<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-9320
WYNDHAM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2878485
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
(Address of principal executive offices) (Zip Code)
(214) 863-1000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
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 the registrant's class of common stock,
par value $.01 per share, as of the close of business on August 12, 1999, was
167,665,527.
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<PAGE>
WYNDHAM INTERNATIONAL, INC.
INDEX
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements
Wyndham International, Inc.:
Condensed Consolidated Balance Sheets as of June 30, 1999 (unaudited)
and December 31, 1998.................................................. 3
Condensed Consolidated Statements of Operations for the three and six
month periods ended June 30, 1999 and 1998 (unaudited)................. 4
Condensed Consolidated Statements of Cash Flows for the six month
periods ended June 30, 1999 and 1998 (unaudited)....................... 5
Notes to Condensed Consolidated Financial Statements as of June 30, 1999
(unaudited)............................................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 23
Item 3. Qualitative and Quantitative Disclosures about Market Risks....... 37
PART II--OTHER INFORMATION
Item 1. Legal Proceedings................................................. 38
Item 2. Changes in Securities and Use of Proceeds......................... 41
Item 4. Submission of Matters to Vote of Security Holders................. 42
Item 6. Exhibits and Reports on Form 8-K:
Exhibits................................................................ 43
Reports on Form 8-K..................................................... 43
Signatures................................................................ 44
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WYNDHAM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 158,579 $ 123,085
Restricted cash.................................... 93,927 35,869
Accounts and lease revenue receivable.............. 190,600 194,583
Inventories........................................ 22,837 23,583
Prepaid expenses and other assets.................. 42,503 35,346
----------- ----------
Total current assets............................. 508,446 412,466
----------- ----------
Investment in real estate and related improvements
net of accumulated depreciation of $428,831 in 1999
and $252,580 in 1998............................... 5,495,442 5,585,616
Investment in unconsolidated subsidiaries........... 177,103 146,912
Mortgage notes and other receivables from
unconsolidated subsidiaries........................ 4,744 78,403
Notes and other receivables......................... 28,267 41,334
Management contract costs, net of accumulated
amortization $20,115 in 1999 and $11,258 in 1998... 128,398 194,014
Leasehold costs, net of accumulated amortization of
$10,647 in 1999 and $5,989 in 1998................. 137,760 179,922
Trade names and franchise costs, net of accumulated
amortization of $8,375 in 1999 and
$6,670 in 1998..................................... 106,217 125,974
Deferred acquisition costs.......................... 9,920 16,144
Goodwill and intangibles, net of accumulated
amortization of $22,451 in 1999 and $20,895 in
1998............................................... 368,204 553,889
Deferred expenses, net of accumulated amortization
of $35,819 in 1999 and $29,136 in 1998............. 102,711 37,998
Other assets........................................ 42,056 42,998
----------- ----------
Total assets..................................... $ 7,109,268 $7,415,670
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.............. $ 284,413 $ 313,657
Deposits........................................... 30,901 26,392
Current portion of borrowings under line of credit,
term loans, mortgage notes and capital lease
obligations....................................... 194,673 1,274,918
----------- ----------
Total current liabilities........................ 509,987 1,614,967
----------- ----------
Borrowings under line of credit facility, term
loans, mortgage notes and capital lease
obligations........................................ 3,328,839 2,582,603
Deferred income taxes............................... 733,970 123,463
Due to unconsolidated subsidiaries.................. 374 7,919
Deferred income..................................... 16,369 174
Minority interest in operating partnerships......... 23,550 253,970
Minority interest in unconsolidated subsidiaries.... 193,514 229,537
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value; authorized:
150,000,000 shares; shares issued and outstanding:
9,550,000 in 1999................................. 96 --
Preferred stock, $0.01 par value; authorized:
100,000,000 shares; shares issued and outstanding:
8,981,886 in 1998................................. -- 90
Excess stock, $0.01 par value; authorized:
750,000,000 shares; no shares issued and
outstanding....................................... -- --
Common stock, $0.01 par value; authorized:
750,000,000 shares; shares issued and outstanding:
166,304,486 in 1999 and 213,521,647 in 1998....... 1,663 4,270
Additional paid in capital......................... 3,671,884 3,024,540
Receivable from shareholders and affiliates........ (16,716) (16,364)
Unearned stock compensation, net of accumulated
amortization of $18,991 in 1999 and
$13,447 in 1998................................... (562) (5,494)
Unrealized loss on securities available for sale... (384) (1,245)
Unrealized foreign exchange (loss) gain............ (9,641) 2,749
Accumulated deficit................................ (1,343,675) (405,509)
----------- ----------
Total shareholders' equity....................... 2,302,665 2,603,037
----------- ----------
Total liabilities and shareholders' equity....... $ 7,109,268 $7,415,670
=========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
WYNDHAM INTERNATIONAL, 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,
------------------- --------------------
1999 1998 1999 1998
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenue:
Hotel revenue...................... $ 628,332 $422,010 $1,267,162 $712,653
Participating and land lease
revenue........................... 255 13,505 588 34,070
Racecourse facility................ -- 1,942 4,561 24,991
Management fee and service fee
income............................ 20,427 22,982 43,218 36,821
Interest and other income.......... 2,139 5,024 6,699 6,734
--------- -------- ---------- --------
Total revenue.................... 651,153 465,463 1,322,228 815,269
--------- -------- ---------- --------
Expenses:
Hotel expenses..................... 450,544 299,021 896,276 499,874
Racing facility operations......... -- 2,673 3,867 20,857
General and administrative......... 60,962 20,502 111,358 37,808
Cost of acquiring leaseholds and
license agreements................ -- 57,062 803 57,062
Restructuring costs................ 185,382 -- 185,382 --
Interest expense................... 90,985 53,494 181,200 89,451
Depreciation and amortization...... 80,796 51,326 156,905 86,929
Net loss on sale of assets......... 8,102 -- 5,327 --
--------- -------- ---------- --------
Total expenses................... 876,771 484,078 1,541,118 791,981
--------- -------- ---------- --------
Operating (loss) income............. (225,618) (18,615) (218,890) 23,288
Equity in earnings of
unconsolidated subsidiaries....... 1,230 2,293 3,931 5,487
--------- -------- ---------- --------
(Loss) income before income tax
provision, minority interests and
extraordinary item................. (224,388) (16,322) (214,959) 28,775
Income tax provision, including a
reorganization charge of $675,000
in 1999............................ (645,496) (932) (654,439) (4,490)
--------- -------- ---------- --------
(Loss) income before minority
interests and extraordinary item... (869,884) (17,254) (869,398) 24,285
Minority interest in the Operating
Partnerships....................... 4,684 4,501 6,642 1,447
Minority interest in other
consolidated subsidiaries.......... (2,192) (1,658) (4,064) (3,014)
--------- -------- ---------- --------
(Loss) income before extraordinary
item............................... (867,392) (14,411) (866,820) 22,718
Extraordinary loss from early
extinguishment of debt, net of
minority interest and income
taxes.............................. (9,838) (11,843) (9,838) (30,560)
--------- -------- ---------- --------
Net loss............................ $(877,230) $(26,254) $ (876,658) $ (7,842)
========= ======== ========== ========
Basic loss attributable to common
shareholders:
Net loss........................... $(877,230) $(26,254) $ (876,658) $ (7,842)
Adjustment for equity forwards..... (10,977) -- (19,372) --
Preferred stock dividends.......... (522) (1,555) (901) (1,555)
--------- -------- ---------- --------
Basic net loss..................... $(888,729) $(27,809) $ (896,931) $ (9,397)
========= ======== ========== ========
Basic (loss) earnings per common
share:
(Loss) income before extraordinary
item.............................. $ (5.65) $ (0.12) $ (5.71) $ 0.17
Extraordinary loss................. (0.06) (0.09) (0.06) (0.25)
--------- -------- ---------- --------
Net loss per common share.......... $ (5.71) $ (0.21) $ (5.77) $ (0.08)
========= ======== ========== ========
Diluted loss attributable to common
shareholders:
Net loss........................... $(877,230) $(26,254) $ (876,658) $ (7,842)
Adjustment for equity forwards..... (19,290) -- (39,322) --
Preferred stock dividends.......... (522) (1,555) (901) --
--------- -------- ---------- --------
Diluted net loss................... $(897,042) $(27,809) $ (916,881) $ (7,842)
========= ======== ========== ========
Diluted (loss) earnings per common
share:
(Loss) income before extraordinary
item.............................. $ (5.70) $ (0.12) $ (5.84) $ 0.18
Extraordinary loss................. (0.06) (0.09) (0.06) (0.24)
--------- -------- ---------- --------
Net loss per common share.......... $ (5.76) $ (0.21) $ (5.90) $ (0.06)
========= ======== ========== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
WYNDHAM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1999 1998
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (876,658) $ (7,842)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation........................................ 124,983 67,999
Amortization of unearned stock compensation......... 5,544 3,144
Amortization of deferred loan costs................. 24,821 8,877
Amortization of management contracts and trade
names.............................................. 10,823 8,228
Amortization of goodwill and other assets........... 21,099 10,702
Cost of acquiring leaseholds........................ -- 55,638
Net loss on sale of assets.......................... 5,327 --
Issuance of stock for bonuses and directors' fee.... -- 880
Equity in earnings of unconsolidated subsidiaries... (3,931) (5,487)
Minority interest in Operating Partnerships......... (6,642) (1,447)
Minority interest in other consolidated
subsidiaries....................................... 4,064 3,014
Deferred income taxes............................... 625,027 (1,591)
Write-down of real estate assets.................... 53,905
Write-off of intangible assets...................... 119,751 --
Bad debt expense.................................... 5,915 --
Extraordinary loss from early extinguishment of
debt............................................... 9,838 30,560
Other............................................... 429 --
Changes in assets and liabilities:
Accounts and lease revenue receivable and other
assets............................................. (17,035) (41,641)
Inventories......................................... 1,028 (1,171)
Accounts payable and accrued expenses............... 18,842 22,845
---------- -----------
Net cash provided by operating activities.......... 127,130 152,708
---------- -----------
Cash flows from investing activities:
Acquisition of hotel properties and related working
capital assets..................................... (59,128) (1,338,475)
Improvements and additions to hotel properties...... (105,439) (109,374)
Net proceeds from asset sales....................... 64,107 --
Acquisition of management contracts................. -- (10,365)
Cash received in acquisition of real estate and
hotel leases....................................... 933 98,312
Collections on other notes receivable............... 2,681 4,118
Advances on other notes receivable.................. (3,469) --
Increase in restricted cash accounts................ (58,058) (4,102)
Investment in unconsolidated subsidiaries........... (2,472) (1,369)
Deferred acquisition costs.......................... (129) (28,197)
Net payments collected from unconsolidated
subsidiaries....................................... -- 7,754
Investment in mortgage and other notes receivable... -- (3,549)
Collections on mortgage and other notes receivable.. 1,422 --
Proceeds from termination of management contracts... 10,474 --
Other............................................... 6,942 (495)
---------- -----------
Net cash used in investing activities.............. (142,136) (1,385,742)
---------- -----------
Cash flows from financing activities:
Borrowings under credit facility, term loans,
mortgage notes and capital lease obligations....... 2,706,375 2,447,542
Net repayments on credit facility and other debt.... (3,041,815) (1,297,209)
Payment of deferred loan costs...................... (103,867) (29,704)
Settlement of forward equity contracts.............. (329,481) --
Proceeds from issuance of preferred stock........... 955,000 --
Cost to retire Patriot series B preferred stock..... (13,966) --
Cash settlement with Interstate upon spinoff........ (15,688) --
Proceeds from issuance of common stock.............. -- 277,020
Payment of offering costs........................... (75,878) (3,586)
Contributions received from minority interest in
consolidated subsidiaries.......................... 171 3,768
Collections on notes receivable from shareholders
and affiliates..................................... -- 2,999
Distribution to minority interest holders........... (20,573) --
Dividends and distributions paid.................... (922) (71,937)
Foreign currency translation adjustment............. (8,905) --
Other............................................... 49 (42)
---------- -----------
Net cash provided by financing activities............ 50,500 1,328,851
---------- -----------
Net increase in cash and cash equivalents............ 35,494 95,817
Cash and cash equivalents at beginning of period..... 123,085 42,431
---------- -----------
Cash and cash equivalents at end of period........... $ 158,579 $ 138,248
========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
1. Organization and Basis of Presentation:
Patriot American Hospitality, Inc. (collectively with its subsidiaries,
"Patriot"), was formed April 17, 1995 as a self-administered real estate
investment trust ("REIT") for the purpose of acquiring equity interests in
hotel properties. Wyndham International, Inc. (collectively with its
subsidiaries, "Old Wyndham") was formed in connection with Patriot's merger
with and into California Jockey Club and Bay Meadows Operating Company on July
1, 1997. Patriot and Old Wyndham are both Delaware corporations.
Prior to June 30, 1999, the shares of common stock of Patriot were paired
and traded together with the shares of Old Wyndham, on a one for one basis, as
a single unit pursuant to a stock pairing arrangement, and were referred to as
a paired share.
Effective June 30, 1999, Patriot and Old Wyndham completed a series of
transactions (See Note 4) which included a restructuring of their existing
organizational structure. As a result of this restructuring, a wholly-owned
subsidiary of Old Wyndham was merged with and into Patriot, with Patriot being
the surviving entity. As such, Patriot is now a wholly-owned subsidiary of Old
Wyndham, and this combined entity, together with all subsidiaries, is
hereafter referred to as Wyndham. When the term Wyndham is used relating to a
period prior to June 30, 1999, such term refers to the combined entity of Old
Wyndham and Patriot. In connection with this restructuring, the pairing
agreement between Patriot and Old Wyndham was terminated, Patriot's status as
a real estate investment trust terminated effective January 1, 1999, and
Patriot became a taxable corporation as of that date.
The restructuring was reflected as a reorganization of two companies under
common control and was accounted for in a manner similar to that used in
pooling of interest accounting. As such, there was no revaluation of the
assets and liabilities of Old Wyndham or Patriot. The 1999 financial
statements of Wyndham are presented on a consolidated basis, representing the
operations of the corporation and its subsidiaries, including Patriot. The
1998 financial statements of Wyndham are presented on a combined basis,
representing the combined results of both Old Wyndham and Patriot.
Unless otherwise stated herein, all information with respect to shares
refers to Wyndham common stock since June 30, 1999 and to paired shares for
periods before June 30, 1999.
Patriot, through its wholly-owned subsidiary, PAH GP, Inc., is the sole
general partner and the holder of a 1% general partnership interest in Patriot
American Hospitality Partnership, L.P. (the "Patriot Partnership"). In
addition, Patriot, through its wholly-owned subsidiary, PAH LP, Inc., owns an
approximate 98% limited partnership interest in the Patriot Partnership.
Wyndham owns a 1% general partnership interest and an approximate 98% interest
in Wyndham International Operating Partnership, L.P. (the "Wyndham
Partnership") as of June 30, 1999. The Patriot Partnership and the Wyndham
Partnership are collectively referred to as the Operating Partnerships.
The Patriot Partnership principally owns, directly or indirectly, interests
in hotel properties and third party leaseholds. The Wyndham Partnership,
directly or indirectly, principally leases hotel properties from the Patriot
Partnership, owns interests in other hotel properties, and manages and
franchises hotels for third parties.
As of June 30, 1999, Wyndham, through the Operating Partnerships and other
subsidiaries, owned interests in 173 hotels with an aggregate of over 43,300
guest rooms and leased 39 hotels from third parties with over 5,700 rooms. In
addition, Wyndham manages 95 hotels for third party owners with over 22,300
guest rooms and franchises 11 hotels with over 2,600 guest rooms.
6
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
Principles of Consolidation and Combination
The unaudited consolidated financial statements for 1999 include the
accounts of Wyndham, its wholly- owned subsidiaries, including Patriot, and
the partnerships, corporations and limited liability companies in which
Wyndham owns a controlling interest.
The 1998 financial statements of Wyndham are presented on a combined basis,
representing the combined results of both Old Wyndham and Patriot. All
significant intercompany accounts and transactions have been eliminated.
Partnerships--control is determined in accordance with generally accepted
accounting principles ("GAAP"). The condition for control is the ownership of
a majority voting interest and the ownership of the general partnership
interest.
Corporations and Limited Liability Companies--control is determined in
accordance with GAAP. The condition for control is the ownership of a majority
voting interest.
These financial statements have been prepared in accordance with GAAP 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 GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 1999 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. For further information, refer to the combined
financial statements and footnotes thereto included in Patriot's and Wyndham's
Joint Annual Report on Form 10-K, as amended, for the year ended December 31,
1998. Certain prior period amounts have been reclassified to conform to
current period presentation.
2. Acquisitions and Disposals:
Disposals
In February 1999, Patriot and Old Wyndham sold their interest in the Bay
Meadows Racecourse located in San Mateo, California. Patriot and Old Wyndham
received cash proceeds of approximately $3,446 after payment of legal costs
and other closing costs. Patriot and Old Wyndham recognized an estimated
impairment loss on assets held for sale of $42,278 related to the racecourse
facility in 1998. The actual loss on the sale of the racecourse facility was
$42,766.
In March 1999, Patriot sold the Holiday Inn Crockett, realizing net cash
proceeds of approximately $18,000 and recognized a gain of approximately
$2,586.
On April 30, 1999, Patriot sold the following hotels; Hampton Inn Rochester,
Hampton Inn Jacksonville, Hampton Inn Cleveland, and the Hampton Inn Canton,
for net proceeds of approximately $23,469 and recognized a loss of
approximately $1,353.
On May 11, 1999, Patriot sold the Holiday Inn Sebring for net proceeds of
approximately $4,100 and recognized a gain of approximately $570.
Acquisitions
In January 1999, Patriot acquired the remaining 25% minority interests in
each of the five following hotels; Embassy Suites Schaumburg, the Hilton
Dania, the Marriott Suites at Valley Forge, the Marriott Boston
7
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
Andover and the Marriott Tysons Corner from CIGNA. The acquisition of these
interests was financed through additional mortgage indebtedness totaling
$49,800 and the sale of an additional 10% interest in the Marriott Warner
Center.
In April 1999, Patriot acquired the remaining 10% minority interests in each
of the four following hotels; the Radisson Akron; the Courtyard Beachwood; the
Holiday Inn Westlake; the Radisson Beachwood from IAH Snavely L.L.C.
("Snavely"). In addition, Patriot sold the Holiday Inn Beachwood to Snavely.
The transaction generated net proceeds of approximately $8,770. Patriot
recorded a loss of approximately $6,625.
On May 7, 1999, Patriot exercised its option to purchase ISIS 2000, formerly
owned by certain related parties and Old Wyndham senior executive officers,
for a cash payment of $3,073. Subsequent to the exercise of the option,
Wyndham owns 100% of this entity which provides reservations and other
services to Wyndham.
On May 18, 1999, Patriot purchased the Billerica hotel for a total purchase
price of approximately $23,775 including assumed indebtedness of approximately
$16,411.
3. Interstate's Third-Party Hotel Management Business:
On May 27, 1998, Wyndham and Interstate Hotels Company ("Old Interstate")
entered into a settlement agreement, as amended, with Marriott International,
Inc. ("Marriott"), which addressed certain claims asserted by Marriott in
connection with Wyndham's then proposed merger with Old Interstate. The
settlement agreement provided for the dismissal of litigation brought by
Marriott, and allowed Wyndham's merger with Old Interstate to close. In
addition to dismissal of the Marriott litigation, the settlement agreement
provides for the re-branding of ten Marriott hotels under the Wyndham name,
the assumption by Marriott of the management of ten Marriott hotels formerly
managed by Old Interstate for the remaining term of the Marriott franchise
agreement, and the spin-off by Wyndham of the third-party management business.
Effective June 18, 1999, Wyndham distributed approximately 92% of Interstate
Hotels Corporation ("Interstate") in the form of a dividend to shareholders.
Shareholders of record on June 7, 1999 received one share of newly issued
Interstate stock for every thirty paired shares owned of Patriot and Old
Wyndham. The remaining 8% is owned equally by Wyndham and Marriott.
As a result of the spin-off, Wyndham now also owns an approximate 55% non-
controlling interest in the subsidiary of Interstate which now operates the
existing third-party management business that Wyndham acquired from Old
Interstate. As of June 30, 1999, Wyndham's investment in the entity was
$53,867 and is reflected in investment in unconsolidated subsidiaries.
4. Restructuring and New Financing Transactions:
Effective June 30, 1999, Wyndham entered into a series of transactions as
follows; 1) a $1 billion equity investment, 2) an organizational
restructuring, 3) closing of a $2,450,000 credit facility, and 4) closing of
new mortgage notes totaling $581,000, as follows:
Equity Investment
Effective June 30, 1999, Wyndham completed a $1 billion equity investment
with a group of investors. Pursuant to the terms of this investment, Wyndham
issued 9.55 million shares of series B preferred stock in exchange for gross
proceeds of $955,000. Wyndham incurred approximately $76,414 in costs directly
8
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
attributable to the equity investment. On July 1, 1999, the remaining $45,000
was funded through the transfer of one of the investor's loan receivable from
PAH Realty Company, LLC which is secured by a mortgage on the Battery March
Hotel, to Wyndham International Inc. for the purchase of 450,000 shares of
series B preferred stock. This series B preferred stock has the following
terms, among others:
. dividends payable quarterly, on a cumulative basis, at a rate of 9.75% per
year;
. for the first six years, the dividends are structured to ensure an
aggregate fixed cash dividend payment of $29,250 per year, so long as there
is no redemption or conversion of the investors' series B preferred stock;
therefore, for that period, dividends are payable partly in cash and partly
in additional shares of series B preferred stock, with the cash component
initially equal to 30% for the first dividend and declining over the period
to approximately 19.8% for the final dividend in year six;
. for the next four years, dividends are payable in cash or additional shares
of series B preferred stock as determined by the Board of Directors; and,
after year 10, dividends are payable solely in cash;
. if any dividends are paid on the Wyndham common stock, additional dividends
will be paid in the amount that would have been paid on the shares of
Wyndham common stock into which the series B preferred stock is then
convertible;
. if a change in control or a liquidation of Wyndham occurs within six years
following the investment, any dividends remaining for the six years will be
accelerated and paid;
. not redeemable by Wyndham for six years, except that up to $300 million of
the series B preferred stock may be redeemed during the 170 day period
following the closing of the investment;
. voting with the Wyndham common stock on an as-converted basis on matters
submitted to the common stockholders and voting as a separate class on
specified matters, with special rules applying to the election of
directors; and
. convertible, at the holder's option, into a number of shares of Wyndham
common stock equal to $100.00 divided by the conversion price, initially
equal to $8.59 but subject to potential downward adjustments.
The investors will also have preemptive rights for the first five years
following their investment as long as they own more than 15% of the Wyndham
common stock.
As noted above, for a period of 170 days following the completion of the
investment, Wyndham may redeem up to $300 million of the series B preferred
stock at a redemption price of $102.00 per share (102% of the stated amount)
plus all accrued dividends. In connection with the settlement of the class
action litigation related to its restructuring discussed below, Wyndham
currently plans to fund this redemption with the proceeds of an offering to
its stockholders and the limited partners in the Operating Partnerships of
rights to purchase three million shares of its series A preferred stock, which
generally will have the same economic terms as the series B preferred stock,
but will have no voting rights, except as required by law and except for a
limited right to elect two directors if dividends are in arrears for six
quarterly periods.
Organizational Restructuring
As a condition of this investment, Old Wyndham was required to terminate the
pairing agreement with Patriot and restructure the existing organization. As
such, a subsidiary of Old Wyndham was merged with and into Patriot and Patriot
became a wholly-owned subsidiary of Wyndham. Patriot's status as a real estate
investment trust terminated effective January 1, 1999, and Patriot became a
taxable corporation as of that date.
Wyndham recorded a one-time charge of $675,000 to establish a deferred tax
liability that resulted from Patriot's change in tax status from a REIT to a C
corporation, as required by Statement of Financial Accounting
9
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
Standard No. 109. This charge is included in income tax expense in the
accompanying 1999 condensed consolidated statement of operations.
Wyndham also recorded a restructuring charge of $185,382 as a result of the
termination of the paired share structure, and management's decision to exit
out of certain activities resulting in the write-down of certain non-strategic
assets, and costs to sever certain employees. Wyndham recorded a charge of
approximately $83,094 for the write off of the unamortized intangible asset
associated with the paired share structure which was abandoned June 30, 1999.
In addition, Wyndham incurred approximately $4,667, in severance and employee
related costs for seven employees in the New York corporate office and two
employees in the Dallas corporate office. The New York office was closed on
June 30, 1999 and its employees were terminated at that time. Wyndham paid
$1,473 in the form of cash and forgiveness of debt; the remaining unpaid
portion of $3,194 has been included in accrued liabilities at June 30, 1999.
Wyndham recorded a charge of $82,299 for the write-down of assets to estimated
fair value, including goodwill of $28,394 as a result of management's strategy
to exit from the European market for their non-branded assets which will be
sold. In addition, Wyndham recorded costs of $7,059 associated with staffing
reductions and other exit costs necessary to reduce Wyndham's infrastructure
in Arcadian International, Wyndham's management division in Europe. Included
in accounts payable and accrued expenses at June 30, 1999 was $3,247 related
to severance costs to terminate 67 employees in the European office and $2,711
related to other exit costs for those actions, primarily lease cancellations,
that have not yet been completed as of June 30, 1999. Wyndham expects these
actions to be completed by March 2000.
In addition, a charge of $8,263 for the tradename intangibles attributable
to the Carefree brand was recorded, as management has decided that none of the
owned or managed assets will carry the Carefree brand now or in the future.
Also as a part of the restructuring, the preferred stockholders of Old
Wyndham were offered an opportunity to exchange their preferred stock for
Wyndham Class A common stock. Each of the 1,781,173 shares of Old Wyndham
series A preferred stock and each of the 1,781,181 shares of Old Wyndham
series B preferred stock were exchanged for one share of Wyndham Class A
common stock.
Pursuant to the merger of a wholly-owned subsidiary of Old Wyndham with
Patriot, each outstanding paired share and share of Patriot series A preferred
stock was converted into a single share of Wyndham Class A common stock, and
each outstanding share of Patriot series B preferred stock was converted into
$25 per share and $1.61 of accrued dividends, or an aggregate of $14,862 in
cash.
Additionally, the third party limited partners in both the Patriot
Partnership, and the Wyndham Partnership were offered an opportunity to
exchange their limited partnership interests for Wyndham Class A common stock.
As a result, an additional 15,097,354 shares of Wyndham Class A common stock
were issued in exchange for limited partnership units in the Operating
Partnerships. The effect of the exchange of certain limited partners interests
for Wyndham Class A common stock, resulted in an adjustment to the basis of
certain assets in accordance with Emerging Issues Task Force ("EITF") 95-7.
This adjustment is reflected in the accompanying balance sheet as a reduction
in the basis of Wyndham's investment in real estate and related improvements
of $37,150, investment in unconsolidated subsidiaries of $2,562 and goodwill
and intangibles of $78,433.
Generally, the assets of Old Wyndham, Patriot and the Operating Partnerships
remained in the entity that owned them prior to restructuring, except that the
non-voting stock of the non-controlled subsidiaries were transferred from the
Patriot Partnership to Patriot.
New Credit Facility
Concurrent with the closing of the $1 billion equity investment described
above, Wyndham closed on a new $2,450,000 credit facility which consists of: a
$1.3 billion term loan with a seven year term, a $500,000 revolving credit
facility with a five year term, and a $650,000 increasing rate loan facility
with a five year term. Proceeds,
10
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
net of closing costs and fees of approximately $41,125 from the term loan and
the revolving credit facility, and proceeds, net of closing costs and fees of
approximately $17,875 from the increasing rate loan facility, were used to
retire existing indebtedness. At June 30, 1999, $50,000 was drawn on the new
revolving credit facility.
Interest rates are based upon LIBOR spreads varying from 2.75% to 3.50% per
annum for the term loan, and 1.25% to 2.75% per annum for the revolving credit
facility, based both on Wyndham's leverage ratio, as defined, and whether any
increasing rate loans are outstanding. The term loan, and the revolving credit
facility are guaranteed by the domestic subsidiaries of Wyndham, and are
secured by pledges of equity interests held by Wyndham and its subsidiaries.
Wyndham's ability to borrow under its revolving credit facility is subject to
Wyndham's compliance with a number of customary financial and other covenants,
including total leverage and interest coverage ratios.
Interest rates for the increasing rate loans are based on LIBOR rates (less
statutory reserves), plus 3.50% through September 30, 1999, and increasing
0.50% every three months, with a cap of LIBOR plus 4.75%. The lender under the
increasing rate loans receives the benefit of the same guarantees and pledges
of security provided under the new term loan, and revolving credit facility.
New Mortgage Debt
Effective June 30, 1999 Wyndham also closed on a $346 million mortgage loan
with Bear, Stearns Funding, Inc., which is secured by twenty-five properties.
The loan matures on July 1, 2004 and bears interest at the LIBOR rate, plus
3.25% per annum. Proceeds from the mortgage debt were used to retire existing
mortgage indebtedness.
Additionally, effective June 30, 1999 Wyndham closed on a $235 million
mortgage loan with Lehman Brothers Holdings Inc. which is secured by ten
properties. The mortgage loan has a three-year term, with a one year extension
option, and bears interest at the LIBOR rate plus 3.50% per annum, plus an
additional 1.75% on the principal amount payable at maturity. Proceeds from
this mortgage loan were used to retire existing mortgage indebtedness.
At June 30, 1999 the LIBOR rate was 5.24%, and averaged 4.96% during the six
month period ended June 30, 1999.
5. Credit Facility, Term Loans, Mortgages and Other Notes:
Credit Facility and Term Loans
Prior to June 30, 1999, Wyndham's credit facilities were led by Chase
Manhattan Bank, Chase Securities, Inc. and Paine Webber Real Estate
Securities, Inc. and included a $900,000 revolving credit facility (the
"Credit Facility") and a series of term loans in the aggregate amount of up to
$1,800,000 (the "Term Loans"). Proceeds from the Credit Facility were used to
fund certain of Wyndham's mergers, as well as to refinance certain outstanding
indebtedness. Interest rates were based on Wyndham's leverage ratio and varied
from 1.5% to 3% over LIBOR.
The Term Loans and the Credit Facility, along with accrued interest and
fees, were repaid in full on June 30, 1999 with proceeds from the new credit
facility and the $1 billion equity investment. As a result of this repayment,
Wyndham incurred an extraordinary loss on early extinguishment of debt of
$9,838, net of minority interest and income tax affects.
11
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
Paine Webber Mortgage Financing
Effective June 30, 1999, a loan with an affiliate of Paine Webber Real
Estate Securities, Inc. ("Paine Webber Real Estate") for $103,000, including
accrued interest was repaid with proceeds from the new financings described
above.
Effective June 30, 1999, Wyndham repaid two loans with Paine Webber Real
Estate of $35,000 and $160,000 which were entered into in connection with the
acquisition of the Wyndham Emerald Plaza Hotel located in San Diego California
and the Arcadian acquisition, respectively with proceeds from the new
financings described above.
Other Mortgage Debt
During 1999, Beacon Capital Partners, L.P. ("Beacon") loaned $45,000 to
Wyndham. The loan, which bore interest at LIBOR plus 2.5% was to mature on
July 1, 1999. The loan was secured by a first mortgage on the Wyndham
Batterymarch hotel, a property under construction in Boston, Massachusetts.
Wyndham paid Beacon a financing fee of 2.50% of the loan principal in May
1999. On July 1, 1999 the loan was transferred from Beacon to Wyndham
International, Inc. for the purchase of 450,000 shares of Series B preferred
stock.
In connection with the acquisition of Billerica, Wyndham assumed a
construction note totaling $16,411. The loan bears interest at 9.5%, and
matures May 17, 2000. As of June 30, 1999, $15,408 had been drawn on the
construction note payable.
El Conquistador and Condado Hotel & Casino Financing
On June 25, 1999, Wyndham entered into an agreement with Citicorp Real
Estate, Inc. to extend $90,000 of mortgage debt related to the El Conquistador
Partnership, L.P., which was set to mature on June 30, 1999. Per the terms of
the extension agreement, the interest rate was amended such that the loan
bears interest at the LIBOR rate plus 2.75% through December 31, 1999 and then
LIBOR plus 3.25% through maturity on June 30, 2000.
Additionally, on June 29, 1999, Wyndham refinanced $55,000 of debt on the
Condado Hotel & Casino with The Bank of Nova Scotia. Principal payments on the
loan are due in monthly amounts of $306 beginning on July 22, 1999 through
maturity on July 22, 2004 at which time a balloon payment of $36,972 is due.
The interest rate on the first $50,000 is based upon LIBOR spreads varying
from 2.50% to 3.25% per annum, and on amounts over $50,000 is based upon LIBOR
spreads varying from 3.00% to 3.75% per annum, based on Wyndham's ratio of
earnings to total debt service, as defined.
12
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
6. Financial Derivatives:
Interest Rate Swaps and Caps
Wyndham enters into interest rate swap and cap agreements to modify the
interest characteristics of its outstanding debt. These agreements involve the
exchange of amounts based on a variable interest rate for amounts based on
fixed interest rates over the life of the agreement without an exchange of the
notional amount upon which the payments are based. The differential to be paid
or received as interest rates change is accrued and recognized as an
adjustment of interest expense related to the debt using a method which
approximates the effective interest method (the accrual accounting method).
The related amount payable to or receivable from counterparties is included in
accrued expenses or other assets.
Wyndham also enters into interest rate cap agreements that are designed to
limit its exposure to increasing interest rates and are designated as hedges
of its outstanding debt. An interest rate cap entitles Wyndham to receive a
payment from the counterparty equal to the excess, if any, of the hypothetical
interest expense (strike price) on a specified notional amount at a current
market interest rate over an amount specified in the agreement. The only
amount Wyndham is obligated to pay the counterparty is an initial premium. The
cost of the agreements (the initial premium) is included in other assets and
amortized to interest expense ratably during the life of the agreement.
Wyndham has entered into two additional interest rate swap arrangements
during 1999 to swap floating rate LIBOR-based interest rates for a fixed rate
interest amount as a hedge against $50,987 of the outstanding balance on
specific property related debt. The interest rate swap fixes the LIBOR portion
of the debt interest rate at 5.31% per annum through January 2000 ($19,987)
and 5.42% per annum through March 2001 ($31,000). At June 30, 1999, Wyndham
has various interest rate swap arrangements as a hedge against $871.6 million
of the outstanding balance of certain floating rate debt.
Additionally, Wyndham entered into two interest rate cap arrangements as
follows; an interest rate cap that limits LIBOR to 7% on up to $1,500,000 of
indebtedness through April 2000, and an interest rate cap that limits LIBOR to
6.75% on up to $19,475 of indebtedness through March 2001.
The fair value of interest rate swap and cap agreements and changes in the
fair value as a result of changes in market interest rates are not recognized
in the financial statements. The unrealized gain on these derivative
instruments was approximately $1,215 at June 30, 1999, which represents the
net proceeds Wyndham would receive if the derivatives were sold.
7. Comprehensive Income (Loss):
SFAS No. 130, "Reporting Comprehensive Income", establishes standards for
reporting and displaying comprehensive income (loss) and its components.
Wyndham adopted SFAS No. 130 beginning with their interim financial statements
for the first quarter of 1998. Total comprehensive income (loss) for the
periods is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1999 1998 1999 1998
--------- -------- --------- -------
<S> <C> <C> <C> <C>
Net loss............................. $(877,230) $(26,254) $(876,658) $(7,842)
Unrealized (loss) gain on securities
available for sale.................. 898 (727) 862 (621)
Unrealized foreign exchange (loss)
gain................................ (5,918) 10 (12,390) 10
--------- -------- --------- -------
Total comprehensive (loss) income.... $(882,250) $(26,971) $(888,186) $(8,453)
========= ======== ========= =======
</TABLE>
13
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
8. Computation of Earnings Per Share:
Earnings per share have been computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1999 June 30, 1998
-------------------- ---------------------
Diluted Diluted
Basic (1) Basic (1)
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Loss before extraordinary item.... $(867,392) $(867,392) $ (14,411) $ (14,411)
Adjustment for equity forwards
(2).............................. (10,977) (19,290) -- --
Preferred stock dividends......... (522) (522) (1,555) (1,555)
--------- --------- --------- ---------
Loss attributable to common
shareholders before extraordinary
item............................. (878,891) (887,204) (15,966) (15,966)
Extraordinary loss................ (9,838) (9,838) (11,843) (11,843)
--------- --------- --------- ---------
Net loss attributable to common
shareholders..................... $(888,729) $(897,042) $ (27,809) $ (27,809)
========= ========= ========= =========
Weighted average number of common
shares outstanding............... 155,687 155,687 132,804 132,804
========= ========= ========= =========
Loss per share:
Loss before extraordinary item.. $ (5.65) $ (5.70) $ (0.12) $ (0.12)
Extraordinary loss.............. (0.06) (0.06) (0.09) (0.09)
--------- --------- --------- ---------
Net loss........................ $ (5.71) $ (5.76) $ (0.21) $ (0.21)
========= ========= ========= =========
</TABLE>
- --------
(1) For the three months ended June 30, 1999, the dilutive effect of unvested
stock grants of 868, the option to purchase common stock of 24 and 9,552
of preferred shares were not included in the computation of diluted
earnings per share because they are anti-dilutive. For the three months
ended June 30, 1998, the dilutive effect of unvested stock grants of 849,
the option to purchase common stock of 1,368, preferred stock of 4,900 and
555 of shares in connection with the forward equity contracts were not
included in the computation of diluted earnings per share because they
were anti-dilutive.
(2) The adjustment relates to the mark-to-market and yield adjustment for the
forward equity contracts which could be settled in cash or stock, at
Wyndham's option.
14
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
--------------------- -------------------
Basic Diluted(1) Basic Diluted(1)
--------- ---------- ------- ----------
<S> <C> <C> <C> <C>
(Loss) income before extraordinary
item................................ $(866,820) $(866,820) $22,718 $22,718
Adjustment for equity forwards (2)... (19,372) (39,322) -- --
Preferred stock dividends............ (901) (901) (1,555) --
--------- --------- ------- -------
(Loss) income (attributable)
available to common shareholders
before extraordinary item........... (887,093) (907,043) 21,163 22,718
Extraordinary loss................... (9,838) (9,838) (30,560) (30,560)
--------- --------- ------- -------
Net loss attributable to common
shareholders........................ $(896,931) $(916,881) $(9,397) $(7,842)
========= ========= ======= =======
Weighted average number of common
shares outstanding.................. 155,340 155,340 121,241 121,241
========= ========= =======
Effect of unvested stock grants.... 888
Dilutive options to purchase
shares............................ 1,688
Dilutive effect of price adjustment
arrangements...................... 279
Dilutive convertible preferred
shares............................ 4,746
-------
128,842
=======
(Loss) earnings per share:
(Loss) income before extraordinary
item.............................. $ (5.71) $ (5.84) $ 0.17 $ 0.18
Extraordinary loss................. (0.06) (0.06) (0.25) (0.24)
--------- --------- ------- -------
Net loss........................... $ (5.77) $ (5.90) $ (0.08) $ (0.06)
========= ========= ======= =======
</TABLE>
- --------
(1) For the six months ended June 30, 1999, the dilutive effect of unvested
stock grants of 827, the option to purchase common stock of 27 and 8,991
of preferred shares were not included in the computation of diluted
earnings per shares because they are anti-dilutive.
(2) The adjustment relates to the mark-to-market and yield adjustment for the
forward equity contracts which could be settled in cash or stock, at
Wyndham's option.
9. Commitments and Contingencies:
Forward Equity Contracts
Wyndham's aggregate obligation under the forward equity transactions was
approximately $335.8 million at June 30, 1999. Effective June 30, 1999,
Wyndham settled in full all of the forward equity transactions in cash, with
part of the proceeds of the $1 billion equity investment. The 100.7 million
shares owned or held by the counterparties were retired effective June 30,
1999.
Contingencies
On June 29, 1992 an action for trademark infringement was filed in the New
York Supreme County of New York, Index No. 17474/92 titled Wyndham Hotel
Company, John Mados, and Suzanne Mados et al v. Wyndham Hotel Company. Ltd. It
is based upon the Madoses' alleged use of the mark WYNDHAM in connection with
the Wyndham Hotel located in Manhattan, New York City, and operated by the
Madoses since 1966 pursuant to a lease agreement entered into by the Madoses
on June 1, 1957. The case was tried in May
15
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
1996, and an order and partial judgement was entered in March 1998. The order
enjoins us from using the name and mark "Wyndham" in connection with the
advertising, promoting, managing or operating a hotel in Manhattan, New York
City, and places restrictions on Wyndham's use of the name and mark "Wyndham"
in all other areas of New York outside of Manhattan. In November 1998, an
order was issued clarifying the original order and a final judgment was
entered. In December 1998, Wyndham appealed that judgment to the New York
Supreme Court, Appellate Division, First Department. In January 1999, Wyndham
moved for a stay of the injunction pending appeal which motion was granted by
the Appellate Division, First Department on February 4, 1999. On May 18, 1999
the Appellate Division, First Department rendered a decision and order
affirming the final judgment. On May 24, 1999, Wyndham filed a motion for
permission to appeal that decision to the Court of Appeals of the State of New
York. In July 1999, Wyndham received notice that the Court of Appeals of the
State of New York would not hear the appeal.
Patriot and Old Wyndham have received two letters dated November 11, 1998
and December 2, 1998 (the "Letters") from the counsel for the Koffman family
and its affiliates (collectively, "Koffman") in connection with a Registration
Rights Agreement entered into as of March 31, 1998 (the "Agreement") among
Patriot, Old Wyndham and the Holders as defined therein, which such Holders
include Koffman. Counsel has asserted in the Letters that, in connection with
Patriot's and Old Wyndham's exercise of their "black-out" rights under the
Agreement, on October 8, 1998 Patriot and Old Wyndham are in breach of their
obligations to Koffman under the Agreement. Counsel has stated in the Letters
that Koffman will seek relief from Patriot and Old Wyndham for any losses that
Koffman may have sustained in connection with Patriot's and Old Wyndham's
alleged breach of the Agreement and also have implied that Koffman may file
against Patriot and Old Wyndham unspecified claims allegedly arising under the
federal securities laws. If Patriot and Old Wyndham are sued, they plan to
vigorously defend this lawsuit.
Patriot and Old Wyndham have disclosed various matters relating to Patriot
and Old Wyndham in their Form 8-K filed with the Securities and Exchange
Commission on November 9, 1998 including, without limitation, an assertion by
UBS AG, London Branch ("UBS") that Patriot and Old Wyndham are in default
under the terms of a forward contract by and among Patriot, Old Wyndham and
UBS. Patriot and Old Wyndham also have disclosed various matters in their
Joint Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on March 26, 1999, and in registration statements on Form S-3
(filed on April 28, 1999) and Form S-4 (filed on April 14, 1999).
On January 12, 1999, a putative class action lawsuit was filed on behalf of
the shareholders of Patriot and Old Wyndham in the Delaware Chancery Court.
This lawsuit, captioned Charles Fraschilla v. Paul A. Nussbaum, et al., No.
16895-NC, names as defendants Patriot, the then Patriot directors ("Patriot
Directors"), and Apollo Real Estate Advisors, L.P., Apollo Management, L.P.,
The Thomas H. Lee Company, Beacon Capital Partners, Inc. and Rosen Consulting
Group (collectively, the "Investors"). This lawsuit alleges, among other
things, that the Patriot Directors breached their fiduciary duties to
Patriot's then shareholders with respect to Patriot's financial condition and
by "effectively selling control" of Patriot to the Investors for inadequate
consideration and without having adequately considered or explored all other
alternatives to the sale or having taken steps to maximize shareholder value;
and the Investors aided and abetted the Patriot Directors in their purported
breaches of fiduciary duty. In the complaint, the plaintiff seeks an
injunction preventing the consummation of the deal with the Investors (which
Investment now has been consummated) and monetary damages.
On January 19, 1999, three additional and similar putative class action
lawsuits were filed in the same court by different purported class
representatives: Sybil R. Meisel and Steven Langsam, Trustees v. Paul A.
Nussbaum,
16
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
et al., No 16905-NC; Crandon Capital Partners v. Paul A. Nussbaum, et al., No.
16906-NC; and Robert A. Staub v. Paul A. Nussbaum, et al., No. 16907-NC. The
four suits since have been consolidated under the Fraschilla caption.
The parties have negotiated and entered into a memorandum of understanding
to settle these four putative consolidated class action lawsuits, dated on or
about April 6, 1999 (the "Memorandum of Understanding"). The Memorandum of
Understanding sets forth the principal bases for the settlement, which
include, among other things, the modification of Wyndham's obligations to make
the optional $300 million rights offering (the "Rights Offering") specified in
Section 6.13 of the Securities Purchase Agreement, as follows: (a) Wyndham
shall make the Rights Offering; (b) the Rights Offering shall be made no
earlier than 60 days after the Closing Date, as defined in the Securities
Purchase Agreement (the "Closing Date"), and shall be held open for a period
of not less than 30 days, and Wyndham shall use its good faith efforts to
commence the Rights Offering no later than 120 days after the Closing Date;
provided, however, that Wyndham will not be required to make the Rights
Offering if: (i) the SEC does not declare effective any registration statement
with regard to securities of Wyndham to be offered in the Rights Offering;
(ii) there is a pending court order, motion, legal proceeding or other action
to enjoin, prevent or delay the Rights Offering; or (iii) the Rights Offering
cannot be completed, despite Wyndham's good faith efforts, within 170 days of
the Closing Date. The Memorandum of Understanding and the proposed settlement
will be contingent upon (a) the drafting and execution of a Stipulation of
Settlement (the "Stipulation") and related documents necessary to effectuate
the terms of the proposed settlement; (b) the continuation and completion by
plaintiffs of reasonable and appropriate discovery sufficient to enable
plaintiffs' counsel to confirm the bona fides of the defendants' position and
that the settlement is and continues to be fair, equitable and reasonable and
in the best interest of the Class; and (c) Final Court Approval of the
settlement (as defined in the Memorandum of Understanding) and dismissal of
the Action with prejudice by the Court.
In the Stipulation, it is anticipated that the parties will request that the
Court certify, for purposes of settlement, a non-opt out, binding class of all
persons and entities (exclusive of defendants and their affiliates) who own
shares of Wyndham common stock or are unit holders of Patriot American
Hospitality, L.P. or Wyndham International Partnership, L.P., beneficially or
of record, as of the Record Date (to be set in the Stipulation) and/or sold
shares of Patriot or Wyndham common stock or units of the partnerships during
the period from December 15, 1998 to and including the Record Date (the
"Class"): that the Court approve the settlement, including dismissing with
prejudice all claims of the plaintiffs and the Class against the Defendants
and others. It is expected that counsel for the class plaintiffs will submit a
fee application to the Court for an award of attorney's fees and expenses. In
the Memorandum of Understanding, counsel for class plaintiffs agreed that such
an application would not exceed $1.25 million, and Wyndham agreed to pay an
award of attorney's fees and expenses if ordered by the Court to the extent
that it does not exceed $1.25 million.
On February 3, 1999, McNeill Investment Company, Inc. filed a lawsuit
against Patriot in the United States District Court for the Western District
of Pennsylvania. In the lawsuit, captioned McNeill Investment Company, Inc. v.
Patriot American Hospitality, Inc., No 99-165, the plaintiff alleges that
Patriot breached its obligations under a registration rights agreement that
Patriot became obligated under throught its merger transaction with Interstate
Hotels Corporation. On March 26, 1999, Patriot filed an answer to the
complaint in which it denied all liability. Wyndham plans to vigorously defend
this lawsuit.
On May 7, 1999, a putative class action lawsuit was filed in the United
States District Court for the Northern District of California on behalf of
former shareholders of California Jockey Club and Bay Meadows Operating
17
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
Company (collectively, "Bay Meadows") who subsequently became shareholders of
Patriot, Patriot American Hospitality Operating Company and Wyndham as a
result of the merger (the "Merger") of the above companies on or about July 1,
1997 (the "Class"). This lawsuit, captioned Johnson, et al. v. Patriot
American Hospitality, Inc. et al., C-99-2153-SI, names as defendants Patriot
American Hospitality, Inc., Wyndham International, Inc., PAH GP, Inc. PAH LP,
Inc., Patriot American Hospitality Partnership, L.P., Wyndham International
Operating Partnership, L.P. and PaineWebber Group, Inc. This action was
commenced on behalf of all former holders of Bay Meadows stock during a class
period from June 2, 1997 to the date of filing (May 7, 1999). This action
asserts securities fraud claims and alleges that the purported class members
wrongfully were induced to tender their Bay Meadows shares as part of the
Patriot/Bay Meadows merger based on a fraudulent prospectus. This action
further alleges that defendants continued to defraud shareholders about their
intentions to acquire numerous hotels and saddle Wyndham with massive debt
during the class period. Three other actions against the same defendants
subsequently were filed in the Northern District of California: (i) Ansell v.
Patriot American Hospitality, Inc., et al., No. C-99-2239 (filed May 14,
1999), (ii) Sola v. Paine Webber Group, Inc., et al., No. C-99-2770 (filed
June 11, 1999), and (iii) Gunderson v. Patriot American Hospitality, Inc., et
al., No. C 99-3040 (filed June 23, 1999). Another action with substantially
identical allegations, Susnow v. Patriot American Hospitality, Inc., et al.,
No. 3-99-CV1354-T (filed June 15, 1999), also subsequently was filed in the
Northern District of Texas. A motion is pending to have this Texas action
transferred to the Northern District of California for all purposes, another
motion is pending to have this Texas action and the Levitch and Gallagher
lawsuits identified below transferred to the Northern District of California
for consolidated pretrial purposes, and a cross-motion is pending to have all
the California actions transferred to the Northern District of Texas for
consolidated pretrial purposes. To date, none of the defendants have been
required to answer, move or otherwise respond to the complaints and no
discovery has been taken. Wyndham plans to vigorously defend those lawsuits.
On or about June 22, 1999, a putative class action lawsuit captioned Levitch
v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1416-D, was filed in
the Northern District of Texas against Patriot, Wyndham, James D. Carreker and
Paul A. Nussbaum. This action asserts securities fraud claims and alleges
that, during the period from January 5, 1998 to December 17, 1998, the
defendants defrauded shareholders by issuing false statements about Wyndham.
The complaint was filed on behalf of all shareholders who purchased Patriot
American and Wyndham stock during that period. Another action, Gallagher v.
Patriot American Hospitality, Inc., et al., No. 3-99-CV1429-L, filed on June
23, 1999, alleges substantially the same allegations and claims as mentioned
above, a motion is pending to have these two actions consolidated with the
four actions pending in the Northern District of California and the Susnow
action pending in the Northern District of Texas. To date, none of the
defendants have been required to answer, move or otherwise respond to the
complaints and no discovery has been taken. Wyndham plans to vigorously defend
those lawsuits.
On May 18, 1999, Patriot received correspondence from Deborah Szekely
("Szekely"), one of the sellers of Golden Door Spa, which Patriot purchased on
May 28, 1998. In that correspondence, Szekely threatened to file a complaint
sounding in securities fraud based upon allegedly misleading financial
information provided to Szekely by Patriot. On May 21, 1999, Patriot received
correspondence from counsel for Szekely stating that Szekely would prosecute a
civil action against Patriot and related entities. Counsel enclosed a draft
Tolling Agreement with that letter. Patriot and potential litigants entered
into a Tolling Agreement on May 26, 1999, which extended the period for the
sellers to file a complaint to June 29, 1999. The Tolling Agreement
subsequently was extended to July 15, 1999 and then to August 2, 1999. Counsel
has provided Patriot with a draft complaint which purports to assert claims
under California state law for securities fraud, fraud in the
18
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
inducement, common law fraud, breach of fiduciary duty and deceit. To the best
of Patriot's knowledge, Szekely has not yet commenced an action. If a
complaint is filed and served on Patriot, Patriot plans to vigorously defend
this lawsuit.
Patriot, a subsidiary of Patriot (the "Subsidiary"), which is the general
partner of a partnership (the "Partnership") and an affiliate of the
Subsidiary, which is a limited partner of the Partnership, are parties to a
dispute with another limited partner of the Partnership relating to a proposed
hotel development in Jacksonville, Florida. The case is captioned C&M
Investors Limited v. Patriot American Hospitality, Inc. et al., originally
filed in the Florida Circuit Court, Fourth Judicial Circuit, in and for Duval
County, Florida, but later removed and now pending in the United States
District Court, Middle District of Florida, Jacksonville Division, Civil
Action No. 98-1236-Civ. J 20B. Wyndham plans to vigorously defend this
lawsuit.
10. Related Party Transactions:
Consulting Agreements
On February 26, 1999, Wyndham and Paul A. Nussbaum entered into a Separation
Agreement (the "Separation Agreement") whereby Mr. Nussbaum resigned his
position as Chairman of the Board of Directors and Chief Executive Officer of
Patriot. Pursuant to the Separation Agreement, Mr. Nussbaum will remain as a
Director of Wyndham.
In accordance with terms of the Separation Agreement, Wyndham will: (1)
guarantee the repayment of the remaining outstanding principal on Mr.
Nussbaum's NationsBank Loan of approximately $7,000 (2) make all interest
payments that become due and payable on the NationsBank Loan on or after the
date of separation; (3) shall pay severance of $3,200 reduced by any interest
payments made by Wyndham on the NationsBank Loan through June 30, 1999.
Additionally, Mr. Nussbaum's outstanding unvested options to purchase
Wyndham shares vested and will remain fully exercisable for the period of
their respective terms and within six months Mr. Nussbaum may elect to
exchange his options on a Black Scholes neutral basis for new options with an
exercise price equal to the fair market value of a share on the election date.
On June 1, 1999 Mr. Nussbaum exchanged 3,078,406 options at varying prices
from $11.18 to $39.58 for 1,154,418 options at $5.1875. Mr. Nussbaum will also
receive 250,000 shares equally over a three year period, of which 83,334 have
vested as of June 30, 1999. Additionally any restrictions will be lifted from
existing shares held by Mr. Nussbaum.
As a condition to receiving the second and third installments of the shares,
Mr. Nussbaum has agreed to provide non-exclusive consulting services to
Wyndham for a period of two years following the resignation date.
Additionally, Mr. Nussbaum will receive other amounts as provided for in the
Separation Agreement.
Other Related Party Transactions
In 1999, Wyndham amended its management contract for the Wyndham Anatole
Hotel to provide that the owners of the hotel may terminate the management
contract following the first annual meeting of Wyndham stockholders after the
completion of the $1 billion equity investment if Paul Nussbaum continues on
the Board of Directors of Wyndham. Mr. Nussbaum has delivered a letter to
Wyndham stating that he would not stand for re-election to the Board of
Directors if it would result in a termination of the management contract.
Additionally, the owners of the Wyndham Anatole Hotel may terminate the
management contract if James Carreker ceases to be an executive officer of
Wyndham.
19
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
On April 30, 1999, Wyndham's option to purchase certain interests in Kinetic
Group Limited Partnership, which provides management information services to
Wyndham, expired without being exercised. Kinetic Group Limited Partnership is
owned 50% by Trammell Crow Company and 50% by an entity owned by Crow family
members and certain of Wyndham's senior executive officers.
11. Dividends:
On January 25, 1999, Patriot paid a stock dividend of $.44 per share of
common stock for the fourth quarter of 1998 to shareholders of record on
December 30, 1998. Earnings per common share, weighted average shares
outstanding and all stock option activity have been restated to reflect the
stock dividend.
On May 4, 1998, Patriot declared a dividend of $0.298 per share for the
first quarter of 1998 . The dividend was paid on May 29, 1998 to shareholders
of record on May 20, 1998.
12. Segment Reporting:
Wyndham classifies its business into proprietary owned brands and non-
proprietary brand hotel divisions, under which it manages the business.
Among its proprietary branded hotels, Wyndham is positioned in the luxury
segment under the Grand Bay Hotel & Resorts(R) brand; in the upscale segment
under Wyndham(TM); and in the mid-priced segment under the ClubHouse brand.
Additionally, Wyndham offers proprietary branded all-suite accommodations
through its upscale Summerfield Suites brand and its mid-priced Sierra Suites
brand. Other proprietary hotel brands owned and developed by Wyndham include
Malmaison and Grand Heritage(R).
Description of Reportable Segments
Wyndham has six reportable segments: Wyndham hotel properties, resort
properties, all suite properties, non-proprietary branded properties, other
proprietary branded hotel properties and other.
. Wyndham hotel properties include Wyndham Hotels, Wyndham Gardens and
Wyndham Grand Heritage. The Wyndham hotel properties are full-service
properties that generally offer a full range of meeting and conference
facilities and banquet space. Facilities generally include restaurants and
lounge areas, gift shops and recreational facilities, including swimming
pools. Full-service hotels generally provide a significant array of guest
services, including room service, valet services and laundry.
. Resort properties include Wyndham Resorts, Grand Bay resort properties and
other resort properties. Resorts are designed to offer unique destinations
which appeal to today's sophisticated vacation traveler and to blend with
their environment, enhancing the natural surroundings with design that fits
the locale. Each resort's recreational activities are of the highest
caliber and are designated to capitalize on the natural attractions of the
location. Many offer a combination of golf, tennis, skiing, health spa,
hiking and other sports.
. All suite properties include the Summerfield and Sierra Suite properties.
The Summerfield and Sierra Suite properties generally target the business
travelers who usually anticipate a one to two week stay. The suites
generally have limited public space and offer limited food and beverage
service. However, the suites provide guests with larger rooms and work
space.
20
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
. Non-proprietary branded properties include all properties which are not
Wyndham hotel properties, resort properties, all suite properties or other
proprietary branded properties. The properties consist of non Wyndham
branded assets such as: Crowne Plaza(R), Embassy Suites(R), Marriott(R),
Courtyard by Marriott(R), Sheraton(R) and independents.
. Other proprietary branded hotel properties include Malmaison, Grand
Heritage, Clubhouse and hotels acquired in the Arcadian acquisition.
. Other includes participating lease revenues, racecourse facility revenue
and expenses, management fee and service fee income, interest and other
income, general and administrative costs, interest expense, depreciation
and amortization and other one-time charges. General and administrative
costs, interest expenses and depreciation and amortization are not
allocated to each reportable segment; therefore, they are reported in the
aggregate within this segment.
Measurement of segment profit or loss
Wyndham evaluates performance based on the operating income or loss from
each business segment. The accounting policies of the reportable segments are
the same as those described in Note 1.
Factors Management Used to Identify the Reportable Segments
Wyndham's reportable segments are determined by brand affiliation and type
of property. The reportable segments are each managed separately due to the
specified characteristics of each segment.
<TABLE>
<CAPTION>
Non- Other
Three Months Ended Wyndham Suite proprietary Proprietary
June 30, 1999 Hotels Resorts Properties Branded Branded Other Total
------------------ -------- -------- ---------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... $146,640 $125,976 $35,192 $295,436 $25,087 $ 22,822 $ 651,153
Operating income
(loss)................. 40,861 29,014 7,931 71,945 7,922 (383,291) (225,618)
<CAPTION>
Three Months Ended
June 30, 1998
------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... $117,841 $125,392 $10,175 $144,541 $24,060 $ 43,454 $ 465,463
Operating income
(loss)................. 29,192 32,373 814 45,779 8,203 (134,976) (18,615)
<CAPTION>
Six Months Ended
June 30, 1999
----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... $289,936 $285,655 $68,305 $576,557 $46,710 $ 55,065 $1,322,228
Operating income
(loss)................. 82,846 87,157 14,410 136,479 13,477 (553,259) (218,890)
<CAPTION>
Six Months Ended
June 30, 1998
----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... $269,647 $200,226 $10,175 $203,340 $29,265 $ 102,616 $ 815,269
Operating income
(loss)................. 72,781 59,172 814 61,021 10,060 (180,560) 23,288
</TABLE>
21
<PAGE>
WYNDHAM INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(dollars in thousands, except per share amounts)
(unaudited)
The following table represents revenue information by geographic area for
the three and six month periods ending June 30, 1999 and 1998. Revenues are
attributed to the United States and its territories and Europe based on the
location of hotel properties. The hotel properties in Europe were acquired on
April 6, 1998. Prior to this date, all of Wyndham's business was attributed to
hotel properties located in the United States and its territories.
<TABLE>
<CAPTION>
Three months ended June 30, 1999
- --------------------------------
United States Europe Total
------------- ------- --------
<S> <C> <C> <C>
Revenues........ $631,104 $20,049 $651,153
<CAPTION>
Six months ended June 30, 1999
------------------------------
United States Europe Total
------------- ------- ----------
<S> <C> <C> <C>
Revenues................ $1,285,073 $37,155 $1,322,228
<CAPTION>
Three months ended June 30, 1998
- --------------------------------
United States Europe Total
------------- ------- --------
<S> <C> <C> <C>
Revenues........ $447,234 $18,229 $465,463
<CAPTION>
Six months ended June 30, 1998
------------------------------
United States Europe Total
------------- ------- --------
<S> <C> <C> <C>
Revenues................ $797,040 $18,229 $815,269
</TABLE>
22
<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 Patriot's and Wyndham's Joint Annual Report on Form 10-
K, as amended, for the year ended December 31, 1998.
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. Although forward-looking statements
reflect management's good faith beliefs, forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievement of Wyndham to differ materially
from anticipated future results, performance or achievements expressed or
implied by such forward-looking statements. Wyndham undertakes 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 availability of equity or debt financing at terms and conditions
favorable to Wyndham, Wyndham's ability to effect sales of assets on favorable
terms and conditions; risks associated with the hotel industry and real estate
markets in general; and risks associated with debt financing.
THE COMPANY
Effective June 30, 1999, Patriot and Old Wyndham completed a series of
transactions which included a restructuring of their existing organizational
structure. As a result of this restructuring, a wholly-owned subsidiary of Old
Wyndham was merged with and into Patriot, with Patriot being the surviving
entity. As such, Patriot is now a wholly-owned subsidiary of Old Wyndham, and
this combined entity, together with all subsidiaries, is hereafter referred to
as Wyndham. In connection with this restructuring, the pairing agreement
between Patriot and Old Wyndham was terminated. Patriot's status as a real
estate investment trust terminated effective January 1, 1999, and Patriot
became a taxable corporation as of that date.
The restructuring was reflected as a reorganization of two companies under
common control and was accounted for in a manner similar to that used in
pooling of interest accounting. As such, there was no revaluation of the
assets and liabilities of Old Wyndham or Patriot. The 1999 financial
statements of Wyndham are presented on a consolidated basis, representing the
operations of the corporation and its subsidiaries, including Patriot. The
1998 financial statements of Wyndham are presented on a combined basis,
representing the combined results of both Old Wyndham and Patriot. All
significant intercompany accounts and transactions have been eliminated.
At June 30, 1999, Wyndham, directly or through its subsidiaries, owned
interests in 173 hotels totaling over 43,300 rooms and leased 39 hotels from
third parties totaling over 5,700 rooms. In addition, Wyndham managed 95
hotels with over 22,300 rooms for third party owners and franchised 11 hotels
under the Wyndham, Summerfield or ClubHouse brands with over 2,600 rooms. 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, Wyndham's portfolio includes world-class resort hotels and
prominent hotels in major tourist destinations.
Asset Sales and Acquisitions
In January 1999, Patriot acquired the remaining 25% minority interests in
each of the five following hotels; Embassy Suites Schaumburg, the Hilton
Dania, the Marriott Suites at Valley Forge, the Marriott Boston Andover and
the Marriott Tysons Corner from CIGNA. The acquisition of such interests was
financed through additional mortgage indebtedness totaling $49.8 million and
the sale of an additional 10% interest in the Marriott Warner Center.
23
<PAGE>
In February 1999, Patriot and Old Wyndham sold their interest in the Bay
Meadows Racecourse located in San Mateo, California. Patriot and Old Wyndham
received cash proceeds of approximately $3.4 million after payment of legal
costs and other closing costs. Patriot and Old Wyndham recognized an estimated
impairment loss on assets held for sale of $42.2 million related to the
racecourse facility in 1998. In connection with the transaction, Patriot
terminated its lease to Wyndham for the racecourse facilities. The actual loss
on the sale of the asset was $42.8 million.
In March 1999, Patriot sold the Holiday Inn Crockett, realizing net cash
proceeds of approximately $18.0 million and recognized a gain of approximately
$2.6 million.
In April 1999, Patriot acquired the remaining 10% minority interests in each
of the four following hotels; the Radisson Akron; the Courtyard Beachwood; the
Holiday Inn Westlake; the Radisson Beachwood from IAH Snavely L.L.C.
("Snavely"). In addition, Patriot sold the Holiday Inn Beachwood to Snavely.
The transaction generated net proceeds of approximately $8.8 million. Patriot
recorded a loss on the sale of approximately $6.6 million.
On April 30, 1999, Patriot sold the following hotels: Hampton Inn Rochester,
Hampton Inn Jacksonville, Hampton Inn Cleveland, and the Hampton Inn Canton,
for net proceeds of approximately $23.5 million and recognized a loss of
approximately $1.4 million.
On May 7, 1999, Patriot exercised its option to purchase the interest in
ISIS 2000, formerly owned by certain related parties and Old Wyndham senior
executive officers, for a cash payment of $3.1 million. Subsequent to the
exercise of the option, Wyndham owns 100% of this entity which provides
reservations and other services to Wyndham.
On May 11, 1999, Wyndham sold the Holiday Inn Sebring for net proceeds of
approximately $4.1 million, and recognized a gain of approximately $0.6
million.
On May 18, 1999, Wyndham purchased the Billerica hotel for a total purchase
price of approximately $23.8 million including the assumption of debt of $16.4
million.
Equity Investment
Effective June 30, 1999, Wyndham completed a $1 billion equity investment
with a group of investors. Pursuant to the terms of this investment Wyndham
issued 9.55 million shares of series B preferred stock in exchange for gross
proceeds of $955 million, representing an approximate 41% voting control of
Wyndham. Wyndham incurred approximately $76.4 million in costs directly
attributable to the equity investment. The remaining $45 million of this
investment was funded through the transfer of one of the investor's loan
receivable from PAH Realty Company, LLC. to Wyndham International Inc. for the
purchase of 450,000 shares of series B preferred stock. Among other terms,
this series B preferred stock pays quarterly dividends on a cumulative basis,
at a rate of 9.75% per year, and is convertible at the holders option into
Wyndham class B common stock.
For a period of 170 days following the completion of the investment, Wyndham
may redeem up to $300 million of the series B preferred stock at a redemption
price of $102.00 per share (102% of the stated amount) plus all accrued
dividends. Wyndham currently plans to fund this redemption with the proceeds
of an offering to its stockholders and the limited partners in the Operating
Partnerships of rights to purchase three million shares of its series A
preferred stock, which generally will have the same economic terms as the
series B preferred stock, but will have no voting rights, except as required
by law and except for a limited right to elect two directors if dividends are
in arrears for six quarterly periods.
Organizational Restructuring
As a condition of the above investment, Old Wyndham was required to
terminate its pairing agreement with Patriot and restructured its existing
organization such that Patriot became a wholly-owned subsidiary of Wyndham.
Patriot's status as a real estate investment trust terminated effective
January 1, 1999, and Patriot became a taxable corporation as of that date.
24
<PAGE>
Wyndham recorded a one-time charge of $675 million as required by SFAS
No. 109 to establish a deferred tax liability that resulted from Patriot's
change in tax status from a REIT to a C corporation. This charge is included
in income tax expense in the accompanying 1999 condensed consolidated
statement of operations.
Wyndham also recorded a restructuring charge of $185.4 million as a result
of the termination of the paired share structure, and management's decision to
exit out of certain activities, resulting in the write-down of certain
nonstrategic assets, and costs to sever certain employees. Wyndham recorded a
charge of approximately $83.1 million for the write off of the unamortized
intangible asset associated with the paired share structure which was
abandoned June 30, 1999. In addition, Wyndham incurred approximately $4.7
million in severance and employee related costs for seven employees in the New
York corporate office and two employees in the Dallas corporate office. The
New York office was closed on June 30, 1999 and its employees were terminated
at that time. Wyndham has paid $1.5 million in the form of cash and
forgiveness of debt, the remaining unpaid portion of $3.2 million has been
included in accrued liabilities at June 30, 1999. Wyndham recorded a charge of
$82.3 million for the write-down of assets to estimated fair value including
$28.4 million of goodwill as a result of management's strategy to exit from
the European market for their non-branded assets which will be sold. In
addition, Wyndham recorded costs of $7.0 million associated with anticipated
staffing reductions and other exits costs necessary to reduce Wyndham's
infrastructure in Arcadian International, Wyndham's management division in
Europe. Included in accounts payable and accrued expenses at June 30, 1999 was
$3.2 million related to severance costs to terminate 67 employees in the
European office and $2.7 million related to other exit costs, primarily lease
cancellations. Wyndham expects these actions to be completed by March 2000.
In addition, a charge of $8.3 million for the tradename intangibles
attributable to the Carefree brand was recorded, as management has decided
that none of the owned or managed assets will carry the Carefree brand now or
in the future.
As part of the restructuring the preferred stockholders of Old Wyndham were
offered an opportunity to exchange their preferred stock for Wyndham Class A
common stock. Each of the 1.78 million shares of Old Wyndham series A
preferred stock and each of the 1.78 million shares of Old Wyndham series B
preferred stock were exchanged for one share of Wyndham Class A common stock.
Pursuant to the merger of a wholly-owned subsidiary of Old Wyndham with
Patriot, each outstanding paired share and shares of Patriot series A
preferred stock was converted into a single share of Wyndham class A common
stock and each outstanding share of Patriot series B preferred stock was
converted into $25 per share and $1.61 of accrued dividends, or an aggregate
of $14.9 million in cash.
Additionally, the third party limited partners in both the Patriot
Partnership and the Wyndham Partnership were offered an opportunity to
exchange their limited partnership interests for Wyndham Class A common stock.
As a result, an additional 15.1 million shares of Wyndham Class A common stock
were issued in exchange for limited partnership units in the Operating
Partnerships. The effect of the exchange of certain limited partners'
interests for Wyndham Class A common stock, resulted in an adjustment to the
basis of certain assets from the application of EITF 95-7. This adjustment is
reflected in the accompanying condensed consolidated balance sheet as a
reduction in basis of Wyndham's investment in real estate and related
improvements of $37.2 million, investment in unconsolidated subsidiaries of
$2.6 million and goodwill and intangibles of $78.4 million.
Interstate's Third-Party Hotel Management Business
On May 27, 1998, Wyndham and Old Interstate entered into a settlement
agreement, as amended, with Marriott which addressed certain claims asserted
by Marriott in connection with Wyndham's then proposed merger with Old
Interstate. The settlement agreement provided for the dismissal of litigation
brought by Marriott, and allowed Wyndham's merger with Old Interstate to
close. In addition to dismissal of the Marriott litigation, the settlement
agreement provides for the re-branding of ten Marriott hotels under the
Wyndham name, the assumption by Marriott of the management of ten Marriott
hotels formerly managed by Old Interstate for the remaining term of the
Marriott franchise agreement, and the spin-off by Wyndham of the third-party
management business.
25
<PAGE>
Effective June 18, 1999, Wyndham distributed approximately 92% of Interstate
in the form of a dividend to shareholders. Shareholders of record on June 7,
1999 received one share of newly issued Interstate stock for every thirty
paired shares of Patriot and Old Wyndham. The remaining 8% is owned equally by
Wyndham and Marriott International, Inc.
As a result of the spin-off, Wyndham now also owns an approximate 55% non-
controlling interest in the subsidiary of Interstate which now operates the
third-party management business that Wyndham acquired from Old Interstate.
Forward Equity Contracts
Wyndham's aggregate obligation under the forward equity contracts was
approximately $335.8 million at June 30, 1999. Effective June 30, 1999,
Wyndham settled in full all of the forward equity contracts in cash, with part
of the proceeds of the $1 billion equity investment. The 100.7 million shares
owned or held by the counterparties were retired effective June 30, 1999.
WYNDHAM INTERNATIONAL, INC.
Results of Operations: Quarter Ended June 30, 1999 Compared with Quarter Ended
June 30, 1998
For the three months ended June 30, 1999, Wyndham (including its
consolidated subsidiaries) had hotel revenues of $628,332,000 as compared to
$422,010,000 during the three months ended June 30, 1998. Of the approximate
$206,322,000 increase, approximately $137,057,000 was a result of hotels
acquired in the Interstate Merger and the Summerfield acquisition. These two
transactions were completed in June of 1998. The second contributing factor is
the acquisition of leaseholds, from CHC Lease Partners, DTR North Canton Inc.
(the "Doubletree Lessee") and North Coast Hotels, L.L.C. ("North Coast"). In
the second quarter of 1998, the income generated from these leases was
reflected as participating lease income. In the second quarter of 1999,
approximately $45,253,000 was reflected as hotel revenues, adding to the
increase in hotel revenues between periods. Hotel expenses increased from
$299,021,000 to $450,544,000, as with revenues, the vast majority of this
increase is a result of the two transactions, which occurred in June of 1998,
and the acquisition of the leaseholds.
As discussed above, the decline in participating lease revenue to $255,000
in the second quarter of 1999 from $13,505,000, was a result of the
acquisition of the leaseholds from third party lessees. At June 30, 1999,
Wyndham owned one hotel that was leased to a third party, as compared to
fourteen in June of 1998.
Management fee and service fee income was $20,427,000 and $22,982,000 for
the three months ended June 30, 1999 and 1998, respectively. The decrease is
primarily the result of a decrease in incentive fee income associated with
seventeen management contracts which were renewed in 1998 with no provision
for Wyndham to earn incentive fees.
Interest and other income decreased from $5,024,000 for the three months
ended June 30, 1998 to $2,139,000 for the three months ended June 30, 1999.
This decline was due to a termination fee of $2,950,000, in 1998 recorded as
other income for the termination of a management contract, in the second
quarter of 1998.
Total revenues and expenses from the racecourse facility operations were
$1,942,000 and $2,673,000 respectively, for the three months ended June 30,
1998. There were no revenues or expenses for the same period in 1999, as the
racetrack operations were sold in February of 1999.
General and administrative expenses were $60,962,000 for the three months
ended June 30, 1999 as compared to $20,502,000 for the same period last year.
This $40,460,000 increase is due in part to the overhead required due to the
growth in the portfolio of managed and leased hotels since 1998. However, a
significant portion is due to several additional factors as follows:
As a result of the $1 billion equity investment, Wyndham incurred costs
of $6,737,000 due to acceleration of vesting of certain employees' stock
awards and incurred $3,309,000 of expenses in
26
<PAGE>
reviewing different strategic alternatives. The reorganization resulted in
the work associated with a high yield bond offering and a bond offering in
Puerto Rico to cease resulting in a write-off of costs associated with the
offerings totaling $3,687,000, and $2,390,000 in other abandoned
transaction costs.
Wyndham also incurred $2,671,000 in legal and unwind fees in order to
settle the forward equity contracts at June 30, 1999 and $3,704,000 of
costs associated with the spin-off of Old Interstate's third-party
management business.
Wyndham also recorded $4,495,000 in bad debt expense for the write-off of
receivables from a hotel that Wyndham no longer intends to manage and has
given notice to terminate the management contract.
In addition, Wyndham has also reflected in general and administrative
expenses, costs of $2,867,000 for the quarter associated with becoming Year
2000 compliant.
As discussed in Note 4, Wyndham recorded a restructuring charge of
$185,382,000. The charge primarily consisted of the following: $83,094,000,
for the write off of an intangible asset associated with the paired share
structure which was abandoned June 30, 1999, and $4,667,000 for severance
payments due to the elimination of job responsibilities. In addition, Wyndham
reflected $82,299,000 in costs to write-down assets to estimated fair values,
including goodwill of $28,394,000, as a result of management's strategy to
exit from the European market for their non-branded assets which will be sold,
and $7,059,000 in staffing reductions and other exit costs, primarily lease
cancellations, necessary to reduce Wyndham's infrastructure in Arcadian
International, Wyndham's management division in Europe. In addition, a charge
of $8,263,000 for the tradename intangibles attributable to the Carefree brand
was recorded, as management has decided that none of the owned or managed
assets will carry the Carefree brand now or in the future.
Depreciation and amortization expense was $80,796,000 for the three months
ended June 30, 1999 compared to $51,326,000 for the three months ended June
30, 1998. This increase results from the hotels acquired in June of 1998 from
the Interstate and Summerfield acquisitions.
Interest expense for the three months ended June 30, 1999 was $90,985,000
compared to $53,494,000 in 1998 resulting in an increase of $37,491,000. The
increase in interest expense is in part due to an additional $1.45 billion in
debt borrowed on June 2, 1998, in order to complete the Interstate Merger.
This debt resulted in interest expense and related amortization of loan costs
of $29,417,000 for the quarter ended June 30, 1999 as compared to $3,968,000
for the quarter ended June 30, 1998. In addition, $11,700,000 in fees were
recorded during the quarter ended June 30, 1999 as interest expense for the
extension of certain maturities relating to the credit facility. The remaining
increase is due to the mortgage debt assumed in the Interstate transaction,
and the refinancing of other mortgage debt.
The primary components of interest expense for the three months ended June
30, 1999 are $52,291,000 of interest related to the revolving credit facility
and term loans, $21,426,000 of interest on mortgage notes, $12,333,000 of
amortization of deferred financing costs and $6,672,000 of other interest
related to other miscellaneous notes, capital lease obligations and
commitments payable. Interest expense for the three months ended June 30, 1998
consists primarily of $32,429,000 of interest on the credit facility, and
$10,669,000 of mortgage note balances outstanding, $5,374,000 of amortization
of deferred financing costs and $7,438,000 of interest related to other
miscellaneous notes, capital lease obligations and commitments payable.
Additionally, Wyndham capitalized interest totaling $1,737,000 and $2,416,000
for the three months ended June 30, 1999 and 1998, respectively, associated
with major renovations of certain hotel properties.
In connection with the acquisition of certain leaseholds and license
agreements, Wyndham recognized an expense of $57,062,000 related to the cost
of acquiring these agreements for the second quarter of 1998, no such expenses
were recognized for the same period in 1999.
In 1999, Wyndham recognized $8,102,000 of net losses related to the
disposition of assets during the second quarter.
Wyndham's share of income from unconsolidated subsidiaries was $1,230,000
for the three months ended June 30, 1999 as compared to $2,293,000 in 1998.
27
<PAGE>
The provision for income taxes increased to $645,496,000 for the three
months ended June 30, 1999 from $932,000 for the three months ended June 30,
1998. The increase is primarily due to the $675,000,000 charge recorded during
June 1999 due to Patriot converting from a REIT to a C corporation, and the
operations of certain special purpose controlled subsidiaries, which
separately report and pay taxes on their taxable income. For federal income
tax purposes, the taxable income from these entities cannot be consolidated
with Wyndham's taxable income or loss, and hence cannot be offset by operating
losses created at the Wyndham Partnership.
Wyndham repaid certain debt obligations of Interstate and Summerfield and,
as a result, Wyndham incurred certain prepayment penalties and wrote off the
remaining balance of unamortized deferred financing costs associated with such
debt in the amount of $11,843,000 net of minority interest, and income tax
effects in 1998. In 1999, because of the new financing obtained, Wyndham wrote
off the remaining balance of unamortized deferred financing costs associated
with the Old Credit facility resulting in an extraordinary loss of $9,838,000,
net of minority interest, and income tax effects.
As a result, the net loss was $877,230,000 for the three months ended June
30, 1999 and $26,254,000 for the three months ended June 30, 1998.
Results of Operations: Six Months Ended June 30, 1999 Compared withSix Months
Ended June 30, 1998
For the six months ended June 30, 1999, hotel revenues were $1,267,162,000
as compared to $712,653,000 during the six months ended June 30, 1999. Of the
approximate $554,509,000 increase, approximately $407,857,000 was attributable
to 1998 acquisitions including Interstate, Summerfield, Arcadian International
and WHG. In addition, the purchase of the remaining third party leaseholds
interests, primarily CHC Lease Partners, NorthCoast Hotels, and Doubletree
Lessee, on June 30, 1998, December of 1998, and January of 1999 led to
increases of hotel revenue of $94,067,000 as the operations of the hotels
during 1999 were consolidated in the statement of operations, whereas in 1998,
Wyndham was receiving a participating rent payment. Hotel expenses increased
from $499,874,000 in 1998 to $896,276,000 in 1999. As with revenues, the vast
majority of this increase is a result of these acquisitions, and the
acquisition of the leaseholds. As a percentage of revenue, gross operating
profits remained relatively constant between periods.
As discussed above, the contributing factor of the decline in participating
lease revenue from $34,070,000 during the six months ended June 30, 1998, to
only $588,000 for the same period in 1999 was the acquisition of the third
party leaseholds. At June 1999, Wyndham leases only one hotel to a third party
lessee as compared to 14 in June of 1998.
Management fee and service fee income was $43,218,000 and $36,821,000 for
the six months ended June 30, 1999 and 1998, respectively. The increase is
primarily the result of the acquisition of the third party management
contracts during 1998 resulting from the Interstate merger and the Summerfield
acquisition.
Interest and other income remained relatively constant between periods,
decreasing slightly from $6,734,000 in 1998 to $6,699,000 in 1999.
Total revenues from the racecourse facility operations (including interest
and other income) were $4,561,000 for the six months ended June 30, 1999
compared to $24,991,000 for the same period last year. Total costs and
expenses associated with the racecourse operations (included marketing costs,
and general and administrative expenses) were $3,867,000 for the six months
ended June 30, 1999 compared to $20,857,000 for the same period last year.
These decreases are due to the sale of Bay Meadows racecourse effective
February 1999.
General and administrative expenses were $111,358,000 for the 1999 period
compared to $37,808,000 for the 1998 period. In part, the increase is due to
the overhead required due to the growth in the portfolio of owned managed and
leased hotels during 1998. However, the significant portion of the increase
was due to several factors as follows:
As a result of the $1 billion equity investment, Wyndham incurred costs
of $6,737,000 due to the acceleration of vesting of certain employees'
stock awards and Wyndham incurred $3,309,000 of expenses
28
<PAGE>
in reviewing different strategic alternatives. The reorganization resulted
in work associated with a high yield bond offering and a bond offering in
Puerto Rico to cease, resulting in a write-off of costs associated with the
offerings totaling $3,687,000, and $5,038,000 in other abandoned
transaction costs.
Wyndham also incurred $4,681,000 in legal and unwind fees in order to
settle the forward equity contracts at June 30, 1999 and $3,704,000 of
costs associated with the spin-off on Intestate's third-party management
business.
In addition, Wyndham has also reflected in general and administrative
expenses, costs associated with becoming Year 2000 compliant of $3,554,000
during 1999.
Wyndham also recorded $4,495,000 in bad debt expense for the write-off of
receivables from a hotel that Wyndham no longer intends to manage and has
given notice to terminate the management contract.
Cost of acquiring license agreements and leaseholds was $803,000 for the six
months ended June 30, 1999 as compared to $57,062,000 for the same period in
1998. This decrease is primarily due to the prior year amount including the
purchase of 17 leasehold interest acquired in connection with the CHCI merger.
As discussed in Note 4, Wyndham recorded $185,382,000, of costs associated
with the restructuring. The costs primarily consisted of the following:
$83,094,000 for the write off an intangible asset associated with the paired
share structure which was abandoned June 30, 1999, and $4,667,000 associated
with severance payments due to the elimination of job responsibilities. In
addition, Wyndham reflected $82,299,000 in costs to write-down assets to
estimated fair values, including goodwill of $28,394,000 as a result of
management's strategy to exit from the European market for non-branded assets
which will be sold, and $7,059,000 in staffing reductions and other exit
costs, primarily lease cancellations, necessary to reduce Wyndham's
infrastructure in Arcadian International, Wyndham's management division in
Europe. Wyndham also recorded a charge of $8,263,000 for the write-off of the
Carefree trade name that will no longer be used with any existing or future
hotels.
Interest expense for the six months ended June 30, 1999 was $181,200,000 as
compared to $89,451,000 for the same period last year. The increase is due in
part to the closing of $1.45 billion in debt in June of 1998 for the merger
with Old Interstate. Related to this increased debt, interest of $3,968,000
was reflected for one month in June of 1998, as compared to $53,528,000 for
the six months in 1999. Secondly, as a result of extending certain maturities
of the credit facilities, Wyndham paid $11,700,000 in fees which has been
reflected in interest expense. Finally, Wyndham assumed, and incurred
additional debt in order to finance the Summerfield, Interstate and Arcadian
transactions during 1998.
The primary components of interest expense for the six months ended June 30,
1999 are $104,919,000 of interest related to the revolving credit facility and
term loans, $41,162,000 of interest on mortgage notes, $24,821,000 of
amortization of deferred financing costs and $14,864,000 of other
miscellaneous notes, capital lease obligations and commitments payable.
Interest expense for the six months ended June 30, 1998 consists primarily of
$54,987,000 of interest on the credit facility, $21,014,000 on mortgage note
balances outstanding, $8,984,000 of amortization of deferred financing costs
and $9,077,000 of interest related to other miscellaneous notes, capital lease
obligations and commitments payable. Additionally, Wyndham capitalized
interest totaling $4,566,000 and $4,611,000 for the six months ended June 30,
1999 and 1998, respectively, associated with major renovations of certain
hotels.
Depreciation and amortization expense was $156,905,000 for the six months
ended June 30, 1999 compared to $86,929,000 for the six months ended June 30,
1998. Of the $69,976,000 increase, $54,904,000 was attributable to the
significant transactions which occurred during the first six months of 1998,
which included Arcadian International in April of 1998, Summerfield and
Interstate in June of 1998. The remaining increase is due to depreciation on
renovations at the hotels and amortization of goodwill.
In 1999, Wyndham also recognized $5,327,000 of net losses related to the
disposition of assets.
Wyndham's share of income from unconsolidated subsidiaries was $3,931,000
for the six months ended June 30, 1999 as compared to $5,487,000 for the six
months ended June 30, 1998.
29
<PAGE>
The provision for income taxes increased from $4,490,000 for the six months
ended June 30, 1998 to $654,439,000 for the six months ended June 30, 1999.
The increase is primarily due to the $675,000,000 charge recorded during June
1999 due to Patriot converting from a REIT to a C corporation, and the
operations of certain special purpose controlled subsidiaries, which
separately report and pay taxes on their taxable income. For federal income
tax purposes, the taxable income from these subsidiaries cannot be
consolidated with Wyndham's taxable income or loss and hence can not be offset
by operating losses created at the Wyndham Partnership.
Minority interest's share of loss associated with the Operating Partnerships
was $6,642,000 for the six months ended June 30, 1999 as compared to
$1,447,000 for the same period last year due to increased losses in the
Operating Partnerships.
Minority interest's share of income in Wyndham's other consolidated
subsidiaries was $4,064,000 in 1999 as compared to $3,014,000 in 1998.
For the six months ended 1998, certain debt obligations of Old Wyndham,
Interstate and Summerfield were repaid upon the merger and acquisition of
these entities. As a result, Wyndham incurred certain prepayment penalties and
wrote off the remaining balance of unamortized deferred financing costs
associated with such debt resulting in an extraordinary loss of $30,560,000,
net of minority interest and income taxes. In connection with the new debt
financing in 1999, Wyndham wrote off the remaining balance of unamortized
deferred financing costs associated with the Old Credit facility resulting in
an extraordinary loss of $9,838,000, net of minority interest and income
taxes.
As a result, the net loss was $876,658,000 for the six months ended June 30,
1999 and $7,842,000 for the six months ended June 30, 1998.
Results of Reporting Segments:
Quarter Ended June 30, 1999 Compared with Quarter Ended June 30, 1998
Wyndham's results of operations are classified into six reportable segments.
Those segments include Wyndham hotels, resort properties, all suite
properties, other proprietary branded properties, non-proprietary branded
properties and other.
Wyndham hotel properties include Wyndham Hotels, Wyndham Gardens and Wyndham
Grand Heritage and represent approximately 22.5% and 25.3% of total revenue
for the three months ended June 30, 1999 and 1998, respectively. Total revenue
was $146,640,000 compared to $117,841,000 for the quarters ended June 30, 1999
and 1998, respectively. The increase is primarily due to the conversion of
other non proprietary assets acquired in June of 1998 to Wyndham hotels.
Operating income for the Wyndham hotels was $40,861,000 compared to
$29,192,000 for the quarters ended June 30, 1999 and 1998, respectively.
Resort hotel properties, including Grand Bay and Wyndham represent
approximately 19.3% and 26.9% of total revenue for the quarters ended June 30,
1999 and 1998, respectively. Total revenue was $125,976,000 compared to
$125,392,000 for the quarters ended June 30, 1999 and 1998, respectively.
Operating income for the resort properties was $29,014,000 compared to
$32,373,000 for the quarters ended June 30, 1999 and 1998, respectively.
All suite properties, including Summerfield and Sierra represent
approximately 5.4% and 2.2% of total revenue for the three months ended June
30, 1999 and June 30, 1998. Total revenue and operating income were
$35,192,000 and $7,931,000, respectively for the three months ended June 30,
1999, and $10,175,000 and $814,000, respectively, for the three months ended
June 30, 1998. The increase is because the portfolio was not acquired until
June of 1998.
Other proprietary branded properties including Malmaison, Grand Heritage,
Clubhouse and hotels acquired in the Arcadian acquisition, represent
approximately 3.9% and 5.2% of total revenue for the quarters ended
30
<PAGE>
June 30, 1999 and 1998, respectively. Total revenue was $25,087,000 compared
to $24,060,000 for the quarters ended June 30, 1999 and 1998, respectively.
Operating income for these properties was $7,922,000 and $8,203,000 for the
quarters ended June 30, 1999 and 1998, respectively.
Non proprietary branded properties including Hilton, Holiday Inn, Marriott,
Ramada, Radisson, Hampton and other major hotel franchises, represent
approximately 45.4% and 31.1% of total revenue for the quarters ended June 30,
1999 and 1998, respectively. Total revenue was $295,436,000 compared to
$144,541,000 for the quarters ended June 30, 1999 and 1998, respectively. The
increase is due primarily to the acquisition of the owned and leased
Interstate properties; the leasehold interests in CHC Lease Partners and North
Coast hotels in June and December of 1998, respectively; as well as several
other leasehold acquisitions throughout 1998. After accounting for these
changes, there was no significant change in revenue from 1998. Operating
income for these properties was $71,945,000 and $45,779,000 for the quarters
ended June 30, 1999 and 1998, respectively. After accounting for the above
acquisitions, operating income was consistent with 1998.
Other represents revenue from various operating businesses including
management and other service companies, and participating lease revenue for
one hotel and a parcel of land. Expenses in this segment are primarily
interest, depreciation, amortization and corporate general and administrative
expenses. Wyndham recorded restructuring expenses that have also been included
in this segment. Total revenue for the other segment was $22,822,000 and
$43,454,000 for the quarters ended June 30, 1999 and 1998, respectively. The
overall $20,632,000 decrease in this segment's revenue was caused by several
factors including, the sale of the Bay Meadows Race Track operations and
leasehold effective February 1, 1999 which reduced revenue by approximately
$1,942,000. The purchase of the remaining third party leasehold interests,
primarily CHC Lease Partners and North Coast Hotels in June and December of
1998, respectively, reduced participating lease revenue by $13,250,000.
Operating losses for the segment were $383,291,000 and $134,976,000 for the
quarters ended June 30, 1999 and 1998, respectively. In addition to the
decrease in revenues, the increase in the segment's operating loss is a result
of increased expenses resulting from the mergers and acquisitions in 1998.
Interest expense increased $37,491,000, depreciation and amortization
increased $29,470,000 and corporate general and administrative expense
increased $40,460,000. The sale of the Bay Meadows Race Track accounted for an
approximate $2,673,000 decrease in expenses. Wyndham also recorded a
restructuring charge of $185,382,000.
Results of Reporting Segments:
Six months Ended June 30, 1999 Compared with Six months Ended June 30, 1998
Wyndham hotel properties represent approximately 21.9% and 33.1% of total
revenue for the six months ended June 30, 1999 and 1998, respectively. Total
revenue was $289,936,000 in 1999 as compared to $269,647,000 or an increase of
7.5%. Operating income was $82,846,000 in 1999 as compared to $72,781,000 in
1998. The increase is primarily a result of the rebranding of certain hotels
acquired in 1998 from non-proprietary brand to Wyndham Hotels.
Resort hotel properties represent approximately 21.6% and 24.6% of total
revenue for the six months ended June 30, 1999 and 1998 respectively. Total
revenue increased from $200,226,000 to $285,655,000 while operating income
increased from $59,172,000 in 1998 to $87,157,000 in 1999. The increase is
primarily due to the acquisition of the remaining partner's interest in WHG in
March of 1998. Prior to the acquisition, Wyndham accounted for its investment
in El Conquistador and El San Juan, on the equity basis of accounting.
Subsequent to the purchase of the partners' interest, the operations were
consolidated into the statement of operations.
All suite properties represent approximately 5.2% and 1.2% of total revenue
for the six months ended June 1999, as compared to 1998. Total revenue
increased from $10,175,000 to $68,305,000 and operating income increased from
$814,000 to $14,410,000 for the six months ended 1998 to 1999, respectively.
Summerfield was not acquired until June of 1998; the timing of the acquisition
is the primary reason for the increase of both revenues and operating income.
31
<PAGE>
Other proprietary branded properties represent approximately 3.5% and 3.6%
of total revenue for the six months ended June 1999, as compared to 1998.
Total revenue increased from $29,265,000 to $46,710,000 and operating income
increased from $10,060,000 to $13,477,000 for the six months ended 1998 to
1999. The hotels acquired in the Arcadian acquisition were not acquired until
April of 1998, accounting primarily for the increase of both revenues and
operating income.
Other nonproprietary branded properties represent approximately 43.6% and
24.9% of total revenue for the six months ended June 1999, as compared to
1998. Total revenue increased from $203,340,000 to $576,557,000 and operating
income increased from $61,021,000 to $136,479,000 for the six months ended
1998 to 1999, respectively. The increase is due primarily to the acquisition
of the owned and leased Interstate properties; the leasehold interest in CHC
Lease Partners, NorthCoast, and the Doubletree Lessees. After accounting for
these changes, there were no significant changes in revenue and operating
income between periods.
Other represents revenue from various operating businesses including
management and other service companies, and participating lease revenue for
one hotel and a parcel of land. Expenses in the segment are primarily
interest, depreciation and amortization and cooperate general and
administrative expenses. In 1999, Wyndham also recorded restructuring expenses
that have also been included in this segment. Total revenue for the other
segment was $55,065,000 and $102,616,000 for the six months ended June 30,
1999 and June 30, 1998 respectively. The overall $47,551,000 decrease in this
segment's revenue was caused by several factors. The sale of Bay Meadows Race
Track operations and leasehold effective February 1, 1999 reduced revenue by
$20,430,000. The purchase of the third party leasehold interests, primarily
CHC Lease Partners and NorthCoast Hotels reduced participating lease revenue
by $33,482,000. The decrease in revenues was partially offset by increases in
management and service fees due to additional management contracts acquired in
the Interstate, and Summerfield acquisitions. Operating losses for the segment
were $553,259,000 and $180,560,000 for the six months ended June 30, 1999 and
1998, respectively. In addition to the decrease in revenues, the increase in
the segment's operating loss is a result of increased expenses resulting from
the mergers and acquisitions in 1998. Interest expense increased $91,749,000,
depreciation and amortization increased $69,976,000 and corporate and general
and administrative expenses increased $69,055,000. The sale of the Bay Meadows
Racetrack accounted for an approximate $16,990,000 decrease in expenses, and
the cost of acquiring the third party leaseholds in 1998 decreased expenses by
an additional $56,259,000. However, Wyndham recorded a restructuring charge in
the second quarter of 1999, for $185,382,000 contributing to the loss in this
segment.
Statistical Information
During 1999, Wyndham's portfolio of owned and leased hotels, experienced
continued growth in both average daily rate ("ADR") and revenue per available
room ("REVPAR") of approximately 3.0% and 1.4% for the three months ended June
30, 1999, and 3.5% and 1.9% for the six months ended June 30, 1999,
respectively, while occupancy remained relatively stable. Management
attributes this growth to continued marketing efforts throughout the portfolio
on hotels that have been newly renovated, and repositioned in certain cases,
as well as to the current strength of market conditions in the U.S. lodging
industry. The following table sets forth certain statistical information for
Wyndham's owned and leased hotels for the three and six month periods ended
June 30, 1999 and 1998 as if the hotels were owned at the beginning of the
periods presented.
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
------------------------------------------ -----------------------------------------
Occupancy ADR REVPAR Occupancy ADR REVPAR
---------- --------------- -------------- ---------- --------------- -------------
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ------- ------- ------ ------- ---- ---- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wyndham Branded Hotels.. 74.2% 75.2% $120.65 $116.13 $89.57 $ 87.36 72.9% 73.8% $129.76 $123.80 $94.60 $91.36
Grand Bay Hotels &
Resorts................ 69.1 68.1 263.07 258.72 181.68 176.13 71.4 72.1 311.91 311.21 222.61 224.25
Summerfield and Sierra
Suites................. 82.5 85.4 117.78 115.50 97.13 98.62 80.0 82.2 119.27 116.69 95.38 95.96
Malmaison............... 85.6 74.4 125.82 118.15 107.75 87.90 83.3 76.2 125.49 117.00 104.60 89.21
Clubhouse............... 61.5 71.8 68.97 68.57 42.45 49.23 58.3 68.0 69.24 68.53 40.37 46.57
Arcadian................ 64.7 63.0 124.91 124.54 80.79 78.50 58.4 56.4 121.18 116.67 70.77 65.81
Non Proprietary Brands.. 73.9 75.4 103.49 101.50 76.52 76.53 71.0 72.4 103.56 101.32 73.51 73.37
---- ---- ------- ------- ------ ------- ---- ---- ------- ------- ------ ------
Weighted Average....... 74.6% 75.8% $113.46 $110.16 $84.60 $ 83.47 72.2% 73.4% $117.72 $113.72 $85.01 $83.45
</TABLE>
32
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents as of June 30, 1999 were $252.5 million, including
restricted cash of $93.9 million. Cash and cash equivalents as of June 30,
1998 were $163.5 million, including capital improvement reserves of $25.2
million.
Cash Flow Provided by Operating Activities
Wyndham's principal source of cash to fund operating expenses and pay
dividends on its preferred stock is cash flow provided by operating
activities. Wyndham's principal source of cash flow is from the operation of
the hotels that it owns, leases and manages. Cash flows from operating
activities were $127.1 million for the six months ended June 30, 1999, and
$152.7 million for the six months ended June 30, 1998. The decrease is
primarily due to increased interest expense, and general and administration
expenses related to evaluating strategic alternatives, and certain severance
costs.
As a result of the reorganization, Wyndham will pay significantly more in
federal income taxes, but will have the ability to retain significantly more
earnings than was previously the case because Wyndham is not required to
distribute at least 95% or more of its taxable income to its shareholders.
Wyndham anticipates that its enhanced ability to retain earnings will allow it
to utilize cash flow from operating activities to fund maintenance, capital
expenditures and acquisitions. Wyndham does not anticipate paying a dividend
to its common shareholders. However, as a result of the issuance of the series
B preferred stock, for the first six years dividends are structured to ensure
an aggregate fixed cash dividend payment of $29.25 million per year, so long
as there is no redemption or conversion of the investors' preferred stock;
therefore, for that period, dividends are payable partly in cash and partly in
additional shares of preferred stock. For the following four years, dividends
are payable in cash or additional shares of series B preferred stock as
determined by the Board of Directors. After year ten, dividends are payable
solely in cash.
Cash Flows From Investing and Financing Activities
Cash flows used in investing activities of Wyndham were $142.1 million for
the six months ended June 30, 1999, resulting primarily from the acquisition
of hotel properties, property renovations and improvements, and cash deposited
as escrows and property improvement reserves. Cash flows provided by financing
activities of $50.5 million for the six months ended June 30, 1999 were
primarily related to the net proceeds from the sale of the series B preferred
stock, the net proceeds from the new credit facility and the net proceeds from
the new mortgage debt, partially offset by the repayment of the old credit
facility, term loans, and the settlement of the forward equity contracts.
Cash flows used in investing activities of Wyndham 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 as collateral under the forward equity
contracts. Cash flows from financing activities of $1.3 billion for the six
months ended June 30, 1998 were primarily related to borrowings under the
revolving credit facility and mortgage notes, and net proceeds from private
placements of equity securities, net of payments of dividends and
distributions.
As of June 30, 1999, Wyndham had approximately $1.3 billion outstanding
under the term loan, $650 million outstanding under the increasing rate loan
facility, and $50 million outstanding under the revolving credit facility.
Additionally, Wyndham had outstanding letters of credit totaling $24.4
million. As of June 30, 1999, Wyndham also had over $1.5 billion of mortgage
debt outstanding that encumbered 83 hotels and approximately $40.9 million in
other debt, resulting in total indebtedness of approximately $3.5 billion. As
of June 30, 1999, Wyndham had $425.6 million of additional availability under
the new revolving credit facility.
Forward Equity Transactions
Wyndham's aggregate obligation under the forward equity transactions was
approximately $335.8 million at June 30, 1999. Effective June 30, 1999,
Wyndham settled in full all of the forward equity transactions in cash, with
part of the proceeds of the $1 billion equity investment. The 100.7 million
shares owned or held by the counterparties were retired effective June 30,
1999.
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Credit Facility and Term Loan
Wyndham's old credit facility with The Chase Manhattan Bank, Chase
Securities, Inc. and Paine Webber Real Estate consisted of a $900 million
revolving credit facility and a series of term loans in the aggregate amount
of $1.8 billion. Interest rates were based on Wyndham's leverage ratio and
varied from 1.5% to 3% over LIBOR. On June 30, 1999 the credit facility and
term loans were repaid with net proceeds of the $1 billion equity investment
and the new credit facilities.
New Credit Facility
Concurrent with the closing of the $1 billion equity investment, Wyndham
closed on a new $2.45 billion credit facility which consists of a $1.3 billion
term loan with a seven year term, a $500 million revolving credit facility
with a five year term, and a $650 million increasing rate loan facility with a
five year term. Proceeds, net of closing costs and fees of approximately $41.1
million from the term loan and the revolving credit facility, and proceeds,
net of closing costs and fees of approximately $17.9 million from the
increasing rate loan facilities, were used to retire existing indebtedness.
Interest rates are based upon LIBOR spread varying from 2.75% to 3.50% per
annum for the term loan, and 1.25% to 2.75% per annum for the revolving credit
facility, based both on Wyndham's leverage ratio, as defined, and whether any
increasing rate loans are outstanding. The term loan and the revolving credit
facility are guaranteed by the domestic subsidiaries of Wyndham, and are
secured by pledges of equity interest held by Wyndham and its subsidiaries.
Wyndham's ability to borrow under its revolving credit facility is subject to
Wyndham's compliance with a number of customary financial and other covenants,
including total leverage and interest coverage ratios.
Interest rates for the increasing rate loans are based on LIBOR rates (less
statutory reserves), plus 3.50% through September 30, 1999, and increasing
0.50% every three months, with a cap of LIBOR plus 4.75%. The lender under the
increasing rate loans receive the benefit of the same guarantees and pledges
of security provided under the new term loan, and revolving credit facility.
New Mortgage Debt
Effective June 30, 1999 Wyndham also closed on a $346 million mortgage loan
with Bear, Stearns Funding, Inc., which is secured by twenty-five properties.
The loan matures on July 1, 2004 and bears interest at the LIBOR rate, plus
3.25% per annum. Proceeds from the mortgage debt were used to retire existing
mortgage indebtedness.
Additionally, effective June 30, 1999 Wyndham closed on a $235 million
mortgage loan with Lehman Brothers Holdings Inc. which is secured by ten
properties. The mortgage loan has a three-year term, with a one year extension
option, and bears interest at the LIBOR rate plus 3.50% per annum, plus an
additional 1.75% on the principal amount payable at maturity. Proceeds from
this mortgage loan were used to retire existing mortgage indebtedness.
Renovations and Capital Improvements
During the first six months of 1999, Wyndham invested approximately $79.8
million in capital improvements and renovations. Management reserves an
average of 4.0% of total hotel revenues, and believes such amounts are
sufficient to fund recurring capital expenditures for the hotels. Capital
expenditures, exclusive of renovations, may exceed 4.0% of total hotel
revenues in a single year.
Wyndham attempts 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 or with working capital.
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Inflation
Operators of hotels in general possess the ability to adjust room rates
quickly. However, competitive pressures may limit Wyndham's ability to raise
room rates in the face of inflation.
Seasonality
The hotel industry is seasonal in nature. Revenues for certain of Wyndham'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
Wyndham's revenues.
Year 2000 Compliance
Many computer systems were not designed to interpret any dates beyond 1999,
which could lead to business disruptions in the United States and
internationally (the "Year 2000 issue"). Wyndham recognizes 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
compliance program involves three major program areas:
. corporate information technology infrastructure and reservation systems
. other electronic assets, which include automated time clocks; point-of-
sale systems; non-information technology systems, such as embedded
technologies that operate fire-life safety systems, phone systems,
energy management systems; and other similar systems
. third parties with whom Wyndham conducts business
Wyndham is applying a three phase approach to each program area:
. Inventory Phase -- identify systems and third parties that may be
affected by Year 2000 issues
. Assessment Phase -- prioritize the inventoried systems and third
parties, assess their Year 2000 readiness, and plan corrective actions
. Remediation Phase -- implement corrective actions, verify
implementation, and formulate contingency plans
Wyndham has engaged a consulting firm to conduct the inventory and
assessment phases of the compliance program. Wyndham has completed inventory
and assessment phases with respect to the corporate information technology
infrastructure and reservation systems. Wyndham has also completed the
inventory and assessment phases with respect to the information technology and
other electronic assets that are located in the hotels, other than some of the
Hotels which are either managed, but not owned, by Wyndham or owned, but not
leased or operated, by Wyndham (the "Third Party Compliance Hotels"). Based on
those assessments and working with our consultants, it was determined which
systems were not Year 2000 compliant and developed appropriate remediation
plans.
Wyndham is implementing the necessary work to remediate those systems at its
owned and leased hotels, and have completed 80 percent of that work. Wyndham
engaged a consulting firm to provide the support and additional skills to
effect the necessary remediation in sufficient time for testing and any
necessary modifications.
Of the 93 Third Party Compliance Hotels that were not acquired in the merger
with Interstate Hotels (the "Interstate Merger"), 66 Third Party Compliance
Hotels have been assessed as part of the compliance program and we have begun
to implement remediation plans at 52 of those hotels. The owners of the other
14 Third Party Compliance Hotels that were assessed have to date neither taken
any action to effect the necessary remediation identified in the assessment
nor authorized Wyndham to effect the remediation on behalf of the owners.
While none of the remaining 27 Third Party Compliance Hotels have been
assessed by the consultants, 20 of the owners have informed Wyndham that they
completed their own assessments. Wyndham continues to monitor the status
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of the Third Party Compliance Hotels and have reminded the owners of the
importance of making the Third Party Compliance Hotels Year 2000 compliant in
sufficient time to permit adequate testing. Wyndham is surveying the Year 2000
compliance of the owners of the hotels that are franchised under the Wyndham
brand but not managed by Wyndham, and have informed those owners of the
appropriate standards to make the equipment operating the systems Year 2000
compliant. However, as the systems at the Third Party Compliance Hotels and
franchised hotels are not under Wyndham's control, Wyndham must rely on the
information provided by those owners or managers/operators and will not be
able to test the assessment or remediation effected by third parties at the
Third Party Compliance Hotels or the franchised hotels.
Wyndham presently expects to expend approximately $34 million in connection
with Year 2000 issues. As of June 30,1999, $2.0 million had been incurred in
connection with the inventory and assessment phases of the compliance program
and $9.9 million to remediate the systems. However, the anticipated
expenditures may increase as the remediation plans are completed.
As part of the settlement of litigation arising out of the Interstate
Merger, Wyndham agreed to contribute to a new company management of the Third
Party Compliance Hotels acquired in that merger, and then dispose of
substantially all of that new company's stock by means of a spin-off to
stockholders or otherwise. That spin-off has been completed and Wyndham does
not expect to bear any of the costs related to the inventory, assessment and
remediation of those hotels.
Wyndham has identified the vendors and service providers that are critical
to its businesses and have requested those parties to provide information
concerning their Year 2000 compliance and remediation efforts. Wyndham has
received responses from 55 percent of those vendors as of June 30, 1999.
Wyndham is continuing to seek additional information from those parties that
did not respond or did not provide sufficient information, but cannot
guarantee that all vendors or service providers will comply with these
requests. More importantly, Wyndham must rely on the information provided by
the third parties and will not be able to test the third parties' compliance.
As a result, Wyndham may not be able to accurately determine the Year 2000
compliance of those vendors or service providers. Based on preliminary
responses, Wyndham believes that its most critical vendors and service
providers will not cause its operations to be materially disrupted as a result
of Year 2000 issues. During the remainder of 1999, Wyndham intends to
determine the extent to which it will be able to replace vendors and service
providers that are expected to be non-compliant. Due to the lack of alternate
sources, however, in most instances Wyndham will be required to remain with
non-compliant vendors or service providers. As the non-compliant vendors and
service providers are identified, appropriate contingency plans will be
determined.
Wyndham believes that its current compliance program will allow sufficient
time to identify which of its systems and other electronic assets are not Year
2000 compliant and to effect the necessary remediation to avoid substantial
problems arising from Year 2000 induced failures. Wyndham believes that its
reprogramming, upgrading and systems replacements will be implemented by the
end of the third quarter of 1999. Wyndham believes that this should provide
adequate time to further correct any problems that did not surface during the
implementation and testing for those systems. Notwithstanding that, Wyndham
recognizes that some vendors and the owners and managers/operators of the
Third Party Compliance Hotels may not comply with their present schedules and
could affect timing and remediation efforts generally. If Wyndham is not
successful in implementing its Year 2000 compliance plan, Wyndham may suffer a
material adverse impact on its consolidated results of operations and
financial condition.
In addition to those systems within our control and the control of our
vendors and suppliers, there are other systems that could have an impact on
our 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
Third Party Compliance Hotels or the hotels franchised under our brands whose
owners and managers/operators
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are implementing their own compliance programs. These systems are outside of
our control or influence and their compliance may not be verified by Wyndham.
However, these systems could adversely affect our financial condition or
results of operation.
Wyndham is continuing to develop contingency plans to address potential Year
2000 induced failures. Because Wyndham has no control over third party
assessment and remediation efforts, its contingency planning is focused on
externally caused disruptions. Wyndham is developing its plans on the belief
that the consequences of Year 2000 induced failures will be local in nature.
Wyndham's plans will be based on existing contingency plans for operations
during storms and other natural disasters. While each Hotel is developing a
contingency plan, any disruption in utilities or other key local services
could have the effect of disrupting operations of several hotels located in
the affected geographic area. As part of the contingency planning, Wyndham is
evaluating the continued management of the Third Party Compliance Hotels that
do not become Year 2000 compliant. Wyndham's initial contingency plans are
expected to be completed in October 1999.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
Wyndham's primary market risk exposure is to future changes in interest
rates related to the Companies' derivative financial instruments and other
financial instruments including debt obligations, interest rate swaps,
interest rate caps, and future debt commitments.
Wyndham manages its debt portfolio by periodically entering into interest
rate swaps and caps to achieve an overall desired position of fixed and
floating rates or to limit its exposure to rising interest rates.
The following table provides information about Wyndham's derivative and
other financial instruments that are sensitive to changes in interest rates.
. For fixed rate debt obligations, the table presents principal cash flows
and related weighted-average interest rates by expected maturity date and
contracted interest rates at June 30, 1999. For variable rate debt
obligations, the table presents principal cash flows by expected maturity
date and contracted interest rates at June 30, 1999.
. For interest rate swaps and caps, the table presents notional amounts and
weighted-average interest rates or strike rates by expected (contractual)
maturity dates. Notional amounts are used to calculate the contractual cash
flows to be exchanged under the contract. Weighted average variable rates
are based on implied forward rates in the yield curve at June 30, 1999.
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 Thereafter Face Value Fair Value
-------- ---------- -------- -------- -------- ---------- ---------- ----------
(in thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt
Long-term debt
obligations including
Current Portion
Fixed Rate............. $ 2,290 $ 32,817 $ 8,322 $ 46,129 $ 6,766 $ 334,891 $ 431,215 $ 431,215
Average Interest Rate.. 8.71% 8.66% 7.85% 8.93% 8.56% 8.18%
Variable Rate.......... $ 65,093 $ 121,861 $140,047 $276,234 $ 78,208 $2,410,854 $3,092,297 $3,092,297
Average Interest Rate.. 7.70% 8.11% 7.82% 8.41% 7.64% 8.70%
Interest Rate Derivative
Financial Instruments
Related to Debt
Interest Rate Swaps
Pay Fixed/Receive
Variable.............. -- $ 91,640 $ 29,910 $500,000 $250,000 -- $ 871,550 $ 800
Average Pay Rate....... 5.96% 5.96% 5.98% 6.00% 5.84% --
Average Receive Rate... 5.96% 5.96% 6.00% 6.01% 6.05% --
Interest Rate Caps
Notional Amount........ $208,750 $1,500,000 $ 55,420 -- -- $ 30,000 $1,794,170 $ 415
Strike Rate............ 6.98% 6.97% 6.50% 8.50% 8.50% 8.50%
Forward Rate........... 5.60% 6.22% 6.46% 6.50% 6.61% 6.65%
</TABLE>
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 29, 1992 an action for trademark infringement was filed in the New
York Supreme County of New York, Index No. 17474/92 titled Wyndham Hotel
Company, John Mados, and Suzanne Mados et al v. Wyndham Hotel Company. Ltd. It
is based upon the Madoses' alleged use of the mark WYNDHAM in connection with
the Wyndham Hotel located in Manhattan, New York City, and operated by the
Madoses since 1966 pursuant to a lease agreement entered into by the Madoses
on June 1, 1957. The case was tried in May 1996, and an order and partial
judgement was entered in March 1998. The order enjoins us from using the name
and mark "Wyndham" in connection with the advertising, promoting, managing or
operating a hotel in Manhattan, New York City, and places restrictions on
Wyndham's use of the name and mark "Wyndham" in all other areas of New York
outside of Manhattan. In November 1998, an order was issued clarifying the
original order and a final judgment was entered. In December 1998, Wyndham
appealed that judgment to the New York Supreme Court, Appellate Division,
First Department. In January 1999, Wyndham moved for a stay of the injunction
pending appeal which motion was granted by the Appellate Division, First
Department on February 4, 1999. On May 18, 1999 the Appellate Division, First
Department rendered a decision and order affirming the final judgment. On May
24, 1999, Wyndham filed a motion for permission to appeal that decision to the
Court of Appeals of the State of New York. In July 1999, Wyndham received
notice that the Court of Appeals of the State of New York would not hear the
appeal.
Patriot and Old Wyndham have received two letters dated November 11, 1998
and December 2, 1998 (the "Letters") from the counsel for the Koffman family
and its affiliates (collectively, "Koffman") in connection with a Registration
Rights Agreement entered into as of March 31, 1998 (the "Agreement") among
Patriot, Old Wyndham and the Holders as defined therein, which such Holders
include Koffman. Counsel has asserted in the Letters that, in connection with
Patriot's and Old Wyndham's exercise of their "black-out" rights under the
Agreement, on October 8, 1998 Patriot and Old Wyndham are in breach of their
obligations to Koffman under the Agreement. Counsel has stated in the Letters
that Koffman will seek relief from Patriot and Old Wyndham for any losses that
Koffman may have sustained in connection with Patriot's and Old Wyndham's
alleged breach of the Agreement and also have implied that Koffman may file
against Patriot and Old Wyndham unspecified claims allegedly arising under the
federal securities laws. If Patriot and Old Wyndham are sued, they plan to
vigorously defend this lawsuit.
Patriot and Old Wyndham have disclosed various matters relating to Patriot
and Old Wyndham in their Form 8-K filed with the Securities and Exchange
Commission on November 9, 1998 including, without limitation, an assertion by
UBS AG, London Branch ("UBS") that Patriot and Old Wyndham are in default
under the terms of a forward contract by and among Patriot, Old Wyndham and
UBS. Patriot and Old Wyndham also have disclosed various matters in their
Joint Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on March 26, 1999, and in registration statements on Form S-3
(filed on April 28, 1999) and Form S-4 (filed on April 14, 1999).
On January 12, 1999, a putative class action lawsuit was filed on behalf of
the shareholders of Patriot and Old Wyndham in the Delaware Chancery Court.
This lawsuit, captioned Charles Fraschilla v. Paul A. Nussbaum, et al., No.
16895-NC, names as defendants Patriot, the then Patriot directors ("Patriot
Directors"), and Apollo Real Estate Advisors, L.P., Apollo Management, L.P.,
The Thomas H. Lee Company, Beacon Capital Partners, Inc. and Rosen Consulting
Group (collectively, the "Investors"). This lawsuit alleges, among other
things, that the Patriot Directors breached their fiduciary duties to
Patriot's then shareholders with respect to Patriot's financial condition and
by "effectively selling control" of Patriot to the Investors for inadequate
consideration and without having adequately considered or explored all other
alternatives to the sale or having taken steps to maximize shareholder value;
and the Investors aided and abetted the Patriot Directors in their purported
breaches of fiduciary duty. In the complaint, the plaintiff seeks an
injunction preventing the consummation of the deal with the Investors (which
Investment now has been consummated) and monetary damages.
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On January 19, 1999, three additional and similar putative class action
lawsuits were filed in the same court by different purported class
representatives: Sybil R. Meisel and Steven Langsam, Trustees v. Paul A.
Nussbaum, et al., No 16905-NC; Crandon Capital Partners v. Paul A. Nussbaum,
et al., No. 16906-NC; and Robert A. Staub v. Paul A. Nussbaum, et al., No.
16907-NC. The four suits since have been consolidated under the Fraschilla
caption.
The parties have negotiated and entered into a memorandum of understanding
to settle these four putative consolidated class action lawsuits, dated on or
about April 6, 1999 (the "Memorandum of Understanding"). The Memorandum of
Understanding sets forth the principal bases for the settlement, which
include, among other things, the modification of Wyndham's obligations to make
the optional $300 million rights offering (the "Rights Offering") specified in
Section 6.13 of the Securities Purchase Agreement, as follows: (a) Wyndham
shall make the Rights Offering; (b) the Rights Offering shall be made no
earlier than 60 days after the Closing Date, as defined in the Securities
Purchase Agreement (the "Closing Date"), and shall be held open for a period
of not less than 30 days, and Wyndham shall use its good faith efforts to
commence the Rights Offering no later than 120 days after the Closing Date;
provided, however, that Wyndham will not be required to make the Rights
Offering if: (i) the SEC does not declare effective any registration statement
with regard to securities of Wyndham to be offered in the Rights Offering;
(ii) there is a pending court order, motion, legal proceeding or other action
to enjoin, prevent or delay the Rights Offering; or (iii) the Rights Offering
cannot be completed, despite Wyndham's good faith efforts, within 170 days of
the Closing Date. The Memorandum of Understanding and the proposed settlement
will be contingent upon (a) the drafting and execution of a Stipulation of
Settlement (the "Stipulation") and related documents necessary to effectuate
the terms of the proposed settlement; (b) the continuation and completion by
plaintiffs of reasonable and appropriate discovery sufficient to enable
plaintiffs' counsel to confirm the bona fides of the defendants' position and
that the settlement is and continues to be fair, equitable and reasonable and
in the best interest of the Class; and (c) Final Court Approval of the
settlement (as defined in the Memorandum of Understanding) and dismissal of
the Action with prejudice by the Court.
In the Stipulation, it is anticipated that the parties will request that the
Court certify, for purposes of settlement, a non-opt out, binding class of all
persons and entities (exclusive of defendants and their affiliates) who own
shares of Wyndham common stock or are unit holders of Patriot American
Hospitality, L.P. or Wyndham International Partnership, L.P., beneficially or
of record, as of the Record Date (to be set in the Stipulation) and/or sold
shares of Patriot or Wyndham common stock or units of the partnerships during
the period from December 15, 1998 to and including the Record Date (the
"Class"): that the Court approve the settlement, including dismissing with
prejudice all claims of the plaintiffs and the Class against the Defendants
and others. It is expected that counsel for the class plaintiffs will submit a
fee application to the Court for an award of attorney's fees and expenses. In
the Memorandum of Understanding, counsel for class plaintiffs agreed that such
an application would not exceed $1.25 million, and Wyndham agreed to pay an
award of attorney's fees and expenses if ordered by the Court to the extent
that it does not exceed $1.25 million.
On February 3, 1999, McNeill Investment Company, Inc. filed a lawsuit
against Patriot in the United States District Court for the Western District
of Pennsylvania. In the lawsuit, captioned McNeill Investment Company, Inc. v.
Patriot American Hospitality, Inc., No 99-165, the plaintiff alleges that
Patriot breached its obligations under a registration rights agreement that
Patriot became obligated under throught its merger transaction with Interstate
Hotels Corporation. On March 26, 1999, Patriot filed an answer to the
complaint in which it denied all liability. Wyndham plans to vigorously defend
this lawsuit.
On May 7, 1999, a putative class action lawsuit was filed in the United
States District Court for the Northern District of California on behalf of
former shareholders of California Jockey Club and Bay Meadows Operating
Company (collectively, "Bay Meadows") who subsequently became shareholders of
Patriot, Patriot American Hospitality Operating Company and Wyndham as a
result of the merger (the "Merger") of the above companies on or about July 1,
1997 (the "Class"). This lawsuit, captioned Johnson, et al. v. Patriot
American Hospitality, Inc. et al., C-99-2153-SI, names as defendants Patriot
American Hospitality, Inc., Wyndham International, Inc., PAH GP, Inc. PAH LP,
Inc., Patriot American Hospitality Partnership, L.P., Wyndham International
Operating
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Partnership, L.P. and PaineWebber Group, Inc. This action was commenced on
behalf of all former holders of Bay Meadows stock during a class period from
June 2, 1997 to the date of filing (May 7, 1999). This action asserts
securities fraud claims and alleges that the purported class members
wrongfully were induced to tender their Bay Meadows shares as part of the
Patriot/Bay Meadows merger based on a fraudulent prospectus. This action
further alleges that defendants continued to defraud shareholders about their
intentions to acquire numerous hotels and saddle Wyndham with massive debt
during the class period. Three other actions against the same defendants
subsequently were filed in the Northern District of California: (i) Ansell v.
Patriot American Hospitality, Inc., et al., No. C-99-2239 (filed May 14,
1999), (ii) Sola v. Paine Webber Group, Inc., et al., No. C-99-2770 (filed
June 11, 1999), and (iii) Gunderson v. Patriot American Hospitality, Inc., et
al., No. C 99-3040 (filed June 23, 1999). Another action with substantially
identical allegations, Susnow v. Patriot American Hospitality, Inc., et al.,
No. 3-99-CV1354-T (filed June 15, 1999), also subsequently was filed in the
Northern District of Texas. A motion is pending to have this Texas action
transferred to the Northern District of California for all purposes, another
motion is pending to have this Texas action and the Levitch and Gallagher
lawsuits identified below transferred to the Northern District of California
for consolidated pretrial purposes, and a cross-motion is pending to have all
the California actions transferred to the Northern District of Texas for
consolidated pretrial purposes. To date, none of the defendants have been
required to answer, move or otherwise respond to the complaints and no
discovery has been taken. Wyndham plans to vigorously defend those lawsuits.
On or about June 22, 1999, a putative class action lawsuit captioned Levitch
v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1416-D, was filed in
the Northern District of Texas against Patriot, Wyndham, James D. Carreker and
Paul A. Nussbaum. This action asserts securities fraud claims and alleges
that, during the period from January 5, 1998 to December 17, 1998, the
defendants defrauded shareholders by issuing false statements about Wyndham.
The complaint was filed on behalf of all shareholders who purchased Patriot
American and Wyndham stock during that period. Another action, Gallagher v.
Patriot American Hospitality, Inc., et al., No. 3-99-CV1429-L, filed on June
23, 1999, alleges substantially the same allegations and claims as mentioned
above, a motion is pending to have these two actions consolidated with the
four actions pending in the Northern District of California and the Susnow
action pending in the Northern District of Texas. To date, none of the
defendants have been required to answer, move or otherwise respond to the
complaints and no discovery has been taken. Wyndham plans to vigorously defend
those lawsuits.
On May 18, 1999, Patriot received correspondence from Deborah Szekely
("Szekely"), one of the sellers of Golden Door Spa, which Patriot purchased on
May 28, 1998. In that correspondence, Szekely threatened to file a complaint
sounding in securities fraud based upon allegedly misleading financial
information provided to Szekely by Patriot. On May 21, 1999, Patriot received
correspondence from counsel for Szekely stating that Szekely would prosecute a
civil action against Patriot and related entities. Counsel enclosed a draft
Tolling Agreement with that letter. Patriot and potential litigants entered
into a Tolling Agreement on May 26, 1999, which extended the period for the
sellers to file a complaint to June 29, 1999. The Tolling Agreement
subsequently was extended to July 15, 1999 and then to August 2, 1999. Counsel
has provided Patriot with a draft complaint which purports to assert claims
under California state law for securities fraud, fraud in the inducement,
common law fraud, breach of fiduciary duty and deceit. To the best of
Patriot's knowledge, Szekely has not yet commenced an action. If a complaint
is filed and served on Patriot, Patriot plans to vigorously defend this
lawsuit.
Patriot, a subsidiary of Patriot (the "Subsidiary"), which is the general
partner of a partnership (the "Partnership") and an affiliate of the
Subsidiary, which is a limited partner of the Partnership, are parties to a
dispute with another limited partner of the Partnership relating to a proposed
hotel development in Jacksonville, Florida. The case is captioned C&M
Investors Limited v. Patriot American Hospitality, Inc. et al., originally
filed in the Florida Circuit Court, Fourth Judicial Circuit, in and for Duval
County, Florida, but later removed and now pending in the United States
District Court, Middle District of Florida, Jacksonville Division, Civil
Action No. 98-1236-Civ. J 20B. Wyndham plans to vigorously defend this
lawsuit.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Since March 31, 1999, Wyndham International, Inc. ("Wyndham") has issued
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 following
amounts and for the consideration set forth below.
On June 30, 1999 Wyndham issued 9.55 million shares of Series B convertible
preferred stock to a group of investors for aggregate gross consideration of
$955 million. For the series B preferred stock, dividends are payable
quarterly, on a cumulative basis, at a rate of 9.75% per year. For the first
six years, the dividends are structured to ensure an aggregate fixed cash
dividend payment of $29.25 million per year, so long as there is no redemption
or conversion of the investors' series B preferred stock; therefore, for that
period, dividends are payable partly in cash and partly in additional shares
of series B preferred stock, with the cash component initially equal to 30%
for the first dividend and declining over the period to approximately 19.8%
for the final dividend in year six. For the next four years dividends are
payable in cash or additional shares of series B preferred stock as determined
by the Board of Directors; and after year 10, dividends are payable solely in
cash. If any dividends are paid on the Wyndham common stock, additional
dividends will be paid in the amount that would have been paid on the shares
of Wyndham common stock into which the series B preferred stock is then
convertible. If a change in control or a liquidation of Wyndham occurs within
six years following the investment, any dividends remaining for the six years
will be accelerated and paid. The series B preferred stock is not redeemable
by Wyndham for six years, except that $300 million of the series B preferred
stock may be redeemed during the 170 day period following the closing of the
investment. The series B preferred stock can vote with the Wyndham common
stock on an as-converted basis on matters submitted to the common stockholders
and voting as a separate class on specified matters, with special rules
applying to the election of directors. The series B preferred stock is also
convertible, at the holder's option, into a number of shares of Wyndham common
stock equal to $100.00 divided by the conversion price, initially equal to
$8.59 but subject to potential downward adjustments.
On June 30, 1999 Wyndham issued 15,097,354 shares of its common stock in
exchange for 12,539,564 paired common partnership units, 1,324,804 preferred B
paired partnership units, 655,892 preferred A Wyndham partnership units and
577,094 preferred C Wyndham partnership units.
On July 1, 1999 Wyndham issued 450,000 shares of Series B convertible
preferred stock to Beacon Capital Partners, L.P. ("Beacon") for $45 million.
Beacon transferred its loan receivable from PAH Realty Company, LLC to Wyndham
International, Inc. for the purchase of these 450,000 shares of Series B
preferred stock.
41
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Patriot and Wyndham each held its annual meeting of stockholders on June 29,
1999. During this meeting, stockholders were asked to consider and vote upon
certain proposals relating to the sale of ten million shares of Series B
convertible preferred stock, at $100 per share, for $1 billion in cash, and
other transactions relating to the restructuring of Wyndham and Patriot in
accordance with a securities purchase agreement. Additionally, stockholders of
both Patriot and Wyndham were asked to vote on the election of certain
individuals to the Board of Directors.
For each of Patriot's four proposals, the results of the shareholders voting
were as follows:
<TABLE>
<CAPTION>
Votes
Proposal Votes FOR AGAINST Abstaining
-------- ---------- --------- ----------
<S> <C> <C> <C>
1. To approve the merger of a wholly-owned
subsidiary of Wyndham with and into Patriot.. 89,315,308 1,547,231 160,845
2. To approve a reverse stock split of Patriot
common stock................................. 89,377,776 2,822,524 251,880
3. To terminate the pairing agreement dated
February 17, 1983, as amended, between
Patriot and Wyndham.......................... 88,329,717 2,429,725 263,941
4. To reelect three members of the Board of
Directors of Patriot to serve until the 2002
annual meeting of stockholders and until
their respective successors are duly elected
and qualified; as follows:
John H. Daniels.............................. 85,917,653 -- 6,534,531
Gregory R. Dillon............................ 85,917,240 -- 6,534,944
Philip J. Ward............................... 85,917,685 -- 6,534,499
</TABLE>
For each of Wyndham's eleven proposals, the results of the shareholders
voting was as follows:
<TABLE>
<CAPTION>
Votes
Proposal Votes FOR AGAINST Abstaining
-------- ---------- --------- ----------
<S> <C> <C> <C>
1. To approve the issuance for cash of $1
billion of Wyndham Series B convertible
preferred stock to new investors........... 87,765,200 2,418,492 549,488
2. To approve the issuance of shares of
Wyndham common stock to existing holders of
Wyndham's preferred stock and existing
limited partners of Wyndham's and Patriot's
operating partnerships in exchange for
their preferred stock and limited
partnership interests...................... 87,907,294 2,202,554 623,330
3. To approve the merger of a wholly-owned
subsidiary of Wyndham with and into
Patriot.................................... 88,855,650 1,642,601 234,932
4. To approve a reverse stock split of
Wyndham common stock....................... 88,266,820 3,272,959 587,761
5. To terminate the existing pairing
agreement, dated February 17, 1983, as
amended, between Patriot and Wyndham....... 88,618,330 1,834,659 280,192
6. To increase the authorized common stock of
Wyndham.................................... 88,455,616 2,370,343 302,982
7. To increase the authorized preferred stock
of Wyndham................................. 82,383,731 8,039,429 310,017
8. To create a class of common stock
designated as "class A" common stock....... 87,720,504 2,627,755 384,919
9. To create a class of common stock
designated as "class B" common stock....... 87,642,055 2,694,028 397,093
10. To change the structure and composition of
the Board of Directors of Wyndham as
described in the joint proxy
statement/prospectus dated June 1, 1999.... 88,051,169 2,723,482 304,189
11. To reelect four members of the Board of
Directors of Wyndham to serve until the
2002 annual meeting of stockholders and
until their respective successors are duly
elected and qualified, as follows:
Leonard Boxer.............................. 85,492,232 -- 6,636,713
Burton C. Einspruch, M.D. ................. 85,491,819 -- 6,637,126
Susan T. Groenteman........................ 85,484,161 -- 6,644,784
Arch K. Jacobsen........................... 85,492,232 -- 6,636,713
</TABLE>
42
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K--Legal to review & update as
necessary
(a) Exhibits:
<TABLE>
<CAPTION>
Item No. Description
-------- -----------
<C> <S>
4.1 Registration Rights Agreement for Series B Preferred stockholders
4.2 Registration Rights Agreement for former Operating Partnership unit
holders
10.1 Executive employment agreement dated April 19, 1999 between Wyndham
International Inc. and Leslie V. Bentley
10.2 Executive employment agreement dated April 19, 1999 between Wyndham
International Inc. and Michael A. Grossman
10.3 Executive employment agreement dated April 19, 1999 between Wyndham
International Inc. and Stanley M. Koonce, Jr.
10.4 Executive employment agreement dated April 19, 1999 between Wyndham
International Inc. and Carla S. Moreland
10.5 Executive employment agreement dated May 26, 1999 between Wyndham
International Inc. and Richard Mahoney
10.6 Letter agreement dated July 12, 1999 between Lawrence S. Jones and
Wyndham International Inc.
10.7 Letter agreement dated July 12, 1999 between William W. Evans III and
Patriot American Hospitality Inc.
27.1 Financial Data Schedule--Wyndham (filed herewith).
</TABLE>
(b) Reports on Form 8-K:
(1) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. filed February 4, 1999 (Nos. 001-09319 and
001-09320), reporting under Item 5 that Patriot and Wyndham received
consents from Patriot's bank group to amend the terms of Patriot's $2.7
billion bank credit facility.
(2) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. filed February 16, 1999 (Nos. 001-09319 and
001-09320), reporting under Item 5 a press release announcing that Patriot
had extended a letter of intent with an investor group, comprised of
Thomas H. Lee Company, Apollo Real Estate Advisors, L.P., Apollo
Management, L.P., Beacon Capital Partners, Inc., and Rosen Consulting
Group, under which the investor group would purchase up to $1 billion of
convertible preferred stock.
(3) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. filed March 2, 1999 (Nos. 001-09319 and 001-
09320), reporting under Item 5 that Patriot had entered into a definitive
securities purchase agreement with a group of investors, including
affiliates of Thomas H. Lee Company, Apollo Real Estate Advisors, L.P.,
Apollo Management, L.P., Beacon Capital Partners, Inc., and Rosen
Consulting Group, providing for a $1 billion equity investment in the
Companies.
(4) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. filed March 3, 1999 (Nos. 001-09319 and 001-
09320), reporting under Item 5 that Paul A. Nussbaum had resigned his
position as Chairman of the Board of Directors and Chief Executive Officer
of Patriot.
(5) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. filed March 26, 1999 (Nos. 001-09319 and 001-
09320), reporting under Item 5 current developments regarding the spin-off
of Interstate Hotels Management, Inc.
(6) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. filed March 29, 1999 (Nos. 001-09319 and 001-
09320), as amended May 10, 1999 and May 24, 1999, filing under Item 5 the
pro forma financial information for the year ended December 31, 1998.
(7) Current Report on Form 8-K of Wyndham International, Inc. filed July 13,
1999 (No. 001-09320), reporting under Item 2 the completion of the sale of
ten million shares of Series B convertible preferred stock, at $100 per
share, for $1 billion in cash, and the related restructuring of Wyndham
International, Inc. and Patriot American Hospitality, Inc. in accordance
with the terms of a Securities Purchase Agreement.
43
<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.
Wyndham International, Inc.
/s/ RICHARD MAHONEY
By___________________________________
Richard Mahoney
Chief Financial Officer
(Authorized Officer and Principal
Accounting and Financial Officer)
DATED: August 13, 1999
44
<PAGE>
EXHIBIT 4.1
=====================================================
REGISTRATION RIGHTS AGREEMENT
By and among
WYNDHAM INTERNATIONAL, INC.
and
The Persons Listed on
the Signature Pages Hereof
----------------
Dated as of February 18, 1999
====================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions.....................................................2
Section 2. Registration Under the Securities Act...........................5
(a) Required Registration.......................................6
(b) Incidental Registration.....................................9
(c) Expenses...................................................11
(d) Effective Registration Statement Suspension................11
(e) Selection of Underwriters..................................12
Section 3. Restrictions on Public Sale by Wyndham.........................12
Section 4. Registration Procedures........................................12
Section 5. Indemnification; Contribution..................................19
(a) Indemnification by Wyndham.................................19
(b) Indemnification by Holders.................................20
(c) Conduct of Indemnification Proceedings.....................20
(d) Contribution...............................................21
Section 6. Miscellaneous..................................................23
(a) Inconsistent Agreements....................................23
(b) Amendments and Waivers.....................................23
(c) Notices....................................................23
(d) Successors and Assigns.....................................24
(e) Recapitalizations, Exchanges, etc.,
Affecting Registrable Securities...........................25
(f) Counterparts...............................................25
(g) Descriptive Headings, Etc..................................25
(h) Severability...............................................25
(i) Governing Law..............................................26
(j) Specific Performance.......................................26
(k) Entire Agreement...........................................26
(i)
<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of February
18, 1999, by and among Wyndham International, Inc., a Delaware corporation
("Wyndham"), the other Persons (as hereinafter defined) listed on the signature
pages hereof (herein referred to collectively, along with their respective
affiliates and successors who from and after the date hereof acquire or are
otherwise the transferee of any Registrable Securities (as hereinafter defined),
as the "Initial Holders" and individually, as an "Initial Holder") and any other
Person that shall from and after the date hereof acquire or otherwise be the
transferee of any Registrable Securities and who shall be a Permitted Transferee
(as hereinafter defined) of any Initial Holder (herein referred to collectively
as the "Holders" and individually as a "Holder").
WHEREAS, Wyndham and Patriot American Hospitality, Inc. ("Patriot"
and, together with Wyndham, the "Companies"), Wyndham International Operating
Partnership, L.P. and Patriot American Hospitality Partnership, L.P. have
entered into a Securities Purchase Agreement, dated as of February 18, 1999 (the
"Securities Purchase Agreement"), with the Initial Holders, which provides, upon
the terms and subject to the conditions thereof, for the purchase by the Initial
Holders of shares of Wyndham's Series B Convertible Preferred Stock, par value
$0.01 per share (the "Series B Preferred Stock");
WHEREAS, the Series B Preferred Stock will be convertible, upon the
terms and subject to the conditions set forth in the Certificate of Designation
relating thereto, into shares of Class B Common Stock, par value $0.01 per share
(the "Class B Common Stock"), of Wyndham; and
WHEREAS, in the event of any transfer of any shares of Series B
Preferred Stock to any Person other than an Initial Holder, such shares of
Series B Preferred Stock will automatically convert, upon the terms and subject
to the conditions set forth in the Certificate of Designation relating thereto,
into shares of Series A Convertible Preferred Stock, par value $0.01 per share
(the "Series A Preferred Stock"), of Wyndham;
WHEREAS, the Series A Preferred Stock will be convertible, upon the
terms and subject to the conditions set forth in the Certificate of Designation
relating thereto, into shares of Class A Common Stock, par value $0.01 per share
(the "Class A Common Stock"), of Wyndham;
<PAGE>
WHEREAS, in the event of any transfer of any shares of Class B Common
Stock to any Person other than an Initial Holder, such shares of Class B Common
Stock will automatically convert, upon the terms and subject to the conditions
set forth in the Restated Certificate of Incorporation of Wyndham; and
WHEREAS, in order to induce the Initial Holders to complete the
transactions contemplated by the Securities Purchase Agreement, Wyndham has
agreed to provide registration rights on the terms and subject to the conditions
provided herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
Section 1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the Exchange Act.
"Blackout Period" shall have the meaning set forth in Section 2(a)(i).
"Class A Common Stock" shall have the meaning set forth in the
preamble; provided, that if there shall be only one authorized class of
Wyndham's common stock at the time, Class A Common Stock shall be deemed to
refer to such common stock.
"Class B Common Stock" shall have the meaning set forth in the
preamble.
"Closing" shall mean the date upon which the purchase and sale of the
Preferred Stock pursuant to the Securities Purchase Agreement occurs.
"Companies" shall have the meaning set forth in the preamble and shall
also include Patriot's and Wyndham's successors.
2
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Holder" shall have the meaning set forth in the preamble.
"Incidental Registration" shall mean a registration required to be
effected by Wyndham pursuant to Section 2(b).
"Incidental Registration Statement" shall mean a registration
statement of Wyndham, as provided in Section 2(b), which covers any of the
Registrable Securities on an appropriate form in accordance with the Securities
Act and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Initial Holder(s)" shall have the meaning set forth in the preamble.
"Majority Holders" shall mean Holders of the Registrable Securities as
to which registration has been requested representing in the aggregate a
majority of such shares beneficially owned by Holders.
"Market Value" shall mean, with respect to the Series A Preferred
Stock or the Class A Common Stock, the average, rounded to the nearest cent
($0.01), of the closing price per share of the Series A Preferred Stock or the
Class A Common Stock, respectively, on the New York Stock Exchange for twenty
consecutive calendar days ending on the trading day immediately preceding the
date in question.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Permitted Transferee" shall mean any Person which would be a
"qualified institutional buyer" within the meaning of Rule 1 44A under the
Securities Act.
"Person" shall mean any individual, limited or general partnership,
corporation, trust, joint venture, association, joint stock company or
unincorporated organization.
3
<PAGE>
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary Prospectus, and any such Prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities and by all other
amendments and supplements to such Prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Registrable Securities" shall mean (i) any shares of Class B Common
Stock issued or issuable upon conversion of any shares of Series B Preferred
Stock, (ii) any shares of Series A Preferred Stock issued or issuable upon
conversion of the shares of Series B Preferred Stock, (iii) any shares of Class
A Common Stock issued or issuable upon conversion of any shares of Series A
Preferred Stock described in clause (ii) above, and (iv) any securities issued
or issuable with respect to any Series A Preferred Stock, Series B Preferred
Stock, Class A Common Stock or Class B Common Stock described in clauses (i),
(ii) and (iii) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation,
reorganization or otherwise.
"Registration Expenses" shall mean (i) all registration, listing,
qualification and filing fees (including NASD filing fees), (ii) fees and
disbursements of counsel for Wyndham, (iii) accounting fees incident to any such
registration, (iv) blue sky fees and expenses (including counsel fees in
connection with the preparation of a Blue Sky Memorandum and legal investment
survey), (v) all expenses of any Persons in preparing or assisting in preparing,
printing, distributing, mailing and delivering any Registration Statement, any
Prospectus, any underwriting agreements, transmittal letters, securities sales
agreements, securities certificates and other documents relating to the
performance of and compliance with this Agreement, (vi) the expenses incurred in
connection with making road show presentations and holding meetings with
potential investors to facilitate the distribution and sale of Registrable
Securities which are customarily borne by the issuer, and (v) all internal
expenses of Wyndham (including all salaries and expenses of officers and
employees performing legal or accounting duties), provided, however, that
Registration Expenses shall not include any Selling Expenses.
"Registration Statement" shall mean any registration statement of
Wyndham which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
4
<PAGE>
"Required Registration Statement" shall mean a Registration Statement
pursuant to Section 2(a)(i).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
"Securities Purchase Agreement" shall have the meaning set forth in
the preamble.
"Selling Expenses" shall mean underwriting discounts, selling
commissions and stock transfer taxes applicable to the shares registered by the
Holders, fees and disbursements of counsel for the Holders retained by them
(other than with respect to the fees and disbursements made in connection with
the preparation of a Blue Sky Memorandum and legal investment survey).
"Series A Preferred Stock" shall have the meaning set forth in the
preamble.
"Series B Preferred Stock" shall have the meaning set forth in the
preamble.
"Shelf Registration" shall mean a registration required to be effected
pursuant to Section 2(a)(ii).
"Shelf Registration Statement" shall mean a Registration Statement
pursuant to Section 2(a)(ii).
"Underwriter" shall have the meaning set forth in Section 5(a).
"Underwritten Offering" shall mean a sale of securities of Wyndham to
an Underwriter or Underwriters for reoffering to the public.
(b) Capitalized terms used herein and not otherwise defined shall have
the meanings assigned such terms in the Securities Purchase Agreement.
Section 2. Registration Under the Securities Act.
(a) Required Registration.
5
<PAGE>
(i) Right to Require Registration. One or more Holders of Registrable
Securities shall have the right from time to time to request in writing (a
"Request") which Request shall specify the Registrable Securities intended to be
disposed of by such Holders and the intended method of distribution thereof)
that Wyndham register such Holders' Registrable Securities by filing with the
SEC a Required Registration Statement. Upon the receipt of such a Request,
Wyndham will, by the fifth business day thereafter, give written notice of such
requested registration to all Initial Holders of Registrable Securities, and,
not later than the 45th calendar day after the receipt of such a Request by
Wyndham, Wyndham will use all reasonable efforts to cause to be filed with the
SEC a Required Registration Statement covering the Registrable Securities which
Wyndham has been so requested to register by Holders thereof other than the
Initial Holder(s) initiating the Request by written request given to Wyndham
within 9 business days after the giving of such written notice by Wyndham,
providing for the registration under the Securities Act of the Registrable
Securities which Wyndham has been so requested to register by all such Holders,
to the extent necessary to permit the disposition of such Registrable Securities
so to be registered in accordance with the intended methods of distribution
thereof specified in such Request or further requests, and shall use all
reasonable efforts to have such Required Registration Statement declared
effective by the SEC as soon as practicable thereafter and to keep such Required
Registration Statement continuously effective for a period of at least 60
calendar days (or, in the case of an Underwritten Offering, such period as the
Underwriters shall reasonably require) following the date on which such Required
Registration Statement is declared effective (or such shorter period which will
terminate when all of the Registrable Securities covered by such Required
Registration Statement have been sold pursuant thereto), including, if
necessary, by filing with the SEC a post-effective amendment or a supplement to
the Required Registration Statement or the related Prospectus or any document
incorporated therein by reference or by filing any other required document or
otherwise supplementing or amending the Required Registration Statement, if
required by the rules, regulations or instructions applicable to the
registration form used by Wyndham for such Required Registration Statement or by
the Securities Act, the Exchange Act, any state securities or blue sky laws, or
any rules and regulations thereunder.
Wyndham shall not be required to effect, pursuant to this Section
2(a)(i), (i) a Required Registration hereunder unless Holders beneficially
owning Registrable Securities with an aggregate Market Value of $50 million have
initiated or joined in such Request and (ii) more than eight registrations in
the aggregate requested by the Holders, provided that so long as the Holders
collectively beneficially own Registrable Securities with a Market Value of at
least $100 million, the
6
<PAGE>
Holders shall have the right to require Wyndham to effect additional Required
Registrations provided that the Registrable Securities included therein have an
aggregate Market Value of at least $50 million and provided further that any
Investor proposing to distribute its Registrable Securities to its partners or
shareholders shall have the right to require Wyndham to effect an additional
Required Registrations to facilitate such distribution.
A Request may be withdrawn prior to the filing of the Required
Registration Statement by the Holder(s) which made such Request (a "Withdrawn
Request") and a Required Registration Statement may be withdrawn prior to the
effectiveness thereof by the Holders of a majority of the Registrable Securities
included therein (a "Withdrawn Required Registration"), and, in either such
event, such withdrawal shall be treated as a Required Registration which shall
have been effected pursuant to clause (ii) of the immediately preceding
paragraph, except that the Holders may require Wyndham to disregard one
Withdrawn Request for purposes of such clause (ii).
The Holders shall not, without Wyndham's consent, be entitled to
deliver a Request for a Required Registration after the completion of the
Required Registration if less than 90 calendar days have elapsed since (A) the
effective date of a prior Required Registration Statement, (B) in the case of a
Required Registration which is effected other than by means of an Underwritten
Offering, the date of sale by the Holders of their Registrable Securities
pursuant thereto or (C) the date of withdrawal of a Withdrawn Required
Registration.
Notwithstanding the foregoing, from and after the Closing, Wyndham may
delay the filing of a Required Registration Statement if the Board of Directors
of Wyndham determines that such action is in the best interests of Wyndham's
stockholders, and only for an aggregate number of days, taken together with any
Blackout Period invoked pursuant to Section 2(a)(ii), not to exceed 60 days in
any twelve month period (a "Blackout Period").
The registration rights granted pursuant to the provisions of this
Section 2(a)(i) shall be in addition to the registration rights granted pursuant
to the other provisions of this Section 2.
(ii) Shelf Registration. Promptly upon the Request of the Holders (but
in no event later than the 75th calendar day after the receipt of such a
Request), the Company shall use its reasonable best efforts to promptly process,
file and cause to become effective a Registration Statement on Form S-3 (the
"Shelf") for an
7
<PAGE>
offering of Registrable Securities to be made on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act (or any similar rule that may be
adopted by the SEC) and permitting sales in ordinary course brokerage or dealer
transactions not involving an Underwritten Offering. Each Holder which owns, on
the date of the initial filing of the Shelf (the "Initial Filing Date"),
Registrable Securities (each such Holder, an "Eligible Holder") shall have the
right to resell such Registrable Securities under the Shelf until the date that
such Eligible Holder sells all of such Registrable Securities, whether or not
under the Shelf (such Eligible Holder's "Termination Date"). The Company agrees
to use its reasonable best efforts to keep the Shelf continuously effective and
usable for resale of Registrable Securities until all Eligible Holders lose
their rights to resell Registrable Securities under the Shelf.
Notwithstanding the foregoing, (A) from the Closing and until the
effectiveness of a Shelf Registration Statement, Wyndham may delay the filing of
a Shelf Registration Statement, or (B) from and after the effectiveness of a
Shelf Registration Statement, each Holder agrees that it will not effect any
sales of the Registrable Securities pursuant to the Shelf Registration, in
either case, if the Board of Directors of Wyndham determines that such action is
in the best interests of Wyndham's stockholders, and only for a Blackout Period,
taken together with any Blackout Period invoked pursuant to Section 2(a)(i), not
to exceed 60 days.
The registration rights granted pursuant to the provisions of this
Section 2(a)(ii) shall be in addition to the registration rights granted
pursuant to the other provisions of this Section 2.
(iii) Priority in Required and Shelf Registrations. If a Required or
Shelf Registration pursuant to this Section 2(a) involves an Underwritten
Offering, and the sole Underwriter or the lead managing Underwriter, as the case
may be, of such Underwritten Offering shall advise Wyndham in writing (with a
copy to each Holder requesting registration) on or before the date 5 days prior
to the date then scheduled for such offering that, in its opinion, the amount of
Registrable Securities requested to be included in such Required or Shelf
Registration exceeds the amount which can be sold in such offering without
adversely affecting the distribution of the Registrable Securities being
offered, Wyndham will include in such Required or Shelf Registration only the
amount of Registrable Securities that Wyndham is so advised can be sold in such
offering; provided, however, that Wyndham shall be required to include in such
Required or Shelf Registration: first, all Registrable Securities requested to
be included in the Required or Shelf Registration by the Holders and, to the
extent not all such Registrable Securities can be included in such Required
Registration, the number of Registrable Securities to be included shall be
8
<PAGE>
allocated pro rata on the basis of the number of shares of Preferred Stock or
Common Stock (whichever is applicable) beneficially owned at that time by all
the Holders requesting to participate in the Required or Shelf Registration or
on such other basis as shall be agreed among the Holders, by agreement of the
Majority Holders; and second, if all Registrable Securities requested to be
included in the Required or Shelf Registration by the Holders can be so
included, all other securities requesting, in accordance with any registration
rights which are granted in compliance with Section 6(a), to be included in such
Required Registration which are of the same class as the Registrable Securities
and, to the extent not all such securities can be included in such Required or
Shelf Registration, the number of securities to be included shall be allocated
pro rata among the holders thereof requesting inclusion in such Required or
Shelf Registration on the basis of the number of securities requested to be
included by all such holders.
(b) Incidental Registration.
(i) Right to Include Registrable Securities. If at any time Wyndham
proposes to register any of their Preferred Stock or Common Stock under the
Securities Act (other than (A) any registration of public sales or distributions
solely by and for the account of Wyndham of securities issued (x) pursuant to
any employee benefit or similar plan or any dividend reinvestment plan or (y) in
any acquisition by Wyndham, or (B) pursuant to Section 2(a) hereof), either in
connection with a primary offering for cash for the account of Wyndham or a
secondary offering, Wyndham will, each time it intends to effect such a
registration, give written notice to all Initial Holders of Registrable
Securities at least 10 business days prior to the initial filing of a
Registration Statement with the SEC pertaining thereto, informing such Initial
Holders of its intent to file such Registration Statement and of the Holders'
rights to request the registration of the Registrable Securities held by the
Holders under this Section 2(b) (the "Company Notice"). Upon the written request
of any Initial Holder made within 7 business days after any such Company Notice
is given (which request shall specify the Registrable Securities intended to be
disposed of by such Initial Holder and such Initial Holder's Permitted
Transferees and, unless the applicable registration is intended to effect a
primary offering of Preferred Stock or Common Stock for cash for the account of
Wyndham, the intended method of distribution thereof), Wyndham will use all
reasonable efforts to effect the registration under the Securities Act of all
Registrable Securities which Wyndham has been so requested to register by such
Initial Holders to the extent required to permit the disposition (in accordance
with the intended methods of distribution thereof or, in the case of a
registration which is intended to effect a primary offering for cash for the
account of Wyndham, in accordance with Wyndham's intended method of distribu-
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tion) of the Registrable Securities so requested to be registered, including, if
necessary, by filing with the SEC a post-effective amendment or a supplement to
the Incidental Registration Statement or the related Prospectus or any document
incorporated therein by reference or by filing any other required document or
otherwise supplementing or amending the Incidental Registration Statement, if
required by the rules, regulations or instructions applicable to the
registration form used by Wyndham for such Incidental Registration Statement or
by the Securities Act, any state securities or blue sky laws, or any rules and
regulations thereunder; provided, however, that if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the Incidental Registration Statement filed in connection with
such registration, Wyndham shall determine for any reason not to register or to
delay registration of such securities, Wyndham may, at its election, give
written notice of such determination to each Initial Holder of Registrable
Securities and, thereupon, (A) in the case of a determination not to register,
Wyndham shall be relieved of their obligation to register any Registrable
Securities in connection with such registration (but not from their obligation
to pay the Registration Expenses incurred in connection therewith), and (B) in
the case of a determination to delay such registration, Wyndham shall be
permitted to delay registration of any Registrable Securities requested to be
included in such Incidental Registration Statement for the same period as the
delay in registering such other securities.
The registration rights granted pursuant to the provisions of this
Section 2(b) shall be in addition to the registration rights granted pursuant to
the other provisions of this Section.
(ii) Priority in Incidental Registrations. If a registration pursuant
to this Section 2(b) involves an Underwritten Offering of the securities so
being registered, whether or not for sale for the account of Wyndham, and the
sole Underwriter or the lead managing Underwriter, as the case may be, of such
Underwritten Offering shall advise Wyndham in writing (with a copy to each
Initial Holder of Registrable Securities requesting registration) on or before
the date 5 days prior to the date then scheduled for such offering that, in its
opinion, the amount of securities (including Registrable Securities) requested
to be included in such registration exceeds the amount which can be sold in (or
during the time of) such offering without adversely affecting the distribution
of the securities being offered, then Wyndham will include in such registration:
first, all the securities entitled to be sold pursuant to such Registration
Statement without reference to the incidental registration rights of any holder
(including the Holders), and second, the amount of other securities (including
Registrable Securities) requested to be included in such registration that
Wyndham is so advised can be sold in (or during the time of) such offering,
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allocated, if necessary, pro rata among the holders (including the Holders)
thereof requesting such registration on the basis of the number of the
securities (including Registrable Securities) beneficially owned at the time by
the holders (including the Holders) requesting inclusion of their securities;
provided, however, that in the event Wyndham will not, by virtue of this
paragraph, include in any such registration all of the Registrable Securities of
any Holder requested to be included in such registration, such Holder may, upon
written notice to Wyndham given within 3 days of the time such Holder first is
notified of such matter, reduce the amount of Registrable Securities it desires
to have included in such registration, whereupon only the Registrable
Securities, if any, it desires to have included will be so included and the
Holders not so reducing shall be entitled to a corresponding increase in the
amount of Registrable Securities to be included in such registration.
(c) Expenses. Wyndham agrees to pay all Registration Expenses in
connection with (i) each of the registrations requested pursuant to Section 2(a)
and (ii) each registration as to which Holders request inclusion of Registrable
Securities pursuant to Section 2(b). All Selling Expenses relating to securities
registered on behalf of the Holders shall be borne by the Holders of shares
included in such registration, other selling stockholders and Wyndham pro rata
on the basis of the number of shares of Preferred Stock or Common Stock so
registered.
(d) Effective Registration Statement: Suspension. Subject to the third
paragraph of Section 2(a)(i), a Registration Statement pursuant to Section 2(a)
will not be deemed to have become effective (and the related registration will
not be deemed to have been effected) unless it has been declared effective by
the SEC prior to a request by the Holders of a majority of the Registrable
Securities included in such registration that such Registration Statement be
withdrawn; provided, however, that if, after it has been declared effective, the
offering of any Registrable Securities pursuant to such Registration Statement
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court shall have been in effect
for at least 30 days, such Registration Statement will be deemed not to have
become effective and the related registration will not be deemed to have been
effected.
(e) Selection of Underwriters. At any time or from time to time, the
Holders of a majority of the Registrable Securities covered by a Required
Registration Statement may elect to have such Registrable Securities sold in an
Underwritten Offering and may select the investment banker or investment bankers
and manager or managers that will serve as lead and co-managing Underwriters
with respect to the offering of such Registrable Securities, subject to the
consent of
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Wyndham which shall not be unreasonably withheld. No Holder may participate in
any Underwritten Offering hereunder unless such Holder (a) agrees to sell such
Holder's securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, custody
agreements, indemnities, underwriting agreements and other documents required
under the terms of such Underwritten Offering.
Section 3. Restrictions on Public Sale by Wyndham.
If requested by the sole Underwriter or lead managing Underwriter(s)
in such Underwritten Offering, Wyndham agrees not to effect any public sale or
distribution (other than public sales or distributions solely by and for the
account of Wyndham of securities issued pursuant to any employee benefit or
similar plan or any dividend reinvestment plan) of any securities during the
period commencing on the date Wyndham receives a Request from any Initial Holder
and continuing until (a) for a Registration Statement relating to such
Underwritten Offering other than a Shelf Registration, 90 days after such
Registration Statement is declared effective by the SEC and (b) for a Shelf
Registration Statement relating to such Underwritten Offering, 90 days after the
commencement of such Underwritten Offering, (or for such shorter period as the
sole or lead managing Underwriter shall request) unless earlier terminated by
the sole Underwriter or lead managing Underwriter(s) in such Underwritten
Offering.
Section 4. Registration Procedures.
In connection with the obligations of Wyndham pursuant to Section 2,
Wyndham shall use all reasonable efforts to effect or cause to be effected the
registration of the Registrable Securities under the Securities Act to permit
the sale of such Registrable Securities by the Holders in accordance with their
intended method or methods of distribution, and Wyndham shall:
(a) (i) prepare and file a Registration Statement with the SEC which
(x) shall be on Form S-3 (or any successor to such form), if available, (y)
shall be available for the sale or exchange of the Registrable Securities in
accordance with the intended method or methods of distribution by the selling
Holders thereof and (z) shall comply as to form with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith and all other information reasonably requested by the lead
managing Underwriter or sole Underwriter, if applicable, to be included therein,
(ii) use all reasonable efforts to cause
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such Registration Statement to become effective and remain effective in
accordance with Section 2, (iii) use all reasonable efforts to not take any
action that would cause a Registration Statement to contain a material
misstatement or omission or to be not effective and usable for resale of
Registrable Securities during the period that such Registration Statement is
required to be effective and usable and (iv) cause each Registration Statement
and the related Prospectus and any amendment or supplement thereto, as of the
effective date of such Registration Statement, amendment or supplement (x) to
comply in all material respects with any requirements of the Securities Act and
the rules and regulations of the SEC and (y) not to 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;
(b) subject to paragraph (j) of this Section 4, prepare and file with
the SEC such amendments and post-effective amendments to each such Registration
Statement, as may be necessary to keep such Registration Statement effective for
the applicable period; cause each such Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof, as
set forth in such registration statement;
(c) furnish to each Holder of Registrable Securities and to each
Underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Holder or Underwriter may reasonably request in order to facilitate the
public sale or other disposition of any Registrable Securities; Wyndham hereby
consents to the use of the Prospectus, including each preliminary Prospectus, by
each Holder of Registrable Securities and each Underwriter of an Underwritten
Offering of Registrable Securities, if any, in connection with the offering and
sale of the Registrable Securities covered by the Prospectus or the preliminary
Prospectus (the Holders hereby agreeing not to make a broad public dissemination
of a form of preliminary Prospectus which is designed to be a "quiet filing"
without Wyndham's consent, such consent to not be withheld unreasonably);
(d) (i) use all reasonable efforts to register or qualify the
Registrable Securities, no later than the time the applicable Registration
Statement is declared effective by the SEC, under all applicable state
securities or "blue sky" laws of such jurisdictions as each Underwriter, if any,
or any Holder of Registrable Securities
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covered by a Registration Statement, shall reasonably request; (ii) use all
reasonable efforts to keep each such registration or qualification effective
during the period such Registration Statement is required to be kept effective;
and (iii) do any and all other acts and things which may be reasonably necessary
or advisable to enable each such Underwriter, if any, and Holder to consummate
the disposition in each such jurisdiction of such Registrable Securities owned
by such Holder; provided, however, that Wyndham shall not be obligated to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to consent to be subject to
general service of process (other than service of process in connection with
such registration or qualification or any sale of Registrable Securities in
connection therewith) in any such jurisdiction;
(e) notify each Holder of Registrable Securities promptly, and, if
requested by such Holder, confirm such advice in writing, (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of the issuance by the
SEC or any state securities authority of any stop order, injunction or other
order or requirement suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose, (iii) if, between the
effective date of a Registration Statement and the closing of any sale of
securities covered thereby pursuant to any agreement to which Wyndham is a
party, the representations and warranties of Wyndham contained in such agreement
cease to be true and correct in all material respects or if Wyndham receives any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose and (iv) of the happening of any event during the
period a Registration Statement is effective as a result of which such
Registration Statement or the related Prospectus contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(f) furnish counsel for each such Underwriter, if any, and for the
Holders of Registrable Securities copies of any request by the SEC or any state
securities authority for amendments or supplements to a Registration Statement
and Prospectus or for additional information;
(g) use all reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible time;
(h) upon request, furnish to the sole Underwriter or lead managing
Underwriter of an Underwritten Offering of Registrable Securities, if any,
without
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<PAGE>
charge, at least one signed copy of each Registration Statement and any post-
effective amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits; and furnish to
each Holder of Registrable Securities, without charge, at least one conformed
copy of each Registration Statement and any post-effective amendment thereto
(without documents incorporated therein by reference or exhibits thereto, unless
requested);
(i) cooperate with the selling Holders of Registrable Securities and
the sole Underwriter or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations (consistent with the provisions of the governing documents
thereof) and registered in such names as the selling Holders or the sole
Underwriter or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, may reasonably request at least three business
days prior to any sale of Registrable Securities;
(j) upon the occurrence of any event contemplated by paragraph (e)(iv)
of this Section, use all reasonable efforts to prepare a supplement or post-
effective amendment to a Registration Statement or the related Prospectus, or
any document incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will 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 were made, not misleading;
(k) enter into customary agreements (including, in the case of an
Underwritten Offering, underwriting agreements in customary form, and including
provisions with respect to indemnification and contribution in customary form
and consistent with the provisions relating to indemnification and contribution
contained herein) and take all other customary and appropriate actions in order
to expedite or facilitate the disposition of such Registrable Securities and in
connection therewith:
(1) make such representations and warranties to the Holders of such
Registrable Securities and the Underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in similar
underwritten offerings;
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(2) obtain opinions of counsel to Wyndham and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the lead managing Underwriter, if any, and the Majority
Holders of the Registrable Securities being sold) addressed to each selling
Holder and the Underwriters, if any, covering the matters customarily
covered in opinions requested in sales of securities or underwritten
offerings and such other matters as may be reasonably requested by such
Holders and Underwriters;
(3) obtain "cold comfort" letters and updates thereof from Wyndham's
independent certified public accountants addressed to the selling Holders
of Registrable Securities, if permissible, and the Underwriters, if any,
which letters shall be customary in form and shall cover matters of the
type customarily covered in "cold comfort" letters to underwriters in
connection with primary underwritten offerings;
(4) to the extent requested and customary for the relevant
transaction, enter into a securities sales agreement with the Holders and
such representative of the selling Holders as the Majority Holders of the
Registrable Securities covered by any Registration Statement relating to
the Registration and providing for, among other things, the appointment of
such representative as agent for the selling Holders for the purpose of
soliciting purchases of Registrable Securities, which agreement shall be
customary in form, substance and scope and shall contain customary
representations, warranties and covenants; and
(5) deliver such customary documents and certificates as may be
reasonably requested by the Majority Holders of the Registrable Securities
being sold or by the managing Underwriters, if any.
The above shall be done (i) at be effectiveness of such Registration Statement
(and each post-effective amendment thereto) in connection with any registration,
and (ii) at each closing under any underwriting or similar agreement as and to
the extent required thereunder;
(1) make available for inspection by representatives of the Initial
Holders of the Registrable Securities and any Underwriters participating in any
disposition pursuant to a Registration Statement and any counsel or accountant
retained by such Holders or Underwriters, all relevant financial and other
records, pertinent corporate documents and properties of Wyndham and cause the
respective
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officers, directors and employees of Wyndham to supply all information
reasonably requested by any such representative, Underwriter, counsel or
accountant in connection with a Registration Statement;
(m) (i) within a reasonable time prior to the filing of
any Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of such
document to the Initial Holders of Registrable Securities and to counsel to such
Initial Holders and to the Underwriter or Underwriters of an Underwritten
Offering of Registrable Securities, if any; fairly consider such reasonable
changes in any such document prior to or after the filing thereof as the counsel
to the Holders or the Underwriter or the Underwriters may request and not file
any such document in a form to which the Majority Holders of Registrable
Securities being registered or any Underwriter shall reasonably object; and make
such of the representatives of Wyndham as shall be reasonably requested by the
Holders of Registrable Securities being registered or any Underwriter available
for discussion of such document;
(ii) within a reasonable time prior to the filing of any document
which is to be incorporated by reference into a Registration Statement or a
Prospectus, provide copies of such document to counsel for the Holders; fairly
consider such reasonable changes in such document prior to or after the filing
thereof as counsel for such Holders or such Underwriter shall request; and make
such of the representatives of Wyndham as shall be reasonably requested by such
counsel available for discussion of such document;
(n) cause all Registrable Securities to be qualified for inclusion in
or listed on the New York Stock Exchange or any securities exchange on which
securities of the same class issued by Wyndham is then so qualified or listed if
so requested by the Majority Holders of Registrable Securities covered by a
Registration Statement, or if so requested by the Underwriter or Underwriters of
an Underwritten Offering of Registrable Securities, if any;
(o) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the SEC, including making available to its security
holders an earnings statement covering at least 12 months which shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(p) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
Underwriter in an Underwritten Offering; and
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(q) use all reasonable efforts to facilitate the distribution and sale
of any Registrable Securities to be offered pursuant to this Agreement,
including without limitation by making road show presentations, holding meetings
with potential investors and taking such other actions as shall be requested by
the Majority Holders of Registrable Securities covered by a Registration
Statement or the lead managing Underwriter of an Underwritten Offering, in each
case subject to the reasonable availability of Wyndham's executives given their
other duties.
Each selling Holder of Registrable Securities as to which any
registration is being effected pursuant to this Agreement agrees, as a condition
to the registration obligations with respect to such Holder provided herein, to
furnish to Wyndham such information regarding such Holder required to be
included in the Registration Statement, the ownership of Registrable Securities
by such Holder and the proposed distribution by such Holder of such Registrable
Securities as Wyndham may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from Wyndham of
the happening of any event of the find described in paragraph (e)(iv) of this
Section, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the affected Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus, contemplated by
paragraph (j) of this Section, and, if so directed by Wyndham, such Holder will
deliver to Wyndham (at the expense of Wyndham), all copies in its possession,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities which was current at the time of
receipt of such notice.
Section 5. Indemnification: Contribution.
(a) Indemnification by Wyndham. Wyndham agrees, jointly and severally,
to indemnify and hold harmless each Person who participates as an underwriter
(any such Person being an "Underwriter"), each Holder and their respective
partners, directors, officers and employees and each Person, if any, who
controls any Holder or Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all losses, liabilities, claims, damages,
judgments and expenses whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement pursuant to which Registrable Securities were
registered under the Securities Act, including all documents incorporated
therein
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by reference, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus, including
all documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not mis leading;
(ii) against any and all losses, liabilities, claims, damages,
judgments and expenses whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, investigation or
proceeding by any governmental agency or body, commenced or threatened, or
of any other claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of Wyndham; and
(iii) against any and all expense whatsoever, as incurred (including
fees and disbursements of counsel), incurred in investigating, preparing or
defending against any litigation, investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case whether
or not such Person is a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement does not apply to any Holder or
Underwriter with respect to any loss, liability, claim, damage, judgment or
expense to the extent arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus, or the omission or
alleged omission therefrom of a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in any such case made in reliance upon and in conformity with
written information furnished to Wyndham by such Holder or Underwriter expressly
for use in a Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto).
(b) Indemnification by Holders. (i) Each selling Holder severally
agrees to indemnify and hold harmless Wyndham, each Underwriter and the other
selling Holders, and each of their respective partners, directors, officers and
employ-
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ees (including each officer of Wyndham who signed the Registration Statement),
and each Person, if any, who controls Wyndham, any Underwriter or any other
selling Holder within the meaning of Section 15 of the Securities Act, against
any and all losses, liabilities, claims, damages, judgments and expenses
described in the indemnity contained in paragraph (a) of this Section (provided
that any settlement of the type described therein is effected with the written
consent of such selling Holder), as incurred, but only with respect to untrue
statements or alleged untrue statements of a material fact contained in any
Prospectus or the omissions, or alleged omissions therefrom of a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in any such case made in reliance
upon and in conformity with written information furnished to Wyndham by such
selling Holder expressly for use in such Registration Statement (or any
amendment thereto) or such Prospectus (or any amendment or supplement thereto).
(c) Conduct of Indemnification Proceedings. Each indemnified party or
parties shall give reasonably prompt notice to each indemnifying party or
parties of any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure so to notify an indemnifying
party or parties shall not relieve it or them from any liability which it or
they may have under this indemnity agreement, except to the extent that the
indemnifying party is materially prejudiced by such failure to give notice. If
the indemnifying party or parties so elects within a reasonable time after
receipt of such notice, the indemnifying party or parties may assume the defense
of such action or proceeding at such indemnifying party's or parties' expense
with counsel chosen by the indemnifying party or parties and approved by the
indemnified party defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such indemnified party
or parties determine in good faith that a conflict of interest exists and that
therefore it is advisable for such indemnified party or parties to be
represented by separate counsel or that, upon advice of counsel, there may be
legal defenses available to it or them which are different from or in addition
to those available to the indemnifying party, then the indemnifying party or
parties shall not be entitled to assume such defense and the indemnified party
or parties shall be entitled to separate counsel (limited in each jurisdiction
to one counsel for all Underwriters and another counsel for all other
indemnified parties under this Agreement) at the indemnifying party's or
parties' expense. If an indemnifying party or parties is not so entitled to
assume the defense of such action or does not assume such defense, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party or parties will pay the reasonable fees and expenses of
counsel for the indemnified party or parties (limited in each jurisdiction to
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one counsel for all Underwriters and another counsel for all other indemnified
parties under this Agreement). No indemnifying party or parties will be liable
for any settlement effected without the written consent of such indemnifying
party or parties, which consent shall not be unreasonably withheld. If an
indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, such indemnifying party
or parties shall not, except as otherwise provided in this subsection (c), be
liable for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
(d) Contribution. (i) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms in respect of any
losses, liabilities, claims, damages, judgments and expenses suffered by an
indemnified party referred to therein, each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, liabilities,
claims, damages, judgments and expenses in such proportion as is appropriate to
reflect the relative fault of Wyndham on the one hand and of the liable selling
Holders (including, in each case, that of their respective officers, directors,
employees and agents) on the other in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages, judgments
or expenses, as well as any other relevant equitable considerations. The
relative fault of Wyndham on the one hand and of the liable selling Holders
(including, in each case, that of their respective officers, directors,
employees and agents) on the other 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 relates to
information supplied by Wyndham, on the one hand, or by or on behalf of the
selling Holders, on the other, 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,
liabilities, claims, damages, judgments and expenses referred to above shall be
deemed to include, subject to the limitations set forth in paragraph (c) of this
Section, any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim.
(ii) Wyndham and each Holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this paragraph (d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in sub-
paragraph (i)
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above. Notwithstanding the provisions of this paragraph (d), in the case of
distributions to the public, an indemnifying Holder shall not be required to
contribute any amount in excess of the amount by which (A) the total price at
which the Registrable Securities sold by such indemnifying Holder and its
affiliated indemnifying Holders and distributed to the public were offered to
the public exceeds (B) the amount of any damages which such indemnifying Holder
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.
(iii) For purposes of this Section, each Person, if any, who controls
a Holder or an Underwriter within the meaning of Section 15 of the Securities
Act (and their respective partners, directors, officers and employees) shall
have the same rights to contribution as such Holder or Underwriter; and each
director of Wyndham, each officer of Wyndham who signed the Registration
Statement, and each Person, if any, who controls Wyndham within the meaning of
Section 15 of the Securities Act, shall have the same rights to contribution as
Wyndham.
Section 6. Miscellaneous.
(a) Inconsistent Agreements. Wyndham is not a party to, and will not
on or after the date of this Agreement enter into, any agreement which conflicts
with the provisions of this Agreement nor has Wyndham entered into any such
agreement, and Wyndham will not on or after the date of this Agreement modify in
any manner adverse to the Holders any such agreement; provided, however, that
nothing in this sentence shall prohibit Wyndham from granting registration
rights, which become exercisable from and after the Closing, to any Person (a
"Third Party") who becomes an owner of shares of any of Wyndham's capital stock
after the date hereof (including granting incidental registration rights with
respect to any Registration Statement required to be filed or maintained
hereunder) if and only if (i) the Third-Party's registration rights (including,
without limitation, demand registration rights) provide to the Holders of
Registrable Securities who seek to participate in such registration (whether or
not such registration is initiated hereunder) rights no less favorable to such
Holders than those rights provided to the Holders hereunder as if such
registration were a Required Registration (including, without limitation, the
priority provisions contained in Section 2(a)(iii)), provided, further, however,
that if such registration is not initiated by the Initial Holders such
registration shall not be deemed one of the eight Required Registrations for
purposes of the limitations contained in the second paragraph of Section
2(a)(i), and (ii) the Third Party is
22
<PAGE>
required to enter into the agreements provided for in Section 3 hereof (as if it
were Wyndham) on the terms and for the period applicable to Wyndham (including
preventing sales pursuant to Rule 144 under the Securities Act) if requested by
the sole Underwriter or lead managing Underwriter in an Underwritten Offering
initiated by Holders of Registrable Securities pursuant to Section 2(a). The
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of Wyndham's other
issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless Wyndham has obtained the written consent of a majority
of the Holders and, if any such amendment, modification, supplement, waiver or
consent would adversely affect the rights of any Holder hereunder, the written
consent of each Holder which is affected shall be obtained; provided, however,
that nothing herein shall prohibit any amendment, modification, supplement,
waiver or consent the effect of which is limited only to those Holders who have
agreed to such amendment, modification, supplement, waiver or consent.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, telex,
telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to Wyndham by means of a notice
given in accordance with the provisions of this paragraph (c), which address
initially is, with respect to each Holder as of the date hereof, the address set
forth next to such Holder's name on the signature pages hereof with a copy to
Randall H. Doud, Esq., telecopier number (212) 735-2000, and with respect to
each Holder who becomes such after the date hereof, the address of such Holder
in the stock records of Wyndham, (ii) if to Wyndham, at 1950 Stemmons Freeway,
Suite 6001, Dallas, Texas 75207, telecopier number (214) 863-1527, Attention:
General Counsel, with a copy to Gilbert G. Menna, P.C., telecopier number (617)
523-1231, and thereafter at such other address, notice of which is given in
accordance with the provisions of this paragraph. Notwithstanding the foregoing,
Wyndham shall not be obligated to provide any notice to any Holder which is not
an Initial Holder except with respect to a Required or Incidental Registration
Statement which has been filed and pursuant to which such Holder is identified
as a selling stockholder.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when answered
23
<PAGE>
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
business day if timely delivered to a courier guaranteeing overnight delivery.
Notwithstanding the foregoing, nothing in this Section 6(c) is intended to
enlarge the class of Persons which are Holders, as defined in the preamble of
this Agreement, and thus entitled to the rights granted hereunder.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without the need for an express assignment, subsequent
Holders. If any successor, assignee or transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and to receive the benefits hereof.
Notwithstanding the foregoing, nothing in this Section 6(d) is intended to
enlarge the class of Persons which are Holders, as defined in the preamble of
this Agreement, and thus entitled to the rights granted hereunder. For purposes
of this Agreement, "successor" for any entity other than a natural person shall
mean a successor to such entity as a result of such entity's merger,
consolidation, liquidation, dissolution, sale of substantially all of its
assets, or similar transaction.
(e) Recapitalizations, Exchanges. Etc.. Affecting Registrable
Securities. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Registrable Securities, to any and all
securities or capital stock of Wyndham or any successor or assign of Wyndham
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of such Registrable
Securities, by reason of any dividend, split, issuance, reverse split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. Upon the occurrence of any of such events, Preferred Stock and Common
Stock amounts hereunder shall be appropriately adjusted if necessary.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which counterparts, taken together, shall constitute
one and the same instrument.
(g) Descriptive Headings. Etc. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise
24
<PAGE>
requires: (1) words of any gender shall be deemed to include each other gender;
(2) words using the singular or plural number shall also include the plural or
singular number, respectively; (3) the words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Article, Section, paragraph and clause references are to the Articles, Sections,
paragraphs and clauses to this Agreement unless otherwise specified; (4) the
word "including" and words of similar import when used in this Agreement shall
mean "including, without limitation," unless otherwise specified; (5) "or" is
not exclusive; and (6) provisions apply to successive events and transactions.
(h) Severability. In the event that any one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAW PRINCIPLES THEREOF).
(j) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform in any material
respect any of its obligations hereunder, and accordingly agree that each party,
in addition to any other remedy to which it may be entitled at law or in equity,
shall be entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between Wyndham, on the one hand, and the other
parties to this Agreement, on the other, with respect to such subject matter.
* * *
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
WYNDHAM INTERNATIONAL, INC.
By:
------------------------------
Name:
Title:
26
<PAGE>
APOLLO REAL ESTATE
INVESTMENT FUND III, L.P.
By: Apollo Real Estate Advisors III, L.P.,
its General Partner
By: Apollo Real Estate Capital
Advisors III, Inc.,
its General Partner
Address:
- -------
1301 Avenue of the Americas
38th Floor
New York, New York 10019 By:
Attention: ------------------------------------
Telecopier Number: Name:
- ----------------- Title:
(212) 261-4060
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors, IV, L.P., its General
Partner
By: Apollo Capital Management IV,
Inc., its General Partner
Address:
- -------
1301 Avenue of the Americas
38th Floor
New York, New York 10019 By:
Attention: ------------------------------------
Telecopier Number: Name:
- ----------------- Title:
(212) 261-4060
27
<PAGE>
THOMAS H. LEE EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC
Address:
- -------
75 State Street, Suite 2600
Boston, MA 02109
Attention: By:
Telecopier Number: -----------------------------
- ----------------- Name:
(617) 227-3514 Title:
THOMAS H. LEE FOREIGN FUND IV, L.P.
By: THL Equity Advisors IV, LLC
Address:
- -------
75 State Street, Suite 2600
Boston, MA 02109
Attention: By:
Telecopier Number: -----------------------------
- ----------------- Name:
(617) 227-3514 Title:
THOMAS H. LEE CHARITABLE
INVESTMENT L.P.
Address: By: THL Equity Advisors IV, LLC
- -------
75 State Street, Suite 2600
Boston, MA 02109
Attention: By:
Telecopier Number: -----------------------------
- ----------------- Name:
(617) 227-3514 Title:
THL-CCI LIMITED PARTNERSHIP
Address: By: THL Equity Advisors IV, LLC
- -------
75 State Street, Suite 2600
Boston, MA 02109
Attention: By:
Telecopier Number: -----------------------------
- ----------------- Name:
(617) 227-3514 Title:
28
<PAGE>
BEACON PRIVATE EQUITY, INC.
Address:
- -------
1 Federal Street, 26th Floor
Boston, MA 02110
Attention: By:
Telecopier Number: ------------------------------
- ----------------- Name:
(617) 457-0499 Title:
BEACON CAPITAL PARTNERS, L.P.
Address: By: Beacon Capital Partners, Inc.,
- ------- its General Partner
1 Federal Street, 26th Floor
Boston, MA 02110
Attention: By:
Telecopier Number: ------------------------------
- ----------------- Name:
(617) 457-0499 Title:
STRATEGIC REAL ESTATE
INVESTMENTS I, L.L.C.
Address:
- -------
1995 University Avenue
Suite 550
Berkeley, CA 94704 By:
Attention: -----------------------------
Telecopier Number: Name:
- ----------------- Title:
(510) 849-1209
<PAGE>
Exhibit 4.2
-----------
================================================================================
REGISTRATION RIGHTS AGREEMENT
By and among
WYNDHAM INTERNATIONAL, INC.
and
The Persons Listed on
the Signature Pages Hereof
Dated as of February 18, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions ........................................... 2
Section 2. Registration Under the Securities Act ................. 5
(a) Required Registration ............................... 6
(b) Incidental Registration ............................. 9
(c) Expenses ............................................11
(d) Effective Registration Statement Suspension .........11
(e) Selection of Underwriters ...........................12
Section 3. Restrictions on Public Sale by Wyndham ................12
Section 4. Registration Procedures ...............................12
Section 5. Indemnification; Contribution .........................19
(a) Indemnification by Wyndham ..........................19
(b) Indemnification by Holders ..........................20
(c) Conduct of Indemnification Proceedings ..............20
(d) Contribution ........................................21
Section 6. Miscellaneous .........................................23
(a) Inconsistent Agreements .............................23
(b) Amendments and Waivers ..............................23
(c) Notices .............................................23
(d) Successors and Assigns ..............................24
(e) Recapitalizations, Exchanges, etc., Affecting
Registrable Securities ..............................25
(f) Counterparts ........................................25
(g) Descriptive Headings, Etc ...........................25
(h) Severability ........................................25
(i) Governing Law .......................................26
(j) Specific Performance ................................26
(k) Entire Agreement ....................................26
(i)
<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of February
18, 1999, by and among Wyndham International, Inc., a Delaware corporation
("Wyndham"), the other Persons (as hereinafter defined) listed on the signature
pages hereof (herein referred to collectively, along with their respective
affiliates and successors who from and after the date hereof acquire or are
otherwise the transferee of any Registrable Securities (as hereinafter defined),
as the "Initial Holders" and individually, as an "Initial Holder") and any other
Person that shall from and after the date hereof acquire or otherwise be the
transferee of any Registrable Securities and who shall be a Permitted Transferee
(as hereinafter defined) of any Initial Holder (herein referred to collectively
as the "Holders" and individually as a "Holder").
WHEREAS, Wyndham and Patriot American Hospitality, Inc. ("Patriot"
and, together with Wyndham, the "Companies"), Wyndham International Operating
Partnership, L.P. and Patriot American Hospitality Partnership, L.P. have
entered into a Securities Purchase Agreement, dated as of February 18, 1999 (the
"Securities Purchase Agreement"), with the Initial Holders, which provides, upon
the terms and subject to the conditions thereof, for the purchase by the Initial
Holders of shares of Wyndham's Series B Convertible Preferred Stock, par value
$0.01 per share (the "Series B Preferred Stock");
WHEREAS, the Series B Preferred Stock will be convertible, upon the
terms and subject to the conditions set forth in the Certificate of Designation
relating thereto, into shares of Class B Common Stock, par value $0.01 per share
(the "Class B Common Stock"), of Wyndham; and
WHEREAS, in the event of any transfer of any shares of Series B
Preferred Stock to any Person other than an Initial Holder, such shares of
Series B Preferred Stock will automatically convert, upon the terms and subject
to the conditions set forth in the Certificate of Designation relating thereto,
into shares of Series A Convertible Preferred Stock, par value $0.01 per share
(the "Series A Preferred Stock"), of Wyndham;
WHEREAS, the Series A Preferred Stock will be convertible, upon the
terms and subject to the conditions set forth in the Certificate of Designation
relating thereto, into shares of Class A Common Stock, par value $0.01 per share
(the "Class A Common Stock"), of Wyndham;
WHEREAS, in the event of any transfer of any shares of Class B Common
Stock to any Person other than an Initial Holder, such shares of Class B Common
Stock will automatically convert, upon the terms and subject to the conditions
set forth in the Restated Certificate of Incorporation of Wyndham; and
<PAGE>
WHEREAS, in the event of any transfer of any shares of Class B Common
Stock to any Person other than an Initial Holder, such shares of Class B Common
Stock will automatically convert, upon the terms and subject to the conditions
set forth in the Restated Certificate of Incorporation of Wyndham; and
WHEREAS, in order to induce the Initial Holders to complete the
transactions contemplated by the Securities Purchase Agreement, Wyndham has
agreed to provide registration rights on the terms and subject to the conditions
provided herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
Section 1. Definitions.
-----------
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
---------
under the Exchange Act.
"Blackout Period" shall have the meaning set forth in Section 2(a)(i).
---------------
"Class A Common Stock" shall have the meaning set forth in the
---------------------
preamble; provided, that if there shall be only one authorized class of
Wyndham's common stock at the time, Class A Common Stock shall be deemed to
refer to such common stock.
"Class B Common Stock" shall have the meaning set forth in the
--------------------
preamble.
"Closing" shall mean the date upon which the purchase and sale of the
-------
Preferred Stock pursuant to the Securities Purchase Agreement occurs.
"Companies" shall have the meaning set forth in the preamble and shall
---------
also include Patriot's and Wyndham's successors.
2
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
"Holder" shall have the meaning set forth in the preamble.
------
"Incidental Registration" shall mean a registration required to be
-----------------------
effected by Wyndham pursuant to Section 2(b).
"Incidental Registration Statement" shall mean a registration
---------------------------------
statement of Wyndham, as provided in Section 2(b), which covers any of the
Registrable Securities on an appropriate form in accordance with the Securities
Act and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Initial Holder(s)" shall have the meaning set forth in the preamble.
-----------------
"Majority Holders" shall mean Holders of the Registrable Securities as
-----------------
to which registration has been requested representing in the aggregate a
majority of such shares beneficially owned by Holders.
"Market Value" shall mean, with respect to the Series A Preferred
-------------
Stock or the Class A Common Stock, the average, rounded to the nearest cent
($0.01), of the closing price per share of the Series A Preferred Stock or the
Class A Common Stock, respectively, on the New York Stock Exchange for twenty
consecutive calendar days ending on the trading day immediately preceding the
date in question.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Permitted Transferee" shall mean any Person which would be a
--------------------
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act.
"Person" shall mean any individual, limited or general partnership,
------
corporation, trust, joint venture, association, joint stock company or
unincorporated organization.
3
<PAGE>
"Prospectus" shall mean the prospectus included in a Registration
-----------
Statement, including any preliminary Prospectus, and any such Prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities and by all other
amendments and supplements to such Prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Registrable Securities" shall mean (i) any shares of Class B Common
-----------------------
Stock issued or issuable upon conversion of any shares of Series B Preferred
Stock, (ii) any shares of Series A Preferred Stock issued or issuable upon
conversion of the shares of Series B Preferred Stock, (iii) any shares of Class
A Common Stock issued or issuable upon conversion of any shares of Series A
Preferred Stock described in clause (ii) above, and (iv) any securities issued
or issuable with respect to any Series A Preferred Stock, Series B Preferred
Stock, Class A Common Stock or Class B Common Stock described in clauses (i),
(ii) and (iii) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation,
reorganization or otherwise.
"Registration Expenses" shall mean (i) all registration, listing,
----------------------
qualification and filing fees (including NASD filing fees), (ii) fees and
disbursements of counsel for Wyndham, (iii) accounting fees incident to any such
registration, (iv) blue sky fees and expenses (including counsel fees in
connection with the preparation of a Blue Sky Memorandum and legal investment
survey), (v) all expenses of any Persons in preparing or assisting in preparing,
printing, distributing, mailing and delivering any Registration Statement, any
Prospectus, any underwriting agreements, transmittal letters, securities sales
agreements, securities certificates and other documents relating to the
performance of and compliance with this Agreement, (vi) the expenses incurred in
connection with making road show presentations and holding meetings with
potential investors to facilitate the distribution and sale of Registrable
Securities which are customarily borne by the issuer, and (v) all internal
expenses of Wyndham (including all salaries and expenses of officers and
employees performing legal or accounting duties), provided, however, that
Registration Expenses shall not include any Selling Expenses.
"Registration Statement" shall mean any registration statement of
-----------------------
Wyndham which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
4
<PAGE>
"Required Registration Statement" shall mean a Registration Statement
-------------------------------
pursuant to Section 2(a)(i).
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.
"Securities Purchase Agreement" shall have the meaning set forth in
-----------------------------
the preamble.
"Selling Expenses" shall mean underwriting discounts, selling
-----------------
commissions and stock transfer taxes applicable to the shares registered by the
Holders, fees and disbursements of counsel for the Holders retained by them
(other than with respect to the fees and disbursements made in connection with
the preparation of a Blue Sky Memorandum and legal investment survey).
"Series A Preferred Stock" shall have the meaning set forth in the
------------------------
preamble.
"Series B Preferred Stock" shall have the meaning set forth in the
------------------------
preamble.
"Shelf Registration" shall mean a registration required to be effected
------------------
pursuant to Section 2(a)(ii).
"Shelf Registration Statement" shall mean a Registration Statement
----------------------------
pursuant to Section 2(a)(ii).
"Underwriter" shall have the meaning set forth in Section 5(a).
-----------
"Underwritten Offering" shall mean a sale of securities of Wyndham to
----------------------
an Underwriter or Underwriters for reoffering to the public.
(b) Capitalized terms used herein and not otherwise defined shall have
the meanings assigned such terms in the Securities Purchase Agreement.
Section 2. Registration Under the Securities Act.
-------------------------------------
(a) Required Registration.
---------------------
5
<PAGE>
(i) Right to Require Registration. One or more Holders of Registrable
---------------------------------
Securities shall have the right from time to time to request in writing (a
"Request") which Request shall specify the Registrable Securities intended to be
disposed of by such Holders and the intended method of distribution thereof)
that Wyndham register such Holders' Registrable Securities by filing with the
SEC a Required Registration Statement. Upon the receipt of such a Request,
Wyndham will, by the fifth business day thereafter, give written notice of such
requested registration to all Initial Holders of Registrable Securities, and,
not later than the 45th calendar day after the receipt of such a Request by
Wyndham, Wyndham will use all reasonable efforts to cause to be filed with the
SEC a Required Registration Statement covering the Registrable Securities
which Wyndham has been so requested to register by Holders thereof other than
the Initial Holder(s) initiating the Request by written request given to Wyndham
within 9 business days after the giving of such written notice by Wyndham,
providing for the registration under the Securities Act of the Registrable
Securities which Wyndham has been so requested to register by all such Holders,
to the extent necessary to permit the disposition of such Registrable Securities
so to be registered in accordance with the intended methods of distribution
thereof specified in such Request or further requests, and shall use all
reasonable efforts to have such Required Registration Statement declared
effective by the SEC as soon as practicable thereafter and to keep such Required
Registration Statement continuously effective for a period of at least 60
calendar days (or, in the case of an Underwritten Offering, such period as the
Underwriters shall reasonably require) following the date on which such Required
Registration Statement is declared effective (or such shorter period which will
terminate when all of the Registrable Securities covered by such Required
Registration Statement have been sold pursuant thereto), including, if
necessary, by filing with the SEC a post-effective amendment or a supplement to
the Required Registration Statement or the related Prospectus or any document
incorporated therein by reference or by filing any other required document or
otherwise supplementing or amending the Required Registration Statement, if
required by the rules, regulations or instructions applicable to the
registration form used by Wyndham for such Required Registration Statement or by
the Securities Act, the Exchange Act, any state securities or blue sky laws, or
any rules and regulations thereunder.
Wyndham shall not be required to effect, pursuant to this Section
2(a)(i), (i) a Required Registration hereunder unless Holders beneficially
owning Registrable Securities with an aggregate Market Value of $50 million have
initiated or joined in such Request and (ii) more than eight registrations in
the aggregate requested by the Holders, provided that so long as the Holders
collectively beneficially own Registrable Securities with a Market Value of at
least $100 million, the
6
<PAGE>
Holders shall have the right to require Wyndham to effect additional Required
Registrations provided that the Registrable Securities included therein have an
aggregate Market Value of at least $50 million and provided further that any
Investor proposing to distribute its Registrable Securities to its partners or
shareholders shall have the right to require Wyndham to effect an additional
Required Registrations to facilitate such distribution.
A Request may be withdrawn prior to the filing of the Required
Registration Statement by the Holder(s) which made such Request (a "Withdrawn
Request") and a Required Registration Statement may be withdrawn prior to the
effectiveness thereof by the Holders of a majority of the Registrable Securities
included therein (a "Withdrawn Required Registration"), and, in either such
event, such withdrawal shall be treated as a Required Registration which shall
have been effected pursuant to clause (ii) of the immediately preceding
paragraph, except that the Holders may require Wyndham to disregard one
Withdrawn Request for purposes of such clause (ii).
The Holders shall not, without Wyndham's consent, be entitled to
deliver a Request for a Required Registration after the completion of the
Required Registration if less than 90 calendar days have elapsed since (A) the
effective date of a prior Required Registration Statement, (B) in the case of a
Required Registration which is effected other than by means of an Underwritten
Offering, the date of sale by the Holders of their Registrable Securities
pursuant thereto or (C) the date of withdrawal of a Withdrawn Required
Registration.
Notwithstanding the foregoing, from and after the Closing, Wyndham may
delay the filing of a Required Registration Statement if the Board of Directors
of Wyndham determines that such action is in the best interests of Wyndham's
stockholders, and only for an aggregate number of days, taken together with any
Blackout Period invoked pursuant to Section 2(a)(ii), not to exceed 60 days in
any twelve month period (a "Blackout Period").
The registration rights granted pursuant to the provisions of this
Section 2(a)(i) shall be in addition to the registration rights granted pursuant
to the other provisions of this Section 2.
(ii) Shelf Registration. Promptly upon the Request of the Holders
------------------------
(but in no event later than the 75th calendar day after the receipt of such a
Request), the Company shall use its reasonable best efforts to promptly process,
file and cause to become effective a Registration Statement on Form S-3 (the
"Shelf") for an
7
<PAGE>
offering of Registrable Securities to be made on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act (or any similar rule that may be
adopted by the SEC) and permitting sales in ordinary course brokerage or dealer
transactions not involving an Underwritten Offering. Each Holder which owns, on
the date of the initial filing of the Shelf (the "Initial Filing Date"),
Registrable Securities (each such Holder, an "Eligible Holder") shall have the
right to resell such Registrable Securities under the Shelf until the date that
such Eligible Holder sells all of such Registrable Securities, whether or not
under the Shelf (such Eligible Holder's "Termination Date"). The Company agrees
to use its reasonable best efforts to keep the Shelf continuously effective and
usable for resale of Registrable Securities until all Eligible Holders lose
their rights to resell Registrable Securities under the Shelf.
Notwithstanding the foregoing, (A) from the Closing and until the
effectiveness of a Shelf Registration Statement, Wyndham may delay the filing of
a Shelf Registration Statement, or (B) from and after the effectiveness of a
Shelf Registration Statement, each Holder agrees that it will not effect any
sales of the Registrable Securities pursuant to the Shelf Registration, in
either case, if the Board of Directors of Wyndham determines that such action is
in the best interests of Wyndham's stockholders, and only for a Blackout Period,
taken together with any Blackout Period invoked pursuant to Section 2(a)(i), not
to exceed 60 days.
The registration rights granted pursuant to the provisions of this
Section 2(a)(ii) shall be in addition to the registration rights granted
pursuant to the other provisions of this Section 2.
(iii) Priority in Required and Shelf Registrations. If a Required or
--------------------------------------------
Shelf Registration pursuant to this Section 2(a) involves an Underwritten
Offering, and the sole Underwriter or the lead managing Underwriter, as the case
may be, of such Underwritten Offering shall advise Wyndham in writing (with a
copy to each Holder requesting registration) on or before the date 5 days prior
to the date then scheduled for such offering that, in its opinion, the amount of
Registrable Securities requested to be included in such Required or Shelf
Registration exceeds the amount which can be sold in such offering without
adversely affecting the distribution of the Registrable Securities being
offered, Wyndham will include in such Required or Shelf Registration only the
amount of Registrable Securities that Wyndham is so advised can be sold in such
offering; provided, however, that Wyndham shall be required to include in such
Required or Shelf Registration: first, all Registrable Securities requested to
be included in the Required or Shelf Registration by the Holders and, to the
extent not all such Registrable Securities can be included in such Required
Registration, the number of Registrable Securities to be included shall be
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<PAGE>
allocated pro rata on the basis of the number of shares of Preferred Stock or
Common Stock (whichever is applicable) beneficially owned at that time by all
the Holders requesting to participate in the Required or Shelf Registration or
on such other basis as shall be agreed among the Holders, by agreement of the
Majority Holders; and second, if all Registrable Securities requested to be
included in the Required or Shelf Registration by the Holders can be so
included, all other securities requesting, in accordance with any registration
rights which are granted in compliance with Section 6(a), to be included in
such Required Registration which are of the same class as the Registrable
Securities and, to the extent not all such securities can be included in such
Required or Shelf Registration, the number of securities to be included shall be
allocated pro rata among the holders thereof requesting inclusion in such
Required or Shelf Registration on the basis of the number of securities
requested to be included by all such holders.
(b) Incidental Registration.
-----------------------
(i) Right to Include Registrable Securities. If at any time Wyndham
---------------------------------------
proposes to register any of their Preferred Stock or Common Stock under the
Securities Act (other than (A) any registration of public sales or distributions
solely by and for the account of Wyndham of securities issued (x) pursuant to
any employee benefit or similar plan or any dividend reinvestment plan or (y) in
any acquisition by Wyndham, or (B) pursuant to Section 2(a) hereof), either in
connection with a primary offering for cash for the account of Wyndham or a
secondary offering, Wyndham will, each time it intends to effect such a
registration, give written notice to all Initial Holders of Registrable
Securities at least 10 business days prior to the initial filing of a
Registration Statement with the SEC pertaining thereto, informing such Initial
Holders of its intent to file such Registration Statement and of the Holders'
rights to request the registration of the Registrable Securities held by the
Holders under this Section 2(b) (the "Company Notice"). Upon the written
request of any Initial Holder made within 7 business days after any such Company
Notice is given (which request shall specify the Registrable Securities intended
to be disposed of by such Initial Holder and such Initial Holder's Permitted
Transferees and, unless the applicable registration is intended to effect a
primary offering of Preferred Stock or Common Stock for cash for the account of
Wyndham, the intended method of distribution thereof), Wyndham will use all
reasonable efforts to effect the registration under the Securities Act of all
Registrable Securities which Wyndham has been so requested to register by such
Initial Holders to the extent required to permit the disposition (in accordance
with the intended methods of distribution thereof or, in the case of a
registration which is intended to effect a primary offering for cash for the
account of Wyndham, in accordance with
9
<PAGE>
Wyndham's intended method of distribution) of the Registrable Securities so
requested to be registered, including, if necessary, by filing with the SEC a
post-effective amendment or a supplement to the Incidental Registration
Statement or the related Prospectus or any document incorporated therein by
reference or by filing any other required document or otherwise supplementing or
amending the Incidental Registration Statement, if required by the rules,
regulations or instructions applicable to the registration form used by Wyndham
for such Incidental Registration Statement or by the Securities Act, any state
securities or blue sky laws, or any rules and regulations thereunder; provided,
however, that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the Incidental
Registration Statement filed in connection with such registration, Wyndham shall
determine for any reason not to register or to delay registration of such
securities, Wyndham may, at its election, give written notice of such
determination to each Initial Holder of Registrable Securities and, thereupon,
(A) in the case of a determination not to register, Wyndham shall be relieved of
their obligation to register any Registrable Securities in connection with such
registration (but not from their obligation to pay the Registration Expenses
incurred in connection therewith), and (B) in the case of a determination to
delay such registration, Wyndham shall be permitted to delay registration of any
Registrable Securities requested to be included in such Incidental Registration
Statement for the same period as the delay in registering such other securities.
The registration rights granted pursuant to the provisions of this
Section 2(b) shall be in addition to the registration rights granted pursuant to
the other provisions of this Section.
(ii) Priority in Incidental Registrations. If a registration pursuant
------------------------------------
to this Section 2(b) involves an Underwritten Offering of the securities so
being registered, whether or not for sale for the account of Wyndham, and the
sole Underwriter or the lead managing Underwriter, as the case may be, of such
Underwritten Offering shall advise Wyndham in writing (with a copy to each
Initial Holder of Registrable Securities requesting registration) on or before
the date 5 days prior to the date then scheduled for such offering that, in its
opinion, the amount of securities (including Registrable Securities) requested
to be included in such registration exceeds the amount which can be sold in (or
during the time of) such offering without adversely affecting the distribution
of the securities being offered, then Wyndham will include in such registration:
first, all the securities entitled to be sold pursuant to such Registration
Statement without reference to the incidental registration rights of any
holder (including the Holders), and second, the amount of other securities
(including Registrable Securities) requested to be included in such
10
<PAGE>
registration that Wyndham is so advised can be sold in (or during the time of)
such offering, allocated, if necessary, pro rata among the holders (including
the Holders) thereof requesting such registration on the basis of the number of
the securities (including Registrable Securities) beneficially owned at the time
by the holders (including the Holders) requesting inclusion of their securities;
provided, however, that in the event Wyndham will not, by virtue of this
paragraph, include in any such registration all of the Registrable Securities of
any Holder requested to be included in such registration, such Holder may, upon
written notice to Wyndham given within 3 days of the time such Holder first is
notified of such matter, reduce the amount of Registrable Securities it desires
to have included in such registration, whereupon only the Registrable
Securities, if any, it desires to have included will be so included and the
Holders not so reducing shall be entitled to a corresponding increase in the
amount of Registrable Securities to be included in such registration.
(c) Expenses. Wyndham agrees to pay all Registration Expenses in
--------
connection with (i) each of the registrations requested pursuant to Section
2(a) and (ii) each registration as to which Holders request inclusion of
Registrable Securities pursuant to Section 2(b). All Selling Expenses relating
to securities registered on behalf of the Holders shall be borne by the Holders
of shares included in such registration, other selling stockholders and Wyndham
pro rata on the basis of the number of shares of Preferred Stock or Common Stock
so registered.
(d) Effective Registration Statement; Suspension. Subject to the
--------------------------------------------
third paragraph of Section 2(a)(i), a Registration Statement pursuant to Section
2(a) will not be deemed to have become effective (and the related registration
will not be deemed to have been effected) unless it has been declared effective
by the SEC prior to a request by the Holders of a majority of the Registrable
Securities included in such registration that such Registration Statement be
withdrawn; provided, however, that if, after it has been declared effective, the
offering of any Registrable Securities pursuant to such Registration Statement
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court shall have been in effect
for at least 30 days, such Registration Statement will be deemed not to have
become effective and the related registration will not be deemed to have been
effected.
(e) Selection of Underwriters. At any time or from time to time, the
-------------------------
Holders of a majority of the Registrable Securities covered by a Required
Registration Statement may elect to have such Registrable Securities sold in an
Underwritten Offering and may select the investment banker or investment bankers
and manager or managers that will serve as lead and co-managing Underwriters
with
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<PAGE>
respect to the offering of such Registrable Securities, subject to the consent
of Wyndham which shall not be unreasonably withheld. No Holder may participate
in any Underwritten Offering hereunder unless such Holder (a) agrees to sell
such Holder's securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, custody
agreements, indemnities, underwriting agreements and other documents required
under the terms of such Underwritten Offering.
Section 3. Restrictions on Public Sale by Wyndham.
--------------------------------------
If requested by the sole Underwriter or lead managing Underwriter(s)
in such Underwritten Offering, Wyndham agrees not to effect any public sale or
distribution (other than public sales or distributions solely by and for the
account of Wyndham of securities issued pursuant to any employee benefit or
similar plan or any dividend reinvestment plan) of any securities during the
period commencing on the date Wyndham receives a Request from any Initial Holder
and continuing until (a) for a Registration Statement relating to such
Underwritten Offering other than a Shelf Registration, 90 days after such
Registration Statement is declared effective by the SEC and (b) for a Shelf
Registration Statement relating to such Underwritten Offering, 90 days after the
commencement of such Underwritten Offering, (or for such shorter period as the
sole or lead managing Underwriter shall request) unless earlier terminated by
the sole Underwriter or lead managing Underwriter(s) in such Underwritten
Offering.
Section 4. Registration Procedures.
-----------------------
In connection with the obligations of Wyndham pursuant to Section 2,
Wyndham shall use all reasonable efforts to effect or cause to be effected the
registration of the Registrable Securities under the Securities Act to permit
the sale of such Registrable Securities by the Holders in accordance with their
intended method or methods of distribution, and Wyndham shall:
(a) (i) prepare and file a Registration Statement with the SEC which
(x) shall be on Form S-3 (or any successor to such form), if available, (y)
shall be available for the sale or exchange of the Registrable Securities in
accordance with the intended method or methods of distribution by the selling
Holders thereof and (z) shall comply as to form with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith and all other information reasonably requested by the lead
managing Underwriter or sole
12
<PAGE>
Underwriter, if applicable, to be included therein, (ii) use all reasonable
efforts to cause such Registration Statement to become effective and remain
effective in accordance with Section 2, (iii) use all reasonable efforts to not
take any action that would cause a Registration Statement to contain a material
misstatement or omission or to be not effective and usable for resale of
Registrable Securities during the period that such Registration Statement is
required to be effective and usable and (iv) cause each Registration Statement
and the related Prospectus and any amendment or supplement thereto, as of the
effective date of such Registration Statement, amendment or supplement (x) to
comply in all material respects with any requirements of the Securities Act and
the rules and regulations of the SEC and (y) not to 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;
(b) subject to paragraph (j) of this Section 4, prepare and file with
the SEC such amendments and post-effective amendments to each such Registration
Statement, as may be necessary to keep such Registration Statement effective for
the applicable period; cause each such Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof, as
set forth in such registration statement;
(c) furnish to each Holder of Registrable Securities and to each
Underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Holder or Underwriter may reasonably request in order to facilitate the
public sale or other disposition of any Registrable Securities; Wyndham hereby
consents to the use of the Prospectus, including each preliminary Prospectus, by
each Holder of Registrable Securities and each Underwriter of an Underwritten
Offering of Registrable Securities, if any, in connection with the offering
and sale of the Registrable Securities covered by the Prospectus or the
preliminary Prospectus (the Holders hereby agreeing not to make a broad public
dissemination of a form of preliminary Prospectus which is designed to be a
"quiet filing" without Wyndham's consent, such consent to not be withheld
unreasonably);
(d) (i) use all reasonable efforts to register or qualify the
Registrable Securities, no later than the time the applicable Registration
Statement is
13
<PAGE>
declared effective by the SEC, under all applicable state securities or "blue
sky" laws of such jurisdictions as each Underwriter, if any, or any Holder of
Registrable Securities covered by a Registration Statement, shall reasonably
request; (ii) use all reasonable efforts to keep each such registration or
qualification effective during the period such Registration Statement is
required to be kept effective; and (iii) do any and all other acts and things
which may be reasonably necessary or advisable to enable each such Underwriter,
if any, and Holder to consummate the disposition in each such jurisdiction of
such Registrable Securities owned by such Holder; provided, however, that
Wyndham shall not be obligated to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
consent to be subject to general service of process (other than service of
process in connection with such registration or qualification or any sale of
Registrable Securities in connection therewith) in any such jurisdiction;
(e) notify each Holder of Registrable Securities promptly, and, if
requested by such Holder, confirm such advice in writing, (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of the issuance by the
SEC or any state securities authority of any stop order, injunction or other
order or requirement suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose, (iii) if, between the
effective date of a Registration Statement and the closing of any sale of
securities covered thereby pursuant to any agreement to which Wyndham is a
party, the representations and warranties of Wyndham contained in such agreement
cease to be true and correct in all material respects or if Wyndham receives any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose and (iv) of the happening of any event during the
period a Registration Statement is effective as a result of which such
Registration Statement or the related Prospectus contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(f) furnish counsel for each such Underwriter, if any, and for the
Holders of Registrable Securities copies of any request by the SEC or any state
securities authority for amendments or supplements to a Registration Statement
and Prospectus or for additional information;
(g) use all reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible time;
14
<PAGE>
(h) upon request, furnish to the sole Underwriter or lead managing
Underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, at least one signed copy of each Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits; and furnish to
each Holder of Registrable Securities, without charge, at least one conformed
copy of each Registration Statement and any post-effective amendment thereto
(without documents incorporated therein by reference or exhibits thereto,
unless requested);
(i) cooperate with the selling Holders of Registrable Securities and
the sole Underwriter or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations (consistent with the provisions of the governing documents
thereof) and registered in such names as the selling Holders or the sole
Underwriter or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, may reasonably request at least three business
days prior to any sale of Registrable Securities;
(j) upon the occurrence of any event contemplated by paragraph (e)(iv)
of this Section, use all reasonable efforts to prepare a supplement or post-
effective amendment to a Registration Statement or the related Prospectus, or
any document incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will 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 were made, not misleading;
(k) enter into customary agreements (including, in the case of an
Underwritten Offering, underwriting agreements in customary form, and including
provisions with respect to indemnification and contribution in customary form
and consistent with the provisions relating to indemnification and contribution
contained herein) and take all other customary and appropriate actions in order
to expedite or facilitate the disposition of such Registrable Securities and in
connection therewith:
(1) make such representations and warranties to the Holders of such
Registrable Securities and the Underwriters, if any, in form, substance
15
<PAGE>
and scope as are customarily made by issuers to underwriters in
similar underwritten offerings;
(2) obtain opinions of counsel to Wyndham and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the lead managing Underwriter, if any, and the Majority
Holders of the Registrable Securities being sold) addressed to each selling
Holder and the Underwriters, if any, covering the matters customarily
covered in opinions requested in sales of securities or underwritten
offerings and such other matters as may be reasonably requested by such
Holders and Underwriters;
(3) obtain "cold comfort" letters and updates thereof from Wyndham's
independent certified public accountants addressed to the selling Holders
of Registrable Securities, if permissible, and the Underwriters, if any,
which letters shall be customary in form and shall cover matters of the
type customarily covered in "cold comfort" letters to underwriters in
connection with primary underwritten offerings;
(4) to the extent requested and customary for the relevant
transaction, enter into a securities sales agreement with the Holders and
such representative of the selling Holders as the Majority Holders of the
Registrable Securities covered by any Registration Statement relating to
the Registration and providing for, among other things, the appointment of
such representative as agent for the selling Holders for the purpose of
soliciting purchases of Registrable Securities, which agreement shall be
customary in form, substance and scope and shall contain customary
representations, warranties and covenants; and
(5) deliver such customary documents and certificates as may be
reasonably requested by the Majority Holders of the Registrable Securities
being sold or by the managing Underwriters, if any.
The above shall be done (i) at be effectiveness of such Registration Statement
(and each post-effective amendment thereto) in connection with any registration,
and (ii) at each closing under any underwriting or similar agreement as and to
the extent required thereunder;
(l) make available for inspection by representatives of the Initial
Holders of the Registrable Securities and any Underwriters participating in any
16
<PAGE>
disposition pursuant to a Registration Statement and any counsel or accountant
retained by such Holders or Underwriters, all relevant financial and other
records, pertinent corporate documents and properties of Wyndham and cause the
respective officers, directors and employees of Wyndham to supply all
information reasonably requested by any such representative, Underwriter,
counsel or accountant in connection with a Registration Statement;
(m) (i) within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of such
document to the Initial Holders of Registrable Securities and to counsel to such
Initial Holders and to the Underwriter or Underwriters of an Underwritten
Offering of Registrable Securities, if any; fairly consider such reasonable
changes in any such document prior to or after the filing thereof as the counsel
to the Holders or the Underwriter or the Underwriters may request and not file
any such document in a form to which the Majority Holders of Registrable
Securities being registered or any Underwriter shall reasonably object; and make
such of the representatives of Wyndham as shall be reasonably requested by the
Holders of Registrable Securities being registered or any Underwriter available
for discussion of such document;
(ii) within a reasonable time prior to the filing of any document
which is to be incorporated by reference into a Registration Statement or a
Prospectus, provide copies of such document to counsel for the Holders; fairly
consider such reasonable changes in such document prior to or after the filing
thereof as counsel for such Holders or such Underwriter shall request; and make
such of the representatives of Wyndham as shall be reasonably requested by such
counsel available for discussion of such document;
(n) cause all Registrable Securities to be qualified for inclusion in
or listed on the New York Stock Exchange or any securities exchange on which
securities of the same class issued by Wyndham is then so qualified or listed if
so requested by the Majority Holders of Registrable Securities covered by a
Registration Statement, or if so requested by the Underwriter or Underwriters
of an Underwritten Offering of Registrable Securities, if any;
(o) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the SEC, including making available to its security
holders an earnings statement covering at least 12 months which shall satisfy
the provisions of Section 11 (a) of the Securities Act and Rule 158 thereunder;
17
<PAGE>
(p) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
Underwriter in an Underwritten Offering; and
(q) use all reasonable efforts to facilitate the distribution and sale
of any Registrable Securities to be offered pursuant to this Agreement,
including without limitation by making road show presentations, holding meetings
with potential investors and taking such other actions as shall be requested by
the Majority Holders of Registrable Securities covered by a Registration
Statement or the lead managing Underwriter of an Underwritten Offering, in each
case subject to the reasonable availability of Wyndham's executives given their
other duties.
Each selling Holder of Registrable Securities as to which any
registration is being effected pursuant to this Agreement agrees, as a condition
to the registration obligations with respect to such Holder provided herein, to
furnish to Wyndham such information regarding such Holder required to be
included in the Registration Statement, the ownership of Registrable Securities
by such Holder and the proposed distribution by such Holder of such Registrable
Securities as Wyndham may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from Wyndham of
the happening of any event of the find described in paragraph (e)(iv) of this
Section, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the affected Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus, contemplated by
paragraph (j) of this Section, and, if so directed by Wyndham, such Holder will
deliver to Wyndham (at the expense of Wyndham), all copies in its possession,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities which was current at the time of
receipt of such notice.
Section 5. Indemnification; Contribution.
-----------------------------
(a) Indemnification by Wyndham. Wyndham agrees, jointly and
--------------------------
severally, to indemnify and hold harmless each Person who participates as an
underwriter (any such Person being an "Underwriter"), each Holder and their
respective partners, directors, officers and employees and each Person, if any,
who controls any Holder or Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act as follows:
18
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(i) against any and all losses, liabilities, claims, damages,
judgments and expenses whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement pursuant to which Registrable Securities were
registered under the Securities Act, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus,
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all losses, liabilities, claims, damages,
judgments and expenses whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, investigation or
proceeding by any governmental agency or body, commenced or threatened, or
of any other claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of Wyndham; and
(iii) against any and all expense whatsoever, as incurred (including
fees and disbursements of counsel), incurred in investigating, preparing or
defending against any litigation, investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case whether
or not such Person is a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement does not apply to any Holder or
Underwriter with respect to any loss, liability, claim, damage, judgment or
expense to the extent arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus, or the omission or
alleged omission therefrom of a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in any such case made in reliance upon and in conformity with
written information furnished to Wyndham by such Holder or Underwriter expressly
for use in a Registration
19
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Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(b) Indemnification by Holders. (i) Each selling Holder severally
--------------------------
agrees to indemnify and hold harmless Wyndham, each Underwriter and the other
selling Holders, and each of their respective partners, directors, officers and
employees (including each officer of Wyndham who signed the Registration
Statement), and each Person, if any, who controls Wyndham, any Underwriter or
any other selling Holder within the meaning of Section 15 of the Securities Act,
against any and all losses, liabilities, claims, damages, judgments and expenses
described in the indemnity contained in paragraph (a) of this Section
(provided that any settlement of the type described therein is effected with the
written consent of such selling Holder), as incurred, but only with respect to
untrue statements or alleged untrue statements of a material fact contained in
any Prospectus or the omissions, or alleged omissions therefrom of a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in any such case made in reliance
upon and in conformity with written information furnished to Wyndham by such
selling Holder expressly for use in such Registration Statement (or any
amendment thereto) or such Prospectus (or any amendment or supplement thereto).
(c) Conduct of Indemnification Proceedings. Each indemnified party or
--------------------------------------
parties shall give reasonably prompt notice to each indemnifying party or
parties of any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure so to notify an indemnifying
party or parties shall not relieve it or them from any liability which it or
they may have under this indemnity agreement, except to the extent that the
indemnifying party is materially prejudiced by such failure to give notice.
If the indemnifying party or parties so elects within a reasonable time after
receipt of such notice, the indemnifying party or parties may assume the defense
of such action or proceeding at such indemnifying party's or parties' expense
with counsel chosen by the indemnifying party or parties and approved by the
indemnified party defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such indemnified party
or parties determine in good faith that a conflict of interest exists and that
therefore it is advisable for such indemnified party or parties to be
represented by separate counsel or that, upon advice of counsel, there may be
legal defenses available to it or them which are different from or in addition
to those available to the indemnifying party, then the indemnifying party or
parties shall not be entitled to assume such defense and the indemnified party
or parties shall be entitled to separate counsel (limited in each jurisdiction
to one
20
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counsel for all Underwriters and another counsel for all other indemnified
parties under this Agreement) at the indemnifying party's or parties' expense.
If an indemnifying party or parties is not so entitled to assume the defense of
such action or does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, the indemnifying party or
parties will pay the reasonable fees and expenses of counsel for the indemnified
party or parties (limited in each jurisdiction to one counsel for all
Underwriters and another counsel for all other indemnified parties under this
Agreement). No indemnifying party or parties will be liable for any settlement
effected without the written consent of such indemnifying party or parties,
which consent shall not be unreasonably withheld. If an indemnifying party is
entitled to assume, and assumes, the defense of such action or proceeding in
accordance with this paragraph, such indemnifying party or parties shall not,
except as otherwise provided in this subsection (c), be liable for any fees and
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action or proceeding.
(d) Contribution. (i) In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
this Section is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms in respect of any
losses, liabilities, claims, damages, judgments and expenses suffered by an
indemnified party referred to therein, each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
liabilities, claims, damages, judgments and expenses in such proportion as is
appropriate to reflect the relative fault of Wyndham on the one hand and of the
liable selling Holders (including, in each case, that of their respective
officers, directors, employees and agents) on the other in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages, judgments or expenses, as well as any other relevant equitable
considerations. The relative fault of Wyndham on the one hand and of the liable
selling Holders (including, in each case, that of their respective officers,
directors, employees and agents) on the other 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
relates to information supplied by Wyndham, on the one hand, or by or on behalf
of the selling Holders, on the other, 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, liabilities, claims, damages, judgments and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (c) of this Section, any legal or other fees or expenses reasonably
21
<PAGE>
incurred by such party in connection with investigating or defending any action
or claim.
(ii) Wyndham and each Holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this paragraph (d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in sub-
paragraph (i) above. Notwithstanding the provisions of this paragraph (d), in
the case of distributions to the public, an indemnifying Holder shall not be
required to contribute any amount in excess of the amount by which (A) the total
price at which the Registrable Securities sold by such indemnifying Holder and
its affiliated indemnifying Holders and distributed to the public were offered
to the public exceeds (B) the amount of any damages which such indemnifying
Holder 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.
(iii) For purposes of this Section, each Person, if any, who
controls a Holder or an Underwriter within the meaning of Section 15 of the
Securities Act (and their respective partners, directors, officers and
employees) shall have the same rights to contribution as such Holder or
Underwriter; and each director of Wyndham, each officer of Wyndham who signed
the Registration Statement, and each Person, if any, who controls Wyndham within
the meaning of Section 15 of the Securities Act, shall have the same rights to
contribution as Wyndham.
Section 6. Miscellaneous.
-------------
(a) Inconsistent Agreements. Wyndham is not a party to, and will not
-----------------------
on or after the date of this Agreement enter into, any agreement which conflicts
with the provisions of this Agreement nor has Wyndham entered into any such
agreement, and Wyndham will not on or after the date of this Agreement modify in
any manner adverse to the Holders any such agreement; provided, however, that
nothing in this sentence shall prohibit Wyndham from granting registration
rights, which become exercisable from and after the Closing, to any Person (a
"Third Party") who becomes an owner of shares of any of Wyndham's capital stock
after the date hereof (including granting incidental registration rights with
respect to any Registration Statement required to be filed or maintained
hereunder) if and only if (i) the Third-Party's registration rights (including,
without limitation, demand registration rights) provide to the Holders of
Registrable Securities who seek to
22
<PAGE>
participate in such registration (whether or not such registration is initiated
hereunder) rights no less favorable to such Holders than those rights provided
to the Holders hereunder as if such registration were a Required Registration
(including, without limitation, the priority provisions contained in Section
2(a)(iii)), provided, further, however, that if such registration is not
initiated by the Initial Holders such registration shall not be deemed one of
the eight Required Registrations for purposes of the limitations contained in
the second paragraph of Section 2(a)(i), and (ii) the Third Party is required to
enter into the agreements provided for in Section 3 hereof (as if it were
Wyndham) on the terms and for the period applicable to Wyndham (including
preventing sales pursuant to Rule 144 under the Securities Act) if requested by
the sole Underwriter or lead managing Underwriter in an Underwritten Offering
initiated by Holders of Registrable Securities pursuant to Section 2(a). The
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of Wyndham's other
issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless Wyndham has obtained the written consent of a majority
of the Holders and, if any such amendment, modification, supplement, waiver or
consent would adversely affect the rights of any Holder hereunder, the written
consent of each Holder which is affected shall be obtained; provided, however,
that nothing herein shall prohibit any amendment, modification, supplement,
waiver or consent the effect of which is limited only to those Holders who have
agreed to such amendment, modification, supplement, waiver or consent.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, telex,
telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to Wyndham by means of a notice
given in accordance with the provisions of this paragraph (c), which address
initially is, with respect to each Holder as of the date hereof, the address set
forth next to such Holder's name on the signature pages hereof with a copy to
Randall H. Doud, Esq., telecopier number (212) 735-2000, and with respect to
each Holder who becomes such after the date hereof, the address of such Holder
in the stock records of Wyndham, (ii) if to Wyndham, at 1950 Stemmons Freeway,
Suite 6001, Dallas, Texas 75207, telecopier number (214) 863-1527, Attention:
General Counsel, with a copy to Gilbert G. Menna, P.C., telecopier number (617)
523-1231, and thereafter at such other address, notice of which is given in
accordance with the provisions of this paragraph.
23
<PAGE>
Notwithstanding the foregoing, Wyndham shall not be obligated to provide any
notice to any Holder which is not an Initial Holder except with respect to a
Required or Incidental Registration Statement which has been filed and pursuant
to which such Holder is identified as a selling stockholder.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
business day if timely delivered to a courier guaranteeing overnight delivery.
Notwithstanding the foregoing, nothing in this Section 6(c) is intended to
enlarge the class of Persons which are Holders, as defined in the preamble of
this Agreement, and thus entitled to the rights granted hereunder.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without the need for an express assignment, subsequent
Holders. If any successor, assignee or transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and to receive the benefits hereof.
Notwithstanding the foregoing, nothing in this Section 6(d) is intended to
enlarge the class of Persons which are Holders, as defined in the preamble of
this Agreement, and thus entitled to the rights granted hereunder. For purposes
of this Agreement, "successor" for any entity other than a natural person shall
mean a successor to such entity as a result of such entity's merger,
consolidation, liquidation, dissolution, sale of substantially all of its
assets, or similar transaction.
(e) Recapitalizations, Exchanges, Etc., Affecting Registrable
---------------------------------------------------------
Securities. The provisions of this Agreement shall apply, to the full extent
- ----------
set forth herein with respect to the Registrable Securities, to any and all
securities or capital stock of Wyndham or any successor or assign of Wyndham
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of such Registrable
Securities, by reason of any dividend, split, issuance, reverse split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. Upon the occurrence of any of such events, Preferred Stock and
Common Stock amounts hereunder shall be appropriately adjusted if necessary.
24
<PAGE>
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which counterparts, taken together, shall constitute
one and the same instrument.
(g) Descriptive Headings, Etc. The headings in this Agreement are for
-------------------------
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, paragraph and clause references are to the
Articles, Sections, paragraphs and clauses to this Agreement unless otherwise
specified; (4) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless otherwise
specified; (5) "or" is not exclusive; and (6) provisions apply to successive
events and transactions.
(h) Severability. In the event that any one or more of the
------------
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF).
(j) Specific Performance. The parties hereto acknowledge that there
--------------------
would be no adequate remedy at law if any party fails to perform in any material
respect any of its obligations hereunder, and accordingly agree that each party,
in addition to any other remedy to which it may be entitled at law or in equity,
shall be entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
25
<PAGE>
(k) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between Wyndham, on the one hand, and the other
parties to this Agreement, on the other, with respect to such subject matter.
* * *
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
WYNDHAM INTERNATIONAL, INC.
By: /s/ James D. Carreker
--------------------------------
Name: James D. Carreker
Title: Chairman and Chief Executive Officer
27
<PAGE>
APOLLO REAL ESTATE
INVESTMENT FUND III, L.P.
By: Apollo Real Estate Advisors III, L.P.,
its General Partner
By: Apollo Real Estate Capital
Advisors III, Inc.,
its General Partner
Address:
- -------
1301 Avenue of the Americas
38th Floor
New York, New York 10019 By: /s/ Ricardo Koenigsberger
Attention: ---------------------------------
Telecopier Number: Name: Ricardo Koenigsberger
- ----------------- Title: Vice President
(212) 261-4060
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors, IV, L.P., its General
Partner
By: Apollo Capital Management IV,
Inc., its General Partner
Address:
- -------
1301 Avenue of the Americas
38th Floor
New York, New York 10019 By: /s/ Eric Press
Attention: ---------------------------------
Telecopier Number: Name: Eric Press
- ----------------- Title: Vice President
(212) 261-4060
28
<PAGE>
THOMAS H. LEE EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC
Address:
- -------
75 State Street, Suite 2600
Boston, MA 02109
Attention: By: /s/ Scott Sperling
Telecopier Number: ---------------------------------
- ----------------- Name: Scott Sperling
(617) 227-3514 Title: Managing Director
THOMAS H. LEE FOREIGN FUND IV, L.P.
By: THL Equity Advisors IV, LLC
Address:
- -------
75 State Street, Suite 2600
Boston, MA 02109
Attention: By: /s/ Scott Sperling
Telecopier Number: ---------------------------------
- ----------------- Name: Scott Sperling
(617) 227-3514 Title: Managing Director
THOMAS H. LEE CHARITABLE INVESTMENT L.P.
By: THL Equity Advisors IV, LLC
Address:
- -------
75 State Street, Suite 2600
Boston, MA 02109
Attention: By: /s/ Scott Sperling
Telecopier Number: ---------------------------------
- ----------------- Name: Scott Sperling
(617) 227-3514 Title: Managing Director
THL-CCI LIMITED PARTNERSHIP
By: THL Equity Advisors IV, LLC
Address:
- -------
75 State Street, Suite 2600
Boston, MA 02109
Attention: By: /s/ Scott Sperling
Telecopier Number: ---------------------------------
- ----------------- Name: Scott Sperling
(617) 227-3514 Title: Managing Director
29
<PAGE>
BEACON CAPITAL PARTNERS, L.P.
By: Beacon Capital Partners, Inc.,
its General Partner
Address:
- -------
1 Federal Street, 26/th/ Floor
Boston, MA 02110
Attention: By: /s/ John C. Halsted
Telecopier Number: ---------------------------------
- ----------------- Name: John C. Halsted
(617) 457-0499 Title: Senior Vice President
STRATEGIC REAL ESTATE INVESTMENTS I, L.L.C.
Address:
- -------
1995 University Avenue
Suite 550
Berkeley, CA 94704
Attention: By: /s/ Kenneth T. Rosen
Telecopier Number: ---------------------------------
- ----------------- Name: Kenneth T. Rosen
(510) 849-1209 Title: Manager
30
<PAGE>
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
AS AMENDED AND RESTATED
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is
made as of the 19th day of April, 1999, between Wyndham International, Inc., a
Delaware corporation (the "Company"), and Leslie V. Bentley ("Executive").
WHEREAS, Executive is currently employed by the Company in a senior
executive capacity;
WHEREAS, the Company desires to continue to employ Executive and Executive
desires to continue to be employed by the Company;
WHEREAS, the Company and Executive desire to amend and restate Executive's
existing Executive Employment Agreement with the Company to make certain changes
therein and to eliminate the requirement of an escrow arrangement upon a Change
in Control of the Company;
WHEREAS, the Company and Executive acknowledge that regardless of the
provisions of Paragraph 8 of this amended and restated Agreement, upon the
closing of the Securities Purchase Agreement by and among Patriot American
Hospitality, Inc., Wyndham International, Inc., Patriot American Hospitality,
L.P. and the Investors named therein, all options and other stock-based awards
granted to Executive prior to the date of this Agreement shall immediately
accelerate and become exercisable or non-forfeitable as of such date;
WHEREAS, as an additional inducement to Executive to enter into this
amended and restated Agreement, the Company shall, on the Commencement Date (as
hereinafter defined), grant Executive an option to purchase a certain number of
Paired Shares of common stock of the Company and of common stock of Patriot
American Hospitality, Inc. as set forth in the agreement attached hereto as
Exhibit A (the "Option"), to enter into a new nonrecourse promissory note
attached hereto as Exhibit B (the "Note") and to enter into a new recourse
promissory note attached hereto as Exhibit C; and
WHEREAS, Executive is desirous of committing to serve the Company on the
terms herein provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment. The term of this Agreement shall extend from the date hereof
(the "Commencement Date") until the third anniversary of the Commencement Date;
provided, however, that the term of this Agreement shall automatically be
extended for one additional year on the third anniversary of the Commencement
Date and each anniversary thereafter unless, not less than 90 days prior to each
such date, either party shall have given notice to the
<PAGE>
other that it does not wish to extend this Agreement; provided, further, that if
a Change in Control occurs during the original or extended term of this
Agreement, the term of this Agreement shall continue in effect for a period of
not less than eighteen (18) months beyond the month in which the Change in
Control occurred. The term of this Agreement shall be subject to termination as
provided in Paragraph 6 and may be referred to herein as the "Period of
Employment."
2. Position and Duties. During the Period of Employment, Executive shall serve
as an Executive Vice President of the Company, shall have supervision and
control over and responsibility for the day-to-day business and affairs of those
functions and operations of the Company and shall have such other powers and
duties as may from time to time be prescribed by the Chairman of the Board of
the Company (the "Chairman") or the Chief Executive Officer of the Company (the
"CEO") or other executive authorized by the Chairman or CEO, provided that such
duties are consistent with Executive's position or other positions that he may
hold from time to time. Executive shall devote his full working time and efforts
to the business and affairs of the Company. Notwithstanding the foregoing,
Executive may serve on other boards of directors, with the approval of the
Chairman or CEO, or engage in religious, charitable or other community
activities as long as such services and activities are disclosed to the Chairman
or CEO and do not materially interfere with Executive's performance of his
duties to the Company as provided in this Agreement.
3. Compensation and Related Matters.
(a) Base Salary and Incentive Compensation. Executive's initial annual
base salary ("Base Salary") shall be $350,000.00. Executive's Base Salary shall
be redetermined at least thirty (30) days before each annual compensation
determination date established by the Company during the Period of Employment in
an amount to be fixed by the Board of Directors of the Company or a Committee
thereof or a duly authorized officer (the "Board"). The Base Salary, as
redetermined, may be referred to herein as "Adjusted Base Salary." The Base
Salary or Adjusted Base Salary shall be payable in substantially equal bi-weekly
installments and shall in no way limit or reduce the obligations of the Company
hereunder. In addition to Base Salary or Adjusted Base Salary, Executive shall
be eligible to receive cash incentive compensation as determined by the Board
from time to time, and shall also be eligible to participate in such incentive
compensation plans as the Board shall determine from time to time for employees
of the same status within the hierarchy of the Company.
(b) Expenses. Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by him (in accordance with the policies and
procedures then in effect and established by the Company for its senior
executive officers) in performing services hereunder during the Period of
Employment, provided that Executive properly accounts therefor in accordance
with Company policy.
(c) Other Benefits. During the Period of Employment, Executive shall be
entitled to continue to participate in or receive benefits under all of the
Company's Employee Benefit
2
<PAGE>
Plans in effect on the date hereof, or under plans or arrangements that provide
Executive with at least substantially equivalent benefits to those provided
under such Employee Benefit Plans. As used herein, "Employee Benefit Plans"
include, without limitation, each pension and retirement plan; supplemental
pension, retirement and deferred compensation plan; savings and profit-sharing
plan; stock ownership plan; stock purchase plan; stock option plan; life
insurance plan; medical insurance plan; disability plan; and health and accident
plan or arrangement established and maintained by the Company on the date hereof
for employees of the same status within the hierarchy of the Company. To the
extent that the scope or nature of benefits described in this section are
determined under the policies of the Company based in whole or in part on the
seniority or tenure of an employee's service, Executive shall be deemed to have
a tenure with the Company equal to the actual time of Executive's service with
Company. During the Period of Employment, Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement which may, in the future, be made available by the Company to its
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plan or
arrangement. Any payments or benefits payable to Executive under a plan or
arrangement referred to in this Subparagraph 3(c) in respect of any calendar
year during which Executive is employed by the Company for less than the whole
of such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is so employed. Should any such payments or benefits accrue
on a fiscal (rather than calendar) year, then the proration in the preceding
sentence shall be on the basis of a fiscal year rather than calendar year.
(d) Life Insurance. The Company shall pay the premiums on, and maintain
in effect throughout the Period of Employment, a life insurance policy on the
life of Executive in an amount not less than the amount of Executive's then
current Base Salary or Adjusted Base Salary. Executive shall have the right to
designate the beneficiary under such policy.
(e) Vacations. Executive shall be entitled to the number of paid vacation
days in each calendar year determined by the Company from time to time for
executives at the same level as Executive. Executive shall also be entitled to
all paid holidays given by the Company to its executives. To the extent that the
scope or nature of benefits described in this section are determined under the
policies of the Company based in whole or in part on the seniority or tenure of
an employee's service, Executive shall be deemed to have a tenure with the
Company equal to the actual time of Executive's service with Company.
(f) Disability Insurance. The Company shall pay the premiums on, and
maintain in effect through the Period of Employment, long-term disability
insurance providing for payment of benefits at rates not less than sixty percent
(60%) of Executive's current Base Salary or Adjusted Base Salary.
(g) Tax Loan. Upon the maturity of the Note, if Executive is still
employed by the Company, the Company shall provide Executive with a loan (the
"Tax Loan") in an amount sufficient to enable Executive to pay taxes due upon
the maturity of the Note. The Tax Loan
3
<PAGE>
shall (i) be personal recourse, (ii) have a term of four (4) years, (iii) bear
interest at the Company's revolver interest rate, and (iv) require Executive to
prepay with fifty percent (50%) of the net after-tax proceeds of the sale of any
shares of stock of the Company acquired through option exercises and with
twenty-five percent (25%) of the net after-tax amount of any bonus payment
from the Company.
4. Unauthorized Disclosure.
(a) Confidential Information. Executive acknowledges that in the course of
his employment with the Company (and, if applicable, its predecessors), he has
been allowed to become, and will continue to be allowed to become, acquainted
with the Company's business affairs, information, trade secrets, and other
matters which are of a proprietary or confidential nature, including but not
limited to the Company's and its predecessors' operations, business
opportunities, price and cost information, finance, customer information,
business plans, various sales techniques, manuals, letters, notebooks,
procedures, reports, products, processes, services, and other confidential
information and knowledge (collectively the "Confidential Information")
concerning the Company's and its predecessors' business. The Company agrees to
provide on an ongoing basis such Confidential Information as the Company deems
necessary or desirable to aid Executive in the performance of his duties.
Executive understands and acknowledges that such Confidential Information is
confidential, and he agrees not to disclose such Confidential Information to
anyone outside the Company except to the extent that (i) Executive deems such
disclosure or use reasonably necessary or appropriate in connection with
performing his duties on behalf of the Company, (ii) Executive is required by
order of a court of competent jurisdiction (by subpoena or similar process) to
disclose or discuss any Confidential Information, provided that in such case,
Executive shall promptly inform the Company of such event, shall cooperate with
the Company in attempting to obtain a protective order or to otherwise restrict
such disclosure, and shall only disclose Confidential Information to the minimum
extent necessary to comply with any such court order; (iii) such Confidential
Information becomes generally known to and available for use by the hotel and
hospitality industry (the "Hotel Industry"), other than as a result of any
action or inaction by Executive; or (iv) such information has been rightfully
received by a member of the Hotel Industry or has been published in a form
generally available to the Hotel Industry prior to the date Executive proposes
to disclose or use such information. Executive further agrees that he will not
during employment and/or at any time thereafter use such Confidential
Information in competing, directly or indirectly, with the Company. At such
time as Executive shall cease to be employed by the Company, he will immediately
turn over to the Company all Confidential Information, including papers,
documents, writings, electronically stored information, other property, and all
copies of them provided to or created by him during the course of his employment
with the Company.
(b) Heirs, successors, and legal representatives. The foregoing provisions
of this Paragraph 4 shall be binding upon Executive's heirs, successors, and
legal representatives. The provisions of this Paragraph 4 shall survive the
termination of this Agreement for any reason.
4
<PAGE>
5. Covenant Not to Compete. In consideration for the Option and the Loan and
for Executive's employment by the Company under the terms provided in this
Agreement and as a means to aid in the performance and enforcement of the terms
of the Unauthorized Disclosure provisions of Paragraph 4, Executive agrees that
(a) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not, directly or indirectly, as an
owner, director, principal, agent, officer, employee, partner, consultant,
servant, or otherwise, carry on, operate, manage, control, or become involved in
any manner with any business, operation, corporation, partnership, association,
agency, or other person or entity which is in the business of owning, operating,
managing or granting franchise rights with respect to hotels, motels or other
lodging facilities in any area or territory in which the Company conducts
operations; provided, however, that the foregoing shall not prohibit Executive
from owning up to one percent (1%) of the outstanding stock of a publicly held
company engaged in the hospitality business. Notwithstanding the foregoing,
Executive shall be permitted to engage in such activities with respect to any
other hotel, motel or lodging facility that would be immaterial to the
operations of the Company in the area or territory in question. Immateriality,
for purposes of the foregoing sentence, shall be determined in the sole
discretion of the Board in good faith.
(b) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not, directly or indirectly, either
for himself or for any other business, operation, corporation, partnership,
association, agency, or other person or entity, call upon, compete for, solicit,
divert, or take away, or attempt to divert or take away any of the customers
(including, without limitation, any hotel owner, lessor or lessee, asset
manager, trustee, consumer with whom the Company from time to time (i) has an
existing agreement or business relationship; or (ii) has included as a prospect
in its applicable pipeline) or vendors of the Company in any of the areas or
territories in which the Company conducts operations if such action has the
intent or effect of interfering with the Company's relationship with the vendor
or customer.
(c) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not directly or indirectly solicit or
induce any present or future employee of the Company to accept employment with
Executive or with any business, operation, corporation, partnership,
association, agency, or other person or entity with which Executive may be
associated, and Executive will not employ or cause any business, operation,
corporation, partnership, association, agency, or other person or entity with
which Executive may be associated to employ any present or future employee of
the Company without providing the Company with ten (10) days' prior written
notice of such proposed employment.
Should Executive violate the provisions of this Paragraph, then in addition
to all other rights and remedies available to the Company at law or in equity,
the duration of this covenant
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shall automatically be extended for the period of time from which Executive
began such violation until he permanently ceases such violation.
6. Termination. Executive's employment hereunder may be terminated without any
breach of this Agreement under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to physical
or mental illness, Executive shall have been absent from his duties hereunder on
a full-time basis for one hundred eighty (180) calendar days in the aggregate in
any twelve (12) month period, the Company may terminate Executive's employment
hereunder.
(c) Termination by Company For Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder for Cause
if such termination is approved by not less than a majority of the Board of
Directors of the Company at a meeting of such Board of Directors called and held
for such purpose. For purposes of this Agreement "Cause" shall mean: (A)
conduct by Executive constituting a material act of willful misconduct in
connection with the performance of his duties, including, without limitation,
misappropriation of funds or property of the Company or any of its affiliates
other than the occasional, customary and de minimis use of Company property for
personal purposes; (B) criminal or civil conviction of Executive, a plea of nolo
contendere by Executive or conduct by Executive that would reasonably be
expected to result in material injury to the reputation of the Company if he
were retained in his position with the Company, including, without limitation,
conviction of a felony involving moral turpitude; (C) continued, willful and
deliberate non-performance by Executive of his duties hereunder (other than by
reason of Executive's physical or mental illness, incapacity or disability) and
such non-performance has continued for more than thirty (30) days following
written notice of such non-performance from the Board; (D) a breach by Executive
of any of the provisions contained in Paragraphs 4 and 5 of this Agreement; or
(E) a violation by Executive of the Company's employment policies and such
violation has continued following written notice of such violation from the
Board.
(d) Termination Without Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder without
Cause if such termination is approved by a majority of the Board at a meeting of
the Board called and held for such purpose. Any termination by the Company of
Executive's employment under this Agreement which does not constitute a
termination for Cause under Subparagraph 6(c) or result from the death or
disability of the Executive under Subparagraph 6(a) or (b) shall be deemed a
termination without Cause. If the Company provides notice to the Executive
under Paragraph 1 that it does not wish to extend the Period of Employment, such
action shall be deemed a termination without Cause.
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(e) Termination by Executive. At any time during the Period of Employment,
Executive may terminate his employment hereunder for any reason, including but
not limited to Good Reason. If Executive provides notice to the Company under
Paragraph 1 that he does not wish to extend the Period of Employment, such
action shall be deemed a voluntary termination by Executive and one without Good
Reason. For purposes of this Agreement, "Good Reason" shall mean that Executive
has complied with the "Good Reason Process" (hereinafter defined) following the
occurrence of any of the following events: (A) a substantial diminution or
other substantive adverse change, not consented to by Executive, in the nature
or scope of Executive's responsibilities, authorities, powers, functions or
duties, other than a change in Executive's position or reporting relationship;
(B) any removal, during the Period of Employment, from Executive of his title of
Executive Vice President; (C) an involuntary reduction in Executive's Base
Salary or Adjusted Base Salary or involuntary reduction in cash incentive
compensation plan (but not reduction in incentive compensation appropriate for
level of performance) except for across-the-board salary reductions similarly
affecting all or substantially all management employees; (D) a breach by the
Company of any of its other material obligations under this Agreement and the
failure of the Company to cure such breach within thirty (30) days after written
notice thereof by Executive; (E) the involuntary relocation of the Company's
offices at which Executive is principally employed or the involuntary relocation
of the offices of Executive's primary workgroup to a location more than thirty
(30) miles from such offices (other than a relocation in either event to Dallas,
Texas), or the requirement by the Company for Executive to be based anywhere
other than the Company's offices at such location or in Dallas, Texas on an
extended basis, except for required travel on the Company's business to an
extent substantially consistent with Executive's business travel obligations; or
(F) the requirement that Executive report to a person who is below the level of
an Executive Vice President. "Good Reason Process" shall mean that (i) the
Executive reasonably determines in good faith that a "Good Reason" event has
occurred; (ii) Executive notifies the Company in writing of the occurrence of
the Good Reason event; (iii) Executive cooperates in good faith with the
Company's efforts, for a period not less than ninety (90) days following such
notice, to modify Executive's employment situation in a manner acceptable to
Executive and Company; and (iv) notwithstanding such efforts, one or more of the
Good Reason events continues to exist and has not been modified in a manner
acceptable to Executive. If the Company cures the Good Reason event during the
ninety (90) day period, Good Reason shall be deemed not to have occurred.
(f) Notice of Termination. Except for termination as specified in
Subparagraph 6(a), any termination of Executive's employment by the Company or
any such termination by Executive shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(g) Date of Termination. "Date of Termination" shall mean: (A) if
Executive's employment is terminated by his death, the date of his death; (B) if
Executive's employment is terminated on account of disability under Subparagraph
6(b) or by the Company for Cause under Subparagraph 6(c), the date on which
Notice of Termination is given; (C) if Executive's
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employment is terminated by the Company under Subparagraph 6(d), sixty (60) days
after the date on which a Notice of Termination is given; and (D) if Executive's
employment is terminated by Executive under Subparagraph 6(e), thirty (30) days
after the date on which a Notice of Termination is given.
7. Compensation Upon Termination or During Disability.
(a) If Executive's employment terminates by reason of his death, the
Company shall, within ninety (90) days of death, pay in a lump sum amount to
such person as Executive shall designate in a notice filed with the Company or,
if no such person is designated, to Executive's estate, Executive's accrued and
unpaid Base Salary or, if applicable, his Adjusted Base Salary, to the date of
his death, plus his accrued and unpaid incentive compensation, if any, under
Subparagraph 3(a). For a period of one (1) year following the Date of
Termination, the Company shall pay such health insurance premiums as may be
necessary to allow Executive's spouse and dependents to receive health insurance
coverage substantially similar to coverage they received prior to the Date of
Termination. In addition to the foregoing, any payments to which Executive's
spouse, beneficiaries, or estate may be entitled under any employee benefit plan
shall also be paid in accordance with the terms of such plan or arrangement.
Such payments, in the aggregate, shall fully discharge the Company's obligations
hereunder.
(b) During any period that Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, Executive
shall continue to receive his accrued and unpaid Base Salary or, if applicable,
his Adjusted Base Salary and accrued and unpaid incentive compensation payments,
if any, under Subparagraph 3(a), until Executive's employment is terminated due
to disability in accordance with Subparagraph 6(b) or until Executive terminates
his employment in accordance with Subparagraph 6(e), whichever first occurs. For
a period of one (1) year following the Date of Termination, the Company shall
pay such health insurance premiums as may be necessary to allow Executive,
Executive's spouse and dependents to receive health insurance coverage
substantially similar to coverage they received prior to the Date of
Termination. Upon termination due to death prior to the termination first to
occur as specified in the preceding sentence, Subparagraph 7(a) shall apply.
(c) If Executive's employment is terminated by Executive other than for
Good Reason as provided in Subparagraph 6(e), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given. Thereafter, the Company shall have no further obligations
to Executive except as otherwise expressly provided under this Agreement,
provided any such termination shall not adversely affect or alter Executive's
rights under any employee benefit plan of the Company in which Executive, at the
Date of Termination, has a vested interest, unless otherwise provided in such
employee benefit plan or any agreement or other instrument attendant thereto.
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(d) If Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e) or if Executive's employment is terminated by the Company
without Cause as provided in Subparagraph 6(d), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given and his accrued and unpaid incentive compensation, if any,
under Subparagraph 3(a). In addition, subject to signing by Executive of a
general release of claims in a form and manner satisfactory to the Company,
(i) the Company shall continue Executive's compensation at a rate
equal to the sum of Executive's Average Base Salary and his Average
Incentive Compensation payable for the remaining length of the Period of
Employment after the Date of Termination (the "Severance Amount"), but in
no event for fewer than twenty-four (24) months. The Severance Amount
shall be paid out in substantially equal bi-weekly installments, in
arrears; provided, however, that in the event Executive commences any
employment during such period, the Company shall be entitled to set-off
against the remaining Severance Amount seventy-five percent (75%) of the
amount of any cash compensation received by Executive from the new
employer. From time to time, Executive may be asked to certify to the
Company that he has not accepted employment with a new employer (including,
without limitation, contract and consulting agreements). For purposes of
this Agreement, "Average Base Salary" shall mean the average of the annual
Base Salary or, if applicable, Adjusted Base Salary received by Executive
for each of the three (3) immediately preceding fiscal years or such fewer
number of complete fiscal years as Executive may have been employed by the
Company. For purposes of this Agreement, "Average Incentive Compensation"
shall mean the average of the annual incentive compensation under
Subparagraph 3(a) received by Executive for the three (3) immediately
preceding fiscal years or such fewer number of complete fiscal years as
Executive may have been employed by the Company. In no event shall
"Average Incentive Compensation" include any sign-on bonus, retention bonus
or any other special bonus. Notwithstanding the foregoing, if the
Executive breaches any of the provisions contained in Paragraphs 4 and 5 of
this Agreement, all payments of the Severance Amount shall immediately
cease. Notwithstanding the foregoing, in the event Executive terminates
his employment for Good Reason as provided in Subparagraph 6(e), he shall
be entitled to the Severance Amount only if he provides the Notice of
Termination provided for in Subparagraph 6(f) within thirty (30) days after
the occurrence of the event or events which constitute such Good Reason as
specified in clauses (A), (B), (C), (D) (E) and (F) of Subparagraph 6(e);
(ii) in addition to any other benefits to which Executive may be
entitled in accordance with the Company's then existing severance policies,
the Company shall, for a period of one (1) year commencing on the Date of
Termination, pay such health insurance premiums as may be necessary to
allow Executive, Executive's spouse and dependents to continue to receive
health insurance coverage substantially similar to the coverage they
received prior to his termination of employment.
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(e) If Executive's employment is terminated by the Company for Cause as
provided in Subparagraph 6(c), then the Company shall, through the Date of
Termination, pay Executive his accrued and unpaid Base Salary or, if applicable,
his Adjusted Base Salary at the rate in effect at the time Notice of Termination
is given. Thereafter, the Company shall have no further obligations to
Executive except as otherwise expressly provided under this Agreement, provided
any such termination shall not adversely affect or alter Executive's rights
under any employee benefit plan of the Company in which Executive, at the Date
of Termination, has a vested interest, unless otherwise provided in such
employee benefit plan or any agreement or other instrument attendant thereto.
(f) Regardless of the reason for termination, for a period of five (5)
years beginning on the Date of Termination, the Company will provide such
reasonable assistance and support to Executive as he shall reasonably require in
connection with the preparation and filing of tax returns, statements and forms
insofar as such returns, statements or forms relate to Executive's association
with the Company or any of its predecessors or affiliates. At the Company's
election, such assistance and support shall be provided by either tax personnel
from the Company or certified public accountants selected and compensated by the
Company.
(g) Nothing contained in the foregoing Subparagraphs 7(a) through 7(f)
shall be construed so as to affect Executive's rights or the Company's
obligations relating to agreements or benefits which are unrelated to
termination of employment.
8. Change in Control Payment. The provisions of this Paragraph 8 set forth
certain terms of an agreement reached between Executive and the Company
regarding Executive's rights and obligations upon the occurrence of a Change in
Control of the Company. These provisions are intended to assure and encourage
in advance Executive's continued attention and dedication to his assigned duties
and his objectivity during the pendency and after the occurrence of any such
event. These provisions shall apply in lieu of, and expressly supersede, the
provisions of Subparagraph 7(d)(i) regarding severance pay upon a termination of
employment, if such termination of employment occurs within eighteen (18) months
after the occurrence of the first event constituting a Change of Control;
provided that such first event occurs during the Period of Employment. These
provisions shall terminate and be of no further force or effect beginning
eighteen (18) months after the occurrence of a Change of Control.
(a) Change in Control.
(i) If within eighteen (18) months after the occurrence of the
first event constituting a Change in Control, Executive's employment is
terminated by the Company without Cause as provided in Subparagraph 6(d) or
Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e), then the Company shall pay Executive the Severance
Amount as provided in Subparagraph 7(d)(i) in substantially bi-weekly
installments, in arrears, over twenty-four (24) months. Notwithstanding the
foregoing, if the Executive breaches any of the provisions
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contained in Paragraphs 4 and 5 of this Agreement, all payments of the
Severance Amount shall immediately cease; and
(ii) Within fifteen (15) days after Executive becomes entitled to
receive the Severance Amount under (i) above, the Company shall place funds
in an amount equal to the estimated Severance Amount in escrow, pursuant to
arrangements that are mutually acceptable to the Company and Executive (the
"Escrow Arrangement"). The Escrow Arrangement shall be maintained until
the final installment payment of the Severance Amount has been made;
(iii) Notwithstanding anything to the contrary in any applicable
option agreement or stock-based award agreement, if Executive terminates
his employment for Good Reason as provided in Subparagraph 6(e) or if
Executive's employment is terminated by the Company without Cause as
provided in Subparagraph 6(d) within eighteen (18) months of a Change in
Control, all stock options and other stock-based awards granted to
Executive by the Company shall immediately accelerate and become
exercisable or non-forfeitable as of the Date of Termination, and Executive
shall have 360 days to exercise all his stock options. Executive shall
also be entitled to any other rights and benefits with respect to stock-
related awards, to the extent and upon the terms provided in the employee
stock option or incentive plan or any agreement or other instrument
attendant thereto pursuant to which such options or awards were granted;
and
(iv) The Company shall, for a period of one (1) year commencing on
the Date of Termination, pay such health insurance premiums as may be
necessary to allow Executive, Executive's spouse and dependents to continue
to receive health insurance coverage substantially similar to the coverage
they received prior to his termination of employment.
(b) Gross Up Payment.
(i) Excess Parachute Payment. If Executive incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") on "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code, the Company will pay to Executive an amount (the
"Gross Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the excess parachute payment and any
federal, state and local income taxes and employment taxes (together with
penalties and interest) and Excise Tax upon the payment provided for by
this Subparagraph 8(c)(i), will be equal to the Severance Amount.
(ii) Applicable Rates. For purposes of determining the amount of the
Gross Up Payment, Executive will be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year
in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of
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taxation in the state and locality of Executive's residence on the date of
Executive's Termination, net of the maximum reduction in federal income
taxes that could be obtained from deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon
the opinion of tax counsel selected by Executive and approved by the
Company, which approval will not be unreasonably withheld. If such opinion
is not finally accepted by the Internal Revenue Service (or state and local
taxing authorities), then appropriate adjustments to the Excise Tax will be
computed and additional Gross Up Payments will be made in the manner
provided by this Subparagraph (c).
(iv) Time For Payment. The Company will pay the estimated amount of
the Gross Up Payment in cash to Executive at such time or times when the
Excise Tax is due. Executive and the Company agree to reasonably cooperate
in the determination of the actual amount of the Gross Up Payment.
Further, Executive and the Company agree to make such adjustments to the
estimated amount of the Gross Up Payment as may be necessary to equal the
actual amount of the Gross Up Payment, which in the case of Executive will
refer to refunds of prior overpayments and in the case of the Company will
refer to makeup of prior underpayments.
(c) Definitions. For purposes of this Paragraph 8, the following terms
shall have the following meanings:
"Change in Control" shall mean any of the following:
(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the
"Acquiring Person"), other than the Company, or any of its Subsidiaries or
any Investor or Excluded Group, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the
combined voting power or economic interests of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors; provided, however, that any transfer from any Investor or
Excluded Group will not result in a Change in Control if such transfer was
part of a series of related transactions the effect of which, absent the
transfer to such Acquiring Person by the Investor or Excluded Group, would
not have resulted in the acquisition by such Acquiring Person of 35% or
more of the combined voting power or economic interests of the then
outstanding voting securities; or
(b) during any period of 12 consecutive months after the Issuance
Date, the individuals who at the beginning of any such 12-month period
constituted a majority of the Class A Directors and Class C Directors (the
"Incumbent Non-Investor Majority") cease for any reason to constitute at
least a majority of such Class A Directors and Class C Directors; provided
that (i) any individual becoming a director whose election,
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or nomination for election by the Company's stockholders, was approved by a
vote of the stockholders having the right to designate such director and
(ii) any director whose election to the Board or whose nomination for
election by the stockholders of the Company was approved by the requisite
vote of directors entitled to vote on such election or nomination in
accordance with the Restated Certificate of Incorporation of the Company,
shall, in each such case, be considered as though such individual were a
member of the Incumbent Non-Investor Majority, but excluding, as a member
of the Incumbent Non-Investor Majority, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) and further excluding any person who is an affiliate or
associate of an Acquiring Person having or proposing to acquire beneficial
ownership of 25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors; or
(c) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were the
respective beneficial owners of the voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 57.5% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors of the Company resulting from such reorganization,
merger or consolidation; or
(d) the sale or other disposition of assets representing 50% or
more of the assets of the Company in one transaction or series of related
transactions .
All defined terms used in the definition of "Change in Control" shall have
the same meaning as set forth in the Form of Certificate of Designation of
Series B Convertible Preferred Stock of Wyndham International, Inc.
"Company" shall mean not only Wyndham International, Inc., but also
its successors by merger or otherwise.
9. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
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if to the Executive:
At his home address as shown
in the Company's personnel records;
if to the Company:
Wyndham International, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, TX 75207
Attention: Senior Vice President of Human Resources and General
Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
10. Miscellaneous. No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Texas (without regard to principles of
conflicts of laws).
11. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. The invalid portion of this Agreement, if any, shall be modified by any
court having jurisdiction to the extent necessary to render such portion
enforceable.
12. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
13. Arbitration; Other Disputes. In the event of any dispute or controversy
arising under or in connection with this Agreement, the parties shall first
promptly try in good faith to settle such dispute or controversy by mediation
under the applicable rules of the American Arbitration Association before
resorting to arbitration. In the event such dispute or controversy remains
unresolved in whole or in part for a period of thirty (30) days after it
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arises, the parties will settle any remaining dispute or controversy exclusively
by arbitration in Dallas, Texas, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding the above,
the Company shall be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any continuation of any violation of
Paragraph 4 or 5 hereof. Furthermore, should a dispute occur concerning
Executive's mental or physical capacity as described in Subparagraph 6(b), 6(c)
or 7(b), a doctor selected by Executive and a doctor selected by the Company
shall be entitled to examine Executive. If the opinion of the Company's doctor
and Executive's doctor conflict, the Company's doctor and Executive's doctor
shall together agree upon a third doctor, whose opinion shall be binding. Any
amount to which Executive is entitled under this Agreement (including any
disputed amount), which is not paid when due, shall bear interest at a rate
equal to the lesser of eighteen percent (18%) per annum or the maximum lawful
rate.
14. Third-Party Agreements and Rights. Executive represents to the Company
that Executive's execution of this Agreement, Executive's employment with the
Company and the performance of Executive's proposed duties for the Company will
not violate any obligations Executive may have to any employer or other party,
and Executive will not bring to the premises of the Company any copies or other
tangible embodiments of non-public information belonging to or obtained from any
such previous employment or other party.
15. Litigation and Regulatory Cooperation. During and after Executive's
employment, Executive shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while Executive was employed by the Company;
provided, however, that such cooperation shall not materially and adversely
affect Executive or expose Executive to an increased probability of civil or
criminal litigation. Executive's cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. During and after Executive's
employment, Executive also shall cooperate fully with the Company in connection
with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences
that transpired while Executive was employed by the Company. The Company shall
also provide Executive with compensation on an hourly basis (to be derived from
the sum of his Base Compensation or, if applicable, Adjusted Base Salary and
Average Incentive Compensation) for requested litigation and regulatory
cooperation that occurs after his termination of employment, and reimburse
Executive for all costs and expenses incurred in connection with his performance
under this Paragraph 15, including, but not limited to, reasonable attorneys'
fees and costs.
16. Gender Neutral. Wherever used herein, a pronoun in the masculine gender
shall be considered as including the feminine gender unless the context clearly
indicates otherwise.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.
WYNDHAM INTERNATIONAL, INC.
By:_______________________________
Its: Chairman and Chief Executive Officer
_______________________________
Leslie V. Bentley
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EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
AS AMENDED AND RESTATED
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is
made as of the 19th day of April, 1999, between Wyndham International, Inc., a
Delaware corporation (the "Company"), and Michael A. Grossman ("Executive").
WHEREAS, Executive has previously had a valued association with Gencom
American Hospitality ("Previous Employer");
WHEREAS, Executive is currently employed by the Company in a senior
executive capacity;
WHEREAS, the Company desires to continue to employ Executive and Executive
desires to continue to be employed by the Company;
WHEREAS, the Company and Executive desire to amend and restate Executive's
existing Executive Employment Agreement with the Company, as set forth herein;
WHEREAS, the Company and Executive acknowledge that regardless of the
provisions of Paragraph 8 of this Agreement, upon the closing of the Securities
Purchase Agreement by and among Patriot American Hospitality, Inc., Wyndham
International, Inc., Patriot American Hospitality, L.P. and the Investors named
therein, all options and other stock-based awards granted to Executive prior to
the date of this Agreement shall immediately accelerate and become exercisable
or non-forfeitable as of such date;
WHEREAS, as an additional inducement to Executive to enter into this
Agreement, the Company shall, on the Commencement Date (as hereinafter defined),
grant Executive an option to purchase a certain number of Paired Shares of
common stock of the Company and of common stock of Patriot American Hospitality,
Inc. as set forth in the agreement attached hereto as Exhibit A (the "Option");
and
WHEREAS, Executive is desirous of committing to serve the Company on the
terms herein provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment. The term of this Agreement shall extend from the date hereof
(the "Commencement Date") until the third anniversary of the Commencement Date;
provided, however, that the term of this Agreement shall automatically be
extended for one additional year on the third anniversary of the Commencement
Date and each anniversary thereafter unless, not less than 90 days prior to each
such date, either party shall have given notice to the other that it does not
wish to extend this Agreement; provided, further, that if a Change in
<PAGE>
Control occurs during the original or extended term of this Agreement, the term
of this Agreement shall continue in effect for a period of not less than
eighteen (18) months beyond the month in which the Change in Control occurred.
The term of this Agreement shall be subject to termination as provided in
Paragraph 6 and may be referred to herein as the "Period of Employment."
2. Position and Duties. During the Period of Employment, Executive shall serve
as an Executive Vice President of the Company, shall have supervision and
control over and responsibility for the day-to-day business and affairs of those
functions and operations of the Company and shall have such other powers and
duties as may from time to time be prescribed by the Chairman of the Board of
the Company (the "Chairman") or the Chief Executive Officer of the Company (the
"CEO") or other executive authorized by the Chairman or CEO, provided that such
duties are consistent with Executive's position or other positions that he may
hold from time to time. Executive shall devote his full working time and
efforts to the business and affairs of the Company. Notwithstanding the
foregoing, Executive may serve on other boards of directors, with the approval
of the Chairman or CEO, or engage in religious, charitable or other community
activities as long as such services and activities are disclosed to the Chairman
or CEO and do not materially interfere with Executive's performance of his
duties to the Company as provided in this Agreement.
3. Compensation and Related Matters.
(a) Base Salary and Incentive Compensation. Executive's initial annual
base salary ("Base Salary") shall be $270,700.00. Effective July 1, 1999, Base
Salary shall be adjusted to $300,000.00. Executive's Base Salary shall be
redetermined at least thirty (30) days before each annual compensation
determination date established by the Company during the Period of Employment in
an amount to be fixed by the Board of Directors of the Company or a Committee
thereof or a duly authorized officer (the "Board"). The Base Salary, as
redetermined, may be referred to herein as "Adjusted Base Salary." The Base
Salary or Adjusted Base Salary shall be payable in substantially equal bi-weekly
installments and shall in no way limit or reduce the obligations of the Company
hereunder. In addition to Base Salary or Adjusted Base Salary, Executive shall
be eligible to receive cash incentive compensation as determined by the Board
from time to time, and shall also be eligible to participate in such incentive
compensation plans as the Board shall determine from time to time for employees
of the same status within the hierarchy of the Company.
(b) Expenses. Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by him (in accordance with the policies and
procedures then in effect and established by the Company for its senior
executive officers) in performing services hereunder during the Period of
Employment, provided that Executive properly accounts therefor in accordance
with Company policy.
(c) Other Benefits. During the Period of Employment, Executive shall be
entitled to continue to participate in or receive benefits under all of the
Company's Employee Benefit Plans in effect on the date hereof, or under plans or
arrangements that provide Executive with
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at least substantially equivalent benefits to those provided under such Employee
Benefit Plans. As used herein, "Employee Benefit Plans" include, without
limitation, each pension and retirement plan; supplemental pension, retirement
and deferred compensation plan; savings and profit-sharing plan; stock ownership
plan; stock purchase plan; stock option plan; life insurance plan; medical
insurance plan; disability plan; and health and accident plan or arrangement
established and maintained by the Company on the date hereof for employees of
the same status within the hierarchy of the Company. To the extent that the
scope or nature of benefits described in this section are determined under the
policies of the Company based in whole or in part on the seniority or tenure of
an employee's service, Executive shall be deemed to have a tenure with the
Company equal to the actual time of Executive's service with Company plus the
actual service by Executive to the Previous Employer. During the Period of
Employment, Executive shall be entitled to participate in or receive benefits
under any employee benefit plan or arrangement which may, in the future, be made
available by the Company to its executives and key management employees, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plan or arrangement. Any payments or benefits payable to
Executive under a plan or arrangement referred to in this Subparagraph 3(c) in
respect of any calendar year during which Executive is employed by the Company
for less than the whole of such year shall, unless otherwise provided in the
applicable plan or arrangement, be prorated in accordance with the number of
days in such calendar year during which he is so employed. Should any such
payments or benefits accrue on a fiscal (rather than calendar) year, then the
proration in the preceding sentence shall be on the basis of a fiscal year
rather than calendar year.
(d) Life Insurance. The Company shall pay the premiums on, and maintain in
effect throughout the Period of Employment, a life insurance policy on the life
of Executive in an amount not less than the amount of Executive's then current
Base Salary or Adjusted Base Salary. Executive shall have the right to
designate the beneficiary under such policy.
(e) Vacations. Executive shall be entitled to the number of paid vacation
days in each calendar year determined by the Company from time to time for
executives at the same level as Executive. Executive shall also be entitled to
all paid holidays given by the Company to its executives. To the extent that
the scope or nature of benefits described in this section are determined under
the policies of the Company based in whole or in part on the seniority or tenure
of an employee's service, Executive shall be deemed to have a tenure with the
Company equal to the actual time of Executive's service with Company plus the
actual service by Executive to the Previous Employer.
(f) Disability Insurance. The Company shall pay the premiums on, and
maintain in effect through the Period of Employment, long-term disability
insurance providing for payment of benefits at rates not less than sixty percent
(60%) of Executive's current Base Salary or Adjusted Base Salary.
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4. Unauthorized Disclosure.
(a) Confidential Information. Executive acknowledges that in the course of
his employment with the Company (and, if applicable, its predecessors), he has
been allowed to become, and will continue to be allowed to become, acquainted
with the Company's business affairs, information, trade secrets, and other
matters which are of a proprietary or confidential nature, including but not
limited to the Company's and its predecessors' operations, business
opportunities, price and cost information, finance, customer information,
business plans, various sales techniques, manuals, letters, notebooks,
procedures, reports, products, processes, services, and other confidential
information and knowledge (collectively the "Confidential Information")
concerning the Company's and its predecessors' business. The Company agrees to
provide on an ongoing basis such Confidential Information as the Company deems
necessary or desirable to aid Executive in the performance of his duties.
Executive understands and acknowledges that such Confidential Information is
confidential, and he agrees not to disclose such Confidential Information to
anyone outside the Company except to the extent that (i) Executive deems such
disclosure or use reasonably necessary or appropriate in connection with
performing his duties on behalf of the Company, (ii) Executive is required by
order of a court of competent jurisdiction (by subpoena or similar process) to
disclose or discuss any Confidential Information, provided that in such case,
Executive shall promptly inform the Company of such event, shall cooperate with
the Company in attempting to obtain a protective order or to otherwise restrict
such disclosure, and shall only disclose Confidential Information to the minimum
extent necessary to comply with any such court order; (iii) such Confidential
Information becomes generally known to and available for use by the hotel and
hospitality industry (the "Hotel Industry"), other than as a result of any
action or inaction by Executive; or (iv) such information has been rightfully
received by a member of the Hotel Industry or has been published in a form
generally available to the Hotel Industry prior to the date Executive proposes
to disclose or use such information. Executive further agrees that he will not
during employment and/or at any time thereafter use such Confidential
Information in competing, directly or indirectly, with the Company. At such
time as Executive shall cease to be employed by the Company, he will immediately
turn over to the Company all Confidential Information, including papers,
documents, writings, electronically stored information, other property, and all
copies of them provided to or created by him during the course of his employment
with the Company.
(b) Heirs, successors, and legal representatives. The foregoing provisions
of this Paragraph 4 shall be binding upon Executive's heirs, successors, and
legal representatives. The provisions of this Paragraph 4 shall survive the
termination of this Agreement for any reason.
5. Covenant Not to Compete. In consideration for the Option and for
Executive's employment by the Company under the terms provided in this Agreement
and as a means to aid in the performance and enforcement of the terms of the
Unauthorized Disclosure provisions of Paragraph 4, Executive agrees that
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(a) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not, directly or indirectly, as an
owner, director, principal, agent, officer, employee, partner, consultant,
servant, or otherwise, carry on, operate, manage, control, or become involved in
any manner with any business, operation, corporation, partnership, association,
agency, or other person or entity which is in the business of owning, operating,
managing or granting franchise rights with respect to hotels, motels or other
lodging facilities in any area or territory in which the Company conducts
operations; provided, however, that the foregoing shall not prohibit Executive
from owning up to one percent (1%) of the outstanding stock of a publicly held
company engaged in the hospitality business. Notwithstanding the foregoing,
Executive shall be permitted to engage in such activities with respect to any
other hotel, motel or lodging facility that would be immaterial to the
operations of the Company in the area or territory in question. Immateriality,
for purposes of the foregoing sentence, shall be determined in the sole
discretion of the Board in good faith.
(b) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not, directly or indirectly, either
for himself or for any other business, operation, corporation, partnership,
association, agency, or other person or entity, call upon, compete for, solicit,
divert, or take away, or attempt to divert or take away any of the customers
(including, without limitation, any hotel owner, lessor or lessee, asset
manager, trustee, consumer with whom the Company from time to time (i) has an
existing agreement or business relationship; or (ii) has included as a prospect
in its applicable pipeline) or vendors of the Company in any of the areas or
territories in which the Company conducts operations if such action has the
intent or effect of interfering with the Company's relationship with the vendor
or customer.
(c) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not directly or indirectly solicit or
induce any present or future employee of the Company to accept employment with
Executive or with any business, operation, corporation, partnership,
association, agency, or other person or entity with which Executive may be
associated, and Executive will not employ or cause any business, operation,
corporation, partnership, association, agency, or other person or entity with
which Executive may be associated to employ any present or future employee of
the Company without providing the Company with ten (10) days' prior written
notice of such proposed employment.
Should Executive violate the provisions of this Paragraph, then in addition
to all other rights and remedies available to the Company at law or in equity,
the duration of this covenant shall automatically be extended for the period of
time from which Executive began such violation until he permanently ceases such
violation.
6. Termination. Executive's employment hereunder may be terminated without any
breach of this Agreement under the following circumstances:
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(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to physical
or mental illness, Executive shall have been absent from his duties hereunder on
a full-time basis for one hundred eighty (180) calendar days in the aggregate in
any twelve (12) month period, the Company may terminate Executive's employment
hereunder.
(c) Termination by Company For Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder for Cause
if such termination is approved by not less than a majority of the Board of
Directors of the Company at a meeting of such Board of Directors called and held
for such purpose. For purposes of this Agreement "Cause" shall mean: (A)
conduct by Executive constituting a material act of willful misconduct in
connection with the performance of his duties, including, without limitation,
misappropriation of funds or property of the Company or any of its affiliates
other than the occasional, customary and de minimis use of Company property for
personal purposes; (B) criminal or civil conviction of Executive, a plea of nolo
contendere by Executive or conduct by Executive that would reasonably be
expected to result in material injury to the reputation of the Company if he
were retained in his position with the Company, including, without limitation,
conviction of a felony involving moral turpitude; (C) continued, willful and
deliberate non-performance by Executive of his duties hereunder (other than by
reason of Executive's physical or mental illness, incapacity or disability) and
such non-performance has continued for more than thirty (30) days following
written notice of such non-performance from the Board; (D) a breach by Executive
of any of the provisions contained in Paragraphs 4 and 5 of this Agreement; or
(E) a violation by Executive of the Company's employment policies and such
violation has continued following written notice of such violation from the
Board.
(d) Termination Without Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder without
Cause if such termination is approved by a majority of the Board at a meeting of
the Board called and held for such purpose. Any termination by the Company of
Executive's employment under this Agreement which does not constitute a
termination for Cause under Subparagraph 6(c) or result from the death or
disability of the Executive under Subparagraph 6(a) or (b) shall be deemed a
termination without Cause. If the Company provides notice to the Executive
under Paragraph 1 that it does not wish to extend the Period of Employment, such
action shall be deemed a termination without Cause.
(e) Termination by Executive. At any time during the Period of Employment,
Executive may terminate his employment hereunder for any reason, including but
not limited to Good Reason. If Executive provides notice to the Company under
Paragraph 1 that he does not wish to extend the Period of Employment, such
action shall be deemed a voluntary termination by Executive and one without Good
Reason. For purposes of this Agreement, "Good Reason" shall mean that Executive
has complied with the "Good Reason Process" (hereinafter defined) following the
occurrence of any of the following events: (A) a substantial
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diminution or other substantive adverse change, not consented to by Executive,
in the nature or scope of Executive's responsibilities, authorities, powers,
functions or duties, other than a change in Executive's position or reporting
relationship; (B) any removal, during the Period of Employment, from Executive
of his title of Executive Vice President; (C) an involuntary reduction in
Executive's Base Salary or Adjusted Base Salary or involuntary reduction in cash
incentive compensation plan (but not reduction in incentive compensation
appropriate for level of performance) except for across-the-board salary
reductions similarly affecting all or substantially all management employees;
(D) a breach by the Company of any of its other material obligations under this
Agreement and the failure of the Company to cure such breach within thirty (30)
days after written notice thereof by Executive; (E) the involuntary relocation
of the Company's offices at which Executive is principally employed or the
involuntary relocation of the offices of Executive's primary workgroup to a
location more than thirty (30) miles from such offices (other than a relocation
in either event to Dallas, Texas), or the requirement by the Company for
Executive to be based anywhere other than the Company's offices at such location
or in Dallas, Texas on an extended basis, except for required travel on the
Company's business to an extent substantially consistent with Executive's
business travel obligations; or (F) the requirement that Executive report to a
person who is below the level of an Executive Vice President. "Good Reason
Process" shall mean that (i) the Executive reasonably determines in good faith
that a "Good Reason" event has occurred; (ii) Executive notifies the Company in
writing of the occurrence of the Good Reason event; (iii) Executive cooperates
in good faith with the Company's efforts, for a period not less than ninety (90)
days following such notice, to modify Executive's employment situation in a
manner acceptable to Executive and Company; and (iv) notwithstanding such
efforts, one or more of the Good Reason events continues to exist and has not
been modified in a manner acceptable to Executive. If the Company cures the Good
Reason event during the ninety (90) day period, Good Reason shall be deemed not
to have occurred.
(f) Notice of Termination. Except for termination as specified in
Subparagraph 6(a), any termination of Executive's employment by the Company or
any such termination by Executive shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(g) Date of Termination. "Date of Termination" shall mean: (A) if
Executive's employment is terminated by his death, the date of his death; (B) if
Executive's employment is terminated on account of disability under Subparagraph
6(b) or by the Company for Cause under Subparagraph 6(c), the date on which
Notice of Termination is given; (C) if Executive's employment is terminated by
the Company under Subparagraph 6(d), sixty (60) days after the date on which a
Notice of Termination is given; and (D) if Executive's employment is terminated
by Executive under Subparagraph 6(e), thirty (30) days after the date on which a
Notice of Termination is given.
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7. Compensation Upon Termination or During Disability.
(a) If Executive's employment terminates by reason of his death, the
Company shall, within ninety (90) days of death, pay in a lump sum amount to
such person as Executive shall designate in a notice filed with the Company or,
if no such person is designated, to Executive's estate, Executive's accrued and
unpaid Base Salary or, if applicable, his Adjusted Base Salary, to the date of
his death, plus his accrued and unpaid incentive compensation, if any, under
Subparagraph 3(a). For a period of one (1) year following the Date of
Termination, the Company shall pay such health insurance premiums as may be
necessary to allow Executive's spouse and dependents to receive health insurance
coverage substantially similar to coverage they received prior to the Date of
Termination. In addition to the foregoing, any payments to which Executive's
spouse, beneficiaries, or estate may be entitled under any employee benefit plan
shall also be paid in accordance with the terms of such plan or arrangement.
Such payments, in the aggregate, shall fully discharge the Company's obligations
hereunder.
(b) During any period that Executive fails to perform his duties hereunder
as a result of incapacity due to physical or mental illness, Executive shall
continue to receive his accrued and unpaid Base Salary or, if applicable, his
Adjusted Base Salary and accrued and unpaid incentive compensation payments, if
any, under Subparagraph 3(a), until Executive's employment is terminated due to
disability in accordance with Subparagraph 6(b) or until Executive terminates
his employment in accordance with Subparagraph 6(e), whichever first occurs.
For a period of one (1) year following the Date of Termination, the Company
shall pay such health insurance premiums as may be necessary to allow Executive,
Executive's spouse and dependents to receive health insurance coverage
substantially similar to coverage they received prior to the Date of
Termination. Upon termination due to death prior to the termination first to
occur as specified in the preceding sentence, Subparagraph 7(a) shall apply.
(c) If Executive's employment is terminated by Executive other than for
Good Reason as provided in Subparagraph 6(e), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given. Thereafter, the Company shall have no further obligations
to Executive except as otherwise expressly provided under this Agreement,
provided any such termination shall not adversely affect or alter Executive's
rights under any employee benefit plan of the Company in which Executive, at the
Date of Termination, has a vested interest, unless otherwise provided in such
employee benefit plan or any agreement or other instrument attendant thereto.
(d) If Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e) or if Executive's employment is terminated by the Company
without Cause as provided in Subparagraph 6(d), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given and his accrued and unpaid
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incentive compensation, if any, under Subparagraph 3(a). In addition, subject to
signing by Executive of a general release of claims in a form and manner
satisfactory to the Company,
(i) the Company shall continue Executive's compensation at a rate
equal to the sum of Executive's Average Base Salary and his Average
Incentive Compensation payable for the remaining length of the Period of
Employment after the Date of Termination (the "Severance Amount"), but in
no event for fewer than twenty-four (24) months. The Severance Amount
shall be paid out in substantially equal bi-weekly installments, in
arrears; provided, however, that in the event Executive commences any
employment during such period, the Company shall be entitled to set-off
against the remaining Severance Amount seventy-five percent (75%) of the
amount of any cash compensation received by Executive from the new
employer. From time to time, Executive may be asked to certify to the
Company that he has not accepted employment with a new employer (including,
without limitation, contract and consulting agreements). For purposes of
this Agreement, "Average Base Salary" shall mean the average of the annual
Base Salary or, if applicable, Adjusted Base Salary received by Executive
for each of the three (3) immediately preceding fiscal years or such fewer
number of complete fiscal years as Executive may have been employed by the
Company and the Previous Employer. For purposes of this Agreement,
"Average Incentive Compensation" shall mean the average of the annual
incentive compensation under Subparagraph 3(a) received by Executive for
the three (3) immediately preceding fiscal years or such fewer number of
complete fiscal years as Executive may have been employed by the Company
and the Previous Employer. In no event shall "Average Incentive
Compensation" include any sign-on bonus, retention bonus or any other
special bonus. Notwithstanding the foregoing, if the Executive breaches
any of the provisions contained in Paragraphs 4 and 5 of this Agreement,
all payments of the Severance Amount shall immediately cease.
Notwithstanding the foregoing, in the event Executive terminates his
employment for Good Reason as provided in Subparagraph 6(e), he shall be
entitled to the Severance Amount only if he provides the Notice of
Termination provided for in Subparagraph 6(f) within thirty (30) days after
the occurrence of the event or events which constitute such Good Reason as
specified in clauses (A), (B), (C), (D), (E) and (F) of Subparagraph 6(e);
(ii) in addition to any other benefits to which Executive may be
entitled in accordance with the Company's then existing severance policies,
the Company shall, for a period of one (1) year commencing on the Date of
Termination, pay such health insurance premiums as may be necessary to
allow Executive, Executive's spouse and dependents to continue to receive
health insurance coverage substantially similar to the coverage they
received prior to his termination of employment.
(e) If Executive's employment is terminated by the Company for Cause as
provided in Subparagraph 6(c), then the Company shall, through the Date of
Termination, pay Executive his accrued and unpaid Base Salary or, if applicable,
his Adjusted Base Salary at the rate in effect at the time Notice of Termination
is given. Thereafter, the Company shall have no
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further obligations to Executive except as otherwise expressly provided under
this Agreement, provided any such termination shall not adversely affect or
alter Executive's rights under any employee benefit plan of the Company in which
Executive, at the Date of Termination, has a vested interest, unless otherwise
provided in such employee benefit plan or any agreement or other instrument
attendant thereto.
(f) Regardless of the reason for termination, for a period of five (5)
years beginning on the Date of Termination, the Company will provide such
reasonable assistance and support to Executive as he shall reasonably require in
connection with the preparation and filing of tax returns, statements and forms
insofar as such returns, statements or forms relate to Executive's association
with the Company or any of its predecessors or affiliates. At the Company's
election, such assistance and support shall be provided by either tax personnel
from the Company or certified public accountants selected and compensated by the
Company.
(g) Nothing contained in the foregoing Subparagraphs 7(a) through 7(f)
shall be construed so as to affect Executive's rights or the Company's
obligations relating to agreements or benefits which are unrelated to
termination of employment.
8. Change in Control Payment. The provisions of this Paragraph 8 set forth
certain terms of an agreement reached between Executive and the Company
regarding Executive's rights and obligations upon the occurrence of a Change in
Control of the Company. These provisions are intended to assure and encourage
in advance Executive's continued attention and dedication to his assigned duties
and his objectivity during the pendency and after the occurrence of any such
event. These provisions shall apply in lieu of, and expressly supersede, the
provisions of Subparagraph 7(d)(i) regarding severance pay upon a termination of
employment, if such termination of employment occurs within eighteen (18) months
after the occurrence of the first event constituting a Change of Control;
provided that such first event occurs during the Period of Employment. These
provisions shall terminate and be of no further force or effect beginning
eighteen (18) months after the occurrence of a Change of Control.
(a) Change in Control.
(i) If within eighteen (18) months after the occurrence of the first
event constituting a Change in Control, Executive's employment is
terminated by the Company without Cause as provided in Subparagraph 6(d) or
Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e), then the Company shall pay Executive the Severance
Amount as provided in Subparagraph 7(d)(i) in substantially bi-weekly
installments, in arrears, over twenty-four (24) months. Notwithstanding
the foregoing, if the Executive breaches any of the provisions contained in
Paragraphs 4 and 5 of this Agreement, all payments of the Severance Amount
shall immediately cease; and
(ii) Within fifteen (15) days after Executive becomes entitled to
receive the Severance Amount under (i) above, the Company shall place funds
in an amount equal
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to the estimated Severance Amount in escrow, pursuant to arrangements that
are mutually acceptable to the Company and Executive (the "Escrow
Arrangement"). The Escrow Arrangement shall be maintained until the final
installment payment of the Severance Amount has been made;
(iii) Notwithstanding anything to the contrary in any applicable
option agreement or stock-based award agreement, if Executive terminates
his employment for Good Reason as provided in Subparagraph 6(e) or if
Executive's employment is terminated by the Company without Cause as
provided in Subparagraph 6(d) within eighteen (18) months of a Change in
Control, all stock options and other stock-based awards granted to
Executive by the Company shall immediately accelerate and become
exercisable or non-forfeitable as of the Date of Termination, and Executive
shall have 360 days to exercise all his stock options. Executive shall
also be entitled to any other rights and benefits with respect to stock-
related awards, to the extent and upon the terms provided in the employee
stock option or incentive plan or any agreement or other instrument
attendant thereto pursuant to which such options or awards were granted;
and
(iv) The Company shall, for a period of one (1) year commencing on the
Date of Termination, pay such health insurance premiums as may be necessary
to allow Executive, Executive's spouse and dependents to continue to
receive health insurance coverage substantially similar to the coverage
they received prior to his termination of employment.
(b) Gross Up Payment.
(i) Excess Parachute Payment. If Executive incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") on "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code, the Company will pay to Executive an amount (the
"Gross Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the excess parachute payment and any
federal, state and local income taxes and employment taxes (together with
penalties and interest) and Excise Tax upon the payment provided for by
this Subparagraph 8(c)(i), will be equal to the Severance Amount.
(ii) Applicable Rates. For purposes of determining the amount of the
Gross Up Payment, Executive will be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year
in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality
of Executive's residence on the date of Executive's Termination, net of the
maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
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(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon
the opinion of tax counsel selected by Executive and approved by the
Company, which approval will not be unreasonably withheld. If such opinion
is not finally accepted by the Internal Revenue Service (or state and local
taxing authorities), then appropriate adjustments to the Excise Tax will be
computed and additional Gross Up Payments will be made in the manner
provided by this Subparagraph (c).
(iv) Time For Payment. The Company will pay the estimated amount of
the Gross Up Payment in cash to Executive at such time or times when the
Excise Tax is due. Executive and the Company agree to reasonably cooperate
in the determination of the actual amount of the Gross Up Payment.
Further, Executive and the Company agree to make such adjustments to the
estimated amount of the Gross Up Payment as may be necessary to equal the
actual amount of the Gross Up Payment, which in the case of Executive will
refer to refunds of prior overpayments and in the case of the Company will
refer to makeup of prior underpayments.
(c) Definitions. For purposes of this Paragraph 8, the following terms
shall have the following meanings:
"Change in Control" shall mean any of the following:
(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the
"Acquiring Person"), other than the Company, or any of its Subsidiaries or
any Investor or Excluded Group, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the
combined voting power or economic interests of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors; provided, however, that any transfer from any Investor or
Excluded Group will not result in a Change in Control if such transfer was
part of a series of related transactions the effect of which, absent the
transfer to such Acquiring Person by the Investor or Excluded Group, would
not have resulted in the acquisition by such Acquiring Person of 35% or
more of the combined voting power or economic interests of the then
outstanding voting securities; or
(b) during any period of 12 consecutive months after the Issuance
Date, the individuals who at the beginning of any such 12-month period
constituted a majority of the Class A Directors and Class C Directors (the
"Incumbent Non-Investor Majority") cease for any reason to constitute at
least a majority of such Class A Directors and Class C Directors; provided
that (i) any individual becoming a director whose election, or nomination
for election by the Company's stockholders, was approved by a vote of the
stockholders having the right to designate such director and (ii) any
director whose election to the Board or whose nomination for election by
the stockholders of the Company was approved by the requisite vote of
directors entitled to vote on such
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election or nomination in accordance with the Restated Certificate of
Incorporation of the Company, shall, in each such case, be considered as
though such individual were a member of the Incumbent Non-Investor
Majority, but excluding, as a member of the Incumbent Non-Investor
Majority, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) and further
excluding any person who is an affiliate or associate of an Acquiring
Person having or proposing to acquire beneficial ownership of 25% or more
of the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors; or
(c) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were the
respective beneficial owners of the voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 57.5% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors of the Company resulting from such reorganization,
merger or consolidation; or
(d) the sale or other disposition of assets representing 50% or more
of the assets of the Company in one transaction or series of related
transactions.
All defined terms used in the definition of "Change in Control" shall have
the same meaning as set forth in the Form of Certificate of Designation of
Series B Convertible Preferred Stock of Wyndham International, Inc.
"Company" shall mean not only Wyndham International, Inc., but also
its successors by merger or otherwise.
9. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
At his home address as shown
in the Company's personnel records;
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if to the Company:
Wyndham International, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, TX 75207
Attention: Senior Vice President of Human Resources and General
Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
10. Miscellaneous. No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Texas (without regard to principles of
conflicts of laws).
11. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. The invalid portion of this Agreement, if any, shall be modified by any
court having jurisdiction to the extent necessary to render such portion
enforceable.
12. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
13. Arbitration; Other Disputes. In the event of any dispute or controversy
arising under or in connection with this Agreement, the parties shall first
promptly try in good faith to settle such dispute or controversy by mediation
under the applicable rules of the American Arbitration Association before
resorting to arbitration. In the event such dispute or controversy remains
unresolved in whole or in part for a period of thirty (30) days after it arises,
the parties will settle any remaining dispute or controversy exclusively by
arbitration in Dallas, Texas, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding the above,
the Company shall be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any continuation of any violation of
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Paragraph 4 or 5 hereof. Furthermore, should a dispute occur concerning
Executive's mental or physical capacity as described in Subparagraph 6(b), 6(c)
or 7(b), a doctor selected by Executive and a doctor selected by the Company
shall be entitled to examine Executive. If the opinion of the Company's doctor
and Executive's doctor conflict, the Company's doctor and Executive's doctor
shall together agree upon a third doctor, whose opinion shall be binding. Any
amount to which Executive is entitled under this Agreement (including any
disputed amount), which is not paid when due, shall bear interest at a rate
equal to the lesser of eighteen percent (18%) per annum or the maximum lawful
rate.
14. Third-Party Agreements and Rights. Executive represents to the Company
that Executive's execution of this Agreement, Executive's employment with the
Company and the performance of Executive's proposed duties for the Company will
not violate any obligations Executive may have to any employer or other party,
and Executive will not bring to the premises of the Company any copies or other
tangible embodiments of non-public information belonging to or obtained from any
such previous employment or other party.
15. Litigation and Regulatory Cooperation. During and after Executive's
employment, Executive shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while Executive was employed by the Company;
provided, however, that such cooperation shall not materially and adversely
affect Executive or expose Executive to an increased probability of civil or
criminal litigation. Executive's cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. During and after Executive's
employment, Executive also shall cooperate fully with the Company in connection
with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences
that transpired while Executive was employed by the Company. The Company shall
also provide Executive with compensation on an hourly basis (to be derived from
the sum of his Base Compensation or, if applicable, Adjusted Base Salary and
Average Incentive Compensation) for requested litigation and regulatory
cooperation that occurs after his termination of employment, and reimburse
Executive for all costs and expenses incurred in connection with his performance
under this Paragraph 15, including, but not limited to, reasonable attorneys'
fees and costs.
16. Gender Neutral. Wherever used herein, a pronoun in the masculine gender
shall be considered as including the feminine gender unless the context clearly
indicates otherwise.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.
WYNDHAM INTERNATIONAL, INC.
By:_______________________________
Its:_______________________________
_______________________________
Michael A. Grossman
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EXHIBIT 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
AS AMENDED AND RESTATED
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is
made as of the 19th day of April, 1999, between Wyndham International, Inc., a
Delaware corporation (the "Company"), and Stanley M. Koonce, Jr. ("Executive").
WHEREAS, Executive is currently employed by the Company in a senior
executive capacity;
WHEREAS, the Company desires to continue to employ Executive and Executive
desires to continue to be employed by the Company;
WHEREAS, the Company and Executive desire to amend and restate Executive's
existing Executive Employment Agreement with the Company to make certain changes
therein and to eliminate the requirement of an escrow arrangement upon a Change
in Control of the Company;
WHEREAS, the Company and Executive acknowledge that regardless of the
provisions of Paragraph 8 of this amended and restated Agreement, upon the
closing of the Securities Purchase Agreement by and among Patriot American
Hospitality, Inc., Wyndham International, Inc., Patriot American Hospitality,
L.P. and the Investors named therein, all options and other stock-based awards
granted to Executive prior to the date of this Agreement shall immediately
accelerate and become exercisable or non-forfeitable as of such date;
WHEREAS, as an additional inducement to Executive to enter into this
amended and restated Agreement, the Company shall, on the Commencement Date (as
hereinafter defined), grant Executive an option to purchase a certain number of
Paired Shares of common stock of the Company and of common stock of Patriot
American Hospitality, Inc. as set forth in the agreement attached hereto as
Exhibit A (the "Option") and to enter into a new promissory note attached hereto
as Exhibit B (the "Note"); and
WHEREAS, Executive is desirous of committing to serve the Company on the
terms herein provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment. The term of this Agreement shall extend from the date hereof
(the "Commencement Date") until the third anniversary of the Commencement Date;
provided, however, that the term of this Agreement shall automatically be
extended for one additional year on the third anniversary of the Commencement
Date and each anniversary thereafter unless, not less than 90 days prior to each
such date, either party shall have given notice to the other that it does not
wish to extend this Agreement; provided, further, that if a Change in Control
occurs during the original or extended term of this Agreement, the term of this
Agreement shall continue in effect for a period of not less than eighteen (18)
months beyond the month in which the
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Change in Control occurred. The term of this Agreement shall be subject to
termination as provided in Paragraph 6 and may be referred to herein as the
"Period of Employment."
2. Position and Duties. During the Period of Employment, Executive shall serve
as an Executive Vice President of the Company, shall have supervision and
control over and responsibility for the day-to-day business and affairs of those
functions and operations of the Company and shall have such other powers and
duties as may from time to time be prescribed by the Chairman of the Board of
the Company (the "Chairman") or the Chief Executive Officer of the Company (the
"CEO") or other executive authorized by the Chairman or CEO, provided that such
duties are consistent with Executive's position or other positions that he may
hold from time to time. Executive shall devote his full working time and efforts
to the business and affairs of the Company. Notwithstanding the foregoing,
Executive may serve on other boards of directors, with the approval of the
Chairman or CEO, or engage in religious, charitable or other community
activities as long as such services and activities are disclosed to the Chairman
or CEO and do not materially interfere with Executive's performance of his
duties to the Company as provided in this Agreement.
3. Compensation and Related Matters.
(a) Base Salary and Incentive Compensation. Executive's initial annual
base salary ("Base Salary") shall be $315,000.00. Executive's Base Salary shall
be redetermined at least thirty (30) days before each annual compensation
determination date established by the Company during the Period of Employment in
an amount to be fixed by the Board of Directors of the Company or a Committee
thereof or a duly authorized officer (the "Board"). The Base Salary, as
redetermined, may be referred to herein as "Adjusted Base Salary." The Base
Salary or Adjusted Base Salary shall be payable in substantially equal bi-weekly
installments and shall in no way limit or reduce the obligations of the Company
hereunder. In addition to Base Salary or Adjusted Base Salary, Executive shall
be eligible to receive cash incentive compensation as determined by the Board
from time to time, and shall also be eligible to participate in such incentive
compensation plans as the Board shall determine from time to time for employees
of the same status within the hierarchy of the Company.
(b) Expenses. Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by him (in accordance with the policies and
procedures then in effect and established by the Company for its senior
executive officers) in performing services hereunder during the Period of
Employment, provided that Executive properly accounts therefor in accordance
with Company policy.
(c) Other Benefits. During the Period of Employment, Executive shall be
entitled to continue to participate in or receive benefits under all of the
Company's Employee Benefit Plans in effect on the date hereof, or under plans or
arrangements that provide Executive with at least substantially equivalent
benefits to those provided under such Employee Benefit Plans. As used herein,
"Employee Benefit Plans" include, without limitation, each pension and
retirement plan; supplemental pension, retirement and deferred compensation
plan; savings and profit-sharing plan; stock ownership plan; stock purchase
plan; stock option plan; life insurance plan; medical
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insurance plan; disability plan; and health and accident plan or arrangement
established and maintained by the Company on the date hereof for employees of
the same status within the hierarchy of the Company. To the extent that the
scope or nature of benefits described in this section are determined under the
policies of the Company based in whole or in part on the seniority or tenure of
an employee's service, Executive shall be deemed to have a tenure with the
Company equal to the actual time of Executive's service with Company. During the
Period of Employment, Executive shall be entitled to participate in or receive
benefits under any employee benefit plan or arrangement which may, in the
future, be made available by the Company to its executives and key management
employees, subject to and on a basis consistent with the terms, conditions and
overall administration of such plan or arrangement. Any payments or benefits
payable to Executive under a plan or arrangement referred to in this
Subparagraph 3(c) in respect of any calendar year during which Executive is
employed by the Company for less than the whole of such year shall, unless
otherwise provided in the applicable plan or arrangement, be prorated in
accordance with the number of days in such calendar year during which he is so
employed. Should any such payments or benefits accrue on a fiscal (rather than
calendar) year, then the proration in the preceding sentence shall be on the
basis of a fiscal year rather than calendar year.
(d) Life Insurance. The Company shall pay the premiums on, and maintain
in effect throughout the Period of Employment, a life insurance policy on the
life of Executive in an amount not less than the amount of Executive's then
current Base Salary or Adjusted Base Salary. Executive shall have the right to
designate the beneficiary under such policy.
(e) Vacations. Executive shall be entitled to the number of paid vacation
days in each calendar year determined by the Company from time to time for
executives at the same level as Executive. Executive shall also be entitled to
all paid holidays given by the Company to its executives. To the extent that the
scope or nature of benefits described in this section are determined under the
policies of the Company based in whole or in part on the seniority or tenure of
an employee's service, Executive shall be deemed to have a tenure with the
Company equal to the actual time of Executive's service with Company.
(f) Disability Insurance. The Company shall pay the premiums on, and
maintain in effect through the Period of Employment, long-term disability
insurance providing for payment of benefits at rates not less than sixty percent
(60%) of Executive's current Base Salary or Adjusted Base Salary.
(g) Tax Loan. Upon the maturity of the Note, if Executive is still
employed by the Company, the Company shall provide Executive with a loan (the
"Tax Loan") in an amount sufficient to enable Executive to pay taxes due upon
the maturity of the Note. The Tax Loan shall (i) be personal recourse, (ii)
have a term of four (4) years, (iii) bear interest at the Company's revolver
interest rate, and (iv) require Executive to prepay with fifty percent (50%) of
the net after-tax proceeds of the sale of any shares of stock of the Company
acquired through option exercises and with twenty-five percent (25%) of the net
after-tax amount of any bonus payment from the Company.
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4. Unauthorized Disclosure.
(a) Confidential Information. Executive acknowledges that in the course
of his employment with the Company (and, if applicable, its predecessors), he
has been allowed to become, and will continue to be allowed to become,
acquainted with the Company's business affairs, information, trade secrets, and
other matters which are of a proprietary or confidential nature, including but
not limited to the Company's and its predecessors' operations, business
opportunities, price and cost information, finance, customer information,
business plans, various sales techniques, manuals, letters, notebooks,
procedures, reports, products, processes, services, and other confidential
information and knowledge (collectively the "Confidential Information")
concerning the Company's and its predecessors' business. The Company agrees to
provide on an ongoing basis such Confidential Information as the Company deems
necessary or desirable to aid Executive in the performance of his duties.
Executive understands and acknowledges that such Confidential Information is
confidential, and he agrees not to disclose such Confidential Information to
anyone outside the Company except to the extent that (i) Executive deems such
disclosure or use reasonably necessary or appropriate in connection with
performing his duties on behalf of the Company, (ii) Executive is required by
order of a court of competent jurisdiction (by subpoena or similar process) to
disclose or discuss any Confidential Information, provided that in such case,
Executive shall promptly inform the Company of such event, shall cooperate with
the Company in attempting to obtain a protective order or to otherwise restrict
such disclosure, and shall only disclose Confidential Information to the minimum
extent necessary to comply with any such court order; (iii) such Confidential
Information becomes generally known to and available for use by the hotel and
hospitality industry (the "Hotel Industry"), other than as a result of any
action or inaction by Executive; or (iv) such information has been rightfully
received by a member of the Hotel Industry or has been published in a form
generally available to the Hotel Industry prior to the date Executive proposes
to disclose or use such information. Executive further agrees that he will not
during employment and/or at any time thereafter use such Confidential
Information in competing, directly or indirectly, with the Company. At such time
as Executive shall cease to be employed by the Company, he will immediately turn
over to the Company all Confidential Information, including papers, documents,
writings, electronically stored information, other property, and all copies of
them provided to or created by him during the course of his employment with the
Company.
(b) Heirs, successors, and legal representatives. The foregoing
provisions of this Paragraph 4 shall be binding upon Executive's heirs,
successors, and legal representatives. The provisions of this Paragraph 4 shall
survive the termination of this Agreement for any reason.
5. Covenant Not to Compete. In consideration for the Option and the Loan and
for Executive's employment by the Company under the terms provided in this
Agreement and as a means to aid in the performance and enforcement of the terms
of the Unauthorized Disclosure provisions of Paragraph 4, Executive agrees that
(a) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not, directly or indirectly, as an
owner, director, principal, agent, officer,
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employee, partner, consultant, servant, or otherwise, carry on, operate, manage,
control, or become involved in any manner with any business, operation,
corporation, partnership, association, agency, or other person or entity which
is in the business of owning, operating, managing or granting franchise rights
with respect to hotels, motels or other lodging facilities in any area or
territory in which the Company conducts operations; provided, however, that the
foregoing shall not prohibit Executive from owning up to one percent (1%) of the
outstanding stock of a publicly held company engaged in the hospitality
business. Notwithstanding the foregoing, Executive shall be permitted to engage
in such activities with respect to any other hotel, motel or lodging facility
that would be immaterial to the operations of the Company in the area or
territory in question. Immateriality, for purposes of the foregoing sentence,
shall be determined in the sole discretion of the Board in good faith.
(b) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not, directly or indirectly, either
for himself or for any other business, operation, corporation, partnership,
association, agency, or other person or entity, call upon, compete for, solicit,
divert, or take away, or attempt to divert or take away any of the customers
(including, without limitation, any hotel owner, lessor or lessee, asset
manager, trustee, consumer with whom the Company from time to time (i) has an
existing agreement or business relationship; or (ii) has included as a prospect
in its applicable pipeline) or vendors of the Company in any of the areas or
territories in which the Company conducts operations if such action has the
intent or effect of interfering with the Company's relationship with the vendor
or customer.
(c) during the term of Executive's employment with the Company and for a
period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not directly or indirectly solicit or
induce any present or future employee of the Company to accept employment with
Executive or with any business, operation, corporation, partnership,
association, agency, or other person or entity with which Executive may be
associated, and Executive will not employ or cause any business, operation,
corporation, partnership, association, agency, or other person or entity with
which Executive may be associated to employ any present or future employee of
the Company without providing the Company with ten (10) days' prior written
notice of such proposed employment.
Should Executive violate the provisions of this Paragraph, then in addition
to all other rights and remedies available to the Company at law or in equity,
the duration of this covenant shall automatically be extended for the period of
time from which Executive began such violation until he permanently ceases such
violation.
6. Termination. Executive's employment hereunder may be terminated without any
breach of this Agreement under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to physical
or mental illness, Executive shall have been absent from his duties hereunder on
a full-time basis for one
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hundred eighty (180) calendar days in the aggregate in any twelve (12) month
period, the Company may terminate Executive's employment hereunder.
(c) Termination by Company For Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder for Cause
if such termination is approved by not less than a majority of the Board of
Directors of the Company at a meeting of such Board of Directors called and held
for such purpose. For purposes of this Agreement "Cause" shall mean: (A)
conduct by Executive constituting a material act of willful misconduct in
connection with the performance of his duties, including, without limitation,
misappropriation of funds or property of the Company or any of its affiliates
other than the occasional, customary and de minimis use of Company property for
personal purposes; (B) criminal or civil conviction of Executive, a plea of nolo
contendere by Executive or conduct by Executive that would reasonably be
expected to result in material injury to the reputation of the Company if he
were retained in his position with the Company, including, without limitation,
conviction of a felony involving moral turpitude; (C) continued, willful and
deliberate non-performance by Executive of his duties hereunder (other than by
reason of Executive's physical or mental illness, incapacity or disability) and
such non-performance has continued for more than thirty (30) days following
written notice of such non-performance from the Board; (D) a breach by Executive
of any of the provisions contained in Paragraphs 4 and 5 of this Agreement; or
(E) a violation by Executive of the Company's employment policies and such
violation has continued following written notice of such violation from the
Board.
(d) Termination Without Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder without
Cause if such termination is approved by a majority of the Board at a meeting of
the Board called and held for such purpose. Any termination by the Company of
Executive's employment under this Agreement which does not constitute a
termination for Cause under Subparagraph 6(c) or result from the death or
disability of the Executive under Subparagraph 6(a) or (b) shall be deemed a
termination without Cause. If the Company provides notice to the Executive
under Paragraph 1 that it does not wish to extend the Period of Employment, such
action shall be deemed a termination without Cause.
(e) Termination by Executive. At any time during the Period of
Employment, Executive may terminate his employment hereunder for any reason,
including but not limited to Good Reason. If Executive provides notice to the
Company under Paragraph 1 that he does not wish to extend the Period of
Employment, such action shall be deemed a voluntary termination by Executive and
one without Good Reason. For purposes of this Agreement, "Good Reason" shall
mean that Executive has complied with the "Good Reason Process" (hereinafter
defined) following the occurrence of any of the following events: (A) a
substantial diminution or other substantive adverse change, not consented to by
Executive, in the nature or scope of Executive's responsibilities, authorities,
powers, functions or duties, other than a change in Executive's position or
reporting relationship; (B) any removal, during the Period of Employment, from
Executive of his title of Executive Vice President; (C) an involuntary reduction
in Executive's Base Salary or Adjusted Base Salary or involuntary reduction in
cash incentive compensation plan (but not reduction in incentive compensation
appropriate for level of performance) except for across-the-board salary
reductions similarly affecting all or substantially all management
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employees; (D) a breach by the Company of any of its other material obligations
under this Agreement and the failure of the Company to cure such breach within
thirty (30) days after written notice thereof by Executive; (E) the involuntary
relocation of the Company's offices at which Executive is principally employed
or the involuntary relocation of the offices of Executive's primary workgroup to
a location more than thirty (30) miles from such offices (other than a
relocation in either event to Dallas, Texas), or the requirement by the Company
for Executive to be based anywhere other than the Company's offices at such
location or in Dallas, Texas on an extended basis, except for required travel on
the Company's business to an extent substantially consistent with Executive's
business travel obligations; or (F) the requirement that Executive report to a
person who is below the level of an Executive Vice President. "Good Reason
Process" shall mean that (i) the Executive reasonably determines in good faith
that a "Good Reason" event has occurred; (ii) Executive notifies the Company in
writing of the occurrence of the Good Reason event; (iii) Executive cooperates
in good faith with the Company's efforts, for a period not less than ninety (90)
days following such notice, to modify Executive's employment situation in a
manner acceptable to Executive and Company; and (iv) notwithstanding such
efforts, one or more of the Good Reason events continues to exist and has not
been modified in a manner acceptable to Executive. If the Company cures the Good
Reason event during the ninety (90) day period, Good Reason shall be deemed not
to have occurred.
(f) Notice of Termination. Except for termination as specified in
Subparagraph 6(a), any termination of Executive's employment by the Company or
any such termination by Executive shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(g) Date of Termination. "Date of Termination" shall mean: (A) if
Executive's employment is terminated by his death, the date of his death; (B) if
Executive's employment is terminated on account of disability under Subparagraph
6(b) or by the Company for Cause under Subparagraph 6(c), the date on which
Notice of Termination is given; (C) if Executive's employment is terminated by
the Company under Subparagraph 6(d), sixty (60) days after the date on which a
Notice of Termination is given; and (D) if Executive's employment is terminated
by Executive under Subparagraph 6(e), thirty (30) days after the date on which a
Notice of Termination is given.
7. Compensation Upon Termination or During Disability.
(a) If Executive's employment terminates by reason of his death, the
Company shall, within ninety (90) days of death, pay in a lump sum amount to
such person as Executive shall designate in a notice filed with the Company or,
if no such person is designated, to Executive's estate, Executive's accrued and
unpaid Base Salary or, if applicable, his Adjusted Base Salary, to the date of
his death, plus his accrued and unpaid incentive compensation, if any, under
Subparagraph 3(a). For a period of one (1) year following the Date of
Termination, the Company shall pay such health insurance premiums as may be
necessary to allow Executive's spouse and dependents to receive health insurance
coverage substantially similar to coverage they received prior to the Date of
Termination. In addition to the foregoing, any payments to which
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Executive's spouse, beneficiaries, or estate may be entitled under any employee
benefit plan shall also be paid in accordance with the terms of such plan or
arrangement. Such payments, in the aggregate, shall fully discharge the
Company's obligations hereunder.
(b) During any period that Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, Executive
shall continue to receive his accrued and unpaid Base Salary or, if applicable,
his Adjusted Base Salary and accrued and unpaid incentive compensation payments,
if any, under Subparagraph 3(a), until Executive's employment is terminated due
to disability in accordance with Subparagraph 6(b) or until Executive terminates
his employment in accordance with Subparagraph 6(e), whichever first occurs. For
a period of one (1) year following the Date of Termination, the Company shall
pay such health insurance premiums as may be necessary to allow Executive,
Executive's spouse and dependents to receive health insurance coverage
substantially similar to coverage they received prior to the Date of
Termination. Upon termination due to death prior to the termination first to
occur as specified in the preceding sentence, Subparagraph 7(a) shall apply.
(c) If Executive's employment is terminated by Executive other than for
Good Reason as provided in Subparagraph 6(e), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given. Thereafter, the Company shall have no further obligations
to Executive except as otherwise expressly provided under this Agreement,
provided any such termination shall not adversely affect or alter Executive's
rights under any employee benefit plan of the Company in which Executive, at the
Date of Termination, has a vested interest, unless otherwise provided in such
employee benefit plan or any agreement or other instrument attendant thereto.
(d) If Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e) or if Executive's employment is terminated by the Company
without Cause as provided in Subparagraph 6(d), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given and his accrued and unpaid incentive compensation, if any,
under Subparagraph 3(a). In addition, subject to signing by Executive of a
general release of claims in a form and manner satisfactory to the Company,
(i) the Company shall continue Executive's compensation at a rate
equal to the sum of Executive's Average Base Salary and his Average
Incentive Compensation payable for the remaining length of the Period of
Employment after the Date of Termination (the "Severance Amount"), but in
no event for fewer than twenty-four (24) months. The Severance Amount
shall be paid out in substantially equal bi-weekly installments, in
arrears; provided, however, that in the event Executive commences any
employment during such period, the Company shall be entitled to set-off
against the remaining Severance Amount seventy-five percent (75%) of the
amount of any cash compensation received by Executive from the new
employer. From time to time, Executive may be asked to certify to the
Company that he has not accepted employment with a new employer (including,
without limitation, contract and consulting agreements).
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For purposes of this Agreement, "Average Base Salary" shall mean the
average of the annual Base Salary or, if applicable, Adjusted Base Salary
received by Executive for each of the three (3) immediately preceding
fiscal years or such fewer number of complete fiscal years as Executive may
have been employed by the Company. For purposes of this Agreement, "Average
Incentive Compensation" shall mean the average of the annual incentive
compensation under Subparagraph 3(a) received by Executive for the three
(3) immediately preceding fiscal years or such fewer number of complete
fiscal years as Executive may have been employed by the Company. In no
event shall "Average Incentive Compensation" include any sign-on bonus,
retention bonus or any other special bonus. Notwithstanding the foregoing,
if the Executive breaches any of the provisions contained in Paragraphs 4
and 5 of this Agreement, all payments of the Severance Amount shall
immediately cease. Notwithstanding the foregoing, in the event Executive
terminates his employment for Good Reason as provided in Subparagraph 6(e),
he shall be entitled to the Severance Amount only if he provides the Notice
of Termination provided for in Subparagraph 6(f) within thirty (30) days
after the occurrence of the event or events which constitute such Good
Reason as specified in clauses (A), (B), (C), (D) (E) and (F) of
Subparagraph 6(e);
(ii) in addition to any other benefits to which Executive may be
entitled in accordance with the Company's then existing severance policies,
the Company shall, for a period of one (1) year commencing on the Date of
Termination, pay such health insurance premiums as may be necessary to
allow Executive, Executive's spouse and dependents to continue to receive
health insurance coverage substantially similar to the coverage they
received prior to his termination of employment.
(e) If Executive's employment is terminated by the Company for Cause as
provided in Subparagraph 6(c), then the Company shall, through the Date of
Termination, pay Executive his accrued and unpaid Base Salary or, if applicable,
his Adjusted Base Salary at the rate in effect at the time Notice of Termination
is given. Thereafter, the Company shall have no further obligations to
Executive except as otherwise expressly provided under this Agreement, provided
any such termination shall not adversely affect or alter Executive's rights
under any employee benefit plan of the Company in which Executive, at the Date
of Termination, has a vested interest, unless otherwise provided in such
employee benefit plan or any agreement or other instrument attendant thereto.
(f) Regardless of the reason for termination, for a period of five (5)
years beginning on the Date of Termination, the Company will provide such
reasonable assistance and support to Executive as he shall reasonably require in
connection with the preparation and filing of tax returns, statements and forms
insofar as such returns, statements or forms relate to Executive's association
with the Company or any of its predecessors or affiliates. At the Company's
election, such assistance and support shall be provided by either tax personnel
from the Company or certified public accountants selected and compensated by the
Company.
(g) Nothing contained in the foregoing Subparagraphs 7(a) through 7(f)
shall be construed so as to affect Executive's rights or the Company's
obligations relating to agreements or benefits which are unrelated to
termination of employment.
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8. Change in Control Payment. The provisions of this Paragraph 8 set forth
certain terms of an agreement reached between Executive and the Company
regarding Executive's rights and obligations upon the occurrence of a Change in
Control of the Company. These provisions are intended to assure and encourage
in advance Executive's continued attention and dedication to his assigned duties
and his objectivity during the pendency and after the occurrence of any such
event. These provisions shall apply in lieu of, and expressly supersede, the
provisions of Subparagraph 7(d)(i) regarding severance pay upon a termination of
employment, if such termination of employment occurs within eighteen (18) months
after the occurrence of the first event constituting a Change of Control;
provided that such first event occurs during the Period of Employment. These
provisions shall terminate and be of no further force or effect beginning
eighteen (18) months after the occurrence of a Change of Control.
(a) Change in Control.
(i) If within eighteen (18) months after the occurrence of the
first event constituting a Change in Control, Executive's employment is
terminated by the Company without Cause as provided in Subparagraph 6(d) or
Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e), then the Company shall pay Executive the Severance
Amount as provided in Subparagraph 7(d)(i) in substantially bi-weekly
installments, in arrears, over twenty-four (24) months. Notwithstanding the
foregoing, if the Executive breaches any of the provisions contained in
Paragraphs 4 and 5 of this Agreement, all payments of the Severance Amount
shall immediately cease; and
(ii) Within fifteen (15) days after Executive becomes entitled to
receive the Severance Amount under (i) above, the Company shall place funds
in an amount equal to the estimated Severance Amount in escrow, pursuant to
arrangements that are mutually acceptable to the Company and Executive (the
"Escrow Arrangement"). The Escrow Arrangement shall be maintained until
the final installment payment of the Severance Amount has been made;
(iii) Notwithstanding anything to the contrary in any applicable
option agreement or stock-based award agreement, if Executive terminates
his employment for Good Reason as provided in Subparagraph 6(e) or if
Executive's employment is terminated by the Company without Cause as
provided in Subparagraph 6(d) within eighteen (18) months of a Change in
Control, all stock options and other stock-based awards granted to
Executive by the Company shall immediately accelerate and become
exercisable or non-forfeitable as of the Date of Termination, and Executive
shall have 360 days to exercise all his stock options. Executive shall
also be entitled to any other rights and benefits with respect to stock-
related awards, to the extent and upon the terms provided in the employee
stock option or incentive plan or any agreement or other instrument
attendant thereto pursuant to which such options or awards were granted;
and
(iv) The Company shall, for a period of one (1) year commencing on
the Date of Termination, pay such health insurance premiums as may be
necessary to allow
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Executive, Executive's spouse and dependents to continue to receive health
insurance coverage substantially similar to the coverage they received
prior to his termination of employment.
(b) Gross Up Payment.
(i) Excess Parachute Payment. If Executive incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") on "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code, the Company will pay to Executive an amount (the
"Gross Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the excess parachute payment and any
federal, state and local income taxes and employment taxes (together with
penalties and interest) and Excise Tax upon the payment provided for by
this Subparagraph 8(c)(i), will be equal to the Severance Amount.
(ii) Applicable Rates. For purposes of determining the amount of the
Gross Up Payment, Executive will be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year
in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality
of Executive's residence on the date of Executive's Termination, net of the
maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon
the opinion of tax counsel selected by Executive and approved by the
Company, which approval will not be unreasonably withheld. If such opinion
is not finally accepted by the Internal Revenue Service (or state and local
taxing authorities), then appropriate adjustments to the Excise Tax will be
computed and additional Gross Up Payments will be made in the manner
provided by this Subparagraph (c).
(iv) Time For Payment. The Company will pay the estimated amount of
the Gross Up Payment in cash to Executive at such time or times when the
Excise Tax is due. Executive and the Company agree to reasonably cooperate
in the determination of the actual amount of the Gross Up Payment.
Further, Executive and the Company agree to make such adjustments to the
estimated amount of the Gross Up Payment as may be necessary to equal the
actual amount of the Gross Up Payment, which in the case of Executive will
refer to refunds of prior overpayments and in the case of the Company will
refer to makeup of prior underpayments.
(c) Definitions. For purposes of this Paragraph 8, the following terms
shall have the following meanings:
"Change in Control" shall mean any of the following:
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(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the
"Acquiring Person"), other than the Company, or any of its Subsidiaries or
any Investor or Excluded Group, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the
combined voting power or economic interests of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors; provided, however, that any transfer from any Investor or
Excluded Group will not result in a Change in Control if such transfer was
part of a series of related transactions the effect of which, absent the
transfer to such Acquiring Person by the Investor or Excluded Group, would
not have resulted in the acquisition by such Acquiring Person of 35% or
more of the combined voting power or economic interests of the then
outstanding voting securities; or
(b) during any period of 12 consecutive months after the Issuance
Date, the individuals who at the beginning of any such 12-month period
constituted a majority of the Class A Directors and Class C Directors (the
"Incumbent Non-Investor Majority") cease for any reason to constitute at
least a majority of such Class A Directors and Class C Directors; provided
that (i) any individual becoming a director whose election, or nomination
for election by the Company's stockholders, was approved by a vote of the
stockholders having the right to designate such director and (ii) any
director whose election to the Board or whose nomination for election by
the stockholders of the Company was approved by the requisite vote of
directors entitled to vote on such election or nomination in accordance
with the Restated Certificate of Incorporation of the Company, shall, in
each such case, be considered as though such individual were a member of
the Incumbent Non-Investor Majority, but excluding, as a member of the
Incumbent Non-Investor Majority, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) and further excluding any person who is an affiliate or
associate of an Acquiring Person having or proposing to acquire beneficial
ownership of 25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors; or
(c) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were the
respective beneficial owners of the voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 57.5% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors of the Company resulting from such reorganization,
merger or consolidation; or
(d) the sale or other disposition of assets representing 50% or
more of the assets of the Company in one transaction or series of related
transactions .
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All defined terms used in the definition of "Change in Control" shall have
the same meaning as set forth in the Form of Certificate of Designation of
Series B Convertible Preferred Stock of Wyndham International, Inc.
"Company" shall mean not only Wyndham International, Inc., but also
its successors by merger or otherwise.
9. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
At his home address as shown
in the Company's personnel records;
if to the Company:
Wyndham International, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, TX 75207
Attention: Senior Vice President of Human Resources and General
Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
10. Miscellaneous. No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Texas (without regard to principles of
conflicts of laws).
11. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. The invalid portion of this Agreement, if any, shall be modified by any
court having jurisdiction to the extent necessary to render such portion
enforceable.
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12. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
13. Arbitration; Other Disputes. In the event of any dispute or controversy
arising under or in connection with this Agreement, the parties shall first
promptly try in good faith to settle such dispute or controversy by mediation
under the applicable rules of the American Arbitration Association before
resorting to arbitration. In the event such dispute or controversy remains
unresolved in whole or in part for a period of thirty (30) days after it arises,
the parties will settle any remaining dispute or controversy exclusively by
arbitration in Dallas, Texas, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding the above,
the Company shall be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any continuation of any violation of
Paragraph 4 or 5 hereof. Furthermore, should a dispute occur concerning
Executive's mental or physical capacity as described in Subparagraph 6(b), 6(c)
or 7(b), a doctor selected by Executive and a doctor selected by the Company
shall be entitled to examine Executive. If the opinion of the Company's doctor
and Executive's doctor conflict, the Company's doctor and Executive's doctor
shall together agree upon a third doctor, whose opinion shall be binding. Any
amount to which Executive is entitled under this Agreement (including any
disputed amount), which is not paid when due, shall bear interest at a rate
equal to the lesser of eighteen percent (18%) per annum or the maximum lawful
rate.
14. Third-Party Agreements and Rights. Executive represents to the Company
that Executive's execution of this Agreement, Executive's employment with the
Company and the performance of Executive's proposed duties for the Company will
not violate any obligations Executive may have to any employer or other party,
and Executive will not bring to the premises of the Company any copies or other
tangible embodiments of non-public information belonging to or obtained from any
such previous employment or other party.
15. Litigation and Regulatory Cooperation. During and after Executive's
employment, Executive shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while Executive was employed by the Company;
provided, however, that such cooperation shall not materially and adversely
affect Executive or expose Executive to an increased probability of civil or
criminal litigation. Executive's cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. During and after Executive's
employment, Executive also shall cooperate fully with the Company in connection
with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences
that transpired while Executive was employed by the Company. The Company shall
also provide Executive with compensation on an hourly basis (to be derived from
the sum of his Base Compensation or, if applicable, Adjusted
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Base Salary and Average Incentive Compensation) for requested litigation and
regulatory cooperation that occurs after his termination of employment, and
reimburse Executive for all costs and expenses incurred in connection with his
performance under this Paragraph 15, including, but not limited to, reasonable
attorneys' fees and costs.
16. Gender Neutral. Wherever used herein, a pronoun in the masculine gender
shall be considered as including the feminine gender unless the context clearly
indicates otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.
WYNDHAM INTERNATIONAL, INC.
By:
-----------------------------------------
Its: Chairman and Chief Executive Officer
-----------------------------------------
Stanley M. Koonce, Jr.
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EXHIBIT 10.4
EXECUTIVE EMPLOYMENT AGREEMENT
AS AMENDED AND RESTATED
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is
made as of the 19th day of April, 1999, between Wyndham International, Inc., a
Delaware corporation (the "Company"), and Carla S. Moreland ("Executive").
WHEREAS, Executive is currently employed by the Company in a senior
executive capacity;
WHEREAS, the Company desires to continue to employ Executive and Executive
desires to continue to be employed by the Company;
WHEREAS, the Company and Executive desire to amend and restate Executive's
existing Executive Employment Agreement with the Company, as set forth herein;
WHEREAS, the Company and Executive acknowledge that regardless of the
provisions of Paragraph 8 of this Agreement, upon the closing of the Securities
Purchase Agreement by and among Patriot American Hospitality, Inc., Wyndham
International, Inc., Patriot American Hospitality, L.P. and the Investors named
therein, all options and other stock-based awards granted to Executive prior to
the date of this Agreement shall immediately accelerate and become exercisable
or non-forfeitable as of such date;
WHEREAS, as an additional inducement to Executive to enter into this
Agreement, the Company shall, on the Commencement Date (as hereinafter defined),
grant Executive an option to purchase a certain number of Paired Shares of
common stock of the Company and of common stock of Patriot American Hospitality,
Inc. as set forth in the agreement attached hereto as Exhibit A (the "Option");
and
WHEREAS, Executive is desirous of committing to serve the Company on the
terms herein provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment. The term of this Agreement shall extend from the date hereof
(the "Commencement Date") until the third anniversary of the Commencement Date;
provided, however, that the term of this Agreement shall automatically be
extended for one additional year on the third anniversary of the Commencement
Date and each anniversary thereafter unless, not less than 90 days prior to each
such date, either party shall have given notice to the other that it does not
wish to extend this Agreement; provided, further, that if a Change in Control
occurs during the original or extended term of this Agreement, the term of this
Agreement shall continue in effect for a period of not less than eighteen (18)
months beyond the month in which the Change in Control occurred. The term of
this Agreement shall be
<PAGE>
subject to termination as provided in Paragraph 6 and may be referred to herein
as the "Period of Employment."
2. Position and Duties. During the Period of Employment, Executive shall serve
as an Executive Vice President and General Counsel of the Company, shall have
supervision and control over and responsibility for the day-to-day business and
affairs of those functions and operations of the Company and shall have such
other powers and duties as may from time to time be prescribed by the Chairman
of the Board of the Company (the "Chairman") or the Chief Executive Officer of
the Company (the "CEO") or other executive authorized by the Chairman or CEO,
provided that such duties are consistent with Executive's position or other
positions that he may hold from time to time. Executive shall devote his full
working time and efforts to the business and affairs of the Company.
Notwithstanding the foregoing, Executive may serve on other boards of directors,
with the approval of the Chairman or CEO, or engage in religious, charitable or
other community activities as long as such services and activities are disclosed
to the Chairman or CEO and do not materially interfere with Executive's
performance of his duties to the Company as provided in this Agreement.
3. Compensation and Related Matters.
(a) Base Salary and Incentive Compensation. Executive's initial annual
base salary ("Base Salary") shall be $300,000.00. Executive's Base Salary shall
be redetermined at least thirty (30) days before each annual compensation
determination date established by the Company during the Period of Employment in
an amount to be fixed by the Board of Directors of the Company or a Committee
thereof or a duly authorized officer (the "Board"). The Base Salary, as
redetermined, may be referred to herein as "Adjusted Base Salary." The Base
Salary or Adjusted Base Salary shall be payable in substantially equal bi-weekly
installments and shall in no way limit or reduce the obligations of the Company
hereunder. In addition to Base Salary or Adjusted Base Salary, Executive shall
be eligible to receive cash incentive compensation as determined by the Board
from time to time, and shall also be eligible to participate in such incentive
compensation plans as the Board shall determine from time to time for employees
of the same status within the hierarchy of the Company.
(b) Expenses. Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by him (in accordance with the policies and
procedures then in effect and established by the Company for its senior
executive officers) in performing services hereunder during the Period of
Employment, provided that Executive properly accounts therefor in accordance
with Company policy.
(c) Other Benefits. During the Period of Employment, Executive shall be
entitled to continue to participate in or receive benefits under all of the
Company's Employee Benefit Plans in effect on the date hereof, or under plans or
arrangements that provide Executive with at least substantially equivalent
benefits to those provided under such Employee Benefit Plans. As used herein,
"Employee Benefit Plans" include, without limitation, each pension and
retirement plan; supplemental pension, retirement and deferred compensation
plan; savings and
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profit-sharing plan; stock ownership plan; stock purchase plan; stock option
plan; life insurance plan; medical insurance plan; disability plan; and health
and accident plan or arrangement established and maintained by the Company on
the date hereof for employees of the same status within the hierarchy of the
Company. To the extent that the scope or nature of benefits described in this
section are determined under the policies of the Company based in whole or in
part on the seniority or tenure of an employee's service, Executive shall be
deemed to have a tenure with the Company equal to the actual time of Executive's
service with Company. During the Period of Employment, Executive shall be
entitled to participate in or receive benefits under any employee benefit plan
or arrangement which may, in the future, be made available by the Company to its
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plan or
arrangement. Any payments or benefits payable to Executive under a plan or
arrangement referred to in this Subparagraph 3(c) in respect of any calendar
year during which Executive is employed by the Company for less than the whole
of such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is so employed. Should any such payments or benefits accrue
on a fiscal (rather than calendar) year, then the proration in the preceding
sentence shall be on the basis of a fiscal year rather than calendar year.
(d) Life Insurance. The Company shall pay the premiums on, and maintain
in effect throughout the Period of Employment, a life insurance policy on the
life of Executive in an amount not less than the amount of Executive's then
current Base Salary or Adjusted Base Salary. Executive shall have the right to
designate the beneficiary under such policy.
(e) Vacations. Executive shall be entitled to the number of paid vacation
days in each calendar year determined by the Company from time to time for
executives at the same level as Executive. Executive shall also be entitled to
all paid holidays given by the Company to its executives. To the extent that the
scope or nature of benefits described in this section are determined under the
policies of the Company based in whole or in part on the seniority or tenure of
an employee's service, Executive shall be deemed to have a tenure with the
Company equal to the actual time of Executive's service with Company.
(f) Disability Insurance. The Company shall pay the premiums on, and
maintain in effect through the Period of Employment, long-term disability
insurance providing for payment of benefits at rates not less than sixty percent
(60%) of Executive's current Base Salary or Adjusted Base Salary.
4. Unauthorized Disclosure.
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(a) Confidential Information. Executive acknowledges that in the course
of his employment with the Company (and, if applicable, its predecessors), he
has been allowed to become, and will continue to be allowed to become,
acquainted with the Company's business affairs, information, trade secrets, and
other matters which are of a proprietary or confidential nature, including but
not limited to the Company's and its predecessors' operations, business
opportunities, price and cost information, finance, customer information,
business plans, various sales techniques, manuals, letters, notebooks,
procedures, reports, products, processes, services, and other confidential
information and knowledge (collectively the "Confidential Information")
concerning the Company's and its predecessors' business. The Company agrees to
provide on an ongoing basis such Confidential Information as the Company deems
necessary or desirable to aid Executive in the performance of his duties.
Executive understands and acknowledges that such Confidential Information is
confidential, and he agrees not to disclose such Confidential Information to
anyone outside the Company except to the extent that (i) Executive deems such
disclosure or use reasonably necessary or appropriate in connection with
performing his duties on behalf of the Company, (ii) Executive is required by
order of a court of competent jurisdiction (by subpoena or similar process) to
disclose or discuss any Confidential Information, provided that in such case,
Executive shall promptly inform the Company of such event, shall cooperate with
the Company in attempting to obtain a protective order or to otherwise restrict
such disclosure, and shall only disclose Confidential Information to the minimum
extent necessary to comply with any such court order; (iii) such Confidential
Information becomes generally known to and available for use by the hotel and
hospitality industry (the "Hotel Industry"), other than as a result of any
action or inaction by Executive; or (iv) such information has been rightfully
received by a member of the Hotel Industry or has been published in a form
generally available to the Hotel Industry prior to the date Executive proposes
to disclose or use such information. Executive further agrees that he will not
during employment and/or at any time thereafter use such Confidential
Information in competing, directly or indirectly, with the Company. At such time
as Executive shall cease to be employed by the Company, he will immediately turn
over to the Company all Confidential Information, including papers, documents,
writings, electronically stored information, other property, and all copies of
them provided to or created by him during the course of his employment with the
Company.
(b) Heirs, successors, and legal representatives. The foregoing
provisions of this Paragraph 4 shall be binding upon Executive's heirs,
successors, and legal representatives. The provisions of this Paragraph 4 shall
survive the termination of this Agreement for any reason.
5. Covenant Not to Compete. The following provisions of this Paragraph 5 are
agreed to by Executive in consideration for the Option and for Executive's
employment by the Company under the terms provided in this Agreement and as a
means to aid in the performance and enforcement of the terms of the Unauthorized
Disclosure provisions of Paragraph 4.
(a) Executive is a licensed attorney and recognizes that he is bound by
the ethical principles governing the legal profession including duties to
preserve confidential client information as defined and presently codified in
Rule 1.05 of the Texas Disciplinary Rules of
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Professional Conduct and further to honor and preserve the attorney client
privilege. Executive recognizes and agrees that these obligations are permanent
and survive the period of Executive's employment by the Company and survive the
period of time that he remains a licensed attorney.
(b) Executive recognizes that if he were to attempt to perform as an
employee of or an attorney for a competitor of the Company, there would be a
genuine and inevitable threat that Executive would use or disclose privileged or
confidential client information, and Executive agrees that during Executive's
employment with the Company and for a period of twenty-four (24) months
thereafter, Executive will not perform as an employee of or an attorney for a
competitor of the Company. Executive agrees that the Company's remedy against
Executive for money damages for a breach of his duties of confidentiality to the
Company would be inadequate, and Executive agrees that an injunction against him
for any such threatened breach is an appropriate remedy.
(c) Executive agrees that during the term of Executive's employment with
the Company and for a period of twenty-four (24) months thereafter, regardless
of the reason for termination of employment, Executive will not, directly or
indirectly, either for himself or for any other business, operation,
corporation, partnership, association, agency, or other person or entity, call
upon, compete for, solicit, divert, or take away, or attempt to divert or take
away any of the customers (including, without limitation, any hotel owner,
lessor or lessee, asset manager, trustee, consumer with whom the Company from
time to time (i) has an existing agreement or business relationship; or (ii) has
included as a prospect in its applicable pipeline) or vendors of the Company in
any of the areas or territories in which the Company conducts operations if such
action has the intent or effect of interfering with the Company's relationship
with the vendor or customer.
(d) Executive agrees that during the term of Executive's employment with
the Company and for a period of twenty-four (24) months thereafter, regardless
of the reason for termination of employment, Executive will not directly or
indirectly solicit or induce any present or future employee of the Company to
accept employment with Executive or with any business, operation, corporation,
partnership, association, agency, or other person or entity with which Executive
may be associated, and Executive will not employ or cause any business,
operation, corporation, partnership, association, agency, or other person or
entity with which Executive may be associated to employ any present or future
employee of the Company without providing the Company with ten (10) days' prior
written notice of such proposed employment.
Should Executive violate the provisions of this Paragraph, then in addition
to all other rights and remedies available to the Company at law or in equity,
the duration of this covenant shall automatically be extended for the period of
time from which Executive began such violation until he permanently ceases such
violation.
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6. Termination. Executive's employment hereunder may be terminated without any
breach of this Agreement under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to physical
or mental illness, Executive shall have been absent from his duties hereunder on
a full-time basis for one hundred eighty (180) calendar days in the aggregate in
any twelve (12) month period, the Company may terminate Executive's employment
hereunder.
(c) Termination by Company For Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder for Cause
if such termination is approved by not less than a majority of the Board of
Directors of the Company at a meeting of such Board of Directors called and held
for such purpose. For purposes of this Agreement "Cause" shall mean: (A)
conduct by Executive constituting a material act of willful misconduct in
connection with the performance of his duties, including, without limitation,
misappropriation of funds or property of the Company or any of its affiliates
other than the occasional, customary and de minimis use of Company property for
personal purposes; (B) criminal or civil conviction of Executive, a plea of nolo
contendere by Executive or conduct by Executive that would reasonably be
expected to result in material injury to the reputation of the Company if he
were retained in his position with the Company, including, without limitation,
conviction of a felony involving moral turpitude; (C) continued, willful and
deliberate non-performance by Executive of his duties hereunder (other than by
reason of Executive's physical or mental illness, incapacity or disability) and
such non-performance has continued for more than thirty (30) days following
written notice of such non-performance from the Board; (D) a breach by Executive
of any of the provisions contained in Paragraphs 4 and 5 of this Agreement; or
(E) a violation by Executive of the Company's employment policies and such
violation has continued following written notice of such violation from the
Board.
(d) Termination Without Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder without
Cause if such termination is approved by a majority of the Board at a meeting of
the Board called and held for such purpose. Any termination by the Company of
Executive's employment under this Agreement which does not constitute a
termination for Cause under Subparagraph 6(c) or result from the death or
disability of the Executive under Subparagraph 6(a) or (b) shall be deemed a
termination without Cause. If the Company provides notice to the Executive
under Paragraph 1 that it does not wish to extend the Period of Employment, such
action shall be deemed a termination without Cause.
(e) Termination by Executive. At any time during the Period of
Employment, Executive may terminate his employment hereunder for any reason,
including but not limited to Good Reason. If Executive provides notice to the
Company under Paragraph 1 that he does not wish to extend the Period of
Employment, such action shall be deemed a voluntary
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termination by Executive and one without Good Reason. For purposes of this
Agreement, "Good Reason" shall mean that Executive has complied with the "Good
Reason Process" (hereinafter defined) following the occurrence of any of the
following events: (A) a substantial diminution or other substantive adverse
change, not consented to by Executive, in the nature or scope of Executive's
responsibilities, authorities, powers, functions or duties, other than a change
in Executive's position or reporting relationship; (B) any removal, during the
Period of Employment, from Executive of his title of Executive Vice President;
(C) an involuntary reduction in Executive's Base Salary or Adjusted Base Salary
or involuntary reduction in cash incentive compensation plan (but not reduction
in incentive compensation appropriate for level of performance) except for
across-the-board salary reductions similarly affecting all or substantially all
management employees; (D) a breach by the Company of any of its other material
obligations under this Agreement and the failure of the Company to cure such
breach within thirty (30) days after written notice thereof by Executive; (E)
the involuntary relocation of the Company's offices at which Executive is
principally employed or the involuntary relocation of the offices of Executive's
primary workgroup to a location more than thirty (30) miles from such offices
(other than a relocation in either event to Dallas, Texas), or the requirement
by the Company for Executive to be based anywhere other than the Company's
offices at such location or in Dallas, Texas on an extended basis, except for
required travel on the Company's business to an extent substantially consistent
with Executive's business travel obligations; or (F) the requirement that
Executive report to a person who is below the level of an Executive Vice
President. "Good Reason Process" shall mean that (i) the Executive reasonably
determines in good faith that a "Good Reason" event has occurred; (ii) Executive
notifies the Company in writing of the occurrence of the Good Reason event;
(iii) Executive cooperates in good faith with the Company's efforts, for a
period not less than ninety (90) days following such notice, to modify
Executive's employment situation in a manner acceptable to Executive and
Company; and (iv) notwithstanding such efforts, one or more of the Good Reason
events continues to exist and has not been modified in a manner acceptable to
Executive. If the Company cures the Good Reason event during the ninety (90) day
period, Good Reason shall be deemed not to have occurred.
(f) Notice of Termination. Except for termination as specified in
Subparagraph 6(a), any termination of Executive's employment by the Company or
any such termination by Executive shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(g) Date of Termination. "Date of Termination" shall mean: (A) if
Executive's employment is terminated by his death, the date of his death; (B) if
Executive's employment is terminated on account of disability under Subparagraph
6(b) or by the Company for Cause under Subparagraph 6(c), the date on which
Notice of Termination is given; (C) if Executive's employment is terminated by
the Company under Subparagraph 6(d), sixty (60) days after the date on which a
Notice of Termination is given; and (D) if Executive's employment is terminated
by Executive under Subparagraph 6(e), thirty (30) days after the date on which a
Notice of Termination is given.
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7. Compensation Upon Termination or During Disability.
(a) If Executive's employment terminates by reason of his death, the
Company shall, within ninety (90) days of death, pay in a lump sum amount to
such person as Executive shall designate in a notice filed with the Company or,
if no such person is designated, to Executive's estate, Executive's accrued and
unpaid Base Salary or, if applicable, his Adjusted Base Salary, to the date of
his death, plus his accrued and unpaid incentive compensation, if any, under
Subparagraph 3(a). For a period of one (1) year following the Date of
Termination, the Company shall pay such health insurance premiums as may be
necessary to allow Executive's spouse and dependents to receive health insurance
coverage substantially similar to coverage they received prior to the Date of
Termination. In addition to the foregoing, any payments to which Executive's
spouse, beneficiaries, or estate may be entitled under any employee benefit plan
shall also be paid in accordance with the terms of such plan or arrangement.
Such payments, in the aggregate, shall fully discharge the Company's obligations
hereunder.
(b) During any period that Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, Executive
shall continue to receive his accrued and unpaid Base Salary or, if applicable,
his Adjusted Base Salary and accrued and unpaid incentive compensation payments,
if any, under Subparagraph 3(a), until Executive's employment is terminated due
to disability in accordance with Subparagraph 6(b) or until Executive terminates
his employment in accordance with Subparagraph 6(e), whichever first occurs. For
a period of one (1) year following the Date of Termination, the Company shall
pay such health insurance premiums as may be necessary to allow Executive,
Executive's spouse and dependents to receive health insurance coverage
substantially similar to coverage they received prior to the Date of
Termination. Upon termination due to death prior to the termination first to
occur as specified in the preceding sentence, Subparagraph 7(a) shall apply.
(c) If Executive's employment is terminated by Executive other than for
Good Reason as provided in Subparagraph 6(e), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given. Thereafter, the Company shall have no further obligations
to Executive except as otherwise expressly provided under this Agreement,
provided any such termination shall not adversely affect or alter Executive's
rights under any employee benefit plan of the Company in which Executive, at the
Date of Termination, has a vested interest, unless otherwise provided in such
employee benefit plan or any agreement or other instrument attendant thereto.
(d) If Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e) or if Executive's employment is terminated by the Company
without Cause as provided in Subparagraph 6(d), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given and his accrued and unpaid
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incentive compensation, if any, under Subparagraph 3(a). In addition, subject to
signing by Executive of a general release of claims in a form and manner
satisfactory to the Company,
(i) the Company shall continue Executive's compensation at a rate
equal to the sum of Executive's Average Base Salary and his Average
Incentive Compensation payable for the remaining length of the Period of
Employment after the Date of Termination (the "Severance Amount"), but in
no event for fewer than twenty-four (24) months. The Severance Amount
shall be paid out in substantially equal bi-weekly installments, in
arrears; provided, however, that in the event Executive commences any
employment during such period, the Company shall be entitled to set-off
against the remaining Severance Amount seventy-five percent (75%) of the
amount of any cash compensation received by Executive from the new
employer. From time to time, Executive may be asked to certify to the
Company that he has not accepted employment with a new employer (including,
without limitation, contract and consulting agreements). For purposes of
this Agreement, "Average Base Salary" shall mean the average of the annual
Base Salary or, if applicable, Adjusted Base Salary received by Executive
for each of the three (3) immediately preceding fiscal years or such fewer
number of complete fiscal years as Executive may have been employed by the
Company. For purposes of this Agreement, "Average Incentive Compensation"
shall mean the average of the annual incentive compensation under
Subparagraph 3(a) received by Executive for the three (3) immediately
preceding fiscal years or such fewer number of complete fiscal years as
Executive may have been employed by the Company. In no event shall
"Average Incentive Compensation" include any sign-on bonus, retention bonus
or any other special bonus. Notwithstanding the foregoing, if the
Executive breaches any of the provisions contained in Paragraphs 4 and 5 of
this Agreement, all payments of the Severance Amount shall immediately
cease. Notwithstanding the foregoing, in the event Executive terminates
his employment for Good Reason as provided in Subparagraph 6(e), he shall
be entitled to the Severance Amount only if he provides the Notice of
Termination provided for in Subparagraph 6(f) within thirty (30) days after
the occurrence of the event or events which constitute such Good Reason as
specified in clauses (A), (B), (C), (D), (E) and (F) of Subparagraph 6(e);
(ii) in addition to any other benefits to which Executive may be
entitled in accordance with the Company's then existing severance policies,
the Company shall, for a period of one (1) year commencing on the Date of
Termination, pay such health insurance premiums as may be necessary to
allow Executive, Executive's spouse and dependents to continue to receive
health insurance coverage substantially similar to the coverage they
received prior to his termination of employment.
(e) If Executive's employment is terminated by the Company for Cause as
provided in Subparagraph 6(c), then the Company shall, through the Date of
Termination, pay Executive his accrued and unpaid Base Salary or, if applicable,
his Adjusted Base Salary at the rate in effect at the time Notice of Termination
is given. Thereafter, the Company shall have no
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further obligations to Executive except as otherwise expressly provided under
this Agreement, provided any such termination shall not adversely affect or
alter Executive's rights under any employee benefit plan of the Company in which
Executive, at the Date of Termination, has a vested interest, unless otherwise
provided in such employee benefit plan or any agreement or other instrument
attendant thereto.
(f) Regardless of the reason for termination, for a period of five (5)
years beginning on the Date of Termination, the Company will provide such
reasonable assistance and support to Executive as he shall reasonably require in
connection with the preparation and filing of tax returns, statements and forms
insofar as such returns, statements or forms relate to Executive's association
with the Company or any of its predecessors or affiliates. At the Company's
election, such assistance and support shall be provided by either tax personnel
from the Company or certified public accountants selected and compensated by the
Company.
(g) Nothing contained in the foregoing Subparagraphs 7(a) through 7(f)
shall be construed so as to affect Executive's rights or the Company's
obligations relating to agreements or benefits which are unrelated to
termination of employment.
8. Change in Control Payment. The provisions of this Paragraph 8 set forth
certain terms of an agreement reached between Executive and the Company
regarding Executive's rights and obligations upon the occurrence of a Change in
Control of the Company. These provisions are intended to assure and encourage
in advance Executive's continued attention and dedication to his assigned duties
and his objectivity during the pendency and after the occurrence of any such
event. These provisions shall apply in lieu of, and expressly supersede, the
provisions of Subparagraph 7(d)(i) regarding severance pay upon a termination of
employment, if such termination of employment occurs within eighteen (18) months
after the occurrence of the first event constituting a Change of Control;
provided that such first event occurs during the Period of Employment. These
provisions shall terminate and be of no further force or effect beginning
eighteen (18) months after the occurrence of a Change of Control.
(a) Change in Control.
(i) If within eighteen (18) months after the occurrence of the first
event constituting a Change in Control, Executive's employment is
terminated by the Company without Cause as provided in Subparagraph 6(d) or
Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e), then the Company shall pay Executive the Severance
Amount as provided in Subparagraph 7(d)(i) in substantially bi-weekly
installments, in arrears, over twenty-four (24) months. Notwithstanding
the foregoing, if the Executive breaches any of the provisions contained in
Paragraphs 4 and 5 of this Agreement, all payments of the Severance Amount
shall immediately cease; and
(ii) Within fifteen (15) days after Executive becomes entitled to
receive the Severance Amount under (i) above, the Company shall place funds
in an amount equal to the estimated Severance Amount in escrow, pursuant to
arrangements that are
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mutually acceptable to the Company and Executive (the "Escrow
Arrangement"). The Escrow Arrangement shall be maintained until the final
installment payment of the Severance Amount has been made;
(iii) Notwithstanding anything to the contrary in any applicable
option agreement or stock-based award agreement, if Executive terminates
his employment for Good Reason as provided in Subparagraph 6(e) or if
Executive's employment is terminated by the Company without Cause as
provided in Subparagraph 6(d) within eighteen (18) months of a Change in
Control, all stock options and other stock-based awards granted to
Executive by the Company shall immediately accelerate and become
exercisable or non-forfeitable as of the Date of Termination, and Executive
shall have 360 days to exercise all his stock options. Executive shall
also be entitled to any other rights and benefits with respect to stock-
related awards, to the extent and upon the terms provided in the employee
stock option or incentive plan or any agreement or other instrument
attendant thereto pursuant to which such options or awards were granted;
and
(iv) The Company shall, for a period of one (1) year commencing on
the Date of Termination, pay such health insurance premiums as may be
necessary to allow Executive, Executive's spouse and dependents to continue
to receive health insurance coverage substantially similar to the coverage
they received prior to his termination of employment.
(b) Gross Up Payment.
(i) Excess Parachute Payment. If Executive incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") on "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code, the Company will pay to Executive an amount (the
"Gross Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the excess parachute payment and any
federal, state and local income taxes and employment taxes (together with
penalties and interest) and Excise Tax upon the payment provided for by
this Subparagraph 8(c)(i), will be equal to the Severance Amount.
(ii) Applicable Rates. For purposes of determining the amount of
the Gross Up Payment, Executive will be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar
year in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality
of Executive's residence on the date of Executive's Termination, net of the
maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon
the
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opinion of tax counsel selected by Executive and approved by the Company,
which approval will not be unreasonably withheld. If such opinion is not
finally accepted by the Internal Revenue Service (or state and local taxing
authorities), then appropriate adjustments to the Excise Tax will be
computed and additional Gross Up Payments will be made in the manner
provided by this Subparagraph (c).
(iv) Time For Payment. The Company will pay the estimated amount of
the Gross Up Payment in cash to Executive at such time or times when the
Excise Tax is due. Executive and the Company agree to reasonably cooperate
in the determination of the actual amount of the Gross Up Payment.
Further, Executive and the Company agree to make such adjustments to the
estimated amount of the Gross Up Payment as may be necessary to equal the
actual amount of the Gross Up Payment, which in the case of Executive will
refer to refunds of prior overpayments and in the case of the Company will
refer to makeup of prior underpayments.
(c) Definitions. For purposes of this Paragraph 8, the following terms
shall have the following meanings:
"Change in Control" shall mean any of the following:
(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the
"Acquiring Person"), other than the Company, or any of its Subsidiaries or
any Investor or Excluded Group, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the
combined voting power or economic interests of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors; provided, however, that any transfer from any Investor or
Excluded Group will not result in a Change in Control if such transfer was
part of a series of related transactions the effect of which, absent the
transfer to such Acquiring Person by the Investor or Excluded Group, would
not have resulted in the acquisition by such Acquiring Person of 35% or
more of the combined voting power or economic interests of the then
outstanding voting securities; or
(b) during any period of 12 consecutive months after the Issuance
Date, the individuals who at the beginning of any such 12-month period
constituted a majority of the Class A Directors and Class C Directors (the
"Incumbent Non-Investor Majority") cease for any reason to constitute at
least a majority of such Class A Directors and Class C Directors; provided
that (i) any individual becoming a director whose election, or nomination
for election by the Company's stockholders, was approved by a vote of the
stockholders having the right to designate such director and (ii) any
director whose election to the Board or whose nomination for election by
the stockholders of the Company was approved by the requisite vote of
directors entitled to vote on such election or nomination in accordance
with the Restated Certificate of Incorporation of the Company, shall, in
each such case, be considered as though such individual were a
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member of the Incumbent Non-Investor Majority, but excluding, as a member
of the Incumbent Non-Investor Majority, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) and further excluding any person who is an affiliate or
associate of an Acquiring Person having or proposing to acquire beneficial
ownership of 25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors; or
(c) the approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were the
respective beneficial owners of the voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 57.5% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors of the Company resulting from such reorganization,
merger or consolidation; or
(d) the sale or other disposition of assets representing 50% or
more of the assets of the Company in one transaction or series of related
transactions .
All defined terms used in the definition of "Change in Control" shall have
the same meaning as set forth in the Form of Certificate of Designation of
Series B Convertible Preferred Stock of Wyndham International, Inc.
"Company" shall mean not only Wyndham International, Inc., but also
its successors by merger or otherwise.
9. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
At his home address as shown
in the Company's personnel records;
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if to the Company:
Wyndham International, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, TX 75207
Attention: Senior Vice President of Human Resources
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
10. Miscellaneous. No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Texas (without regard to principles of
conflicts of laws).
11. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. The invalid portion of this Agreement, if any, shall be modified by any
court having jurisdiction to the extent necessary to render such portion
enforceable.
12. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
13. Arbitration; Other Disputes. In the event of any dispute or controversy
arising under or in connection with this Agreement, the parties shall first
promptly try in good faith to settle such dispute or controversy by mediation
under the applicable rules of the American Arbitration Association before
resorting to arbitration. In the event such dispute or controversy remains
unresolved in whole or in part for a period of thirty (30) days after it arises,
the parties will settle any remaining dispute or controversy exclusively by
arbitration in Dallas, Texas, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding the above,
the Company shall be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any continuation of any violation of
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Paragraph 4 or 5 hereof. Furthermore, should a dispute occur concerning
Executive's mental or physical capacity as described in Subparagraph 6(b), 6(c)
or 7(b), a doctor selected by Executive and a doctor selected by the Company
shall be entitled to examine Executive. If the opinion of the Company's doctor
and Executive's doctor conflict, the Company's doctor and Executive's doctor
shall together agree upon a third doctor, whose opinion shall be binding. Any
amount to which Executive is entitled under this Agreement (including any
disputed amount), which is not paid when due, shall bear interest at a rate
equal to the lesser of eighteen percent (18%) per annum or the maximum lawful
rate.
14. Third-Party Agreements and Rights. Executive represents to the Company
that Executive's execution of this Agreement, Executive's employment with the
Company and the performance of Executive's proposed duties for the Company will
not violate any obligations Executive may have to any employer or other party,
and Executive will not bring to the premises of the Company any copies or other
tangible embodiments of non-public information belonging to or obtained from any
such previous employment or other party.
15. Litigation and Regulatory Cooperation. During and after Executive's
employment, Executive shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while Executive was employed by the Company;
provided, however, that such cooperation shall not materially and adversely
affect Executive or expose Executive to an increased probability of civil or
criminal litigation. Executive's cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. During and after Executive's
employment, Executive also shall cooperate fully with the Company in connection
with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences
that transpired while Executive was employed by the Company. The Company shall
also provide Executive with compensation on an hourly basis (to be derived from
the sum of his Base Compensation or, if applicable, Adjusted Base Salary and
Average Incentive Compensation) for requested litigation and regulatory
cooperation that occurs after his termination of employment, and reimburse
Executive for all costs and expenses incurred in connection with his performance
under this Paragraph 15, including, but not limited to, reasonable attorneys'
fees and costs.
16. Gender Neutral. Wherever used herein, a pronoun in the masculine gender
shall be considered as including the feminine gender unless the context clearly
indicates otherwise.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.
WYNDHAM INTERNATIONAL, INC.
By:
_______________________________
Its:
_______________________________
_______________________________
Carla S. Moreland
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EXHIBIT 10.5
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26th
day of May 1999, between Wyndham International, Inc., a Delaware corporation
(the "Company"), and Richard Mahoney ("Executive").
WHEREAS, Executive is desirous of committing to serve the Company on the
terms herein provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment. The term of this Agreement shall extend from the date hereof
(the "Commencement Date") until the third anniversary of the Commencement Date;
provided, however, that the term of this Agreement shall automatically be
extended for one additional year on the third anniversary of the Commencement
Date and each anniversary thereafter unless, not less than 90 days prior to each
such date, either party shall have given notice to the other that it does not
wish to extend this Agreement; provided, further, that if a Change in Control
occurs during the original or extended term of this Agreement, the term of this
Agreement shall continue in effect for a period of not less than eighteen (18)
months beyond the month in which the Change in Control occurred. The term of
this Agreement shall be subject to termination as provided in Paragraph 6 and
may be referred to herein as the "Period of Employment."
2. Position and Duties. During the Period of Employment, Executive shall
serve as an Executive Vice President and Chief Financial Officer of the Company,
shall have supervision and control over and responsibility for the day-to-day
business and affairs of those functions and operations of the Company and shall
have such other powers and duties as may from time to time by prescribed by the
Chairman of the Board of the Company (the "Chairman") or the Chief Executive
Officer of the Company (the "CEO") or other executive authorized by the Chairman
or CEO, provided that such duties are consistent with Executive's position or
other positions that he may hold from time to time. Executive shall devote his
full working time and efforts to the business and affairs of the Company.
Notwithstanding the foregoing, Executive may serve on other boards of directors,
with the approval of the Chairman of CEO, or engage in religious, charitable or
other community activities as long as such services and activities and disclosed
to the Chairman or CEO and do not materially interfere with Executive's
performance of his duties to the Company as provided in this Agreement.
3. Compensation and Related Matters.
(a) Base Salary and Incentive Compensation. Executive's initial annual
base salary ("Base Salary") shall be $450,000.00. Executive's Base Salary shall
be redetermined at least thirty (30) days before each annual compensation
determination date established by the Company during the Period of Employment in
an amount to be fixed by the Board of Directors of the
<PAGE>
Company or a Committee thereof or a duly authorized officer (the "Board"). The
Base Salary, as redetermined, may be referred to herein as "Adjusted Base
Salary". The Base Salary or Adjusted Base Salary shall be payable in
substantially equal bi-weekly installments and shall in no way limit or reduce
the obligations of the Company hereunder. In addition to Base Salary or Adjusted
Base Salary, Executive shall be eligible to receive cash incentive compensation
as determined by the Board from time to time, and shall also be eligible to
participate in such incentive compensation plans as the Board shall determine
from time to time for employees of the same status within the hierarchy of the
Company. Executive's incentive compensation potential shall be between zero and
150% of Executive's Base Salary, or, if applicable, Adjusted Base Salary and
Executive's target incentive compensation shall be 100% of Executive's Base
Salary or, if applicable, Adjusted Base Salary if the budget is achieved. For
the fiscal year ending December 31, 1999, Executive shall be entitled to
incentive compensation in an amount not less than $450,000.00.
(b) Expenses. Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by him (in accordance with
the policies and procedures then in effect and established by the Company for
its senior executive employees) in performing services hereunder during the
Period of Employment, provided that Executive properly accounts therefor in
accordance with Company policy.
(c) Signing Bonus. Executive shall be entitled to receive a signing
bonus of $1,250,000.00 in cash on the Commencement Date. In the event that
within twelve (12) months of the Commencement Date, Executive shall voluntarily
terminate his employment without Good Reason (as defined in Paragraph 6(e)) or
the Company shall terminate Executive's employment for Cause (as defined in
Paragraph 6(c)), Executive shall return to the Company an amount determined by
dividing the signing bonus, net of income and employment taxes, by twelve (12),
and multiplying and quotient by the amount of months or partial months less than
twelve (12) that Executive is employed by the Company.
(d) Restricted Paired Unit Award. On the Commencement Date, the Company
shall issue to Executive a Restricted Paired Unit Award covering the right to
vest in 121,053 shares of common stock of the Company and common stock of
Patriot American Hospitality, Inc. which trade as a pair ("Paired Shares"). Said
award shall vest and become nonforfeitable on the Commencement Date. In the
event that within twelve (12) months of the Commencement Date, Executive shall
voluntarily terminate his employment without Good Reason (as defined in
Paragraph 6(e)) or the Company shall terminate Executive's employment for Cause
(as defined in Paragraph 6(c)), Executive shall return to the Company an amount
determined by dividing the initial value of the Restricted Paired Unit Award,
net of income and employment taxes, by twelve (12) and multiplying the quotient
by the amount of months or partial months less than twelve (12) that Executive
is employed by the Company.
(e) Option Grant. On May 7, 1999 (the "Grant Date"), the Company has
issued to Executive a non-qualified stock option (the "Option") to acquire
850,000 Paired Shares at an exercise price of $4.75 per Paired Share. Said
Option shall vest and become exercisable ratably over five (5) years, at the
rate of 20% on each anniversary date of the Grant Date.
<PAGE>
(f) Relocation Benefits. Executive shall relocate to the Dallas area as
soon as reasonably practicable. The Company shall reimburse Executive for all
reasonable relocation expenses, grossed up for tax purposes.
(g) Travel benefits. Executive shall be entitled to reimbursement for
round trip air transportation (Dallas-Seattle-Dallas) up to twenty-four (24)
times annually.
(h) Other Benefits. During the Period of Employment, Executive shall be
entitled to continue to participate in or receive benefits under all the
Company's Employee Benefit Plans in effect on the date hereof, or under plans or
arrangements that provide Executive with at least substantially equivalent
benefits to those provided under such Employee Benefit Plans. As used herein,
"Employee Benefit Plans" include, without limitation, each pension and
retirement plan; supplemental pension, retirement and deferred compensation
plan; savings and profit-sharing plan; stock ownership plan; stock purchase
plan; stock option plan; life insurance plan; medical insurance plan; disability
plan; and health and accident plan or arrangement established and maintained by
the Company on the date hereof for employees of the same status within the
hierarchy of the Company. During the Period of Employment, Executive shall be
entitled to participate in or receive benefits under any employee benefit plan
or arrangement which may, in future, be made available by the Company to its
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plan or
arrangement. Any payments or benefits payable to Executive under a plan or
arrangement referred to in this Subparagraph 3(h) in respect of any calendar
year during which Executive is employed by the Company for less than the whole
of such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is employed. Should any such payments or benefits accrue on
a fiscal (rather than calendar) year, then the proration in the preceding
sentence shall be on the basis of a fiscal year rather than a calendar year.
(i) Life Insurance. The Company shall pay the premiums on, and maintain
in effect throughout the Period of Employment a life insurance policy on the
life of Executive in an amount not less than the amount of Executive's then
current Base Salary or Adjusted Base Salary. Executive shall have the right to
designate the beneficiary under such policy.
(j) Vacations. Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for executives at the same level of Executive but in no event less than four (4)
weeks per calendar year. Executive shall also be entitled to all paid holidays
given by the Company to its executives.
(k) Disability Insurance. The Company shall pay the premiums on, and
maintain in effect through the Period of Employment, long-term disability
insurance providing for payment of benefits at rates not less than sixty percent
(60%) of Executive's current Base Salary or Adjusted Base Salary.
<PAGE>
4. Unauthorized Disclosure.
(a) Confidential Information. Executive acknowledges that in the course
of his employment with the Company (and, if applicable, its predecessors), he
has been allowed to become, and will continue to be allowed to become,
acquainted with the Company's business affairs, information, trade secrets, and
other matters which are of a proprietary or confidential nature, including but
not limited to the Company's and its predecessors' operations, business
opportunities, price and cost information, finance, customer information,
business plans, various sales techniques, manuals, letters, notebooks,
procedures, reports, products, processes, services, and other confidential
information and knowledge (collective the "Confidential Information") concerning
the Company's and its predecessors' business. The Company agrees to provide on
an ongoing basis such Confidential Information as the Company deems necessary or
desirable to aid Executive in the performance of his duties. Executive
understands and acknowledges that such Confidential Information is confidential,
and he agrees not to disclose such Confidential Information to anyone outside
the Company except to the extent that (i) Executive deems such disclosure or use
reasonably necessary or appropriate in connection with performing his duties on
behalf of the Company, (ii) Executive is required by order of a court of
competent jurisdiction (by subpoena or similar process) to disclose or discuss
any Confidential Information, provided that in such case, Executive shall
promptly inform the Company of such event, shall cooperate with the Company in
attempting to obtain a protective order or to otherwise restrict such
disclosure, and shall only disclose Confidential Information to the minimum
extent necessary to comply with any such court order, (iii) such Confidential
Information becomes generally known to and available for use by the hotel and
hospitality industry (the "Hotel Industry"), other than as a result of any
action or inaction by Executive; or (iv) such information has been rightfully
received by a member of the Hotel Industry or has been published in a form
generally available to the Hotel Industry prior to the date Executive proposes
to disclose or use such information. Executive further agrees that he will not
during employment and/or at any time thereafter use such Confidential
Information in competing, directly or indirectly, with the Company. At such time
as Executive shall cease to be employed by the Company, he will immediately turn
over to the Company all Confidential Information, including papers, documents,
writings, electronically stored information, other property, and all copies of
them provided to or created by him during the course of his employment with the
Company.
(b) Heirs, successors, and legal representatives. The foregoing
provisions of this Paragraph 4 shall be binding upon Executive's heirs,
successors, and legal representatives. The provisions of this Paragraph 4 shall
survive the termination of this Agreement for any reason.
5. Covenant Not to Compete. In consideration for the equity grants under
Paragraph 3 and for Executive's employment by the Company under the terms
provided in this Agreement and as a means to aid in the performance and
enforcement of the terms of the Unauthorized Disclosure provisions of Paragraph
4, Executive agrees that
(a) during the term of Executive's employment with the Company and for
a period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not, directly or indirectly, as an
owner, director, principal, agent, officer,
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employee, partner, consultant, servant, or otherwise, carry on, operate, manage,
control, or become involved in any manner with any business, operation,
corporation, partnership, association, agency, or other person or entity which
is in the business of owning, operating, managing or granting franchise rights
with respect to hotels, motels or other lodging facilities in any area or
territory in which the Company conducts operations; provided, however, that the
foregoing shall not prohibit Executive from owning up to one percent (1%) of the
outstanding stock of a publicly held company engaged in the hospitality
business. Notwithstanding the foregoing, Executive shall be permitted to engage
in such activities with respect to any other hotel, motel or lodging facility
that would be immaterial to the operations of the Company in the area or
territory in question. Immediately, for purposes of the foregoing sentence,
shall be determined in the sole discretion of the Board of good faith.
(b) during the term of Executive's employment with the Company and for
a period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not, directly or indirectly, either
for himself or for any other business, operation, corporation, partnership,
association, agency, or other person or entity, call upon, compete for, solicit,
divert, or take away, or attempt to divert or take away any of the customers
(including, without limitation, any hotel owner, lessor or lessee, asset
manager, trustee, consumer with whom the Company from time to time (i) has an
existing agreement or business relationship; or (ii) has included as a prospect
in its applicable pipeline) or vendors of the Company in any of the areas or
territories in which the Company conducts operations if such action has the
intent or effect of interfering with the Company's relationship with the vendor
or customer.
(c) during the term of Executive's employment with the Company and for
a period of twenty-four (24) months thereafter, regardless of the reason for
termination of employment, Executive will not directly or indirectly solicit or
induce any present or future employee of the Company to accept employment with
Executive or with any business, operation, corporation, partnership,
association, agency, or other person or entity with which Executive may be
associated, and Executive will not employ or cause any business, operation,
corporation, partnership, association, agency, or other person or entity with
which Executive may be associated to employ any present or future employee of
the Company without providing the Company with ten (10) days' prior written
notice of such proposed employment.
Should Executive violate the provisions of this Paragraph, then in
addition to all other rights and remedies available to the Company at law or in
equity, the duration of this covenant shall automatically be extended for the
period of from which Executive began such violation until he permanently ceases
such violation.
6. Termination. Executive's employment hereunder may be terminated without
any breach of this Agreement under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been absent from his duties
hereunder on a full-time basis for one
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<PAGE>
hundred eighty (180) calendar days in the aggregate in any twelve (12) month
period, the Company may terminate Executive's employment hereunder.
(c) Termination by Company For Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment hereunder for Cause
if such meeting of such Board of Directors called and held for such purpose. For
purposes of this Agreement "Cause" shall mean: (A) conduct by Executive
constituting a material act of willful misconduct in connection with the
performance of his duties, including, without limitation, misappropriation of
funds or property of the Company or any of its affiliates other than the
occasional, customary and de minimis use of Company property for personal
purposes; (B) criminal or civil conviction by Executive, a plea of nolo
contendere by Executive or conduct of Executive that has resulted in material
injury to the repuration of the Company including, without limitation,
conviction of a felony involving moral turpitude; (C) continued, willful and
deliberate non-performance by Executive of his duties hereunder (other than by
reason of Executive's physical or mental illness, incapacity or disability) and
such non-performance has continued for more than thirty (30) days following
written notice of such non-performance from the Board; (D) a breach by Executive
of any of the provisions contained in Paragraphs 4 and 5 of this Agreement; or
(E) a violation by Executive of the Company's employment policies and such
violation has continued following written notice of such violation from the
Board.
(d) Termination Without Cause. At any time during the Period of
Employment, the Company may terminate Executive's employment thereunder without
Cause if such termination is approved by a majority of the Board at a meeting of
the Board called and held for such purpose. Any termination by the Company of
Executive's employment under this Agreement which does not constitute a
termination for Cause under Subparagraph 6(c), or result from the death or
disability of the Executive under Subparagraph 6(a) or (b) shall be deemed a
termination without Cause. If the Company provides notice to the Executive under
Paragraph 1 that it does not wish to extend the Period of Employment, such
action shall be deemed a termination without a Cause.
(e) Termination by Executive. At any time during the Period of
Employment, Executive may terminate his employment hereunder for any reason,
including but not limited to Good Reason. If Executive provides notice to the
Company under Paragraph 1 that he does not wish to extend the Period of
Employment, such action shall be deemed a voluntary termination by Executive and
one without Good Reason. For purposes of this Agreement, "Good Reason" shall
mean that Executive has complied with the "Good" Reason Process" (hereinafter
defined) following the occurrence of any of the following events: (A) a
substantial diminution or other substantive adverse change, not consented to by
Executive, in the nature or scope of Executive's responsibilities, authorities,
powers, functions or duties, other than a change in Executive's position or
reporting relationship; (B) any removal, during the Period of Employment, from
Executive of his title of Executive Vice President; (C) an involuntary reduction
compensation plan (but not reduction in incentive compensation appropriate for
level of performance) except for across-the-board salary reductions similarly
affecting all or substantially all management
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employees; (D) a breach by the Company of any of its other material obligations
under this Agreement and the failure of the Company to cure such breach within
thirty (30) days after written notice thereof by Executive; (E) the involuntary
relocation of the Company's offices at which Executive is principally employed
or the involuntary relocation of the offices of Executive's primary workgroup to
a location more than fifty (50) miles from such offices (other than a relocation
in either event to Dallas, Texas), or the requirement by the Company for
Executive to be based anywhere other than the Company's offices at such location
or in Dallas, Texas on an extended basis, except for required travel on the
Company's business to an extent substantially consistent with Executive's
business travel obligations; or (F) the requirement that Executive report to a
person who is not the CEO or the Chief Operating Officer. "Good Reason Process"
shall mean that (i) the Executive reasonably determines in good faith that a
"Good Reason" event has occurred; (ii) Executive notifies the Company in writing
of the occurrence of the Good Reason event; (iii) Executive cooperates in good
faith with the Company's efforts, for a period not less than sixty (60) days
following such notice, to modify Executive's employment situation in a manner
acceptable to Executive and Company; and (iv) notwithstanding such efforts, one
or more of the Good Reason events continues to exist and has not been modified
in a manner acceptable to Executive. If the Company cures the Good Reason event
during the sixty (60) day period, Good Reason shall be deemed not to have
occurred.
(f) Notice of Termination. Except for termination as specified in
Subparagraph 6(a), any termination of Executive's employment by the Company or
any such termination by Executive shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(g) Date of Termination. "Date of Termination" shall mean: (A) if
Executive's employment is terminated by his death, the date of his death; (B) if
Executive's employment is terminated on account of disability under Subparagraph
6(b) or by the Company for Cause under Subparagraph 6(c), the date on which
Notice of Termination is given; (C) if Executive's employment is terminated by
the Company under Subparagraph 6(d), sixty (60) days after the date on which a
Notice of Termination is given; and (D) if Executive's employment is terminated
by Executive under Subparagraph 6(e), thirty (30) days after the date on which
Notice of Termination is given.
7. Compensation Upon Termination or During Disability.
(a) If Executive's employment terminates by reason of his death, the
Company shall, within ninety (90) days of death, pay in a lump sum amount to
such person as Executive shall designate in a notice filed with the Company or,
if no such person is designated, to Executive's estate, Executive's accrued and
unpaid Base Salary or, if applicable, his Adjusted Base Salary, to the date of
his death, plus his accrued and unpaid incentive compensation, if any, under
Subparagraph 3(a). For a period of one (1) year following the Date of
Termination, the Company shall pay such health insurance premiums as may be
necessary to allow Executive's spouse and dependents to receive health insurance
coverage substantially similar to coverage they received prior to the Date of
Termination. In addition to the foregoing, any payments to
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<PAGE>
which Executive's spouse, beneficiaries, or estate may be entitled under any
employee benefit plan shall also be paid in accordance with the terms of such
plan or arrangement. Such payments, in the aggregate, shall fully discharge the
Company's obligations hereunder.
(b) During any period that Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness,
Executive shall continue to receive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary and accrued and unpaid incentive
compensation payments, if any, under Subparagraph 3(a), until Executive's
employment is terminated due to disability in accordance with Subparagraph 6(b)
or until Executive terminates his employment in accordance with Subparagraph
6(e), whichever first occurs. For a period of one (1) year following the Date of
Termination, the Company shall pay such health insurance premiums as may be
necessary to allow Executive, Executive's spouse and dependents to receive
health insurance coverage substantially similar to coverage they received prior
to the Date of Termination. Upon termination due to death prior to the
termination first to occur as specified in the preceding sentence, Subparagraph
7(a) shall apply.
(c) If Executive's employment is terminated by Executive other than for
Good Reason as provided in Subparagraph 6(e), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given. Thereafter, the Company shall have no further obligations
to Executive except as otherwise expressly provided under this Agreement,
provided any such termination shall not adversely affect or alter Executive's
rights under any employee benefit plan of the Company in which Executive, at the
Date of Termination, has a vested interest, unless otherwise provided in such
employee benefit plan or any agreement or other instrument attendant thereto.
(d) If Executive terminates his employment for Good Reason as provided
in Subparagraph 6(e) or if Executive's employment is terminated by the Company
without Cause as provided in Subparagraph 6(d), then the Company shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given and his accrued and unpaid incentive compensation, if any,
under Subparagraph 3(a). In addition, subject to signing by Executive of a
general release of claims in a form and manner satisfactory to the Company,
(i) the Company shall provide payments to Executive in an amount
equal to the sum of Executive's Average Base Salary and his Adjusted
Incentive Compensation payable for the remaining length of the Period of
Employment after the Date of Termination (the "Severance Amount"), but
in no event for fewer than twenty-four (24) months. The Severance Amount
shall be paid out in substantially equal bi-weekly installments, in
arrears; provided, however, that in the event Executive commences any
employment during such period, the Company shall be entitled to set-off
against the remaining Severance Amount seventy-five percent (75%) of the
amount of any cash compensation received by Executive from the new
employer. From time to time, Executive may be asked to certify to the
Company that he has not accepted employment with a new employer
(including, without limitation, contract and consulting agreements).
<PAGE>
For purposes of this Agreement, "Average Base Salary" shall mean the
average of the annual Base Salary or, if applicable, Adjusted Base
Salary received by Executive for each of the three (3) immediately
preceding fiscal years or such fewer number of complete fiscal years as
Executive may have been employed by the Company. For purposes of this
Agreement, "Average Incentive Compensation" shall mean the average of
the annual incentive compensation under Subparagraph 3(a) received by
executive for three (3) immediately preceding fiscal years or such fewer
number of complete fiscal years as Executive may have been employed by
the Company. In the event Executive's employment terminates within the
first twelve (12) months of the Commencement Date, his Average Incentive
Compensation for purposes of this Subparagraph is deemed to be
$450,000.00. In no event shall "Average Incentive Compensation" include
any sign-on bonus, retention bonus or any other special bonus.
Notwithstanding the foregoing, if the Executive breaches any of the
provisions contained in Paragraphs 4 and 5 of this Agreement, all
payments of the Severance Amount shall immediately cease.
Notwithstanding the foregoing, in the event Executive terminates his
employment for Good Reason as provided in Subparagraph 6(e), he shall be
entitled to the Severance Amount only if he provides the Notice of
Termination provided for in Subparagraph 6(f) within sixty (60) days
after the occurrence of the event or events which constitute such Good
Reason as specified in clauses (A), (B), (C), (D), (E) and (F) of
Subparagraph 6(e).
(ii) in addition to any other benefits to which Executive may be
entitled in accordance with the Company's then existing severance
policies, the Company shall, for a period of one (1) year commencing on
the Date of Termination, pay such health insurance premiums as may be
necessary to allow Executive, Executive's spouse and dependents to
continue to receive health insurance substantially similar to the
coverage they received prior to his termination of employment.
(e) If Executive's employment is terminated by the Company for Cause as
provided in Subparagraph 6(c), then the Company shall, through the Date of
Termination, pay Executive his accrued and unpaid Base Salary or, if applicable,
his Adjusted Base Salary at the rate in effect at the time Notice of Termination
is given. Thereafter, the Company shall have no further obligations to Executive
except as otherwise expressly provided under this Agreement, provided any such
termination shall not adversely affect or alter Executive's rights under any
employee benefit plan of the Company in which Executive, at the Date of
Termination, has a vested interest, unless otherwise provided in such employee
benefit plan or any agreement or other instrument attendant thereto.
(f) Regardless of the reason for termination, for a period of five (5)
years beginning on the Date of Termination, the Company will provide such
reasonable assistance and support to Executive as he shall reasonably require in
connection with the preparation and filing of tax returns, statements and forms
insofar as such returns, statements or forms relate to Executive's association
with the Company or its predecessors or affiliates. At the Company's election,
such assistance and support shall be provided by either tax personnel from the
Company or certified public accountants selected and compensated by the Company.
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(g) Nothing contained in the foregoing Subparagraphs 7(a) through 7(f)
shall be construed so as to affect Executive's rights or the Company's
obligations relating to agreements or benefits which are unrelated to
termination of employment.
8. Change in Control Payment. The provisions of this Paragraph 8 set forth
certain terms of an agreement reached between Executive and the Company
regarding Executive's rights and obligations upon the occurrence of a Change in
Control of the Company. These provisions are intended to assure and encourage in
advance Executive's continued attention and dedication to his assigned duties
and his objectivity during the pendency and after the occurrence of any such
event. These provisions shall apply in lieu of, and expressly supersede, the
provisions of Subparagraph 7(d)(i) regarding severance pay upon a termination of
employment, if such termination of employment occurs within eighteen (18) months
after the occurrence of the first event constituting a Change of Control;
provided that such first event occurs during the Period of Employment. These
provisions shall terminate and be of no further force or effect beginning
eighteen (18) months after the occurrence of Change of Control.
(a) Change in Control.
(i) If within eighteen (18) months after the occurrence of the
first event constituting a Change of Control, Executive's employment is
terminated by the Company without Cause as provided in Subparagraph 6(d) or
Executive terminates his employment for Good Reason as provided in
Subparagraph 6(e), then the Company shall pay Executive the Severance
Amount as provided in Subparagraph 7(d)(i) in substantially bi-weekly
installments, in arrears, over twenty-four (24) months. Notwithstanding the
foregoing, if the Executive breaches any of the provisions contained in
Paragraphs 4 and 5 of this Agreement, all payments of the Severance Amount
shall immediately cease; and
(ii) Within fifteen (15) days after Executive becomes entitled to
receive the Severance Amount under (i) above, the Company shall place funds
in an amount equal to the estimated Severance Amount in escrow, pursuant to
arrangements that are mutually acceptable to the Company and Executive (the
"Escrow Arrangement"). The Escrow Arrangement shall be maintained under the
final installment payment of the Severance Amount has been made;
(iii) Notwithstanding anything to the contrary in any applicable
option agreement or stock-based award agreement; if Executive terminates
his employment for Good Reason as provided in Subparagraph 6(e) or if
Executive's employment is terminated by the Company without Cause as
provided in Subparagraph 6(d) within eighteen (18) months of a Change in
Control, all stock options and other stock-based awards granted to
Executive by the Company shall immediately accelerate and become
exercisable or non-forfeitable as of the Date of Termination, and Executive
shall have 360 days to exercise all his stock options. Executive shall also
be entitled to any other rights and benefits with respect to stock-related
awards, to the extent and upon the terms provided in the employee stock
option or incentive plan or any agreement or other instrument attendant
thereto pursuant to which such options or awards were granted; and
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(iv) The Company shall, for a period of one (1) year commencing on
the Date of Termination, pay such health insurance premiums as may be
necessary to allow Executive, Executive's spouse and dependents to
continue to receive health insurance coverage substantially similar to the
coverage they received prior to his termination of employment.
(b) Gross Up Payment.
(i) Excess Parachute Payment. If Executive incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") on "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code, the Company will pay to Executive an amount (the
"Gross Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the excess parachute payment and any
federal, state and local income taxes and employment taxes (together with
penalties and interest) and Excise Tax upon the payment provided for by
this Subparagraph 8(c)(i), will be equal to the Severance Amount.
(ii) Applicable Rates. For purposes of determining the amount of
the Gross Up Payment, Executive will be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar
year in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality
of Executive's residence on the date of Executive's Termination, net of
the maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon
the opinion of tax counsel selected by Executive and approved by the
Company, which approval will not be unreasonably withheld. If such opinion
is not finally accepted by the Internal Revenue Service (or state and local
taxing authorities), then appropriate adjustments to the Excise Tax will be
computed and additional Gross Up Payments will be made in the manner
provided by this Subparagraph (c).
(iv) Time for Payment. The Company will pay the estimated amount of
the Gross Up Payment in cash to Executive at such time or times when the
Excise Tax is due. Executive and the Company agree to reasonably cooperate
in the determination of the actual amount of the Gross Up Payment. Further,
Executive and the Company agree to make such adjustments to the estimated
amount of the Gross Up Payment as may be necessary to equal the actual
amount of the Gross Up Payment, which in the case of Executive will refer
to refunds of prior overpayments and in the case of the Company will refer
to makeup of prior underpayments.
(c) Definitions. For purposes of this Paragraph 8, the following terms
shall have the following meanings:
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"Change in Control" shall mean any of the following:
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the "Acquiring
Person"), other than the Company, or any of its Subsidiaries or any Investor or
Excluded Group, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 35% or more of the combined voting power
or economic interests of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors; provided, however, that
any transfer from any Investor or Excluded Group will not result in a Change in
Control if such transfer was part of a series of related transactions the effect
of which, absent the transfer to such Acquiring Person by the Investor or
Excluded Group, would not have resulted in the acquisition by such Acquiring
Person of 35% or more of the combined voting power or economic interests of the
then outstanding voting securities; or
(b) during any period of 12 consecutive months after the Issuance Date,
the individuals who at the beginning of any such 12-month period constituted a
majority of Class A Directors and Class C Directors (the "Incumbent Non-Investor
Majority") cease for any reason to constitute at least a majority of such Class
A Directors and Class C Directors; provided that (i) any individual becoming a
director whose election, or nomination for election by the Company's
stockholders, was approved by a vote of the stockholders having the right to
designate such director and (ii) any director whose election to the Board or
whose nomination for election by the stockholders of the Company was approved
by the requisite vote of directors entitled to vote on such election or
nomination in accordance with the Restated Certificate of Incorporation of the
Company, shall, in each such case, be considered as though such individual were
a member of the Incumbent Non-Investor Majority, but excluding, as a member of
the Incumbent Non-Investor Majority, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (such as terms
as used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) and
further excluding any person who is an affiliate or associate of an Acquiring
Person having or proposing to acquire beneficial ownership of 25% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors; or
(c) the approval by the stockholders of the Company of a reorganization
merger or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners of the voting securities of the Company immediately prior to
such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 57.5% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors of the
Company resulting from such reorganization, merger or consolidation; or
12
<PAGE>
(d) the sale or other disposition of assets representing 50% or
more of the assets of the Company in one transaction or series of related
transactions.
All defined terms used in the definition of "Change in Control" shall have
the same meaning as set forth in the Form of Certificate of Designation of
Series B Convertible Preferred Stock of Wyndham International, Inc.
"Company" shall mean not only Wyndham International, Inc., but also
its successors by merger or otherwise.
9. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
At his home address as shown
in the Company's personnel records;
if to the Company:
Wyndham International, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, TX 75207
Attention: Senior Vice President of Human Resources and
General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
10. Miscellaneous. No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Texas (without regard to principles of
conflicts of laws).
11. Validity. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. The
invalid portion of this Agreement, if
13
<PAGE>
any, shall be modified by any court having jurisdiction to the extent necessary
to render such portion enforceable.
12. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
13. Arbitration; Other Disputes. In the event of any dispute or controversy
arising under or in connection with this Agreement, the parties shall first
promptly try in good faith to settle such dispute or controversy by mediation
under the rules of the American Arbitration Association before resorting to
arbitration. In the event such dispute or controversy remains unresolved in
whole or in part for a period of thirty (30) days after it arises, the parties
will settle any remaining dispute or controversy exclusively by arbitration in
Dallas, Texas, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. Notwithstanding the above, the Company
shall be entitled to seek a restraining order or injunction in any court of
competent jurisdiction to prevent any continuation of any violation of Paragraph
4 or 5 hereof. Furthermore, should a dispute occur concerning Executive's
mental or physical capacity as described in Subparagraph 6(b), 6(c) or 7(b), a
doctor selected by Executive and a doctor selected by the Company shall be
entitled to examine Executive. If the opinion of the Company's doctor and
Executive's doctor conflict, the Company's doctor and Executive's doctor shall
together agree upon a third doctor, whose opinion shall be binding. Any amount
to which Executive is entitled under this Agreement (including any disputed
amount), which is not paid when due, shall bear interest at a rate equal to the
lesser of eighteen percent (18%) per annum or the maximum lawful rate.
14. Third-Party Agreements and Rights. Executive represents to the Company
that Executive's execution of this Agreement, Executive's employment with the
Company and the performance of Executive's proposed duties for the Company will
not violate any obligations Executive may have to any employer or other party,
and Executive will not bring to the premises of the Company any copies or other
tangible embodiments of non-public information belonging to or obtained from any
such previous employment or other party.
15. Litigation and Regulatory Cooperation. During and after Executive's
employment, Executive shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while Executive was employed by the Company;
provided, however, that such cooperation shall not materially and adversely
affect Executive or expose Executive to an increased probability of civil or
criminal litigation. Executive's cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. During and after Executive's
employment, Executive also shall cooperate fully with the Company in connection
with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences
that transpired while Executive was employed by the Company. The Company shall
also provide Executive with compensation on
14
<PAGE>
an hourly basis calculated at his final base compensation rate for requested
litigation and regulatory cooperation that occurs after his termination of
employment, and reimburse Executive for all costs and expenses incurred in
connection with his performance under this Paragraph 15, including, but not
limited to, reasonable attorneys' fees and costs.
16. Gender Neutral. Wherever used herein, a pronoun in the masculine gender
shall be considered as including the feminine gender unless the context clearly
indicates otherwise.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year first above written.
WYNDHAM INTERNATIONAL, INC.
By: /s/ James D. Carreker
--------------------------------------
Its: Chairman and Chief Executive Officer
/s/ Richard Mahoney
--------------------------------------
Richard Mahoney
<PAGE>
EXHIBIT 10.6
July 12, 1999
Mr. Lawrence S. Jones
[address]
Dear Larry:
This letter agreement (the "Agreement") confirms the agreement that we have
reached regarding your resignation from your regular, full-time employment and
all offices you hold with Wyndham International, Inc. ("WII"), Patriot American
Hospitality, Inc. ("PAHI") and their respective related and affiliated entities
(collectively, the "Companies").
The purpose of this Agreement is to establish mutually agreeable
arrangements for ending your employment and structuring your continuing
relationship with the Companies following your resignation. This Agreement does
not constitute and should not be construed as an admission by the Companies that
they have in any way violated any legal obligation that they owe to you or to
any other person or as an admission by you that you have in any way violated any
legal obligation that you owe to the Companies or to any other person. To the
contrary, the parties' willingness to enter into this Agreement demonstrates
that they are continuing to deal with each other fairly and in good faith.
With those understandings and in exchange for the promises set forth below,
you and the Companies agree as follows:
1. Resignation
You hereby resign as an employee of PAHI and WII effective as of July 13,
1999 (the "Resignation Date"). You also hereby resign from your offices of
Executive Vice President and Treasurer of each of PAHI and WII and any and all
employment, offices and board of directors seats that you may hold with any of
the other Companies as of the Resignation Date. Said resignations are hereby
accepted by the Companies.
2. Compensation and Benefits
(a) Vesting of Outstanding Options. Effective as of June 30, 1999 (the
"Vesting Date"), all of your outstanding unvested options to purchase paired
shares of common stock of WII and PAHI ("Paired Shares") shall vest and remain
fully exercisable for the period of up to one (1) year from the Resignation
Date. Except to the extent inconsistent
<PAGE>
Mr. Lawrence S. Jones
July 12, 1999
Page 2
with the express terms of this Section 2(a), said options shall remain subject
to the terms of the Option Agreements dated as of November 13, 1998 by and
between you and WII.
(b) Restricted Paired Units. Effective as of the Vesting Date, the
restrictions shall lapse on the remaining restricted Paired Units previously
granted to you by PAHI and WII pursuant to Section 3(d) of the Employment
Agreement, dated as of the 9th day of March, 1998, by and among PAHI, WII and
you (the "Employment Agreement").
(c) Severance. PAHI and WII shall pay you severance in a gross amount
equal to Seven Hundred Fifty Thousand Dollars ($750,000) (the "Severance
Payment"). The Severance Payment shall be reduced by applicable withholding and
shall be payable by lump sum to you within five (5) business days following the
later of the Resignation Date or the Effective Date (as defined in Section 13(d)
below) by check or wire transfer as directed by you.
(d) Loan Forgiveness. In accordance with Section 3(g) of the
Employment Agreement, Seven Hundred Fifty Thousand Dollars ($750,000) of the
outstanding principal and accrued interest on the loan described in said Section
3(g) is hereby forgiven. Any remaining indebtedness, including accumulated
interest, under that loan shall remain subject to the repayment terms of the
loan.
(e) Benefit Continuation. You may continue to participate in WII's
group health and dental plans in which, and to the same extent as, you are
currently participating for up to one (1) year from the Resignation Date, with
the cost of the regular premium for such benefits shared in the same relative
proportion by you and WII as in effect for senior executives of WII on the
Resignation Date; provided that nothing in this Section 3(e) shall be construed
to affect your or your dependents' rights thereafter to receive continuation
coverage to the extent authorized by and consistent with 29 U.S.C. (S) 1161 et
seq. (commonly known as "COBRA") and applicable group health and dental plan
terms, entirely at your or their own cost after your right to cost sharing under
this Section 3(e) ends.
(f) Other Benefits. Except as expressly provided above, your
eligibility to participate in any of the Companies' respective employee benefit
plans and programs ceases on or after the Resignation Date in accordance with
the terms and conditions of each of those benefit plans and programs and your
rights to benefits under any of the employee benefit plans and programs, if any,
are governed by the terms and conditions of each of those employee benefit plans
and programs.
<PAGE>
Mr. Lawrence S. Jones
July 12, 1999
Page 3
(g) Payments through Resignation Date. You shall continue as an
employee of WII and PAHI and shall continue on WII's and PAHI's payroll and
receive your Adjusted Base Salary and all other benefits, through the
Resignation Date.
4. Release of Claims
(a) Release by Mr. Jones. You voluntarily and irrevocably release and
discharge the Companies, their related or affiliated entities, and their
respective predecessors, successors, and assigns, and the current and former
officers, directors, shareholders, employees, and agents of each of the
foregoing (any and all of which are referred to as "Releasees") generally from
all charges, complaints, claims, promises, agreements, causes of action,
damages, and debts that relate in any manner to your employment with or services
for the Companies, known or unknown ("Claims"), which you have, claim to have,
ever had, or ever claimed to have had against any of the Releasees through the
date on which you execute this Agreement. This general release of Claims
includes, without implication of limitation, all Claims for or related to: the
Employment Agreement; the compensation provided to you by the Companies; your
resignations as described in Section 1; wrongful or constructive discharge;
breach of contract; breach of any implied covenant of good faith and fair
dealing; tortious interference with advantageous relations; intentional or
negligent misrepresentation, fraud or deceit; infliction of emotional distress,
and unlawful retaliation or discrimination under the common law or any federal,
state or local statute or law (including, without implication of limitation, the
Employee Retirement Income Security Act, Title VII of the Civil Rights Act of
1964, the American with Disabilities Act, the Age Discrimination in Employment
Act, Tex. Lab. Code (S)~ 21.001, et seq., and Tex. Hum. Res. Code (S)~ 121.001,
et seq.). You also waive any Claim for reinstatement, severance, incentive or
retention pay (except as expressly provided in this Agreement), attorney's fees,
or costs, relating to the above waived claims.
You agree that you will not hereafter pursue any Claim against any Releasee
by filing a lawsuit in any local, state or federal court for or on account of
anything which has occurred up to the present time as a result of your
employment, and you shall not seek reinstatement with, or damages of any nature,
severance, incentive or retention pay, attorney's fees, or costs from the
Companies or any of the other Releasees; provided, however, that nothing in this
general release shall be construed to bar or limit your rights, if any, to
indemnification subject to and in accordance with the terms of the By-Laws of
WII and the Indemnification Agreement, dated as of May 23, 1998, by and among
you, WII and PAHI (the "Indemnification Agreement"), or to enforce your rights
under this Agreement.
<PAGE>
Mr. Lawrence S. Jones
July 12, 1999
Page 4
(b) Release by the Companies. The Companies, on behalf of themselves
and their respective predecessors, successors, assigns, directors (but only in
their capacities as directors of the Companies) and officers (but only in their
capacities as officers of the Companies) voluntarily and irrevocably release and
discharge you and your successors, assigns, heirs and survivors from any and all
charges, complaints, claims, promises, agreements, causes of action, damages and
debts, (including attorney's fees and costs actually incurred) which any of them
have, claim to have, ever had or ever claimed to have had against you through
the date hereof, known or unknown, which relate to good faith acts or omissions
by you during the course of your employment undertaken or not undertaken in the
reasonable belief that such acts or omissions were in the best interests of the
Companies.
The Companies further represent that they do not have any knowledge at this
time of any acts or omissions by you that would give rise claims not otherwise
released in the previous paragraph.
5. Employment Agreement
This Agreement supersedes all provisions of the Employment Agreement other
than Paragraphs 4, 5, 8(c), 13 and 15 thereof. Paragraphs 4, 5, 8(c), 13 and 15
of the Employment Agreement are incorporated herein by reference and shall
continue to bind you in accordance with their respective terms. The Employment
Agreement, except for Paragraphs 4, 5, 8(c) 13 and 15 thereof, shall terminate
on the Resignation Date.
6. Return of Property
All documents, records, material and all copies of any of the foregoing
pertaining to Confidential Information (as defined in Paragraph 4 of the
Employment Agreement), and all software, equipment, and other supplies, whether
or not pertaining to Confidential Information, that have come into your
possession or been produced by you in connection with your employment
("Property") have been and remain the sole property of the Companies. You shall
return all Property to the Companies on or before the Resignation Date. In no
event should this provision be construed to require you to return to the Company
any document or other materials concerning your remuneration and benefits during
your employment with the Companies.
<PAGE>
Mr. Lawrence S. Jones
July 12, 1999
Page 5
7. Nondisparagement
You agree not to take any action or make any statement, written or oral,
which disparages or criticizes the Companies or their respective officers,
directors, agents, or management and business practices, or which disrupts or
impairs the Companies' normal operations. The Companies, on behalf of
themselves, agree (a) not to take any action or make any statement, written or
oral, which disparages or criticizes you or your management and business
practices, and (b) to instruct their respective directors and officers not to
take any action or make any statement, written or oral, which disparages or
criticizes you or your management and business practices. The provisions of this
Section 7 shall not apply to any truthful statement required to be made by you
or the Companies, as the case may be, in any legal proceeding or governmental or
regulatory investigation.
8. Additional Representations, Warranties and Covenants
(a) As a material inducement to the Companies to enter into this
Agreement, you represent, warrant and covenant as follows:
(i) You have not assigned to any third party any Claim released by
this Agreement.
(ii) You have not heretofore filed with any agency or court any Claim
released by this Agreement.
(b) As a material inducement to you to enter into this Agreement, the
Companies represent, warrant and covenant as follows:
(i) The Companies have not assigned to any third party any claim
against you released by this Agreement; and
(ii) The Companies have not heretofore filed with any agency or court
any claim against you released by this Agreement.
9. Further Assurances
Upon the terms and subject to the conditions herein provided, each of the
parties hereto agrees to use its reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to
<PAGE>
Mr. Lawrence S. Jones
July 12, 1999
Page 6
consummate and make effective the transactions contemplated by this Agreement,
subject, in the case of the Companies, to the provisions of any credit agreement
or financing agreement or other contract or agreement by which any of the
Companies may be bound.
10. Exclusivity
This Agreement sets forth all the consideration to which you are entitled
from the Companies by reason of your resignation and your duties for the
Companies while employed, and you agree that you shall not be entitled to or
eligible for any payments or benefits under any other Company severance, bonus,
retention or incentive policy, arrangement or plan.
11. Tax Matters
All payments and other consideration provided to you pursuant to this
Agreement shall be subject to any deductions, withholding or tax reporting that
the Companies reasonably determine to be required for tax purposes. In
accordance with Section 8(c) of the Employment Agreement, the Companies shall
make a Gross Up Payment on your behalf of Four Hundred Seven Thousand, Five
Hundred Twenty-eight Dollars ($407,528) in connection with your payments
hereunder.
12. Arbitration of Disputes
Any controversy or claim arising out of or relating to this Agreement or
the breach thereof shall, to the fullest extent permitted by law, be settled by
arbitration in accordance with Paragraph 15 of the Employment Agreement. This
Section 12 shall be specifically enforceable. Notwithstanding the foregoing,
this Section 12 shall not preclude either party from pursuing a court action for
the sole purpose of obtaining a temporary restraining order or a preliminary
injunction in circumstances in which such relief is appropriate; provided that
any other relief shall be pursued through an arbitration proceeding pursuant to
this Section 12.
13. Consent to Jurisdiction
To the extent that any court action is permitted consistent with or to
enforce Section 12 of this Agreement, the parties hereby consent to the
jurisdiction of the state and federal courts in or for Dallas, Texas.
Accordingly, with respect to any such court action, you and the Companies (a)
submit to the personal jurisdiction of such courts; (b) consent to service of
process; and (c) waive any other requirement (whether imposed by statute, rule
of court, or otherwise) with respect to personal jurisdiction or service of
process.
<PAGE>
Mr. Lawrence S. Jones
July 12, 1999
Page 7
14. Notices, Acknowledgments and Other Terms
(a) You are advised to consult with an attorney before signing this
Agreement.
(b) You acknowledge and agree that the Companies' promises in this
Agreement constitute consideration in addition to anything of value to which you
are otherwise entitled by reason of the termination of your employment.
(c) By signing this Agreement, you acknowledge that you are doing so
voluntarily and knowingly, fully intending to be bound by this Agreement. You
also acknowledge that you are not relying on any representations by us or any
other representative of the Companies concerning the meaning of any aspect of
this Agreement. You understand that this Agreement shall not in any way be
construed as an admission by the Companies of any liability or any act of
wrongdoing whatsoever by the Companies against you and that the Companies
specifically disclaim any liability or wrongdoing whatsoever against you on the
part of themselves and their respective officers, directors, shareholders,
employees and agents. You understand that if you do not to enter into this
Agreement and bring any claims against the Companies, the Companies will dispute
the merits of those claims and contend that they acted lawfully and for good
business reasons with respect to you.
(d) You acknowledge that you have been given the opportunity, if you
so desired, to consider this Agreement for twenty-one (21) days before executing
it. If not signed by you and returned to the General Counsel of WII so that it
is received by close of business on the twenty-second (22nd) day after your
receipt of the Agreement, this Agreement will not be valid. In addition, if you
breach any of the conditions of the Agreement within the twenty-one (21) day
period, the offer of this Agreement will be withdrawn and your execution of the
Agreement will not be valid. In the event that you execute and return this
Agreement within twenty-one (21) days or less of the date of its delivery to
you, you acknowledge that such decision was entirely voluntary and that you had
the opportunity to consider this letter agreement for the entire twenty-one (21)
day period. The Companies acknowledge that for a period of seven (7) days from
the date of the execution of this Agreement, you shall retain the right to
revoke this Agreement by written notice delivered to the General Counsel of WII
before the end of such period, and that this Agreement shall not become
effective or enforceable until the expiration of such revocation period (the
"Effective Date").
<PAGE>
Mr. Lawrence S. Jones
July 12, 1999
Page 8
(e) In the event of any dispute, this Agreement will be construed as a
whole, will be interpreted in accordance with its fair meaning, and will not be
construed strictly for or against either you or the Companies.
(f) The law of the State of Texas will govern any dispute about this
Agreement, including any interpretation or enforcement of this Agreement.
(g) In the event that any provision or portion of a provision of this
Agreement shall be determined to be illegal, invalid or unenforceable, the
remainder of this Agreement shall be enforced to the fullest extent possible and
the illegal, invalid or unenforceable provision or portion of a provision will
be amended by a court of competent jurisdiction to reflect the parties' intent
if possible. If such amendment is not possible, the illegal, invalid or
unenforceable provision or portion of a provision will be severed from the
remainder of this Agreement and the remainder of this Agreement shall be
enforced to the fullest extent possible as if such illegal, invalid or
unenforceable provision or portion of a provision was not included.
(h) This Agreement may be modified only by a written agreement signed
by you and authorized representatives of the Companies.
(i) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements between the parties with respect to any related subject matter;
provided that the Indemnification Agreement shall remain in full force and
effect in accordance with its terms.
(j) This Agreement shall be binding upon each of the parties and upon
their respective heirs, administrators, representatives, executors, successors
and assigns, and shall inure to the benefit of each party and to their heirs,
administrators, representatives, executors, successors, and assigns.
<PAGE>
Mr. Lawrence S. Jones
July 12, 1999
Page 9
If you agree to these terms, please sign and date below and return this
Agreement to the General Counsel of WII.
Sincerely,
WYNDHAM INTERNATIONAL, INC.
By: /s/ James D. Carreker
-------------------------------------
James D. Carreker
Chairman and Chief Executive Officer
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ James D. Carreker
-------------------------------------
James D. Carreker
Chairman
Accepted and agreed to:
/s/ Lawrence S. Jones 7/20/99
- ----------------------------- -------------------------------
Lawrence S. Jones Date
<PAGE>
EXHIBIT 10.7
July 12, 1999
Mr. William W. Evans, III
24 Saddle Ridge Road
Darien, CT 06820
Dear Bill:
This letter agreement (the "Agreement") confirms the agreement that we have
reached regarding your resignation from your regular, full-time employment and
all offices you hold with Patriot American Hospitality, Inc. ("PAHI") and its
related and affiliated entities (collectively, "Patriot") and your agreement to
remain available on a consulting basis to assist Patriot and Wyndham
International, Inc. ("WII") and its related and affiliated entities
(collectively with WII, "Wyndham" and, together with Patriot, the "Companies")
in connection with certain pending matters.
The purpose of this Agreement is to establish mutually agreeable
arrangements for ending your relationship with the Companies. This Agreement
does not constitute and should not be construed as an admission by the Companies
that they have in any way violated any legal obligation that they owe to you or
to any other person or as an admission by you that you have in any way violated
any legal obligation that you owe to the Companies or to any other person. To
the contrary, the parties' willingness to enter into this Agreement demonstrates
that they are continuing to deal with each other fairly and in good faith.
With those understandings and in exchange for the promises set forth below,
you and the Companies agree as follows:
1. Resignation
-----------
You hereby confirm that you resigned as an employee of PAHI effective as of
June 30, 1999 (the "Resignation Date"). You also hereby confirm that you
resigned from your office of President of PAHI and any and all employment,
offices and board of directors seats that you may hold with any of the other
Companies as of the Resignation Date. Said resignations are hereby accepted by
the Companies.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 2
2. Compensation and Benefits
-------------------------
(a) Loan. The outstanding principal amount and accrued interest with
----
respect to your indebtedness to PAHI, as set forth in the Nonrecourse Promissory
Note and Security Agreement made by you and dated November 27, 1998 (the "Note")
shall be due on or before August 29, 1999 in accordance with Section 6(a)(i)
thereof. PAHI agrees to accept the Collateral Shares (as defined in Section 2 of
the Note) in full satisfaction of the outstanding principal amount and accrued
interest under the Note.
(b) Severance. The Companies shall pay you severance and notice pay
---------
in a gross amount equal to One Million, Five Hundred Eleven Thousand, Three
Hundred Ten Dollars ($1,511,310) (the "Severance Payment"). The Severance
Payment shall be reduced by applicable withholding and shall be payable by lump
sum to you within five (5) business days following the Effective Date (as
defined in Section 12(c) below) by wire transfer as instructed in Section 2(j)
below.
(c) Repricing of Outstanding Options. As of the date hereof, all of
--------------------------------
your outstanding options to purchase 601,074 paired shares of the common stock
of WII and PAHI ("Paired Shares") hereby are canceled, and in lieu thereof you
are granted fully vested new options to purchase 57,216 Paired Shares at a
purchase price of $5.1875 per Paired Share (the "New Options"). The New Options
shall remain fully exercisable until June 30, 2002 and shall be subject to the
terms of a mutually acceptable stock option agreement with WII containing
standard terms and conditions not otherwise inconsistent with the provisions of
this Section 2(c).
(d) Performance Bonus. PAHI shall pay you an incentive bonus in a
-----------------
gross amount equal to One Million, Five Hundred Thousand Dollars ($1,500,000)
(the "Incentive Payment"). The Incentive Payment shall be reduced by applicable
withholding and shall be payable by lump sum to you within five (5) business
days following the Effective Date (as defined in Section 12(c) below) by wire
transfer as instructed in Section 2(j) below.
(e) Restricted Paired Unit Award. Your Restricted Paired Unit Award
----------------------------
of 166,666 Paired Shares pursuant to PAHI's Incentive Plan shall remain in
effect subject to the terms of this Section 2(e). Paired Shares awarded under
the Restricted Paired Unit Award shall be payable as follows:
(i) 55,556 Paired Shares payable within five (5) business days
following the effective Date (as defined in Section 12(c) below);
(ii) 55,555 Paired Shares payable on June 30, 2000; and
(iii) 55,555 Paired Shares payable on June 30, 2001.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 3
As a condition to receiving the second or third installment of Paired
Shares, you will make yourself reasonably available for Consulting Services (as
defined in Section 3 below) during the Consulting Period (as defined in Section
3 below). In the event you should die or are unavailable to provide Consulting
Services because you become totally disabled, as determined by the Board of PAHI
or WII, in its sole discretion, after the date hereof, you or your estate, as
the case may be, shall thereupon become entitled to receive any unpaid
installment of Paired Shares.
(f) Benefits. For one (1) year from the Resignation Date, you will
--------
continue to receive fringe benefits from PAHI as in effect for you on the
Resignation Date, such as the use of Ernest and Young for accounting services,
and you may continue to participate in PAHI's group health and dental plans and
in the life and disability insurance plans in which, and to the same extent as,
you are currently participating, with the cost of the regular premium for such
benefits paid by PAHI; provided that nothing in this Section 2(f) shall be
--------
construed to affect your or your dependents' rights thereafter to receive
continuation coverage to the extent authorized by and consistent with 29 U.S.C.
(S) 1161 et seq. (commonly known as "COBRA") and applicable group health and
dental plan terms, entirely at your or their own cost after your right to
benefit continuation under this Section 2(f) ends.
(g) Other Benefits. Except as expressly provided above, your
--------------
eligibility to participate in any of the Companies' respective employee benefit
plans, including without limitation, any 401(k) savings plans, ceases on or
after the Resignation Date in accordance with the terms and conditions of each
of those benefit plans and programs and your rights to benefits under any of the
employee benefit plans and programs, if any, are governed by the terms and
conditions of each of those employee benefit plans and programs.
(h) Payments through Resignation Date. You shall continue as an
---------------------------------
employee of PAHI and shall continue on PAHI's payroll and receive your base
salary and all other benefits, through the Resignation Date. You shall be paid
for all accrued but unused vacation in the amount of Forty-three Thousand, Two
Hundred Sixty-Nine and 25/100 Dollars ($43,269.25) within five (5) business days
following the Effective Date (as defined in Section 12(c) below). Such payment
shall be made by wire transfer as instructed in Section 2(j) below.
(i) The Companies shall pay up to Seven Thousand, Five Hundred Dollars
($7,500) to Friedman Siegelbaum LLP for legal services and expenses incurred by
you in connection with the negotiation of this Agreement. Invoices for fees and
expenses should be submitted directly to WII's General Counsel.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 4
(j) Transfer Instructions. The payments to you pursuant to Sections
---------------------
2(b), 2(d) and 2(h) above shall be made by wire transfer as follows: Wire
transfer to Bank of New York ABA Number 021000018 for credit to Paine Webber
House Account Number 8900114088 for credit to William W. Evans, III, Account
Number HA 00279 42. In addition you will receive from the Companies telephone
confirmation at 203-655-5138 when the above wire transfer has been made.
Further, you will receive vial mail from the Companies a written statement
detailing the withholding and related deductions made from the wire transfer
payments.
3. Consulting Services
-------------------
(a) You hereby agree to provide non-exclusive consulting services to
the Companies for a period of two (2) years following the Resignation Date (the
"Consulting Period").
(b) In your capacity as a consultant to the Companies, you agree upon
request from one or more of the Companies to assist with respect to transitional
matters that may arise in connection with your resignation, to respond to
requests for assistance or information concerning business matters with which
you became familiar while employed, and to provide assistance with respect to
matters relating to the consummation of the private equity investment
transaction by the investment group consisting of affiliates of each of Apollo
Real Estate Management III, L.P., Apollo Management IV, L.P., Thomas H. Lee
Equity Fund IV, L.P., Beacon Capital Partners, L.P., and Rosen Consulting Group
(the "Transaction") and the Companies' pending restructuring (the "Consulting
Services"); provided, however, that any Consulting Services hereunder shall not
--------
interfere with your then current employment or any subsequent employment..
(c) It is intended and agreed by and between the parties that while
providing Consulting Services, you are, and shall at all times be and remain, an
independent contractor. You understand and agree that during the Consulting
Period, you are not an employee of any of the Companies and shall not be treated
as an employee for any purpose. You understand and agree that as an independent
contractor, you are required to pay and are solely liable for, all applicable
taxes, including, without limitation, federal income tax and state income tax on
remuneration you receive in exchange for the Consulting Services and you may be
required to pay quarterly estimated income taxes. In addition to the payments
described in Section 3(e) above, the Companies shall pay you a fee of $500 per
hour for time reasonably spent providing Consulting Services. The Companies
shall promptly reimburse you for all reasonable disbursements incurred by you in
connection with providing Consulting Services, subject to approval and
documentation in accordance with applicable policies
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 5
as may be in effect from time to time. Nothing in this Agreement or otherwise
shall be construed as identifying you as an employee, agent or legal
representative of any of the Companies during the Consulting Period for any
purpose whatsoever. You will not be authorized to transact business, incur
obligations, sell goods, receive payments, solicit orders or assign or create
any obligation of any kind, express or implied, on behalf of any of the
Companies, or to bind in any way whatsoever, or to make any promise, warranty or
representation on behalf of any of the Companies with respect to any matter,
except as expressly authorized in writing by the Companies. You shall not use
any of the Companies' trade names, trademarks, service names or servicemarks
without the prior written approval of the Companies.
During the Consulting Period, you shall be free to pursue other business
opportunities or employment (except to the extent that such other business
opportunities or employment might violate Paragraphs 23(a) and 23(b) of the
Employment Agreement, dated as of February 14, 1997 by and between you and PAHI,
as amended by the Supplemental Employment Agreement dated as of February 14,
1997, the 1998 Amendment dated November 27, 1998, and the 1998 Amendment No. 2
dated December 31, 1998 (the "Employment Agreement")); provided, however, that
-------- -------
you shall remain available to provide and shall provide, on reasonable notice,
Consulting Services to the Companies.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 6
4. Release of Claims
-----------------
(a) Release by Mr. Evans. You voluntarily and irrevocably release and
--------------------
discharge the Companies, their related or affiliated entities, and their
respective predecessors, successors, and assigns, and the current and former
officers, directors, shareholders, employees, and agents of each of the
foregoing (any and all of which are referred to as "Releasees") generally from
all charges, complaints, claims, promises, agreements, causes of action,
damages, and debts that relate in any manner to your employment with or
termination of employment from the Companies, known or unknown ("Claims"), which
you have, claim to have, ever had, or ever claimed to have had against any of
the Releasees through the date on which you execute this Agreement. This
general release of Claims includes, without implication of limitation, all
Claims for or related to: the Employment Agreement; the compensation provided to
you by the Companies; your resignations as described in Section 1; wrongful or
constructive discharge; breach of contract; breach of any implied covenant of
good faith and fair dealing; tortious interference with advantageous relations;
intentional or negligent misrepresentation, fraud or deceit; infliction of
emotional distress, and unlawful discrimination under the common law or any
statute (including, without implication of limitation, the Employee Retirement
Income Security Act, Title VII of the Civil Rights Act of 1964, the American
with Disabilities Act, the Age Discrimination in Employment Act, Tex. Lab. Code
(S)(S) 21.001, et seq., Tex. Hum. Res. Code (S)(S) 121.001, et seq., the New
York Human Rights Law, N.Y. Exec. Laws (S) 290, et seq., or the New York Equal
Rights Law, N.Y. Civ. Rights Laws (S) 40-c, et seq.). You also waive any Claim
for reinstatement, severance, incentive or retention pay (except as expressly
provided in this Agreement), attorney's fees, or costs, relating to the above
waived claims.
You agree that you will not hereafter pursue any Claim against any Releasee
by filing a lawsuit in any local, state or federal court for or on account of
anything which has occurred up to the present time as a result of your
employment, and you shall not seek reinstatement with, or damages of any nature,
severance, incentive or retention pay, attorney's fees, or costs from the
Companies or any of the other Releasees; provided, however, that nothing in this
--------
general release shall be construed to bar or limit your rights, if any, to
indemnification subject to and in accordance with the terms of the By-Laws of
PAHI and the Indemnification Agreement, dated as of May 23, 1998, by and among
you, PAHI and WII (the "Indemnification Agreement"), or to enforce your rights
under this Agreement.
(b) Release by the Companies. The Companies, on behalf of themselves
------------------------
and their respective predecessors, successors, assigns, directors (but only in
their capacities as directors of the Companies) and officers (but only in their
capacities
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 7
as officers of the Companies) voluntarily and irrevocably release and discharge
you and your successors, assigns, heirs and survivors from any and all charges,
complaints, claims, promises, agreements, causes of action, damages and debts,
(including attorney's fees and costs actually incurred) which any of them have,
claim to have, ever had or ever claimed to have had against you through the date
hereof, known or unknown, which relate to good faith acts or omissions by you
during the course of your employment undertaken or not undertaken in the
reasonable belief that such acts or omissions were in the best interests of the
Companies.
The Companies further represent that they do not have any knowledge at this
time of any acts or omissions by you that would give rise claims not otherwise
released in the previous paragraph.
5. Employment Agreement
--------------------
This Agreement supersedes all provisions of the Employment Agreement other
than Paragraphs 4(g), 23(a), 23(b), 23(c), 23(d), 23(f), 23(g), or 24 thereof
and Paragraph 1(c) of the Supplemental Employment Agreement dated as of February
14, 1997; provided that payments described in Sections 2(d) and 2(e) above shall
--------
not be taken into account in determining the Gross Up Payment (as that term is
defined in the Supplemental Employment Agreement).
6. Return of Property
------------------
All documents, records, material and all copies of any of the foregoing
pertaining to Confidential Information (as defined in Paragraph 23(a) of the
Employment Agreement), and all software, equipment, and other supplies, whether
or not pertaining to Confidential Information, that have come into your
possession or been produced by you in connection with your employment
("Property") have been and remain the sole property of the Companies. You
confirm that you have returned all Property to the Companies, except to the
extent such Property is reasonably necessary for you to perform your services
during the Consulting Period. All Property shall be returned to the Companies
promptly upon termination of the Consulting Period. In no event should this
provision be construed to require you to return to the Company any document or
other materials concerning your remuneration and benefits during your employment
with the Companies. The Companies agree to return to you, promptly upon your
request, such of your property as may be in the possession of any of the
Companies.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 8
7. Nondisparagement
----------------
You agree not to take any action or make any statement, written or oral,
which disparages or criticizes the Companies or their respective officers,
directors, agents, or management and business practices, or which disrupts or
impairs the Companies' normal operations. The Companies, on behalf of
themselves, agree (a) not to take any action or make any statement, written or
oral, which disparages or criticizes you or your management and business
practices, and (b) to instruct their respective directors and officers not to
take any action or make any statement, written or oral, which disparages or
criticizes you or your management and business practices. The provisions of
this Section 7 shall not apply to any truthful statement required to be made by
you or the Companies, as the case may be, in any legal proceeding or
governmental or regulatory investigation.
8. Additional Representations, Warranties and Covenants
----------------------------------------------------
(a) As a material inducement to the Companies to enter into this
Agreement, you represent, warrant and covenant as follows:
(i) You have not assigned to any third party any Claim released by
this Agreement.
(ii) You have not heretofore filed with any agency or court any Claim
released by this Agreement.
(b) As a material inducement to you to enter into this Agreement,
the Companies represent, warrant and covenant as follows:
(i) The Companies have not assigned to any third party any claim
against you released by this Agreement.
(ii) The Companies have not heretofore filed with any agency or court
any claim against you released by this Agreement.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 9
9. Further Assurances
------------------
Upon the terms and subject to the conditions herein provided, each of the
parties hereto agrees to use its reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, subject, in the case
of the Companies, to the provisions of any credit agreement or financing
agreement or other contract or agreement by which any of the Companies may be
bound.
10. Exclusivity
-----------
This Agreement sets forth all the consideration to which you are entitled
by reason of your resignation, the consummation by the Companies of any
strategic restructuring or transaction, including, without limitation, the
Transaction, and your provision of Consulting Services, and you shall not be
entitled to or eligible for any payments or benefits under any other Company
severance, bonus, retention or incentive policy, arrangement or plan.
11. Tax Matters
-----------
All payments and other consideration provided to you pursuant to this
Agreement shall be subject to any deductions, withholding or tax reporting that
the Companies reasonably determine to be required for tax purposes.
12. Notices, Acknowledgments and Other Terms
----------------------------------------
(a) You are advised to consult with an attorney before signing this
Agreement.
(b) You acknowledge and agree that the Companies' promises in this
Agreement constitute consideration in addition to anything of value to which you
are otherwise entitled by reason of the termination of your employment.
(c) You acknowledge that you have been given the opportunity, if you
so desired, to consider this Agreement for twenty-one (21) days before executing
it. If not signed by you and returned to the General Counsel of WII so that it
is received by close of business on the twenty-second (22nd) day after your
receipt of the Agreement, this Agreement will not be valid. In addition, if you
breach any of the conditions of the Agreement within the twenty-one (21) day
period, the offer of this Agreement will be withdrawn and your execution of the
Agreement will not be valid.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 10
In the event that you execute and return this Agreement within twenty-one (21)
days or less of the date of its delivery to you, you acknowledge that such
decision was entirely voluntary and that you had the opportunity to consider
this letter agreement for the entire twenty-one (21) day period. The Companies
acknowledge that for a period of seven (7) days from the date of the execution
of this Agreement, you shall retain the right to revoke this Agreement by
written notice delivered to the General Counsel of WII before the end of such
period. This Agreement shall become effective upon the expiration of such
revocation period (the "Effective Date").
(d) By signing this Agreement, you acknowledge that you are doing so
voluntarily and knowingly, fully intending to be bound by this Agreement. You
also acknowledge that you are not relying on any representations by us or any
other representative of the Companies concerning the meaning of any aspect of
this Agreement. You understand that this Agreement shall not in any way be
construed as an admission by the Companies of any liability or any act of
wrongdoing whatsoever by the Companies against you and that the Companies
specifically disclaim any liability or wrongdoing whatsoever against you on the
part of themselves and their respective officers, directors, shareholders,
employees and agents. You understand that if you do not to enter into this
Agreement and bring any claims against the Companies, the Companies will dispute
the merits of those claims and contend that they acted lawfully and for good
business reasons with respect to you.
(e) In the event of any dispute, this Agreement will be construed as a
whole, will be interpreted in accordance with its fair meaning, and will not be
construed strictly for or against either you or the Companies.
(f) The law of the State of Texas will govern any dispute about this
Agreement, including any interpretation or enforcement of this Agreement.
(g) In the event that any provision or portion of a provision of this
Agreement shall be determined to be illegal, invalid or unenforceable, the
remainder of this Agreement shall be enforced to the fullest extent possible and
the illegal, invalid or unenforceable provision or portion of a provision will
be amended by a court of competent jurisdiction to reflect the parties' intent
if possible. If such amendment is not possible, the illegal, invalid or
unenforceable provision or portion of a provision will be severed from the
remainder of this Agreement and the remainder of this Agreement shall be
enforced to the fullest extent possible as if such illegal, invalid or
unenforceable provision or portion of a provision was not included.
(h) This Agreement may be modified only by a written agreement signed
by you and authorized representatives of the Companies.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 11
(i) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements between the parties with respect to any related subject matter.
(j) This Agreement shall be binding upon each of the parties and upon
their respective heirs, administrators, representatives, executors, successors
and assigns, and shall inure to the benefit of each party and to their heirs,
administrators, representatives, executors, successors, and assigns.
<PAGE>
Mr. William W. Evans, III
July 12, 1999
Page 12
If you agree to these terms, please sign and date below and return this
Agreement to the General Counsel of WII.
Sincerely,
PATRIOT AMERICAN HOSPITALITY, INC.
By:________________________________
James D. Carreker
Chairman
WYNDHAM INTERNATIONAL, INC.
By:________________________________
James D. Carreker
Chairman and Chief Executive Officer
Accepted and agreed to:
_________________________ _______________________________
William W. Evans, III Date
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