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EXHIBIT 10.38
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COOPERATION AGREEMENT
between
PATRIOT AMERICAN HOSPITALITY, INC.
and
PATRIOT AMERICAN HOSPITALITY OPERATING COMPANY
dated as of
_____________, 1997
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TABLE OF CONTENTS
PAGE
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RECITALS ....................................................................1
ARTICLE I - DEFINITIONS......................................................2
ARTICLE II - GENERAL COOPERATION AND COORDINATION............................6
2.1 General....................................................6
2.2 Joint Board Meetings.......................................6
2.3 Establishment of Cooperation Committee.....................6
2.4 Corporate Matters Categories...............................7
2.5 Consideration of Corporate Matters.........................7
2.6 Reconsideration Process....................................8
2.7 Change in Patriot's Line of Business.......................8
2.8 Hotel Acquisitions Committee...............................9
2.9 Limitation on Committees...................................9
2.10 Voting by Directors........................................9
ARTICLE III - ISSUANCE OF PAIRED AND UNPAIRED EQUITY........................10
3.1 General...................................................10
3.2 Authority to Issue Paired Equity..........................10
3.3 Procedures in Connection with Issuance of Paired Equity...11
3.4 Authority to Issue Unpaired Equity........................13
3.5 Procedures in Connection with Issuance of Unpaired
Equity....................................................13
3.6 Holders of Unpaired Equity................................13
3.7 Operating Partnership Redemption Provisions...............14
3.8 Ordinary Course...........................................14
3.9 Indemnification...........................................14
ARTICLE IV - INTERFERENCE EVENTS............................................14
4.1 Interference Events.......................................14
4.2 Removal of Directors......................................14
ARTICLE V - CHARTER AND BYLAW PROVISIONS....................................14
ARTICLE VI - EXCHANGE OF INFORMATION; CONFIDENTIALITY.......................15
6.1 Provision of Corporate Records; Agreement for
Exchange of Information...................................15
6.2 Ownership of Information..................................15
6.3 Compensation for Providing Information....................15
(i)
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ARTICLE VII - TERMINATION...................................................15
7.1 Termination by Mutual Consent.............................15
7.2 Other Termination.........................................16
7.3 Effect of Termination.....................................16
ARTICLE VIII - PATRIOT'S REMEDIES UNDER ARTICLES III AND IV.................16
ARTICLE IX - MISCELLANEOUS..................................................16
9.1 Counterparts; Entire Agreement; Corporate Power...........16
9.2 Governing Law.............................................16
9.3 Assignability.............................................17
9.4 Third Party Beneficiaries.................................17
9.5 Notices...................................................17
9.6 Severability..............................................18
9.7 Headings..................................................18
9.8 Waivers of Default........................................18
9.9 Amendments................................................18
9.10 Interpretation............................................18
9.11 Dispute Resolution........................................19
(ii)
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COOPERATION AGREEMENT
This COOPERATION AGREEMENT (this "Agreement"), is made and entered
into as of _________, 1997, between Patriot American Hospitality, Inc., a
Delaware corporation which operates as a real estate investment trust
("Patriot"), and Patriot American Hospitality Operating Company, a Delaware
corporation ("OPCO"). Certain terms used but not defined below have the
definitions set forth in Article I - Definitions.
RECITALS
WHEREAS, Patriot and Wyndham Hotel Corporation, a Delaware corporation
("Wyndham") entered into an Agreement and Plan of Merger dated as of April 14,
1997 (the "Merger Agreement") in which Patriot and Wyndham agreed to engage in
a business combination pursuant to which, at the Effective Time (as defined in
the Merger Agreement), Wyndham will merge with and into Patriot with Patriot
being the surviving corporation (the "Merger");
WHEREAS, immediately following the Merger, the shares of common stock,
par value $.01 per share, of OPCO (the "OPCO Paired Stock") and the shares of
common stock, par value $.01 per share, of Patriot (the "Patriot Paired Stock")
will be paired and transferable and traded only in combination as a single unit
on the New York Stock Exchange (together, the "Paired Shares");
WHEREAS, the parties to this Agreement (each a "Party" and, together,
the "Parties") have determined that it is necessary and desirable to set forth
the agreements and understandings that will govern certain matters that may
arise between Patriot and OPCO following the Merger, including, without
limitation, the issuance of Paired Equity;
WHEREAS, the Parties recognize that an essential and necessary
objective and purpose of this Agreement is to make clear and to provide
certainty that Patriot shall have the sole right and power to (a) authorize,
effect and control Issuances of Paired Equity and (b) control Issuances of
Unpaired Equity pursuant to the operations and authority of the Unpaired Equity
Committee, as provided for herein;
WHEREAS, in connection with the Merger the Board of Directors of each
of OPCO and Patriot (together, the "Boards") have resolved that, in the
business judgment of each of such Boards, the creation of a single corporate
mechanism for Issuances of Paired Equity will maximize the continued growth of
the Paired REIT Structure and overall shareholder value;
WHEREAS, OPCO acknowledges that any Issuance of Paired Equity requires
certain actions to be taken by OPCO and its Board of Directors that cannot be
effected by Patriot or its Board of Directors and that this Agreement requires
OPCO and its Board of Directors to take such actions at the request of Patriot
as set forth herein; and
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WHEREAS, the execution and delivery of this Agreement by the Parties
is a condition to the obligation of Wyndham to consummate the Merger, and the
acknowledgment and agreement to be bound by this Agreement by Wyndham is a
condition to the obligation of Patriot to consummate the Merger.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I - DEFINITIONS
As used in this Agreement, capitalized terms defined immediately after
their use shall have the respective meanings thereby provided and the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"ACTION" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
"AFFILIATE" of any Person means a Person that controls, is controlled
by, or is under common control with such Person. As used herein, "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such entity, whether through
ownership of voting securities or other interests, by contract, or otherwise.
"BLUE SKY DOCUMENTS" means any and all applications, certificates and
other papers and documents necessary to comply with the applicable securities
laws of any states or jurisdiction of the United States, including but not
limited to, applications, notices, reports, surety bonds, proscribed forms of
preambles or resolutions relating to the sale of securities, irrevocable
consents and appointments of attorneys for service of process.
"CHANGE OF CONTROL" shall mean the occurrence, with respect to either
Patriot or OPCO, of any one of the following events (Patriot and OPCO being
referred to below, as the case may be, as the "Company"):
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company or any trustee
fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company, together with all
"affiliates" and "associates" (as such terms are defined in Rule 12b-2
under the Exchange Act) of such person, shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50%
or more of either (A) the combined voting
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power of the Company's then outstanding securities having the right to
vote in an election of the Company's Board of Directors (the "Voting
Securities") or (B) the then outstanding Paired Shares (in either such
case other than as a result of an acquisition of securities directly
from the Company); or
(ii) (A) any consolidation or merger of the Company where the
stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, securities representing in the
aggregate 50% or more of the voting securities of the corporation
issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (B) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company or (C) any plan or
proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall
not be deemed to have occurred for purposes of the foregoing clause
(i) solely as the result of an acquisition of securities by the
Company which, by reducing the number of Paired Shares or other Voting
Securities outstanding, increases (x) the proportionate number of
Paired Shares beneficially owned by any person to 50% or more of the
Paired Shares then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any person
to 50% or more of the combined voting power of all then outstanding
Voting Securities; provided, however, that if any person referred to
in clause (x) or (y) of this sentence shall thereafter become the
beneficial owner of any additional Paired Shares or other Voting
Securities (other than pursuant to a stock split, stock dividend, or
similar transaction), then a "Change of Control" shall be deemed to
have occurred for purposes of the foregoing clause (i).
"CHANGE IN PATRIOT'S LINE OF BUSINESS" shall mean an action by Patriot
or Patriot OP (as hereinafter defined) with respect to Patriot's or Patriot
OP's business that results in the consolidation for financial reporting
purposes of the results of operations of Patriot with those of any business
activity other than hospitality and hospitality-related businesses.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSENTS" means any consents, waivers or approvals from, or
notification requirements to, any third parties.
"CROW OWNERSHIP THRESHOLD" means beneficial ownership of at least five
percent (5%) of the lesser of (x) the sum of (i) the number of then outstanding
Paired Shares and (ii) the number of then outstanding shares of Unpaired
Preferred Stock, or (y) the sum of (i) the number of Paired Shares outstanding
immediately after the Merger and (ii) the number of
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shares of Unpaired Preferred Stock outstanding immediately after the Merger
(the lesser of (x) and (y) being the "Sum") (provided, however, that in the
event the Standstill Agreement of even date herewith between Patriot and CF
Securities, L.P. is no longer in effect, then the Sum shall be (x),
irrespective of the number of shares computed pursuant to (y)).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GOVERNMENTAL APPROVALS" means any notices, reports or other filings
to be made, or any consents, registrations, approvals, permits or
authorizations to be obtained from, any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority.
"INFORMATION" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
"ISSUANCE OF PAIRED EQUITY" means a private or public offering, sale,
issuance or delivery of, or agreement to commit to offer, sell, issue or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other debt or equity securities of OPCO (including, without
limitation, indebtedness having the right to vote, indebtedness convertible
into any equity of any class or any other securities) or limited partnership
interests or units of [OPCO OPERATING PARTNERSHIP] ("OPCO OP")), or equity
equivalents of either (including, without limitation, stock appreciation
rights), if it is contemplated that such stock or other securities, or any
securities underlying such stock or other securities, would or could be paired
with Patriot Stock (as defined in the Merger Agreement) or any other securities
of Patriot, or, in the case of limited partnership interests or units of OPCO
OP, it is contemplated that such interests or units would be economically (or
otherwise) "paired" (even if not pursuant to the Pairing Agreement (as defined
in the Merger Agreement)) with the limited partnership interests or units of
[PATRIOT OPERATING PARTNERSHIP] ("Patriot OP"). Issuance of Paired Equity shall
also mean the related issuance by Patriot or Patriot OP of the securities of
Patriot or Patriot OP which are paired with the securities of OPCO or OPCO OP.
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"ISSUANCE OF UNPAIRED EQUITY" means, in the case of OPCO, a public or
private offering, sale, issuance, delivery or agreement to commit to offer,
sell, issue or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any and
all securities described in the immediately preceding definition of "Issuance
of Paired Equity" if it is contemplated that such stock or other securities, or
any securities underlying such stock or other securities, would NOT or could
NOT be paired with Patriot Stock (as defined in the Merger Agreement) or, in
the case of limited partnership interests or units of OPCO OP, it is
contemplated that such interests or units would NOT or could NOT economically
(or otherwise) be "paired" with the limited partnership interests or units of
Patriot OP. "Issuance of Unpaired Equity" means, in the case of Patriot, a
public or private offering, sale, issuance or delivery of, or agreement to
commit to offer, sell, issue or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise), any stock of any class or any other debt or equity securities of
Patriot (including, without limitation, indebtedness having the right to vote
and indebtedness convertible into any equity of any class or any other
securities) or limited partnership interests or units of [PATRIOT OPERATING
PARTNERSHIP] ("Patriot OP"), or equity equivalents of either (including,
without limitation, stock appreciation rights), if it is contemplated that such
stock or other securities, or any securities underlying such stock or other
securities, would NOT or could NOT be paired with OPCO Stock (as defined in the
Merger Agreement) or any other securities of OPCO or, in the case of limited
partnership interests or units of Patriot OP, it is contemplated that such
interests or units would NOT or could NOT be economically (or otherwise)
"paired" (even if not pursuant to the Pairing Agreement (as defined in the
Merger Agreement)) with the limited partnership interests or units of OPCO OP.
"PAIRED EQUITY OFFICER/DIRECTOR" means any officer or officers of
Patriot designated by Patriot, from time to time, to be a Paired Equity
Officer/Director pursuant to Section 3.2(a) hereof.
"PAIRED REIT STRUCTURE" means the effectively consolidated structure
of Patriot and OPCO as a result of the paired nature of the Paired Shares.
"PERSON" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a
limited liability entity, any other entity and any Governmental Authority.
"REGISTRATION STATEMENT" means any registration statement under the
Securities Act that covers any Paired Equity, including the related prospectus,
all amendments and supplements to such registration statement (including
post-effective amendments), all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the United States Securities and Exchange Commission.
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"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY" or "SUBSIDIARIES" when used with respect to any party
means any corporation, partnership, joint venture, business trust or other
entity, of which such party directly or indirectly owns or controls at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization.
"UNPAIRED PREFERRED STOCK" means shares of unpaired preferred stock,
par value $.01 per share, of Patriot.
"UNPAIRED EQUITY COMMITTEE" means that committee whose members shall
consist of (i) the Chairman of Patriot's Board of Directors, (ii) the Chairman
of OPCO' Board of Directors, (iii) two designees of Patriot from either
Patriot's or OPCO' Board of Directors and (iv) one designee of OPCO from either
Patriot's or OPCO' Board of Directors. Upon consummation of the Merger, the
members of the Unpaired Equity Committee shall consist of (i) Paul A. Nussbaum
until such time as he shall no longer serve as Chairman of Patriot's Board of
Directors and, after such time, the Chairman of Patriot's Board of Directors,
(ii) James Carreker until such time as he shall no longer serve on OPCO' Board
of Directors and, after such time, the Chairman of OPCO' Board of Directors,
(iii) two designees of Patriot from either Patriot's or OPCO' Board of
Directors and (iv) one designee of OPCO from either Patriot's or OPCO' Board of
Directors, which shall have the sole and exclusive authority to authorize OPCO'
Issuance of Unpaired Equity.
ARTICLE II - GENERAL COOPERATION AND COORDINATION
2.1 General. Patriot and OPCO hereby agree that it is in the best
interests of both entities and their shareholders that they cooperate to the
fullest extent possible in the conduct of their respective operations. In that
regard, Patriot and OPCO hereby agree to take all necessary action to preserve
the Paired REIT Structure and to maximize the economic and tax advantages
associated therewith.
2.2 Joint Board Meetings. In furtherance of the foregoing,
meetings of the Boards of Directors of Patriot and OPCO may be held jointly if
their respective Chairmen so decide.
2.3 Establishment of Cooperation Committee. Patriot and OPCO hereby
agree to establish, as promptly as practicable following the closing of the
Merger, a committee (the "Cooperation Committee") consisting of (i) the
Chairman of Patriot's Board of Directors (who shall be the Chairman of the
Cooperation Committee), (ii) the Chairman of OPCO' Board of Directors, (iii) a
designee of the Chairman of Patriot's Board of Directors reasonably acceptable
to OPCO (who shall serve at the pleasure of Patriot's Chairman and may be
removed and replaced at any time); provided, however, that for purposes of the
foregoing, OPCO acknowledges that Karim Alibhai is a reasonably acceptable
designee, and (iv) the
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President of OPCO. Initially, the Cooperation Committee will consist of Paul A.
Nussbaum (as committee Chairman), James Carreker, Karim Alibhai (as the
designee of Patriot's Chairman) and William Evans. The Cooperation Committee
will normally consider and propose the agenda listing the matters to be
considered at any joint meeting of the Boards of Directors of Patriot and OPCO,
subject to the right of a Board member to request consideration of additional
matters. The Cooperation Committee shall establish such procedures for the
conduct of its business as it shall deem appropriate from time to time.
2.4 Corporate Matters Categories. All matters to be considered by
the Boards, except a Change in Line of Business, Issuances of Paired Equity and
Issuances of Unpaired Equity, shall be classified into the most appropriate of
the following three categories:
(a) Routine corporate governance matters, such as approval
and retention of independent accountants, the fixing of employee compensation
and other like matters (each, a "Category 1 Matter");
(b) All other matters, other than a Change of Control and,
after the third anniversary of the Merger, all other matters including a Change
of Control (each, a "Category 2 Matter); and
(c) Any proposed action by Patriot or OPCO, as the case may
be, that would result in a Change of Control, until the third anniversary of
the Merger (each, a "Category 3 Matter").
2.5 Consideration of Corporate Matters.
(a) At any meeting of the Board of Directors of Patriot or
OPCO (whether or not held jointly), each of Patriot and OPCO, as the case may
be, may (the Board submitting any matter being referred to herein as the
"Proposing Board") (i) submit a Category 1 Matter to the consideration and vote
of its Board, irrespective of any consideration by the other Board, (ii) submit
a Category 2 Matter to the consideration and vote of its Board, with such
matter requiring the majority vote of its Board for approval (except for the
removal of the Chief Executive Officer of either Patriot or OPCO, which shall
be a Category 2 Matter, but which shall require a 662/3% vote of Patriot's
Board or OPCO' Board, as the case may be), and (iii) submit a Category 3 Matter
to the consideration and vote of its Board, with such matter requiring a 662/3%
vote of its Board for approval until the third anniversary of the Merger, after
which time a Category 3 Matter shall become a Category 2 Matter.
(b) If the Proposing Board at any such meeting that is not held
jointly (the "Proposing Board Meeting") shall have approved any Category 2
Matter or Category 3 Matter, such Proposing Board shall promptly provide notice
(the "Proposing Board Notice") to the Chairman of the other company's Board of
the occurrence of such meeting and the Category 2 Matters or Category 3 Matters
approved at such meeting. The Cooperation
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Committee shall convene promptly (in any event, within ten (10) business days)
following the Proposing Board Meeting to consider the actions taken by the
Proposing Board. If the Cooperation Committee approves the action taken by the
Proposing Board with respect to any such matter, then the Proposing Board may
take such action without consideration of such matter by the other Board. If
the Cooperation Committee does not approve the action taken by the Proposing
Board, the other company's Board (the "Responding Board") may then hold a
meeting within fifteen (15) business days following receipt of the Proposing
Board Notice to consider and vote upon the Category 2 Matters or Category 3
Matters approved by the Proposing Board and during such period the Proposing
Board may not take action with respect to such matters. In the event that the
Responding Board approves at such a meeting the action taken by the Proposing
Board or the Responding Board does not hold a meeting within fifteen (15)
business days following receipt of the Proposing Board Notice, the Proposing
Board may take such action without consideration of such matter by the
Responding Board.
(c) In the event the Responding Board holds a meeting within
fifteen (15) business days following receipt of the Proposing Board Notice but
does not approve the action taken by the Proposing Board, the Proposing Board
may not take action with respect to such matter. The Cooperation Committee will
convene promptly following the meeting of the Responding Board to consider the
contrary positions of the Proposing Board and the Responding Board and
recommend a resolution of such contrary positions in connection with the
Reconsideration Process described below. The Boards will then follow the
Reconsideration Process.
(d) At any joint meeting of the Boards of Directors of Patriot
and OPCO, in the event that the Proposing Board approves a Category 2 Matter or
Category 3 Matter but the other Board does not, the Proposing Board may not
take action with respect to such matter. The Cooperation Committee shall
convene following the joint meeting to consider the votes of the Boards taken
at such meeting. The Boards will then follow the Reconsideration Process
described below.
2.6 Reconsideration Process. Any Proposing Board may reconsider a
Category 2 Matter at any subsequent meeting of such Board and, if the Proposing
Board approves such matter by a majority vote at such subsequent meeting, then
the Proposing Board may take the action contemplated by such matter regardless
of the position of the other Board. The Proposing Board may reconsider a
Category 3 Matter at any subsequent meeting of such Board and, if the Proposing
Board approves such matter by a 662/3% vote at such subsequent meeting, then
the Proposing Board may take the action contemplated by such matter, but only
if the other Board approves such matter by a majority vote.
2.7 Change in Patriot's Line of Business. Until the third
anniversary of the Merger, any Change in Patriot's Line of Business shall
require a 66 2/3% vote of Patriot's Board and a majority vote of OPCO' Board
for approval.
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2.8 Hotel Acquisitions Committee. Patriot's Board of Directors shall
constitute and establish a hotel acquisitions committee (the "Hotel
Acquisitions Committee") promptly following the Effective Time to analyze,
evaluate and consider potential acquisitions by Patriot of hotel properties and
related assets (which properties and related assets may consist of a portfolio
of hotel properties and related assets) ("Hotel Acquisitions"). The Hotel
Acquisitions Committee shall have the power and authority to cause Patriot to
enter into a binding agreement with respect to Hotel Acquisitions involving a
proposed purchase price (inclusive of any indebtedness to be assumed in
connection therewith) not exceeding (with respect to each Hotel Acquisition or
such series of Hotel Acquisitions as are reasonably likely to be considered an
integrated transaction) $___ million. The Hotel Acquisitions Committee shall
consist of Paul Nussbaum, James Carreker and one of the Patriot Designees (as
defined in the Merger Agreement) selected by Wyndham immediately prior to the
Effective Time and reasonably satisfactory to Patriot (the "Wyndham Committee
Designee"). In the event that Paul Nussbaum fails to serve or continue to serve
on the Hotel Acquisitions Committee for any reason, Patriot's Board of
Directors shall have the right to select an individual to replace Mr. Nussbaum,
provided that such individual shall be reasonably satisfactory to James
Carreker, Harlan Crow (so long as Family Securities L.P. continues to meet the
Crow Ownership Threshold) and the Wyndham-OPCO Designees (as defined in the
Merger Agreement) other than James Carreker (with respect to each such
designee, so long as such designee continues to serve on the Board of Directors
of either Patriot or OPCO). In the event that either James Carreker or a
Wyndham Committee Designee fails to serve or continue to serve on the Hotel
Acquisitions Committee for any reason, Harlan Crow (so long as CF Securities,
L.P. continues to meet the Crow Ownership Threshold) and the remaining
Wyndham-OPCO Designees (with respect to each such designee, so long as such
designee continues to serve on the Board of Directors of either Patriot or
OPCO) shall have the right to select an individual to replace Mr. Carreker or
such Wyndham Committee Designee; provided, however, that a Wyndham Committee
Designee may only be replaced by an individual who is also a Patriot Designee;
and provided, further, that in any case such individual shall be reasonably
satisfactory to Patriot's Board of Directors. Notwithstanding the foregoing,
the Hotel Acquisitions Committee shall no longer have the power and authority
described herein on and after the third anniversary of the Merger.
2.9 Limitation on Committees. The Parties hereby agree that, for the
term of this Agreement, neither will form either (i) an executive or similar
committee of its Board of Directors which is authorized to act upon any
Category 2 Matter or Category 3 Matter or (ii) a nomination committee for the
purpose of nominating directors.
2.10 Voting by Directors. Any vote on any matter by the Board of
Directors of either Patriot or OPCO shall require for approval the affirmative
vote of the applicable number or percentage of all of the members of either
such Board of Directors.
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ARTICLE III - ISSUANCE OF PAIRED AND UNPAIRED EQUITY
3.1 General. The parties hereto recognize the paramount importance of
preserving the Paired REIT Structure and have negotiated in good faith the
provisions of this Agreement in such a manner so as to maximize the current and
continued value of such structure by delegating authority to Patriot to decide
all matters relating to raising capital through an Issuance of Paired Equity
and by delegating authority to the Unpaired Equity Committee as set forth
herein to decide all matters relating to raising capital through an Issuance of
Unpaired Equity. OPCO hereby acknowledges that any Issuance of Paired Equity
requires certain actions to be taken by OPCO and its Board of Directors that
cannot be effected by Patriot or its Board of Directors. OPCO hereby agrees to
take any and all such actions, including, without limitation, those actions set
forth in Section 3.3 hereof, as are deemed by Patriot to be necessary and
appropriate to effect any such Issuance of Paired Equity.
3.2 Authority to Issue Paired Equity.
(a) The Parties hereby agree that, from and after the date
hereof until the date (the "Termination Date") [which is twelve (12) months
after the date] on which the Pairing Agreement (as defined in the Merger
Agreement) is no longer in effect, Patriot shall have the sole right to
authorize and to effect an Issuance of Paired Equity and to take any and all
action in contemplation of, or in connection with, an Issuance of Paired
Equity, and OPCO' certificate of incorporation and bylaws shall so provide. In
connection therewith, Patriot shall also have the authority to cause OPCO to
comply with the procedures set forth in Section 3.3 hereof.
(b) Patriot shall be entitled to designate from time to time
one or more officers of Patriot to serve as a Paired Equity Officer/Director.
The Board of Directors of OPCO shall appoint any such Paired Equity
Officer/Director to the positions of vice president and assistant secretary of
OPCO and take all action required by OPCO' Board of Directors to cause any such
Paired Equity Officer/Director to hold such positions at all times throughout
the term of this Agreement. Any Paired Equity Officer/Director may resign or be
removed by Patriot at any time and, at any time thereafter, Patriot may
designate a new Paired Equity Officer/Director. Any Paired Equity
Officer/Director shall have the express authority to do any and all acts and
things related to any Issuance of Paired Equity, including, without limitation,
the execution and delivery in the name and on behalf of OPCO of any and all
documents, certificates (including stock certificates) and other instruments
necessary or appropriate in connection with the issuance of any OPCO Paired
Stock pursuant to an Issuance of Paired Equity, the engagement of investment
bankers, accountants, attorneys and other professionals, and the incurrence of
any and all other transaction costs related thereto.
(c) OPCO hereby covenants and agrees to, and shall at all
times and in all circumstances maintain and support the position that, Patriot
has the sole right and power to authorize and effect the Issuance of Paired
Equity and OPCO hereby further covenants,
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warrants and agrees not to assert otherwise in any forum, proceeding, Action or
communication.
(d) OPCO hereby expressly waives, disclaims and releases any
and all claims, causes of action, rights, defenses and arguments that any
Issuance of Paired Equity approved by Patriot in any way violates or infringes
any rights that OPCO or its past, present or future officers, directors,
employees, shareholders or affiliates may have, including, without limitation,
that any Issuance of Paired Equity approved by Patriot in any way breaches,
violates or infringes any fiduciary duties, duties of one shareholder to
another, partnership duties, joint venturer duties, or any other duties or
obligations that may exist or exist in the future; provided, that nothing
herein shall be, or be asserted to be, an admission that any such duties exist.
OPCO further expressly disclaims, and agrees not to assert that, any such
duties or obligations exist in any way that would interfere with the sole
rights of Patriot with respect to the Issuance of Paired Equity.
3.3 Procedures in Connection with Issuance of Paired Equity.
(a) Patriot shall give notice (an "Issuance Notice") to OPCO
as promptly as practicable of each determination by Patriot to engage in an
Issuance of Paired Equity. Such Issuance Notice shall include the proposed
material terms of such issuance, to the extent determined by Patriot, including
whether such issuance is proposed to be pursuant to a public or private
offering, the amount of Paired Equity proposed to be issued, and the manner of
determining the offering price thereof.
(b) Upon receipt of an Issuance Notice, OPCO and the
Directors of OPCO shall promptly cooperate with Patriot in every way to effect
such Issuance of Paired Equity pursuant to the terms and schedule thereof as
established by Patriot, including, without limitation, the following:
(i) Making available such members of OPCO'
management as shall be requested by Patriot to
assist in effecting such Issuance of Paired
Equity;
(ii) In connection with a public offering of Paired
Equity, (A) assisting in the preparation of
and (B) executing and filing with the SEC, a
Registration Statement or Registration
Statements under the Securities Act, including
the prospectus contained therein and any
amendments or supplements thereto, or any
other statements, forms or documents required
to be executed pursuant to law or regulation
with respect to such Issuance of Paired
Equity, and, in connection therewith,
providing Patriot with such information,
including financial statements, market
studies, environmental and engineering reports
and other data, as may be
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required to be included in such Registration
Statement pursuant to the terms of the
Securities Act;
(iii) Promptly notifying Patriot of any information
that comes to the attention of OPCO which
affects or could affect such Issuance of
Paired Equity, including, without limitation,
the occurrence of any event which makes any
statement made in such Registration Statement
or related prospectus or any document
incorporated or deemed to be incorporated
therein by reference or in any other offering
document with respect to such Issuance of
Paired Equity untrue in any material respect
or which requires the making of any changes in
such Registration Statement, prospectus or any
such offering document so that, in the case of
the Registration Statement, it will not
contain any untrue statement of a material
fact or omit to state any material fact
required to be stated therein or necessary to
make the statements therein not misleading
and, in the case of the prospectus or any
other offering document, it will not contain
any untrue statement of a material fact or
omit to state any material fact required to be
stated or necessary to make the statements
therein, in light of the circumstances under
which they were made, not misleading;
(iv) Cooperating with Patriot in the preparation,
execution and filing of any Blue Sky
Documents;
(v) Cooperating with Patriot to facilitate the
timely preparation and delivery of
certificates, if any, representing Paired
Equity;
(vi) Obtaining any consents, approvals or
authorizations of Governmental Authorities and
other third parties as are necessary in
connection with such Issuance of Paired
Equity;
(vii) In connection with any underwritten public
offering, cause appropriate members of OPCO'
management to cooperate and participate on a
reasonable basis in the underwriters' "road
show" conferences related to such offering;
and
(viii) Performing any and all other acts and
executing and delivering any and all other
certificates, instruments and other documents
as shall be requested by Patriot to effect any
such Issuance of Paired Equity.
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(c) Upon any Issuance of Paired Equity, the Parties hereby
agree that the net proceeds therefrom shall be allocated as follows:
[TO BE COMPLETED]
(d) From time to time, OPCO may request that Patriot effect
an Issuance of Paired Equity in connection with employee benefit plans, other
forms of incentive compensation and other arrangements or commitments of OPCO.
To the extent that Patriot approves in writing any such plan, arrangement or
commitment, Patriot hereby agrees that it will either (A) issue the Patriot
Paired Stock which forms a part of the Paired Equity when the Paired Equity is
required to be issued pursuant to the terms of any such plan, arrangement or
commitment or (B) indemnify OPCO to the fullest extent permitted under
applicable law from and against any and all Damages (as hereinafter defined) of
OPCO which may arise out of any failure by Patriot to issue such Patriot Paired
Stock.
3.4 Authority to Issue Unpaired Equity. From and after the date hereof
until the Termination Date, each of Patriot and OPCO shall have the right to
engage in an Issuance of Unpaired Equity in accordance with and pursuant to the
procedures contained in Section 3.5 of this Agreement, and to take any and all
action in contemplation of, or in connection with, an Issuance of Unpaired
Equity, including, without limitation, filing a Registration Statement and Blue
Sky Documents and any and all other filings, documents, exhibits, and all
material required to be incorporated by reference or which are deemed
incorporated by reference therein, whether filed pursuant to federal or state
securities laws or otherwise, necessary to effect such Issuance of Unpaired
Equity in accordance with applicable securities laws.
3.5 Procedures in Connection with Issuance of Unpaired Equity.
(a) OPCO shall have the right to engage in an Issuance of
Unpaired Equity upon the affirmative vote of a majority of the members of the
Unpaired Equity Committee.
(b) Patriot shall have the right to engage in an Issuance of
Unpaired Equity upon the affirmative vote of a majority of the members of its
Board of Directors.
3.6 Holders of Unpaired Equity. Whenever, from time to time, there
shall be outstanding any class of equity securities of Patriot, OPCO or any of
their respective subsidiaries, which securities are not paired with
corresponding securities of the other company or its subsidiaries, but are
convertible or exchangeable into or for Paired Shares (including, without
limitation, the Unpaired Preferred Stock issued to CF Securities, L.P. on the
date hereof) (the "Unpaired Shares"), then, so long as any such Unpaired Shares
were issued in accordance with the terms of this Agreement, Patriot and OPCO
shall issue the Patriot Paired Stock or the OPCO Paired Stock, as the case may
be, underlying such Unpaired Shares in accordance with the terms thereof. The
covenants of Patriot and OPCO set forth in this Section 3.6 are made for the
benefit of the holders of such Unpaired Shares and such holders shall be
express third-party beneficiaries thereof. The Unpaired Preferred Stock
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issued to CF Securities, L.P. shall be deemed to have been issued in accordance
with the terms of this Agreement.
3.7 Operating Partnership Redemption Provisions.
Patriot's Operating Partnership shall make all determinations
with respect to whether to pay cash or deliver paired equity to limited
partners of Patriot's Operating Partnership or OPCO' Operating Partnership who
exercise their right to redeem operating partnership units under the
partnership agreements of such operating partnerships.
3.8 Ordinary Course. Subject to the terms and conditions of this
Agreement, the provisions of this Agreement shall not be construed as limiting
the independent rights of Patriot and OPCO to conduct their respective
businesses and operations in the ordinary course.
3.9 Indemnification. Patriot hereby agrees to indemnify and hold
harmless all directors and officers of OPCO from and against all losses,
claims, damages, liabilities and expenses ("Damages") to which any such
directors or officers may become subject insofar as such Damages arise out of
an Issuance of Paired Equity or an Issuance of Unpaired Equity to the same
extent, and on the same terms and conditions (including, without limitation,
provision for advancement of expenses and contribution) that Patriot
indemnifies its own directors and officers with respect to such matters.
ARTICLE IV - INTERFERENCE EVENTS
4.1 Interference Events. Upon any interference or failure to cooperate
by OPCO, or any of its officers, directors, agents or employees with any
Issuance of Paired Equity (an "Interference Event"), the provisions of this
Article IV shall apply.
4.2 Removal of Directors. The occurrence of any Interference Event
shall be deemed to constitute, and OPCO' certificate of incorporation and/or
bylaws shall so provide, the tendering of the resignation of any director
participating in, voting in favor of or otherwise supporting such Interference
Event, and OPCO hereby agrees to accept the resignation of any such director.
Thereafter, the remaining OPCO directors shall (i) elect such replacements as
are necessary to fill the vacated seat or seats, as the case may be, on OPCO'
Board of Directors and (ii) call a special meeting of stockholders of OPCO for
the purpose of electing a new slate of directors.
ARTICLE V - CHARTER AND BYLAW PROVISIONS
The Parties hereby agree to take any and all action necessary to cause
their respective charters and bylaws to be amended appropriately to effect the
provisions of this Agreement.
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ARTICLE VI - EXCHANGE OF INFORMATION; CONFIDENTIALITY
6.1 Provision of Corporate Records; Agreement for Exchange of
Information. From and after the date hereof, Patriot and OPCO shall provide, or
cause to be provided, to the other Party and such Party's authorized
accountants, counsel and other designated representatives, as soon as
reasonably practicable after written request therefor, reasonable access to and
duplicating rights with respect to any Information in the possession or under
the control of such Party which the requesting Party reasonably needs (i) to
comply with reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities or tax laws) by a
Governmental Authority having jurisdiction over the requesting Party, (ii) for
use in any other judicial, regulatory, administrative, tax or other proceeding
or in order to satisfy audit, accounting, claims, regulatory, litigation, tax
or other similar requirements, (iii) to comply with its obligations under this
Agreement, or (iv) for any other reasonable purpose (including without
limitation, audit, accounting, claims, Actions, litigation and tax purposes);
provided, however, that in the event that any Party determines that any such
provision of Information could be commercially detrimental, violate any law or
agreement, or waive any attorney-client or work product privilege, the parties
shall take all reasonable measures to permit the compliance with such
obligations in a manner that avoids any such harm or consequence.
6.2 Ownership of Information. Any Information owned by one Party
hereto that is provided to a requesting Party pursuant to Section 6.1 shall be
deemed to remain the property of the providing Party. Unless specifically set
forth herein, nothing contained in this Agreement shall be construed as
granting or conferring rights of license or otherwise in any such Information.
6.3 Compensation for Providing Information. The Party requesting
Information agrees to reimburse the other Party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting Party. Except as may
be otherwise specifically provided elsewhere in this Agreement or in any other
agreement between the parties, such costs shall be computed in accordance with
a commercially reasonable procedure.
ARTICLE VII - TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be terminated at
any time by the mutual consent of the Parties.
7.2 Other Termination. Unless earlier terminated pursuant to Section
7.1, this Agreement shall terminate on the Termination Date.
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7.3 Effect of Termination. In the event of any termination of this
Agreement, no Party (or any of its directors, officers, employees or agents)
shall have any liability or further obligation to any other party, except for
the obligations under Article II, which shall survive any termination of this
Agreement.
ARTICLE VIII - PATRIOT'S REMEDIES UNDER ARTICLES III AND IV
OPCO hereby recognizes and agrees that the specific performance of its
duties under Articles III and IV hereof, and Patriot's right to such specific
performance, is of paramount importance, that time is of the essence with
respect thereto and that remedies at law for any breach or threatened breach of
such duties, including monetary damages, would be inadequate compensation for
any loss suffered thereby. OPCO hereby agrees, therefore, that in the event of
any actual or threatened default or breach by OPCO with respect to any of its
obligations under Article III or Article IV hereof, Patriot shall be entitled
to the specific performance thereof and injunctive or other equitable relief,
in addition to any and all other rights and remedies at law or in equity, and
all such rights and remedies shall be cumulative. Patriot shall be entitled to
bring any action to enforce the provisions of Article III or Article IV hereof
in the Delaware Court of Chancery, which shall have sole jurisdiction and
venue. OPCO hereby waives (i) any requirement that Patriot secure or post any
bond in any action for equitable relief hereunder and (ii) any defense in any
action for specific performance that a remedy at law would be adequate.
ARTICLE IX - MISCELLANEOUS
9.1 Counterparts; Entire Agreement; Corporate Power.
(a) This Agreement may be executed in one or more original or
facsimile counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the Parties and delivered to the other Party.
(b) This Agreement contains the entire agreement between the
Parties with respect to the subject matter hereof, supersedes all previous
agreements, negotiations, discussions, writings, understandings, commitments
and conversations with respect to such subject matter and there are no
agreements or understandings between the Parties other than those set forth or
referred to herein or therein.
9.2 Governing Law. Unless expressly provided therein, this Agreement
shall be governed by and construed and interpreted in accordance with the laws
of the State of Delaware, irrespective of the choice of laws principles of the
State of Delaware, as to all matters, including matters of validity,
construction, effect, enforceability, performance and remedies.
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9.3 Assignability. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors and assigns;
provided, however, that neither Party may assign its respective rights or
delegate its respective obligations under this Agreement without the express
prior written consent of the other Party hereto or thereto.
9.4 Third Party Beneficiaries. Except as set forth in Section 3.6
hereof, the provisions of this Agreement are solely for the benefit of the
Parties and are not intended to confer upon any Person any rights or remedies
hereunder, and there are no third party beneficiaries of this Agreement and
this Agreement shall not provide any third person with any remedy, claim,
liability, reimbursement, claim of action or other right in addition to those
existing without reference to this Agreement. Notwithstanding anything to the
contrary contained in any other agreement, including, without limitation, the
Merger Agreement, OPCO hereby covenants, warrants and agrees that it shall not
take any action contrary to any covenant, agreement, term or provision of this
Agreement.
9.5 Notices. All notices or other communications under this Agreement
shall be in writing and shall be deemed to be duly given when (a) delivered in
person or (b) deposited in the United States mail or private express mail,
postage prepaid, addressed as follows:
If to Patriot, to: President
Patriot American Hospitality, Inc.
Tri-West Plaza
3030 LBJ Freeway
Suite 1500
Dallas, TX 75234
and to: Gilbert G. Menna, P.C.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
If to OPCO, to: James D. Carreker
Wyndham International
2001 Bryan Street
Suite 2300
Dallas, TX 75201
and to: M. Charles Jennings, Esq.
Locke Purnell Rain Harrell
2200 Ross Avenue
Suite 2200
Dallas, TX 75201-6776
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Any Party may, by notice to the other Party, change the address to
which such notices are to be given to it.
9.6 Severability. OPCO covenants, warrants and agrees not to claim or
assert that the validity or enforceability of this Agreement is subject to a
defense or claim based on recharacterization, unconscionability or public
policy. If any provision of this Agreement or the application thereof to any
Person or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof or thereof, or
the application of such provision to Persons or circumstances or in
jurisdictions other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby or thereby, as the case may
be, is not affected in any manner adverse to any Party. Upon such
determination, the Parties shall negotiate in good faith in an effort to agree
upon such a suitable and equitable provision to effect the original intent of
the parties.
9.7 Headings. The article, section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.8 Waivers of Default. Waiver by any Party of any default by the
other Party of any provision of this Agreement shall not be deemed a waiver by
the waiving Party of any subsequent or other default, nor shall it prejudice
the rights of the other Party.
9.9 Amendments. No provisions of this Agreement shall be deemed
waived, amended, supplemented or modified by any Party, unless such waiver,
amendment, supplement or modification is in writing and signed by the
authorized representative of the party against whom it is sought to enforce
such waiver, amendment, supplement or modification.
9.10 Interpretation. The recitals in the forepart of this Agreement
are an integral part hereof and are essential to the construction of this
Agreement. Such recitals should be given full force and effect and accorded the
same significance as the other provisions hereof. Words in the singular shall
be held to include the plural and vice versa and words of one gender shall be
held to include the other genders as the context requires. The terms "hereof,"
"herein," and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement. Article and Section references are to
the Articles and Sections to this Agreement unless otherwise specified. The
word "including" and words of similar import when used in this Agreement shall
mean "including, without limitation," unless the context otherwise requires or
unless otherwise specified. The word "or" shall not be exclusive.
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9.11 Dispute Resolution. Any dispute relating to or any determination
with respect to any matter set forth in this Agreement other than the
enforcement of Patriot's rights under Articles III and IV hereof shall be
finally settled by arbitration conducted expeditiously in accordance with the
Center for Public Resources Rules for Nonadministered Arbitration of Business
Disputes (the "CPR Rules"). The Center for Public Resources shall appoint a
neutral advisor from its National CPR Panel having appropriate experience in
the matters that are the subject of the dispute (the "Advisor"). The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
ss.ss.1-16, and judgment upon the award rendered by the Advisor may be entered
by any court having jurisdiction thereof. The place of arbitration shall be
Dallas, Texas.
Such proceedings shall be administered by the Advisor in accordance
with the CPR Rules as he/she deems appropriate; however, such proceedings shall
in any event be governed by the following agreed upon procedures:
(a) the Advisor shall be appointed within fifteen (15) days
of the service of a statement of claim, the initial pre-hearing conference
shall take place within twenty (20) days after appointment of the Advisor, and
the arbitration hearing shall commence within sixty (60) days after appointment
of the Advisor;
(b) Subject to the following agreed-upon modifications,
discovery shall be governed by Rule 10 of the CPR Rules:
(i) the parties agree to a mandatory exchange of all
relevant documents, to be accomplished within twenty (20) days of
request by the other Party; and
(ii) each Party shall be entitled to no more than
two (2) depositions; such depositions may be scheduled on ten (10)
days notice to the other Party;
(c) hearings before the Advisor which shall consist of a
presentation by each side of not more than three days (including
cross-examination of the other party's witnesses); such hearings to take place
on six days at a maximum; and
(d) decision to be rendered in writing, including a statement
of reasons supporting the decision, not more than fifteen (15) days following
such hearings.
Nothing provided in this Section 9.11 shall limit or interfere with
Patriot's right to seek relief pursuant to Article VII hereof in the Delaware
Court of Chancery.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have caused this Cooperation Agreement
to be executed by their duly authorized representatives.
PATRIOT AMERICAN HOSPITALITY,
INC.
By:
--------------------------
Name:
Title:
PATRIOT AMERICAN HOSPITALITY
OPERATING COMPANY
By:
--------------------------
Name:
Title:
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By its signature below, Wyndham hereby acknowledges the execution and
delivery of this Agreement by the parties hereto and confirms its agreement to
the terms and conditions hereof. Wyndham further agrees to be bound by the
terms of this Agreement if and when the Merger is consummated.
ACKNOWLEDGED AND AGREED:
WYNDHAM HOTEL CORPORATION
By:
----------------------------
Name:
Title:
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