant's participation is not
increased as a result thereof) or (ii) consent to the assignment or transfer by
either Borrower of any of its rights and obligations under this Agreement. In
the case of any such participation, the participant shall not
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have any rights under this Agreement or any of the other Credit Documents (the
participant's rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
participant relating thereto) and all amounts payable by the Borrowers hereunder
shall be determined as if such Lender had not sold such participation.
(b) Notwithstanding the foregoing, any Lender (or any Lender together
with one or more other Lenders) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans to its parent company and/or any affiliate of such Lender
which is at least 50% owned by such Lender or its parent company or to one or
more Lenders and (y) assign a constant, and not a varying, ratable percentage of
all of the assigning Lender's Revolving Loan Commitment (and related outstanding
Obligations hereunder) and outstanding principal amount of Term Loans, and all
of its rights and obligations under this Agreement, to an Eligible Transferee,
and, in the case of a partial assignment of such Revolving Loan Commitment
and/or outstanding Term Loans, shall be in a minimum amount of $5,000,000 (and
the assignor shall maintain a minimum amount of $5,000,000 for its own account
unless the assignor shall assign its entire interest), and all assignees shall
become a party to this Agreement as a Lender by execution of an Assignment and
Assumption Agreement substantially in the form of Exhibit K, provided that (i)
at such time Schedule I shall be deemed modified to reflect the Commitments
and/or outstanding Term Loans, as the case may be, of such new Lender and of the
existing Lenders, (ii) upon surrender of the old Notes, new Notes will be issued
to such new Lender and to the assigning Lender, such new Notes to be in
conformity with the requirements of Section 1.05 (with appropriate
modifications) to the extent needed to reflect the revised Commitments and/or
Term Loans, (iii) the consent of the Administrative Agent shall be required in
connection with any such assignment pursuant to clause (y) above (which consent
shall not be unreasonably withheld), (iv) the Administrative Agent shall receive
at the time of each such assignment, from the assigning or assignee Lender, the
payment of a non-refundable assignment fee of $3,500, and (v) upon the
occurrence and continuance of an Event of Default, none of the restrictions on
assignments contained in clause (y) above shall apply, provided, however, that
while an Event of Default (other than an Event of Default that shall have
required that the Administrative Agent shall have delivered a notice of the
underlying Default) shall be continuing but prior to acceleration of the Loans,
the applicable Lender shall give the Borrowers five (5) days' written notice by
telecopy of its intention to assign any or all of its interest in this Agreement
and, provided further, that such transfer or assignment will not be effective
until recorded by the Administrative Agent on the Register pursuant to Section
13.16. To the extent of any assignment pursuant to this Section 13.04(b), the
assigning Lender shall be relieved of its obligations hereunder with respect to
its assigned Commitments and/or outstanding Term Loans. At the time of each
assignment pursuant to this Section 13.04(b) to a Person which is not already a
Lender hereunder and which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Lender shall provide to the Borrowers and the Administrative
Agent the appropriate Internal Revenue Service Forms (and, if applicable a
Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent
that an assignment of all or any portion of a Lender's Commitments and related
outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would,
at the time of such assignment, result in increased costs under Section 1.10,
1.11, 2.05 or 4.04 from those being charged by the respective assigning
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Lender prior to such assignment, then the Borrowers shall not be obligated to
pay or reimburse such increased costs (although the Borrowers shall be obligated
to pay any other increased costs of the type described above resulting from
changes after the date of the respective assignment). Notwithstanding anything
to the contrary contained above, at any time after the termination of the Total
Revolving Loan Commitment, if any Revolving Loans or Letters of Credit remain
outstanding, assignments may be made as provided above, except that the
respective assignment shall be of a portion of the outstanding Revolving Loans
of the respective RL Lender and its participation in Letters of Credit and its
obligation to make Mandatory Borrowings, although any such assignment effected
after the termination of the Total Revolving Loan Commitment shall not release
the assigning RL Lender from its obligations as a Participant with respect to
outstanding Letters of Credit or to fund its share of any Mandatory Borrowing
(although the respective assignee may agree, as between itself and the
respective assigning RL Lender, that it shall be responsible for such amounts).
(c) Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loans and Note hereunder to a Federal Reserve Bank in support
of borrowings made by such Lender from such Federal Reserve Bank and, with the
consent of the Administrative Agent, any Lender which is a fund may pledge all
or any portion of its Notes or Loans to its trustee in support of its
obligations to its trustee. No pledge pursuant to this clause (c) shall release
the transferor Lender from any of its obligations hereunder.
13.05 No Waiver; Remedies Cumulative. No failure or delay on the part
of any Agent or Arranger or any Lender or any holder of any Note in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between any Borrower or any other Credit Party and any
Agent or Arranger or any Lender or the holder of any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Credit Document expressly provided are cumulative and not exclusive of any
rights, powers or remedies which any Agent or Arranger or any Lender or the
holder of any Note would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of any Agent or Arranger or any Lender or the holder of any Note to any other or
further action in any circumstances without notice or demand.
13.06 Payments Pro Rata. (a) Except as otherwise provided in this
Agreement, the Administrative Agent agrees that promptly after its receipt of
each payment from or on behalf of the Borrowers in respect of any Obligations
hereunder, it shall distribute such payment to the Lenders (other than any
Lender that has consented in writing to waive its pro rata share of any such
payment) pro rata based upon their respective shares, if any, of the Obligations
with respect to which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit
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Documents, or otherwise), which is applicable to the payment of the principal
of, or interest on, the Loans, Unpaid Drawings, Commitment Fees or Letter of
Credit Fees, of a sum which with respect to the related sum or sums received by
other Lenders is in a greater proportion than the total of such Obligation then
owed and due to such Lender bears to the total of such Obligation then owed and
due to all of the Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the respective
Credit Party to such Lenders in such amount as shall result in a proportional
participation by all the Lenders in such amount; provided that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 13.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.
13.07 Calculations; Computations. (a) The financial statements to be
furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the Borrowers to the
Lenders) ("GAAP"); provided that, (i) except as otherwise specifically provided
herein, all computations determining compliance with Sections 9.08 through 9.12,
inclusive, shall utilize accounting principles and policies in conformity with
those used to prepare the annual financial statements first delivered to the
Lenders pursuant to Section 8.01(b) and (ii) PAH Ravinia, Inc. and PAH
Windwatch, L.L.C. shall be treated as Subsidiaries.
(b) All computations of interest, Commitment Fees, and other Fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest, Commitment Fees or other Fees are payable;
provided, that the computation of interest payable on Base Rate Loans shall be
made on the basis of a year of 365 days.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY
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<PAGE>
CLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER SUCH CREDIT PARTY, AND AGREES
NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS,
THAT ANY SUCH COURT LACKS JURISDICTION OVER SUCH CREDIT PARTY. EACH BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH CREDIT PARTY
AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH BORROWER HEREBY IRREVOCABLY WAIVES
ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR
UNDER ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID
OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY AGENT OR ARRANGER
UNDER THIS AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION.
(b) EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrowers and the
Administrative Agent.
13.10 Effectiveness. This Agreement shall become effective on the date
(the "Restatement Effective Date") on which (i) each Borrower, each Arranger,
each New Lender, the Required Lenders (determined immediately before the
occurrence of the Restatement Effective
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<PAGE>
Date and without giving effect thereto), the Administrative Agent and the
Syndication Agent shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered the same to the Administrative
Agent at its Notice Office or, in the case of the Lenders, shall have given to
the Administrative Agent telephonic (confirmed in writing), written or telex
notice (actually received) at such office that the same has been signed and
mailed to it and (ii) the conditions contained in Sections 5, 6 and 13.17 are
met to the satisfaction of the Agents and the Required Lenders (determined
immediately after the occurrence of the Restatement Effective Date). Unless the
Administrative Agent has received actual notice from any Lender that the
conditions described in clause (ii) of the preceding sentence have not been met
to its satisfaction, upon the satisfaction of the condition described in clause
(i) of the immediately preceding sentence and upon the Arrangers' good faith
determination that the conditions described in clause (ii) of the immediately
preceding sentence have been met, then the Restatement Effective Date shall have
deemed to have occurred, regardless of any subsequent determination that one or
more of the conditions thereto had not been met (although the occurrence of the
Restatement Effective Date shall not release any Borrower from any liability for
failure to satisfy one or more of the applicable conditions contained in
Sections 5, 6 and 13.17). The Administrative Agent will give any Borrower, each
Arranger and each Lender prompt written notice of the occurrence of the
Restatement Effective Date.
13.11 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Lenders, provided that no such change, waiver, discharge or termination
shall, without the consent of each Lender (other than a Defaulting Lender) with
Obligations being directly modified thereby, (i) extend the final scheduled
maturity of any Loan or Note or extend the stated maturity of any Letter of
Credit (unless such Letter of Credit is not extended beyond the Revolving Loan
Maturity Date), or reduce the rate or extend the time of payment of interest
(except in connection with a waiver of applicability of any post-default
increase in interest rates) or Fees thereon, or reduce the principal amount
thereof (except to the extent repaid in cash), (ii) amend, modify or waive any
provision of this Section 13.12, (iii) reduce the percentage specified in the
definition of Required Lenders (it being understood that, with the consent of
the Required Lenders, additional extensions of credit pursuant to this Agreement
may be included in the determination of the Required Lenders on substantially
the same basis as the extensions of Term Loans and Revolving Loan Commitments
are included on the Restatement Effective Date), (iv) consent to the assignment
or transfer by any Borrower of any of its rights and obligations under this
Agreement or (v) release any of Wyndham or Wyndham Partnership from its
obligations as a Guarantor under this Agreement or any other Credit Document;
provided further, that no such change, waiver, discharge or termination shall
(x) increase the Commitments of any Lender over the amount thereof then in
effect without the consent of such Lender (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a
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<PAGE>
mandatory reduction in the Total Commitment shall not constitute an increase of
the Commitment of any Lender, and that an increase in the available portion of
any Commitment of any Lender shall not constitute an increase in the Commitment
of such Lender), (y) without the consent of each Agent affected thereby, amend,
modify or waive any provision of Section 12 as same applies to such Agent or any
other provision as same relates to the rights or obligations of such Agent, and
(z) without the consent of Chase or the respective Issuing Lender, amend, modify
or waive any provision of Section 2 or alter its rights or obligations with
respect to Letters of Credit.
(b) If, in connection with any proposed change, waiver, discharge or
termination with respect to any of the provisions of this Agreement as
contemplated by clauses (i) through (v), inclusive, of the first proviso to
Section 13.12(a), or by clause (i) of Section 13.12(c), the consent of the
Required Lenders is obtained but the consent of one or more of such other
Lenders whose consent is required is not obtained, then the Borrowers shall have
the right, so long as all non-consenting Lenders whose individual consent is
required are treated as described below, to replace each such non-consenting
Lender or Lenders (or, at the option of the Borrowers if the respective Lender's
consent is required with respect to less than all Tranches of Loans (or related
Commitments), to replace only the Revolving Loan Commitments and/or Loans of the
respective nonconsenting Lender which gave rise to the need to obtain such
Lender's individual consent) with one or more Replacement Lenders pursuant to
Section 1.13 so long as at the time of such replacement, each such Replacement
Lender consents to the proposed change, waiver, discharge or termination,
provided, that in any event the Borrowers shall not have the right to replace a
Lender solely as a result of the exercise of such Lender's rights (and the
withholding of any required consent by such Lender) pursuant to the second
proviso to Section 13.12(a).
(c) In addition to the provisions of Section 13.12(a) above, no
change, waiver, discharge or termination outlined therein shall, (i) without the
consent of each Lender (other than a Defaulting Lender) with Obligations being
directly modified thereby, release all or substantially all of the Collateral
(except as expressly provided in the Pledge Agreement) under the Pledge
Agreement, (ii) without the consent of Chase or the respective Swingline Lender,
alter its rights or obligations with respect to Swingline Loans, (iii) without
the consent of the Collateral Agent, amend modify or waive any provision
relating to the rights or obligations of the Collateral Agent, (iv) without the
consent of the Majority Lenders of each Tranche which is being allocated a
lesser prepayment, repayment or commitment reduction as a result of the actions
described below, alter the required application of any prepayments or repayments
(or commitment reductions), as between the various Tranches, pursuant to Section
4.01 or 4.02 (excluding Section 4.02(b)) (although (x) the Majority Lenders of
any Tranche may waive, in whole or in part, any portion of such prepayment,
repayment or commitment reduction applicable to such Tranche, so long as the
application, as amongst the various Tranches, of any such prepayment, repayment
or commitment reduction which is still required to be made is not altered, (y)
if additional Tranches of Term Loans are extended after the Restatement
Effective Date with the consent of the Required Lenders as required above, such
Tranches may be included on a pro rata basis (as is originally done with the
Tranche I Term Loans, Tranche II Term Loans, Tranche III Term Loans and Tranche
B Term Loans) in the various prepayments or repayments required pursuant to
Sections 4.01 and 4.02 (excluding Section 4.02(b) and any section providing
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<PAGE>
Scheduled Repayments for any new Tranche of Term Loans)) or (v) without the
consent of the Majority Lenders of the respective Tranche, reduce the amount of,
or extend the date of, any Scheduled Repayment applicable to such Tranche or,
without the consent of the Majority Lenders of each Tranche, amend the
definition of Majority Lenders (it being understood that, with the consent of
the Required Lenders, additional extensions of credit pursuant to this Agreement
may be included in the determination of the Majority Lenders on substantially
the same basis as the extensions of Term Loans and Revolving Loan Commitments
are included on the Restatement Effective Date).
13.13 Survival. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.05, 4.04, 12.06, 13.01 and 13.06 shall
survive the execution, delivery and termination of this Agreement and the Notes
and the making and repayment of the Loans.
13.14 Domicile of Loans. Each Lender may transfer and carry its Loans
and/or Commitments at, to or for the account of any office, Subsidiary or
Affiliate of such Lender. Notwithstanding anything to the contrary contained
herein, to the extent that a transfer of Loans pursuant to this Section 13.14
would, at the time of such transfer, result in increased costs under Section
1.10, 1.11, 2.05 or 4.04 from those being charged by the respective Lender prior
to such transfer, then the Borrowers shall not be obligated to pay such
increased costs (although the Borrowers shall be obligated to pay any other
increased costs of the type described above resulting from changes after the
date of the respective transfer).
13.15 Confidentiality. (a) Subject to the provisions of clause (b) of
this Section 13.15, each Lender agrees that it will use its reasonable efforts
not to disclose without the prior consent of the Borrowers (other than to its
employees, auditors, advisors or counsel or to another Lender if the Lender or
such Lender's holding or parent company in its sole discretion determines that
any such party should have access to such information, provided such Persons
shall be subject to the provisions of this Section 13.15 to the same extent as
such Lender) any information with respect to any Credit Party or any of its
Subsidiaries which is now or in the future furnished pursuant to this Agreement
or any other Credit Document, provided that any Lender may disclose any such
information (a) as has become generally available to the public, (b) as may be
required or appropriate in any report, statement or testimony submitted to any
municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Lender or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or similar organizations (whether in the United
States or elsewhere) or their successors, (c) as may be required or appropriate
in respect to any summons or subpoena or in connection with any litigation, (d)
in order to comply with any law, order, regulation or ruling applicable to such
Lender, (e) to any Agent or Arranger, (f) to any prospective or actual
transferee or participant in connection with any contemplated transfer or
participation of any of the Notes or any interest therein by such Lender, and
(g) to any direct or indirect contractual counterparty in swap agreements or
such contractual counterparty's professional advisor (so long as such
contractual counterparty or such professional advisor agrees to be bound by the
provisions of this Section 13.15), provided that such prospective transferee
agrees with such Lender to be subject to the provisions of this Section
13.15(a).
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<PAGE>
(b) Each Borrower hereby acknowledges and agrees that each Lender may
share with any of its affiliates any information related to Credit Parties or
any of their respective Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of the Credit
Parties and their respective Subsidiaries, provided such Persons shall be
subject to the provisions of this Section 13.15 to the same extent as such
Lender), it being understood that for purposes of this Section 13.15(b) the term
"affiliate" shall mean any direct or indirect holding company of a Lender as
well as any direct or indirect Subsidiary of such holding company.
13.16 Register. Each Borrower hereby designates the Administrative
Agent to serve as such Borrower's agent, solely for purposes of this Section
13.16, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Lenders, the Loans made by each of
the Lenders and each repayment in respect of the principal amount of the Loans
of each Lender. Failure to make any such recordation, or any error in such
recordation shall not affect any Borrower's obligations in respect of such
Loans. With respect to any Lender, the transfer of the Commitments of such
Lender and the rights to the principal of, and interest on, any Loan shall not
be effective until such transfer is recorded on the Register maintained by the
Administrative Agent with respect to ownership of such Commitments and Loans and
prior to such recordation all amounts owing to the transferor with respect to
such Commitments and Loans shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Commitments and
Loans shall be recorded by the Administrative Agent on the Register only upon
the acceptance by the Administrative Agent of a properly executed and delivered
Assignment and Assumption Agreement pursuant to Section 13.04(b). Coincident
with the delivery of such an Assignment and Assumption Agreement to the
Administrative Agent for acceptance and registration of assignment or transfer
of all or part of a Commitment and/or Loan, or as soon thereafter as
practicable, the assigning or transferor Lender shall surrender the Note
evidencing such Commitment and/or Loan, and thereupon one or more new Notes in
the same aggregate principal amount shall be issued to the assigning or
transferor Lender and/or the new Lender. Each Borrower agrees, on a joint and
several basis to indemnify the Administrative Agent from and against any and all
losses, claims, damages and liabilities of whatsoever nature which may be
imposed on, asserted against or incurred by the Administrative Agent in
performing its duties under this Section 13.16, provided that the Borrowers
shall have no obligation to indemnify the Administrative Agent for any loss,
claim, damage, liability or expense to the extent resulting solely from the
gross negligence, willful misconduct or breach of agreement of the
Administrative Agent.
13.17 Addition of New Lenders, Amendment and Restatement of Original
Credit Agreement. On and as of the occurrence of the Restatement Effective Date
in accordance with Section 13.10, (a) each New Lender shall become a "Lender"
under, and for all purposes of, this Agreement and the other Credit Documents,
and (b) the Original Credit Agreements shall each be deemed to be amended and
restated in their entirety, and superseded by to this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
1950 Stemmons Freeway PATRIOT AMERICAN
Suite 6001 HOSPITALITY, INC.
Dallas, Texas 75207
Telephone No.: (214) 863-1000
Telecopier No.: (214) 863-1527
Attention: Lawrence Jones By
----------------------------
Name:
Title:
1950 Stemmons Freeway PATRIOT AMERICAN HOSPITALITY
Suite 6001 PARTNERSHIP, L.P.,
Dallas, Texas 75207
Telephone No.: (214) 863-1000
Telecopier No.: (214) 863-1527 By: PAH GP, INC., its General Partner
Attention: Lawrence Jones
By
----------------------------
Name:
Title:
<PAGE>
CHASE SECURITIES INC., as an Arranger
By
----------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
Individually and as the
Administrative Agent
By
----------------------------
Name:
Title:
PAINE WEBBER REAL ESTATE
SECURITIES INC., Individually,
as an Arranger and as the
Syndication Agent
By
----------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
Individually and as
Documentation Agent
By
----------------------------
Name:
Title:
<PAGE>
CITIBANK, N..A.,
Individually and as Documentation Agent
By
----------------------------
Name:
Title:
BANKERS TRUST COMPANY
By
----------------------------
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By
----------------------------
Name:
Title:
BAYERISCHE HYPOTHEKEN-UND
WECHSEL-BANK
AKTIENGESELLSCHAFT
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
<PAGE>
SOCIETE GENERALE, SOUTHWEST
AGENCY
By
----------------------------
Name:
Title:
BANKBOSTON, N.A.
By
----------------------------
Name:
Title:
BARCLAYS BANK PLC
By
----------------------------
Name:
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By
----------------------------
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By
----------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By
----------------------------
Name:
Title:
PACIFIC LIFE INSURANCE COMPANY
formerly known as Pacific
Mutual Life Insurance Company
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
<PAGE>
CIBC INC.
By
----------------------------
Name:
Title:
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN BRANCH
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
BANK ONE TEXAS, N.A.
By
----------------------------
Name:
Title:
BANK UNITED
By
----------------------------
Name:
Title:
<PAGE>
FIRST AMERICAN BANK TEXAS, SSB
By
----------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED
By
----------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., NEW YORK BRANCH
By
----------------------------
Name:
Title:
THE TOYO TRUST & BANKING
COMPANY, LTD.
By
----------------------------
Name:
Title:
BANK HAPOALIM B.M.
By
----------------------------
Name:
Title:
<PAGE>
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By
----------------------------
Name:
Title:
SUMMIT BANK
By
----------------------------
Name:
Title:
HIBERNIA NATIONAL BANK
By
----------------------------
Name:
Title:
ALLIED IRISH BANKS PLC
By
----------------------------
Name:
Title:
FIRST NATIONAL BANK OF COMMERCE
By
----------------------------
Name:
Title:
<PAGE>
SIAM COMMERCIAL BANK PUBLIC
COMPANY LIMITED NEW YORK
AGENCY
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By
----------------------------
Name:
Title:
HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
By: Hartford Investment Services, Inc., its
Agent and Attorney-in-fact
By
----------------------------
Name:
Title:
<PAGE>
BHF-BANK AKTIENGESELLSCHAFT
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
BANK OF HAWAII
By
----------------------------
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
<PAGE>
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
DEUTSCHE BANK A.G. NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By
----------------------------
Name:
Title:
ARAB BANK PLC, GRAND CAYMAN
BRANCH
By
----------------------------
Name:
Title:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By
----------------------------
Name:
Title:
<PAGE>
DEBT STRATEGIES FUND II, INC.
By
----------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By
----------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By
----------------------------
Name:
Title:
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P.
its General Partner
By: Oak Hill Securities MGP, Inc.,
its General Partner
By
----------------------------
Name:
Title:
<PAGE>
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS,
LDC
By: ING Capital Advisors, Inc.,
as Investment Advisor
By
----------------------------
Name:
Title:
KZH-ING-2 CORPORATION
By
----------------------------
Name:
Title:
PRIME INCOME TRUST
By
----------------------------
Name:
Title:
OCTAGON LOAN TRUST
By: Octagon Credit Investors, as manager.
By
----------------------------
Name:
Title:
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By
----------------------------
Name:
Title:
FLOATING RATE PORTFOLIO
By: Chancellor LGT Senior Secured
Management, Inc., as Attorney-in-fact
By
----------------------------
Name:
Title:
PILGRIM AMERICA PRIME RATE TRUST
By: Pilgrim America Investments, Inc.,
as its Investment Manager
By
----------------------------
Name:
Title:
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company,
its Investment Manager
By
----------------------------
Name:
Title:
<PAGE>
ALLSTATE INSURANCE COMPANY
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
BANKERS LIFE & CASUALTY
INSURANCE COMPANY
By
----------------------------
Name:
Title:
ARES LEVERAGED INVESTMENT FUND, LP
By: Ares Management, L.P., its General Partner
By
----------------------------
Name:
Title:
<PAGE>
THE BANK OF NEW YORK
as Trustee on behalf of NATS Loan Trust
10 and not in its individual capacity
By
----------------------------
Name:
Title:
<PAGE>
BALANCED HIGH-YIELD FUND I LTD.,
By: BHF-BANK Aktiengesellschaft,
acting through its New York Branch,
as attorney-in-fact
By
----------------------------
Name:
Title:
By
----------------------------
Name:
Title:
<PAGE>
SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
Revolving Tranche II Tranche III Tranche B
Loan Original Term Loan Term Loan Term Loan
Lender Commitment Term Loans Commitment Commitment Commitment
- ------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
The Chase Manhattan Bank 60,000,000.00 39,500,000.00 96,509,803.95 108,573,529.38 340,166,666.67
Paine Webber Real Estate 60,000,000.00 39,500,000.00 25,372,549.02 28,544,117.65 44,833,333.33
Securities Inc.
Credit Lyonnais New York 16,000,000.00 18,000,000.00
Branch
Citibank, N.A. 60,000,000.00 38,000,000.00 16,000,000.00 18,000,000.00
Bankers Trust Company 47,755,102.04 30,244,897.96 16,000,000.00 18,000,000.00
NationsBank of Texas, N.A. 58,000,000.00 37,000,000.00 13,647,058.82 15,352,941.18
Bayerische Hypotheken-Und 58,000,000.00 37,000,000.00 13,647,058.82 15,352,941.18
Wechsel-Bank
Aktiengesellschaft
Societe Generale, 58,000,000.00 37,000,000.00 13,647,058.82 15,352,941.18
Southwest Agency
BankBoston, N.A. 58,000,000.00 37,000,000.00 13,647,058.82 15,352,941.18
Barclays Bank PLC 13,647,058.82 15,352.941.18
Westdeutsche Landesbank 13,647,058.82 15,352,941.18
Girozentrale
First Union National Bank 11,764,705.88 13,235,294.12
The Travelers Insurance 11,764,705.88 13,235,294.12
Company
The Bank of Nova Scotia 12,244,897.96 7,755,102.04 11,764,705.88 13,235.294.12
Pacific Life Insurance 73,000,000.00 17,000,000.00
Company
CIBC Inc. 55,000,000.00 20,000,000.00 9,411,764.71 10,588,235.29
Dresdner Bank AG, New York 40,000,000.00 10,000,000.00
Branch and Grand Cayman
Branch
Bank One Texas, N.A. 35,000,000.00
Bank United 35,000,000.00
First American Inc. Bank 25,000,000.00
Texas, SSB
The Sumitomo Bank, Limited 20,000,000.00
The Long-Term Credit Bank 20,000,000.00
of Japan, Ltd., New York
Branch
The Toyo Trust & Banking 20,000,000.00
Company, Ltd.
Bank Hapoalim B.M. 20,000,000.00
Merrill Lynch, Pierce, 20,000,000.00
Fenner & Smith
Incorporated
Summit Bank 20,000,000.00
Hibernia National Bank 20,000,000.00
Allied Irish Banks PLC, 10,000,000.00
Cayman Islands Branch
First National Bank of 10,000,000.00
Commerce
Siam Commercial Bank 5,000,000.00
Public Company Limited,
New York Agency
The Industrial Bank of 9,411,764.71 10,588,235.29
Japan, Limited, New York
Branch
Hartford Life and Annuity 9,411,764.71 10,588.235.29
Insurance Company
BHF-Bank Aktiengesellschaft 7,058,823.53 7,941,176.47
</TABLE>
<PAGE>
Schedule I
Page 2
<TABLE>
<CAPTION>
Revolving Tranche II Tranche III Tranche B
Loan Original Term Loan Term Loan Term Loan
Lender Commitment Term Loans Commitment Commitment Commitment
- ------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Bank of Hawaii 4,705,882.35 5,294,117.65
Compagnie Financiere de 9,411,764.71 10,588,235.29
CIC et de L'Union
Europeenne
Erste Bank Der 7,058,823.53 7,941,176.47
Oesterreichischen
Sparkassen
Deutsche Bank A.G., New 9,411,764.71 10,588,235.29
York and/or Cayman
Islands Branches
Arab Bank PLC, Grand 4,705,882.35 5,294,117.65
Cayman Branch
Massachusetts Mutual Life 9,411,764.71 10,588,235.29
Insurance Company
Debt Strategies Fund II, 15,000,000.00
Inc.
Merrill Lynch Senior 20,000,000.00
Floating Rate Fund, Inc.
Van Kampen American 5,882,352.94 6,617,647.06 25,000,000.00
Capital Prime Rate
Income Trust
Oak Hill Securities Fund, 40,000,000.00
L.P.
ING High Income Principal 2,352,941.18 2,647,058.83 10,000,000.00
Preservation Fund
Holdings, LDC
KZH-ING-2 Corporation 2,352,941.17 2,647,058.82 10,000,000.00
Prime Income Trust 3,529,411.76 3,970,588.24 15,000,000.00
Octagon Loan Trust 3,529,411.76 3,970,588.24 15,000,000.00
Toronto Dominion (Texas), 2,205,882.35 2,481,617.65 9,375,000.00
Inc.
Floating Rate Portfolio 1,323,529.41 1,488,970.59 5,625,000.00
Pilgrim America Prime Rate 4,705,882.35 5,294,117.65 10,000,000.00
Trust
Crescent/Mach I Partners, 5,000,000.00
L.P.
Allstate Insurance Company 5,000,000.00
Allstate Life Insurance 5,000,000.00
Company
Bankers Life & Casualty 10,000,000.00
Insurance Company
Ares Leveraged Investment 10,000,000.00
Fund, L.P.
The Bank of New York, as 7,058,823.53 7,941,176.47
Trustee on behalf of
Nats Loan Trust 10
Balanced High-Yield Fund I 5,000,000.00
Ltd.
____________ ____________ _____________ _____________ _____________
Total $900,000,000.00 $350,000,000.00 $400,000,000.00 $450,000,000.00 $600,000,000.00
</TABLE>
<PAGE>
SCHEDULE II
The Chase Manhattan Bank 380 Madison Avenue
New York, New York 10017
Telephone No.: (212) 622-3250
Telecopier No.: (212) 622-3395
Attention: Mr. Fred Hammer
Paine Webber Real Estate 1285 Avenue of the Americas
Securities Inc. 19th Floor
New York, New York 10019
Telephone No.: (212) 713-2000
Telecopier No.: (212) 713-7949
Attention: Mr. Christopher S. Johnson
Credit Lyonnais New York Branch 1301 Avenue of the Americas
New York, NY 10019
Telephone No.: (212) 261-7743
Telecopier No.: (212) 261-7532
Attention: Ms. Judy Greenlee
Citibank, N.A. 399 Park Avenue
New York, New York 10043
Telephone No.: (212) 559-6635
Telecopier No.: (212) 935-2019
Attention: Mr. Jeff Warner
with a copy to:
Citicorp Real Estate Legal
599 Lexington Avenue
New York, New York 10044
Attention: Group General Counsel
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Telephone No.: (212) 250-2550
Telecopier No.: (212) 669-0743
Attention: Mr. Garrett Thelander
<PAGE>
Schedule II
Page 2
NationsBank of Texas, N.A. 901 Main Street, 51st Plaza
Dallas, Texas 75202-3714
Telephone No.: (214) 508-1562
Telecopier No.: (214) 508-0085
Attention: Mr. Anthony Fertitta
Bayerische Hypotheken-Und HYPO Bank
Wechsel-Bank Aktiengesellschaft 32 Old Slip
New York, NY 10005
Telephone No.: (212) 440-0848
Telecopier No.: (212) 440-0824
Attention: Ms. Margaret Boomers
Societe Generale, Southwest Agency Trammell Crow Center, Suite 4900
2001 Ross Avenue
Dallas, Texas 75201
Telephone No.: (214) 979-2774
Telecopier No.: (214) 979-2727
Attention: Mr. Thomas K. Day
BankBoston, N.A. 115 Perimeter Center Place, N.E.,
Suite 500
Atlanta, Georgia 30346
Telephone No.: (770) 390-6583
Telecopier No.: (770) 390-8434
Attention: Mr. John T. Pearson
Barclays Bank PLC 222 Broadway
8th Floor
New York, NY 10038
Telephone No.: (212) 412-2620
Telecopier No.: (212) 412-7600
Attention: Ms. Jessica Donahue
<PAGE>
Schedule II
Page 3
Westdeutsche Landesbank Girozentrale 1211 Avenue of the Americas
25th Floor
New York, NY 10036-8701
Telephone No.: (212) 852-6135
Telecopier No.: (212) 921-5947
Attention: Mr. Mark Lanspa
First Union National Bank 301 South College Street, TW10
One First Union Center
Charlotte, NC 28288
Telephone No.: (704) 383-0530
Telecopier No.: (704) 383-0202
Attention: Mr. Charles Edmondson
The Travelers Insurance Company One Tower Square, 9PB
205 Columbus Blvd.
Hartford, CT 06183
Telephone No.: (860) 277-1877
Telecopier No.: (860) 954-1186
Attention: Ms. Susan E.D. Neuberg
and
388 Greenwich Street
New York, NY 10013
Telephone No.: (212) 816-7199
Telecopier No.: (212) 816-8577
Attention: Ms. Carmen Somarriba
The Bank of Nova Scotia One Liberty Plaza
New York, NY 10006
Telephone No.: (212) 225-5158
Telecopier No.: (212) 225-5166
Attention: Mr. Bruce Ferguson
Pacific Life Insurance Company 700 Newport Center Drive
Newport Beach, California 92660
Telephone No.: (714)721-5447
Telecopier No.: (714) 721-5174
Attention: Mr. T. Anthony Premer
<PAGE>
Schedule II
Page 4
CIBC INC. CIBC Oppenheimer Corp.
425 Lexington Avenue, 8th Floor
New York, New York 10017
Telephone No.: (212) 856-3564
Telecopier No.: (212) 856-3991
Attention: Ms. Cheryl Root
with a copy to:
CIBC Oppenheimer Corp.
350 South Grand Avenue, Suite 2600
Two California Plaza
Los Angeles, California 90071
Telephone No.: (213) 617-6245
Telecopier No.: (213) 346-0157
Attention: Mr. Dean J. Decker
Dresdner Bank AG, New York Branch 75 Wall Street
and Grand Cayman Branch New York, NY 10005-2889
Telephone No.: (212) 429-2657
Telecopier No.: (212) 429-2781
Attention: Mr. Neil Crawford
Bank One Texas, N.A. 1717 Main Street
Dallas, Texas 75201
Telephone No.: (214) 290-3146
Telecopier No.: (214) 290-2275
Attention: Mr. Eddie V. Hodges, Jr.
Bank United 3200 Southwest Freeway, Suite 1900
Houston, Texas 77027
Telephone No.: (713) 543-6954
Telecopier No.: (713) 543-7927
Attention: Mr. Mario Chiodetti
First American Bank Texas, SSB 14651 Dallas Parkway, Suite 400
Dallas, Texas 75240-7479
<PAGE>
Schedule II
Page 5
Telephone No.: (972) 419-3414
Telecopier No.: (972) 419-3308
Attention: Mr. Jeffrey C. Schultz
The Sumitomo Bank, Limited 233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone No.: (312) 876-7796
Telecopier No.: (312)876-6436
Attention: Mr. James Horvath
The Long-Term Credit Bank 165 Broadway, 50th Floor
of Japan, Ltd., New York New York, New York 10006
Branch Telephone No.: (212) 335-4562
Telecopier No.: (212) 608-3058
Attention: Mr. Kenji Kondo
The Toyo Trust & Banking Company, 444 South Flower Street
Ltd. Suite 2550
Los Angeles, California 90071
Telephone No.: (213) 236-1543
Telecopier No.: (213) 624-5874
Attention: Mr. Jeff Dragovich
Bank Hapoalim B.M. 1177 Avenue of the Americas
New York, New York 10036
Telephone No.: (212) 782-2177
Telecopier No.: (212) 782-2187
Attention: Ms. Laura Anne Raffa
Merrill Lynch, Pierce, Fenner & World Financial Center
Smith Incorporated North Tower
New York, New York 10281
Telephone No.: (212) 449-1000
Telecopier No.: (212) 449-8230
Attention: Mr. Brian O'Callahan
Summit Bank 750 Walnut Avenue
<PAGE>
Schedule II
Page 6
Cranford, New Jersey 07016
Telephone No.: (732) 709-6079
Telecopier No.: (732) 709-6435
Attention: Mr. Gregory Haines
Hibernia National Bank 313 Carondelet Street, 14th Floor
New Orleans, Louisiana 70130
Telephone No.: (504) 533-5742
Telecopier No.: (504) 533-2042
Attention: Mr. Randy Crochet
Allied Irish Banks PLC, Cayman 405 Park Avenue
Islands Branch New York, New York 10022
Telephone No.: (212) 339-8018
Telecopier No.: (212) 339-8008
Attention: Ms. Marcia Meeker
with a copy to:
Rogers & Wells
200 Park Avenue
New York, NY 10166
Telephone No.: (212) 878-8020
Telecopier No.: (212) 878-8375
Attention: Ms. Barbara Goodstein, Esq.
First National Bank of Commerce 201 St. Charles Avenue
New Orleans, LA 70170
Telephone No.: (504) 561-1493
Telecopier No.: (504) 561-1738
Attention: Honore Aschaffenburg
Siam Commercial Bank One Exchange Plaza
Public Company Limited, 55 Broadway, 8th Floor
New York Agency New York, NY 10006
Telephone No.: (212) 208-9303
Telecopier No.: (212) 747-0106
Attention: Mr. John Bishop
The Industrial Bank of Japan, 1251 Avenue of the Americas
Limited, New York Branch 32nd Floor
New York, NY 10020-1104
Telephone No.: (212) 282-3440
<PAGE>
Schedule II
Page 7
Telecopier No.: (212) 282-4488
Attention: Mr. John Veltri
Hartford Life and Annuity Insurance Hartford Investment Services, Inc.
Company 55 Farmington Avenue
Hartford, CT 06105
Telephone No.: (860) 297-6727
Telecopier No.: (860) 297-8884
Attention: Mr. Rick Conway
BHF-Bank Aktiengesellschaft New York Branch
590 Madison Avenue
New York, NY 10022-2540
Telephone No.: (212) 756-5937
Telecopier No.: (212) 756-5536
Attention: Ms. Catherine Hickey
Bank of Hawaii 1850 North Central Avenue
Suite 400
Phoenix, AZ 85004
Telephone No.: (602) 257-2235
Telecopier No.: (602) 257-2489
Attention: Ms. Brenda Testerman
Compagnie Financiere de CIC et de 520 Madison Avenue
L'Union Europeenne 37th Floor
New York, NY 10022
Telephone No.: (212) 715-4427
Telecopier No.: (212) 715-4535
Attention: Mr. Marcus Edwards
Erste Bank der Oesterreichischen 280 Park Avenue
Sparkassen West Building
New York, NY 10017
Telephone No.: (212) 984-5630
Telecopier No.: (212) 984-5627
Attention: Mr. John Runnion
Deutsche Bank A.G., New York and/or 31 West 52nd Street
<PAGE>
Schedule II
Page 8
Cayman Islands Branches New York, NY 10019
Telephone No.: (212) 474-8205
Telecopier No.: (212) 474-8212
Attention: Mr. Thomas Foley
Arab Bank PLC 520 Madison Avenue
2nd Floor
New York, NY 10022
Telephone No.: (212) 715-9712
Telecopier No.: (212) 593-4632
Attention: Mr. Khanh Vuong
Massachusetts Mutual Life Insurance 1295 State Street
Company Springfield, MA 01111-0001
Telephone No.: (413) 744-7601
Telecopier No.: (413) 744-6123
Attention: Mr. Robert Little
Debt Strategies Fund II, Inc. 800 Scudders Mill Road
c/o Merrill Lynch Asset Management Plainsboro, NJ 08536
Telephone No.: (609) 282-2059
Telecopier No.: (609) 282-2756
Attention: Mr. Douglas Henderson
Merrill Lynch Senior Floating Rate 800 Scudders Mill Road
Fund, Inc. Plainsboro, NJ 08536
c/o Merrill Lynch Asset Management Telephone No.: (609) 282-2059
Telecopier No.: (609) 282-2756
Attention: Mr. Douglas Henderson
Van Kampen American Capital Prime One Parkview Plaza
Rate Income Trust 5th Floor
Oakbrook Terrace, IL 60181
Telephone No.: (630) 684-6438
Telecopier No.: (630) 684-6740
Attention: Mr. Jeffrey Maillet
Oak Hill Securities Fund, L.P. 65 East 55th Street
Park Avenue Towers
New York, NY 10022
Telephone No.: (212) 326-1551
<PAGE>
Schedule II
Page 9
Telecopier No.: (212) 593-3596
Attention: Mr. Scott Krase
ING High Income Principal 333 South Grand Avenue
Preservation Fund Holdings, LDC Suite 4250
c/o ING Capital Advisors Los Angeles, CA 90071
Telephone No.: (213) 346-3975
Telecopier No.: (213) 626-6552
Attention: Ms. Beth Digati
KZH-ING-2 Corporation 333 South Grand Avenue
c/o ING Capital Advisors Suite 4250
Los Angeles, CA 90071
Telephone No.: (213) 346-3975
Telecopier No.: (213) 626-6552
Attention: Ms. Beth Digati
Prime Income Trust Dean Witter InterCapital
Two World Trade Center
72nd Floor
New York, NY 10048
Telephone No.: (212) 392-9034
Telecopier No.: (212) 392-5345
Attention: Mr. Peter Gewirtz
Octagon Loan Trust Octagon Credit Investors
380 Madison Avenue
12th Floor
New York, NY 10017
Telephone No.: (212) 622-3070
Telecopier No.: (212) 622-3797
Attention: Mr. James Ferguson
Toronto Dominion (Texas), Inc. 909 Fannin Road
Suite 1700
Houston, TX 77010
Telephone No.: (713) 653-8248
Telecopier No.: (713) 951-9921
Attention: Mr. David G. Parker
<PAGE>
Schedule II
Page 10
Floating Rate Portfolio 1166 Avenue of the Americas
c/o Chancellor LGT Asset Management 27th Floor
New York, NY 10036
Telephone No.: (212) 278-9870
Telecopier No.: (212) 278-9619
Attention: Mr. Anthony Clemente
Pilgrim America Prime Rate Trust Two Renaissance Square
40 North Central Avenue
Phoenix, AZ 85004-4424
Telephone No.: (602) 417-8259
Telecopier No.: (602) 417-8327
Attention: Mr. Howard Tiffen
Crescent/Mach I Partners, L.P. 200 Park Avenue
c/o The Trust Company of the West Suite 2200
New York, NY 10166
Telephone No.: (212) 297-4137
Telecopier No.: (212) 297-4159
Attention: Mr. Justin Driscoll
Allstate Insurance Company 3075 Sanders Road
Suite G3a
Northbrook, IL 60062-7127
Telephone No.: (847) 402-3095
Telecopier No.: (847) 402-3092
Attention: Chris Georgen
Allstate Life Insurance Company 3075 Sanders Road
Suite G3a
Northbrook, IL 60062-7127
Telephone No.: (847) 402-3095
Telecopier No.: (847) 402-3092
Attention: Chris Georgen
Bankers Life & Casualty Insurance 11825 North Pennsylvania Street
Company Carmel, IN 46032
c/o Conseco Capital Management, Inc. Telephone No.: (317) 574-5640
Telecopier No.: (317) 817-2763
Attention: Mr. Peter Sakon
<PAGE>
Schedule II
Page 11
Ares Leveraged Investment Fund, L.P. 1999 Avenue of the Stars
c/o Ares Management, Inc. Suite 1900
Los Angeles, CA 90067
Telephone No.: (310) 201-4172
Telecopier No.: (310) 201-4170
Attention: Mr. Will Morton
The Bank of New York, as Trustee on Corporate Trust Administration
behalf of Nats Loan Trust 10 101 Barclays Street
12-East
New York, NY 10286
Telephone No.: (212) 815-5366
Telecopier No.: (212) 815-7157
Attention: Ms. Betty A. Cocozza
Balanced High-Yield Fund I Ltd. c/o BHF-Bank, New York Branch
590 Madison Avenue
New York, NY 10022-2540
Telephone No.: (212) 756-5937
Telecopier No.: (212) 756-5536
Attention: Ms. Catherine Hickey
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
SECTION 1. Amount and Terms of Credit ................................... 1
1.01 The Commitments .............................................. 1
1.02 Minimum Borrowing Amounts .................................... 6
1.03 Notice of Borrowing .......................................... 6
1.04 Disbursement of Funds ........................................ 7
1.05 Notes ........................................................ 8
1.06 Conversions .................................................. 10
1.07 Pro Rata Borrowings .......................................... 11
1.08 Interest ..................................................... 11
1.09 Interest Periods ............................................. 11
1.10 Increased Costs, Illegality, etc ............................. 13
1.11 Compensation ................................................. 15
1.12 Change of Lending Office ..................................... 15
1.13 Replacement of Lenders ....................................... 15
SECTION 2. Letters of Credit ............................................ 17
2.01 Letters of Credit ............................................ 17
2.02 Letter of Credit Requests .................................... 18
2.03 Letter of Credit Participations .............................. 19
2.04 Agreement to Repay Letter of Credit Drawings ................. 20
2.05 Increased Costs .............................................. 21
SECTION 3. Fees; Reductions of Commitment ............................... 22
3.01 Fees ......................................................... 22
3.02 Voluntary Termination of Commitments ......................... 23
3.03 Mandatory Termination and Reduction of Commitments ........... 23
SECTION 4. Prepayments; Payments; Taxes ................................. 24
4.01 Voluntary Prepayments ........................................ 24
4.02 Mandatory Repayments and Cash Collateralization .............. 25
4.03 Method and Place of Payment .................................. 28
4.04 Net Payments; Taxes .......................................... 28
SECTION 5. Conditions Precedent to Restatement Effective Date ........... 30
5.01 Execution of Agreement; Notes ................................ 30
5.02 Fees, etc .................................................... 30
5.03 Opinions of Counsel .......................................... 30
5.04 Trust, Corporate, Limited Liability Company and
Partnership Documents; Proceedings; etc ...................... 30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.05 Amended and Restated Affiliate Guaranty ...................... 31
5.06 Pledge Agreement ............................................. 31
5.07 Adverse Change; Approvals .................................... 31
5.08 Litigation ................................................... 32
5.09 Consummation of Interstate Transaction ....................... 32
5.10 Solvency Certificate; Insurance Certificates ................. 32
5.11 Pro Forma Balance Sheets; Projections ........................ 33
5.12 Original Credit Agreements; etc .............................. 33
SECTION 6. Conditions Precedent to All Credit Events .................... 33
6.01 No Default; Representations and Warranties ................... 33
6.02 Notice of Borrowing; Letter of Credit Request ................ 33
SECTION 7. Representations and Warranties ............................... 34
7.01 Trust, Corporate, Limited Liability Company and
Partnership Status ........................................... 34
7.02 Trust, Corporate, Limited Liability Company or
Partnership Power and Authority .............................. 34
7.03 No Violation ................................................. 35
7.04 Governmental Approvals ....................................... 35
7.05 Financial Statements; Financial Condition;
Undisclosed Liabilities; Projections; etc .................... 35
7.06 Litigation ................................................... 37
7.07 True and Complete Disclosure ................................. 37
7.08 Use of Proceeds; Margin Regulations .......................... 37
7.09 Tax Returns and Payments ..................................... 37
7.10 Compliance with ERISA ........................................ 38
7.11 Real Properties .............................................. 39
7.12 Subsidiaries ................................................. 39
7.13 Compliance with Statutes, etc ................................ 39
7.14 Investment Company Act ....................................... 40
7.15 Public Utility Holding Company Act ........................... 40
7.16 Environmental Matters ........................................ 40
7.17 Labor Relations .............................................. 41
7.18 Intellectual Property ........................................ 41
7.19 Indebtedness ................................................. 41
7.20 Ground Leases ................................................ 41
7.21 Status as REIT ............................................... 41
7.22 Operators .................................................... 41
7.23 Security Interests ........................................... 42
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8. Affirmative Covenants ....................................... 42
8.01 Information Covenants ........................................ 42
8.02 Books, Records and Inspections ............................... 45
8.03 Maintenance of Property; Insurance ........................... 45
8.04 Corporate Franchises ......................................... 45
8.05 Compliance with Statutes, etc ................................ 46
8.06 Compliance with Environmental Laws ........................... 46
8.07 ERISA ........................................................ 46
8.08 End of Fiscal Years; Fiscal Quarters ......................... 47
8.09 Performance of Obligations ................................... 48
8.10 Payment of Taxes ............................................. 48
8.11 Further Assurances ........................................... 48
8.12 FF&E Reserves ................................................ 48
8.13 REIT Requirements ............................................ 49
8.14 Maintenance of Operating Account ............................. 49
8.15 Interest Rate Protection ..................................... 49
8.16 Foreign Subsidiaries Security ................................ 49
SECTION 9. Negative Covenants .......................................... 50
9.01 Line of Business ............................................. 50
9.02 Consolidation, Merger, etc ................................... 50
9.03 Dividends .................................................... 50
9.04 Investments .................................................. 51
9.05 Certain Indebtedness Obligations ............................. 52
9.06 Liens ........................................................ 52
9.07 Transactions with Affiliates ................................. 54
9.08 Total Interest Coverage ...................................... 55
9.09 Fixed Charge Coverage ........................................ 55
9.10 Tangible Net Worth ........................................... 55
9.11 Limitations on Indebtedness .................................. 55
9.12 Derivatives Obligations ...................................... 55
9.13 Limitation on Certain Restrictions ........................... 56
9.14 Limitation on Creation of Subsidiaries ....................... 56
SECTION 10. Events of Default ........................................... 57
10.01 Payments ..................................................... 57
10.02 Representations, etc ......................................... 57
10.03 Covenants .................................................... 57
10.04 Default Under Other Agreements ............................... 57
10.05 Bankruptcy, etc .............................................. 57
10.06 ERISA ........................................................ 58
10.07 REIT Status .................................................. 59
10.08 Guaranties ................................................... 59
10.09 Judgments .................................................... 59
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Page
----
10.10 Change of Control ............................................ 59
10.11 General Partner Status ....................................... 59
10.12 Security Documents ........................................... 59
SECTION 11. Definitions and Accounting Terms ............................ 60
11.01 Defined Terms ................................................ 60
SECTION 12. The Agents .................................................. 93
12.02 Nature of Duties ............................................. 94
12.03 Lack of Reliance on the Agents ............................... 94
12.04 Certain Rights of the Agents ................................. 94
12.05 Reliance ..................................................... 95
12.06 Indemnification .............................................. 95
12.07 Each Agent in its Individual Capacity ........................ 95
12.08 Holders ...................................................... 95
12.09 Removal of or Resignation by Either of the Agents ............ 95
</TABLE>
(v)
<PAGE>
SCHEDULE I Commitments on the Effective Date
SCHEDULE II Lender Addresses
SCHEDULE III Litigation
SCHEDULE IV Initial Hotels and Real Property
SCHEDULE V Subsidiaries
SCHEDULE VI Existing Indebtedness
SCHEDULE VII Existing Liens
SCHEDULE VIII Non-Credit Party and Non-Pledgor Credit Party Subsidiaries
SCHEDULE IX Original Letters of Credit
EXHIBIT A Notice of Borrowing
EXHIBIT B-1 Form of Tranche I Term Note
EXHIBIT B-2 Form of Tranche II Term Note
EXHIBIT B-3 Form of Tranche III Term Note
EXHIBIT B-4 Form of Tranche B Term Note
EXHIBIT B-5 Form of Revolving Note
EXHIBIT B-6 Form of Swingline Note
EXHIBIT C Letter of Credit Request
EXHIBIT D Section 4.04(b)(ii) Certificate
EXHBIIT E Opinions of Counsel to the Credit Parties
EXHIBIT F Officers' Certificate
EXHIBIT G Amended and Restated Affiliate Guaranty
EXHIBIT H Pledge Agreement
EXHIBIT I Officer's Solvency Certificate
EXHIBIT J Compliance Certificate
EXHIBIT K Assignment and Assumption Agreement
<PAGE>
Exhibit 10.3
PURCHASE PRICE ADJUSTMENT MECHANISM AGREEMENT
THIS PURCHASE PRICE ADJUSTMENT MECHANISM AGREEMENT is made as of the
6th day of April, 1998, by and between Patriot American Hospitality, Inc. (the
"REIT"), Wyndham International, Inc. ("OPCO," and together with the REIT, the
"Companies") and PaineWebber Financial Products Inc. ("PaineWebber") (the
"Agreement").
The purpose of this Agreement is to set forth the terms and conditions
of the purchase price adjustment transaction (the "Transaction") entered into
between PaineWebber and the Companies.
IN CONSIDERATION of the mutual representations, warranties and
covenants herein contained, and on the terms and subject to the conditions
herein set forth, the Companies and PaineWebber hereby agree as follows:
Section 1. Definitions and Other Provisions.
(a) Ability to Settle in Paired Shares. As of the date hereof,
the Companies have not, and after the date hereof, the Companies will not, enter
into any obligation that would contractually prohibit the Companies from
delivering Paired Shares pursuant to Sections 3.2 or 5 of this Agreement.
As used in this Agreement, the following terms shall have the meanings
set forth below:
(b) Adjustment Shares. 5,150,000 Paired Shares, as may be
adjusted from time to time pursuant to Section 1(c), reduced by the number of
Settlement Shares that are the subject of Settlement.
(c) Certain Adjustments to Reference Price or Number of
Adjustment Shares. In the event of:
(i) a subdivision, consolidation or reclassification
of the Paired Shares, or a free distribution or
dividend of any Paired Shares to all existing holders
of Paired Shares by way of bonus, capitalization or
similar issue; or
(ii) a distribution or dividend to all existing
holders of Paired Shares of (A) additional Paired
Shares or (B) other share capital or securities
granting right to payment of dividends and/or the
proceeds of liquidation of the Companies equally or
proportionally with such payments to holders of
Paired Shares,
<PAGE>
an adjustment shall thereupon be effected to the Reference
Price and/or the Adjustment Shares at the time of such event with the intent
that following such adjustment, the value of this Transaction is economically
equivalent to the value immediately prior to the occurrence of the event causing
the adjustment.
(d) Block Sale. Any one or more privately negotiated sales of
the Paired Shares involving at least a block of such security (as defined in
Rule 10b-18 under the Exchange Act).
(e) Business Day. Any day other than Saturday, Sunday, or any
other day on which banking institutions in the State of New York are not open
for business.
(f) Calculation Agent. PaineWebber, whose calculations and
determinations shall be made in a reasonable manner and shall be binding in the
absence of manifest error.
(g) Closing Price. The last sale price of the Paired Shares
on the Relevant Exchange on the relevant date.
(h) Commission. The Securities and Exchange Commission.
(i) Compounding Periods. Means each period commencing from
and including:
(i) in the case of the first Compounding Period, the
Effective Date and to but excluding the first Reset
Date, and
(ii) for each period thereafter, a Reset Date and to
but excluding the next following Reset Date.
(j) Date of Effectiveness. Means the date a resale
registration statement covering any resales of the Purchase Shares, as defined
in the Purchase Agreement, is declared effective under the Securities Act by the
Commission.
(k) Distribution Amount. Means, on each Reset Date, an amount
in U.S. Dollars equal to:
(i) the sum of all cash distributions paid on a
single Paired Share during the relevant Compounding
Period; plus
(ii) an amount representing interest that could have
been earned on such distributions, at the USD LIBOR
rate having a designated maturity of 1 month, plus
Spread, for the period from the date that such
2
<PAGE>
distributions are received by PaineWebber, by a
holder of such number of Paired Shares until such
Reset Date.
(l) DRIP Distribution. 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.
(m) Effective Date. April 6, 1998.
(n) Exchange Act. The Securities Exchange Act of 1934, as
amended.
(o) Exchange Trading Day. Each day on which the Relevant
Exchange is open for trading.
(p) Execution Price. $27.5625 per Paired Share.
(q) Gradual Market Distribution. An offering of the Paired
Shares into the existing trading market for outstanding shares of the same
class, at other than a fixed price, on or through facilities of a national
securities exchange or to or through a market maker otherwise than on an
exchange.
(r) Initial Price. Means,
(i) for the first Compounding Period the Execution
Price, and
(ii) for each subsequent Compounding Period, the
Reference Price as calculated on or adjusted as of
the Reset Date in the previous Compounding Period.
(s) Interim Settlement Amount. With respect to a given Reset
Date or Settlement Date, means the amount (if any) by which the Reference Amount
minus $5,000,000 exceeds the product of (x) the Closing Price and (y) the number
of Adjustment Shares.
(t) Interim Settlement Shares. The Interim Settlement Amount
divided by the Closing Price on the relevant Reset Date or Settlement Date, as
the case may be.
(u) Maturity Date. April 6, 1999.
(v) Paired Shares. Units consisting of one share of common
stock, $.01 par value per share, of the REIT and one share of common stock, par
value $.01 per share, of OPCO, which shares are paired and traded as a unit.
(w) Reference Amount. On any date, the Reference Price
multiplied by the Adjustment Shares or Settlement Shares, as applicable.
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<PAGE>
(x) Reference Price. On each Reset Date, the Reference Price
shall be determined by:
(i) compounding the Initial Price for each
Compounding Period at USD LIBOR rate plus Spread for
a designated maturity of 1 month (Actual/360 day
count fraction) to such Reset Date and
(ii) subtracting the Distribution Amount at that
date.
(y) Relevant Exchange. Means, with respect to any Exchange
Trading Day, the principal Stock Exchange on which the Paired Shares are traded
on that day.
(z) Reset Date. Means, through the final Settlement Date, (i)
the last day of each three-month period, beginning on June 30, 1998 (provided,
that if such day is not a Business Day then the Reset Date shall be the next
Business Day) and (ii) as to any Settlement Shares, each Settlement Date.
(aa) Securities Act. The Securities Act of 1933, as amended.
(bb) Settlement. Has the meaning set forth in Sections 3.1,
4.1 or 4.2, as applicable.
(cc) Settlement Amount. The net sales proceeds realized by or
on behalf of PaineWebber for all sales of Paired Shares in connection with any
Settlement, calculated as follows:
(i) if the manner of Settlement Sale pursuant to
Section 3.1 is an Underwritten Secondary Offering,
the Settlement Amount will equal the gross proceeds
realized, net of a negotiated underwriting discount;
(ii) if the manner of Settlement Sale pursuant to
Section 3.1 is a Block Sale, the Settlement Amount
will equal the gross sales proceeds realized, net of
a negotiated spread;
(iii) if the manner of Settlement Sale pursuant to
Section 3.1 is a Gradual Market Distribution, the
Settlement Amount will equal the gross sales proceeds
realized from sales to the market over the period of
the distribution, net of a resale spread of 50 basis
points;
(iv) if the manner of Settlement Sale pursuant to
Section 3.1 is a DRIP Distribution, the Settlement
Amount will equal the gross sales proceeds realized
from sales to any Purchase Agent for a Company
Distribution Reinvestment Plan, net of a resale
spread of 50 basis points;
4
<PAGE>
(dd) Settlement Date. The date on which, in accordance with
standard market practice, the Paired Shares have been delivered and all funds
received in respect of any Settlement in accordance with Sections 3.2, 4.1 or
4.2.
(ee) Settlement Shares. The number of Adjustment Shares
subject to Settlement.
(ff) Spread. 140 basis points.
(gg) Stock Exchange. Means the New York Stock Exchange, the
American Stock Exchange or NASDAQ.
(hh) Underwritten Secondary Offering. An underwritten fixed
price offering of Paired Shares.
(ii) USD LIBOR. The London Inter Bank Offered Rate in respect
of U.S. Dollars for the designated maturity as quoted on Page 3750 on the
Telerate Service (or such other page as may replace Page 3750 on that service)
as of 11:00 a.m., London time, on the date on which it is to be determined.
Section 2. Representations and Warranties.
The representations and warranties of the Companies in Section 4 of the
Purchase Agreement, dated as of April 6, 1998 (the "Purchase Agreement"), among
the Companies and PaineWebber are hereby incorporated by reference herein, and
the Companies hereby so represent and warrant to PaineWebber. The provisions of
Section 6 of the Purchase Agreement shall also be applicable to any Paired
Shares delivered to PaineWebber under this Agreement.
Section 3. Settlement.
3.1 Settlement Sale.
On any Reset Date, or on any other Exchange Trading Date agreed to by
both parties (in which case, the related Settlement (as defined below) will
include standard market interest breakage fees), up to and including the
Maturity Date, the Companies may give telephonic notice to PaineWebber to
settle, and PaineWebber shall settle, in a commercially reasonable manner (which
may require sales over a period of more than 1 day), all or a portion of the
Adjustment Shares ("Settlement"), as specified by the Companies, through the
sale of not more than the number of Paired Shares, the sale of which would,
based on PaineWebber's commercially reasonable judgement, result in a Settlement
Amount equal to up to 105% of the Reference Amount with respect to the
Settlement Shares on the Settlement Date, in any of the manners set forth below,
as specified by the Companies (the "Settlement Sale"):
5
<PAGE>
(i) an Underwritten Secondary Offering (for which the
Companies shall provide at least 21 Business Days
prior notice to PaineWebber);
(ii) a Block Sale (for which the Companies shall
provide at least 3 Business Days prior notice to
PaineWebber);
(iii) a Gradual Market Distribution (for which the
Companies shall provide at least 2 Business Days
prior notice to PaineWebber); or
(iv) a DRIP Distribution (for which the Companies
shall provide at least 2 Business Days prior notice
to PaineWebber).
Upon the Maturity Date, if the Companies do not specify a manner of
sale, a Gradual Market Distribution shall be used. Notwithstanding the
foregoing, if the manner of sale for any Settlement Sale is a Gradual Market
Distribution and such Gradual Market Distribution is continuing three months
following the Maturity Date, PaineWebber may discontinue such Gradual Market
Distribution and sell such Paired Shares in any manner set forth above.
Settlement procedures with respect to any Settlement shall begin as soon as
commercially practicable, as determined by PaineWebber, after PaineWebber
receives notice from the Companies and no later than the first Exchange Trading
Day so specified in the notice from the Companies, subject to the notice
requirements of Sections 3.1(i)-(iv) (unless such notice requirements have been
waived by PaineWebber), unless otherwise agreed by the Companies and
PaineWebber.
3.2 Settlement.
(a) If, on the Settlement Date, the Settlement Amount is
greater than the Reference Amount with respect to the Settlement Shares (the
amount of such difference, a "Surplus"), PaineWebber will, at its option, pay
the Companies an amount in cash or Paired Shares (valued on a per share basis
equal to the Settlement Amount divided by the number of Paired Shares sold)
equal to the Surplus; provided that the Companies may elect to apply the Surplus
towards effecting Settlement of all or a portion of the number of Adjustment
Shares equal to the Surplus divided by the Reference Price on the Settlement
Date.
(b) If the number of Paired Shares sold by PaineWebber
pursuant to Section 3.1, 4.1 or 4.2 is greater than the number of Settlement
Shares, the Companies shall deliver to PaineWebber, on the Settlement Date, a
number of Paired Shares equal to the difference (the "Additional Shares"). If
the number of Paired Shares sold by PaineWebber pursuant to Section 3.1, 4.1 or
4.2 is less than the number of Settlement Shares, PaineWebber shall deliver to
the Companies, on the Settlement Date, a number of Paired Shares equal to the
difference.
(c) In all events, PaineWebber will pay to the Companies an
amount equal to all cash distributions payable to holders of the number of
Paired Shares equal to the number
6
<PAGE>
of the Settlement Shares, which cash distributions are paid to PaineWebber after
the Settlement Date, on the Business Day after the relevant distribution is
made.
(d) If PaineWebber, in connection with any Settlement,
receives net sales proceeds, as calculated pursuant to the definition of
Settlement Amount, from the sale of Paired Shares prior to the applicable
Settlement Date, PaineWebber, on the Settlement Date, shall pay the Companies an
amount in cash representing interest that could have been earned on such net
sales proceeds at the USD LIBOR rate having a designated maturity of 1 month,
plus Spread, for the period from the date that such net sales proceeds are
received by PaineWebber until such Settlement Date.
Section 4. Price Decline Termination Event and Cross Default Settlement.
4.1 Price Decline Termination Event Sale.
If the Closing Price on any Exchange Trading Day falls below any
Termination Price listed in the following schedule ("Price Decline Termination
Event"), PaineWebber may settle, in a commercially reasonable manner (which may
require sales over a period of more than 1 day) following notice to the
Companies, up to the percentage of the Adjustment Shares indicated in the table
below ("Settlement") through the sale of not more than the number of Paired
Shares, the sale of which would, based on PaineWebber's commercially reasonable
judgement, result in a Settlement Amount equal to up to 105% of the Reference
Amount with respect to the Settlement Shares on the Settlement Date, in any
manner specified in Section 3.1. The Companies shall specify a manner of sale
within one (1) Business Day following notice by PaineWebber to the Companies. If
the percentage of Adjustment Shares to be settled pursuant to this Section 4.1
is 100% or if the Companies do not specify a manner of sale, PaineWebber shall
have the option to specify the manner of sale. PaineWebber may, at its sole
discretion, waive any or all notice provisions in Section 3.1.
<TABLE>
<CAPTION>
Percentage of Adjustment
Shares to be Settled Termination Price
------------------------ ----------------------
<S> <C>
50% 75% of Execution Price
100% 65% of Execution Price
</TABLE>
Settlement procedures pursuant to this Section 4.1 shall be in accordance with
Section 3.2 and shall commence on the date specified by PaineWebber.
4.2 Cross Default Settlement.
(a) "Cross Default" means (i) the occurrence of a default or
event of default under any of the Companies' unsecured and/or recourse lending
agreements involving
7
<PAGE>
indebtedness of either Company in excess of $25 million or any other unsecured
and/or recourse payment obligation of either Company in excess of $25 million
(each, a "Subject Indebtedness") that has not been cured within five (5) days
(in the case of a default or event of default involving a covenant of a
financial nature) or fifteen (15) days (in the case of any other default or
event of default) following the later of the date of occurrence of such default
or event of default and the end of any cure period provided in such lending
agreement, or (ii) a holder of any of the Companies' Subject Indebtedness
provides notice to either of the Companies pursuant to such Subject Indebtedness
to accelerate the maturity of such Subject Indebtedness.
(b) Upon the occurrence of a Cross Default, PaineWebber may
sell all the Adjustment Shares plus all of the Interim Settlement Shares in any
manner(s) and at any time it deems appropriate (a "Settlement"). Any Settlement
procedures in connection with this Section 4 shall commence on the date
specified by PaineWebber and in any of the manners set forth in Section 3.1 as
determined by PaineWebber at is sole discretion, and shall be in accordance with
Section 3.2.
Section 5. Interim Settlements.
5.1 Interim Settlement Account.
Within 5 Business Days following each Reset Date or Settlement Date,
the Companies shall deliver the Interim Settlement Amount in Interim Settlement
Shares to PaineWebber or its agent for deposit in a collateral account in the
name of the Company at PaineWebber or a custodian or depository designated by
PaineWebber (the "Interim Settlement Account"). Interim Settlement Shares
delivered shall be the subject of a registration statement covering any sale of
such Interim Settlement Shares by PaineWebber that has been declared effective
under the Securities Act by the Commission (an "Effective Registration
Statement"). All Interim Settlement Shares shall be registered in the stock
register of the Companies as instructed by PaineWebber and shall be held by
PaineWebber or a custodian or depository designated by PaineWebber. If the
Companies are unable to deliver Interim Settlement Shares in accordance with the
preceding two sentences, the Companies shall deliver cash collateral in an
amount equal to the Interim Settlement Amount. On any Reset Date or Settlement
Date, if Interim Settlement Shares are held by PaineWebber, PaineWebber shall
deliver to the Companies within five (5) Business Days after such Reset Date,
the amount in cash or Interim Settlement Shares by which the value in Interim
Settlement Shares held by PaineWebber (valued at the Closing Price on such Reset
Date) plus any cash amounts in the collateral account exceeds the Interim
Settlement Amount. Distributions on the Interim Settlement Shares will be
deposited in the collateral account at PaineWebber or a custodian or depositary
designated by PaineWebber. The cash amounts in the collateral account will earn
interest at the USD LIBOR rate having a designated maturity of 1 month plus
Spread. If the Companies shall fail to deliver sufficient Additional Shares
pursuant Section 3.2(b), PaineWebber may, at its discretion, apply the Interim
Settlement Shares or cash in the Interim Settlement Account to satisfy such
deficiency. Upon final Settlement, PaineWebber shall immediately release all
claims to cash and Interim Settlement Shares held in the collateral account
(including interest
8
<PAGE>
earned thereon) and deliver such amounts and all Interim Settlement Shares, free
and clear of any security interest, lien, encumbrance or other restrictions, to
the Companies.
5.2 Use of Interim Settlement Shares.
The PaineWebber Parties (as defined in the Purchase Agreement) will,
notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the
right to pledge, rehypothecate, or assign, any Interim Settlement Shares it
holds, free from any claim of right of any nature whatsoever of the Companies,
including any equity or right of redemption by the Companies.
Section 6. Certain Covenants and Other Provisions.
6.1 Par Value.
PaineWebber shall pay to the Companies $.02 par value per share for
each Paired Share delivered to PaineWebber pursuant to this Agreement.
6.2 Allocation of Payments by PaineWebber.
When making any payment to the Companies pursuant to this Agreement,
PaineWebber shall allocate such payment between the REIT and OPCO in the manner
specified by the Companies.
6.3 Purchase Price Adjustment Treatment.
The Companies and PaineWebber 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 this Agreement as adjustments to the purchase price paid
for the Purchase Shares pursuant to Section 2 of the Purchase Agreement.
6.4 Resale Registration Statement.
Any Paired Shares delivered by the Companies to PaineWebber pursuant to
this Agreement shall be the subject of a resale registration statement that has
been declared effective under the Securities Act by the Commission (an
"Effective Resale Registration Statement"). The Companies further agree that
they will cause any resale registration statement to remain in effect until the
earliest of the date on which (i) the final Settlement, or (ii) PaineWebber has
advised the Companies that it no longer requires that such registration be
effective. The provisions of Section 5.2 and Section 7.2 of the Purchase
Agreement shall be deemed to apply to any resale registration statement filed by
the Companies pursuant to this Agreement.
9
<PAGE>
6.5 Delivery of Paired Shares.
The Companies covenant and agree with PaineWebber that Paired Shares
delivered by the Companies pursuant to settlement events in accordance herewith
will be duly authorized, validly issued, fully paid and nonassessable. The
issuance of such Paired Shares will not require the consent, approval,
authorization, registration, or qualification of any government authority,
except such as shall have been obtained on or before the delivery date to
PaineWebber in connection with any registration statement filed with respect to
any Paired Shares.
6.6 Securities Law Compliance.
Each party agrees that it will comply, in connection with this
Transaction and all related or contemporaneous sales and purchases of the
Companies' Paired Shares, with the applicable provisions of the Securities Act,
the Exchange Act and the rules and regulations thereunder.
6.7 Regulatory Compliance.
Each party agrees that if the delivery of Paired Shares upon settlement
is subject to any restriction imposed by a regulatory authority, it shall not be
an event of default, and the parties will negotiate in good faith a procedure to
effect settlement of such shares in a manner which complies with any relevant
rules of such regulatory authority and which is satisfactory in form and
substance to their respective counsel, subject to Section 6.2 of this Agreement
and Section 7 of the Purchase Agreement. Each party further agrees that any sale
pursuant to Section 3.1, 4.1 or 4.2 may be delayed or postponed if, in
PaineWebber's judgement, such delay or postponement is necessary to comply with
the requirements of applicable law or regulation.
6.8 Settlement Transfer.
All settlements shall occur through The Depository Trust Company or any
other mutually acceptable depository.
6.9 Trading Authorization.
The following individual and/or any individual authorized in writing by
the respective Treasurers of the Companies is authorized by the Companies to
provide trading instructions to PaineWebber with regard to this transaction.
10
<PAGE>
For the REIT:
William W. Evans III
For OPCO:
William W. Evans III
The address, telephone number and facsimile number of William W. Evans
III: c/o Patriot American Hospitality, Inc., 590 Madison Avenue, 22nd Floor, New
York, New York 10022, telephone: (212) 521-1480, and facsimile: (212) 355-7772.
6.10 Joint and Several Liability.
Each of REIT and OPCO will be jointly and severally liable for all the
obligations of REIT and OPCO hereunder. References in this Agreement to "a
party" or words of such import, shall be deemed to refer to PaineWebber,
individually, on the one hand, or to REIT and OPCO, individually and
collectively, on the other hand.
6.11 Currency.
All cash amounts required to be paid under this Agreement shall be in
United States Dollars.
6.12 Expenses.
If either the Companies, on the one hand, or PaineWebber, on the other
hand, is in default of its obligations under this Agreement, such party will, on
demand, indemnify and hold harmless the other party for and against all
reasonable out-of-pocket expenses, including legal fees, incurred by such other
party by reason of the enforcement and protection of its rights under this
Agreement in connection with any default, including, but not limited to, costs
and collection.
6.13 Tax Matters.
If either of the Companies merges with a non-U.S. entity, the Companies
agree to enter into a standard and customary provision dealing with taxes.
Section 7. General Provisions.
7.1 Specific Performance.
The parties acknowledge and agree that the failure of the Companies, on
the one hand, or PaineWebber, on the other hand, to deliver Paired Shares in
accordance with the provisions
11
<PAGE>
hereof would result in damage to the other party that could not be adequately
compensated by a monetary award. The parties therefore agree that, if either
party fails to deliver Paired Shares in accordance with the provisions hereof,
the other party may, in addition to all other remedies, seek an order of
specific performance from a court of appropriate jurisdiction.
7.2 Governing Law.
The Agreement will be governed by and construed in accordance with the
laws of the State of New York without reference to choice of law doctrine.
7.3 Jurisdiction.
With respect to any suit, action or proceedings relating to this
Agreement ("Proceedings"), each party irrevocably:
(a) submits to the exclusive jurisdiction of the courts of the
State of New York and the United States District Court located in the Borough of
Manhattan in New York City; and
(b) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such court
does not have any jurisdiction over such party.
7.4 Waiver of Jury Trial.
Each party waives, to the fullest extent permitted by applicable law,
any right it may have to a trial by jury in respect of any Proceedings. Each
party (i) certifies that no representative, agent or attorney or other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges
that it has been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications set forth above in this Section.
7.5 Notices.
All notices, requests, claims, demands and other communications under
this Agreement shall be in writing or by facsimile and shall be deemed given if
delivered to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to PaineWebber, to
PaineWebber Financial Products Inc.
1285 Avenue of the Americas, 19th Floor
New York, NY 10019
12
<PAGE>
Telefax: (212) 713-7949
Attention: Terrence E. Fancher
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telefax: (212) 474-3700
Attention: Daniel P. Cunningham, Esq.
(b) if to the Companies, to
Patriot American Hospitality, Inc.
Wyndham International, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, TX 75207
Telefax: (214) 863-1986
Attention: John Bohlmann, Esq.
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Telefax: (617) 523-1231
Attention: Martin Carmichael III, P.C.
7.6 Interpretation.
When a reference is made in this Agreement to a Section, such reference
shall be to a Section of this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
7.7 Counterparts.
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<PAGE>
(a) This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
(b) This Agreement shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
parties.
7.8 Entire Agreement; No Third-Party Beneficiaries.
This Agreement constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and is not intended to
confer upon any person other than the parties any rights or remedies.
7.9 Assignment.
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of law
or otherwise by any of the parties without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
7.10 Amendments.
No amendment, modification or waiver in respect of this Agreement will
be effective unless in writing (including a writing evidenced by a facsimile
transmission) and executed by each of the parties.
7.11 No Waiver of Rights.
A failure or delay in exercising any right, power or privilege in
respect of this Agreement will not be presumed to operate as a waiver, and a
single or partial exercise of any right, power or privilege will not be presumed
to preclude any subsequent or further exercise of that right, power or privilege
or the exercise of any other right, power or privilege.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
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:-----------------------------
Name:
Title:
WYNDHAM INTERNATIONAL, INC.
By:-----------------------------
Name:
Title:
PAINEWEBBER FINANCIAL
PRODUCTS INC.
By:-----------------------------
Name:
Title:
<PAGE>
Exhibit 10.4
August 14, 1998
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: William W. Evans III
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: Leslie Ng
Ladies and Gentlemen:
This letter agreement among Patriot American Hospitality, Inc. (the
"REIT"), Wyndham International, Inc. (the "OPCO") (each a "Company" and
collectively, the Companies") and PaineWebber Financial Products Inc.
("PaineWebber") modifies and amends, in part, certain of the terms and
conditions of that certain Purchase Price Adjustment Mechanism Agreement, dated
April 6, 1998 (the "Agreement") between the Companies and PaineWebber, as
amended. Defined terms not otherwise defined herein shall have the meanings
ascribed to them under the Agreement.
Notwithstanding the terms and conditions of the Agreement, the
Companies and PaineWebber agree as follows:
1. The representations, warranties and covenants of the Companies in Section 4
of the Purchase Agreement, dated as of April 6, 1998 (the "Purchase Agreement"),
among the Companies and PaineWebber are hereby incorporated by reference herein,
and the Companies hereby so represent, warrant and covenant to PaineWebber. The
provisions of Section 6 of the Purchase Agreement shall also be applicable to
any Paired Shares delivered to PaineWebber under this Agreement.
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
August 14, 1998
Page 2
2. "Interim Settlement Shares," as defined in Section 1 of the Agreement, shall
be deleted in its entirety and replaced as follows:
(t) Interim Settlement Shares. The Interim Settlement Amount divided by
the Closing Price on the relevant Reset Date or Settlement Date, as the case may
be; provided however, if the Companies have not delivered to PaineWebber an
effective registration statement as contemplated by Section 6.4, 125% of the
Interim Settlement Amount divided by the Closing Price on the relevant Reset
Date or Settlement Date, as the case may be.
3. "Maturity Date," as defined in Section 1 of the Agreement, shall be deleted
in its entirety and replaced as follows:
(a) Maturity Date. October 15, 1998.
4. The table in Section 4.1 of the Agreement, shall be deleted in its entirety
and replaced with the following:
<TABLE>
<CAPTION>
Percentage of Shares to be Settled Termination Price
<S> <C>
100% $16.00
</TABLE>
Additionally, upon the occurrence of a Price Decline Termination Event,
PaineWebber, at its sole discretion, shall have the option to specify the manner
of sale.
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
August 14, 1998
Page 3
5. Section 5.1 shall be deleted in its entirety and replaced as follows:
5.1 Interim Settlement Account.
Within 5 Business Days following each Reset Date or Settlement Date,
the Companies shall deliver the Interim Settlement Amount in Interim Settlement
Shares to PaineWebber or its agent for deposit in a collateral account in the
name of the Company at PaineWebber or a custodian or depository designated by
PaineWebber (the "Interim Settlement Account"). Interim Settlement Shares
delivered shall be the subject of a registration statement covering any sale of
such Interim Settlement Shares by PaineWebber that has been declared effective
under the Securities Act by the Commission (an "Effective Registration
Statement"); provided however, if the Companies are unable to deliver Interim
Settlement Shares that are the subject of an Effective Registration Statement,
the Companies shall deliver cash collateral in an amount equal to the Interim
Settlement Amount or Interim Settlement Shares. All Interim Settlement Shares
shall be registered in the stock register of the Companies as instructed by
PaineWebber and shall be held by PaineWebber or a custodian or depository
designated by PaineWebber. On any Reset Date or Settlement Date, if Interim
Settlement Shares are held by PaineWebber, PaineWebber shall deliver to the
Companies within five (5) Business Days after such Reset Date, the amount in
cash or Interim Settlement Shares by which the value in Interim Settlement
Shares held by PaineWebber (valued at the Closing Price on such Reset Date
unless there is no Effective Registration Statement on such Reset Date, in which
case valued at 80% of the Closing Price on such Reset Date) plus any cash
amounts in the collateral account exceeds the Interim Settlement Amount.
Distributions on the Interim Settlement Shares will be deposited in the
collateral account at PaineWebber or a custodian or depositary designated by
PaineWebber. The cash amounts in the collateral account will earn interest at
the USD LIBOR rate having a designated maturity of 1 month plus Spread. If the
Companies shall fail to deliver sufficient Additional Shares pursuant Section
3.2(b), PaineWebber may, at its discretion, apply the Interim Settlement Shares
or cash in the Interim Settlement Account to satisfy such deficiency. Upon final
Settlement, PaineWebber shall immediately release all claims to cash and Interim
Settlement Shares held in the collateral account (including interest earned
thereon) and deliver such amounts and all Interim Settlement Shares, free and
clear of any security interest, lien, encumbrance or other restrictions, to the
Companies.
Notwithstanding the foregoing, if cash collateral or Interim Settlement
Shares that are not the subject of an Effective Registration Statement are
delivered by the Companies pursuant to this Section 5.1, then during the period
between each Reset Date or between the final Reset Date and the Maturity Date,
the Interim Settlement Amount shall be recalculated and the Companies or
PaineWebber, as applicable, shall deliver to the other party an adjustment
amount in cash or Interim Settlement Shares in accordance with such recalculated
Interim Settlement Amount, on a bi-weekly (every two weeks) basis (each an
"Adjustment Date"); provided, that PaineWebber shall not be obligated to, but
may in its sole discretion, return to
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
August 14, 1998
Page 4
the Companies Paired Shares held as collateral. For purposes of this Section
5.1 and the definitions of Interim Settlement Amount and Interim Settlement
Shares, each such Adjustment Date shall be deemed a Reset Date. The Companies
are hereby delivering to PaineWebber 2,347,218 shares of Paired Common Stock
as collateral.
6. Following Section 4.2 the following shall be added:
4.3 Early Settlements with Respect to Other Substantially Similar
Transactions: The Companies agree that (i) prior to the
partial or full early settlement, unwind or liquidation of any
transaction that is substantially similar to the transaction
contemplated by this Agreement (an "Other Transaction"
including without limitation the transactions contemplated by
(i) the Forward Stock Contract, dated December 31, 1997, among
the Companies and UBS AG, London Branch, as amended on August
14, 1998 and (ii) the Purchase Price Adjustment Mechanism,
dated as of February 26, 1998, among the Companies and
NationsBanc Mortgage Capital Corporation, as amended on August
14, 1998), the Companies shall promptly, after learning that
any such event may occur, give telephone notice (confirmed in
writing) of such upcoming settlement, unwind or liquidation,
(ii) any such settlement, unwind or liquidation shall be
treated as a Cross-Default, and (iii) PaineWebber may require
all or part of the obligation hereunder to be settled
coincident with an Other Transaction.
7. The modifications and amendments contemplated by this letter agreement shall
be effective April 6, 1998 retroactively; PROVIDED HOWEVER, if the Companies
fail to deliver to PaineWebber on or before September 30, 1998, an Effective
Registration Statement the modifications and amendments contemplated by this
letter agreement shall be null and void and of no effect.
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
August 14, 1998
Page 5
Sincerely,
PaineWebber Financial Products Inc.
By:
-------------------------------
Name:
Title:
AGREED TO AND ACCEPTED
Patriot American Hospitality, Inc. Wyndham International, Inc.
By: By:
-------------------------------
Name: Name:
Title: Title:
<PAGE>
Exhibit 10.5
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of the 26th day
of February, 1998, by and among Patriot American Hospitality, Inc. (the "REIT"),
Wyndham International, Inc. (the "OPCO") (the REIT and the OPCO, each a
"Company" and collectively the "Companies"), and NMS Services, Inc., a
subsidiary of NationsBank Corporation (the "Purchaser"), through its agent
NationsBanc Montgomery Securities LLC. References herein to the "Companies"
refer to the REIT and the OPCO, and those entities respectively owned or
controlled by the REIT or the OPCO.
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the REIT, the OPCO and the Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms
and conditions of this Agreement, the REIT has authorized the issuance to the
Purchaser of up to an aggregate of 4,900,000 shares of common stock, par value
$0.01 per share, of the REIT (the "REIT Shares") and the OPCO has authorized the
issuance to the Purchaser of up to an aggregate of 4,900,000 shares of common
stock, par value $0.01 per share (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, pursuant to the
Purchase Price Adjustment Mechanism dated as of February 26, 1998 (the "Purchase
Price Adjustment Mechanism"), among the REIT, the OPCO and the Purchaser (which
is incorporated by reference herein and attached hereto), issue to the Purchaser
additional Paired Shares (the "Additional Shares") in settlement of certain of
its obligations thereunder. The Purchase Shares and the Additional Shares are
hereinafter collectively called the "Shares". For U.S. federal income tax and
financial accounting purposes, the Companies and Purchaser agree, to the extent
relevant to their respective business and commercial activities and in the
absence of a change in applicable law or rules or an administrative
determination or judicial ruling to the contrary, to treat payments and
deliveries made pursuant to the Purchase Price Adjustment Mechanism as
adjustments to the purchase price paid for the Purchase Shares pursuant to
Section 2 hereof.
SECTION 2. Agreement to Sell and Purchase the Purchase Shares.
Subject to the terms and conditions of this Agreement, on the Closing Date (as
defined in Section 3 hereof), the Companies will sell to the Purchaser the
<PAGE>
Purchase Shares, the number of which shall equal 4,900,000 paired shares for a
per paired share purchase price of $24.8625 per Paired Share.
SECTION 3. Delivery of the Shares at the Closing.
(a) Closing. The completion of the purchase and sale of the Purchase
Shares (the "Closing") shall occur as soon as practicable, on such date to be
agreed upon among the REIT, the OPCO and the Purchaser, but in no event later
than the earlier of (i) February 27, 1998 or (ii) three business days after the
execution of this Agreement (hereinafter, the "Closing Date").
(b) Conditions. At Closing, the Companies shall deliver or cause to be
delivered to the Purchaser one or more stock certificates registered in the name
of the Purchaser representing the number of Purchase Shares set forth in Section
2 above.
The obligation of the Companies to complete the sale of the Purchase
Shares and deliver such stock certificate(s) to the Purchaser 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
Federal Funds (or other mutually agreed upon form of payment) in the full amount
of the purchase price for the Purchase Shares being purchase hereunder, (ii) the
accuracy in all material respects, as of the Closing Date, of the
representations and warranties made by the Purchaser herein and the fulfillment,
in all material respects, as of the Closing Date, of those undertakings of the
Purchaser to be fulfilled prior to the Closing, (iii) the full execution of the
Purchase Price Adjustment Mechanism by the parties hereto and (iv) receipt by
the Companies of a cross-receipt with respect to the Purchase Shares executed by
the Purchaser.
The Purchaser's obligation to accept delivery of such stock
certificate(s) and to pay for the Purchase Shares evidenced thereby shall be
subject to the following conditions: (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, as of the Closing
Date, of those undertakings of the Companies to be fulfilled prior to Closing;
and (ii) the receipt by the Purchaser of all opinions and certificates to be
delivered by the Companies pursuant to this Agreement.
SECTION 4. Representations, Warranties and Covenants of the Companies.
Except as set forth in the Companies' SEC Filings (as defined below), the
Companies hereby represent and warrant to, and covenant with, the Purchaser as
follows:
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<PAGE>
(a) Organization and Qualification. The REIT has been formed as a real
estate investment trust under Delaware law pursuant to a Certificate of
Incorporation filed as of January 21, 1983 in the office of the Delaware
Secretary of State, as amended and restated as of January 5, 1998 and filed in
the office of the Delaware Secretary of State on such date. The REIT's existence
has not been suspended or terminated nor have any dissolution, revocation or
forfeiture proceedings regarding the REIT been commenced. The REIT has been duly
qualified to do business in each jurisdiction where the failure so to qualify to
do business would have a material adverse effect on the financial condition,
business, operations or prospects of the Companies taken as a whole (a "Material
Adverse Effect"). The OPCO has been duly organized, is validly existing and in
good standing under the laws of Delaware. The OPCO's corporate existence has not
been suspended or terminated, nor have any dissolution, liquidation or
forfeiture proceedings involving the OPCO been commenced. The OPCO has been duly
qualified to do business in each jurisdiction where the failure so to qualify to
do business would have a Material Adverse Effect.
(b) Authorized Capital Stock. The REIT had 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 had authorized capital stock as of December 1, 1997
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 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 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 in all material respects
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 in all material respects to the description thereof
included in the Companies' SEC Filings. Other than as described in the
Companies' SEC Filings, none of the Companies has outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell,
3
<PAGE>
shares of its capital stock or any such options, rights, convertible securities
or obligations. The description of the Companies' 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. The Purchase Shares represented less than 4.7%
of the total issued and outstanding Paired Shares on February 26, 1998.
(c) Issuance, Sale and Delivery of the Shares. The Purchase Shares to
be sold by the Companies have been duly authorized and, when issued, delivered
and paid for in the manner set forth in this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable, and will conform in all material
respects to the description thereof included in the Companies' SEC Filings. The
Additional Shares, if and when issued pursuant to the Purchase Price Adjustment
Mechanism, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform in all material respects to the description
thereof included in the Companies' SEC Filings. None of the Purchase Shares when
issued and delivered to the Purchaser shall be subject to any lien, security
interest, claim, charge or encumbrance of any nature. No further approval or
authority of the stockholders or the Board of Directors of the REIT or the OPCO
will be required for the issuance and/or sale of the Purchase Shares to be sold
by the Companies as contemplated herein or in the Purchase Price Adjustment
Mechanism, except such as shall have been obtained on or before the Closing
Date. The issuance and/or sale of the Purchase Shares to the Purchaser by the
Companies pursuant to this Agreement or the Purchase Price Adjustment Mechanism
(as the case may be), the compliance by the Companies with the other provisions
of this Agreement or the Purchase Price Adjustment Mechanism 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 governmental authority, except such as shall have been obtained on
or before the Closing Date or as could not prevent or adversely affect the
transactions contemplated by this Agreement, other than the registration of the
resale of the Shares by the Purchaser with the Securities and Exchange
Commission (the "SEC") and any required Blue Sky filings with the States. 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 promulgated thereunder
(the "Rules and Regulations"). The Companies have filed and will file all
documents which are required to file under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and all such documents (collectively, together
with the Companies' registration statements filed under the Securities Act which
have been declared effective since January 1, 1997 and have not been withdrawn,
the "Companies' SEC Filings") comply in all material respects with the
requirements of the Securities Act and the Rules and Regulations and the
Exchange Act and the rules and regulations
4
<PAGE>
thereunder, as applicable, and none of such documents, when so filed, contained
or will contain any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and any documents so filed and incorporated by reference
subsequent to the effective date of the Registration Statements (as defined in
Section 7 below) shall, when they are filed with the SEC, conform in all
material respects with the requirements of the Securities Act and the Rules and
Regulations and the Exchange Act and the rules and regulations thereunder, as
applicable. No Registration Statement filed in respect of any of the Purchase
Shares or Additional Shares, when so filed, will contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) Due Execution, Delivery and Performance of the Agreement. Each
Company has full legal right, power and authority to enter into this Agreement
and the Purchase Price Adjustment Mechanism and perform the transactions
contemplated hereby and thereby. This Agreement and the Purchase Price
Adjustment Mechanism have been duly authorized, executed and delivered by the
Companies. The making and performance of this Agreement and the Purchase Price
Adjustment Mechanism by the Companies and the consummation of the transactions
herein and therein contemplated will not in any material respect violate any
provision of the certificate of incorporation, bylaws, or other organizational
documents, of the Companies, and will not in any material respect 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, lease, franchise, license, indenture, 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. Upon the execution and
delivery hereof, each of this Agreement and the Purchase Price Adjustment
Mechanism will constitute the valid and binding obligation of the 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 proceeding in
equity or at law) and except as the enforceability of the indemnification
agreements of the Companies in Section 7(e) hereof may be limited by public
policy.
5
<PAGE>
(e) 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 Rules and Regulations. Each Company shall cause
its independent certified public accountants to deliver, on the effective date
of the Registration Statement, and thereafter on any Relevant Date (as defined
below) upon the request of the Purchaser (which shall be made no more frequently
than once during any 30-day period), a letter stating that such accountants are
independent public accountants within the meaning of the Securities Act and
otherwise in customary form and covering such financial and accounting matters
as are then customarily covered by "comfort letters" of independent certified
public accountants delivered to underwriters in connection with secondary public
offerings of equity securities pursuant to a shelf registration statement.
"Relevant Date" means each of (i) each Exchange Trading Day during the Unwind
Period for any Daily Sales unwind (each as defined in the Purchase Price
Adjustment Mechanism), (ii) Day S for any Underwritten Sale unwind (each as
defined in the Purchase Price Adjustment Mechanism), (iii) the date any Paired
Shares are delivered by the Companies pursuant to Section III.E.6. of the
Purchase Price Adjustment Mechanism and (iv) the date any Interim Settlement
Shares (as defined in the Purchase Price Adjustment Mechanism) are delivered
under the Purchase Price Adjustment Mechanism and each Exchange Trading Day
during the related Interim Settlement Unwind Period.
(f) No Defaults. Except as to defaults, violations and breaches which
individually or in the aggregate would not be material to the Companies taken as
a whole, neither Company is in violation or default of any provision of its
certificate of incorporation or bylaws, or other organizational documents, and
is not in breach of or default with respect to any provision of any agreement
judgment, decree, order, mortgage, deed of trust, lease, franchise, license
indenture, permit or other instrument to which it is a party or by which it or
any of its properties are bound; and there does not exist any state of fact
which constitutes an event of default on the part of the Company as defined in
such documents or which, with notice or lapse of time or both, would constitute
such an event of default except such defaults which individually or in the
aggregate would not be material to the Companies.
(g) Contracts. Neither Company, nor to the best of the knowledge of
each Company, any other party is in breach of or default under any contracts to
which either Company is a party except such breach or default which individually
or in the aggregate would not have a Material Adverse Effect.
(h) No Actions. There are no legal or governmental actions, suits or
proceedings pending or, to the best of the Companies' knowledge, threatened to
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<PAGE>
which either Company is or may be a part or of which property owned or leased by
either Company is or may be the subject, or related to environmental or
discrimination matters, which actions, suits or proceedings would be reasonably
likely, individually or in the aggregate, to prevent or to adversely affect the
transactions contemplated by this Agreement or result in a Material Adverse
Effect, and no labor disturbance by the employees of the Companies exists or is
imminent which might be expected to have a Material Adverse Effect. Except as
may be described in the Companies' SEC Filings, neither Company is a party or
subject to the provisions of any material injunction, judgment, decree or order
of any court, regulatory body, administrative agency or other governmental body.
(i) Properties. Each Company has good and marketable title to all the
properties and assets reflected as owned by such Company in the financial
statements included in the Most Recent Financial Statements, except for
properties or assets disposed of in the ordinary course of business since the
date thereof, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except (i) those, if any, reflected in such financial statements or the
Companies' SEC Filings, or (ii) those which are not material in amount and do
not adversely affect the use made and promised to be made of such property by
the Company. Each Company holds its leased properties under valid and binding
lease, with such exceptions as are not materially significant in relation to the
business of the Companies. Each Company owns or leases all such properties as
are necessary to its operations as now conducted. The REIT is qualified as a
real estate investment trust under the Internal Revenue Code of 1986, as
amended, with respect to its taxable years ended December 31, 1995 and December
31, 1996, 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.
(j) 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 or in writing to the Purchaser (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
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 business related to or engaged
in the hospitality industry) or
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<PAGE>
which could reasonably be expected to result in a material reduction in the
future earnings of the Companies; (ii) neither Company has sustained any loss or
interference with its businesses or properties (taken as a whole) from fire,
flood, windstorm, accident or other calamity, whether or not covered by
insurance, which has had a Material Adverse Effect; (iii) there has not been any
material change in the authorized capital of the Companies or material increase
in the principal amount of outstanding indebtedness of the Companies (other than
in the ordinary course of business); and (iv) there has not been any material
adverse change in the condition (financial or otherwise), business, properties,
results of operations or prospects of the Companies.
(k) Intellectual Property. Each Company believes it has sufficient
trademarks, trade names, patent rights, copyrights, licenses, approvals and
governmental authorizations 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 no claim has been made against either Company
regarding trademark, trade name, patent, copyright, license, trade secrecy or
other infringement which is reasonably likely to have a Material Adverse Effect.
(l) Compliance. Neither Company has been advised, nor has reason to
believe, that it 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 have a Material Adverse Effect.
(m) Taxes. Each Company has filed all necessary material federal,
state and foreign income and franchise tax returns and has paid or accrued all
taxes shown as due thereon (except for those taxes which are being contested in
good faith through appropriate proceedings, for which adequate reserves have
been established and which are either reflected in the Most Recent Financial
Statements or disclosed by the Companies to the Purchaser in writing), and
neither Company has knowledge of any tax deficiency which has been or might be
asserted or threatened against the Company which could have a Material Adverse
Effect.
(n) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (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 the Purchaser
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 in all material respects.
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(o) Investment Company. Neither of the Companies is required to
register as an "investment company" at such term is defined in the Investment
Company Act of 1940, as amended.
(p) Insurance. Each Company maintains insurance (or insurance is
maintained on its behalf) of the types and in the amounts generally deemed
adequate under customary industry standards for its business, including, but not
limited to, insurance covering all real and personal property owned or leased by
such Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, which insurance is in full force and effect
in all material respects.
(q) SEC Filings. The information contained in the following documents,
which the Companies have furnished to the Purchaser, or will furnish prior to
the Closing, is or will be true and correct in all material respects as of their
respective filing dates:
(i) Joint Annual Report on Form 10-K for the year ended December 31,
1996, which Joint Annual Report includes the REIT's and the OPCO's most
recently available audited financial statements together with the
report thereon of the independent certified public accountants (the
"Most Recent Financial Statements").
(ii) Joint Quarterly Report on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(iii) The Companies' proxy statements on Form 14A relating to (i) the
most recent Annual Meetings of the OPCO's and the REIT's Stockholders
and (ii) any Special Meetings of the OPCO's Stockholders and the REIT's
Stockholders 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;
(iv) all other documents, if any, filed by or with respect to the
REIT and the OPCO with the SEC since January 1, 1997 pursuant to
Sections 13, 15(d) or 16(a) of the Exchange Act; and
(v) a covenant compliance certification stating that none of the REIT
and the OPCO and their respective subsidiaries are in default under any
of its credit agreements or other financing arrangements involving at
least $25 million in indebtedness.
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(r) Legal Opinion. Prior to the Closing, counsel to the Companies will
deliver their legal opinions to the Purchaser in substantially the form of
Exhibit A hereto (except that such opinion shall not contain paragraph (vi) of
such Exhibit).
(s) ERISA. The Companies and their affiliates are in compliance in all
material respects with all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended and the rules and regulations
promulgated thereunder ("ERISA"). Except as would not have a Material Adverse
Effect: (i) 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 affiliates; (ii) 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; (iii) the Companies and their affiliates have not completely or
partially withdrawn under Sections 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 Internal Revenue Code of
1986, as amended (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; (iv) 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); (v) no part of the funds to be used by the Companies in
satisfaction of their obligations under this Agreement or the Purchase Price
Adjustment Mechanism constitute "plan assets" of any "employee benefit plan"
within the meaning of ERISA or of any "plan" within the meaning of Section
4975(o)(1) 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.
(t) Certificate. Each Company shall deliver to the Purchaser a
certificate of such Company executed by an executive officer of such Company, to
be dated the Closing Date in form and substance satisfactory to the Purchaser to
the effect that (i) 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 date of such certificate, and (ii) 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 the date of such certificate. On any Relevant Date,
upon request from the Purchaser (which shall be made no more frequently than
once during any
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30-day period), each Company shall deliver a certificate of such Company
executed by an executive officer of such Company to be dated the date of its
delivery in form and substance satisfactory to the Purchaser to the effect set
forth in the previous sentence; provided that such certificate may state
exceptions to the representations and warranties of the Companies set forth in
this Section 4 that do not, in the reasonable judgment of the Companies and the
Purchaser, require disclosure in the Companies' SEC Filings in order that such
SEC Filings will not contain a misstatement of a material fact or omit to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(u) 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 or (ii) is likely to result in
the imposition of a lien on any asset owned, directly or indirectly, by the
Companies that would have a Material Adverse Effect. To the knowledge of the
Companies, neither of the Companies nor any of their affiliates is subject to
any existing, pending or threatened investigation or proceeding by any
governmental agency or authority with respect or pursuant to any Environmental
Law, except any which would not be reasonably likely to 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. ss.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. ss.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. ss.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.
ss.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
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Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq.; and (vii) petroleum,
petroleum products, petroleum by-products, petroleum decomposition by-
products, and waste oil.
SECTION 5. Representations, Warranties and Covenants of the Purchaser.
(a) Investment. The Purchaser represents and warrants to, and covenants with,
the Companies that: (i) the Purchaser, taking into account the personnel and
resources it can practically bring to bear on the purchase of the Purchase
Shares contemplated hereby, is knowledgeable, sophisticated and experienced in
making, and is 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, and has requested, received, reviewed and considered all information
it deems relevant in making an informed decision to purchase the Purchase
Shares; (ii) the Purchaser 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 Shares, except pursuant to a registration statement effective under, or
an exemption from the registration requirements of, the Securities Act; (iii)
the Purchaser will not, 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, the Rules and Regulations and any
applicable state securities or blue sky laws or pursuant to an available
exemption or exclusion therefrom; (iv) the Purchaser will, prior to the
effectiveness of the Registration Statement, complete or cause to be completed
the Registration Statement Questionnaire and the Stock Certificate
Questionnaire, both attached hereto as Appendix 1, for use in preparation of the
Registration Statement and the answers thereto will be true and correct to the
best knowledge of the Purchaser as of the date thereof and as of the effective
date of the Registration Statement; (v) the Purchaser 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 Sections 4(e), 4(q), 4(r)
and 4(t), the documents and information referred to in Sections 7(a)(iv) and
7(g) and the representations and warranties of the Company contained herein;
(vi) the Purchaser is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act; (vii) the Purchaser is not a
beneficial owner, as such term is defined in Rule 13d-3 under the Exchange Act,
of five percent or more of the Paired Shares outstanding as shown in the
Companies' Quarterly Reports on Form 10-Q for the quarter ended September 30,
1997 and (viii) the Purchaser understands that the Shares will contain a legend
to the following effect:
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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
COMPANY'S COUNSEL THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT.
(b) Resale. The Purchaser acknowledges and agrees that the Shares are
not transferable on the books of either the REIT or the OPCO unless the
certificate submitted to the transfer agent evidencing the Shares is accompanied
by a separate officer's certificate: (i) in the form of Appendix II hereto, (ii)
executed by an officer of, or other authorized person designated by, the
Purchaser, and (iii) to the effect that (A) the Shares have been sold in
accordance with the Registration Statement, the Securities Act and the Rules and
Regulations and any applicable state securities or blue sky laws or pursuant to
valid exemptions or exclusions therefrom and (B) the requirement under the
Securities Act of delivering a current prospectus has been satisfied. The
Purchaser acknowledges that there may occasionally be times when the Companies
must suspend the right of the Purchaser to effect sales of the Shares through
use of the Prospectus forming a part of the Registration Statement until such
time as an amendment to the Registration Statement has been filed by the
Companies and declared effective by the SEC, or until such time as the Companies
have filed an appropriate report with the SEC pursuant to the Exchange Act
(each, a "Black-Out Period"); provided that no Black-Out Period shall exceed 90
consecutive days. The Purchaser hereby covenants that it will not sell any
Shares pursuant to said Prospectus during the period commencing at the time at
which the Companies give the Purchaser written notice of the suspension of the
use of said Prospectus and ending at the time the Companies give the Purchaser
written notice that the Purchaser may thereafter effect sales pursuant to said
Prospectus. The Purchaser further covenants to notify the REIT and the OPCO
promptly of the sale by the Purchaser of all of the Shares.
(c) Due Execution, Delivery and Performance of this Agreement. The
Purchaser further represents and warrants to, and covenants with, the Companies
that (i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement and to 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
Purchaser
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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 as the indemnification agreements of the Purchaser
in Section 7(e) hereof may be legally unenforceable.
(d) Residence of the Purchaser. The Purchaser is organized under the
laws of Delaware and has its principal place of business outside the United
States.
(e) No Affiliation. The Purchaser further represents and warrants to,
and covenants with, the Companies that no officer, director or affiliate of the
Purchaser is an officer, director or affiliate of any Company. The term
"affiliate" has the meaning set forth in Rule 405 under the Securities Act.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Companies and
the Purchaser herein and in the certificates for the Shares delivered pursuant
hereto shall survive the execution of this Agreement, the Purchase Price
Adjustment Mechanism, the delivery to the Purchaser of the Purchase Shares being
purchased and the payment therefor.
SECTION 7. Registration of the Shares; Compliance with the Securities
Act.
(a) Registration Procedures and Expenses. The Companies shall:
(i) within 60 days after receipt of a demand from the Purchaser,
which demand may not be made within 60 days after the Closing, prepare
and file with the SEC Registration Statements (as defined below)
covering the resale by the Purchaser, from time to time, of the Shares
(not to exceed a number of Shares equal to 130% of the number of
Purchase Shares) through the facilities of the New York Stock Exchange,
the American Stock Exchange or the National Market System of The Nasdaq
Stock Market or the facilities of any other national securities
exchange on which the Paired Share is then traded or in privately
negotiated transactions (the "Initial Registration Statements"). If the
total number of Shares issued to the Purchaser hereunder and under the
Purchase Price Adjustment Mechanism exceeds the number of Shares
covered by the Initial Registration Statements, then the Companies
shall prepare and file with the SEC such additional Registration
Statements as shall be necessary to
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<PAGE>
cover the resale by the Purchaser of such excess Shares in the same
manner as contemplated by the Initial Registration Statements for the
Shares covered thereby ("Additional Registration Statements"); provided
that prior to delivering certificates evidencing any such excess Shares
to the Purchaser, the Companies shall cause such Registration
Statements to have become effective. For purposes of this Purchase
Agreement, "Registration Statement" means a registration statement
under the Securities Act on Form S-3 covering the resale by the
Purchaser of up to a specified number of Shares, filed and maintained
effective by the Companies pursuant to the provisions of this Section
7, including the Prospectus (as defined below) contained therein, 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;
(ii) use all reasonable best efforts to cause the SEC to notify the
Companies of the SEC's willingness to declare the Initial Registration
Statements effective within 60 days after the Registration Statements
are filed by the Companies; provided that the Companies will use their
reasonable best efforts to cause such Initial Registration Statements
to become effective no later than 90 days after the Closing Date;
(iii) prepare and file with the SEC such amendments and supplements
to the Registration Statements and the prospectus used in connection
therewith (the "Prospectus") as may be necessary to keep the
Registration Statements effective during the period set forth in
Section III. A.4 of the Purchase Price Adjustment Mechanism;
(iv) furnish to the Purchaser with respect to the Shares registered
under the Registration Statements (and to each underwriter, if any, of
such Shares) (A) such reasonable number of copies of Prospectuses,
including any supplements and amendments thereto, (B) promptly
following the effectiveness of such Registration Statements and
thereafter on any Relevant Date upon request of the Purchaser (which
shall be made no more frequently than once during any 30-day period) an
opinion from counsel to the Companies covering the matters set forth on
Exhibits A and B hereto and (C) such other documents as the Purchaser
may reasonably request in order to facilitate the public sale or other
disposition of all or any of the Shares by the Purchaser; promptly
following the effectiveness of the Registration Statement and
thereafter on any Relevant Date upon request of the Purchaser (which
shall be made no more frequently than once during any 30-day period)
provide access by the Purchaser and its counsel to documents and
personnel of the Companies necessary to allow
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<PAGE>
the Purchaser to perform a "due diligence" investigation of the
Companies in a manner customary for underwriters in underwritten public
offerings of equity securities;
(v) use their reasonable best efforts to prevent the happening of
any event that would cause such Registration Statements to contain an
untrue statement of a material fact or an omission of a material fact
necessary to make the statements therein not misleading or to be not
effective and usable for resale of the Shares during the period that
such Registration Statements are required to be effective and usable;
provided that this paragraph 7(a)(v) shall in no way limit the
Companies' right to suspend the right of the Purchaser to effect sales
under the Registration Statement during any Black-Out Period as
specified at Section 5(b) above;
(vi) file documents required of the Companies for normal blue sky
clearance in states specified in writing by the Purchaser, 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; and
(vii) bear all reasonable out-of-pocket expenses in connection with
the procedures in paragraphs (i) through (vi) of this Section 7(a) and
the registration of the Shares pursuant to the Registration Statements,
including the reasonable fees and reasonable expenses of counsel or
other advisers to the Purchaser, other than underwriting discounts,
brokerage fees and commissions incurred by the Purchaser, if any.
(b) Covenants in Connection with Registration.
(i) The Companies hereby covenant with the Purchaser that (A) the
Companies shall not file any Registration Statement or Prospectus
relating to the resale of the Shares or any amendment or supplement
thereto, unless a copy thereof shall have been first submitted to the
Purchaser and the Purchaser did not object thereto in good faith
(provided that if the Purchaser does not object within two business
days of receiving any such material, they shall be deemed to have no
objection thereto); (B) the Companies shall immediately notify the
Purchaser of the issuance by the SEC of any stop order suspending the
effectiveness of such Registration Statement or the initiation of any
proceedings for such purpose; (C) the Companies shall make every
commercially reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of such Registration Statement at the
earliest possible moment; (D) the Companies shall notify the Purchaser
of the receipt of any notification with respect to the suspension of
the qualification of the Shares for sale
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<PAGE>
under the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; and (E) the Companies
shall as soon as practicable notify the Purchaser in writing of the
existence of any fact which results in any Registration Statement, any
amendment or post-effective amendment thereto, the 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, in the light of the circumstances under which they
were made, not misleading and shall (except during a Black-Out Period)
prepare a supplement or post-effective amendment to such Registration
Statement or the 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 Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided that this clause (E) shall in no
way limit the Companies' right to suspend the right of the Purchaser to
effect sales under the Registration Statement during any Black-Out
Period as specified at Section 5(c) above.
(ii) The Purchaser shall notify the Companies at least two business
days prior to the date on which the Purchaser intends to commence
effecting any resales of Shares under Registration Statement and if
the Companies do not, within such two-day period, advise the Purchaser
of the existence of any facts of the type referred to in Section 7(b)
(i)(E) above, then the Companies shall be deemed to have certified and
represented to the Purchaser that no such facts then exist and the
Purchaser may rely on such certificate and representation in making
such sales. The preceding sentence shall in no way limit the Companies'
obligations under Section 7(b)(i) above.
(c) Extension of Required Effectiveness. In the event that the
Companies shall give any notice required by Section 7(b)(i)(E) hereof, the
period during which the Companies are required to keep such 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 Purchaser is advised in writing by the Companies
that the use of the Prospectuses may be resumed.
(d) Transfer of Shares after Registration. The Purchaser agrees that
it will not effect any disposition of the Shares that would constitute a sale
within the meaning of the Securities Act or pursuant to any applicable state
securities or blue
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<PAGE>
sky laws except as contemplated in Registration Statements referred to in
Section 7(a) or 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
Registration Statements regarding the Purchaser or the Plan of Distribution.
(e) Indemnification. For the purpose of this Section 7(e), the term
"Registration Statement" shall include any final prospectus, exhibit, supplement
or amendment included in or relating to any Registration Statement referred to
in Section 7(a).
(i) Indemnification by Companies. For purposes of this Section 7(e),
the Companies agree to indemnify and hold harmless the Purchaser and as
more particularly described herein. The Companies agree to indemnify
and hold harmless the Purchaser and each person, if any, who controls
the Purchaser within the meaning of the Securities Act, against any
losses, claims, damages, liabilities or expenses, joint or several, to
which the Purchaser or such controlling person may become subject
(including in settlement of any litigation, if such settlement is
effected with the written consent of the Companies), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, including the Prospectus,
financial statements and schedules, and all other documents filed as a
part thereof, as amended at the time of effectiveness of such
Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of
Rule 430A, or pursuant to Rule 434, of the Rules and Regulations, or
the Prospectus, in the form first filed with the SEC pursuant to Rule
424(b) of the Regulations, or filed as part of such Registration
Statement at the time of effectiveness if no Rule 424(b) filing is
required, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state in any of them
a material fact required to be stated therein or necessary to make the
statements in any of them not misleading, and will reimburse the
Purchaser and each such controlling person for any legal and other
expenses as such expenses are reasonably incurred by the Purchaser or
such controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage,
liability, expense or action. The Companies will also indemnify selling
brokers, dealers and similar securities industry professionals
participating in the sale or resale of the Shares, their officers,
directors and partners and each
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<PAGE>
person who controls any such person within the meaning of the
Securities Act, provided, however, that the Companies will not be
liable in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, such Prospectus or any amendment
or supplement thereto in reliance upon and in conformity with written
information furnished to the Companies (A) by or on behalf of the
Purchaser expressly for use therein or (B) any statement or omission in
any Prospectus that is corrected in any subsequent Prospectus that was
delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser and not delivered by the Purchaser in connection with such
sale or sales.
(ii) Indemnification by the Purchaser. The Purchaser will indemnify
and hold harmless the Companies, each of their directors, each of their
officers who signed any Registration Statement and each person, if any,
who controls the Companies within the meaning of the Securities Act,
against any losses, claims, damages, liabilities or expenses, joint and
several, to which the Companies, each of their directors, each of their
officers who signed any Registration Statement or any controlling
person may become subject (including in settlement of any litigation,
if such settlement is effected with the written consent of the
Purchaser) insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise
out of or are based upon any untrue or alleged untrue statement of any
material fact contained in such Registration Statement, such
Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such Registration
Statement, such Prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to
the Companies by or on behalf of the Purchaser expressly for use
therein, and will reimburse the Companies, each of their directors,
each of their officers who signed such Registration Statement and each
controlling person for any legal and other expense reasonably incurred
by the Companies, each of their directors, each of their officers who
signed such Registration Statement or controlling person in connection
with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action.
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(iii) Proceedings. Promptly after receipt by an indemnified
party under this Section 7(e) of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof
is to be made against an indemnifying party under this Section 7(e),
notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any
indemnified party for contribution or otherwise than under the
indemnity agreement contained in this Section 7(e) or to the extent
it is not prejudiced as a proximate result of such failure. In case
any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume and
control the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants in any
such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that
there may be a conflict between the positions of the indemnifying
party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it
and/or other indemnified parties which are different from or
additional to those available to the indemnifying parties, the
indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate
in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party
under this Section 7(e) for any reasonable legal or other expenses
subsequently incurred by such indemnified party in connection with
the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal
defenses in accordance with the proviso to the preceding sentence
(it being understood, however, that the indemnifying party shall be
not liable for the expenses of more than one separate counsel,
approved by such indemnifying party in the case of paragraph (a),
representing the indemnified parties who are parties to such action)
or (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the fees and expenses
of counsel shall be at the expense of the indemnifying party.
Notwithstanding the foregoing, without the written consent of the
indemnified party, the indemnifying party may not settle or agree to
compromise of any such claim or action
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for which the indemnified party intends to seek reimbursement from the
indemnifying party, and the indemnified party will permit the
indemnifying party to settle or compromise any such action or suit at
the indemnifying party's sole cost and expense if as a result thereof
the indemnified party is provided a full and unconditional release of
such claim or action.
(iv) Contribution. If the indemnification provided for in this
Section 7(e) 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 paragraphs (i), (ii) or (ii) of this Section
7(e) 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 in such proportion as is appropriate to
reflect the relative benefits received by the Companies and the
Purchaser from the purchase and sale of the Shares and the relative
fault of the Companies and the Purchaser 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 Purchaser on the other
shall be deemed to be in the same proportion as the amount paid by
the Purchaser to the Companies pursuant to this Agreement for the
Shares purchased by the Purchaser that were sold pursuant to any
Registration Statement bears to the difference (the "Difference")
between the amount the Purchaser paid for the Shares that were sold
pursuant to such Registration Statement and the amount received by
the Purchaser from such sale. The relative fault of the Companies
and the Purchaser shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission or 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
Purchaser 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 (iii) of this Section 7(e) 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 (iii) of this Section 7(e) with respect to notice
of commencement of any action shall apply if a claim for
21
<PAGE>
contribution is to be made under this paragraph (iv); provided,
however, that no additional notice shall be required with respect to
any action for which notice has been given under paragraph (iii) for
purposes of indemnification. The Companies and the Purchaser agree that
it would not be just and equitable if contribution pursuant to this
Section 7(e) 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. Notwithstanding the
provisions of this Section 7(e), the Purchaser shall not be required to
contribute any amount in excess of the amount by which the aggregate
proceeds received by the Purchaser from the transactions contemplated
hereby exceeds the amount of any damages that the Purchaser 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.
(v) Relationship Between the REIT and the OPCO. The
obligations set forth in this Section 7(e) shall in no way limit the
ability of the Companies to allocate liability between themselves.
(f) Termination of Conditions and Obligations. The conditions
precedent imposed by Section 5 or this Section 7 upon the transferability of the
Shares shall cease and terminate as to any particular number of the Shares when
such Shares may, in the judgment of the Purchaser, be, and in fact are, sold
under Rule 144(k) promulgated under the Securities Act. Further, as to any
particular number of Shares, the conditions precedent imposed by Section 5 or
this Section 7 on the transferability of such Shares shall cease and terminate
at such earlier time as an opinion of counsel satisfactory to the Companies and
the Purchaser shall have been rendered to the effect that such conditions are
not necessary in order to comply with the Securities Act with respect to such
Shares. In each such case, the Companies' obligation to maintain effective
Registration Statements with respect to such Shares which are no longer subject
to the restrictions and limitations of Section 5 and this Section 7 shall cease.
(g) Information Available. So long as any Registration Statement
covering the resale of any Shares owned by the Purchaser is effective, the
Companies will furnish to the Purchaser:
(i) as soon as practicable after available, one copy of (A)
its Joint Annual Report to Stockholders, (B) its Joint Annual Report
on Form 10-K, (C) its joint Quarterly Reports to Stockholders, (D)
its joint
22
<PAGE>
quarterly reports on Form 10-Q, (E) a full copy of the particular
Registration Statements covering the Shares (the foregoing, in each
case, excluding exhibits) and (F) upon request, any or all other public
filings under the Exchange Act by the Companies; and
(ii) upon the reasonable request of the Purchaser, a
reasonable number of copies of the Prospectuses to supply to any
other party requiring such Prospectuses;
and the Companies, upon the reasonable request of the Purchaser, will meet with
the Purchaser or a representative thereof at the Companies headquarters to
discuss all information relevant for disclosure in such Registration Statements
covering the Shares, subject to appropriate confidentiality limitations.
(h) Non-Exclusivity. The rights and remedies provided under Section
7(e) hereof shall not be in limitation or exclusion of any rights or remedies
available to a party, whether by agreement, at law, in equity or otherwise, with
respect to the inaccuracy of any representation or warranty by, or the breach of
any covenant of, the other party made herein or in the Purchase Price Adjustment
Mechanism.
(i) Notice Requirement. The REIT and OPCO each covenants and agrees
that it will notify the Purchaser at any time it becomes aware that as a result
of a change in the REIT's and the OPCO's capital stock the Purchaser
beneficially holds more than 4.9% of the REIT's and the OPCO's Paired Shares.
(j) Transfer of Shares. The Companies covenant and agree to use their
best efforts to cause the transfer agent to effect promptly any transfer of the
Shares requested by the Purchaser and to cause the transfer agent to remove
promptly the restrictive legend from the Shares upon presentation to the
transfer agent of all necessary documentation.
(k) Underwriting Agreement. If the Companies elect Underwritten Sale
as the unwind method for a settlement under the Purchase Price Adjustment
Mechanism, the Companies and the Purchaser shall enter into an underwriting
agreement with the underwriters for such Underwritten Sale in customary form for
an Underwritten Sale effected in the manner contemplated.
SECTION 8. Registration Exemptions. For so long as the REIT and the
OPCO are subject to the reporting requirements of Section 13 or 15 of the
Exchange Act, the REIT and the OPCO covenant that they will file the reports
required to be filed by them under the Securities Act and Section 13(a) and
15(d)
23
<PAGE>
of the Exchange Act and the rules and the regulations adopted by the Commission
thereunder.
SECTION 9. Broker's Fee. Other than any fees payable under or in
connection with the Purchase Price Adjustment Mechanism, each of the parties
hereto hereby 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 the Purchaser.
SECTION 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, 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.
24
<PAGE>
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn: John P. Bohlmann
Telecopier: (214) 863-1527
and
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn: Carla S. Moreland
Telecopier: (214) 863-1527
25
<PAGE>
with a copy so mailed to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Attn: Gilbert G. Menna, P.C.
Telecopier: 617-523-1231
26
<PAGE>
27
<PAGE>
28
<PAGE>
(b) if to the Purchaser, to NMS Services, Inc. c/o NationsBanc
Montgomery Securities LLC at 9 W. 57th Street, 47th Floor, New York,
New York 10019, Attention: Christopher J. Innes,
Telecopier: 212-583-8573 or at such other address or addresses
as may have been furnished to the Companies in writing.
SECTION 11. Changes. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Companies and the
Purchaser.
SECTION 12. 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 13. 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 14. Governing Law, Jurisdiction.
(a) 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) and of the federal law of the United States of America.
(b) 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 purpose of any
suit, action or other proceeding arising out of or based upon this Agreement or
the transactions contemplated hereby and (ii) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such proceeding, any claim that 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 proceeding 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.
29
<PAGE>
SECTION 15. Transfer to Affiliate. Notwithstanding anything herein to
the contrary, the Purchaser may transfer the Purchase Shares to any affiliate of
the Purchaser, together with all of the Purchaser's rights hereunder; provided
that (i) such affiliate shall assume and be subject to all of the Purchaser's
obligations hereunder; (ii) such affiliate shall be an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act; (iii) such transfer shall be consistent with the investment representations
set forth at Section 5 hereto and (iv) such affiliate shall assume the rights
and obligations of the Purchaser under the Purchase Price Adjustment Mechanism.
In the event of such an assignment, such affiliate shall in all respects be
substituted for the Purchaser as a party hereto and to the Purchase Price
Adjustment Mechanism.
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 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.
30
<PAGE>
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:
-----------------------------
Name:
Title:
WYNDHAM INTERNATIONAL, INC,
By:
-----------------------------
Name:
Title:
NMS SERVICES, INC.
By:
-----------------------------
Name:
Title:
NATIONSBANC MONTGOMERY
SECURITIES LLC, as agent
By:
-----------------------------
Name:
Title:
31
<PAGE>
APPENDIX I
(one of two)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be registered in (this is the
name that will appear on your stock certificate(s)). You may use a
nominee name if appropriate:
------------------------------------
2. All relationships between the Purchaser and the Registered Holder
listed in response to item 1 above:
------------------------------------
------------------------------------
------------------------------------
3. The mailing address of the Registered Holder listed in response to item
1 above:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to item 1 above:
------------------------------------
32
<PAGE>
APPENDIX I
(two of two)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Pursuant to the "Selling Shareholders" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the number of shares that you or your organization
will own immediately after Closing, including those Shares purchased by you or
your organization pursuant to this Purchase Agreement and those shares purchased
by you or your organization through other transactions:
3. Have you or your organization had any position, office or other
material relationship within the past three years with the REIT, the OPCO or any
of their affiliates?
_____ Yes _____ No
If yes, please indicate the nature of any such relationships
below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
33
<PAGE>
APPENDIX II
Attention:
HOLDER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
______________________________________ hereby certifies that [he/she] [fill in
official name of individual or institution] [said institution] is the holder of
the shares evidenced by the attached certificate, and as such, sold such shares
on _______ in accordance with
[date]
Registration Statement number ________________________________________,
[fill in number or otherwise identify Registration Statement]
the Securities Act of 1933, as amended, and any applicable state securities or
blue sky laws and the requirement of delivering a current prospectus by the REIT
and the OPCO has been complied with in connection with such sale.
Print or Type:
Name of Holder
(Individual or
Institution): _________________
Name of Individual
representing
Holder (if an
Institution): _________________
Title of Individual
representing
Holder (if an
Institution): _________________
Signature by:
Individual Holder
or Individual repre-
senting Holder: _________________
35
<PAGE>
EXHIBIT A
FORM OF OPINION OF COUNSEL
[Date]
NMS Services, Inc.
c/o NationsBanc Montgomery Securities LLC
9 West 57th Street
47th Floor
New York, NY 10019
Re: Patriot American Hospitality, Inc., a Delaware corporation (the
"Corporation") and Wyndham International, Inc., a Delaware corporation
(the "Operating Company" and, together with the Corporation, the
"Companies")
Ladies and Gentlemen:
In connection with the purchase by NMS Services, Inc., a subsidiary of
NationsBank Corporation (the "Purchaser"), of 4,900,000 shares of common stock,
$.01 par value per share, of the Corporation ("Corporation Common Stock"), and
4,900,000 shares of common stock, $.01 par value per share, of the Operating
Company ("Operating Company Common Stock"), we, as counsel for the Companies,
have examined such corporate records, certificates and other documents, and such
questions of law, as we have considered necessary or appropriate for the
purposes of this opinion. The Corporation Common Stock and Operating Company
Common Stock are paired and trade as a single unit consisting of one share of
Corporation Common Stock and one share of Operating Company Common Stock
("Paired Common Stock"). The shares of Paired Common Stock being purchased by
the Purchaser, as described above, are herein referred to as the "Purchased
Shares".
With your approval, we have relied as to certain matters on information
obtained from public officials, officers of the Companies and other sources
believed by us to be responsible. Also with your approval, we have assumed that
the certificates for the Purchased Shares conform to the specimen thereof
examined by us and have been duly countersigned by the transfer agent and duly
registered by the registrar of the Corporation Common Stock and the Operating
Company Common Stock, and have further assumed the genuineness of all
A-1
<PAGE>
NMS Services, Inc.
[Date]
Page 2
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, the authenticity of the originals of such latter
documents, and the legal capacity of natural persons, assumptions which we have
not independently verified.
In rendering the opinions expressed below, we express no opinion other
than as to the Federal laws of the United States, the laws of the Commonwealth
of Massachusetts, and the General Corporation Law of Delaware.
Based on and subject to the foregoing, we are of the opinion that:
(i) Each of the Companies has been duly incorporated and is an
existing corporation in good standing under the laws of Delaware;
(ii) The Purchased Shares have been duly authorized and, when the
Purchased Shares are paid for by the Purchaser in accordance with the Purchase
Agreement dated as of February 26, 1998 (the "Purchase Agreement") by and among
the Companies and the Purchaser, will be validly issued, fully paid and
non-assessable;
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by each of the Companies;
(iv) The Purchase Price Adjustment Mechanism dated as of February 26,
1998 between the Companies and the Purchaser has been duly authorized, executed
and delivered by each of the Companies;
(v) The ISDA Master Agreement (including the Schedule to that
Agreement) dated as of February 26, 1998 between the Companies and the Purchaser
has been duly authorized, executed and delivered by each of the Companies; and
(vi) The execution and delivery of the Purchase Agreement and the
Purchase Price Adjustment Mechanism by the Companies and the performance by the
Companies of their respective obligations thereunder (i) will not result in any
violation of the provisions of the charter or by-laws of either Company or any
subsidiary; (ii) will not to the best knowledge of such counsel constitute a
breach of, or default under any material contracts filed as exhibits to the
Companies'
A-2
<PAGE>
SEC Filings (as defined in the Purchase Agreement) except such breach, default,
lien, charge or encumbrance which 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 their respective subsidiaries considered as an enterprise (a "Material
Adverse Effect"); and (iii) to the best knowledge of such counsel, will not
result in any violation of any law or administrative regulation applicable to
either Company or any of their respective subsidiaries the violation of which
would, individually or in the aggregate, have a Material Adverse Effect.
The opinions set forth herein are based upon currently existing
statutes, rules and regulations and are rendered as of the date hereof, and we
disclaim any obligation to advise you of any change in any of the foregoing
sources of law or subsequent developments in law or changes in facts or
circumstances which might affect any matters or opinions set forth herein.
The opinions set forth herein are furnished by us as counsel for the
Companies to you and are solely for your benefit.
Very truly yours,
A-3
<PAGE>
EXHIBIT B
OPINION MATTERS FOR REGISTRATION STATEMENTS
[opinion paragraphs to be delivered in connection with resale registration
statements]
Each of the REIT and the OPCO is duly organized, validly existing and
in good standing under the laws of the State of Delaware, and each of the REIT
and the OPCO has the requisite corporate power and authority to own its
properties and to conduct its business as presently conducted. The REIT is a
real estate investment trust duly organized, validly existing and in good
standing as a business REIT under the laws of the State of Delaware, and the
REIT has the requisite corporate power and authority to own its properties and
to conduct its business as is presently conducted.
The [Additional] Shares have been duly authorized and are validly
issued, nonassessable and fully paid, and are not subject to any preemptive or
similar rights.
The Registration Statement has been declared effective under the
Securities Act; to our knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or threatened; and the Registration Statement, the Final
Prospectus, and each amendment thereof or supplement thereto (except for the
financial statements, schedules and the notes thereto and the other financial
data included or incorporated by reference therein, as to which we express no
opinion) comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act and the respective rules of the Commission
thereunder.
While we have not verified, and are not passing upon and do not assume
any responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement or Final Prospectus, we have
participated in reviews and discussions in connection with the preparation of
the Registration Statement and Final Prospectus, and advise you that, in the
course of such reviews and discussions, nothing has come to our attention which
would lead us to believe (i) that the Registration Statement at the time it
became effective (except for the financial statements and the notes thereto and
the other financial data included or incorporated by reference therein, as to
which we express no belief) contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein not
misleading or (ii) that the Final Prospectus on the date thereof or on the date
of this opinion (except for the financial statements and the notes thereto and
the other financial data included or incorporated by
B-1
<PAGE>
reference therein, as to which we express no belief) contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
B-2
<PAGE>
Exhibit 10.6
Purchase Price Adjustment Mechanism
To: Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
To: Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
From: NMS Services, Inc., a subsidiary of NationsBank Corporation
c/o NationsBanc Montgomery Securities LLC
9 W. 57th Street, 47th Floor
New York, NY 10019
Date: February 26, 1998
Ladies and Gentlemen,
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between us on the Trade
Date specified below (the "Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern. References herein to the "Transaction" shall be deemed to be references
to a "Swap Transaction" solely for the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to, the ISDA
Master Agreement dated as of February 26, 1998, as amended and supplemented from
time to time (the "Agreement"), between you and us. All provisions contained in
the Agreement govern this Confirmation except as expressly modified below. In
the event of any inconsistency between the provisions of that agreement and this
Confirmation, this Confirmation will prevail for the purposes of this
Transaction.
I. The Transaction
Patriot American Hospitality, Inc. (the "REIT") and Wyndham International, Inc.
(the "OPCO") (each a "Company" and collectively, the "Companies") and NMS
Services, Inc., a subsidiary of NationsBank Corporation (the "Purchaser"),
through its agent NationsBanc Montgomery Securities LLC ("NMS"), hereby agree to
make the payments and deliveries provided for in Sections III., IV. and V.
hereof, all on the terms more particularly specified herein. The Transaction is
being entered into in connection with and is incorporated by reference in the
Purchase Agreement, as defined below.
<PAGE>
Purchase Price Adjustment Mechanism
II. Definitions
For the purposes of this Confirmation, the following terms shall have the
meanings set opposite:
Adjustments: In the event of:
(a) a subdivision, consolidation or
reclassification of the REIT Shares or the
OPCO Shares, or a free distribution or
dividend to all existing holders of REIT
Shares or the OPCO Shares by way of bonus,
capitalization or similar issue;
(b) a distribution or dividend to all
existing holders of REIT Shares or the OPCO
Shares of (i) additional REIT Shares or OPCO
Shares or (ii) other share capital or
securities granting right to payment of
dividends and/or the proceeds of liquidation
of either Company equally or proportionally
with such payments to holders of Paired
Shares; or
(c) a merger, consolidation, reorganization
or liquidation of either Company;
an adjustment shall thereupon be effected by
the Calculation Agent to the Forward Price
and/or the Underlying Shares at the time of
such event with the intent that following
such adjustment, the value of this
Transaction is economically equivalent to
the value immediately prior to the
occurrence of the event causing the
adjustment.
Bank: NationsBank, N.A.
Calculation Agent: The calculations and determinations of the
Calculation Agent shall be made in a
commercially reasonable manner and shall
be binding absent manifest error.
Collateral Release Shares: Paired Shares delivered pursuant to Section
V.C.
Compounding Period: Means each period commencing on and
including:
(i) in the case of the first Compounding
Period, the Effective Date and ending on but
excluding the earlier of the first Interim
Settlement Date or Day S, and
(ii) for each period thereafter, an Interim
Settlement Date and ending on but excluding
the earlier of the next following Interim
Settlement Date or Day S.
If there is a Partial Settlement, then (i)
the Compounding Period for the Settlement
Shares covered by such Partial Settlement
shall end on Day S for such Partial
Settlement and
2
<PAGE>
Purchase Price Adjustment Mechanism
(ii) the Compounding Period for the
remaining Underlying Shares shall be
determined without regard to such Partial
Settlement.
Customer Account: The account established in favor of the
Companies pursuant to the Customer Agreement
dated the date hereof between the Companies
and NMS.
Daily Average Price: Means, for any Exchange Trading Day, the sum
of (i) the dollar volume weighted average
price per Paired Share for that Exchange
Trading Day based on transactions executed
during that Exchange Trading Day on the
Relevant Exchange, excluding any transaction
executed during the last one-half hour of
trading, as reported on Bloomberg.
Daycount Fraction: Actual/360.
Day S: For Settlement pursuant to Section III. or
VI., the day upon which settlement
activities shall begin.
Dividend Amount: A. Means, on each Interim Settlement Date or
Day S, an amount in U.S. Dollars equal to
the sum of all cash distributions paid on
either a REIT Share or on an OPCO Share
comprising part of a Paired Share during the
relevant Compounding Period; and
B. Separately, and not included in the
Dividend Amount, the Purchaser will pay or
cause to be paid to the Companies on the
Business Day after the relevant dividend
payment date (i) all cash dividends on
Paired Shares that have gone ex- dividend,
but on which dividends have not been paid,
prior to the end of the final Compounding
Period for any settlement, based on a number
of Paired Shares equal to the number of
Settlement Shares for such settlement, (ii)
all cash dividends received by the Purchaser
at any time, on Paired Shares delivered by
the Companies pursuant to Section III.E.
that have gone ex-dividend after Day S but
prior to the end of the Unwind Period for
any settlement, and (iii) all cash dividends
paid on Paired Shares held in the Customer
Account.
Effective Date: February 26, 1998
Exchange Trading Day: Each day on which the Relevant Exchange is
open for trading.
Forward Price: On each Interim Settlement Date or Day S,
the Forward Price shall be determined for
such day by:
a) multiplying the Initial Price for the
Compounding Period by the sum of
3
<PAGE>
Purchase Price Adjustment Mechanism
1 plus the product of (i) the appropriate
Daycount Fraction and (ii) the sum of (x)
LIBOR, determined as of the previous Interim
Settlement Date (or in the case of the first
Interim Settlement Date, as of the Effective
Date), for a Designated Maturity of 3
months, and (y) the Spread; and
b) subtracting the Dividend Amount at that
date;
PROVIDED HOWEVER that if the Companies
deliver Interim Settlement Shares pursuant
to Section IV. or Collateral Release Shares
pursuant to Section V.C. during any
Compounding Period, the Forward Price as of
the preceding Interim Settlement Date for
the purpose of determining the Initial Price
for such Compounding Period shall be
adjusted to a price equal to the Daily
Average Price on the Exchange Trading Day
immediately prior to the most recent Interim
Settlement Date, adjusted up for any
positive result or down for any negative
result of the following formula:
(i) the Interim Settlement Amount for the
most recent Interim Settlement Date.
minus,
(ii) the product of (x) the number of
Interim Settlement Shares or Collateral
Release Shares, as the case may be,
delivered during such Compounding Period and
(y) the average Daily Average Price on each
Exchange Trading Day during the Interim
Settlement Unwind Period.
then divide such result by,
(iii) the number of Underlying Shares.
The Forward Price will be subject to
adjustment as provided in the definition of
Adjustments.
Initial Price: Means,
a) for the Compounding Period ending on the
first Interim Settlement Date, an amount in
U.S. Dollars equal to $25.50,
and
b) for each subsequent Compounding Period,
the Forward Price as calculated on or
adjusted as of the preceding Interim
Settlement Date.
4
<PAGE>
Purchase Price Adjustment Mechanism
Interim Settlement Dates: May 26, 1998, August 26, 1998 and November
26, 1998, subject to adjustment in
accordance with the Modified Following
Business Day convention.
Interim Settlement Amount: On any Interim Settlement Date, the product
of (a) the number of Underlying Shares, and
(b) the amount by which the Forward Price
exceeds the Daily Average Price on the
Exchange Trading Day immediately prior to
such Interim Settlement Date.
Interim Settlement Shares: The Interim Settlement Amount divided by the
Daily Average Price on the Exchange Trading
Day immediately prior to such Interim
Settlement Date, with any fractional shares
rounded up to the next highest whole number.
Interim Settlement
Unwind Period: Means, following any delivery of Interim
Settlement Shares or Collateral Release
Shares hereunder, a number of consecutive
Exchange Trading Days commencing on the
Exchange Trading Day immediately following
the date of delivery of such shares, which
number shall equal the product (rounded up
to the next highest whole number) of (i) 100
times (ii) the quotient of (A) the number of
shares so delivered divided by (B) the
number of Underlying Shares as of the date
of this Confirmation.
LIBOR: Means USD-LIBOR-BBA as such term is defined
in the Agreement.
Mandatory Unwind Date: In the case of a Mandatory Unwind Event
specified in clause (i) of the Mandatory
Unwind provisions of Section VI., at least
three Exchange Trading Days following such
Mandatory Unwind Event. In the case of a
Mandatory Unwind Event specified in clause
(ii) of such provisions, the date specified
in the notice delivered to the Companies
pursuant to such provision of Section VI.
<TABLE>
<CAPTION>
Mandatory Unwind
Thresholds: Mandatory
Unwind Thresholds Unwind Share Limit
----------------- ------------------
<S> <C> <C>
$20.00 up to 33.0% of Underlying Shares
$18.75 67.0%
$17.25 100.0%
</TABLE>
Margin Percentage: On the First Exchange Trading Day of any
Unwind Period, 107%, declining ratably on
each subsequent Unwind Day during the Unwind
Period to 100%.
5
<PAGE>
Purchase Price Adjustment Mechanism
Maturity Date: One (1) year after the Effective Date,
subject to extension upon the written
approval of the Purchaser in its sole
discretion.
Maturity Placement Fee: 2.00%, based on the mechanics in Section
III.E. The parties may agree to alter the
settlement mechanics, which may result in a
different Maturity Placement Fee.
Paired Shares: Shares of common stock, $0.01 par value per
share, of the REIT (the "REIT Shares") and
shares of common stock, par value $0.01 per
share, of OPCO (the "OPCO Shares"), which
are paired and traded as a unit consisting
of one (1) REIT Share and one (1) OPCO Share
(which REIT Shares and OPCO Shares shall
include the common stock of any successor
issuers).
Partial Settlement: A settlement effected in accordance with
Section III.A. with respect to less than the
full number of Underlying Shares.
Purchase Agreement: The Purchase Agreement, dated as of February
26, 1998, by and among the Companies and the
Purchaser.
Purchase Shares: Has the meaning set forth in Section 1 of
the Purchase Agreement.
Relevant Exchange: Means, with respect to any Exchange Trading
Day, the principal Stock Exchange on which
the Paired Shares are traded on that day.
Settlement Amount: The product of the Settlement Price and the
Settlement Shares.
Settlement Disruption
Event: Means an event beyond the control of the
parties as a result of which The Depository
Trust Company ("DTC") or any successor
depositary cannot effect a transfer of the
Settlement Shares or the Paired Shares. If
there is a Settlement Disruption Event on a
date on which a transfer of Paired Shares is
required to be made hereunder, then the
transfer of the Paired Shares that would
otherwise be due to be made by the Purchaser
or the transfer of the Paired Shares that
would otherwise be due to be made by the
Companies, as applicable, on that date shall
take place on the first succeeding Exchange
Trading Day on which settlement can take
place through DTC, provided that if such a
Settlement Disruption Event persists for
five consecutive Business Days, then the
party obliged to deliver such Settlement
Shares shall use its best efforts to cause
such Shares to be delivered promptly
thereafter to the other party in any
commercially reasonable manner.
6
<PAGE>
Purchase Price Adjustment Mechanism
Settlement Price: If Day S is an Interim Settlement Date or
the Maturity Date, the Forward Price;
otherwise, the Forward Price adjusted for
LIBOR breakage adjustments (either positive
or negative) for such Forward Price for the
period from Day S to the next following
Interim Settlement Date. Any breakage
adjustments shall be calculated by the
Calculation Agent in accordance with normal
industry standards.
Settlement Shares: The number of shares up to the full number
of Underlying Shares subject to settlement
under Section III. or VI.
Spread: 1.50% per annum.
Stock Exchange: Means the New York Stock Exchange, the
American Stock Exchange or the National
Market System of the Nasdaq Stock Exchange.
Stock Settlement
Unwind Price: If Daily Sales is elected as the unwind
method, the weighted average Daily Average
Price for the Unwind Days during the Unwind
Period where the weighting of the Daily
Average Price in each Unwind Day of the
Unwind Period other than the last Unwind Day
of the Unwind Period shall be one and the
weighting of the Daily Average Price for the
last Unwind Day of the Unwind Period shall
be equal to the quotient obtained by
dividing (i) the difference between (A) the
Settlement Amount and (B) the product of (1)
one less than the number of Unwind Days in
the Unwind Period, (2) 1% of the number of
Underlying Shares on the date of this
Confirmation and (3) the average Daily
Average Price for the Unwind Days in the
Unwind Period excluding the last Unwind Day
of the Unwind Period by (ii) the product of
(x) 1% of the number of Underlying Shares on
the date of this Confirmation and (y) the
Daily Average Price on the last Unwind Day
of the Unwind Period.
If Underwritten Sale is elected as the
unwind method, a price equal to the per
share sale proceeds to the Purchaser in such
Underwritten Sale.
Trade Date: February 26, 1998.
Underlying Shares: 4,900,000 Paired Shares of the Companies
(NYSE ticker "PAH"), subject to adjustment
in the event of Partial Settlements.
Unwind Day: Each Exchange Trading Day on which (i) no
Market Disruption Event has occurred and
(ii) the resale registration
7
<PAGE>
Purchase Price Adjustment Mechanism
statement provided by the Company pursuant
to the Purchase Agreement and Section
III.A.4. is effective and the related
prospectus is not unavailable (including by
reason of the existence of a Black-Out
Period under the Purchase Agreement) for
delivery to purchasers of Paired Shares.
Unwind Period: In the event of (i) Stock Settlement or Net
Stock Settlement and (ii) the election of
Daily Sales as the unwind method, the period
beginning on Day S and ending on (and
including) the first Unwind Day on which the
product of (A) the Stock Settlement Unwind
Price as calculated on such Unwind Day as if
such Unwind Day were the final Unwind Day of
the Unwind Period (provided that, for
purposes of this calculation, the Stock
Settlement Unwind Price shall be calculated
by weighting equally each Unwind Day in the
hypothetical Unwind Period), (B) the number
of Unwind Days in the Unwind Period
(including such Unwind Day) and (C) 1% of
the number of Underlying Shares on the date
of this Confirmation equals or exceeds the
Settlement Amount.
Valuation Date: In the case of determining any Physical
Settlement value, Net Stock Settlement
Shares or Stock Settlement Shares, Day S,
the day preceding Day S and all Unwind Days
during the Unwind Period; in the case of
determining any Preliminary Stock Settlement
Shares or Preliminary Net Stock Settlement
Shares, the Exchange Trading Day immediately
preceding Day S; in the case of determining
the Interim Settlement Amount and related
calculation, the day prior to the Interim
Settlement Date, and the five (5) Exchange
Trading Days following receipt of Interim
Settlement Shares by the Purchaser.
Valuation Time: 4:00 pm EST, or in the event the Relevant
Exchange closes early, such closing time.
III. Settlement
A. Notice and Procedures
1. The Companies may on any Exchange Trading Day up to and including the
Maturity Date, upon the giving of telephonic notice to the Purchaser
(the "Settlement Notice") at least three (3) Business Days (or, if
Underwritten Sale is elected as the unwind method and such Underwritten
Sale takes the form of a fixed price underwritten public offering, 21
Business Days) prior to Day S as specified in such Settlement Notice,
settle all or part of this Transaction. The Settlement Notice shall
specify:
(i) the Settlement Shares;
8
<PAGE>
Purchase Price Adjustment Mechanism
(ii) the settlement method, subject to change upon notice as
described below in this section (Physical, Stock or Net Stock
Settlement, as such methods are described below); and
(iii) Day S, which must be an Exchange Trading Day; provided
however, that if Physical Settlement, Stock Settlement or Net
Stock Settlement is selected and in the Purchaser's reasonable
judgment the delivery of the Settlement Shares would
potentially violate or contravene any legal or regulatory
prohibition or requirement applicable to the Purchaser or
cause the Purchaser to contravene any established corporate
policy or compliance policy of the Purchaser which relates to
any legal or regulatory prohibition or requirement applicable
to the Purchaser (other than any corporate policy limiting the
amount of the Purchaser's investment in another entity) then
the Purchaser shall at least three (3) Business Days prior to
the proposed Day S, notify the Companies telephonically
(confirmed by writing) of any such impediment and its estimate
of the period during which such impediment will preclude the
Purchaser's ability to settle all or part of this Transaction,
in which event Day S shall be postponed until the Purchaser
notifies the Companies of its ability to effect Physical
Settlement, Stock Settlement or Net Stock Settlement; and
(iv) the unwind method (Daily Sales or Underwritten Sale, as
such methods are described below).
The Settlement Notice shall be effective only if the notice
requirements specified above are fulfilled; provided, that if
the Settlement Notice is complete except that no settlement
method is specified, then the settlement method shall be
deemed to be Physical Settlement, and if the Settlement Notice
is complete except that no unwind method is specified, the
unwind method shall be deemed to be Daily Sales. If no
Settlement Notice meeting the above requirements is received
prior to five (5) Business Days prior to the Maturity Date,
then a settlement shall occur with respect to which Day S
shall be deemed to be one Exchange Trading Date after the
Maturity Date and Settlement Shares shall be deemed to equal
Underlying Shares. The Companies may upon telephonic notice to
the Purchaser of at least one (1) Exchange Trading Date prior
to the proposed Day S, withdraw any Settlement Notice.
In the case of any Partial Settlement, the number of Underlying Shares
to which this Transaction shall relate shall be adjusted, as of Day S,
by subtracting the number of Settlement Shares from the number of
Underlying Shares (as the same may have been adjusted prior to such
Partial Settlement) immediately prior to such Day S.
In the event that the Company provided notice of Stock or Net Stock
Settlement, on any day during the applicable Unwind Period, upon
providing one (1) Business Day's telephonic notice, the Company may
elect to effect Physical Settlement for all Settlement Shares that have
not already been settled, determined in the manner provided in the
following sentence. The number of Settlement Shares deemed to have
already been settled shall equal the product of 1% of the number of
Underlying Shares on the date of this Confirmation and the number of
elapsed Unwind Days in the Unwind Period. In the event that the
Companies elect to effect Physical Settlement pursuant to this
paragraph,
9
<PAGE>
Purchase Price Adjustment Mechanism
(i) the notice day shall become the final day of the Unwind Period with
regard to the Settlement Shares that are deemed to have been settled,
and (ii) the Exchange Trading Day immediately following the notice day
shall become Day S for the remaining Settlement Shares and the
Settlement Price for these remaining Settlement Shares shall be
recalculated accordingly.
2. On Day S, the Settlement Price for the Settlement Shares and the
Settlement Amount shall be determined for Day S.
3. The Settlement Amount shall be determined by the Calculation Agent and
the settlement procedures shall be executed pursuant to the settlement
method (B., C., or D. of this Section III.) selected by the Companies
in their its sole discretion.
4. It shall be a condition precedent to any right of the Companies to
elect Stock Settlement (III.C. below) or Net Stock Settlement (III.D.
below) or to deliver Paired Shares in satisfaction of their obligations
under Section III.E.6., that the Companies must (i) notify the
Purchaser (in writing or telephonically) of such election at least five
(5) Business Days prior to Day S and (ii) prior to Day S, cause to be
filed with the Securities and Exchange Commission (the "Commission")
and cause to become effective under the Securities Act of 1933, as
amended (the "Securities Act") a registration statement that results in
the Purchaser (or any affiliate of the Purchaser designated by the
Purchaser) being able to resell all Paired Shares to be delivered by
the Company in effecting such Stock Settlement or Net Stock Settlement
without further registration under the Securities Act. Such
registration statement shall include one or more preliminary
prospectuses, prospectuses, and any amendments and supplements thereto
such that any preliminary prospectus or prospectus, as amended or
supplemented, shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading. In addition,
the Companies shall not deliver any Paired Shares pursuant to Section
IV. below unless at the time of such delivery a registration statement
has become effective under the Securities Act that result in the
Purchaser (or any affiliate of the Purchaser designated by the
Purchaser) being able to resell such Paired Shares without further
registration under the Securities Act, such registration statement to
include one or more preliminary prospectuses, prospectuses, and any
amendments or supplements thereto such that any preliminary
prospectuses, prospectus and any amendments or supplements thereto such
that any preliminary prospectus or prospectus, as amended or
supplemented, shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Companies
further agree that they will cause any such Registration Statement
referred to in this paragraph 5 of Section III.A. to remain in effect
until the earliest of the date on which (i) all Paired Shares delivered
to the Purchaser by the Companies and not required to be delivered to
the Companies hereunder have been sold by the Purchaser (or an
affiliate of the Purchaser), and the Purchaser agrees to notify the
Companies of such fact within two (2) Business Days of its occurrence,
(ii) the Purchaser is able, in the opinion of its counsel, to sell the
Paired Shares subject thereto under Rule 144(k) or (iii) the Purchaser
has advised the Companies that it no longer requires that such
registration statement be effective; provided, however, that in no
event shall the Companies be obligated to keep such Registration
Statement effective for more than 10
10
<PAGE>
Purchase Price Adjustment Mechanism
Exchange Trading Days after the end of the applicable Unwind Period.
Notwithstanding any other provision of this Confirmation, if the
conditions set forth in this Section III.A.4 are not satisfied as of
Day S, then (except as provided in Section V - Mandatory Unwind Event)
the Companies shall be deemed to have elected Physical Settlement.
B. Physical Settlement
If the Companies elect Physical Settlement, the Companies shall settle
by delivering to the Purchaser cash in an amount equal to the
Settlement Amount in exchange for the Settlement Shares ("Physical
Settlement") on the Exchange Trading Day immediately succeeding Day S.
The Purchaser shall deliver the Settlement Shares to the Companies on
the Exchange Trading Day immediately succeeding Day S upon receipt of
such cash.
C. Stock Settlement
If the Companies elect to settle the Settlement Amount by delivering
Paired Shares in exchange for the Settlement Shares ("Stock
Settlement"), the Companies shall settle by delivering to the Purchaser
a number of Paired Shares (the "Stock Settlement Shares") equal to (i)
the Settlement Amount divided by (ii) the Stock Settlement Unwind
Price. The mechanics for settlement are set forth in Section III. E.
below.
D. Net Stock Settlement
If the Companies elect to settle the Settlement Amount on a net stock
basis ("Net Stock Settlement"), the Companies shall settle by
delivering to the Purchaser a number of net stock settlement shares
(the "Net Stock Settlement Shares"), which shall equal;
a) (i) the number of Settlement Shares, times (ii) the amount
(positive or negative) equal to the Settlement Price minus the
Stock Settlement Unwind Price,
such product divided by,
b) the Stock Settlement Unwind Price.
If such calculation yields a positive number, this shall indicate the
number of Paired Shares to be delivered by the Companies to the
Purchaser. If such calculation yields a negative number, this shall
indicate the number of Paired Shares to be delivered by the Purchaser
to the Companies. The mechanics for settlement are set forth in Section
III.E. below. (The mechanics set forth in Section III.E. below do not
apply for purposes of Interim Net Stock Settlement pursuant to Section
IV.)
11
<PAGE>
Purchase Price Adjustment Mechanism
E. Stock and Net Stock Settlement Mechanics
1. Preliminary Stock Settlement:
If the Companies elect Stock Settlement and Daily Sales, the
Companies shall deliver to the Customer Account (for
subsequent sale for the account of the Purchaser as provided
in Section VI), by 11:00 a.m. on Day S, that number of Paired
Shares (the "Preliminary Stock Settlement Shares") equal to
the product of (i) the Settlement Amount divided by the Daily
Average Price on the Exchange Trading Day immediately
preceding Day S, times (ii) 107% (with fractional shares
rounded up to the next larger whole number). Upon delivery of
the Preliminary Stock Settlement Shares to the Customer
Account, the Purchaser will deliver the Settlement Shares to
the Customer Account.
2. Preliminary Net Stock Settlement:
If the Companies elect Net Stock Settlement and Daily Sales
and if the Settlement Price exceeds the Daily Average Price on
the Exchange Trading Day immediately preceding Day S, the
Companies shall deliver to the Customer Account (for
subsequent sale for the account of the Purchaser as provided
in Section VI), by 11:00 a.m. on Day S, that number of Paired
Shares (the "Preliminary Net Stock Settlement Shares") equal
to:
a) the sum of (i) the product of the number of Settlement
Shares times the difference between the Settlement Price and
the Daily Average Price on the Exchange Trading Day
immediately preceding Day S and (ii) 7% of the Settlement
Amount, and
such amount divided by
b) the Daily Average Price on the Exchange Trading Day
immediately preceding Day S.
If the Daily Average Price on the Exchange Trading Day
immediately preceding Day S exceeds the Settlement Price, the
Companies shall not be required to deliver any shares to the
Purchaser under this subsection III.E.2.
3. If Daily Sales is elected as the unwind method, then by 11:00
a.m. on every fifth (5th) Unwind Day (other than the final
Unwind Day) during the Unwind Period and on the Business Day
following the final Unwind Day of the Unwind Period:
(a) For Stock Settlement:
Stock Settlement Shares shall be calculated as if such Unwind
Day were the final Unwind Day of the Unwind Period (provided
that, for purposes of this calculation, the Stock Settlement
Unwind Price shall be calculated by weighting equally each
Unwind Day in the hypothetical Unwind Period).
(i) If (a) the Margin Percentage times Stock Settlement Shares
(calculated as set forth above) is greater than (b) the sum of
(x) Preliminary Stock Settlement
12
<PAGE>
Purchase Price Adjustment Mechanism
Shares plus (y) any shares previously delivered pursuant to
this settlement under this subparagraph (i), then the
Companies shall deliver that number of Paired Shares equal to
the difference between (a) and (b) to the Customer Account
(for subsequent sale for the account of the Purchaser as
provided in Section VI), and
(ii) as of the final day of the Unwind Period, if (a) the sum
of (x) Preliminary Stock Settlement Shares plus (y) any shares
previously delivered pursuant to this settlement under
subparagraph (i) above is greater than Stock Settlement
Shares, then all claims of the Purchaser to such remaining
shares shall be released as provided in Section III.E.5.
(b) For Net Stock Settlement:
Net Stock Settlement Shares shall be calculated as if such
Unwind Day were the final Unwind Day of the Unwind Period
(provided that, for purposes of this calculation, the Stock
Settlement Unwind Price shall be calculated by weighting
equally each Unwind Day in the hypothetical Unwind Period).
(i) if (a) the Margin Percentage times Net Stock Settlement
Shares is greater than (b) the sum of (x) Preliminary Net
Stock Settlement Shares plus (y) any shares previously
delivered pursuant to this settlement under this subparagraph
(i), then the Companies shall deliver Paired Shares equal in
number to the difference between (a) and (b) to the Customer
Account (for subsequent sale for the account of the Purchaser
as provided in Section VI), and
(ii) as of the final day of the Unwind Period, if (a) the sum
of (x) Preliminary Net Stock Settlement Shares plus (y) any
shares previously delivered pursuant to this settlement under
subparagraph (i) above is greater than (b) Net Stock
Settlement Shares, then all claims of the Purchaser to such
remaining shares shall be released as provided in Section
III.E.5.
4. The Companies shall cause all shares delivered by it to the
Customer Account pursuant to this Confirmation to be fully and
effectively registered under the Securities Act for resale by
the Purchaser (or an affiliate of the Purchaser) (as provided
in Section III.A.4, above).
5. On the Exchange Trading Day following the final Unwind Day of
the Unwind Period for any Daily Sales unwind or on or prior to
the day 10 Exchange Trading Days following Day S for any
Underwritten Sale unwind, as the case may be, the Purchaser
shall release all claims to Paired Shares held in the
Companies' Customer Account in respect of such unwind, and
deliver all such Paired Shares to the Companies with the
dollar value of all fractional shares settled in cash.
6. In the event of Stock Settlement or Net Stock Settlement
pursuant to Section III.C or III.D. and the election of Daily
Shares as the unwind method, the Companies shall pay to the
Purchaser on the Business Day immediately following the last
Unwind Day of the Unwind Period an unwind accretion fee, in
cash or, subject to the following conditions and in the manner
provided below, in Paired Shares, equal to the product of (i)
the quotient of (A) the Settlement Amount divided by (B) the
number of calendar days in the Unwind
13
<PAGE>
Purchase Price Adjustment Mechanism
Period times (ii) the sum of (A) 3-Month LIBOR plus (B) the
Spread times (iii) the quotient of (A) the sum of all of the
whole numbers beginning with one and ending with the number of
calendar days in the Unwind Period divided by (B) 360.
The Companies may satisfy this obligation by delivering Paired
Shares to the Purchaser in an amount so that the value of such
Paired Shares, calculated by reference to the Daily Average
Price on the Relevant Exchange on the Exchange Trading Day
immediately prior to the date of such delivery, provided that
such Paired Shares have been registered for resale in the
manner provided in Section III.A.4.
7. In the event of Stock Settlement or Net Stock Settlement
pursuant to Section III.C. or III.D., the Companies shall pay
on Day S a placement fee to an affiliate of the Purchaser
designated by the Purchaser calculated as:
Settlement Amount x Maturity Placement Fee.
In the event that Interim Settlement Shares are delivered
pursuant to Section IV. or Collateral Release Shares are
delivered pursuant to Section V.C., the Companies shall pay on
the date of such delivery a placement fee to an affiliate of
the Purchaser designated by the Purchaser calculated as:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of x Daily Average Price x Maturity
shares so delivered on Exchange Trading Placement
Day immediately prior to Fee
date of delivery
</TABLE>
8. In the event of Stock Settlement or Net Stock Settlement and
the election of Underwritten Sale as the unwind method, the
Purchaser or one or more of its affiliates shall sell the
Stock Settlement Shares or the Net Stock Settlement Shares and
the Settlement Shares, as the case may be, in a manner agreed
among the Companies and the Purchaser, which may include (i)
sales to one or more institutional purchasers in transactions
of the type commonly referred to as "block trades" or (ii) a
fixed price underwritten public offering.
14
<PAGE>
Purchase Price Adjustment Mechanism
IV. Interim Net Stock Settlement
On each Interim Settlement Date, if the Forward Price exceeds the Daily
Average Price on such Interim Settlement Date, then on the Business Day
following the fifth Exchange Trading Day thereafter the Companies
shall, subject to the conditions stated in Section III.A.4, deliver a
number of Paired Shares to the Purchaser equal to the Interim
Settlement Shares; provided, however, that if the Companies are
restricted by Section III.A.4., by law or regulation or self-regulatory
requirements or related policies and procedures, whether or not such
requirements, policies or procedures are imposed by law directly or
have been voluntarily adopted by the Companies to insure compliance
with applicable laws, or in their reasonable judgment are otherwise
unable or unwilling to deliver registered Paired Shares, the Companies
shall deliver Treasury Notes to the Purchaser as described in Section
V.B. below. Paired Shares to be delivered pursuant to this Section IV.
shall initially be delivered to the Customer Account as collateral for
the Companies' obligations hereunder, and the Bank shall be authorized
to direct its affiliates to sell such Paired Shares for the account of
the Purchaser as provided in Section VI.
V. Collateral Provisions
A. If the Companies fail to make effective a resale registration
statement as described in Section III.A.4 within 60 days of a
written request by the Purchaser, then until such a resale
registration statement has become effective, the Companies
shall deliver United States Treasury Notes, with a maturity of
three months or less, that are held through the
Treasury/Reserve Automated Debt Entry System ("Treasury
Notes") in an aggregate principal amount equal to the Interim
Settlement Amount (calculated as if such 60th day were an
Interim Settlement Date) to the Purchaser. If Treasury Notes
are delivered pursuant to this Section V.A., then until the
date Paired Shares could be delivered in connection with an
Interim Net Stock Settlement (if such date were an Interim
Settlement Date) or the Transaction is settled on a Physical
Settlement basis, the Interim Settlement Amount shall be
recalculated and the aggregate principal amount of Treasury
Notes required to be delivered shall be adjusted (and
additional Treasury Notes shall be delivered to the Bank and
excess Treasury Notes shall be returned to the Companies as
necessary) to equal such recalculated Interim Settlement
Amount on a biweekly (every 2 weeks) basis, with the Interim
Settlement Amount calculated as if the last day of such
biweekly period were an Interim Settlement Date.
B. In the event that the Companies do not deliver Paired Shares
pursuant to Section IV. for one or more of the reasons
described in the provision at the end of such paragraph, then,
unless Treasury Notes have been delivered pursuant to Section
V.A. above, the Companies shall deliver Treasury Notes in an
amount equal to the Interim Settlement Amount to the
Purchaser.
C. If the Companies have delivered Treasury Notes to the
Purchaser pursuant to Sections V.A. or V.B. above, at the
Companies' option, the Companies may deliver Paired Shares
(which Paired Shares have been registered for resale by the
Purchaser (or an affiliate of the Purchaser) pursuant to a
registration statement as described in Section III.A.4) to the
Purchaser equal in saleable
15
<PAGE>
Purchase Price Adjustment Mechanism
market value, based on the Daily Average Price on the Exchange
Trading Day prior to such delivery, to the aggregate principal
amount of the Treasury Notes theretofore delivered to the
Purchaser hereunder. Prior to the next Interim Settlement
Date, if on any five consecutive Exchange Trading Days the
Daily Average Price is above the Forward Price as of the prior
Interim Settlement Date, the Purchaser shall, on the Business
Day after such fifth Exchange Trading Day, release all claims
to Treasury Notes theretofore delivered to the Purchaser and
deliver such Treasury Notes to the Companies. On any
subsequent Interim Settlement Date, if Treasury Notes are held
by the Purchaser, the Purchaser shall deliver to the
Companies, within five (5) Business Days after such Interim
Settlement Date, Treasury Notes in an aggregate principal
amount equal to the amount by which the aggregate principal
amount of Treasury Notes held by the Purchaser exceeds the
Interim Settlement Amount.
D. Security Interest
The Companies hereby pledge to the Purchaser, as security for
their obligations herein, a first priority continuing security
interest in, lien on and right of set-off against all Treasury
Notes delivered to the Purchaser, all security entitlements in
respect thereof and all proceeds in respect of the foregoing.
Upon delivery to the Companies by the Purchaser of such
Treasury Notes, the security interest and lien granted
hereunder will be released immediately, and, to the extent
possible, without any further action by either party.
For purposes of this Agreement, "delivery" of Treasury Notes
to any person shall mean the crediting of such Treasury Notes
to an account of such person at a securities intermediary
designated by such person by Federal Bank-Wire in accordance
with (i) Subpart O - Book-Entry Procedure of Title 31 of the
Code of Federal Regulations (31 CFR ss.ss. 306.115 et seq.)
and any other regulations of the United States Treasury
Department from time to time applicable to the transfer or
pledge of book-entry United States Treasury Notes, including,
without limitation, the regulations set forth in 31 CFR Part
357 and (ii) the Uniform Commercial Code as in effect in the
State of New York.
E. Representations
As of the Trade Date of this Confirmation, the Companies
represent to the Purchaser (which representations will be
deemed to be repeated as of each date that the Companies
deliver Treasury Notes to the Purchaser and each date on which
Paired Shares are delivered to the Customer Account pursuant
to Section III.E.) that:
(i) each Company has the power to grant a security interest in
and lien on any Treasury Notes it delivers to the Purchaser or
Paired Shares it delivers to the Customer Account and has
taken all necessary actions to authorize the granting of that
security interest and lien;
16
<PAGE>
Purchase Price Adjustment Mechanism
(ii) each Company is the sole owner of or otherwise has the
right to deliver all Treasury Notes to the Purchaser hereunder
or Paired Shares to the Customer Account hereunder, free and
clear of any security interest, lien, encumbrance or other
restrictions other than the security interest and lien created
hereby;
(iii) upon delivery of any Treasury Notes to the Purchaser or
delivery of any Paired Shares to the Customer Account under
the terms of this Confirmation, the Purchaser will have a
valid and perfected first priority security interest therein;
(iv) the performance by each Company of its obligations under
this Confirmation will not result in the creation of any
security interest, lien or other encumbrance on any Treasury
Notes delivered to the Purchaser or Paired Shares delivered to
the Customer Account other than the security interest and lien
granted hereunder; and
(v) each of the Companies will be solvent and able to pay its
debts as they mature, will have capital sufficient to carry on
business and all businesses in which it engages, and will have
assets which will have a present fair market valuation greater
than the amount of all of its liabilities.
F. Other Collateral Provisions
During settlement of the entire Transaction pursuant to
Section III. or VI., any Treasury Notes held by the Purchaser
shall be held until the end of the applicable Unwind Period
and shall be released on the Business Day following the final
Unwind Day for that Unwind Period or, if there is no Unwind
Period, the Business Day immediately following Day S. So long
as there has not occurred any Event of Default under the
Agreement, any interest paid on any Treasury Notes delivered
to the Purchaser in pledge hereunder shall be paid over to the
Companies.
G. Definitions related to Collateral Provisions
"Local Business Day" means a day on which commercial banks in
New York, New York are open for business (including dealings
in foreign exchange).
VI. Certain Covenants and Other Provisions
Ability to Settle in Stock: As of the date hereof, the Companies have
not, and after the date hereof, the Company
will not, enter into any obligation that
would contractually prohibit the Companies
from Stock Settlement, Net Stock Settlement
or Interim Net Stock Settlement of any
shares under this Agreement.
Allocation between the REIT
and OPCO: As between the REIT and OPCO, (i) any
delivery to or by the Companies of the REIT
Share portion of Paired Shares pursuant to
this Confirmation shall be made by delivery
to or
17
<PAGE>
Purchase Price Adjustment Mechanism
by the REIT, (ii) any delivery to or by the
Companies of the OPCO Share portion of
Paired Shares pursuant to this Confirmation
shall be made by delivery to or by OPCO, and
(iii) any delivery to or by the Companies of
cash pursuant to this Confirmation shall be
allocated between the REIT and OPCO between
and among themselves based on the ratios
that the Companies allocate proceeds of any
issuance of Paired Shares pursuant to the
Pairing Agreement between the Companies as
amended from time to time, without effect on
any obligation of the Companies to the
Purchaser or on any obligation of the
Purchaser to the Companies. Such allocation
ratios are currently set at 95% to the REIT
and 5% to the OPCO.
Condition Precedent to
Physical Settlement: It shall be a condition precedent to any
right of the Companies to elect Physical
Settlement, that the Companies must, not
more than 180 days prior to such Day S, have
completed the private placement or public
offering of such number of Shares or any
security that may be converted, exchanged or
exercised into Shares, having such initial
purchase price so as to provide the
Companies with net cash proceeds in an
amount not less than the Settlement Amount
or the amount provided in clause (a) of
Section III.D., as the case may be.
Mandatory Unwind Event: If at any time prior to the Maturity Date:
(i) the average Daily Average Price on the
Relevant Exchange of the Paired Shares on
any two consecutive Exchange Trading Days,
other than a day on which a Market
Disruption Event has occurred, is equal to
or less than the highest Mandatory Unwind
Threshold, then the Purchaser shall have the
right, upon written notice to the Companies,
to require the parties to settle all or a
portion of the Transaction (up to the Unwind
Share Limit for such Mandatory Unwind
Threshold) on the Mandatory Unwind Date
pursuant to the settlement procedures set
forth in Section III. above.
Once a Mandatory Unwind Event has occurred,
if the Daily Average Price on any two
consecutive Exchange Trading Days is less
than a lower Mandatory Unwind Threshold, the
Purchaser shall have the right, upon
providing notice to the Companies, to
require the Parties to settle pursuant to
Section III. above on the Mandatory Unwind
Date, all or a portion of the Transaction,
up to a number of Paired Shares that,
together with any shares settled as a result
of any previous Mandatory Unwind Event,
equals the number of Underlying Shares
(calculated, for this purpose, without
regard to any previous Partial Settlement
occurring as a result of a Mandatory
18
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Purchase Price Adjustment Mechanism
Unwind Event) multiplied by the
corresponding cumulative Unwind Share Limit,
on the Mandatory Unwind Date pursuant to the
settlement procedures set forth in Section
III. above; or,
(ii) if any of the following events occur:
(1) any default or event of default under
any of the Companies' unsecured and/or
recourse lending agreements involving any of
the Companies' Specified Indebtedness in the
amount of more than $25,000,000 that has not
been cured within five (5) days (in the case
of a default or event of default involving a
covenant of a financial nature) or fifteen
(15) days (in the case of any other default
or event of default) following the later of
the date of occurrence of such default or
event of default and the end of any cure
period provided in such lending agreement;
(2) a holder of any of the Companies'
unsecured and/or recourse Specified
Indebtedness in the amount of more than
$25,000,000 provides notice to either of the
Companies pursuant to such Specified
Indebtedness to accelerate the maturity of
such Specified Indebtedness;
(3) Bankruptcy or Insolvency (as such terms
are defined in the Agreement); and/or
(4) any failure of the Companies to post
Treasury Notes as collateral pursuant to
Section V. hereof if such failure is not
remedied on or before the third Local
Business Day after notice of such failure is
given to the Companies; then, the Purchaser
may, upon providing five Business Days
notice to the Companies, require all or part
of the Transaction to be settled early on
the Mandatory Unwind Date pursuant to the
settlement procedures set forth in Section
III.
For purposes of the settlement procedures
set forth in Section III., "Day S" shall be
the Mandatory Unwind Date and the
"Settlement Shares" shall be the number of
Paired Shares to be settled pursuant to
clause (i) or (ii) above. The Companies may
elect the method of settlement for such
early settlement in accordance with the
settlement provisions set forth herein;
provided however, that if Stock Settlement
or Net Stock Settlement is elected, and (1)
no resale Registration Statement
as described in Section III.A.4. has been
declared effective prior to Day S or (2) any
such resale Registration Statement so
declared effective becomes, on Day S or
during an Unwind Period, the subject of a
stop order suspending its effectiveness
19
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Purchase Price Adjustment Mechanism
or is the subject of any proceeding for that
purpose or any such proceeding is threatened
by the Commission, then the Companies at
their sole option may choose to (A)
collateralize 125% of the Settlement Amount
with Treasury Notes in a manner similar to
that described in Section V., in which event
Day S will be postponed and the Unwind
Period will not begin until such
registration statement is effective and
available for resales and Paired Shares are
delivered by the Companies pursuant to a
Stock Settlement or Net Stock Settlement,
(B) effect Physical Settlement as to all of
the Settlement Shares in accordance with
Section III.B. hereof on the Exchange
Trading Day immediately succeeding the
occurrence of one of the events specified in
(1) or (2) above or (C) effect settlement
with Paired Shares that have not been
registered for resale by the Purchaser or
any affiliate of the Purchaser to allow the
Purchaser to unwind the Transaction and
liquidate any position they may hold in
Paired Shares by means of negotiated private
resales, to the extent and in the manner
permitted by applicable federal and state
securities laws. In recognition that such
negotiated private resales, if any, are
likely to be completed at prices reflective
of a discount to the prevailing open market
prices for any freely tradeable Paired
Shares, the Companies agree to deliver to
the Purchaser such number of supplemental
Paired Shares as the Purchaser may
reasonably request, to which the Purchaser
shall assign a dollar price in order to
approximate an aggregate amount equal to the
aggregate discount accepted by the Purchaser
in connection with the unregistered resale
of the Paired Shares, or the Companies shall
pay an amount in cash to the Purchaser equal
to the aggregate discount accepted by the
Purchaser in connection with the
unregistered resale of the Stock Settlement
Shares.
Market Disruption Event: A "Market Disruption Event" is the
occurrence or existence on any Exchange
Trading Day during the one-half hour period
that ends at the Valuation Time of
any suspension of or limitation
imposed on trading on (i) any of
the Relevant Exchanges or (ii) any of the
exchanges or boards of trade or futures
contract markets on which options or futures
contracts on the Paired Shares are traded
that, in the reasonable determination of the
Calculation Agent, is material. In the event
that a Market Disruption Event occurs or is
continuing on a Valuation Date, any
determination of the Daily Average Price
shall be postponed to the first succeeding
Exchange Trading day on which there is no
Market Disruption Event, provided that if
there is a Market Disruption Event on each
of the five Exchange Trading Days
immediately following the original Valuation
Date that but for the Market Disruption
Event would have been a day on which Daily
Average Price
20
<PAGE>
Purchase Price Adjustment Mechanism
would have been determined, such fifth
Exchange Trading Day shall be deemed to be
the Valuation Date notwithstanding the
Market Disruption Event and the Calculation
Agent shall, in consultation with the
Companies, determine the Daily Average Price
for that Valuation Date based upon the last
Daily Average Price prior to such Market
Disruption Event and, if applicable, shall
effect the relevant settlement by using such
last Daily Average Price for the
determination of the Stock Settlement Unwind
Price.
The Calculation Agent shall within one (1)
Business Day notify the other party of the
existence or occurrence of a Market
Disruption Event on any day that but for the
occurrence or existence of a Market
Disruption Event would have been a Valuation
Date.
Regulatory Compliance: Each party agrees that if the delivery of
shares upon settlement is subject to any
restriction imposed by a regulatory
authority, it shall not be an event of
default, and the parties will negotiate in
good faith a procedure to effect settlement
of such shares in a manner which complies
with any relevant rules of such regulatory
authority and which is satisfactory in form
and substance to their respective counsel.
Securities Law Compliance: Each party agrees that it will comply, in
connection with this Transaction and all
related or contemporaneous sales and
purchases of the Companies' Paired Shares,
with the applicable provisions of the
Securities Act, the Securities Exchange Act
of 1934 and the rules and regulations
thereunder.
Settlement: All settlements shall occur through DTC or
any other mutually acceptable depositary.
Settlement Stock Delivery: Any Paired Shares delivered to the Customer
Account pursuant to Section III.E. or
Section IV. above (the "Pledged Shares")
will serve as collateral for the Companies'
obligations hereunder until the security
interest granted therein is released in
accordance with the settlement mechanics
noted under III.E.5. Paired Shares held in
the Companies' Customer Account shall not be
voted.
The Companies assign and pledge to NMS, as
collateral agent of and for the benefit of
the Purchaser, and grant to NMS, as
collateral agent of and for the benefit of
the Purchaser, as and by way of a security
interest having priority over all other
security interests, with power of sale, all
of its right, title and interest in and to
the Pledged Shares, all security
entitlements in respect thereof and all
income or proceeds received or
21
<PAGE>
Purchase Price Adjustment Mechanism
derived therefrom. The Companies authorize
the Bank to direct NMS to sell, or cause the
Purchaser or another affiliate of the Bank
to sell, the Pledged Shares for the account
of the Purchaser, and such shares shall,
except as provided herein, be so sold. Any
shares so sold shall be considered to be
Stock Settlement Shares, Net Stock
Settlement Shares or Interim Settlement
Shares, as the case may be, delivered to the
Purchaser in satisfaction of the Companies'
obligations under Section III.C., Section
III.D. or Section IV., as the case may be.
Delivery of any Pledged Shares to the
Customer Account shall be effected by
delivery of stock certificates for such
Pledged Shares to NMS duly endorsed to NMS
or in blank or accompanied by a duly
executed instrument of transfer to NMS or in
blank or by crediting such Pledged Shares to
an account of NMS at a securities
intermediary designated by NMS.
The Companies covenant and agree with the
Purchaser that Paired Shares delivered by
the Companies pursuant to settlement events
in accordance herewith will be duly
authorized, validly issued, fully paid and
non-assessable. The issuance of such Paired
Shares will not require the consent,
approval, authorization, registration, or
qualification of any government authority,
except such as shall have been obtained on
or before the delivery date of such Paired
Shares.
All references herein to Paired Shares or
other securities to be transferred or
delivered hereunder shall be deemed to
include security entitlements in respect
thereof.
Settlement Volume: In the event of a settlement other than a
Mandatory Unwind Event, on any Unwind Day
during an Unwind Period, the Purchaser
shall, pursuant to its hedging activities
relating to this Transaction, not sell
Paired Shares in an amount in excess of 20%
of the average daily volume for the 20
Exchange Trading Days immediately preceding
Day S.
Trading Authorization: The following individuals and/or any
individual authorized in writing by the
Treasurer of the Companies are authorized by
the Companies to provide trading
instructions to the Purchaser with regard to
this Transaction.
William W. Evans III for the REIT
and
Leslie Ng for OPCO.
VII. Delivery Instructions:
22
<PAGE>
Purchase Price Adjustment Mechanism
Party A: To be supplied by the Purchaser prior to
receipt of any payment hereunder.
Party B: To be supplied by the Companies prior to
receipt of any payment hereunder.
23
<PAGE>
Purchase Price Adjustment Mechanism
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to Mr. Christopher Innes, 47th Floor.
Yours faithfully,
- ------------------------------------
NMS SERVICES, INC.
By:
Name:
Title:
Date:
-------------------------------
NATIONSBANC MONTGOMERY
SECURITIES LLC, as agent
By:
Name:
Title:
Date:
-------------------------------
PATRIOT AMERICAN HOSPITALITY, INC.
By:
Name:
Title:
Date:
-------------------------------
WYNDHAM INTERNATIONAL, INC.
By:
Name:
Title:
Date:
-------------------------------
24
<PAGE>
Exhibit 10.7
AMENDMENT TO AGREEMENTS
THIS AMENDMENT TO AGREEMENTS (this "Amendment") is made and
entered into as of this 14th day of August, 1998 by and among Patriot
American Hospitality, Inc. (the "REIT"), Wyndham International, Inc. (the
"OPCO") (the REIT and the OPCO, each a "Company" and collectively, the
"Companies"), and NationsBanc Mortgage Capital Corporation (the "Purchaser").
RECITALS:
A . As of February 26, 1998 the Companies and NMS Services,
Inc., a subsidiary of NationsBank Corporation (the "Original Purchaser"),
through its agent NationsBanc Montgomery Securities LLC, entered into (i) a
Purchase Agreement (the "Purchase Agreement") pursuant to which, among other
things, the Companies sold to Original Purchaser 4,900,000 paired shares of
stock (referred to herein and in the Purchase Agreement as the "Purchase
Shares") of the companies on February 27, 1998, and (ii) a Purchase Price
Adjustment Mechanism, including an ISDA Master Agreement and the Schedules
thereto (the "Purchase Price Adjustment Mechanism") which provides for, among
other things, adjustments to the purchase price paid for the Purchase Shares
as more particularly described therein. Capitalized terms used in this
Amendment and not otherwise defined herein shall have the meanings given such
terms in the Purchase Price Adjustment Mechanism, or, if not defined in the
Purchase Price Adjustment Mechanism, in the Purchase Agreement.
B. As of July 31, 1998 Original Purchaser and the Purchaser
entered into a certain Transfer and Assignment Agreement pursuant to the
terms of which, among other things, Original Purchaser transferred and
assigned to the Purchaser all of the Purchase Shares and all of Original
Purchaser's rights and obligations under the Purchase Agreement and the
Purchase Price Adjustment Mechanism and Purchaser assumed all of such rights
and obligations.
C. The Companies have requested that the Purchaser amend the
Purchase Price Adjustment Mechanism in certain respects and the Purchaser has
agreed to do so on the terms and subject to the conditions set forth in this
Amendment.
NOW THEREFORE, in consideration of the premises, the sum of
<PAGE>
Ten Dollars ($10.00) in hand paid by the Companies and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged and
confessed by the Purchaser, the Companies and the Purchaser do hereby agree as
follows:
1. Rights to Unwind. In consideration of the agreements
made by the Companies in this Amendment, the Purchaser hereby agrees that it
will not require a settlement pursuant to Section III of the Purchase Price
Adjustment Mechanism as a consequence of any Mandatory Unwind Event described
in paragraph (i) or subparagraph (ii)(4) of the provisions entitled
"Mandatory Unwind Event" of Section VI of the Purchase Price Adjustment
Agreement (any Mandatory Unwind Events described in such paragraph (i) and
subparagraph (ii)(4) are collectively referred to herein as "Price Decline
Unwind Event") that occurs on or before October 15, 1998. Any Price Decline
Unwind Event that occurs on or after the October 15, 1998 shall be governed
by the Purchase Price Adjustment Mechanism, as amended by this Amendment.
The agreements in this Section 1 do not apply to any Mandatory Unwind Event
other than a Price Decline Unwind Event.
2. Additional Mandatory Unwind Event. In addition to the
events described in subparagraphs (1), (2), and (3) of paragraph (ii) of the
provisions entitled "Mandatory Unwind Event" in Section VI of the Purchase
Price Adjustment Mechanism, the following event occurring after the date of
this Amendment shall also constitute a Mandatory Unwind Event under the
Purchase Price Adjustment Mechanism:
(5) The sale, lease, conveyance or transfer of any one or more
the hotels listed on Exhibit A attached hereto and made a part
hereof for all purposes (the "Listed Hotels") or the granting of
a deed of trust, mortgage or other similar encumbrance securing
any indebtedness covering any of the Listed Hotels, except (i) in
connection with the consummation of a transaction in which the
net proceeds of such transaction are being applied in whole or
in part to effect a complete and final Physical Settlement in
accordance with Section III.B of the Purchase Price Adjustment
Mechanism, or (ii) a transaction between or among the Companies
and their affiliates that does not have a material adverse effect
on the assets of the Companies determined on a consolidated basis.
<PAGE>
The foregoing additional Mandatory Unwind Event is not a Price Decline Unwind
Event.
3. Agreement to File Registration Statements. In
consideration for the Purchaser's agreement to enter into this Amendment, the
Companies hereby covenant and agree to (i) immediately commence the
preparation of Registration Statements (as defined in the Purchase Agreement)
that meet the requirements of Section 7 of the Purchase Agreement and Section
III.A.4 of the Purchase Price Adjustment Mechanism (except that, if required
by the Securities and Exchange Commission (the "SEC") such Registration
Statements shall register the sale of Shares by the Companies through the
Purchaser or its affiliates, as agent, rather than the resale of Shares by
the Purchaser or its affiliates) and to complete such preparation and
thereafter file such Registration Statements with the SEC and take all other
action that is necessary or prudent to assure that the Purchaser (or any
affiliate of the Purchaser designated by the Purchaser) will be able to sell
all of the Shares in its possession without further registration under the
Securities Act of 1933 at any time on or after the October 15, 1998 (any such
registration is referred to as a "Valid Registration"), (ii) fully comply
with all of their respective obligations under the Purchase Agreement and the
Purchase Price Adjustment Mechanism in respect of the Registration Statements
so as to permit Purchaser (or its designated affiliate) to sell the Shares
any time after the October 15, 1998, and (iii) waive all requirements in the
Purchase Agreement and the Purchase Price Adjustment Mechanism that the
Purchaser make a written request or demand as a condition to the Companies'
obligation to prepare or file a registration statement regarding the Shares
and agreements that the Companies are entitled to 60 days (or any other time
period) advance notice before the Companies are required to prepare or file a
registration statement regarding the Shares.
4. Pending Transactions. The Companies have advised the
Purchaser that the Companies and a third party (the "Third Party") are
currently engaged in negotiations regarding certain transactions related to
the Listed Hotels (such transactions are referred to herein collectively as
the "Pending Transactions"), pursuant to which the Third Party would provide
certain financing to the Companies secured by mortgages encumbering the
Listed Hotels and the Companies would subsequently transfer ownership of the
Listed Hotels to a business association between the Third Party and
<PAGE>
the Companies or entities affiliated with the Companies. The Companies
hereby covenant and agree that contemporaneously with the consummation of any
aspect of the Pending Transactions in which the Companies or either of them
receives cash (in connection with any financing, transfer or otherwise),
settlement of the Transaction shall occur and that the Companies shall apply
proceeds from the Pending Transactions (after the payment of normal and
customary closing costs and any indebtedness encumbering the Listed Hotels on
the date hereof) to the extent necessary to accomplish a full and final
Physical Settlement of the Transaction. The Companies shall use commercially
reasonable efforts to consummate the Pending Transactions on or before
October 15, 1998.
5. Pledge of Additional Shares. A. Contemporaneously with
the execution and delivery of this Amendment, the Companies hereby
irrevocably and unconditionally pledge, grant, assign, hypothecate and
transfer to the Purchaser, a first and prior pledge and security interest in
2,375,000 Paired Shares and all proceeds thereof, and any increase and
profits received therefrom and, to the extent provided Section 5D below,
Dividends (as defined below), and all security entitlements in respect of the
foregoing (such Paired Shares are in addition to the Purchase Shares and are
hereinafter referred to as the "Collateral Shares"). This Section 5 creates a
security interest in the Collateral Shares to secure the payment and
performance of any and all obligations now or hereafter existing of the
Companies under the Purchase Agreement, the Purchase Price Adjustment
Mechanism and this Amendment (collectively, the "Obligations"). Upon the
occurrence of a Default (as defined below), in addition to any and all other
rights and remedies which the Purchaser may then have hereunder, under
applicable laws or otherwise, the Purchaser at its option may, subject to any
limitation or restriction imposed by any applicable laws, (i) foreclose or
otherwise enforce its security interest in all or any part of the Collateral
Shares by any available judicial procedure; (ii) sell or otherwise dispose
of, at the office of the Purchaser, all or any part of the Collateral Shares,
and any such sale or other disposition shall be in accordance with applicable
laws, and may be as a unit or in parcels, by public or private proceedings,
and by way of one or more contracts (it being agreed that the sale of any
part of the Collateral Shares shall not exhaust the Purchaser's power of
sale, but sales may be made from time to time until all of the Collateral
Shares have been sold or until the Obligations have been performed and paid
in full), and at
<PAGE>
any such sale it shall not be necessary to exhibit the Collateral Shares;
(iii) at its discretion, retain the Collateral Shares in satisfaction of the
Obligations whenever the circumstances are such that the Purchaser is
entitled to do so under applicable laws; (iv) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral Shares, or any
part thereof, and the Companies hereby consent to any appointment; (v) buy
the Collateral Shares at any public sale; and (vi) buy the Collateral Shares
at any private sale, subject to any restrictions imposed by applicable laws.
The Companies agree that, if notice is required to be given by applicable
laws, two days' advance written notice shall constitute reasonable notice.
The Purchaser shall apply the proceeds of any collection, sale, disposition
or other realization upon any Collateral Shares as follows:
First, to the payment of the reasonable costs and expenses of
such collection, sale, disposition, or other realization, including
reasonable out-of-pocket costs and expenses of the Purchaser and the
reasonable fees and expenses of its agents and counsel;
Next, to the payment of the Obligations; and
Finally, to the payment to the Companies, or their respective
successors or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining.
If the proceeds of collection, sale, disposition, or other realization are
insufficient to cover the costs and expenses of such realization and the
payment in full of the Obligations, the Companies shall remain liable for any
deficiency.
B. The Companies recognize that if a Default occurs prior to
a Valid Registration becoming effective, the Purchaser may be unable to
effect a public sale of any or all of the Collateral Shares by reason of
certain prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act") and applicable state securities laws, and may be compelled
to resort to one or more private sales thereof. The Companies acknowledge and
agree that the Purchaser shall have the right to sell the Collateral Shares
at a private sale and any such private sale may result in prices and other
terms less favorable to the seller than if such sale were a public sale. The
Purchaser shall be under no obligation to delay a sale of any of the
Collateral Shares until a
<PAGE>
Valid Registration is in effect. The Companies hereby agree (i) that in the
event the Purchaser shall, upon any Default, sell the Collateral Shares or
any portion thereof, at a private sale or sales, the Purchaser shall have the
right to rely upon the advice and opinion of a member of a nationally
recognized investment banking firm acceptable to the Purchaser (which may be
NationsBanc Montgomery Securities LLC, an affiliate of the Purchaser), as to
the best price reasonably obtainable upon such a private sale thereof, and
(ii) in the absence of fraud, wilful misconduct and gross negligence, that
such reliance shall be conclusive evidence that the Purchaser handled such
matter in a commercially reasonable manner under the Uniform Commercial Code.
C. Notwithstanding the provisions of Section IV of the
Purchase Price Adjustment Mechanism entitled "Interim Net Stock Settlement",
there shall be no requirement to deliver Paired Shares or Treasury Notes on
the Interim Settlement Date scheduled to occur on August 26, 1998.
D. All dividends and other distributions in respect of the
Collateral Shares (collectively, "Dividends") that become payable during a
Compliance Period (as defined below) shall belong to the Companies, and all
dividends and other distributions in respect of the Collateral Shares that
become payable during any period other than a Compliance Period shall be
delivered to the Purchaser and held as security for the Obligations. The
term "Compliance Period" means any period of time after the date hereof when
(i) no Default has occurred and is continuing, and (ii) the Daily Average
Price on the Relevant Exchange of all of the Purchase Shares and all of the
Collateral Shares is equal to or greater than 125% of the amount that would
be payable to the Purchaser on the relevant date if a final and complete
Physical Settlement was occurring on such date.
E. The Companies shall not be obligated to pay a placement
fee to the Purchaser or an affiliate of the Purchaser with respect to the
Collateral Shares.
6. Amendment of Maturity Date. The Maturity Date is hereby
amended to be the date that is the first to occur of (i) the date of the
consummation of the Pending Transactions, or (ii) five days after the date
the Purchaser gives written notice to the Companies that a Default (as
defined below) has occurred, or (iii) February
<PAGE>
26, 1999.
7. Final Settlement. The Companies shall have the right to
elect any settlement method permitted by Section III.B., III.C. or III.D. of
the Purchase Price Adjustment Mechanism with respect to the final settlement
to occur on the Maturity Date; provided, however, the Companies' right to
elect Stock Settlement (III.C. of the Purchase Price Adjustment Mechanism) or
Net Stock Settlement (III.D. of the Purchase Price Adjustment Mechanism) or
to deliver Paired Shares in satisfaction of their obligations under III.E.6.
of the Purchase Price Adjustment Mechanism) is conditioned upon the
satisfaction of the following conditions precedent on the Maturity Date:
(i) No Default shall have occurred and be continuing;
(ii) The Daily Average Price on the Relevant Exchange of the
Paired Shares shall be equal to or greater than the highest
Mandatory Unwind Threshold;
(iii) A Valid Registration shall be in effect; and
(iv) All other requirements set forth in Section III.A.4. of the
Purchase Price Adjustment Mechanism and Section 7 of the Purchase
Agreement shall have been complied with and satisfied.
If the foregoing conditions precedent have not been satisfied or waived in
writing by Purchaser on the Maturity Date, the Companies will be deemed to
have elected Physical Settlement (and the conditions precedent to a Physical
Settlement described in Section VI of the Purchase Price Adjustment Mechanism
is hereby waived as to such Physical Settlement). In the event the foregoing
conditions precedent have been satisfied and the Companies elect a Stock
Settlement or a Net Stock Settlement, the Companies may include some or all
of the Collateral Shares in the number of Paired Shares or Net Stock
Settlement Shares, as the case may be, the Companies are obligated to deliver
to the Purchaser to effect such settlement. Upon a final settlement that is
accomplished through any of the settlement methods described in Section
III.B., III.C. and III.D. of the Purchase Price Adjustment Mechanism, the
Purchaser shall return to the Companies any of the Collateral Shares that are
not delivered to the Purchaser to accomplish the
<PAGE>
settlement in accordance with the applicable settlement method.
8. Default. The following events shall constitute a "Default" by
the Companies:
(i) The Companies shall fail to timely complete and file and
cause to be effective with the SEC a Valid Registration on or before the
October 15, 1998;
(ii) The Companies shall fail to settle the Transaction on the
Maturity Date in accordance with the Purchase Price Adjustment Mechanism,
as modified by this Amendment; or
(iii) The occurrence of any event described in clauses
(1)(defaults involving the Companies's Specified Indebtedness),
(2)(acceleration of Specified Indebtedness) or (3)(Bankruptcy or
Insolvency) of the provisions entitled "Mandatory Unwind Event" of
subparagraph (ii) of Section VI of the Purchase Price Adjustment
Mechanism; or
(iv) The occurrence of the Mandatory Unwind Event described in
Section 2 above; or
(v) The Third Party declares that the Companies are in default
of their obligations to the Third Party in respect of the Pending
Transactions and such default is not cured within any applicable notice,
grace or cure periods, if any.
9. Rights of Purchaser Upon Default. If a Default occurs, the
Purchaser shall have the right to pursue all remedies at law and in equity,
including specifically, the right to immediately sell all of the Purchase
Shares in its possession and/or to foreclose the security interest granted in
Section 5 in respect of the Collateral Shares. Without limiting the
generality of the foregoing, if on the date of a Default (a) there is not in
effect a Valid Registration, or (b) the Companies are not in full compliance
with their respective obligations and covenants in Section 7 of the Purchase
Agreement, then, in such event, the Purchaser may sell the Shares in one or
more negotiated private sales to the extent and in the manner permitted by
applicable state and federal securities laws. In the event a Default occurs,
the Companies hereby waive any requirement (and any related covenant) in the
Purchase Agreement or the Purchase Price Adjustment
<PAGE>
Mechanism that (i) the Purchaser make a request or demand for the Companies
to prepare, file or make effective a registration statement in respect of
the Shares, (ii) entitles the Companies to any period of time after such
written request or demand to make effective a resale registration statement,
or (iii) requires the Purchaser to defer selling the Shares until a
Registration Statement has been prepared and filed in accordance with the
Securities Act of 1933; provided, however, the foregoing waivers are for the
benefit of the Purchaser and such waiver shall not excuse the Companies from
the obligation to perform each covenant and agreement of the Companies under
the Purchase Agreement, the Purchase Price Adjustment Mechanism and this
Amendment unless the Purchaser agrees otherwise in writing. If a Default
occurs, the Companies shall immediately pay to the Purchaser the difference
between the amount the Purchaser would have been paid upon a Physical
Settlement on the Maturity Date if the Companies had fully performed their
obligations relating to such Physical Settlement pursuant to the Purchase
Price Adjustment Mechanism, as amended by this Amendment (the "Full
Settlement Amount"), and the amount the Purchaser actually received from the
sale of the Shares; provided, however, if the Purchaser is unable to sell the
Shares because of any act or omission of the Companies (including without
limitation, any injunction, automatic stay or other legal impediment) or
because the Purchaser was unable locate a buyer for the Shares after meeting
the requirements of applicable laws regarding a private sale, and the
Companies shall pay to the Purchaser the Full Settlement Amount within five
days after written demand by the Purchaser. If and to the extent the
Purchaser is paid in full for all amounts owed to the Purchaser by the
Companies under the Purchase Agreement, the Purchase Price Adjustment
Mechanism and this Amendment, the Purchaser agrees to release the security
interests in any of the Collateral Shares that have not been foreclosed and
to deliver to the Companies any Purchase Shares not previously sold and any
Dividends delivered to the Purchaser and not applied against the Obligations.
If no Valid Registration is in effect on the date the Purchaser is permitted
to sell the Shares the Purchaser shall have no liability to the Companies
with respect to the amount realized by the Purchaser as a consequence of
selling the Shares at one or more private sales or any diminution in the
value of the Shares as a consequence of such private sales.
10. Reaffirmation of Representations; Indemnifications. The
Companies hereby confirm and reaffirm to the Purchaser all the
<PAGE>
representations and warranties made by the Companies, or either of them,
under or pursuant to the Purchase Agreement and the Purchase Price Adjustment
Mechanism are true and correct on the date hereof. The indemnification
obligations of the Companies under Section 7(e)(i) of the Purchase Agreement
is intended to include and apply to any registration statement and related
documents that are described in this Amendment.
11. Further Assurances. The Companies acknowledge that the
Purchaser (i) is entering into this Amendment without the opportunity to
conduct any independent investigation or due diligence with respect to the
Hotels and (ii) to minimize the cost to the Companies associated with the
Purchaser's agreement to take such additional collateral, is relying on the
truth and accuracy of the representations and warranties of the Companies to
the Purchaser regarding the Hotels. In addition, the Companies will, on
request of the Purchaser, (a) execute, acknowledge, deliver, procure and
record and/or file such further instruments (including, without limitation,
further deeds of trust, security agreements, financing statements, and
continuation statements) and do such further acts as, in Purchaser's opinion,
are necessary to carry out more effectively the purposes of this Amendment;
(b) execute, acknowledge, deliver, procure and file and/or record any
document or instrument (including specifically any financing statement)
deemed advisable by the Purchaser to protect the the security interest
herein granted against the rights or interests of third persons; (c) provide
such information, reports, surveys, title commitments, market studies,
franchise agreements, books, ledgers and instruments and any other
information relating to the use, operation or value of the Listed Hotels,
permit the Purchaser and its agents and consultants to conduct such
inspections and investigations as the Purchaser deems necessary or
appropriate, and do such further acts as may be necessary, desirable or
proper in the reasonable determination of the Purchaser to enable the
Purchaser to carry out normal and customary due diligence regarding the
Listed Hotels; (d) keep the Purchaser fully apprised on a regular basis as to
the status of the Pending Transactions and provide to the Purchaser copies of
the purchase and sale agreement and, if applicable, those other documents
which contain the essential terms of the Pending Transactions; and (e) the
Purchaser may notify the Third Party of the covenants and agreements of the
Companies relating to the Pending Transactions contained in this Amendment.
<PAGE>
12. Inducement. The Companies acknowledge that the
covenants and undertakings of the Companies in this Amendment are material
inducements to the Purchaser's agreement to enter into this Amendment and
that but for such covenants and undertakings, the Purchaser would not enter
into this Amendment.
13. Counterparts. This Amendment has been executed in
several counterparts, all of which are identical, and all of which
counterparts together shall constitute one and the same instrument.
14. Time of Essence. Time shall be of the essence in this
Amendment with respect to all of the parties' obligations hereunder and under
the Purchase Price Adjustment Mechanism.
15. Amendment. This Amendment amends the Purchase Agreement
and the Purchase Price Adjustment Mechanism, each of which, as amended by
this Amendment, is hereby ratified and reaffirmed and declared to be in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized representatives as of the
day and year first above written.
PATRIOT AMERICAN HOSPITALITY, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
WYNDHAM INTERNATIONAL, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
<PAGE>
NATIONSBANC MORTGAGE CAPITAL CORPORATION
By: __________________________________
Name: ________________________________
Title: _________________________________
DOCSC\660174.1
<PAGE>
Exhibit 10.8
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the
31st day of December, 1997, by and among Patriot American Hospitality, Inc.,
a Delaware corporation (the "REIT"), Patriot American Hospitality Operating
Company, a Delaware corporation (the "OPCO") (the REIT and the OPCO, each a
"Company" and collectively the "Companies"), and UBS Limited, an English
corporation ("UBS Limited") and Union Bank of Switzerland, London Branch
("UBS-LB"), acting through its agent UBS Securities LLC (UBS Limited and
UBS-LB being hereinafter collectively called the "UBS Parties" and sometimes
individually, a "UBS Party"). References herein to the "Companies" refer to
the REIT and the OPCO, and those entities respectively owned or controlled by
the REIT or the OPCO.
IN CONSIDERATION of the mutual covenants contained in this
Purchase Agreement, the REIT, the OPCO and the UBS Parties agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to
the terms and conditions of this Agreement, the REIT has authorized the
issuance to UBS Limited of up to an aggregate of 3,250,000 shares of common
stock, par value $0.01 per share, of the REIT (the "REIT Shares") and the
OPCO has authorized the issuance to UBS Limited of up to an aggregate of
3,250,000 shares of common stock, par value $0.01 per share (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 UBS-LB additional Paired Shares
in settlement of certain of its obligations under the Forward Stock Purchase
Agreement, dated December 31, 1997 (the "Forward Stock Purchase Agreement"),
among the REIT, the OPCO and UBS-LB (the "Additional Shares"). 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 Agreement, on the Closing
Date (as defined in Section 3 hereof), the Companies will sell to UBS Limited
the Purchase Shares, the number of which shall equal 3,250,000 paired shares
for a per paired share purchase price of $28.8125 per Paired Share.
SECTION 3. Delivery of the 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
such date to be agreed upon among the REIT, the OPCO and the UBS Parties, but
in no event later than the earlier of (i) December 31, 1997 or (ii) three
business days after the execution of this Agreement (hereinafter, the
"Closing Date").
<PAGE>
3.2. Conditions. At Closing, the Companies shall deliver or
cause to be delivered to UBS Limited one or more stock certificates
registered in the name of UBS Limited representing the number of Purchase
Shares set forth in Section 2 above.
The obligation of the Companies to complete the sale of the
Purchase Shares and deliver such stock certificate(s) to UBS Limited 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 Federal Funds (or other mutually agreed upon form of
payment) in the full amount of the purchase price 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 UBS
Parties herein and the fulfillment, in all material respects, as of the
Closing Date, of those undertakings of the UBS Parties to be fulfilled prior
to the Closing, (iii) the Forward Stock Purchase Agreement shall have been
fully executed by the parties thereto and (iv) receipt by the Companies of a
cross-receipt with respect to the Purchase Shares executed by UBS Limited.
UBS Limited's obligation to accept delivery of such stock
certificate(s) and to pay for the Purchase Shares evidenced thereby shall be
subject to the following conditions: (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, as of
the Closing Date, of those undertakings of the Companies to be fulfilled
prior to Closing; and (ii) the UBS Parties shall have received all opinions
and certificates to be delivered by the Companies pursuant to this Agreement.
SECTION 4. Representations, Warranties and Covenants of the
Companies. The Companies hereby represent and warrant to, and covenant with,
the UBS Parties as follows:
4.1. Organization and Qualification. The REIT has been
formed as a real estate investment trust under Delaware law pursuant to a
Certificate of Incorporation filed as of January 27, 1983 in the office of
the Delaware Secretary of State, as amended and restated as of July 1, 1997
and filed in the office of the Delaware Secretary of State on such date. The
REIT's existence has not been suspended or terminated nor have any
dissolution, revocation or forfeiture proceedings regarding the REIT been
commenced. The REIT has been duly qualified to do business in each
jurisdiction (i) wherein it owns, leases or manages real property or (ii)
where the failure so to qualify to do business would have a material adverse
effect on the financial condition, business, operations or prospects of the
Companies taken as a whole (a "Material Adverse Effect"). The OPCO has been
duly organized, is validly existing and in good standing under the laws of
Delaware. The OPCO's corporate existence has not been suspended or
terminated, nor have any dissolution, liquidation or forfeiture proceedings
involving the OPCO been commenced. The OPCO has been duly qualified to do
business in each jurisdiction (i) wherein such entity owns, leases or manages
real property or (ii) where the failure so to qualify to do business would
have a Material Adverse Effect.
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<PAGE>
4.2. Authorized Capital Stock. The REIT has 1.5 billion
authorized shares as of December 1, 1997, 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. The OPCO has authorized capital stock as of December 1, 1997
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
December 1, 1997, there were 70,120,137 Paired Shares outstanding, 7,975,970
Paired Shares were reserved for issuance pursuant to equity plans filed
pursuant to the Companies' SEC Filings (as defined below), and 12,795,851
Paired Shares were reserved for issuance upon the election by the Companies
to 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. No preferred shares of the REIT are 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
included 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 any preemptive rights or other rights to subscribe for or to
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 Fillings accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
4.3. Issuance, Sale and Delivery of the Shares. The
Purchase Shares to be sold by the Companies have been duly authorized and,
when issued, delivered and paid for in the manner set forth in this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof included in the
Companies' SEC Filings or incorporated by reference in the Registration
Statements, if available. The Additional Shares, if and when issued pursuant
to the Forward Stock Purchase Agreement, will be duly authorized, validly
issued, fully paid and nonassessable, and will conform to the description
thereof included in the Companies' SEC filings or incorporated by reference
in the Registration Statements. None of the Purchase Shares when issued and
delivered to the UBS Parties shall be subject to any lien, security interest,
claim, charge or encumbrance of any nature. No further approval or authority
of the stockholders or the Board of Directors of the REIT or the OPCO will be
required for the issuance and/or sale of the Purchase Shares to be sold by
the Companies as contemplated herein or in the Forward Stock Purchase
Agreement, except such as shall have been obtained on or before the Closing
Date. The issuance and/or sale of the Purchase Shares to the UBS Parties by
the Companies pursuant to this Agreement or the Forward Stock Purchase
Agreement (as the case may be), the compliance by the Companies with the
other provisions of this Agreement or the Forward Stock Purchase Agreement
and the consummation of the other transactions contemplated hereby or thereby
do not require the consent, approval, authorization, registration
3
<PAGE>
or qualification of or with any governmental authority, except such as shall
have been obtained on or before the Closing Date other than the registration
of the resale of the Shares by the UBS Parties with the Securities and
Exchange Commission (the "SEC") and any required Blue Sky filings with the
States. 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
promulgated thereunder (the "Rules and Regulations"). The Companies have
filed and will file all documents which are required to file under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and all such
documents (collectively, together with the Companies' registration statements
filed under the Securities Act which have been declared effective since
January 1, 1997 and have not been withdrawn, the "Companies' SEC Filings")
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder, as applicable, and none of such
documents, when so filed, contained or will contain any untrue statement of a
material fact or omitted 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, and any documents
so filed and incorporated by reference subsequent to the effective date of
the Registration Statements (as defined in Section 7 below) shall, when they
are filed with the SEC, conform in all material respects with the
requirements of the Securities Act and the Rules and Regulations and the
Exchange Act and the rules and regulations thereunder, as applicable. No
Registration Statement filed in respect of any of the Purchase Shares or
Additional Shares, when so filed, will contain any untrue statement of 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.
4.4. Due Execution, Delivery and Performance of the
Agreement. Each Company has full legal right, power and authority to enter
into the Purchase Agreement and the Forward Stock Purchase Agreement and
perform the transactions contemplated hereby and thereby. The Purchase
Agreement and the Forward Stock Purchase Agreement have been duly authorized,
executed and delivered by the Companies. The making and performance of the
Purchase Agreement and the Forward Stock Purchase Agreement by the Companies
and the consummation of the transactions 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, lease, franchise, license, indenture,
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. No
consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body is required by or on
the part of either Company for the execution and delivery of this Agreement,
the Forward Stock Purchase Agreement or the consummation of the transactions
contemplated hereby or thereby, except in connection with the filing of any
Registration Statements pursuant to Section 7 below or for compliance with
the Blue Sky laws applicable to the offering of the Shares. Upon the
execution and delivery hereof, each of this Agreement and the Forward Stock
Purchase
4
<PAGE>
Agreement will constitute the valid and binding obligation of the 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 proceeding 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.
4.5. 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 Rules and Regulations. Each Company
shall cause its independent certified public accountants to deliver, on the
effective date of the Registration Statement, and thereafter upon the request
of a UBS Entity (which shall be made no more frequently than once during any
30-day period), a letter stating that such accountants are independent public
accountants within the meaning of the Securities Act and otherwise in
customary form and covering such financial and accounting matters as are then
customarily covered by letters of independent certified public accountants
delivered in connection with secondary public offerings of equity securities
pursuant to a shelf registration statement.
4.6. No Defaults. Except as to defaults, violations and
breaches which individually or in the aggregate would not be material to the
Companies taken as a whole, neither Company is in violation or default of any
provision of its certificate of incorporation or bylaws, or other
organizational documents, and is not in breach of or default with respect to
any provision of any agreement, judgment, decree, order, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to
which it is a party or by which it or any of its properties are bound; and
there does not exist any state of fact which constitutes an event of default
on the part of the Company as defined in such documents or which, with notice
or lapse of time or both, would constitute such an event of default except
such defaults which individually or in the aggregate would not be material to
the Companies.
4.7. Contracts. Neither Company, nor to the best of the
knowledge of each Company, any other party is in breach of or default under
any contracts to which the REIT is a party except such breach or default
which individually or in the aggregate would not have a Material Adverse
Effect.
4.8. No Actions. There are no legal or governmental
actions, suits or proceedings pending or, to the best of the Companies'
knowledge, threatened to which either Company is or may be a part or of which
property owned or leased by either Company is or may be the subject, or
related to environmental or discrimination matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or adversely
affect the transactions contemplated by this Agreement or result in a
material adverse change in the condition (financial or otherwise), of the
properties, business, results of operations or prospects of the Company, and
no labor disturbance by the employees of the Companies exists or is imminent
which might be expected to affect
5
<PAGE>
adversely such condition, properties, business, results of operations or
prospects. Except as may be described in the Companies' SEC Filings, neither
Company is a party or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body administrative agency
or other governmental body.
4.9. Properties. Each Company has good and marketable title
to all the properties and assets reflected as owned by such Company in the
financial statements included in the Most Recent Financial Statements,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such financial statements or the
Companies' SEC Filings, or (ii) those which are not material in amount and do
not adversely affect the use made and promised to be made of such property by
the Company. Each Company holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation to
the business of the Companies. Each Company owns or leases all such
properties as are necessary to its operations as now conducted. The REIT is
qualified as a real estate investment REIT under the Internal Revenue Code of
1986, as amended, with respect to its taxable years ended December 31, 1995
and December 31, 1996, 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.
4.10. 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 or in writing to the UBS Parties (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 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 business related to or engaged in the lodging industry) or which
could reasonably be expected to result in a material reduction in the future
earnings of the Companies; (ii) neither Company has sustained any loss or
interference with its businesses or properties (taken as a whole) from fire,
flood, windstorm, accident or other calamity, whether or not covered by
insurance, which has had a material adverse effect on such business or
properties; (iii) neither Company is in default in the payment of principal
or interest on any outstanding debt obligations; (iv) there has not been any
change in the authorized capital of the Companies or material increase in the
principal amount of outstanding indebtedness of the Companies (other than in
the ordinary course of business); and (v) there has not been any material
adverse change in the condition (financial or otherwise), business,
properties, results of operations or prospects of the Companies.
4.11. Intellectual Property. Each Company believes it has
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals and governmental authorizations to
6
<PAGE>
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 no claim has been made against either Company regarding
trademark, trade name, patent, copyright, license, trade secrecy or other
infringement which could have a Material Adverse Effect.
4.12. Compliance. Neither Company has been advised, nor has
reason to believe, that it is 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), business, results of operations or prospects of the
Companies.
4.13. Taxes. Each Company has filed all necessary federal,
state and foreign income and franchise tax returns and has paid or accrued
all taxes shown as due thereon (except for those taxes which are being
contested in good faith through appropriate proceedings, for which adequate
reserves have been established and which are either reflected in the Most
Recent Financial Statements or disclosed by the Companies to UBS in writing),
and neither Company has knowledge of any tax deficiency which has been or
might be asserted or threatened against the Company which could have a
Material Adverse Effect.
4.14. Transfer Taxes. On the Closing Date, all stock
transfer or other taxes (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 UBS Limited 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.
4.15. Investment Company. Neither of the Companies are
required to register as an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
4.16. Insurance. Each Company maintains insurance (or
insurance is maintained on its behalf) of the types and in the amounts
generally deemed adequate under customary industry standards for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by such Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect.
4.17. SEC Filings. The information contained in the
following documents, which the Companies have furnished to the UBS Parties,
or will furnish prior to the Closing, is or will be 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, 1996, which Joint Annual Report includes
the REIT's and the OPCO's most
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recently available audited financial statements
together with the report thereon of the independent
certified public accountants (the "Most Recent
Financial Statements");
(b) Joint Quarterly Report on Form 10-Q for the quarters
ended March 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 OPCO's
and the REIT's Stockholders and (ii) any Special
Meetings of the OPCO's Stockholders and the REIT's
Stockholders 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 SEC since January
1, 1997 pursuant to Sections 13, 15(d) or 16(a) of
the Exchange Act; and
(e) a covenant compliance certification stating that none
of the REIT and the OPCO and their respective
subsidiaries are in default under any of its credit
agreements or other financing arrangements.
4.18. Legal Opinion. Prior to the Closing, counsel to the
Companies will deliver their legal opinions to the UBS Parties in
substantially the forms of Exhibits A-1 and A-2 hereto.
4.19. ERISA. The Companies and their affiliates are in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended and the rules and
regulations promulgated thereunder ("ERISA"). 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 affiliates; no notice of intent to terminate a Plan has been filed nor has
any Plan been terminated within the past five years; 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 Sections 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 Internal Revenue Code of 1986, as
amended (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 Forward Stock Purchase
Agreement constitute "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section
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4975(e)(1) 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. Certificate. A certificate of each Company executed
by the chief executive, financial or accounting officer of such Company, to
be dated the Closing Date in form and substance satisfactory to the UBS
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 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.
4.21. 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 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.
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SECTION 5. Representations, Warranties and Covenants of
the UBS Parties.
5.1. Investment. UBS Limited and/or UBS-LB represents and
warrants to, and covenants with, the Companies that: (i) UBS Limited, taking
into account the personnel and resources it can practically bring to bear on
the purchase of the Purchase Shares contemplated hereby, is knowledgeable,
sophisticated and experienced in making, and is 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, and has requested, received, reviewed
and considered all information it deems relevant in making an informed
decision to purchase the Purchase Shares; (ii) UBS Limited 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 Shares (this representation
and warranty not limiting the rights of either UBS Party to sell pursuant to
any Registration Statement); (iii) neither UBS 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, the Rules and Regulations and any applicable state
securities or blue sky laws or pursuant to an available exemption or
exclusion therefrom; (iv) each UBS 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 the UBS Parties as of the date hereof and will be true
and correct as of the effective date of the Registration Statement; (v) the
UBS Parties have, in connection with their 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
7.7 and the representations and warranties of the Company contained herein;
(vi) each of the UBS Parties is an "accredited investor" within the meaning
of Rule 501 of Regulation D promulgated under the Securities Act and a
"qualified institutional buyer" within the meaning of Rule 144A promulgated
under the Securities Act; (vii) the UBS Parties do not directly or indirectly
have an interest of five percent or more of the Paired Shares outstanding as
shown in the Companies' Quarterly Reports on Form 10-Q for the quarter ended
September 30, 1997 and (viii) the Purchaser understands that 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 COMPANY'S COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
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5.2. Resale. Each UBS Party acknowledges and agrees that
the Shares are not transferable on the books of either the REIT or the OPCO
unless the certificate submitted to the transfer agent evidencing the Shares
is accompanied by a separate officer's certificate: (i) in the form of
Appendix II hereto, (ii) executed by an officer of, or other authorized
person designated by, the UBS Parties, and (iii) to the effect that (A) the
Shares have been sold in accordance with the Registration Statement, the
Securities Act and the Rules and Regulations and any applicable state
securities or blue sky laws or pursuant to valid exemptions or exclusions
therefrom and (B) the requirement under the Securities Act of delivering a
current prospectus has been satisfied. Each UBS Party acknowledges that there
may occasionally be times when the Companies must suspend the right of the
UBS Parties to effect sales of the Shares through use of the Prospectus
forming a part of the Registration Statement until such time as an amendment
to the Registration Statement has been filed by the Companies and declared
effective by the SEC, or until such time as the Companies have filed an
appropriate report with the SEC pursuant to the Exchange Act (each, a
"Black-out Period"); provided that no Black-out Period shall exceed 90
consecutive days. Each UBS Party hereby covenants that it will not sell any
Shares pursuant to said Prospectus during the period commencing at the time
at which the Companies give the UBS Parties written notice of the suspension
of the use of said Prospectus and ending at the time the Companies give the
UBS Parties written notice that the UBS Parties may thereafter effect sales
pursuant to said Prospectus. Each UBS Party further covenants to notify the
REIT and the OPCO promptly of the sale of all of its Shares.
5.3. Due Execution, Delivery and Performance of this
Agreement. The UBS Parties further represent and warrant to, and covenant
with, the Companies that (i) each UBS Party has full right, power, authority
and capacity to enter into this Agreement and to 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 UBS 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 as the indemnification agreements of the UBS Parties in
Section 7.5 hereof may be legally unenforceable.
5.4. Residence of UBS Limited. UBS Limited is organized
under the laws of England and has its principal place of business in London.
5.5. Beneficial Ownership of Company Common Stock. The UBS
Parties further represent and warrant to, and covenant with, the Companies
that (i) as of the date of this Agreement and immediately prior to the
purchase and sale of the Purchase Shares, UBS Limited is not a beneficial
owner, as such term is defined by Rule 13d-3 under the Exchange act of more
than five (5) percent of the total number of outstanding shares of any
Company, and (ii) no
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officer, director or affiliate of UBS Limited is an officer, director or
affiliate of any Company. The term "affiliate" has the meaning set forth in
Rule 405 under the Securities Act.
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 UBS Parties herein and in the certificates for
the Shares delivered pursuant hereto shall survive the execution of this
Purchase Agreement, the Forward Stock Purchase Agreement, the delivery to UBS
Limited of the Purchase Shares being purchased and the payment therefor.
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 receipt of a demand from the UBS
Parties, which demand may not be made within 30 days
after the Closing, prepare and file with the SEC
Registration Statements (as defined below) covering
the resale by the UBS Parties, from time to time, of
the Shares (not to exceed a number of Shares equal to
130% of the number of Purchase Shares) through the
facilities of the New York Stock Exchange, the
automated quotation system of The Nasdaq Stock Market
or the facilities of any other national securities
exchange on which the Paired Share is then traded or
in privately negotiated transactions (the "Initial
Registration Statements"). If the total number of
Shares issued to the UBS Parties hereunder and under
the Forward Stock Purchase Agreement exceeds the
number of Shares covered by the Initial Registration
Statements, then the Companies shall prepare and file
with the SEC such additional Registration Statements
as shall be necessary to cover the resale by UBS-LB
of such excess Shares in the same manner as
contemplated by the Initial Registration Statements
for the Shares covered thereby ("Additional
Registration Statements"); provided that prior to
delivering certificates evidencing any such excess
Shares to UBS-LB, the Companies shall cause such
Registration Statements to have become effective. For
purposes of this Purchase Agreement, "Registration
Statement" means a registration statement under the
Securities Act on Form S-3 covering the resale by one
or both UBS Parties of up to a specified number of
Shares, filed and maintained effective by the
Companies pursuant to the provisions of this Section
7, including the Prospectus (as defined below)
contained therein, 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 cause the SEC to
notify the Companies of the SEC's willingness to
declare the Initial Registration Statements
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effective within 60 days after the Registration
Statements are filed by the Companies; provided that
the Companies will use their reasonable best efforts
to cause such Initial Registration Statements to
become effective no later than 90 days after the
Closing Date;
(c) prepare and file with the SEC such amendments and
supplements to the Registration Statements and the
prospectus used in connection therewith (the
"Prospectus") as may be necessary to keep the
Registration Statements effective until the date on
which the Shares may be resold by the UBS Parties
without registration, by reason of Rule 144(k) under
the Securities Act or any other rule of similar
effect;
(d) furnish to the UBS Parties with respect to the Shares
registered under the Registration Statements (and to
each underwriter, if any, of such Shares) such
reasonable number of copies of Prospectuses,
including any supplements and amendments thereto,
promptly following the effectiveness of such
Registration Statements an opinion from counsel to
the Companies covering the matters set forth on
Exhibit B hereto and such other documents as the UBS
Parties may reasonably request, in order to
facilitate the public sale or other disposition of
all or any of the Shares by the UBS Parties;
(e) use their reasonable best efforts to prevent the
happening of any event that would cause such
Registration Statements to contain a material
misstatement or omission or to be not effective and
usable for resale of the Shares during the period
that such Registration Statements are required to be
effective and usable; provided that this paragraph
(e) shall in no way limit the Companies' right to
suspend the right of the UBS Parties to effect sales
under the Registration Statement during any Black-out
Period as specified at Section 5.2 above.
(f) file documents required of the Companies for normal
blue sky clearance in states specified in writing by
the UBS 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; and
(g) bear all reasonable out-of-pocket expenses in
connection with the procedures in paragraphs (a)
through (f) of this Section 7.1 and the registration
of the Shares pursuant to the Registration
Statements, including the reasonable fees and
reasonable expenses of counsel or other advisers to
the UBS Parties, other than underwriting discounts,
brokerage fees and commissions incurred by the UBS
Parties, if any.
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7.2. Covenants in Connection With Registration.
(a) The Companies hereby covenant with the UBS Parties that
(i) the Companies shall not file any Registration Statement or Prospectus
relating to the resale of the Shares or any amendment or supplement thereto,
unless a copy thereof shall have been first submitted to the UBS Parties and
the UBS Parties did not object thereto in good faith (provided that if the
UBS Parties do not object within two business days of receiving any such
material, they shall be deemed to have no objection thereto); (ii) the
Companies shall immediately notify the UBS Parties of the issuance by the SEC
of any stop order suspending the effectiveness of such Registration Statement
or the initiation of any proceedings for such purpose; (iii) the Companies
shall make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of such Registration Statement at the earliest
possible moment; (iv) the Companies shall notify the UBS 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 as soon as practicable notify the UBS Parties in
writing of the existence of any fact which results in any Registration
Statement, any amendment or post-effective amendment thereto, the 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 shall (except during a Black-out
Period) prepare a supplement or post-effective amendment to such Registration
Statement or the 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 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; provided that this clause (v) shall in no
way limit the Companies' right to suspend the right of the UBS Parties to
effect sales under the Registration Statement during any Black-out Period as
specified at Section 5.2 above.
(b) The UBS Parties shall notify the Companies at least two
business days prior to the date on which it intends to commence effecting any
resales of Shares under Registration Statements and if the Companies do not,
within such two-day period, advise the UBS Parties of the existence of any
facts of the type referred to in Section 7.2(a)(v) above, then the Companies
shall be deemed to have certified and represented to the UBS Parties that no
such facts then exist and the UBS Parties may rely on such certificate and
representation in making such sales. The preceding sentence shall in no way
limit the Companies obligations under Section 7.2(a) above.
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 Registration
Statements 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 UBS Parties are advised in writing by the
Companies that the use of the Prospectuses may be resumed.
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7.4. Transfer of Shares After Registration. Each UBS Party
agrees that it will not effect any disposition of the Shares or 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 except as contemplated in Registration Statements referred to in Section
7.1 or 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
Company of any changes in the information set forth in any such Registration
Statements regarding the UBS Parties or its Plan of Distribution.
7.5. Indemnification. For the purpose of this Section 7.5,
the term "Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to any Registration
Statement referred to in Section 7.1.
(a) Indemnification by Companies. For purposes of this
Section 7.5, the Companies agree to indemnify and hold harmless the UBS
Parties and as more particularly described herein. The Companies agree to
indemnify and hold harmless the UBS Parties and each person, if any, who
controls either UBS Party within the meaning of the Securities Act, against
any losses, claims, damages, liabilities or expenses, joint or several, to
which the UBS Parties or such controlling person may become subject
(including in settlement of any litigation, if such settlement is effected
with the written consent of the Companies), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, including the Prospectus, financial statements and schedules, and
all other documents filed as a part thereof, as amended at the time of
effectiveness of such Registration Statement, including any information
deemed to be a part thereof as of the time of effectiveness pursuant to
paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and
Regulations, or the Prospectus, in the form first filed with the SEC pursuant
to Rule 424(b) of the Regulations, or filed as part of such Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required,
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state in any of them a material fact required
to be stated therein or necessary to make the statements in any of them not
misleading, and will reimburse each UBS Party and each such controlling
person for any legal and other expenses as such expenses are reasonably
incurred by the UBS Parties or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action. The Companies will also
indemnify selling brokers, dealers and similar securities industry
professionals participating in the sale or resale of the Shares, their
officers, directors and partners and each person who controls any such person
within the meaning of the Securities Act, provided, however, that the
Companies will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, such Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written
information furnished to the Companies (i) by or on behalf of the UBS Parties
expressly for use therein or (ii) any statement or omission in any Prospectus
that is corrected in any subsequent Prospectus that was delivered
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to a UBS Party prior to the pertinent sale or sales by such UBS Party and not
delivered by such UBS Party in connection with such sale or sales.
(b) Indemnification by UBS Parties. The UBS Parties will
indemnify and hold harmless the Companies, each of their directors, each of
their officers who signed any Registration Statement and each person, if any,
who controls the Companies within the meaning of the Securities Act, against
any losses, claims, damages, liabilities or expenses, joint and several, to
which the Companies, each of their directors, each of their officers who
signed any Registration Statement or any controlling person may become
subject (including in settlement of any litigation, if such settlement is
effected with the written consent of the UBS Parties) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in such Registration
Statement, such Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement, such
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Companies by or on
behalf of the UBS Parties expressly for use therein, and will reimburse the
Companies, each of their directors, each of their officers who signed such
Registration Statement and each controlling person for any legal and other
expense reasonably incurred by the Companies, each of their directors, each
of their officers who signed such Registration Statement or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action.
(c) Proceedings. Promptly after receipt by an indemnified
party under this Section 7.5 of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 7.5 notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which it may
have to any indemnified party for contribution or otherwise than under the
indemnity agreement contained in this Section 7.5 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume and
control the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a
conflict between the positions of the indemnifying party and the indemnified
party in conducting the defense of any such action or that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel
to assume such legal defenses and to otherwise participate in the defense
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of such action on behalf of such indemnified party or parties. Upon receipt
of notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 7.5 for any reasonable legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in
accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall be not liable for the expenses of
more than one separate counsel, approved by such indemnifying party in the
case of paragraph (a), representing the indemnified parties who are parties
to such action) or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
action, in each of which cases the fees and expenses of counsel shall be at
the expense of the indemnifying party. Notwithstanding the foregoing, without
the written consent of the indemnified party, the indemnifying party may not
settle or agree to compromise of any such claim or action for which the
indemnified party intends to seek reimbursement from the indemnifying party,
and the indemnified party will permit the indemnifying party to settle or
compromise any such action or suit at the indemnifying party's sole cost and
expense if as a result thereof the indemnified party is provided a full and
unconditional release of such claim or action.
(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 paragraphs (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 in such proportion as is
appropriate to reflect the relative benefits received by the Companies and
the UBS Parties from the purchase and sale of the Shares and the relative
fault of the Companies and the UBS 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 UBS Parties on the other shall be deemed to be in the same proportion as
the amount paid by the UBS Parties to the Companies pursuant to this
Agreement for the Shares purchased by the UBS Parties that were sold pursuant
to any Registration Statement bears to the difference (the "Difference")
between the amount the UBS Parties paid for the Shares that were sold
pursuant to such Registration Statement and the amount received by the UBS
Parties from such sale. The relative fault of the Companies and the UBS
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
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 UBS 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
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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 UBS 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. Notwithstanding the provisions of this Section 7.5, the UBS
Parties shall not be required to contribute any amount in excess of the
amount by which the aggregate proceeds received by the UBS Parties from the
transactions contemplated hereby exceeds the amount of any damages that the
UBS 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 the OPCO. The
obligations set forth in this Section 8.5 shall in no way limit the ability
of the parties to allocate liability between themselves.
7.6. Termination of Conditions and Obligations. The
conditions precedent imposed by Section 6 or this Section 7 upon the
transferability of the Shares shall cease and terminate as to any particular
number of the Shares when such Shares may be, and in fact are, sold under
Rule 144(k) promulgated under the Securities Act. Further, as to any
particular number of Shares, the conditions precedent imposed by Section 5 or
this Section 7 on the transferability of such Shares shall cease and
terminate at such earlier time as an opinion of counsel satisfactory to the
Companies and the UBS Parties shall have been rendered to the effect that
such conditions are not necessary in order to comply with the Securities Act
with respect to such Shares. In each such case, the Companies' obligation to
maintain effective Registration Statements with respect to such Shares which
are no longer be subject to the restrictions and limitations of Section 5 and
this Section 7 shall cease.
7.7. Information Available. So long as any Registration
Statement covering the resale of any Shares owned by either UBS Party is
effective, the Companies will furnish to the UBS Parties:
(a) as soon as practicable after available, one copy of
(i) its Joint Annual Report to Stockholders, (ii) its
Joint Annual Report on Form 10-K, (iii) its joint
Quarterly Reports to Stockholders, (iv) its joint
quarterly reports on Form 10-Q, (v) a full copy of
the particular Registration Statements covering the
Shares (the foregoing, in each case, excluding
exhibits) and (vi) upon request, any or all other
public filings under the Exchange Act by the
Companies; and
18
<PAGE>
(b) upon the reasonable request of either UBS Party, a
reasonable number of copies of the Prospectuses to
supply to any other party requiring such
Prospectuses;
and the Companies, upon the reasonable request of the UBS Parties, will meet
with the UBS Parties or a representative thereof at the Companies
headquarters to discuss all information relevant for disclosure in such
Registration Statements covering the Shares, subject to appropriate
confidentiality limitations.
7.8. Non-Exclusivity. The rights and remedies provided
under Section 8.5 hereof shall not be in limitation or exclusion of any other
rights or remedies available to a party, whether by agreement, at law, in
equity or otherwise, with respect to the inaccuracy of any representation or
warranty by, or the breach of any covenant of, the other party made herein or
in the Forward Stock Purchase Agreement.
7.9. Notice Requirement. The REIT and the OPCO each
covenants and agrees that it will notify the UBS Parties at any time it
becomes aware that as a result of a change in the REIT's and the OPCO's
capital stock the UBS Parties beneficially hold more than 4.9% of the REIT's
and the OPCO's Paired Shares.
7.10. Transfer of Shares. The Companies covenant and agree
to use their best efforts to cause the transfer agent to effect promptly any
transfer of the Shares requested by the UBS Parties and to cause the transfer
agent to remove promptly the restrictive legend from the Shares upon
presentation to the transfer agent of all necessary documentation.
SECTION 8. Registration Exemptions. For so long as the REIT
and the OPCO are subject to the reporting requirements of Section 13 or 15 of
the Exchange Act, the REIT and the OPCO covenant that they will file the
reports required to be filed by them under the Securities Act and Section
13(a) and 15(d) of the Exchange Act and the rules and regulations adopted by
the Commission thereunder.
SECTION 9. Broker's Fee. Other than any fees payable under
or in connection with the Forward Stock Purchase Agreement, each of the
parties hereto hereby 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 the UBS Parties.
SECTION 10. Notices. All notices, requests, consents and
other communications hereunder shall be in writing, shall be mailed by
first-class registered or certified airmail, 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:
19
<PAGE>
Patriot American Hospitality, Inc.
Patriot American Hospitality Operating Company
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn: John P. Bohlman
Telecopier: 214-863-1527
with a copy so mailed to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Attn: Gilbert G. Menna, P.C.
Telecopier: 617-523-1231
or to such other person at such other place as the
Companies shall designate to the UBS Parties in
writing; and
(b) if to the UBS Parties, c/o UBS Securities, LLC, 299
Park Avenue, New York, New York 10171, Telecopier:
212-223-2815 or at such other address or addresses as
may have been furnished to the Companies in writing.
SECTION 11. Changes. This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by the Companies and
the UBS Parties.
SECTION 12. 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 13. 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 14. Governing Law; Jurisdiction.
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) and of the federal law of the United States
of America.
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
20
<PAGE>
located in the City and County of New York for the purpose of any suit,
action or other proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby and (ii) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, by way of motion, 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 proceeding 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, UBS Limited may transfer the Purchase Shares to any
affiliate of UBS Limited, together with all of UBS Limited's rights
hereunder; provided that (i) such affiliate shall assume and be subject to
all of UBS Limited's obligations hereunder; (ii) such affiliate shall be an
"accredited investor" within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act; and (iii) such transfer shall be
consistent with the investment representations set forth at Section 6.1
hereto. In the event of such an assignment, such affiliate shall in all
respects be substituted for UBS Limited 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.
21
<PAGE>
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:________________________________
Name:
Title:
Patriot American Hospitality Operating Company
By:________________________________
Name:
Title:
UBS Limited
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
Union Bank of Switzerland
London Branch
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
22
<PAGE>
Appendix I
(one of two)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be registered in (this is the
name that will appear on your stock certificate(s)). You may use a
nominee name if appropriate: ____________________________
2. All relationships between each UBS Party and the Registered Holder
listed in response to Item 1 above: ____________________________
____________________________
____________________________
3. The mailing address of the Registered Holder listed in
response to item 1 above: ____________________________
____________________________
____________________________
____________________________
4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to item 1 above:
____________________________
<PAGE>
Appendix I
(two of two)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Pursuant to the "Selling Shareholders" section of the
Registration Statement, please state your or your organization's name exactly as
it should appear in the Registration Statement:
2. Please provide the number of shares that you or your
organization will own immediately after Closing, including those Shares
purchased by you or your organization pursuant to this Purchase Agreement and
those shares purchased by you or your organization through other transactions:
3. Have you or your organization had any position, office or
other material relationship within the past three years with the REIT, the OPCO
or any of their affiliates?
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
<PAGE>
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly
authorized by] _______________________________________ hereby certifies that
he/she [fill in official name of individual or institution] [said institution]
is the Purchaser of the shares evidenced by the attached certificate, and as
such, sold such shares on ________________ in accordance with Registration
Statement
[date]
number ___________________________________________________________________,
[fill in the number of or otherwise identify Registration Statement]
the Securities Act of 1933, as amended, and any applicable state securities or
blue sky laws and the requirement of delivering a current prospectus by the REIT
and the OPCO has been complied with in connection with such sale.
Print or Type:
Name of Purchaser
(Individual or
Institution): ____________________________________
Name of Individual
representing
Purchaser (if an
Institution) ____________________________________
Title of Individual
representing
Purchaser (if an
Institution): ____________________________________
Signature by:
Individual Purchaser
or Individual repre-
senting Purchaser: ____________________________________
<PAGE>
EXHIBIT A-1
[Form of Closing Opinion of Counsel to the REIT and the OPCO]
<PAGE>
EXHIBIT A-2
[Form of Closing Opinion of Counsel to the REIT and the OPCO]
<PAGE>
EXHIBIT B
Opinion Matters for Additional Registration Statements
[opinion paragraphs to be delivered in connection with resale registration
statements]
Each of the REIT and the OPCO is duly organized, validly
existing and in good standing under the laws of the State of Delaware, and each
of the REIT and the OPCO has the requisite corporate power and authority to own
its properties and to conduct is business as presently conducted. The REIT is a
real estate investment trust duly organized, validly existing and in good
standing as a business REIT under the laws of the State of Delaware, and the
REIT has the requisite corporate power and authority to own its properties and
to conduct its business as is presently conducted.
The [Additional] Shares have been duly authorized and are
validly issued, nonassessable and fully paid, and are not subject to any
preemptive or similar rights.
The Registration Statement has been declared effective under
the Securities Act; to our knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or threatened; and the Registration Statement, the
Final Prospectus, and each amendment thereof or supplement thereto (except for
the financial statements, schedules and the notes thereto and the other
financial data included or incorporated by reference therein, as to which we
express no opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act and the respective rules
of the Commission thereunder.
While we have not verified, and are not passing upon and do not assume
any responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement or Final Prospectus, we have
participated in reviews and discussions in connection with the preparation of
the Registration Statement and Final Prospectus, and advise you that, in the
curse of such reviews and discussions, nothing has come tot our attention which
would lead us to believe (i) that the Registration Statement at the time it
became effective (except for the financial statements and the notes thereto and
the other financial data included or incorporated by reference therein, as to
which we express no belief) contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein not
misleading or (ii)that the Final Prospectus on the date thereof or on the date
of this opinion (except for the financial statements and the notes thereto and
the other financial data included or incorporated by reference therein, as to
which we express no belief) contained any
<PAGE>
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
<PAGE>
Exhibit 10.9
FORWARD STOCK CONTRACT
To: Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: William W. Evans III
To: Patriot American Hospitality Operating Company
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: Leslie Ng
From: Union Bank of Switzerland, London Branch
c/o UBS Securities LLC, as agent
299 Park Avenue
New York, NY 10171
Date: 31 December 1997
Ladies and Gentlemen,
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between us on the Trade
Date specified below (the "Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern. References herein to the "Transaction" shall be deemed to be references
to a "Swap Transaction" solely for the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to, the ISDA
Master Agreement dated as of 31 December 1997, as amended and supplemented from
time to time (the "Agreement"), between you and us. All provisions contained in
the Agreement govern this Confirmation except as expressly modified below. In
the event of any inconsistency between the provisions of that agreement and this
Confirmation, this Confirmation will prevail for the purposes of this
Transaction.
The Agreement and each Confirmation thereunder will be governed by and construed
in accordance with the laws of the State of New York without reference to choice
of law doctrine.
I. The Transaction
Patriot American Hospitality, Inc. (the "REIT") and Patriot American Hospitality
Operating Company (the "OPCO") (each a "Company" and collectively, the
"Companies") and the Union Bank of Switzerland, London Branch ("UBS") acting
through UBS Securities LLC as its agent for each purchase or sale of Securities
("UBS LLC"), hereby agree to make the payments and deliveries provided for in
Sections III., IV. and V. hereof, all on the terms more particularly specified
herein (this "Confirmation").
II. Definitions
For the purpose of this Confirmation, the following terms shall have the
meanings set opposite:
1
<PAGE>
FORWARD STOCK CONTRACT
Adjustments: In the event of:
(a) a subdivision, consolidation or
reclassification of the Paired Shares, or a
free distribution or dividend of any Paired
Shares to all existing, holders of Paired
Shares by way of bonus, capitalization or
similar issue; or
(b) a distribution or dividend to all
existing holders of Paired Shares of, (i)
additional Paired Shares or (ii) other share
capital or securities granting right to
payment of dividends and/or the proceeds of'
liquidation of either Company equally or
proportionally with such payments to holders
of' Paired Shares;
an adjustment shall thereupon be effected to
the Forward Price and/or the Underlying
Shares at the time of such event with the
intent that following such adjustment, the
value of this Transaction is economically
equivalent to the value immediately prior to
the occurrence of the event causing the
adjustment.
Calculation Agent: UBS, whose calculations and determinations
shall be made in a commercially reasonable
manner and shall be binding absent manifest
error.
Calculation Period: Means each period commencing on and
including:
(i) in the case of the first Calculation
Period, the Effective Date and ending on but
excluding the earlier of the first Interim
Settlement Date or Day S, and
(ii) for each period thereafter, an Interim
Settlement Date and ending on but excluding
the earlier of the next following Interim
Settlement Date or Day S.
If there is a Partial Settlement, then (i)
the Calculation Period for the Settlement
Shares covered by such Partial Settlement
shall end on Day S for such Partial
Settlement and (ii) the Calculation Period
for the remaining Underlying Shares shall be
determined without regard to such Partial
Settlement.
Collateral Release Shares: Paired Shares delivered pursuant to
Section V.C.
Collateral Valuation Date: In the event that the Companies posts cash
collateral pursuant to Section V. or VI. any
day upon which the amount of collateral
required is calculated.
Compounding Period: Means each period commencing on and
including:
(i) in the case of the first Compounding
Period, the Effective Date and ending on but
excluding the earlier of the first Interim
Settlement Date or Day S, and
(ii) for each period thereafter, an Interim
Settlement Date and ending on but excluding
the earlier of the next following Interim
Settlement Date or Day S.
If there is a Partial Settlement, then (i)
the Compounding Period for the Settlement
Shares covered by such Partial Settlement
shall end on Day S for such Partial
Settlement and (ii) the Compounding Period
for the remaining Underlying Shares shall be
determined without regard to such Partial
Settlement.
2
<PAGE>
FORWARD STOCK CONTRACT
Customer Account: The account established in favor of the
Companies pursuant to the Customer Agreement
dated the date hereof between the Companies
and UBS Securities LLC.
Daycount Fraction: Actual/360.
Day S: For Settlement pursuant to Section III. or
VI. or Interim Net Stock Settlement pursuant
to Section IV., the day upon which
settlement activities shall begin.
Dividend Amount: (A) Means, on each Interim Settlement Date
or Day S an amount in U.S. Dollars equal to
the sum of all cash distributions paid on
either a REIT share or on an OPCO share
comprising part of a Paired Share, during
the relevant Compounding Period; and
(B) Separately, and not included in Dividend
Amount, UBS will cause UBS LLC to pay to the
Companies on the Business Day after the
relevant dividend payment date declared by
the Companies' Board of Directors, (i) all
cash dividends on Paired Shares that have
gone ex-dividend, but on which dividends
have not been paid, prior to the end of the
final Compounding Period for any settlement,
based on a number of Paired Shares equal to
the number of Settlement Shares for such
settlement, (ii) all cash dividends received
by UBS at any time, on Paired Shares
delivered by the Companies pursuant to
Section III. E. that have gone ex-dividend
after Day S but prior to the end of the
Unwind Period for any settlement, and (iii)
all cash dividends paid on Paired Shares
held in the Customer Account.
Effective Date: 31 December 1997
Exchange Trading Day: Each day on which the Relevant Exchange is
open for trading.
Forward Price: On each Interim Settlement Date or Day S,
the Forward Price shall be determined for
such day by:
a) multiplying the Initial Price for the
Compounding Period by the sum of
1 plus the product of (i) the appropriate
Daycount Fraction and (ii) the sum of (x)
LIBOR, determined as of the previous Interim
Settlement Date (or in the case of the first
Interim Settlement Date, as of the Effective
Date) for a Designated Maturity of 3 months,
and (y) the Spread; and
b) subtracting the Dividend Amount at that
date;
PROVIDED HOWEVER that if the Companies
deliver Interim Settlement Shares pursuant
to Section IV. or Collateral Release Shares
pursuant to Section V.C. during any
Calculation Period, the Forward Price for
purposes of determining the Initial Price
for the first Compounding Period during such
Calculation Period, shall be adjusted to a
price equal to the closing price of the
Paired Shares on the Exchange Trading Day
immediately prior to the most recent Interim
Settlement Date, adjusted up for any
positive result or down for any negative
result of the following formula:
(i) the Interim Settlement Amount for the
most recent Interim Settlement Date.
3
<PAGE>
FORWARD STOCK CONTRACT
minus,
(ii) the product of (x) the number of
Interim Settlement Shares or Collateral
Release Shares, as the case may be, and (y)
the average closing price of the Paired
Shares on the five (5) Exchange Trading Days
immediately following the receipt of the
Interim Settlement Shares by UBS pursuant to
Section IV. or the Collateral Release Shares
pursuant to Section V.C.
then divide such result by,
(iii) the number of Underlying Shares.
Initial Price: Means,
a) for the Compounding Period ending on the
first Interim Settlement Date, an amount in
U.S. Dollars equal to $28.8125, and
b) for each subsequent Compounding Period,
the Forward Price as calculated on or
adjusted as of the preceding Interim
Settlement Date.
Interim Settlement Dates: 31 March 1997, 30 June 1998, 30 September
1998, subject to adjustment in accordance
with the Modified Following Business Day
convention.
Interim Settlement Amount: on any Interim Settlement
Date, the product of (a) the number of
Underlying Shares, and (b) the amount by
which the Forward Price exceeds the closing
price of the Paired Shares on the Exchange
Trading Day immediately prior to such
Interim Settlement Date.
Interim Settlement Shares: The Interim Settlement
Amount divided by the closing price of the
Paired Shares on the Exchange Trading Day
immediately prior to such Interim Settlement
Date.
LIBOR Means USD-LIBOR-BBA as such term in defined
in the Agreement.
Mandatory Unwind Date: In the case of a Mandatory Unwind Event
specified in clause (i) of Mandatory Unwind
provisions of Section VI., at least three
Exchange Trading Days following such
Mandatory Unwind Event. In the case of a
Mandatory Unwind Event specified in clause
(ii) of such provision, the date specified
in the notice delivered to the Companies
pursuant to such provision of Section VI.
<TABLE>
<CAPTION>
Mandatory Unwind Mandatory
Thresholds: Unwind Thresholds Unwind Share Limit
----------------- ------------------
<S> <C> <C>
$20.00 up to 33.0% of Underlying Shares
$18.75 67.0%
$17.25 100.0%
</TABLE>
Maturity Date: One (1) year after the Effective Date,
subject to extension upon the written
approval of UBS in its sole discretion.
4
<PAGE>
FORWARD STOCK CONTRACT
Maturity Placement Fee: 0.50%, based on the mechanics in Section E.
The parties may agree to alter the
settlement mechanics which may result in a
different Maturity Placement Fee.
Paired Shares: Shares of beneficial interest, $0.01 par
value per share, of the REIT (the "REIT
Shares") and shares of Common Stock, par
value $0.01 per share, of OPCO (the "OPCO
Shares"), which are paired and traded as a
unit consisting of one (1) REIT Share and
one (1) OPCO Share.
Relevant Exchange: Means, with respect to any Exchange Trading
Day, the principal Stock Exchange on which
the Paired Shares are traded on that day.
Settlement Amount: The product of the Settlement Price and the
Settlement Shares.
Settlement Disruption Event: Means an event beyond the control of the
parties as a result of which The Depository
Trust Company ("DTC") or any successor
depository cannot effect a transfer of the
Settlement Shares or the Paired Shares. If
there is a Settlement Disruption Event on a
Valuation Date, then the transfer of the
Paired Shares that would otherwise be due to
be made by UBS LLC for the account of UBS or
the transfer of the Paired Shares that would
otherwise be due to be made by the
succeeding Exchange Trading Day on which
settlement can take place through DTC,
provided that if such a Settlement
Disruption Event persists for five
consecutive Business Days, then the Party
obliged to deliver such Settlement Shares
shall use its best efforts to cause such
Shares to be delivered promptly thereafter
to the other Party in any commercially
reasonable manner.
Settlement Price: If Day S is an Interim Settlement Date or
the Maturity Date, the Forward Price;
otherwise the Forward Price adjusted for
LIBOR breakage adjustments (either positive
or negative) for the such Forward Price for
the period from Day S to the next following
Interim Settlement Date. Any breakage
adjustments shall be calculated by the
Calculation Agent in accordance with normal
industry standards.
Settlement Shares: The number of shares up to the full amount
of Underlying Shares subject to settlement
under Section III. or VI.
Spread: 1.40% per annum.
Stock Exchange: Means the New York Stock Exchange, the
American Stock Exchange or NASDAQ.
Stock Settlement
Unwind Price: The daily average closing price of the
Paired Shares for Exchange Trading Days
during the Unwind Period.
Trade Date: 31 December 1997.
UBS LLC: UBS Securities LLC
Unwind Period: In the event of Stock Settlement or Net
Stock Settlement 100 Exchange Trading Days
(or a proportionately smaller number of
Exchange Trading Days for partial
settlements) beginning on Day S; provided
that UBS may extend such period (such
extension not to exceed 20 Exchange Trading
Days) and that the
5
<PAGE>
FORWARD STOCK CONTRACT
Unwind Period shall be automatically
extended i) upon the occurrence of a Market
Disruption Event and ii) for any day during
the Unwind Period that the Company is not
able to provide an updated and effective
registration statement to UBS.
Underlying Shares: 3,250,000 Paired Shares of the Companies
(NYSE ticker "PAH"), subject to adjustment
in the event of partial settlements.
Valuation date: In the case of determining any Physical
Settlement value, Net Stock Settlement
Shares or Stock Settlement Shares, Day S,
the day preceding Day S and all Exchange
Trading Days during the Unwind Period; in
the case of determining any Preliminary
Stock Settlement Shares or Preliminary Net
Stock Settlement Shares, the Exchange
Trading Day immediately preceding Day S; in
the case of determining the Interim
Settlement Amount and related calculation,
the day prior to the Interim Settlement
Date, and the five (5) Exchange Trading Days
following receipt of Interim Settlement
Shares by UBS.
Valuation Time: 4:00 pm EST, or in the event the Relevant
Exchange closes early, such closing time.
III. Settlement
A. Notice and Procedures
1. The Companies may on any Exchange Trading Day up to and including the
Maturity Date, upon the giving of at least five (5) Business Days
telephonic notice to UBS (the "Settlement Notice"), settlement all or
part of this Transaction. The Settlement Notice shall specify:
(i) the Settlement Shares,
(ii) the settlement method subject to change upon notice as
described below in this section (Physical, Stock or Net Stock
Settlement, as such methods are described below); and
(iii) Day S, which smut be an Exchange Trading Day; provided
however, that if Physical or Net Stock Settlement is selected
and in UBS' reasonable judgement the settlement of the
Settlement Shares would potentially violate or contravene any
legal or regulatory prohibition or requirement applicable to
UBS or cause UBS to contravene any established UBS corporate
policy or compliance policy which relates to any legal or
regulatory prohibition or requirement applicable to UBS (other
than any corporate policy limiting the amount of UBS's
investment in another entity) then UBS shall at least three
(3) Business Days prior to proposed Day S, notify the
Companies telephonically (confirmed by writing) of any such
impediment and is estimate of the period during which such
impediment will preclude UBS' ability to settle all or part of
this Transaction.
The Settlement Notice shall be effective only if the notice
requirements specified above are fulfilled; provided, that if
such notice is incomplete, and i) if no settlement method is
specified, then the settlement method shall be deemed to be
Physical Settlement and ii) if no Day S is specified, Day S
shall be deemed to be one Exchange Trading Date after the
Maturity Date and Settlement Shares shall be deemed to equal
Underlying Shares; and provided further that the Companies may
upon telephonic notice to UBS of at least one (1) Exchange
Trading Day prior to the proposed Say S, withdraw any
Settlement Notice.
6
<PAGE>
FORWARD STOCK CONTRACT
In the case of any partial settlement, following such settlement the
number of Underlying Shares to which this Transaction shall relate
shall be adjusted, as of Day S, by subtracting the number of Settlement
Shares from the number of Underlying Shares (as the same may have been
adjusted prior to such Partial Settlement) immediately prior to such
Day S. The Settlement Shares shall not be subject to forward accretion
and shall be treated separately from the remaining Underlying Shares
during any Unwind Period.
In the event that the Company provided notice of Stock or Net Stock
Settlement, on any day during the applicable unwind period, upon
providing one Business Day's telephonic notice, the Company may elect
to effect Physical Settlement for all remaining Settlement Shares. The
number of Settlement Shares deemed to have already been settled shall
equal the Settlement Shares times a fraction, the numerator of which
shall equal the number of elapsed Exchange Trading Days in the Unwind
Period until the notice date and the denominator of which shall equal
the total Exchange Trading Days in the Unwind period as agreed to among
the parties; provided however, that the number of Settlement Shares
deemed to have already been settled shall be adjusted to reflect
adjustments (if any) to the Unwind Period prior to the notice date for
Physical Settlement. In the event that the Companies elect to effect
Physical Settlement pursuant to this paragraph, (i) the notice day
shall become the final day of the Unwind Period with regard to
Settlement Shares that are deemed to have been settled, and (ii) the
Exchange Trading Day immediately following the notice day shall become
Day S for the remaining Settlement Shares and the Settlement Price for
these remaining Settlement Shares shall be recalculated accordingly.
2. On Day S, the Settlement Price for the Settlement Shares and the
Settlement Amount shall be determined for Day S.
3. The Settlement Amount shall be determined and the settlement procedures
executed pursuant to the settlement method (B, C, or D of this Section
III.) selected by the Companies in their sole discretion.
4. It shall be a condition precedent to any right of the Companies to
elect Stock Settlement (III. C. below) or Net Stock Settlement (III. D.
below), that the Companies must (i) notify UBS (in writing or
telephonically) of such election at least five (5) Business Days prior
to Day S and (ii) prior to Day S, cause to be filed with the Securities
and Exchange Commission (the "Commission") and cause to become
effective under the Securities Act of 1933, as amended (the "Securities
Act") a registration statement that results in UBS being able to resell
all Paired Shares to be delivered by the Companies to UBS LLC for the
account of UBS in effecting such Stock Settlement or Net Stock
Settlement without further registration under the Securities Act. Such
registration statement shall include one or more preliminary
prospectuses, prospectuses, and any amendments and supplements therefor
such that any preliminary prospectus or prospectus, as amended or
supplemented, shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they are made. In addition, the Companies
shall not deliver any Paired Shares to UBS LLC for the account of UBS
pursuant to Section IV. below unless at the time of such delivery a
registration statement has become effective under the Securities Act
that results in UBS being able to resell such Paired Shares without
further registration under the Securities Act, such Registration
Statement to include one or more preliminary prospectuses, prospectus
and any amendments or supplements thereto such that any preliminary
prospectus or prospectus, as amended or supplemented, shall not contain
any untrue statement of a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances under which they are made. The Companies further
agree that it will cause any such Registration Statement referred to in
this paragraph 5 of Section III.A. to remain in effect until the
earliest of the date on which (i) all Paired Shares issued pursuant
hereto and not required to be delivered to the Companies hereunder have
been sold by UBS LLC for the account of UBS and UBS agrees to notify
the Companies of such fact, within two (2) Business Days of its
occurrence, (ii) UBS LLC for the account of UBS is able to sell the
Paired Shares subject thereto under Rule 144(k), or (iii) UBS has
advised the Companies that it no longer requires that such registration
statement be effective; provided, however, that in no event shall the
Companies be obligated to
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<PAGE>
FORWARD STOCK CONTRACT
keep such Registration Statement effective for more than 10 Exchange
Trading Days after the end of the applicable Unwind Period.
B. Physical Settlement
If the Companies elect Physical Settlement, the Companies shall settle
by delivering cash in an amount equal to the Settlement Amount in
exchange for the Settlement Shares ("Physical Settlement") on the
Exchange Trading Day immediately succeeding Day S. UBS shall cause UBS
LLC for the account of UBS to deliver the Settlement Shares to the
Companies on the Exchange Trading Day immediately succeeding Day S upon
receipt of such Physical Settlement.
C. Stock Settlement
If the Companies elect to settle the Settlement Amount by delivering
Paired Shares in exchange for the Settlement Shares ("Stock
Settlement"), the number of Paired Shares to be delivered (the "Stock
Settlement Shares") shall be equal to (i) the Settlement Amount divided
by (ii) the Stock Settlement Unwind Price. The mechanics for settlement
are set forth in Section III. E. below.
D. Net Stock Settlement
If the Companies elect to settlement the Settlement Amount on a net
stock basis ("Net Stock Settlement"), the number of the net stock
settlement shares (the "Net Stock Settlement Shares") shall equal:
a) (i) the number of Settlement Shares, times (ii) the amount
(positive or negative) equal to the Settlement Price minus the
Stock Settlement Unwind Price,
such product divided by,
b) the Stock Settlement Unwind Price.
If such calculation yields a negative number, this shall indicate the
number of Paired Shares to be delivered by UBS LLC for the account of
UBS to the Companies. The mechanics for settlement are set forth in
Section III. E. below. (This section does not apply for purposes of
Interim Net Stock Settlement).
E. Stock and Net Stock Settlement Mechanics
1. Preliminary Stock Settlement:
If the Companies elect Stock Settlement, the Companies shall
deliver to UBS LLC for the account of UBS, by 11:00 a.m. on
Day S, that number of Paired Shares (the "Preliminary Stock
Settlement Shares") equal to the product of (i) the Settlement
Amount divided by the closing price of the Paired Shares on
the Exchange Trading Day immediately preceding Day S, times
(ii) 10.5%. Upon receipt of the Preliminary Stock Settlement
Shares, UBS will cause UBS LLC to deposit the Settlement
Shares in the Companies' Customer Account.
2. Preliminary Net Stock Settlement:
If the Companies elect Net Stock Settlement and if the
Settlement Price exceeds the closing price of the Paired
Shares on the Exchange Trading Day immediately preceding Day
S, the Companies shall deliver to UBS LLC for the account of
UBS by 11:00 a.m. on Day S, that number of Paired Shares (the
"Preliminary Net Stock Settlement Shares) equal to:
8
<PAGE>
FORWARD STOCK CONTRACT
a) the sum of (i) the product of the number of Settlement
Shares times the difference between the Settlement Price and
the closing price of the Paired Shares on the Exchange Trading
Day immediately preceding Day S and (ii) 5% of the Settlement
Amount, and
such amount divided by
b) the closing price of the Paired Shares on the Exchange
Trading Day immediately preceding Day S.
If the closing price of the Paired Shares on the Exchange
Trading Day immediately preceding Day S exceeds the Settlement
Price, the Companies shall not be required to deliver any
shares to UBS LLC for the account of UBS under this subsection
III.E.2.
3. By 11:00 a.m. on every fifth (5th) Exchange Trading Day (other
than the final Exchange Trading Day) during the Unwind Period
and on the Business Day following the final Exchange Trading
Day of the Unwind Period:
(a) For Stock Settlement:
Stock Settlement Shares shall be calculated as if such
Exchange Trading Day were the final Exchange Trading Day of
the Unwind Period.
(i) If (a) Stock Settlement Shares (calculated as set forth
above) are greater than (b) the sum of (x) Preliminary Stock
Settlement Shares plus (y) any shares previously delivered
pursuant to this subparagraph (i), ten the Companies shall
deliver that number of Paired Shares equal to the difference
between (a) and (b) to UBS LLC for the account of UBS, and
(ii) as of the final day of the Unwind Period, if (a) the sum
of (x) Preliminary Stock Settlement Shares plus (y) any shares
previously delivered pursuant to this settlement under
subparagraph (i), above is greater than Stock Settlement
Shares, then UBS LLC, for the account of UBS, shall deliver
that number of Paired Shares equal to the difference between
(a) and (b) above to the Companies' Customer Account.
(b) For Net Stock Settlement:
Net Stock Settlement Shares shall be calculated as if such
Exchange Trading Day were the final Exchange Trading Day of
the Unwind Period.
(i) if (a) Net Stock Settlement Shares are greater than (b)
the sum of (x) Preliminary Net Stock Settlement Shares plus
(y) any shares previously delivered pursuant to this
settlement under this subparagraph (i), then the Companies
shall deliver Paired Shares (which Paired Shares may be
delivered from its Margin Account) equal in number to the
difference between (a) and (b) to UBS LLC for the account of
UBS, or
(ii) as of the final day of the Unwind Period, if (a) the sum
of (x) Preliminary Net Stock Settlement Shares plus (y) any
shares previously delivered pursuant to this settlement under
subparagraph (i), above is greater than (b) net Stock
Settlement Shares, then UBS LLC, for the account of UBS, shall
deliver that number of Paired Shares equal to the difference
between (a) and (b) above to the Companies' Customer Account.
4. The Companies shall cause all shares delivered by it to UBS
LLC for the account of UBS to be fully and effectively
registered under the Securities Act (as provided in Section
III.A.5.
above).
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<PAGE>
FORWARD STOCK CONTRACT
5. On the Exchange Trading Day following the final Exchange
Trading Day of the Unwind Period, UBS LLC for the account of
UBS shall release all claims to Paired Shares held in the
Companies' Customer Account, including any Settlement Shares
delivered pursuant to Preliminary Stock Settlement (Section
III. E.1. above), and deliver all such Paired Shares to the
Companies with the dollar value of all fractional shares
settled in cash.
6. In the event of Stock or Net Stock Settlement pursuant to
Section III. C. or III.D., the Companies shall pay an unwind
accretion fee, in cash or stock, calculated in accordance with
the following formula:
Settlement Amount x (days in Unwind Period) x (1 month LIBOR +
Spread)
7. In the event of Stock or Net Stock Settlement pursuant to
Section III.C. or III.D., the Companies shall pay a placement
fee to UBS LLC for the account of UBS calculated as:
Settlement Amount x Maturity Placement Fee %
IV. Interim Net Stock Settlement
On each Interim Settlement Date, if the Forward Price exceeds the
closing price of the Paired Shares on such interim Settlement Date,
then on the Business Day following the Fifth Exchange Trading Day
thereafter the Companies shall deliver a number of Paired Shares to UBS
LLC for the account of UBS equal to the Interim Settlement Shares;
provided however, that if the Companies are restricted by law or
regulation or self-regulatory requirements or related policies and
procedures, whether or not such requirements, policies or procedures
are imposed by law directly or have been voluntarily adopted by the
Companies to insure compliance with applicable laws, or in its
reasonable judgement is otherwise unable or unwilling to deliver
registered Paired Shares, the Companies shall deliver Cash Collateral
to UBS as described in Section V.B. below.
V. Collateral Provisions
A. If the Companies fail to deliver an effective resale registration
statement within 60 days of a written request by UBS for the Companies
to deliver of an effective resale registration statement, then until an
effective resale registration statement is provided and an Interim Net
Stock Settlement can be effected, the Companies shall deliver Cash
Collateral in an amount equal to the Interim Settlement Amount to UBS.
If Cash Collateral is delivered pursuant to this Section V.A., then
until an Interim net Settlement can be effected or the transaction is
settled on a Physical Settlement basis or a registration statement
becomes effective, the Interim Settlement Amount shall be recalculated
and the amount of Cash Collateral shall be adjusted to equal such
recalculated Interim Settlement Amount on a biweekly (every 2 weeks)
basis.
B. In the event that the Companies do not deliver Paired Shares pursuant
to Section IV. for one or more of the reasons described in the
provision at the end of such paragraph, then, unless Cash Collateral
has been delivered pursuant to Section V.A. above, the Companies shall
deliver Cash Collateral in an amount equal to the Interim Settlement
Amount to a Cash Collateral Account at UBS.
C. If the Companies have delivered Cash Collateral to UBS pursuant to
Sections V.A. or V.B. above, at the Companies' option, the Companies
may deliver freely salable registered Paired Shares to UBS equal in
saleable market value, based on closing market prices on the Exchange
Trading Day prior to such delivery, to the value of the Cash Collateral
held in the Cash Collateral Account at UBS. Prior to the next Interim
Settlement Date, if on any five consecutive Business Days the Market
Price of the Paired Shares closes above the Forward Price as of the
prior Reset Date, UBS shall deliver all cash collateral held, to the
Companies. On
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<PAGE>
FORWARD STOCK CONTRACT
the day after such Exchange Trading Date, UBS shall release all claims
to Cash Collateral held in the Cash Collateral Account and deliver such
amounts to the Companies. On any subsequent Interim Settlement Date, if
Cash Collateral is held by UBS, UBS shall deliver to the Companies
within five (5) Business Days after such Interim Settlement Date, the
amount by which the amount of Cash Collateral exceeds the Interim
Settlement Amount.
D. Security Interest.
The Companies hereby pledges to UBS, as security for its obligations
herein, a first priority continuing security for its obligations
herein, a first priority continuing security interest in, lien on and
right of set-off against all Cash Collateral Paid to UBS, or UBS
Securities LLC, as its agent. Upon release to the Companies by UBS of
such Cash Collateral, the security interest and lien granted hereunder
will be released immediately, and, to the extent possible, without any
further action by either party.
E. Representations
As of the Trade Date of this Confirmation, the Companies represent to
UBS (which representations will be deemed to be repeated as of each
date that the Companies Pay Cash Collateral to UBS) that:
(i) each Company has the power to grant a security interest in and lien
on any Cash Collateral it Pays to UBS and has taken all necessary
actions to authorize the granting of that security interest and lien;
(ii) each Company is the sole owner of or otherwise has the right to
Pay all Cash Collateral to UBS hereunder, free and clear of any
security interest, lien, encumbrance or other restrictions other than
the security interest and lien created hereby;
(iii) upon Payment of any Cash Collateral to UBS under the terms of
this Confirmation, UBS will have a valid and perfected first priority
security interest therein (assuming that any third-party financial
intermediary or other entity not within its control involved in the
transfer of the Cash Collateral gives the notice sand takes the action
required of it under applicable law for perfection of that interest);
(iv) the performance by each Company of its obligations under this
Confirmation will not result in the creation of any security interest,
lien or other encumbrance on any Cash Collateral other than the
security interest and lien granted hereunder; and
(v) the Companies will be solvent and able to pay its debts as they
mature, will have capital sufficient to carry on business and all
business in which it engages, and will have assets which will have a
present fair market valuation greater tan the amount of all of its
liabilities.
F. Other Collateral Provisions
During settlement of the Transaction pursuant to Sections III. Or VI.
Any Cash Collateral held by UBS shall be held until the end of the
applicable Unwind Period and shall be released upon the final
Settlement Date for that Unwind Period.
G. Definitions related to Collateral Provisions
"Cash Collateral" means the amount of cash denominated in USD, if any,
Paid by the Companies to or for the benefit of UBS, acting through UBS
Securities LLC as its agent, pursuant to Sections IV. or V. of this
Confirmation.
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<PAGE>
FORWARD STOCK CONTRACT
"Local Business Day" means a day on which commercial banks in New York,
New York are open for business (including dealings in foreign
exchange).
"Paid", "Pays" or "Payment" means payment in same day funds in the same
manner provided for payments to be made to UBS, or UBS Securities LLC
as its agent under this Confirmation.
VI. Certain Covenants and Other Provisions
Ability to Settle in Stock: As of the date hereof, the Companies have
not, and after the date hereof, the
Companies will not, enter into any
obligation that would contractually
prohibit the Companies from Stock Settlement
of any shares under this Agreement.
Allocation between the REIT
and OPCO: As between the _________ and OPCO, (i) any
delivery to or by the Companies of the REIT
Share portion of Paired Shares pursuant to
this Confirmation shall be made by delivery
to or by the REIT, (ii) any delivery to or
by the Companies of the OPCO share portion
of Paired Shares pursuant to this
Confirmation shall be made by delivery to or
by OPCO, and (iii) any delivery to or by the
Companies of cash pursuant to this
Confirmation shall be allocated between the
REIT and OPCO between and among themselves
based on the ratios that the Companies
allocate proceeds of any issuance of Paired
Shares pursuant to the Pairing Agreement
between the Companies as amended from time
to time without effect on any obligation of
the Companies to UBS or on any obligation of
UBS to the Companies. Such Allocation ratios
are currently set at 95% to the REIT and 5%
to the OPCO.
Condition Precedent to
Physical Settlement: It shall be a condition precedent to any
right of the Companies to elect Physical
Settlement, that the Companies must, not
more than 180 days prior to such Day S, have
completed the private placement or public
offering of such number of Shares or any
security that may be converted, exchanged or
exercised into Shares, having such initial
purchase price so as to provide the
Companies with net cash proceeds in an
amount not less than the Settlement Amount.
Mandatory Unwind Event: If at any time prior to the Maturity Date:
(i) the average closing price on the
Relevant Exchange of the Paired Shares on
any two consecutive Exchange Trading Days,
other than a day on which a Market
Disruption Event has occurred, is equal to
or less than any of the Mandatory Unwind
Thresholds, then such day shall be declared
an Interim Settlement Date, and UBS shall
have the right upon written notice to the
Companies, to require the parties to settle
all or a portion of the Transaction (up to
the cumulative Unwind Share Limit for the
corresponding Mandatory Unwind Threshold) on
the Mandatory Unwind Date pursuant to the
settlement procedures set forth in Section
III. Above.
Once a Mandatory Unwind Event has occurred,
if the trading price of the Paired Shares is
less than a lower mandatory Unwind
Threshold, UBS shall have the right upon
providing notice to the Companies, to
require the Parties to settle pursuant to
Section III above on the Mandatory Unwind
Date, all or a portion of the Transaction,
up to a number of Paired Shares equal to the
number of Underlying Shares multiplied by
the corresponding cumulative Unwind Share
Limit, on the
12
<PAGE>
FORWARD STOCK CONTRACT
mandatory Unwind Date pursuant to the
settlement procedures set forth in Section
III. above; or,
(ii) if any of the following events occur:
(1) any Financial Covenant Default as more
particularly described in Exhibit A attached
hereto;
(2) any Event of Default that has not been
cured or (except for Events of Default with
respect to those provisions of the REITS
Credit Agreement specified in Exhibit A
attached hereto) waived under the REIT's
Credit Agreement and Term Loan Credit
Agreement, both dated as of July 18, 1997,
by and among the REIT as borrower, various
lenders and The Chase Manhattan Bank as
Administrative Agent;
(3) any Event of Default that has not been
a) cured under any other unsecured and/or
recourse lending agreement involving the
Companies' Specified Indebtedness in
aggregate in the amount of $10,000,000, or
b) waived under any other unsecured and/or
recourse lending agreement involving the
Companies' Specified Indebtedness in
aggregate in the amount of $250,000,000;
(4) Bankruptcy or Insolvency (as such terms
are defined in the Agreement); and/or
(5) any failure of the Companies to post
Cash Collateral pursuant to Section III. or
IV. herein if such failure is not remedied
on or before the third Local Business Day
after notice of such failure is given to the
Companies.
then, UBS LLC for the account of UBS may
upon providing five Business Days notice to
the Companies, require all or part of the
Transaction to be settled early on the
Mandatory unwind Date pursuant to the
settlement procedures set forth in Section
III.
For purposes of the settlement procedures
set forth in Section III, "Day S" shall be
the Mandatory Unwind Date and the
"Settlement Shares" shall be the number of
Paired Shares to be settled pursuant to
clause (i) or (ii) above. The Companies may
elect the method of settlement for such
early settlement in accordance with the
settlement provisions set forth herein;
provided however, that if Stock Settlement
or Net Stock Settlement is elected, and (1)
no resale Registration Statement has been
provided and declared effective prior to Day
S or (2) any resale Registration Statement
so provided and declared effective becomes,
on Day S or during an Unwind Period, the
subject of a stop order suspending its
effectiveness or is the subject of any
proceeding for that purpose or any such
proceeding is threatened by the Commission,
then the Companies at their sole opinion may
choose to (A) cash collateralize 125% of the
obligation to UBS in a manner similar to
that described in Section V., (B) effect
Physical Settlement as to all of the
Settlement Shares in accordance with Section
III.B. hereof on the Exchange Trading Day
immediately succeeding the occurrence of one
of the events specified in (1) or (2) above
or (C) effect settlement with unregistered
Paired Shares to allow UBS to unwind the
Transaction and liquidate any position it
may hold in Paired Shares by means of
negotiated private resales, to the extent
and in the manner permitted by applicable
federal and state securities laws. In
13
<PAGE>
FORWARD STOCK CONTRACT
recognition that such negotiated private
resales, if any, are likely to be completed
at prices reflective of a discount to the
prevailing open market prices for any freely
tradeable Paired Shares, the Companies agree
to deliver such number of supplemental
Paired Shares as UBS may reasonably request
to which UBS shall assign a dollar price in
order to approximate an aggregate amount
equal to the aggregate discount accepted by
UBS in connection with the resale of the
unregistered Stock Settlement Shares or the
Companies shall pay an amount to UBS equal
to the aggregate discount accepted by UBS in
connection with the resale of the
unregistered Stock Settlement Shares.
Upon completion of all settlement
activities. UBS LLC for the account of UBS,
will promptly return all remaining shares in
the Companies' Customer Account to the
Companies.
Market Disruption Event: A Market Disruption Event is the occurrence
or existence on any Exchange Trading Day
during the one-half hour period that ends at
the Valuation Time of any suspension of or
limitation imposed on trading on (i) any of
the Relevant Exchanges or (ii) any of the
exchange or boards of trade or futures
contract market on which options of future
contracts on the Paired Shares of the
Companies are traded that, in the reasonable
determination of the Calculation Agent, is
material. In the event that a Market
Disruption Event occurs or is continuing on
a Valuation Date, any determination of the
closing price of the Paired Shares shall be
postponed to the first succeeding Exchange
Trading Day on which there is no Market
Disruption Event, provided that if there is
a Market Disruption Event on each of the
five Exchange Trading Days immediately
following the original Valuation Date that
but for the Market Disruption Event on each
of the five Exchange Trading Days
immediately following the original Valuation
Date that but for the Market Disruption
Event would have been a day on which the
closing price of the Paired Shares would
have been determined, such fifth Exchange
Trading Day shall be deemed to be the
Valuation Date notwithstanding the Market
Disruption Event and the Calculation Agent
shall, in consultation with the Companies,
determine the closing price for the
Valuation Date based upon the last closing
price prior to such Market Disruption Event,
and if applicable, shall effect the
settlement of the Underlying Shares by using
such last closing price for the
determination of the Stock Settlement Unwind
Price.
The Calculation Agent shall within one (1)
Business Day notify the other party of the
existence or occurrence of a Market
Disruption Event on any day that but for the
occurrence or existence of a Market
Disruption Event would have been a Valuation
Date.
Regulatory Compliance: Each party agrees that if the delivery of
shares upon settlement is subject to any
restriction imposed by a regulatory
authority, it shall not be an event of
default, and the parties will negotiate in
good faith a procedure to effect settlement
of such shares in a manner which complies
with any relevant rules of such regulatory
authority and which is satisfactory in form
and substance to their respective counsel.
Securities Law Compliance: Each party agrees that it will comply, in
connection with this Transaction and all
related or contemporaneous sales and
purchases of the Companies' Paired Shares,
with the applicable provisions of the
Securities Act, the securities Exchange Act
of 1934 (the "Exchange Act") and the rules
and regulations thereunder.
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FORWARD STOCK CONTRACT
Settlement: All settlements shall occur through DTC or
any other mutually acceptable depository.
Settlement Stock Delivery: Pursuant to the Stock Settlement and Net
Stock Settlement provision sunder Section
III. above, UBS LLC for the account of UBS
shall deliver all Settlement Shares to the
Companies' Customer Account. Such Paired
Shares will serve as collateral until
released by UBS LLC for the account of UBS
in accordance with the settlement mechanics
noted under III.E. above, or delivered to
the Companies pursuant to Section III.E.5.
Paired Shares held in the Companies'
Customer Account shall not be voted.
The Companies covenant and agree with UBS
that Paired Shares delivered by the
Companies pursuant to settlement events in
accordance herewith will be duly authorized,
validly issued, fully paid and
non-assessable. The issuance of such Paired
Shares will not require the consent,
approval, authorization, registration, or
qualification of any government authority,
except such as shall have been obtained on
or before the delivery date to UBS LLC for
the account of UBS in connection with any
registration statement filed with respect to
any share or otherwise.
Settlement Volume: In the event of a settlement other than a
mandatory Unwind Event, on any Exchange
Trading Day during an Unwind Period, UBS,
pursuant to its hedging activities relating
to this Transaction, shall not sell Paired
Shares in an amount in excess of 20% of the
average daily volume for the 20 Exchange
Trading Days immediately preceding Day S.
Trading Authorization: The following individuals and/or any
individual authorized in writing by
the Treasurer of the Companies are
authorized by the Companies to provide
trading instructions to UBS LLC for the
account of UBS with regard to this
Transaction.
William W. Evans for the REIT
and
Leslie NG for OPCO
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<PAGE>
FORWARD STOCK CONTRACT
VII. Delivery Instructions:
Party A: Chase NYC
UBS Securities LLC
ABA 021000021
A/C No. ###-##-####
Attn: GED
Party B: The Chase Manhattan Bank
ABA 021000021
for the account of Patriot American Revolving Credit Facility
DDA# ###-##-####
Attn: Daniella Cassagnolli
Please confirm that the foregoing correctly sets forth the
terms of our agreement by executing the copy of the
Confirmation enclosed for that purpose and returning it to Ms.
Gale Herzing, 29th Floor.
Yours faithfully,
Union Bank of Switzerland, London Branch:
By: ___________________________________ By: ______________________________
Name: Name:
Title: Title:
Date: Date:
Patriot American Hospitality, Inc.
By: ___________________________________ By: ______________________________
Name: Name:
Title: Title:
Date: Date:
Patriot American Hospitality Operating Company:
By: ___________________________________ By: ______________________________
Name: Name:
Title: Title:
Date: Date:
16
<PAGE>
August 14, 1998
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn: William W. Evans III
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn: Leslie Ng
Ladies and Gentlemen:
This letter agreement between Patriot American Hospitality, Inc.
(the "REIT") and Wyndham International, Inc., as successor to Patriot
American Hospitality Operating Company (the "OPCO") (each a "Company" and
collectively, the "Companies"), and UBS AG, London Branch ("UB-LB"), as
successor to UBS (as defined), acting through its agent Warburg Dillon Read
LLC, modifies and amends, in part, certain of the terms and conditions of
that certain Forward Stock Contract, dated December 31, 1997 (the "Forward
Agreement") between the Companies and Union Bank of Switzerland, London
Branch ("UBS"), as amended. Defined terms not otherwise defined herein shall
have the meanings ascribed to them under the Forward Agreement.
As of July 28, 1998, the average closing price of the Paired Shares
was below the first Mandatory Unwind Threshold, and UBS is providing notice
to the Companies that a Mandatory Unwind Event occurred. However, the
amendments to the Forward Stock Contract contained herein, amend the
Mandatory Unwind Thresholds retroactively to July 28, 1998 and through the
Maturity Date.
1. "Mandatory Unwind Thresholds," as defined in Section II of the Forward
Agreement, shall be deleted in its entirety and replaced as follows:
Notwithstanding the terms and conditions of the Forward Agreement, the
Companies and UBS agree as follows:
Mandatory Unwind Threshold Unwind Share Limit
-------------------------- ------------------
$16.00 100.0%
2. "Maturity Date" shall be October 15, 1998.
3. a) Section IV shall be deleted in its entirety and replaced as follows:
IV. Interim Settlement
On each Interim Settlement Date, if the Forward Price exceeds the
closing price of the Paired Shares on such Interim Settlement Date,
then on the Business Day following the Fifth Exchange Trading Day
thereafter the Companies shall deliver Cash Collateral to UBS in an
amount equal to the Interim Settlement Amount to a Cash Collateral
Account of UBS; provided, however, that with the prior written
consent of UBS and without affecting the Forward Price (e.g., as if
Cash Collateral had been delivered), the Companies may deliver, in
lieu of such Cash Collateral, Paired
<PAGE>
Shares to Warburg Dillon Read LLC for the account of UBS equal to
125% of the Interim Settlement Shares; provided, further, that no such
Paired Shares may be delivered unless they are subject to a
registration statement complying with Section III.A 4. above. If either
Cash Collateral or Interim Settlement Shares is delivered pursuant to
Section IV, then during the period between each Interim Settlement Date
or between the final Interim Settlement Date and the Maturity Date,
the Interim Settlement Amount shall be recalculated and the amount of
Cash Collateral (or Interim Settlement Shares, as the case may be)
shall be adjusted to equal such recalculated Interim Settlement Amount
on a bi-weekly basis.
b) Subsections A and B of Section V shall be deleted in their entirety and
replaced by:
A. [This subsection intentionally left blank]
B. [This subsection intentionally left blank]
c) The first sentence of Subsection C of Section V shall be deleted in its
entirety.
4. a) After "Condition Precedent to Physical Settlement" and before
"Mandatory Unwind Event" in Section VI, the following shall be added:
Early Settlements
with respect to Other
Substantially Similar
Transactions: The Companies agree that (i) prior to the
early settlement, unwind or liquidation of
any transaction that is substantially
similar to the transaction contemplated by
this Forward Stock Contract (an "Other
Transaction" including without limitation
the Nationsbank and Paine Webber
transactions of approximately $125 million
each), the Companies shall promptly, after
learning that any such event may occur,
give telephone notice (confirmed in writing)
of such upcoming settlement, unwind or
liquidation, (ii) any such settlement,
unwind or liquidation shall constitute a
Mandatory Unwind Event under clause (ii) of
"Mandatory Unwind Event" in this Section VI,
and (iii) UBS may required all or part of
the Transaction to be settled at least
coincident with an Other Transaction.
b) To clause (ii) under "Mandatory Unwind Event" in Section VI, the
following shall be added:
(6) the Companies settle, unwind or liquidate any transaction that is
substantially similar to this Transaction, thus giving rise to a
Mandatory Unwind Event under "Early Settlements with respect to
Other Substantially Similar Transactions" of this Section VI.
(7) Failure to deliver to UBS on or before September 30, 1998, an
effective registration statement as contemplated by
Section III.A.4. above.
5. The modifications and amendments contemplated by this letter agreement
shall not be effective unless this letter agreement is executed by all of the
parties hereto on or before August 14, 1998.
6. The agreement of UBS to the modifications and amendments provided for
herein shall not constitute or imply any agreement or undertaking to agree to
any other modification or agreement with respect to the Forward Agreement.
2
<PAGE>
Sincerely,
UBS AG, London Branch
By: /s/ By: /s/
--------------------------- -------------------------------
Name: Karen Hayes Name: Rob Morgan
Title: Title:
AGREED TO AND ACCEPTED
Patriot American Hospitality, Inc.
By: /s/
---------------------------
Name:
Title:
Wyndham International, Inc.
By: /s/
---------------------------
Name:
Title:
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1998 AND DECEMBER 31, 1997 AND THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1997 OF PATRIOT AMERICAN HOSPITALITY, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000016343
<NAME> PATRIOT AMERICAN HOSPITALITY, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 65,550 20,360
<SECURITIES> 0 0
<RECEIVABLES> 15,982 14,458
<ALLOWANCES> 0 0
<INVENTORY> 1,242 1,306
<CURRENT-ASSETS> 0 0
<PP&E> 5,171,796 2,083,768
<DEPRECIATION> 125,952 67,501
<TOTAL-ASSETS> 6,775,479 2,321,105
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
48 0
<COMMON> 1,450 733
<OTHER-SE> 2,619,015 908,294
<TOTAL-LIABILITY-AND-EQUITY> 6,775,479 2,321,105
<SALES> 0 0
<TOTAL-REVENUES> 253,422 73,118
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 121,425 30,736
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 85,027 17,328
<INCOME-PRETAX> 66,218 28,147
<INCOME-TAX> 406 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 30,560 0
<CHANGES> 0 0
<NET-INCOME> 27,556 23,166
<EPS-PRIMARY> 0.23 0.54
<EPS-DILUTED> 0.23 0.52
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1998 AND DECEMBER 31, 1997 AND THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 OF
WYNDHAM INTERNATIONAL, INC.
</LEGEND>
<CIK> 0000715273
<NAME> WYNDHAM INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 97,931 27,076
<SECURITIES> 0 0
<RECEIVABLES> 207,450 46,340
<ALLOWANCES> 0 0
<INVENTORY> 0 9,144
<CURRENT-ASSETS> 383,925 100,662
<PP&E> 624,430 29,686
<DEPRECIATION> 20,191 1,304
<TOTAL-ASSETS> 2,020,086 252,088
<CURRENT-LIABILITIES> 401,401 115,656
<BONDS> 0 0
0 0
36 0
<COMMON> 1,449 733
<OTHER-SE> 200,633 80,132
<TOTAL-LIABILITY-AND-EQUITY> 2,020,086 252,088
<SALES> 712,653 0
<TOTAL-REVENUES> 782,230 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 797,367 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13,798 0
<INCOME-PRETAX> (26,921) 0
<INCOME-TAX> 4,084 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (40,651) 0
<EPS-PRIMARY> (0.37) 0
<EPS-DILUTED> (0.37) 0
</TABLE>
