Exhibit 10.6
Purchase Price Adjustment Mechanism
To: Patriot American Hospitality, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
To: Wyndham International, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
From: NMS Services, Inc., a subsidiary of NationsBank Corporation
c/o NationsBanc Xxxxxxxxxx Securities LLC
0 X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Date: February 26, 1998
Ladies and Gentlemen,
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between us on the Trade
Date specified below (the "Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern. References herein to the "Transaction" shall be deemed to be references
to a "Swap Transaction" solely for the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to, the ISDA
Master Agreement dated as of February 26, 1998, as amended and supplemented from
time to time (the "Agreement"), between you and us. All provisions contained in
the Agreement govern this Confirmation except as expressly modified below. In
the event of any inconsistency between the provisions of that agreement and this
Confirmation, this Confirmation will prevail for the purposes of this
Transaction.
I. The Transaction
Patriot American Hospitality, Inc. (the "REIT") and Wyndham International, Inc.
(the "OPCO") (each a "Company" and collectively, the "Companies") and NMS
Services, Inc., a subsidiary of NationsBank Corporation (the "Purchaser"),
through its agent NationsBanc Xxxxxxxxxx Securities LLC ("NMS"), hereby agree to
make the payments and deliveries provided for in Sections III., IV. and V.
hereof, all on the terms more particularly specified herein. The Transaction is
being entered into in connection with and is incorporated by reference in the
Purchase Agreement, as defined below.
Purchase Price Adjustment Mechanism
II. Definitions
For the purposes of this Confirmation, the following terms shall have the
meanings set opposite:
Adjustments: In the event of:
(a) a subdivision, consolidation or
reclassification of the REIT Shares or the
OPCO Shares, or a free distribution or
dividend to all existing holders of REIT
Shares or the OPCO Shares by way of bonus,
capitalization or similar issue;
(b) a distribution or dividend to all
existing holders of REIT Shares or the OPCO
Shares of (i) additional REIT Shares or OPCO
Shares or (ii) other share capital or
securities granting right to payment of
dividends and/or the proceeds of liquidation
of either Company equally or proportionally
with such payments to holders of Paired
Shares; or
(c) a merger, consolidation, reorganization
or liquidation of either Company;
an adjustment shall thereupon be effected by
the Calculation Agent to the Forward Price
and/or the Underlying Shares at the time of
such event with the intent that following
such adjustment, the value of this
Transaction is economically equivalent to
the value immediately prior to the
occurrence of the event causing the
adjustment.
Bank: NationsBank, N.A.
Calculation Agent: The calculations and determinations of the
Calculation Agent shall be made in a
commercially reasonable manner and shall
be binding absent manifest error.
Collateral Release Shares: Paired Shares delivered pursuant to Section
V.C.
Compounding Period: Means each period commencing on and
including:
(i) in the case of the first Compounding
Period, the Effective Date and ending on but
excluding the earlier of the first Interim
Settlement Date or Day S, and
(ii) for each period thereafter, an Interim
Settlement Date and ending on but excluding
the earlier of the next following Interim
Settlement Date or Day S.
If there is a Partial Settlement, then (i)
the Compounding Period for the Settlement
Shares covered by such Partial Settlement
shall end on Day S for such Partial
Settlement and
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(ii) the Compounding Period for the
remaining Underlying Shares shall be
determined without regard to such Partial
Settlement.
Customer Account: The account established in favor of the
Companies pursuant to the Customer Agreement
dated the date hereof between the Companies
and NMS.
Daily Average Price: Means, for any Exchange Trading Day, the sum
of (i) the dollar volume weighted average
price per Paired Share for that Exchange
Trading Day based on transactions executed
during that Exchange Trading Day on the
Relevant Exchange, excluding any transaction
executed during the last one-half hour of
trading, as reported on Bloomberg.
Daycount Fraction: Actual/360.
Day S: For Settlement pursuant to Section III. or
VI., the day upon which settlement
activities shall begin.
Dividend Amount: A. Means, on each Interim Settlement Date or
Day S, an amount in U.S. Dollars equal to
the sum of all cash distributions paid on
either a REIT Share or on an OPCO Share
comprising part of a Paired Share during the
relevant Compounding Period; and
B. Separately, and not included in the
Dividend Amount, the Purchaser will pay or
cause to be paid to the Companies on the
Business Day after the relevant dividend
payment date (i) all cash dividends on
Paired Shares that have gone ex- dividend,
but on which dividends have not been paid,
prior to the end of the final Compounding
Period for any settlement, based on a number
of Paired Shares equal to the number of
Settlement Shares for such settlement, (ii)
all cash dividends received by the Purchaser
at any time, on Paired Shares delivered by
the Companies pursuant to Section III.E.
that have gone ex-dividend after Day S but
prior to the end of the Unwind Period for
any settlement, and (iii) all cash dividends
paid on Paired Shares held in the Customer
Account.
Effective Date: February 26, 1998
Exchange Trading Day: Each day on which the Relevant Exchange is
open for trading.
Forward Price: On each Interim Settlement Date or Day S,
the Forward Price shall be determined for
such day by:
a) multiplying the Initial Price for the
Compounding Period by the sum of
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Purchase Price Adjustment Mechanism
1 plus the product of (i) the appropriate
Daycount Fraction and (ii) the sum of (x)
LIBOR, determined as of the previous Interim
Settlement Date (or in the case of the first
Interim Settlement Date, as of the Effective
Date), for a Designated Maturity of 3
months, and (y) the Spread; and
b) subtracting the Dividend Amount at that
date;
PROVIDED HOWEVER that if the Companies
deliver Interim Settlement Shares pursuant
to Section IV. or Collateral Release Shares
pursuant to Section V.C. during any
Compounding Period, the Forward Price as of
the preceding Interim Settlement Date for
the purpose of determining the Initial Price
for such Compounding Period shall be
adjusted to a price equal to the Daily
Average Price on the Exchange Trading Day
immediately prior to the most recent Interim
Settlement Date, adjusted up for any
positive result or down for any negative
result of the following formula:
(i) the Interim Settlement Amount for the
most recent Interim Settlement Date.
minus,
(ii) the product of (x) the number of
Interim Settlement Shares or Collateral
Release Shares, as the case may be,
delivered during such Compounding Period and
(y) the average Daily Average Price on each
Exchange Trading Day during the Interim
Settlement Unwind Period.
then divide such result by,
(iii) the number of Underlying Shares.
The Forward Price will be subject to
adjustment as provided in the definition of
Adjustments.
Initial Price: Means,
a) for the Compounding Period ending on the
first Interim Settlement Date, an amount in
U.S. Dollars equal to $25.50,
and
b) for each subsequent Compounding Period,
the Forward Price as calculated on or
adjusted as of the preceding Interim
Settlement Date.
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Interim Settlement Dates: May 26, 1998, August 26, 1998 and November
26, 1998, subject to adjustment in
accordance with the Modified Following
Business Day convention.
Interim Settlement Amount: On any Interim Settlement Date, the product
of (a) the number of Underlying Shares, and
(b) the amount by which the Forward Price
exceeds the Daily Average Price on the
Exchange Trading Day immediately prior to
such Interim Settlement Date.
Interim Settlement Shares: The Interim Settlement Amount divided by the
Daily Average Price on the Exchange Trading
Day immediately prior to such Interim
Settlement Date, with any fractional shares
rounded up to the next highest whole number.
Interim Settlement
Unwind Period: Means, following any delivery of Interim
Settlement Shares or Collateral Release
Shares hereunder, a number of consecutive
Exchange Trading Days commencing on the
Exchange Trading Day immediately following
the date of delivery of such shares, which
number shall equal the product (rounded up
to the next highest whole number) of (i) 100
times (ii) the quotient of (A) the number of
shares so delivered divided by (B) the
number of Underlying Shares as of the date
of this Confirmation.
LIBOR: Means USD-LIBOR-BBA as such term is defined
in the Agreement.
Mandatory Unwind Date: In the case of a Mandatory Unwind Event
specified in clause (i) of the Mandatory
Unwind provisions of Section VI., at least
three Exchange Trading Days following such
Mandatory Unwind Event. In the case of a
Mandatory Unwind Event specified in clause
(ii) of such provisions, the date specified
in the notice delivered to the Companies
pursuant to such provision of Section VI.
Mandatory Unwind
Thresholds: Mandatory
Unwind Thresholds Unwind Share Limit
----------------- ------------------
$20.00 up to 33.0% of Underlying Shares
$18.75 67.0%
$17.25 100.0%
Margin Percentage: On the First Exchange Trading Day of any
Unwind Period, 107%, declining ratably on
each subsequent Unwind Day during the Unwind
Period to 100%.
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Maturity Date: One (1) year after the Effective Date,
subject to extension upon the written
approval of the Purchaser in its sole
discretion.
Maturity Placement Fee: 2.00%, based on the mechanics in Section
III.E. The parties may agree to alter the
settlement mechanics, which may result in a
different Maturity Placement Fee.
Paired Shares: Shares of common stock, $0.01 par value per
share, of the REIT (the "REIT Shares") and
shares of common stock, par value $0.01 per
share, of OPCO (the "OPCO Shares"), which
are paired and traded as a unit consisting
of one (1) REIT Share and one (1) OPCO Share
(which REIT Shares and OPCO Shares shall
include the common stock of any successor
issuers).
Partial Settlement: A settlement effected in accordance with
Section III.A. with respect to less than the
full number of Underlying Shares.
Purchase Agreement: The Purchase Agreement, dated as of February
26, 1998, by and among the Companies and the
Purchaser.
Purchase Shares: Has the meaning set forth in Section 1 of
the Purchase Agreement.
Relevant Exchange: Means, with respect to any Exchange Trading
Day, the principal Stock Exchange on which
the Paired Shares are traded on that day.
Settlement Amount: The product of the Settlement Price and the
Settlement Shares.
Settlement Disruption
Event: Means an event beyond the control of the
parties as a result of which The Depository
Trust Company ("DTC") or any successor
depositary cannot effect a transfer of the
Settlement Shares or the Paired Shares. If
there is a Settlement Disruption Event on a
date on which a transfer of Paired Shares is
required to be made hereunder, then the
transfer of the Paired Shares that would
otherwise be due to be made by the Purchaser
or the transfer of the Paired Shares that
would otherwise be due to be made by the
Companies, as applicable, on that date shall
take place on the first succeeding Exchange
Trading Day on which settlement can take
place through DTC, provided that if such a
Settlement Disruption Event persists for
five consecutive Business Days, then the
party obliged to deliver such Settlement
Shares shall use its best efforts to cause
such Shares to be delivered promptly
thereafter to the other party in any
commercially reasonable manner.
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Purchase Price Adjustment Mechanism
Settlement Price: If Day S is an Interim Settlement Date or
the Maturity Date, the Forward Price;
otherwise, the Forward Price adjusted for
LIBOR breakage adjustments (either positive
or negative) for such Forward Price for the
period from Day S to the next following
Interim Settlement Date. Any breakage
adjustments shall be calculated by the
Calculation Agent in accordance with normal
industry standards.
Settlement Shares: The number of shares up to the full number
of Underlying Shares subject to settlement
under Section III. or VI.
Spread: 1.50% per annum.
Stock Exchange: Means the New York Stock Exchange, the
American Stock Exchange or the National
Market System of the Nasdaq Stock Exchange.
Stock Settlement
Unwind Price: If Daily Sales is elected as the unwind
method, the weighted average Daily Average
Price for the Unwind Days during the Unwind
Period where the weighting of the Daily
Average Price in each Unwind Day of the
Unwind Period other than the last Unwind Day
of the Unwind Period shall be one and the
weighting of the Daily Average Price for the
last Unwind Day of the Unwind Period shall
be equal to the quotient obtained by
dividing (i) the difference between (A) the
Settlement Amount and (B) the product of (1)
one less than the number of Unwind Days in
the Unwind Period, (2) 1% of the number of
Underlying Shares on the date of this
Confirmation and (3) the average Daily
Average Price for the Unwind Days in the
Unwind Period excluding the last Unwind Day
of the Unwind Period by (ii) the product of
(x) 1% of the number of Underlying Shares on
the date of this Confirmation and (y) the
Daily Average Price on the last Unwind Day
of the Unwind Period.
If Underwritten Sale is elected as the
unwind method, a price equal to the per
share sale proceeds to the Purchaser in such
Underwritten Sale.
Trade Date: February 26, 1998.
Underlying Shares: 4,900,000 Paired Shares of the Companies
(NYSE ticker "PAH"), subject to adjustment
in the event of Partial Settlements.
Unwind Day: Each Exchange Trading Day on which (i) no
Market Disruption Event has occurred and
(ii) the resale registration
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Purchase Price Adjustment Mechanism
statement provided by the Company pursuant
to the Purchase Agreement and Section
III.A.4. is effective and the related
prospectus is not unavailable (including by
reason of the existence of a Black-Out
Period under the Purchase Agreement) for
delivery to purchasers of Paired Shares.
Unwind Period: In the event of (i) Stock Settlement or Net
Stock Settlement and (ii) the election of
Daily Sales as the unwind method, the period
beginning on Day S and ending on (and
including) the first Unwind Day on which the
product of (A) the Stock Settlement Unwind
Price as calculated on such Unwind Day as if
such Unwind Day were the final Unwind Day of
the Unwind Period (provided that, for
purposes of this calculation, the Stock
Settlement Unwind Price shall be calculated
by weighting equally each Unwind Day in the
hypothetical Unwind Period), (B) the number
of Unwind Days in the Unwind Period
(including such Unwind Day) and (C) 1% of
the number of Underlying Shares on the date
of this Confirmation equals or exceeds the
Settlement Amount.
Valuation Date: In the case of determining any Physical
Settlement value, Net Stock Settlement
Shares or Stock Settlement Shares, Day S,
the day preceding Day S and all Unwind Days
during the Unwind Period; in the case of
determining any Preliminary Stock Settlement
Shares or Preliminary Net Stock Settlement
Shares, the Exchange Trading Day immediately
preceding Day S; in the case of determining
the Interim Settlement Amount and related
calculation, the day prior to the Interim
Settlement Date, and the five (5) Exchange
Trading Days following receipt of Interim
Settlement Shares by the Purchaser.
Valuation Time: 4:00 pm EST, or in the event the Relevant
Exchange closes early, such closing time.
III. Settlement
A. Notice and Procedures
1. The Companies may on any Exchange Trading Day up to and including the
Maturity Date, upon the giving of telephonic notice to the Purchaser
(the "Settlement Notice") at least three (3) Business Days (or, if
Underwritten Sale is elected as the unwind method and such Underwritten
Sale takes the form of a fixed price underwritten public offering, 21
Business Days) prior to Day S as specified in such Settlement Notice,
settle all or part of this Transaction. The Settlement Notice shall
specify:
(i) the Settlement Shares;
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Purchase Price Adjustment Mechanism
(ii) the settlement method, subject to change upon notice as
described below in this section (Physical, Stock or Net Stock
Settlement, as such methods are described below); and
(iii) Day S, which must be an Exchange Trading Day; provided
however, that if Physical Settlement, Stock Settlement or Net
Stock Settlement is selected and in the Purchaser's reasonable
judgment the delivery of the Settlement Shares would
potentially violate or contravene any legal or regulatory
prohibition or requirement applicable to the Purchaser or
cause the Purchaser to contravene any established corporate
policy or compliance policy of the Purchaser which relates to
any legal or regulatory prohibition or requirement applicable
to the Purchaser (other than any corporate policy limiting the
amount of the Purchaser's investment in another entity) then
the Purchaser shall at least three (3) Business Days prior to
the proposed Day S, notify the Companies telephonically
(confirmed by writing) of any such impediment and its estimate
of the period during which such impediment will preclude the
Purchaser's ability to settle all or part of this Transaction,
in which event Day S shall be postponed until the Purchaser
notifies the Companies of its ability to effect Physical
Settlement, Stock Settlement or Net Stock Settlement; and
(iv) the unwind method (Daily Sales or Underwritten Sale, as
such methods are described below).
The Settlement Notice shall be effective only if the notice
requirements specified above are fulfilled; provided, that if
the Settlement Notice is complete except that no settlement
method is specified, then the settlement method shall be
deemed to be Physical Settlement, and if the Settlement Notice
is complete except that no unwind method is specified, the
unwind method shall be deemed to be Daily Sales. If no
Settlement Notice meeting the above requirements is received
prior to five (5) Business Days prior to the Maturity Date,
then a settlement shall occur with respect to which Day S
shall be deemed to be one Exchange Trading Date after the
Maturity Date and Settlement Shares shall be deemed to equal
Underlying Shares. The Companies may upon telephonic notice to
the Purchaser of at least one (1) Exchange Trading Date prior
to the proposed Day S, withdraw any Settlement Notice.
In the case of any Partial Settlement, the number of Underlying Shares
to which this Transaction shall relate shall be adjusted, as of Day S,
by subtracting the number of Settlement Shares from the number of
Underlying Shares (as the same may have been adjusted prior to such
Partial Settlement) immediately prior to such Day S.
In the event that the Company provided notice of Stock or Net Stock
Settlement, on any day during the applicable Unwind Period, upon
providing one (1) Business Day's telephonic notice, the Company may
elect to effect Physical Settlement for all Settlement Shares that have
not already been settled, determined in the manner provided in the
following sentence. The number of Settlement Shares deemed to have
already been settled shall equal the product of 1% of the number of
Underlying Shares on the date of this Confirmation and the number of
elapsed Unwind Days in the Unwind Period. In the event that the
Companies elect to effect Physical Settlement pursuant to this
paragraph,
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Purchase Price Adjustment Mechanism
(i) the notice day shall become the final day of the Unwind Period with
regard to the Settlement Shares that are deemed to have been settled,
and (ii) the Exchange Trading Day immediately following the notice day
shall become Day S for the remaining Settlement Shares and the
Settlement Price for these remaining Settlement Shares shall be
recalculated accordingly.
2. On Day S, the Settlement Price for the Settlement Shares and the
Settlement Amount shall be determined for Day S.
3. The Settlement Amount shall be determined by the Calculation Agent and
the settlement procedures shall be executed pursuant to the settlement
method (B., C., or D. of this Section III.) selected by the Companies
in their its sole discretion.
4. It shall be a condition precedent to any right of the Companies to
elect Stock Settlement (III.C. below) or Net Stock Settlement (III.D.
below) or to deliver Paired Shares in satisfaction of their obligations
under Section III.E.6., that the Companies must (i) notify the
Purchaser (in writing or telephonically) of such election at least five
(5) Business Days prior to Day S and (ii) prior to Day S, cause to be
filed with the Securities and Exchange Commission (the "Commission")
and cause to become effective under the Securities Act of 1933, as
amended (the "Securities Act") a registration statement that results in
the Purchaser (or any affiliate of the Purchaser designated by the
Purchaser) being able to resell all Paired Shares to be delivered by
the Company in effecting such Stock Settlement or Net Stock Settlement
without further registration under the Securities Act. Such
registration statement shall include one or more preliminary
prospectuses, prospectuses, and any amendments and supplements thereto
such that any preliminary prospectus or prospectus, as amended or
supplemented, shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading. In addition,
the Companies shall not deliver any Paired Shares pursuant to Section
IV. below unless at the time of such delivery a registration statement
has become effective under the Securities Act that result in the
Purchaser (or any affiliate of the Purchaser designated by the
Purchaser) being able to resell such Paired Shares without further
registration under the Securities Act, such registration statement to
include one or more preliminary prospectuses, prospectuses, and any
amendments or supplements thereto such that any preliminary
prospectuses, prospectus and any amendments or supplements thereto such
that any preliminary prospectus or prospectus, as amended or
supplemented, shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Companies
further agree that they will cause any such Registration Statement
referred to in this paragraph 5 of Section III.A. to remain in effect
until the earliest of the date on which (i) all Paired Shares delivered
to the Purchaser by the Companies and not required to be delivered to
the Companies hereunder have been sold by the Purchaser (or an
affiliate of the Purchaser), and the Purchaser agrees to notify the
Companies of such fact within two (2) Business Days of its occurrence,
(ii) the Purchaser is able, in the opinion of its counsel, to sell the
Paired Shares subject thereto under Rule 144(k) or (iii) the Purchaser
has advised the Companies that it no longer requires that such
registration statement be effective; provided, however, that in no
event shall the Companies be obligated to keep such Registration
Statement effective for more than 10
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Exchange Trading Days after the end of the applicable Unwind Period.
Notwithstanding any other provision of this Confirmation, if the
conditions set forth in this Section III.A.4 are not satisfied as of
Day S, then (except as provided in Section V - Mandatory Unwind Event)
the Companies shall be deemed to have elected Physical Settlement.
B. Physical Settlement
If the Companies elect Physical Settlement, the Companies shall settle
by delivering to the Purchaser cash in an amount equal to the
Settlement Amount in exchange for the Settlement Shares ("Physical
Settlement") on the Exchange Trading Day immediately succeeding Day S.
The Purchaser shall deliver the Settlement Shares to the Companies on
the Exchange Trading Day immediately succeeding Day S upon receipt of
such cash.
C. Stock Settlement
If the Companies elect to settle the Settlement Amount by delivering
Paired Shares in exchange for the Settlement Shares ("Stock
Settlement"), the Companies shall settle by delivering to the Purchaser
a number of Paired Shares (the "Stock Settlement Shares") equal to (i)
the Settlement Amount divided by (ii) the Stock Settlement Unwind
Price. The mechanics for settlement are set forth in Section III. E.
below.
D. Net Stock Settlement
If the Companies elect to settle the Settlement Amount on a net stock
basis ("Net Stock Settlement"), the Companies shall settle by
delivering to the Purchaser a number of net stock settlement shares
(the "Net Stock Settlement Shares"), which shall equal;
a) (i) the number of Settlement Shares, times (ii) the amount
(positive or negative) equal to the Settlement Price minus the
Stock Settlement Unwind Price,
such product divided by,
b) the Stock Settlement Unwind Price.
If such calculation yields a positive number, this shall indicate the
number of Paired Shares to be delivered by the Companies to the
Purchaser. If such calculation yields a negative number, this shall
indicate the number of Paired Shares to be delivered by the Purchaser
to the Companies. The mechanics for settlement are set forth in Section
III.E. below. (The mechanics set forth in Section III.E. below do not
apply for purposes of Interim Net Stock Settlement pursuant to Section
IV.)
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E. Stock and Net Stock Settlement Mechanics
1. Preliminary Stock Settlement:
If the Companies elect Stock Settlement and Daily Sales, the
Companies shall deliver to the Customer Account (for
subsequent sale for the account of the Purchaser as provided
in Section VI), by 11:00 a.m. on Day S, that number of Paired
Shares (the "Preliminary Stock Settlement Shares") equal to
the product of (i) the Settlement Amount divided by the Daily
Average Price on the Exchange Trading Day immediately
preceding Day S, times (ii) 107% (with fractional shares
rounded up to the next larger whole number). Upon delivery of
the Preliminary Stock Settlement Shares to the Customer
Account, the Purchaser will deliver the Settlement Shares to
the Customer Account.
2. Preliminary Net Stock Settlement:
If the Companies elect Net Stock Settlement and Daily Sales
and if the Settlement Price exceeds the Daily Average Price on
the Exchange Trading Day immediately preceding Day S, the
Companies shall deliver to the Customer Account (for
subsequent sale for the account of the Purchaser as provided
in Section VI), by 11:00 a.m. on Day S, that number of Paired
Shares (the "Preliminary Net Stock Settlement Shares") equal
to:
a) the sum of (i) the product of the number of Settlement
Shares times the difference between the Settlement Price and
the Daily Average Price on the Exchange Trading Day
immediately preceding Day S and (ii) 7% of the Settlement
Amount, and
such amount divided by
b) the Daily Average Price on the Exchange Trading Day
immediately preceding Day S.
If the Daily Average Price on the Exchange Trading Day
immediately preceding Day S exceeds the Settlement Price, the
Companies shall not be required to deliver any shares to the
Purchaser under this subsection III.E.2.
3. If Daily Sales is elected as the unwind method, then by 11:00
a.m. on every fifth (5th) Unwind Day (other than the final
Unwind Day) during the Unwind Period and on the Business Day
following the final Unwind Day of the Unwind Period:
(a) For Stock Settlement:
Stock Settlement Shares shall be calculated as if such Unwind
Day were the final Unwind Day of the Unwind Period (provided
that, for purposes of this calculation, the Stock Settlement
Unwind Price shall be calculated by weighting equally each
Unwind Day in the hypothetical Unwind Period).
(i) If (a) the Margin Percentage times Stock Settlement Shares
(calculated as set forth above) is greater than (b) the sum of
(x) Preliminary Stock Settlement
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Shares plus (y) any shares previously delivered pursuant to
this settlement under this subparagraph (i), then the
Companies shall deliver that number of Paired Shares equal to
the difference between (a) and (b) to the Customer Account
(for subsequent sale for the account of the Purchaser as
provided in Section VI), and
(ii) as of the final day of the Unwind Period, if (a) the sum
of (x) Preliminary Stock Settlement Shares plus (y) any shares
previously delivered pursuant to this settlement under
subparagraph (i) above is greater than Stock Settlement
Shares, then all claims of the Purchaser to such remaining
shares shall be released as provided in Section III.E.5.
(b) For Net Stock Settlement:
Net Stock Settlement Shares shall be calculated as if such
Unwind Day were the final Unwind Day of the Unwind Period
(provided that, for purposes of this calculation, the Stock
Settlement Unwind Price shall be calculated by weighting
equally each Unwind Day in the hypothetical Unwind Period).
(i) if (a) the Margin Percentage times Net Stock Settlement
Shares is greater than (b) the sum of (x) Preliminary Net
Stock Settlement Shares plus (y) any shares previously
delivered pursuant to this settlement under this subparagraph
(i), then the Companies shall deliver Paired Shares equal in
number to the difference between (a) and (b) to the Customer
Account (for subsequent sale for the account of the Purchaser
as provided in Section VI), and
(ii) as of the final day of the Unwind Period, if (a) the sum
of (x) Preliminary Net Stock Settlement Shares plus (y) any
shares previously delivered pursuant to this settlement under
subparagraph (i) above is greater than (b) Net Stock
Settlement Shares, then all claims of the Purchaser to such
remaining shares shall be released as provided in Section
III.E.5.
4. The Companies shall cause all shares delivered by it to the
Customer Account pursuant to this Confirmation to be fully and
effectively registered under the Securities Act for resale by
the Purchaser (or an affiliate of the Purchaser) (as provided
in Section III.A.4, above).
5. On the Exchange Trading Day following the final Unwind Day of
the Unwind Period for any Daily Sales unwind or on or prior to
the day 10 Exchange Trading Days following Day S for any
Underwritten Sale unwind, as the case may be, the Purchaser
shall release all claims to Paired Shares held in the
Companies' Customer Account in respect of such unwind, and
deliver all such Paired Shares to the Companies with the
dollar value of all fractional shares settled in cash.
6. In the event of Stock Settlement or Net Stock Settlement
pursuant to Section III.C or III.D. and the election of Daily
Shares as the unwind method, the Companies shall pay to the
Purchaser on the Business Day immediately following the last
Unwind Day of the Unwind Period an unwind accretion fee, in
cash or, subject to the following conditions and in the manner
provided below, in Paired Shares, equal to the product of (i)
the quotient of (A) the Settlement Amount divided by (B) the
number of calendar days in the Unwind
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Purchase Price Adjustment Mechanism
Period times (ii) the sum of (A) 3-Month LIBOR plus (B) the
Spread times (iii) the quotient of (A) the sum of all of the
whole numbers beginning with one and ending with the number of
calendar days in the Unwind Period divided by (B) 360.
The Companies may satisfy this obligation by delivering Paired
Shares to the Purchaser in an amount so that the value of such
Paired Shares, calculated by reference to the Daily Average
Price on the Relevant Exchange on the Exchange Trading Day
immediately prior to the date of such delivery, provided that
such Paired Shares have been registered for resale in the
manner provided in Section III.A.4.
7. In the event of Stock Settlement or Net Stock Settlement
pursuant to Section III.C. or III.D., the Companies shall pay
on Day S a placement fee to an affiliate of the Purchaser
designated by the Purchaser calculated as:
Settlement Amount x Maturity Placement Fee.
In the event that Interim Settlement Shares are delivered
pursuant to Section IV. or Collateral Release Shares are
delivered pursuant to Section V.C., the Companies shall pay on
the date of such delivery a placement fee to an affiliate of
the Purchaser designated by the Purchaser calculated as:
Number of x Daily Average Price x Maturity
shares so delivered on Exchange Trading Placement
Day immediately prior to Fee
date of delivery
8. In the event of Stock Settlement or Net Stock Settlement and
the election of Underwritten Sale as the unwind method, the
Purchaser or one or more of its affiliates shall sell the
Stock Settlement Shares or the Net Stock Settlement Shares and
the Settlement Shares, as the case may be, in a manner agreed
among the Companies and the Purchaser, which may include (i)
sales to one or more institutional purchasers in transactions
of the type commonly referred to as "block trades" or (ii) a
fixed price underwritten public offering.
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Purchase Price Adjustment Mechanism
IV. Interim Net Stock Settlement
On each Interim Settlement Date, if the Forward Price exceeds the Daily
Average Price on such Interim Settlement Date, then on the Business Day
following the fifth Exchange Trading Day thereafter the Companies
shall, subject to the conditions stated in Section III.A.4, deliver a
number of Paired Shares to the Purchaser equal to the Interim
Settlement Shares; provided, however, that if the Companies are
restricted by Section III.A.4., by law or regulation or self-regulatory
requirements or related policies and procedures, whether or not such
requirements, policies or procedures are imposed by law directly or
have been voluntarily adopted by the Companies to insure compliance
with applicable laws, or in their reasonable judgment are otherwise
unable or unwilling to deliver registered Paired Shares, the Companies
shall deliver Treasury Notes to the Purchaser as described in Section
V.B. below. Paired Shares to be delivered pursuant to this Section IV.
shall initially be delivered to the Customer Account as collateral for
the Companies' obligations hereunder, and the Bank shall be authorized
to direct its affiliates to sell such Paired Shares for the account of
the Purchaser as provided in Section VI.
V. Collateral Provisions
A. If the Companies fail to make effective a resale registration
statement as described in Section III.A.4 within 60 days of a
written request by the Purchaser, then until such a resale
registration statement has become effective, the Companies
shall deliver United States Treasury Notes, with a maturity of
three months or less, that are held through the
Treasury/Reserve Automated Debt Entry System ("Treasury
Notes") in an aggregate principal amount equal to the Interim
Settlement Amount (calculated as if such 60th day were an
Interim Settlement Date) to the Purchaser. If Treasury Notes
are delivered pursuant to this Section V.A., then until the
date Paired Shares could be delivered in connection with an
Interim Net Stock Settlement (if such date were an Interim
Settlement Date) or the Transaction is settled on a Physical
Settlement basis, the Interim Settlement Amount shall be
recalculated and the aggregate principal amount of Treasury
Notes required to be delivered shall be adjusted (and
additional Treasury Notes shall be delivered to the Bank and
excess Treasury Notes shall be returned to the Companies as
necessary) to equal such recalculated Interim Settlement
Amount on a biweekly (every 2 weeks) basis, with the Interim
Settlement Amount calculated as if the last day of such
biweekly period were an Interim Settlement Date.
B. In the event that the Companies do not deliver Paired Shares
pursuant to Section IV. for one or more of the reasons
described in the provision at the end of such paragraph, then,
unless Treasury Notes have been delivered pursuant to Section
V.A. above, the Companies shall deliver Treasury Notes in an
amount equal to the Interim Settlement Amount to the
Purchaser.
C. If the Companies have delivered Treasury Notes to the
Purchaser pursuant to Sections V.A. or V.B. above, at the
Companies' option, the Companies may deliver Paired Shares
(which Paired Shares have been registered for resale by the
Purchaser (or an affiliate of the Purchaser) pursuant to a
registration statement as described in Section III.A.4) to the
Purchaser equal in saleable
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Purchase Price Adjustment Mechanism
market value, based on the Daily Average Price on the Exchange
Trading Day prior to such delivery, to the aggregate principal
amount of the Treasury Notes theretofore delivered to the
Purchaser hereunder. Prior to the next Interim Settlement
Date, if on any five consecutive Exchange Trading Days the
Daily Average Price is above the Forward Price as of the prior
Interim Settlement Date, the Purchaser shall, on the Business
Day after such fifth Exchange Trading Day, release all claims
to Treasury Notes theretofore delivered to the Purchaser and
deliver such Treasury Notes to the Companies. On any
subsequent Interim Settlement Date, if Treasury Notes are held
by the Purchaser, the Purchaser shall deliver to the
Companies, within five (5) Business Days after such Interim
Settlement Date, Treasury Notes in an aggregate principal
amount equal to the amount by which the aggregate principal
amount of Treasury Notes held by the Purchaser exceeds the
Interim Settlement Amount.
D. Security Interest
The Companies hereby pledge to the Purchaser, as security for
their obligations herein, a first priority continuing security
interest in, lien on and right of set-off against all Treasury
Notes delivered to the Purchaser, all security entitlements in
respect thereof and all proceeds in respect of the foregoing.
Upon delivery to the Companies by the Purchaser of such
Treasury Notes, the security interest and lien granted
hereunder will be released immediately, and, to the extent
possible, without any further action by either party.
For purposes of this Agreement, "delivery" of Treasury Notes
to any person shall mean the crediting of such Treasury Notes
to an account of such person at a securities intermediary
designated by such person by Federal Bank-Wire in accordance
with (i) Subpart O - Book-Entry Procedure of Title 31 of the
Code of Federal Regulations (31 CFR xx.xx. 306.115 et seq.)
and any other regulations of the United States Treasury
Department from time to time applicable to the transfer or
pledge of book-entry United States Treasury Notes, including,
without limitation, the regulations set forth in 31 CFR Part
357 and (ii) the Uniform Commercial Code as in effect in the
State of New York.
E. Representations
As of the Trade Date of this Confirmation, the Companies
represent to the Purchaser (which representations will be
deemed to be repeated as of each date that the Companies
deliver Treasury Notes to the Purchaser and each date on which
Paired Shares are delivered to the Customer Account pursuant
to Section III.E.) that:
(i) each Company has the power to grant a security interest in
and lien on any Treasury Notes it delivers to the Purchaser or
Paired Shares it delivers to the Customer Account and has
taken all necessary actions to authorize the granting of that
security interest and lien;
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Purchase Price Adjustment Mechanism
(ii) each Company is the sole owner of or otherwise has the
right to deliver all Treasury Notes to the Purchaser hereunder
or Paired Shares to the Customer Account hereunder, free and
clear of any security interest, lien, encumbrance or other
restrictions other than the security interest and lien created
hereby;
(iii) upon delivery of any Treasury Notes to the Purchaser or
delivery of any Paired Shares to the Customer Account under
the terms of this Confirmation, the Purchaser will have a
valid and perfected first priority security interest therein;
(iv) the performance by each Company of its obligations under
this Confirmation will not result in the creation of any
security interest, lien or other encumbrance on any Treasury
Notes delivered to the Purchaser or Paired Shares delivered to
the Customer Account other than the security interest and lien
granted hereunder; and
(v) each of the Companies will be solvent and able to pay its
debts as they mature, will have capital sufficient to carry on
business and all businesses in which it engages, and will have
assets which will have a present fair market valuation greater
than the amount of all of its liabilities.
F. Other Collateral Provisions
During settlement of the entire Transaction pursuant to
Section III. or VI., any Treasury Notes held by the Purchaser
shall be held until the end of the applicable Unwind Period
and shall be released on the Business Day following the final
Unwind Day for that Unwind Period or, if there is no Unwind
Period, the Business Day immediately following Day S. So long
as there has not occurred any Event of Default under the
Agreement, any interest paid on any Treasury Notes delivered
to the Purchaser in pledge hereunder shall be paid over to the
Companies.
G. Definitions related to Collateral Provisions
"Local Business Day" means a day on which commercial banks in
New York, New York are open for business (including dealings
in foreign exchange).
VI. Certain Covenants and Other Provisions
Ability to Settle in Stock: As of the date hereof, the Companies have
not, and after the date hereof, the Company
will not, enter into any obligation that
would contractually prohibit the Companies
from Stock Settlement, Net Stock Settlement
or Interim Net Stock Settlement of any
shares under this Agreement.
Allocation between the REIT
and OPCO: As between the REIT and OPCO, (i) any
delivery to or by the Companies of the REIT
Share portion of Paired Shares pursuant to
this Confirmation shall be made by delivery
to or
17
Purchase Price Adjustment Mechanism
by the REIT, (ii) any delivery to or by the
Companies of the OPCO Share portion of
Paired Shares pursuant to this Confirmation
shall be made by delivery to or by OPCO, and
(iii) any delivery to or by the Companies of
cash pursuant to this Confirmation shall be
allocated between the REIT and OPCO between
and among themselves based on the ratios
that the Companies allocate proceeds of any
issuance of Paired Shares pursuant to the
Pairing Agreement between the Companies as
amended from time to time, without effect on
any obligation of the Companies to the
Purchaser or on any obligation of the
Purchaser to the Companies. Such allocation
ratios are currently set at 95% to the REIT
and 5% to the OPCO.
Condition Precedent to
Physical Settlement: It shall be a condition precedent to any
right of the Companies to elect Physical
Settlement, that the Companies must, not
more than 180 days prior to such Day S, have
completed the private placement or public
offering of such number of Shares or any
security that may be converted, exchanged or
exercised into Shares, having such initial
purchase price so as to provide the
Companies with net cash proceeds in an
amount not less than the Settlement Amount
or the amount provided in clause (a) of
Section III.D., as the case may be.
Mandatory Unwind Event: If at any time prior to the Maturity Date:
(i) the average Daily Average Price on the
Relevant Exchange of the Paired Shares on
any two consecutive Exchange Trading Days,
other than a day on which a Market
Disruption Event has occurred, is equal to
or less than the highest Mandatory Unwind
Threshold, then the Purchaser shall have the
right, upon written notice to the Companies,
to require the parties to settle all or a
portion of the Transaction (up to the Unwind
Share Limit for such Mandatory Unwind
Threshold) on the Mandatory Unwind Date
pursuant to the settlement procedures set
forth in Section III. above.
Once a Mandatory Unwind Event has occurred,
if the Daily Average Price on any two
consecutive Exchange Trading Days is less
than a lower Mandatory Unwind Threshold, the
Purchaser shall have the right, upon
providing notice to the Companies, to
require the Parties to settle pursuant to
Section III. above on the Mandatory Unwind
Date, all or a portion of the Transaction,
up to a number of Paired Shares that,
together with any shares settled as a result
of any previous Mandatory Unwind Event,
equals the number of Underlying Shares
(calculated, for this purpose, without
regard to any previous Partial Settlement
occurring as a result of a Mandatory
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Purchase Price Adjustment Mechanism
Unwind Event) multiplied by the
corresponding cumulative Unwind Share Limit,
on the Mandatory Unwind Date pursuant to the
settlement procedures set forth in Section
III. above; or,
(ii) if any of the following events occur:
(1) any default or event of default under
any of the Companies' unsecured and/or
recourse lending agreements involving any of
the Companies' Specified Indebtedness in the
amount of more than $25,000,000 that has not
been cured within five (5) days (in the case
of a default or event of default involving a
covenant of a financial nature) or fifteen
(15) days (in the case of any other default
or event of default) following the later of
the date of occurrence of such default or
event of default and the end of any cure
period provided in such lending agreement;
(2) a holder of any of the Companies'
unsecured and/or recourse Specified
Indebtedness in the amount of more than
$25,000,000 provides notice to either of the
Companies pursuant to such Specified
Indebtedness to accelerate the maturity of
such Specified Indebtedness;
(3) Bankruptcy or Insolvency (as such terms
are defined in the Agreement); and/or
(4) any failure of the Companies to post
Treasury Notes as collateral pursuant to
Section V. hereof if such failure is not
remedied on or before the third Local
Business Day after notice of such failure is
given to the Companies; then, the Purchaser
may, upon providing five Business Days
notice to the Companies, require all or part
of the Transaction to be settled early on
the Mandatory Unwind Date pursuant to the
settlement procedures set forth in Section
III.
For purposes of the settlement procedures
set forth in Section III., "Day S" shall be
the Mandatory Unwind Date and the
"Settlement Shares" shall be the number of
Paired Shares to be settled pursuant to
clause (i) or (ii) above. The Companies may
elect the method of settlement for such
early settlement in accordance with the
settlement provisions set forth herein;
provided however, that if Stock Settlement
or Net Stock Settlement is elected, and (1)
no resale Registration Statement
as described in Section III.A.4. has been
declared effective prior to Day S or (2) any
such resale Registration Statement so
declared effective becomes, on Day S or
during an Unwind Period, the subject of a
stop order suspending its effectiveness
19
Purchase Price Adjustment Mechanism
or is the subject of any proceeding for that
purpose or any such proceeding is threatened
by the Commission, then the Companies at
their sole option may choose to (A)
collateralize 125% of the Settlement Amount
with Treasury Notes in a manner similar to
that described in Section V., in which event
Day S will be postponed and the Unwind
Period will not begin until such
registration statement is effective and
available for resales and Paired Shares are
delivered by the Companies pursuant to a
Stock Settlement or Net Stock Settlement,
(B) effect Physical Settlement as to all of
the Settlement Shares in accordance with
Section III.B. hereof on the Exchange
Trading Day immediately succeeding the
occurrence of one of the events specified in
(1) or (2) above or (C) effect settlement
with Paired Shares that have not been
registered for resale by the Purchaser or
any affiliate of the Purchaser to allow the
Purchaser to unwind the Transaction and
liquidate any position they may hold in
Paired Shares by means of negotiated private
resales, to the extent and in the manner
permitted by applicable federal and state
securities laws. In recognition that such
negotiated private resales, if any, are
likely to be completed at prices reflective
of a discount to the prevailing open market
prices for any freely tradeable Paired
Shares, the Companies agree to deliver to
the Purchaser such number of supplemental
Paired Shares as the Purchaser may
reasonably request, to which the Purchaser
shall assign a dollar price in order to
approximate an aggregate amount equal to the
aggregate discount accepted by the Purchaser
in connection with the unregistered resale
of the Paired Shares, or the Companies shall
pay an amount in cash to the Purchaser equal
to the aggregate discount accepted by the
Purchaser in connection with the
unregistered resale of the Stock Settlement
Shares.
Market Disruption Event: A "Market Disruption Event" is the
occurrence or existence on any Exchange
Trading Day during the one-half hour period
that ends at the Valuation Time of
any suspension of or limitation
imposed on trading on (i) any of
the Relevant Exchanges or (ii) any of the
exchanges or boards of trade or futures
contract markets on which options or futures
contracts on the Paired Shares are traded
that, in the reasonable determination of the
Calculation Agent, is material. In the event
that a Market Disruption Event occurs or is
continuing on a Valuation Date, any
determination of the Daily Average Price
shall be postponed to the first succeeding
Exchange Trading day on which there is no
Market Disruption Event, provided that if
there is a Market Disruption Event on each
of the five Exchange Trading Days
immediately following the original Valuation
Date that but for the Market Disruption
Event would have been a day on which Daily
Average Price
20
Purchase Price Adjustment Mechanism
would have been determined, such fifth
Exchange Trading Day shall be deemed to be
the Valuation Date notwithstanding the
Market Disruption Event and the Calculation
Agent shall, in consultation with the
Companies, determine the Daily Average Price
for that Valuation Date based upon the last
Daily Average Price prior to such Market
Disruption Event and, if applicable, shall
effect the relevant settlement by using such
last Daily Average Price for the
determination of the Stock Settlement Unwind
Price.
The Calculation Agent shall within one (1)
Business Day notify the other party of the
existence or occurrence of a Market
Disruption Event on any day that but for the
occurrence or existence of a Market
Disruption Event would have been a Valuation
Date.
Regulatory Compliance: Each party agrees that if the delivery of
shares upon settlement is subject to any
restriction imposed by a regulatory
authority, it shall not be an event of
default, and the parties will negotiate in
good faith a procedure to effect settlement
of such shares in a manner which complies
with any relevant rules of such regulatory
authority and which is satisfactory in form
and substance to their respective counsel.
Securities Law Compliance: Each party agrees that it will comply, in
connection with this Transaction and all
related or contemporaneous sales and
purchases of the Companies' Paired Shares,
with the applicable provisions of the
Securities Act, the Securities Exchange Act
of 1934 and the rules and regulations
thereunder.
Settlement: All settlements shall occur through DTC or
any other mutually acceptable depositary.
Settlement Stock Delivery: Any Paired Shares delivered to the Customer
Account pursuant to Section III.E. or
Section IV. above (the "Pledged Shares")
will serve as collateral for the Companies'
obligations hereunder until the security
interest granted therein is released in
accordance with the settlement mechanics
noted under III.E.5. Paired Shares held in
the Companies' Customer Account shall not be
voted.
The Companies assign and pledge to NMS, as
collateral agent of and for the benefit of
the Purchaser, and grant to NMS, as
collateral agent of and for the benefit of
the Purchaser, as and by way of a security
interest having priority over all other
security interests, with power of sale, all
of its right, title and interest in and to
the Pledged Shares, all security
entitlements in respect thereof and all
income or proceeds received or
21
Purchase Price Adjustment Mechanism
derived therefrom. The Companies authorize
the Bank to direct NMS to sell, or cause the
Purchaser or another affiliate of the Bank
to sell, the Pledged Shares for the account
of the Purchaser, and such shares shall,
except as provided herein, be so sold. Any
shares so sold shall be considered to be
Stock Settlement Shares, Net Stock
Settlement Shares or Interim Settlement
Shares, as the case may be, delivered to the
Purchaser in satisfaction of the Companies'
obligations under Section III.C., Section
III.D. or Section IV., as the case may be.
Delivery of any Pledged Shares to the
Customer Account shall be effected by
delivery of stock certificates for such
Pledged Shares to NMS duly endorsed to NMS
or in blank or accompanied by a duly
executed instrument of transfer to NMS or in
blank or by crediting such Pledged Shares to
an account of NMS at a securities
intermediary designated by NMS.
The Companies covenant and agree with the
Purchaser that Paired Shares delivered by
the Companies pursuant to settlement events
in accordance herewith will be duly
authorized, validly issued, fully paid and
non-assessable. The issuance of such Paired
Shares will not require the consent,
approval, authorization, registration, or
qualification of any government authority,
except such as shall have been obtained on
or before the delivery date of such Paired
Shares.
All references herein to Paired Shares or
other securities to be transferred or
delivered hereunder shall be deemed to
include security entitlements in respect
thereof.
Settlement Volume: In the event of a settlement other than a
Mandatory Unwind Event, on any Unwind Day
during an Unwind Period, the Purchaser
shall, pursuant to its hedging activities
relating to this Transaction, not sell
Paired Shares in an amount in excess of 20%
of the average daily volume for the 20
Exchange Trading Days immediately preceding
Day S.
Trading Authorization: The following individuals and/or any
individual authorized in writing by the
Treasurer of the Companies are authorized by
the Companies to provide trading
instructions to the Purchaser with regard to
this Transaction.
Xxxxxxx X. Xxxxx III for the REIT
and
Xxxxxx Xx for OPCO.
VII. Delivery Instructions:
22
Purchase Price Adjustment Mechanism
Party A: To be supplied by the Purchaser prior to
receipt of any payment hereunder.
Party B: To be supplied by the Companies prior to
receipt of any payment hereunder.
23
Purchase Price Adjustment Mechanism
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to Xx. Xxxxxxxxxxx Xxxxx, 47th Floor.
Yours faithfully,
------------------------------------
NMS SERVICES, INC.
By:
Name:
Title:
Date:
-------------------------------
NATIONSBANC XXXXXXXXXX
SECURITIES LLC, as agent
By:
Name:
Title:
Date:
-------------------------------
PATRIOT AMERICAN HOSPITALITY, INC.
By:
Name:
Title:
Date:
-------------------------------
WYNDHAM INTERNATIONAL, INC.
By:
Name:
Title:
Date:
-------------------------------
24
