JOSEPH W. COTCHETT (36324)
BRUCE L. SIMON (96241)
MARIE S. WEINER (112032)
MARK C. MOLUMPHY (168009)
COTCHETT, PITRE & SIMON
San Francisco Airport Office Center
840 Malcolm Road, Suite 200
Burlingame, California 94010
Telephone: (650) 697-6000
Attorneys for Plaintiffs and the Class
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DORIS JOHNSON and CHARLES Plaintiffs, vs. PATRIOT AMERICAN HOSPITALITY, INC., Defendants. _________________________________________ |
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CLASS ACTION Case No. [C-99-2153 SI] COMPLAINT FOR: 1. FOR VIOLATIONS OF §10(b) 2. FOR VIOLATIONS OF §11 3. FOR VIOLATIONS OF §12(2) JURY TRIAL DEMANDED |
I. INTRODUCTION
III. THE CLASS PLAINTIFFS
IV. THE DEFENDANTS
VII. FACTUAL BACKGROUND
A. BAY MEADOWS AS A STABLE INVESTMENT BEFORE THE MERGER
B. THE BACKGROUND OF PATRIOT AMERICAN
C. PATRIOT AMERICAN'S SEARCH FOR A PAIRED REAL ESTATE INVESTMENT TRUST
D. PATRIOT'S INTEREST IN BAY MEADOWS
E. DEFENDANTS DISSEMINATE JOINT PROXY AND PROSPECTUS
2. Failure To Disclose Paine Webber's Inherent Conflicts Of Interest
3. False And Misleading Fairness Opinion And Valuation By PAINEWEBBER
F. DEFENDANTS' KNOWLEDGE AND SCIENTER
G. THE MERGER IS APPROVED AND THE LAND SOLD TO PAINEWEBBER
VIII. CAUSES OF ACTION
IX. DAMAGES
Plaintiffs Doris Johnson and Charles Dougherty, individually and on behalf of all those similarly situated, bring this Complaint for violations of federal securities laws, and make the following allegations against defendants.
1. This is a securities class action brought on behalf of plaintiffs and all other similarly situated persons and entities, except defendants, who were shareholders of California Jockey Club ("CJC") and Bay Meadows Operating Company ("BMOC"), a paired stock, collectively referred to as BAY MEADOWS, and who subsequently became shareholders of Patriot American Hospitality, Inc. ("NEW PATRIOT REIT"), Patriot American Hospitality Operating Company ("NEW PATRIOT OPERATING COMPANY"), and Wyndham International, Inc. ("WYNDHAM"), collectively referred to as PATRIOT, as a result of the reverse merger of the companies on or about July 1, 1997. The class includes all persons and entities who acquired PATRIOT shares, warrants, options or other rights to acquire PATRIOT shares, in exchange of shares, warrants, options or other rights to acquire shares of BAY MEADOWS, in connection with PATRIOT's merger with BAY MEADOWS. Defendants include NEW PATRIOT REIT, its present paired operating entity, WYNDHAM, their wholly owned operating subsidiaries and partnerships, as well as Paine Webber Group, Inc. ("PAINEWEBBER").
2. BAY MEADOWS was an institution in San Mateo County, operating and owning a horse racetrack since 1934. BAY MEADOWS provided its shareholders, many of them senior citizens living on the Peninsula, with a safe investment and steady stream of income through dividends. BAY MEADOWS achieved success in part due to its focus on the racetrack, fiscal responsibility, reluctance to incur debt to finance its operations, and unique paired stock ownership structure, operating as a Real Estate Investment Trust ("REIT").
3. Under the Internal Revenue Code, REITs that otherwise would be treated for federal income tax purposes as corporations are not taxed at the corporate level on their "real estate investment trust taxable income" that is distributed to shareholders. This treatment substantially eliminates the "double taxation" on earnings, i.e., taxation at both the corporate and stockholder levels, that generally results from the use of a corporate form, and is thus entitled to special tax benefits.
4. Generally, REITs may not obtain lucrative "non-rent" revenue derived from properties they own, such as operation and management fees. In the early 1980s, in order to avoid paying some other entity substantial fees to manage the real estate, certain REITs created a separate but related corporation to operate the business, and then "paired" the stock of the two companies so that stockholders owned the same number of shares in the REIT and the paired operating company. In 1984, Congress barred this structure, but exempted the few paired corporations that existed as of June 1983.
5. BAY MEADOWS was one such company "grandfathered" as an exception to the anti-pairing provisions. BAY MEADOWS operated with a "paired share" ownership structure in 1983, utilizing two separate entities -- one, CJC, which owned the Bay Meadows real estate as a REIT, and the other, BMOC, which leased and operated the racetrack, making payments to CJC. CJC's shares of common stock were "paired" and traded together with BMOC's shares of common stock, as a single unit on the American Stock Exchange pursuant to a stock pairing arrangement.
6. The fiscal strength and stability of BAY MEADOWS, and this unique corporate REIT structure, which is no longer available under the IRS Code, made it an immensely attractive target for defendants. Defendants strongly desired to expand their hotel acquisitions, but found themselves restricted each time by tax limitations placed on them as a REIT. However, mirroring the acquisition strategy of one of its main competitors, defendants targeted BAY MEADOWS as a "stepping stone" to give them the vehicle to acquire hotel properties across the world and reap substantial lease and management proceeds through a "paired" operating company.
7. In July 1997, defendants participated in the preparation and dissemination of a Joint Proxy and Prospectus ("Prospectus") to all BAY MEADOWS' shareholders in order to induce BAY MEADOWS' shareholders to agree to a merger with PATRIOT. The Prospectus was prepared with the direct participation of PAINEWEBBER, acting throughout the relevant period as the financial advisor, investment banker, underwriter, placement agent, negotiator, market maker and direct beneficiary of the merger transaction, and contained uniform written material misrepresentations and concealments. Defendants told the BAY MEADOWS' shareholders that it was a strong, stable and dynamic company, which would continue to own and operate the racetrack and surrounding properties, as well as to acquire and develop hotel properties. That was not the complete story. Defendants failed to disclose and intentionally concealed the true value, nature, scope and strategy of PATRIOT's hotel business, PATRIOT's sole motivation in the merger to exploit BAY MEADOWS' unique corporate structure to pursue high-risk, debt-laden investments in hotel properties, and the true existence, extent and effect of conflicts of interest existing between PATRIOT and its underwriter, creditor, and development partner, defendant PAINEWEBBER, which issued an "independent" fairness opinion on the transaction, and to which PATRIOT was financially beholden.
8. As of June 1997, when the Prospectus was mailed to BAY MEADOWS' shareholders, BAY MEADOWS had no outstanding debt. At the same time, PATRIOT had approximately $525 million debt outstanding, and a $475 million line of credit from Paine Webber Real Estate Securities, Inc. However, following the merger, and by the end of 1998, PATRIOT had expended over $5.5 billion to purchase hotels, management and other related business, and amassed over $3.8 billion in debt, primarily through the efforts of PAINEWEBBER.
9. In late 1998, PATRIOT's financial house began to crumble, and PATRIOT started to default on its massive loans. In order to forestall a potential bankruptcy, and to pay off its creditors, including PAINEWEBBER, PATRIOT began selling off hotel properties to an affiliate of PAINEWEBBER. In March 1999, still in dire financial straits, PATRIOT brokered a deal with an investment group, which offered to make a $1 billion equity investment in PATRIOT in return for up to 30% of the company. Pursuant to the deal, which is still subject to shareholder approval, PATRIOT must pay tens of millions in fees for transaction expenses, accountants, lawyers and investment bankers.
10. At the time of the merger on July 1, 1997, BAY MEADOWS shares were trading at $44 5/8 per share. As of April 26, 1999, after a subsequent two-for-one stock split, the converted PATRIOT shares were trading at approximately $5 per share and PATRIOT had stopped paying dividends. PATRIOT recently announced its intention to terminate its REIT status and paired share corporate structure.
11. Plaintiffs bring this action pursuant to §§11, 12(2) and 15 of the Securities Act of 1933 (15 U.S.C. §§ 77k, 77l(2) and 77(o)), §§10(b) and 20(a) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5).
12. The Court has jurisdiction over this action pursuant to §22 of the 1933 Act (15 U.S.C. §77v), §27 of the 1934 Act (15 U.S.C. §78aa), and 28 U.S.C. §§1331, 1337(a).
13. Venue is proper in this District pursuant to §22 of the 1933 Act (15 U.S.C. §77v), §27 of the 1934 Act (15 U.S.C. §78aa), and 28 U.S.C. §§1391(a)(2) and 1391(b)(2). BAY MEADOWS is located in this District. A substantial part of the events, acts, omissions and transactions complained of herein, including the dissemination of the Joint Proxy Statement and Prospectus which contained materially false and misleading information, occurred in substantial part in this District. At all relevant times herein, the defendants conducted substantial business and/or committed violations of United States law by acts committed in this District.
14. Plaintiff Doris Johnson, age 78, is a life-long resident of the Bay Area. Johnson worked for the Bay Meadows racetrack for 49 years, beginning in 1937 as a clerk performing bets. When she retired in 1986, she held the position of Head Hostess and Director of the Turf Club. Since 1986, she has remained active in the horse racing industry, serving as a Director of both the California Thoroughbred Horsemen's Foundation and the Winners Foundation, an organization that sets up charity events to raise money for drug rehabilitation. Johnson made her initial investment in BAY MEADOWS in the early to mid 1940s, purchasing between 50 to 100 shares, and she continued to purchase shares in the years that followed. In 1997, she was induced to transfer all of her shares to PATRIOT. She currently owns 60,000 shares of PATRIOT stock, and has been severely damaged by the merger transaction.
15. Plaintiff Charles Dougherty, age 79, is a Navy veteran, and a former steward with the California Horse Racing Board, a position he held for 18 years before his retirement in 1992. Prior to that, Dougherty served as the Assistant Racing Secretary at major racing venues, including Bay Meadows racetrack, Golden Gate Fields and Tanforan. Dougherty is a life long resident of the Bay Area. In the early 1950s, he purchased shares of BAY MEADOWS stock at a price of $300 per share, and continued to purchase shares in the years that followed. When PATRIOT merged with BAY MEADOWS, he was induced to transfer all of his shares to PATRIOT. He currently owns 33,232 shares of PATRIOT stock and has been severely damages by the merger transaction.
16. Defendant Paine Webber Group, Inc. ("PAINEWEBBER") is a Delaware corporation which maintains its principal place of business at 1285 Avenue of the Americas, New York, N.Y., and does business in the Northern District of California.
17. Defendant Patriot American Hospitality, Inc. ("NEW PATRIOT REIT") is a Delaware corporation which maintains its principal place of business at 1950 Stemmons Freeway, Suite 6001, Dallas, Texas. As a result of the merger on July 1, 1997, NEW PATRIOT REIT's predecessor, also called Patriot American Hospitality, Inc. (and referred to herein as "OLD PATRIOT REIT") merged with and into CJC, with CJC being the surviving legal entity. CJC then changed its name to "Patriot American Hospitality, Inc." NEW PATRIOT REIT is a self-administered real estate investment trust ("REIT"), and does business in the Northern District of California.
18. Defendant Wyndham International, Inc. ("WYNDHAM"), is a Delaware Corporation which maintains its principal place of business at 1950 Stemmons Freeway, Suite 6001, Dallas, Texas. As a result of the merger on July 1, 1997, BMOC changed its name to "Patriot American Hospitality Operating Company" ("NEW PATRIOT OPERATING COMPANY"). As a result of the merger between PATRIOT and Wyndham Hotel Company on January 5, 1998, Wyndham Hotel Company merged with and into PATRIOT, and NEW PATRIOT OPERATING COMPANY changed its name to "Wyndham International, Inc." ("WYNDHAM"). Accordingly, WYNDHAM is the present operating corporation for NEW PATRIOT REIT, and in addition to leasing and managing hotels owned by NEW PATRIOT REIT, WYNDHAM is engaged in the business of conducting and offering pari-mutuel wagering on thoroughbred horse racing at the Bay Meadows racetrack.
19. Defendant PAH GP, Inc. ("PAH GP") is a wholly owned subsidiary of NEW PATRIOT REIT. PAH GP is the sole general partner and the holder of a 1% general partnership interest in Patriot American Hospitality Partnership, L.P.
20. Defendant PAH LP, Inc., ("PAH LP"), is a wholly owned subsidiary of NEW PATRIOT REIT. PAH LP owns an approximate 88% limited partner interest in the Patriot American Hospitality Partnership, L.P.
21. Defendant Patriot American Hospitality Partnership, L.P. ("PATRIOT PARTNERSHIP"), is a limited partnership formed in connection with OLD PATRIOT REIT's initial public offering, and OLD PATRIOT REIT contributed its assets to the partnership in exchange for units of limited partnership interest.
22. Defendant Wyndham International Operating Partnership, L.P. ("WYNDHAM PARTNERSHIP), is a limited partnership, and until PATRIOT's merger with WYNDHAM, was known as the Patriot American Hospitality Operating Ownership, L.P. WYNDHAM presently owns a 1% general partnership interest and an approximate 87% limited partnership interest in the WYNDHAM PARTNERSHIP. PAH GP, PAH LP, PATRIOT PARTNERSHIP and WYNDHAM PARTNERSHIP are collectively referred to as the "OPERATING PARTNERSHIPS."
23. From July 1997 to December 31, 1998, NEW PATRIOT REIT and WYNDHAM, either directly or through their OPERATING PARTNERSHIPS and subsidiaries, invested over $4.5 billion in the acquisition of hotels and other related businesses, financed primarily with funds drawn on credit lines and the issuance of paired shares and partnership units.
24. Plaintiffs bring this action as a class action under Federal Rule of Civil Procedure, Rule 23(a) and (b)(3). The class is defined as follows:
All former shareholders of the California Jockey Club and Bay Meadows Operating Company who as a result of the merger which occurred on or about July 1, 1997 between California Jockey Club, Bay Meadows Operating Company and Patriot American Hospitality, Inc., became shareholders in the successor companies, Patriot American Hospitality, Inc. and Patriot American Hospitality Operating Company, later Wyndham International Inc. Excluded from the class are the defendants herein, and the subsidiaries, affiliates, or controlled persons or entities of any of the corporate defendants.
The Class Period is from June 2, 1997, when a Proxy Statement and Prospectus was issued, to the date of the filing of this Complaint.
25. PATRIOT, including its predecessor and successor entities, OLD PATRIOT REIT, NEW PATRIOT REIT, NEW PATRIOT OPERATING COMPANY, and WYNDHAM, is and was listed on the New York Stock Exchange, a highly efficient market, under the symbol "PAH," and following the merger with BAY MEADOWS, traded as a paired entity.
26. The members of the Class are so numerous that joinder of all members is impracticable. At the time of the merger, BMOC and CJC had approximately 6 million shares of paired common stock outstanding. Class members can be identified from business records of PATRIOT, including the merger documents.
27. Plaintiffs' claims are typical of the claims of the members of the Class, as plaintiffs and the Class were induced to trade and transfer their shares of BMOC and CJC stock, through the merger, for shares of PATRIOT and the post-merger entities, NEW PATRIOT REIT, NEW PATRIOT OPERATING COMPANY (later WYNDHAM), based upon the same false statements and were damaged thereby.
28. Plaintiffs will fairly and adequately protect the interests of the members of the Class and have retained counsel competent and experienced in class and securities litigation. Plaintiffs have no interests which are contrary to or in conflict with those of the Class members which they seek to represent.
29. A class action is superior to other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual members may be relatively small, the expense and burden of individual litigation make it virtually impossible for the Class members to individually seek redress for the wrongs done to them. Plaintiffs know of no difficulty which will be encountered in the management of this litigation which would preclude its maintenance as a class action.
30. There is a well-defined community of interest in the questions of law and fact involved in this case. Common questions of law and fact exist as to all members of the Class, and predominate over any questions affecting solely individual members of the Class. Among questions of law and fact common to the class are:
a. whether the 1933 Act was violated by defendants;
b. whether the 1934 Act was violated by defendants;
c. whether defendants misrepresented material facts;
d. whether defendants failed to disclose material facts;
e. whether defendants acted with scienter; and
f. whether Class members were damaged and the measure of damages.
31. The names and address of the class members are available from the business records of PATRIOT. Since PATRIOT sends periodic mail to its shareholders, it will have the most current addresses for the Class members. Notice can be provided to the Class members by first class mail and by using other techniques customarily used in class actions arising under the federal securities law.
32. The statutory safe harbor provided under 15 U.S.C. §78u-5 for forward-looking statements under certain circumstances does not apply to the defendants' false statements and material omissions alleged in this Complaint.
33. The "safe harbor" for forward looking statements is not applicable, pursuant to 15 U.S.C. §78u-5(b)(2) as the alleged forward looking statements were contained in a prospectus issued by defendants and disseminated to plaintiffs in connection with a tender offer.
34. Defendants' statements were not identified as forward-looking statements when made, they were not accompanied by meaningful cautionary statements identifying important factors which could cause actual results to differ materially from those in forward-looking statements, or they were not forward-looking statements within the meaning of the statute.
35. Alternatively, to the extent any statements pleaded herein are considered to be "forward-looking," the defendants are liable for those statements because at the time each of those statements was made, the speaker knew that the statement was false and the statement was authorized and/or approved for issuance by the defendants who knew that those statements were false when made.
36. Prior to its merger with PATRIOT in July 1997, the California Jockey Club ("CJC"), operated as an equity REIT, under the Internal Revenue Code, and was the owner of the Bay Meadows racecourse. A REIT is a business entity that pays no federal income tax on its earnings, but must distribute 95% of its taxable dividends to shareholders. To qualify as a REIT, a company can only own assets, traditionally, real estate, but cannot operate or manage the assets. CJC generated revenue through the lease or sale of its assets at BAY MEADOWS.
37. Prior to its merger with PATRIOT, Bay Meadows Operating Company ("BMOC"), was a gaming and entertainment company conducting horse racing at the Bay Meadows racecourse. BMOC was the operating company for CJC. While CJC owned the Bay Meadows property and racetrack, the operations of horse racing were conducted by BMOC, which leased the property and made payments to CJC.
38. CJC and BMOC are corporations which were incorporated in 1983. However, the companies' predecessor was incorporated in 1932, and horse racing has been an institution at Bay Meadows in San Mateo County, since 1934, and for fifty years prior to that at local Peninsula tracks. The long history of Bay Meadows, CJC and BMOC's historic stability as an investment, was a prime motive in the plaintiffs holding their shares for such long periods of time.
39. In 1983, CJC and BMOC were incorporated under a "paired" ownership structure, i.e., CJC's shares of common stock were "paired" and traded together with BMOC's shares of common stock, as a single unit on the American Stock Exchange, pursuant to a stock pairing arrangement, and shareholders could only purchase or sell an equal amount of both shares. According to CJC's 1996's Form 10-1C, both CJC and BMOC had 5,763,257 shares of common stock outstanding as of March 17, 1997, and the aggregate market value of the paired voting stock held by non-affiliates of CJC and BMOC was approximately $250,000, based upon a per share price of $46.00.
40. The practice of pairing REIT and related operation companies was banned in 1994. However, since CJC and BMOC, collectively "BAY MEADOWS," existed as a paired REIT in 1983, it was entitled to be "grandfathered" as an exception to the IRS Code. This pairing arrangement permitted CJC to derive "non-rent" income from the operation and management of its property, collected from BMOC.
41. BAY MEADOWS' principle asset was its 175 acres of prime Peninsula land, which included a racetrack, grandstand, clubhouse and turf club, and contiguous parcels of land, including a 38-acre parcel containing a barn and stable area, and a 40-acre parcel containing the practice track. Historically, the entire 175 acre site has been used in conjunction with horse racing and BAY MEADOWS managed these real estate holdings and derived most of its income through the lease and operations.
42. BAY MEADOWS' property, and particularly the parcel adjacent to the racetrack, was viewed as a prime location for potential commercial development; especially since many commercial development projects had been completed in the surrounding area, including the development of Oracle headquarters and office buildings in the Mariner's Island area. This prime real estate is located adjacent to Highway 101, in the heart of San Mateo County, about halfway between San Francisco and San Jose, and ten miles from the San Francisco International Airport.
43. In 1995, an opportunity arose to sell some of this land. CJC directors believed it was in the best interests of the company to diversify its real estate holdings by adding commercial revenue streams to the operational cash flow of the company. Accordingly, in May 1995, CJC entered into a sales agreement with Franklin Resources, Inc., for the sale of the 39-acre stable area for $21 million. Franklin Resources intended to develop some 900,000 square feet of office space at the location. The agreement included specific provisions about the allocation of costs associated with off-site improvements with the proviso that CJC could terminate the agreement if the costs exceeded $11 million. It was not anticipated that the Franklin Resources sale would close until August 1997.
44. In December 1995, CJC entered into a separate agreement to sell an adjacent parcel, including the 40-acre practice track, to Lee Iacocca & Associates, Inc. Iacocca planned retail stores and a superior first class hotel. The purchase price for this parcel was $30.75 million subject to reductions if certain portions of the development package were not achieved. This agreement also included a termination provision in the event off site improvements exceeded $8 million. By March 1996, the estimated cost of these improvements was well in excess of that amount. CJC had until December 1998 to obtain the necessary approvals of the development plan entitlements from the County of San Mateo.
45. Since most of the BAY MEADOWS' revenue was from racing activities, its financial condition was largely judged by the number of live racing days and the net revenues derived therefrom. During the period 1992-1995, the financial performance of BAY MEADOWS was stable and consistent. The revenues derived from betting and the rent paid by BAY MEADOWS to CJC ranged from a high of approximately $4.7 million in 1994 to a low of $3.6 million in 1993.
46. CJC consistently paid regular semi-annual dividends based on management's estimated earnings. If necessary, special dividends were paid at the year end to meet IRS rules, requiring the distribution of 95% of taxable net income to shareholders in a REIT. The dividends reflected the seasonality of BAY MEADOWS income stream as it related to the racing season.
47. The revenue stream generated by BAY MEADOWS from pari-mutuel betting is known, in the racing industry, as the "handle." For the relevant time period prior to the merger, the combination of live racing days, intertrack wagering by satellite and the expansion of the pari-mutuel betting pool, contributed to a substantial increase in revenue. For example, in 1985, the total pari-mutuel handle was $192,378,000, compared to $464,290,000 in 1995. These increases resulted in a corresponding increases in rental payments by BMOC to CJC, which was based on the amount of racing revenues. In 1994 alone, total revenues for CJC increased 30% compared to the previous year.
48. As demonstrated above, prior to the merger, the liquidity and capital picture for BAY MEADOWS prior to the merger was positive, and BAY MEADOWS provided a consistent and stable investment for the plaintiffs and the class, with a ready and increasing income stream related to racing, as well as the prospect of generating additional substantial cash from the sale of its valuable land assets. Moreover, BAY MEADOWS was unencumbered by debt and adequately financed. At the time of the merger, CJC had a line of credit available from a bank, but had made no borrowings against it and pledged no collateral. All of these factors led the plaintiffs and the class to believe their investment in BAY MEADOWS was safe, secure, and provided them with the type of protection commensurate with such an investment.
49. PATRIOT was founded in 1991 by Paul Nussbaum. Until he was terminated in 1999, Nussbaum was the central figure in the operation, and ultimate financial collapse of PATRIOT, serving as Chairman of the Board of Directors and Chief Executive Officer. Prior to his association with PATRIOT, Nussbaum practiced real estate and corporate law for over twenty years in the State of New York.
50. According to the December1997 Institutional Investor, Nussbaum said, "If I was ever going to become an entrepreneur, this was the time. You could acquire real estate at a fraction of the long-term value." Nussbaum formed an investment group and cut a deal with the Resolution Trust Corporation, the agency trying to sell massive amounts of real estate seized by the government after the national Savings and Loan crisis. Nussbaum's group put up $15 million and acquired office properties and one run-down hotel in New Orleans.
51. Following the acquisition of the Bourbon Orleans, Nussbaum quickly went after other hotels. In 1997, Institutional Investor quoted Nussbaum, "Although office buildings had long-term leases, hotels could change their rates daily, so cash flows were recovering faster. You could buy full-service hotels at a fraction of the replacement cost, because unintentional owners like the government and banks were eager to sell . . . " According to Nussbaum, the buying environment was so good, "my biggest mistake was not buying every hotel brought to me."
52. On April 17, 1995, Nussbaum formed PATRIOT for the purpose of acquiring equity interests in hotel properties and to take advantage of tax benefits as a REIT. On July 14, 1995, PATRIOT filed a Form S-11 Registration Statement with the SEC, registering to offer 10,815,000 shares of common stock, at a proposed maximum offering price of $24.00 per share, in their initial public offering. According to the Registration Statement, PATRIOT was formed to acquire, own, redevelop and reposition its hotel business, and upon completion of the public offering and the initial formation transactions, PATRIOT owned 20 hotels with about 4200 rooms.
53. In October 1995, PATRIOT completed its initial public offering, and as a result, PATRIOT commenced operations with $350 million in assets. Defendant PAINEWEBBER was the managing underwriter for PATRIOT's initial public offering and chief financial advisor.
54. The largest hotel REIT, and PATRIOT's competitor, was Starwood Lodging Trust. Starwood was a pioneer in operating hotel REITs, and discovered the potential value of acquiring a "paired-share" REIT to exploit non-rent revenues from Starwood's properties. In 1995, Starwood acquired a paired share corporation belonging to financially ailing Hotel Investors Trust. With that structure in place, in 1997, Starwood acquired Westin Hotels & Resorts for $1.6 billion and ITT Corporation's hotel and casino business for $13.7 billion.
55. The strategy was not lost on PATRIOT. PATRIOT determined that it was restricted by its corporate structure, and in order to obtain the type of growth PATRIOT envisioned, and to expand to keep up with Starwood, at whatever cost necessary, defendants began looking for a company using a similar paired REIT structure, to use as a shell to carry out its expansion. It made no difference to defendants what underlying business the paired REIT was engaged in, so long as they obtained the corporate shell.
56. PATRIOT discovered that there were few paired REITs in existence. PATRIOT, learned of BAY MEADOWS and determined that it was the one of the last possible merger partners. PATRIOT would have to be an attractive merger opportunity for BAY MEADOWS because other suitors also recognized the benefits of the paired REIT and had made offers to BAY MEADOWS.
57. In BAY MEADOWS, PATRIOT found a vehicle through which it could expand both acquisition and operating platforms, with the help of willing lenders and creditors, including defendant PAINEWEBBER, and the use of exotic lending devices, including revolving lines of credit and equity forward contracts. Unfortunately for the plaintiffs and the class, PATRIOT's single-minded strategy to obtain such growth at all costs, through massive and risky undertakings of debt, was not told to the shareholders of BAY MEADOWS, and put their shares at risk in an unwarranted and undisclosed fashion.
58. To boost its chances of gaining shareholder approval, on or about August 23, 1996, PATRIOT retained PAINEWEBBER, with whom it had a long standing relationship, to act as a financial adviser and to render an opinion as to the value of the PATRIOT and BAY MEADOWS merger and assist as a major principal in the merger.
59. On October 31, 1996, PATRIOT with the assistance of PAINEWEBBER, entered into a merger agreement with CJC and BMOC to acquire BAY MEADOWS. Pursuant to the agreement, BAY MEADOWS were given the "option" either to convert their paired shares into the same number of shares of the new companies' i.e., PATRIOT's common stock, or to tender their shares for $33.00 in cash. Pursuant to the agreement, PAINEWEBBER performed a fairness opinion on the transaction.
60. In the intervening period, from October 31, 1996 to the merger, PATRIOT and PAINEWEBBER attempted to convince the shareholders and directors of BAY MEADOWS, through public statements, press releases, and disclosures, that it was a financially sound corporation. At the same time, PATRIOT with the assistance of PAINEWEBBER completed certain transactions and put on hold other pending acquisitions, so that it would not incur substantial debt before the merger and disclose the true nature of its intended business strategy to BAY MEADOWS' shareholders.
61. On January 8, 1997, PATRIOT issued a press release and announced the acquisition of five hotels from Metropolitan Life Insurance Company. "This transaction with MetLife and Doubletree fulfills three of Patriot's primary short term goals." "First, the objective announced at our October 1995 initial public offering to triple our initial portfolio of 4,206 rooms within 30 months. When these acquisitions are completed during the first quarter of 1997, we will have exceeded our goal in less than half that time." The release also stated, "[T]his transaction will support Patriot's latest goal of building a substantial portfolio to fold into the 'paired-share REIT structure that we intend to establish early in 1997." PATRIOT President and Chief Operating Officer Thomas Lattin continued, "These hotels, like our other acquisitions, are in excellent locations in strong markets. . . ."
62. On January 20, 1997, PATRIOT issued a press release and announced its acquisition of four resort properties, including Carefree Resorts. PATRIOT announced that it had expanded its line of credit from $250 million to $475 million with defendant PAINEWEBBER's affiliate, Paine Webber Real Estate Securities Inc., to fund the acquisitions. PATRIOT also announced that it had a "binding agreement to acquire a paired-share REIT structure, California Jockey and Bay Meadows Operating Company (ASE:CJ). The paired-share structure enables Patriot to manage as well as own hotels and resorts." According to PATRIOT's release, the Carefree acquisition marked PATRIOT's "first application of the paired-share structure" and PATRIOT's portfolio now featured "51 hotels and resorts with a total of 12,111 rooms" with contracts and letters of intent to add nine additional hotels, totaling 2,446 rooms."
63. On January 31, 1997, PATRIOT issued a press release and reported "Record Fourth Quarter and Year-end Financial Results" and improvement in operating performance "across the portfolio" during the fourth quarter of 1996. PATRIOT announced an 87% increase in funds from operations (FFO) and a 25% increase in FFO per share for the fourth quarter, a 121% increase in fourth quarter revenue compared to 1995, and an 89% increase in net income in the fourth quarter compared to 1995. PATRIOT also noted that "certain acquisitions" which it expected to complete in the fourth quarter were delayed until the first quarter of 1997, quoting Nussbaum: "A number of our pending acquisitions were pushed back, in light of the announcement of our merger with California Jockey Club and Bay Meadows Operating Company. In completing these acquisitions prior to the merger, we wanted to make sure we would have maximum flexibility with respect to leasing many of them to our paired company following completion of the merger. We have now formed appropriate structures to provide us with this flexibility."
64. On February 4, 1997, PATRIOT issued a press release and announced the inclusion of five of its hotels in Conde Nast Traveler's selection of the top 500 hotels. Nussbaum utilized such publicity to his advantage, emphasizing PATRIOT's focus on quality not quantity, "As the nation's second largest hotel REIT, we're in the enviable position of picking and choosing those acquisitions that add value to our portfolio rather than buying whatever comes our way." PATRIOT said its portfolio included 52 hotels and 12,424 rooms.
65. On February 21, 1997, PATRIOT issued a press release and announced the appointment of William W. Evans to its Office of the Chairman, effective March 1, 1997. According to the release, Evans had worked for PAINEWEBBER, serving as a lead investment banker on equity and debt offerings, and the managing director of PAINEWEBBER's Real Estate Group. In that capacity, Evans was "instrumental in identifying, pursuing and negotiating transactions on behalf of Patriot American, among other clients. Recently, Evans worked closely with Nussbaum on Patriot American's acquisition of California Jockey Club and Bay Meadows Operating Company which, when closed in May, will distinguish Patriot as one of only four real estate investment trusts (REITs) that can own and operate its properties through the newly created paired-share structure." According to the release, Evans' responsibilities at PATRIOT include "negotiating and closing corporate mergers and acquisitions." Evans stated, "Having been closely associated with Patriot American since its IPO, I'm very familiar with the company and its record of solid performance." In fact, Evans, while at PAINEWEBBER was the key person working with PATRIOT on the CJC merger.
66. On February 24, 1997, PATRIOT and BAY MEADOWS entered into an Agreement and Plan of Merger, superseding the October 31, 1996 agreement, by which PATRIOT agreed to merge into CJC, with the new name being "Patriot American Hospitality, Inc.," and agreed to merge into BMOC, with that company's new name to be Patriot American Hospitality Operating Company. Again, BAY MEADOWS shareholders were given the option of tendering their shares for $33 per share in cash, or retaining their shares for conversion into the same number of shares in the new PATRIOT entity. Conversely, PATRIOT shareholders, who received a two-for-one stock split in February 1997, were entitled to convert each share for 0.519 shares of the new PATRIOT entity. Pursuant to the Merger Agreement, the parties also agreed to form the OPERATING PARTNERSHIPS, into which CJC and BMOC's assets were placed, in return for limited partnership interests. Substantially all of PATRIOT's operations were to be conducted through the OPERATING PARTNERSHIPS.
67. At the same time, PATRIOT and PAINEWEBBER agreed in principle that, following the closed of the merger, PAINEWEBBER or its affiliate would purchase substantially all of the land of CJC, including the land subject to the Franklin and Iacocca agreements, for $83 million. PATRIOT would retain ownership of the improvements located on the land. Simultaneously, PAINEWEBBER and PATRIOT agreed to enter into a ground lease covering the land on which the racecourse was situated, for a term of seven years. PATRIOT would then sublease the racecourse land and related improvements to the PATRIOT operating company.
68. On February 26, 1997, PATRIOT issued a press release on the Business Wire, and announced that it had signed the "final merger agreement" following the terms and conditions previously announced on October 31, 1996, and its filing of the proxy statement for the merger with the SEC. PATRIOT also announced a two-for-one stock split in the form of a stock dividend for PATRIOT shareholders as of March 7, 1997, concluding that the exchange ratio for the merger "will be adjusted accordingly for a neutral effect to the shareholders of California Jockey Club and Bay Meadows as a result of the stock split." PATRIOT concluded that its portfolio consisted of 52 hotels with a total of 12,329 rooms.
69. On February 26, 1997, PATRIOT issued a second press release and announced contracts to purchase five hotels with a total of 1,593 rooms in Minnesota, Florida and California. It stated, "We believe our strategy of purchasing quality assets in major metropolitan markets at below-replacement costs contributed significantly to our success in 1996, and will continue to drive our earnings in 1997 and the years to come. By taking an opportunistic, while disciplined, approach to building our portfolio, we are financially positioned to purchase the best properties in the market. Adhering to our focused strategy will continue to differentiate us from our competitors."
70. On March 25, 1997, PATRIOT issued a press release and announced a dividend to shareholders for the first quarter of 1997. PATRIOT calculated that its portfolio consisted of 54 hotels with 12,559 rooms, and 20 properties with a total of 5,169 rooms under contract or a letter of intent.
71. On April 14, 1997, PATRIOT issued a press release and announced its acquisition of WYNDHAM for approximately $1.1 Billion in stock, cash and assumption of debt. According to the release, the transaction created "the nation's first fully integrated and nationally branded paired-share" hotel REIT. Under the terms of the merger, PATRIOT would acquire WYNDHAM's assets, including its portfolio of 23 hotels and 4,877 rooms, in return for $763 million, including $611 million in PATRIOT stock and $152 million in assumption or retirement of debt. PATRIOT also announced its agreement with Trammell Crow to acquire 11 hotels with 3,072 rooms for about $330 million in cash. PATRIOT expected both transactions to be completed in the fourth quarter of 1997.
72. On April 14, 1997, PATRIOT issued a second press release and announced the signing of a commitment for a $1.4 billion line of credit with a syndicate of lenders, led by PAINEWEBBER, as well as Citicorp, Merrill Lynch and Bankers Trust. The credit facilities were structured as a $600 million revolving credit facility and up to $800 million in term loans. According to PATRIOT's Evans, the credit "will provide adequate financing for Patriot to complete its acquisition of Wyndham Hotel Corporation and 11 hotels from related partnerships, refinance existing debt and fund Patriot's continuing hotel acquisition program." The credit line, secured by PATRIOT's assets, was to bear interest at "variable rates based on spreads over the London Interbank Offered Rate (LIBOR)." The specific interest rates and arrangements were not disclosed.
73. An April 30, 1997, PATRIOT issued a press release and reported "record" first quarter 1997 earnings, including a 163% percent increase in total revenue, a 97% percent increase in FFO, and a 27% increase in FFO per share. These increases were described as a "record growth in revenues" attributable to the company's acquisitions and concomitant focus on asset management strategies. It stated, "We are proud to continue our impressive growth in this year's first quarter and we believe that our performance is a direct tribute not only to the strength of our management team and our lessees, but to our successful strategy of renovating and repositioning our properties as a means of maximizing their market potential."
74. On May 29, 1997, PATRIOT issued a press release and announced that it had replaced the secured $1.4 billion credit facility, offered by PAINEWEBBER, Citicorp, Merrill Lynch and Bankers Trust, with an unsecured $1.2 billion credit facility, offered by PAINEWEBBER and Chase Manhattan. According to the release, PATRIOT negotiated the new arrangements with PAINEWEBBER and Chase Manhattan to achieve more favorable pricing and status as an unsecured borrower. The new facility, to be used for the same purposes previously announced on April 14, was structured as a three-year $700 million unsecured revolving credit facility and a $500 million non-recourse five-year term loan, secured by "a to-be-agreed-upon pool of hotel assets." On May 28, 1997, PATRIOT increased its PAINEWEBBER line of credit to $625 million.
75. On June 19, 1997, PATRIOT issued a press release and announced that, in connection with its acquisition of CJC and BMOC, set for July 1, 1997, PATRIOT would make a dividend distribution of $.3225 per share to PATRIOT shareholders of record, representing PATRIOT's regularly scheduled dividend payment for the second quarter of 1997 of $.2625 per share, together with a special dividend of $.06 per share representing the distribution of its earnings and profits in connection with the merger.
76. On or about June 2, 1997, CJC, BMOC and PATRIOT issued a uniform Joint Proxy Statement and Prospectus to all shareholders regarding the proposed merger. PATRIOT made representations which were false and/or misleading, or which omitted to state material facts necessary in order to make the statements made, in light of the circumstances which they were made, not misleading.
77. The Joint Proxy and Prospectus failed to disclose defendants' true intentions and business strategy to incur substantial debt, through massive short-term debt instruments and equity forward financing contracts, largely underwritten by defendant PAINEWEBBER. For example, at page 71 of the Proxy and Prospectus, defendants told the shareholders of CJC and BMOC on the very important subject of debt:
Patriot has entered into a commitment letter with Painewebber Real Estate and Chase regarding expending and replacing the Line of Credit with the New Credit Facility which Patriot expects will have availability of up to approximately $1.2 billion. The New Credit Facility will consist of a three-year $700 million unsecured revolving line of credit and a 60-month $500 million term loan. It is anticipated that the term loan portion of the New Credit Facility will be secured by specific assets and properties of Patriot (and following the Merger, the assets and properties of New Patriot REIT and New Patriot Operating Company) that will be transferred to a special purpose "bankruptcy remote" entity. The revolving line of credit will be used for the acquisition of additional properties, business and other assets, for capital expenditures and for general working capital purposes. The term loan will be used to finance payments to be made in connection with the Proposed Wyndham Transactions and the acquisition of certain other properties. The interest rates for the New Credit Facility are proposed to be as follows: (i) the revolving line of credit will have an interest rate per annum ranging from LIBOR plus 1.50% to 2.00% (depending on Patriot's leverage ratio) or the customary alternate base rate announced from time to time (the "Alternate Base Rate") plus 0.0% to 0.50% (depending on Patriot's leverage ratio), at the election of the borrower, and (ii) the term loan will have an interest rate per annum equal to LIBOR plus 1.75%. While negotiations concerning the New Credit Facility are ongoing, there can be no assurance that such a credit facility will be obtained, or if obtained, when it will become effective or available or what the specific terms of such credit facility will be.
78. These representations are totally misleading and omits material facts in that it fails to tell the shareholders that substantially all of the $1.2 billion facility was already committed and would dramatically increase PATRIOT's debt, and that PATRIOT intended to increase such debt, at an exorbitant rate, in the succeeding months. Additionally, there are no disclosures about any additional costs, fees, points, prepayments penalties which is all material information.
79. In fact, PATRIOT planned to enter into equity forward contracts with the assistance of defendant PAINEWEBBER and failed to inform BAY MEADOWS' shareholders. An equity forward contract is debt that the borrower agrees to repay from equity pegged at a price in the future. The company bets that its stock price will increase so the loan can be covered. If the stock drops, the company loses the bet and must pay the loan from other sources. PATRIOT received a $95 million equity forward with UBS, a $125 million equity forward with NationsBanc Montgomery Securities and a $139 million equity forward with PAINEWEBBER. As of March 18, 1999, PATRIOT had delivered 79 million shares to these parties as collateral, in addition to about 12.5 million paired shares already owned by them. There are no disclosures of any equity forward contracts, nor the obligations incurred as a result of such debt by PATRIOT, in the Prospectus.
80. PATRIOT retained PAINEWEBBER on August 23, 1996 to act as financial advisor in connection with the possible merger with BAY MEADOWS, and in such capacity, participated in negotiations with the parties and rendered financial advice to PATRIOT. However, at the same time, PAINEWEBBER agreed to provide a fairness opinion regarding the value of BAY MEADOWS. On October 29, 1996, PAINEWEBBER delivered its opinion, which it knew would be included in the Joint Proxy and Prospectus sent to shareholders.
81. While defendants disclosed the general nature of PAINEWEBBER's work for PATRIOT, the Joint Proxy and Prospectus fails to disclose the existence of a conflict of interest, and indeed, explicitly makes the opposite conclusion:
During the negotiations which eventually resulted in the execution of the October 31, 1996 Agreement, PaineWebber engaged in discussions with Patriot regarding a potential acquisition by PaineWebber or an affiliate thereof of certain of the real estate assets of Cal Jockey following consummation of the transactions contemplated by the October 31, 1996 Agreement. See "--Background of the Merger." These discussions, however, had terminated prior to the time that PaineWebber had finalized the valuation analyses described above and delivered its fairness opinion to the Patriot Board of Directors. Thus, neither Patriot nor PaineWebber believe that PaineWebber had any conflict of interest at the time that PaineWebber delivered the PaineWebber Opinion. In December 1996, PaineWebber and Patriot resumed such discussions and subsequently reached an agreement in principle pursuant to which an affiliate of PaineWebber would purchase substantially all of the land owned by Cal Jockey following consummation of the Merger for a purchase price of $78.05 million in cash. See "The Companies--Surviving Companies--Proposed PaineWebber Land Sale."
82. PAINEWEBBER was PATRIOT's long-time investment advisor. PAINEWEBBER helped PATRIOT finance its early hotel acquisitions, and took the company public as a REIT. PATRIOT was one of PAINEWEBBER's biggest clients and with the BAY MEADOWS merger, it also become its lender and lessor creating conflicts of interest which were undisclosed.
83. PAINEWEBBER advised PATRIOT against entering into equity forward debt and instead recommended that PATRIOT sell stock. However, when PAINEWEBBER saw that PATRIOT could obtain equity forward programs from other lenders, it was afraid that it would lose PATRIOT's business and thus entered into equity forward programs with PATRIOT for $139 million, which PAINEWEBBER knew to be risky to PATRIOT because of PATRIOT's financial condition and which PAINEWEBBER knew created a conflict of interest. PAINEWEBBER was also an advisor, lessor, and lender to PATRIOT. Because of this conflict of interest, it has been able to purchase hotels from PATRIOT at lower-than-market prices and decreased the number of hotel properties owned by PATRIOT, hotels on which PATRIOT depended upon for income.
84. In October 1995, PAINEWEBBER served as the underwriter for PATRIOT's initial public offering, along with Montgomery Securities, Salomon Brothers Inc. and Smith Barney Inc. In connection with the initial offering, PATRIOT obtained a line of credit for up to $165 million from PAINEWEBBER's real estate affiliate, PaineWebber Real Estate, to fund the acquisition of additional hotels, renovations, and for general working capital purposes. The line of credit matured in October 1998. In January 1997, the line of credit was increased to $475 million, of which PATRIOT had over $471 million outstanding at the time the Joint Proxy and Prospectus was distributed to plaintiffs, secured by 38 of PATRIOT's then 56 hotels. In addition, prior to the merger, PATRIOT entered into a commitment letter with PAINEWEBBER and Chase to expand and replace the line of credit with a new credit facility for $1.2 billion, and PAINEWEBBER agreed to increase PATRIOT's line of credit from $475 million to $625 million.
85. Prior to the merger, and at the time the Joint Proxy and Prospectus was distributed to plaintiffs, PATRIOT agreed to sell substantially all of CJC's land holdings to PAINEWEBBER's real estate affiliate, including the land subject to the Franklin and Iaccoca agreements, following the merger, for approximately $78 million. Under the agreement, PATRIOT retained ownership of the improvements on the land, and PAINEWEBBER only had to grant a seven-year ground lease covering the land on which the racecourse was situated.
86. PAINEWEBBER gave a misleading valuation of the true value of PATRIOT, upon its acquisition of the paired share structure from BAY MEADOWS, making it more attractive to the BAY MEADOWS shareholders than it actually was to induce the shareholders to vote in favor of the merger. At several points, including pages 46 and 47 of the Joint Proxy and Prospectus, the shareholders were advised that PAINEWEBBER valued the shares at between $33 and $39 per share:
In connection with rendering its fairness opinion, Painewebber advised Patriot's Board of Directors that the individual valuations of the assets and business of Cal Jockey and Bay Meadows (including the paired share structure) produced a valuation range per Paired Share of between $33.48 and $39.50. See "The Merger and Subscription - Opinion of Patriot's Financial Advisor." In connection with rendering its fairness opinion, Montgomery advised Cal Jockey's and Bay Meadows' Boards of Directors that the analyses performed by Montgomery and described to the Cal Jockey and Bay Meadows Boards of Directors indicated a potential implied equity value range per Paired Share of between $15.00 and $18.50. See "The Merger and Subscription - Opinion of Financial Advisor for Cal Jockey and Bay Meadows." A significant reason for the two different ranges is that, in their respective fairness analyses, Montgomery attempted to determine the value of the paired share structure currently realized by Cal Jockey and Bay Meadows, which Painewebber attempted to determine the value of the paired share structure that could be realized by Patriot.
87. There was no disclosure that PAINEWEBBER had a conflict of interest due to its relationship with PATRIOT, and as a beneficiary of the merger transaction.. Additionally, there was no discussion regarding the difficulty of achieving the results deemed necessary to warrant the higher value, nor was there any risk analysis.
88. As PAINEWEBBER knew that PATRIOT would carry an increasing and substantial debt, and extremely high debt-to-total-market-capitalization ratios in the REIT industry, particularly for hotel REIT's, the company would be put in high risk. Hotel REIT's tend to be more conservative about taking on debt, because the business is more cyclical than other types of real estate, with higher fixed costs. This would lead to a potential great risk to the shareholders.
89. PATRIOT, including defendants NEW PATRIOT REIT and WYNDHAM, and their predecessor entities, through their officers and directors, including Paul Nussbaum, the former Chief Executive Officer and Chairman of the Board of Directors of NEW PATRIOT REIT and a director of WYNDHAM, William W. Evans, III, the President, Chief Operating Officer and director of NEW PATRIOT REIT and Executive Vice President of WYNDHAM, and James D. Carreker, Chief Executive Officer and Chairman of the Board of Directors of NEW PATRIOT REIT and WYNDHAM, controlled and/or possessed the power and authority to control the contents of the information disseminated by defendants to the plaintiff class. On behalf of PATRIOT, the officers and directors, including Nussbaum and Evans, and after the WYNDHAM merger, Carreker, signed documents included within the Joint Proxy Statement and Prospectus (Nussbaum only), and/or the filings submitted to the Securities & Exchange Commission, participated in the issuance of press releases and other public statements, in which they were quoted, had day-to-day involvement with PATRIOT, and were the primary decision-makers for the company. By virtue of their positions at PATRIOT, and their access to public and non-public information available to them (and not to the investing public), the officers and directors, including Nussbaum, Evans and/or Carreker, knew that each of the adverse facts specified herein had not been disclosed and were being concealed from the investing public, and that the positive representations being made were thereby rendered false and misleading. PATRIOT, through its officers and directors, had the motive to allow the false statements and omissions in order to cause and ensure PATRIOT's merger with BAY MEADOWS. NEW PATRIOT REIT and WYNDHAM controlled defendants PAH GP, INC., PAH LP INC., PATRIOT PARTNERSHIP and WYNDHAM PARTNERSHIP.
90. Defendant PAINEWEBBER, through its officers and directors, acted as the underwriter, market maker and financial advisor to the pre-merger companies of PATRIOT, as well as the new merged entities. PAINEWEBBER provided financial advisory and investment banking services, engaged in full discussions with the merging companies, issued a fairness opinion, and assisted with the preparation and dissemination of the Prospectus and filings with the Securities and Exchange Commission. During the negotiations with CJC, William W. Evans III was a managing director in PAINEWEBBER's Real Estate group which structured the purchase by PAINEWEBBER of the 175 acres of real property owned by BAY MEADOWS following the merger. In March 1997, just prior to the merger, Evans began serving in the office of the chairman of PATRIOT advising Nussbaum on the merger details. At all relevant times, both PAINEWEBBER, through its officers and directors, and Evans, knew that each of the adverse facts specified herein had not been disclosed and were being concealed from the investing public, and that the positive representations being made were thereby rendered false and misleading. PAINEWEBBER, through its officers and directors, had the motive to allow the false statements and omissions in order to cause and ensure PATRIOT's merger with BAY MEADOWS.
91. On July 1, 1997, PATRIOT announced that shareholders of PATRIOT, CJC and BMOC voted in favor of PATRIOT's merger with CJC and BMOC, to become one of only two paired-share hotel REIT's in the country. Immediately after the closing, PATRIOT's Nussbaum called the merger a "springboard for the company's strategic growth" and stated, "since we announced our agreement to acquire California Jockey and Bay Meadows last October, we've proceeded with our aggressive acquisition strategy to ensure that we can put the paired structure to use immediately following the closing. . . . [D]espite the lengthy amount of time this merger has taken to complete, I'm extremely proud to say that because we have focused on establishing the components of our paired operating structure, we are ready to begin leasing properties to our paired operating company. In addition, we have approximately 11 hotel properties under contract or letter of intent that, when closed, also will be leased to our paired operating company. All totaled, we expect the completion of our merger with California Jockey to amplify our growth potential, particularly as we proceed with our acquisition of Grand Heritage Hotels and our merger with Wyndham Hotel Corporation later this year."
92. As part of the merger, each PATRIOT share was converted into the right to receive 0.51895 shares of both the REIT and the operating company. As of July 1, 1997, PATRIOT's closing price on the New York Stock Exchange was $24 per share (after application of the exchange ratio, $46.24 per share). PATRIOT also announced a two-for-one stock split in the form of a stock dividend, with a record date of July 15, 1997. According to the release, PATRIOT's then portfolio consisted of 56 hotels and 13,354 rooms, with another 15 hotels and 3,745 rooms under contract or letter of intent. As of the merger on July 1, 1997, PATRIOT's debt was approximately $482.9 million, or less than 31% of total market capitalization.
93. On July 2, 1997, PATRIOT issued a press release and announced a joint venture with the Snavely Group, to acquire four Ohio hotels and 705 rooms for about $40 million in cash. PATRIOT invested 90% and the Snavely Group invested 10% in the $51 million acquisition of the four properties, which includes the assumption of a $5.825 million first mortgage loan on one of the hotels.
94. On July 21, 1997, PATRIOT issued a press release and announced its sale of BAY MEADOWS' entire 175 acres of land in San Mateo to PAINEWEBBER's affiliate, PW Acquisitions IV, LLC, for $81 million in cash. As part of the transaction, PATRIOT retained the BAY MEADOWS racetrack improvements and agreed to lease the facility pursuant to a seven-year ground lease. PATRIOT's operating company would manage the facility. According to Nussbaum, divesting of the land under and surrounding the racetrack while retaining the residual racing dates "complimented" the company's focus on hotel operations and future acquisitions, rather than unrelated land development. "In light of the explosive real estate market in northern California right now, we believed that selling this land a this juncture will allow us to re-deploy our capital in our hospitality and leisure core businesses."
95. On July 23, 1997, PATRIOT issued a press release and announced that it had closed on the first stage of its $1.2 billion credit facilities arranged with PAINEWEBBER, the $700 million unsecured revolving credit line. PATRIOT announced that the remaining $500 term loan with PAINEWEBBER and Chase Manhattan was expected in the Fall with the close of the WYNDHAM acquisition. PATRIOT immediately used the credit line to repay its existing debt. PATRIOT's Evans stated, "Our new unsecured credit facility provides us with significant balance sheet flexibility and will be important for the financing of our acquisition of Wyndham and other hotel properties, aw well as other pending acquisitions in the near future. This significant credit facility also represents our first step toward our goal of becoming a rated credit in the capital market."
96. On July 24, 1997, PATRIOT issued a press release and announced that it had completed the acquisition of the 219-room Ambassador West hotel in Chicago and the 124-room Union Station hotel in Nashville for the aggregate price of $25.45 million. PATRIOT claimed the acquisitions enhanced the company's growing portfolio of unique full-service landmark and historic hotels. Nussbaum said, "We believe that acquiring landmark properties like the Union Station Hotel and the Ambassador West distinguishes Patriot from our competitors, first by underscoring our commitment to owning high-quality assets and second, by allowing us to establish ourselves in central business districts of major cities with high barriers to entry." At the time, PATRIOT's portfolio comprised of 64 hotels and 14,950 rooms, with another six hotels and 1,883 rooms under contract or letter of intent.
97. On July 29, 1997, PATRIOT issued a press release and announced that it had completed an offering of 9.2 million paired shares of common stock, "pursuant to an existing shelf registration statement" which PAINEWEBBER assisted in and led the underwriting group. The offering, priced at $24 per paired share, generated gross proceeds of $220.8 million, with net proceeds expected to total approximately $210 million. According to PATRIOT's release, the proceeds were to be used to reduce outstanding debt incurred on the companies' revolving credit facility. Assuming all of the proceeds were applied to PATRIOT's outstanding debt, the total debt would be approximately $523.8 million or 23 percent of PATRIOT's total market capitalization.
98. On August 1, 1997, PATRIOT issued a Letter to Shareholders, and a related press release to announce its financial results for the second quarter ended June 30, 1997. According to PATRIOT, compared to the first six months of 1996, total revenue jumped 133 percent to reach $77.0 million, funds from operations (FFO) jumped 78 percent to reach $47.4 million, and net income jumped 46.5 percent to reach $23.2 million. PATRIOT stated the positive results would improve with the merger with BAY MEADOWS, "the quarter's results also reflected Patriot's focus on completing our merger with California Jockey Club and Bay Meadows Operating Company. As a result, we delayed the completion of various hotel acquisitions in order to complete the merger and more fully utilize our new paired-share ownership structure. With the merger completed on July 1, we acquired eight hotel properties in July alone, six of which have been leased to our paired operating company."
99. On August 7, 1997, PATRIOT issued a press release and announced two "swap transactions" with Morgan Guaranty Trust Company to fix the interest rates on $250 million of PATRIOT's $700 million revolving line of credit facility. Under the two agreements, effective August 4 and 5, 1997, respectively, PATRIOT exchanged its LIBOR floating rates for an average fixed rate of 6.17 percent over a 63-month period, with the first monthly payment due on September 1, 1997.
100. On August 21, 1997, PATRIOT issued a press release and announced its acquisition of the Park Shore hotel in Honolulu for $24 million. On September 8, 1997, PATRIOT issued a press release and announced its acquisition from Metropolitan Life of four Doubletree Hotels in Anaheim, Houston, Kansas City and St. Louis, for a purchase price of $146.5 million. On September 19, 1997, PATRIOT issued a press release and announced its acquisition of the Buttes resort in Tempe, Arizona for $63.6 million.
101. On October 1, 1997, PATRIOT issued separate press releases which announced its acquisition of the hospitality management assets of Gencom American Hospitality of Houston, and the hospitality business of Carnival Hotels and Resorts of Miami, including ten hotels and Gencom's and Carnival's joint-venture lessee, CHC Lease Partners, PATRIOT's largest third-party lessee. PATRIOT purchased the properties, valued at $485 million, with the payment of cash, assumed debt, preferred stock, and OPERATING PARTNERSHIP interests. PATRIOT also announced its acquisition of WHG Resorts & Casinos Inc., of Puerto Rico, in a stock deal valued at $148 million, which represented PATRIOT's "debut in the casino gaming industry." "While this will be our first experience with gaming operations, we are pleased to be acquiring three of the most distinctive and appealing casinos in the Caribbean," said Nussbaum. As a result of these transactions, PATRIOT's portfolio increased to 82 hotels with approximately 21,456 rooms.
102. On November 5, 1997, PATRIOT issued a press release and announced a quarterly dividend of $0.32 per share for the fourth quarter ended December 31, 1997, a 22 percent increase from $0.2625 per share for the previous four quarters. PATRIOT's Nussbaum stated, "This dividend increase represents our confidence in Patriot American's abilities to recognize and seize opportunities, and to continue our growth as a major force in the hospitality and leisure industries."
103. On November 6, 1997, PATRIOT issued a press release and announced its earnings for the third quarter of 1997, its first quarter of combined earnings since acquiring Bay Meadow's paired share structure in July 1997. PATRIOT announced that total combined revenue increased by 235 percent, totaling $81.8 million in the 1997 third quarter, compared to $24.4 million in 1996, and that combined funds from operation (FFO) increased 57 percent to $30.7 million, or 43 cents per share, compared to $19.5 million, or 42 cents per share, for the same period of 1996. PATRIOT stated that their combined net loss for the period of $27.1 million, or 43 cents per share, resulted from a one-time write-off of $43.8 million of costs related to PATRIOT's acquisition of certain assets of its largest lessee, CHC Lease Partners, and writ-off of deferred loan costs of $2.9 million.
104. On December 2, 1997, PATRIOT issued a press release and announced an agreement with Interstate Hotels Company for Interstate to merge with and into PATRIOT. Interstate was the largest independent hotel management company in the United States. As a result of the merger agreement, PATRIOT was to acquired Interstate's portfolio of 40 hotels with about 11,580 rooms, for $37.50 per share in cash and paired stock. According to PATRIOT, when combined with Interstate's outstanding debt of about $785 million, the total transaction value was about $2.1 billion. According to PATRIOT, with the completion of the Interstate merger, as well as the pending acquisition of Wyndham and WHG Hotels & Casinos, PATRIOT's hotel portfolio will be comprised of 156 owned hotels with more than 40,000 rooms.
105. On December 31, 1997, PATRIOT issued a press release and announced the shareholder approval of Wyndham Hotel Corporation's merger with and into PATRIOT. In connection with the merger, consummated on January 5, 1998, NEW PATRIOT OPERATING COMPANY changed its name to "Wyndham International, Inc." and PATRIOT paired with Wyndham continued to trade on the New York Stock Exchange. PATRIOT also announced a private placement offering of 3,250,000 paired shares at a net price of $28.8125 per paired share to Union Bank of Switzerland, proceeds of which were to be used to reduce indebtedness of PATRIOT's unsecured revolving credit facility. In February 1998, PATRIOT, Wyndham and Interstate Hotels merged, and PATRIOT was the surviving company. This merger positioned PATRIOT as the nation's number two REIT and one of only two paired-share hotel REITs in the country.
106. In March 1998, Marriott International, Inc. sued to block PATRIOT's acquisition of Interstate. The dispute centered on the Marriott hotels which Interstate owned or managed. As a result of extended negotiations, a settlement agreement was entered into that in which PATRIOT agreed to spin off the Interstate management company, an important money generating asset.
107. In June 1998, PATRIOT obtained $1.45 billion in financing from Chase Manhattan and PAINEWEBBER to complete the acquisition of Interstate Hotels. These loans included a $400 million one-year loan, a $450 million two-year loan and a $600 million five year loan.
108. In late 1998, in stark contrast to glowing public reports by PATRIOT prior to its merger with BAY MEADOWS, stock analysts and industry experts began to seriously question the many acquisitions made by PATRIOT, focusing on the dramatic spiral in PATRIOT's stock value and the high degree of risk associated with the type of loans PATRIOT was taking on. Serious questions were starting to be asked about the amount of lending and expenses being incurred.
109. By October 1998, PATRIOT owed $192 million to UBS and PAINEWEBBER. As of the end of the third quarter 1998, PATRIOT had about $3.8 billion in total debt. For the third quarter 1998, PATRIOT reported a net loss of $59.4 million or $1.09 per share on revenue of $603.9 million. By November of 1998, lender UBS said that PATRIOT was in default on one forward equity contract. PATRIOT agreed to sell a group of seven hotels and controlling interest in its Interstate Hotel Management, Inc. for $165 million to affiliates of PaineWebber Real Estate Securities Inc. As part of the deal, PAINEWEBBER also agreed to extend the term of $138 million in debt. PATRIOT also agreed to sell interests in four hotels to one of its directors, Milton D. Fine.
110. By December of 1998, PATRIOT's stock had plummeted to approximately $8 per share because it could not service the massive debt that had been taken on through the undisclosed use equity forward debts. Essentially, defendants obtained the tax benefits of a financially solid company, BAY MEADOWS, through false and misleading material in the 1997 merger documents, and then proceeded to decimate it, through its PATRIOT existence, because of their greed and misdeeds.
111. To the benefit of defendant PAINEWEBBER, through the collection of massive fees, PATRIOT went on a buying spree of over 450 hotels financed through a scheme of financing that bet the entire assets of the company on the price of the stock on any given day. The undisclosed financing scheme forced the company to issue more shares of stock to cover the outstanding loans thereby diluting its pool of existing stock. Over the year 1998, PATRIOT's shares lost almost 75% of their value because of the scheme devised by PATRIOT management and PAINEWEBBER, its financial advisor.
112. In February 1999, PATRIOT sold its interests in the Bay Meadows racetrack for $3.4 million, after payment of legal costs and other closing costs. PATRIOT also terminated its lease to WYNDHAM for the racecourse facilities.
113. In March 1999, an investor group which includes the Apollo group, which has long-established relationships with Nussbaum, agreed to make an equity investment of up to $1 billion to PATRIOT. Under the terms of the agreement, the investor group will purchase $1 billion of 9.75% convertible stock, callable after six years with an initial conversion price of $8.59 per share. The funds will be used to retire the forward equity obligations. The Apollo group's initial stake will be between 29% to 41% and it will hold eight of the company's 19 board seats. As part of the deal, PATRIOT agreed to pay million in fees, including approximately $52 million to Apollo for transaction expenses, $75 million to banks to refinance the debt and $40 million to various advisers, including lawyers, investment bankers and accountants.
114. Recently, as a result of its wrongdoing, PATRIOT announced that it was giving up its REIT status to become a C-corporation, and as a result, would not have to pay out most of its net income to shareholders in the form of dividends, exactly the opposite of what was told to the shareholders in June 1997 at the time of the merger.
115. Plaintiffs incorporate all of the above as set forth above. This claim is asserted by plaintiffs and the Class against all defendants for violation of Section 10(b) of the 1934 Act, and Rule 10b-5 promulgated thereunder.
116. During the Class Period, defendants, and each of them, individually and in concert, engaged in a plan, scheme, and unlawful course of conduct pursuant to which they knowingly and recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud upon plaintiffs and other members of the Class. Defendants made untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading which operated as a fraud and deceit upon plaintiffs and the Class who received PATRIOT stock as part of the BAY MEADOWS/PATRIOT merger. 117. The purpose and effect of this scheme was to artificially inflate the price of PATRIOT's stock to induce the shareholders of BMOC and CJC to accept the offer of PATRIOT stock offered in exchange for their stock holdings, at artificially inflated prices. During the Class Period, defendants issued public statements and reports, including the May 30, 1997 Joint Proxy Statement and Prospectus, as described herein above, were materially false and misleading in violation of Section 10(b) and Rule 10(b)-5.
118. Each of the defendants knew or recklessly disregarded the facts that the above acts and practices, misleading statements and omissions would adversely affect the integrity of the market in PATRIOT common stock and artificially inflate or maintain the prices of such stock. Defendants, by acting as described herein, did so knowingly or in such a reckless manner as to constitute a fraud and deceit upon plaintiffs and the Class.
119. As a result of the dissemination of the false and misleading statements, the market price of PATRIOT's common stock was artificially inflated at the time of the merger. In ignorance of the adverse facts concerning PATRIOT's business concealed by the defendants, plaintiffs and members of the Class accepted PATRIOT stock in exchange for their BAY MEADOWS stock at artificially inflated prices, relying upon the integrity of the market, and were damaged thereby.
120. Plaintiffs incorporate all of the above as set forth above. This claim is asserted by plaintiffs and the Class against all defendants for violation of Section 11 of the 1933 Act.
121. Defendants, and each of them, violated Section 11 of the 1933 Act in that the Joint Proxy and Prospectus for the merger contained untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading.
122. Defendants, and each of them, had the duty of conducting a "due diligence" investigation of the information contained in the Joint Proxy and Prospectus for the merger before the dissemination to shareholders and the merger, and failed to satisfy that duty. Defendants, and each of them, owed to the former BAY MEADOWS' shareholders, including plaintiffs and the Class, the duty to ensure that the statements contained in the Joint Proxy and Prospectus were true and complete and that there was no omission to state material facts required to be stated in order to make the statements contained therein not misleading. By virtue of the misrepresentations and omissions contained in or omitted from the Joint Proxy and Prospectus, as herein alleged, defendants, and each of them, are liable to plaintiffs and the Class.
123. Defendants, and each of them, issued, caused to be issued and participated in the issuance of materially false and misleading written statements to plaintiffs and the Class which were contained in the Joint Proxy Statement and Prospectus, which misrepresented or failed to disclose the facts set forth above. By reason of the conduct herein alleged, defendants violated Section 11 of the 1933 Act.
124. Plaintiffs and the Class acquired their PATRIOT common stock without the knowledge of the untruths and/or omissions contained herein.
125. As a direct and proximate result of defendants' misconduct and material misstatements and omissions contained in the Joint Proxy and Prospectus, plaintiffs and the Class suffered substantial damages in connection with the exchange of stock from the merger between BAY MEADOWS and PATRIOT. 126. This action was brought within one year after the discovery of the untrue statements and omissions (and within one year after such discovery should have been made in the exercise of reasonable diligence) and within three years after the merger between BAY MEADOWS and PATRIOT.
127. Plaintiffs incorporate all of the above as set forth above. This claim is asserted by plaintiffs and the Class against all defendants for violation of Section 12(2) of the 1933 Act.
128. The defendants, and each of them, violated Section 12(2) of the 1933 Act by virtue of their participation in the merger, and dissemination of the Joint Proxy and Prospectus, and the exchange of stock. The defendants, and each of them, actively and jointly caused to be drafted, revised and approved the Registration which was provided to plaintiffs and the Class, finalized it and caused it to become effective. Defendants, and each of them, acted by the use of means or instruments of transportation or communication in interstate commerce, or of the mails, by means of the Joint Proxy and Prospectus, which included untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, as alleged above.
129. Plaintiffs and members of the Class did not know of such untruths or omissions and could not in the exercise of reasonable care have known of such untruths or omissions.
130. But for these defendants having drafted, filed, signed and/or distributed the Joint Proxy Statement and Prospectus, the merger between BAY MEADOWS and PATRIOT would not have closed and plaintiffs and the Class, ultimately through the merger, would not have received PATRIOT common stock.
131. Absent the selling efforts by defendants, the merger between BAY MEADOWS and PATRIOT could not and would not have been accomplished. At all relevant times, these defendants knew, or in the exercise of reasonable care should have known, of the misstatements and omissions contained in the Joint Proxy Statement and Prospectus, as set forth above.
132. Because of the conduct alleged herein, defendants have violated Section 12(2) of the 1933 Securities Act. As a direct and proximate cause of the defendants' violation of Section 12(2), plaintiffs and members of the Class have sustained damage, including injuries in connection with their transfer of BAY MEADOWS' stock for, ultimately, stock of PATRIOT. Plaintiffs and the Class seek rescission to recover the consideration paid for such securities, with interest thereon, or to receive payment from the defendants for damages sustained. Plaintiffs hereby tender their PATRIOT shares to defendants in exchange for the value of the consideration paid or transferred for such shares, plus interest. In the alternative, plaintiffs and the Class seek recovery of damages in an amount to be proven at trial.
133. Plaintiffs and members of the Class have sustained substantial damage, including injuries in connection with their transfer of BAY MEADOWS' stock for, ultimately, stock of PATRIOT. As of March 1997, both CJC and BMOC had 5,763,257 shares of common stock outstanding, which shares were trading at a per share price of $46.00. After a July 1997 stock split, the shares are now worth about $5.00 per share.
134. Plaintiffs and members of the Class, have also lost the primary assets previously belonging to BAY MEADOWS, including substantial portions of the land and racetrack, which was sold to third parties. In February 1999, PATRIOT sold its interests in the Bay Meadows racetrack for $3.4 million, after payment of legal costs and other closing costs. PATRIOT also terminated its lease to WYNDHAM for the racecourse facilities.
135. Plaintiffs have made the foregoing allegations based upon the investigation of their counsel, which included, among other things, a review of the Joint Proxy and Prospectus of June 2, 1997, press releases issued by PATRIOT, media reports about PATRIOT and discussions with consultants. Plaintiffs believe that substantial evidence exists for the allegations set forth in this Complaint.
WHEREFORE, plaintiffs, on behalf of themselves and the plaintiff class, pray for judgment as follows:
1. Declaring this action to be a proper class action pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of the Class defined herein, and declaring plaintiffs to be proper class representatives and plaintiffs' counsel as counsel for the class;
2. Awarding plaintiffs and all members of the class compensatory damages in an amount to be proven at trial;
3. Awarding plaintiffs and members of the Class pre-judgment interest, as well as reasonable attorneys' fees, expert witness fees and other costs;
4. Awarding such other relief as this Court may deem just and proper.
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Dated: May ___, 1999 |
COTCHETT, PITRE & SIMON By: ______________________________ Attorneys for Plaintiffs and the Class |
Plaintiffs demand a trial by jury.
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Dated: May ___, 1999 |
COTCHETT, PITRE & SIMON By: ______________________________ Attorneys for Plaintiffs and the Class |
I, Doris Johnson, declare as to the claims asserted under the federal securities laws:
1. I am a named Plaintiff in the Complaint against PATRIOT AMERICAN HOSPITALITY, INC., WYNDHAM INTERNATIONAL, INC., PAH GP, INC., PAH LP, INC., PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P., WYNDHAM INTERNATIONAL OPERATING PARTNERSHIP, L.P., and PAINE WEBBER GROUP, INC., which is being filed on my behalf and on behalf of all others similarly situated. I make this sworn certification pursuant to 15 U.S.C. §78 u-4(a)(2).
2. I have reviewed the Complaint, which is being filed on my behalf and on behalf of all others similarly situated, and I authorized it to be filed.
3. I did not purchase the securities that are the subject of this action, namely shares of California Jockey Club, Bay Meadows Operating Company, Patriot American Hospitality, Inc., Patriot American Hospitality Operating Company or Wyndham International, Inc., at the direction of Plaintiffs' counsel nor to participate in any private action arising under 15 U.S.C. §§78 a, et. seq.
4. I am willing to serve as a plaintiff class representative, including providing testimony at deposition and trial, if necessary.
5. During the Class Period specified in the Complaint, I made the following transaction(s) in securities that are the subject of this action: I owned paired shares of California Jockey Club and Bay Meadows Operating Company, which I exchanged as part of a merger with Patriot American Hospitality, Inc. Pursuant to the merger stock exchange on July 1, 1997, I acquired and currently own 60,000 shares of Patriot American Hospitality, Inc., as well as Patriot American Hospitality Operating Company, which is now called Wyndham International, Inc.
6. During the three year period prior to the date of this certification, I have neither sought to serve nor served as a representative party on behalf of a class in any action under the Securities Exchange Act of 1934.
7. I agree not to accept any payment for serving as a representative party on behalf of the class beyond my pro rata share of any recovery, except such reasonable costs and expenses (including loss wages) directly relating to the representation of the class, as ordered or approved by the Court.
I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed this ___ day of May 1999 at ____________________, California.
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I, Charles Dougherty, declare as to the claims asserted under the federal securities laws:
1. I am a named Plaintiff in the Complaint against PATRIOT AMERICAN HOSPITALITY, INC., WYNDHAM INTERNATIONAL, INC., PAH GP, INC., PAH LP, INC., PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P., WYNDHAM INTERNATIONAL OPERATING PARTNERSHIP, L.P., and PAINE WEBBER GROUP, INC., which is being filed on my behalf and on behalf of all others similarly situated. I make this sworn certification pursuant to 15 U.S.C. §78 u-4(a)(2).
2. I have reviewed the Complaint, which is being filed on my behalf and on behalf of all others similarly situated, and I authorized it to be filed.
3. I did not purchase the securities that are the subject of this action, namely shares of California Jockey Club, Bay Meadows Operating Company, Patriot American Hospitality, Inc., Patriot American Hospitality Operating Company or Wyndham International, Inc., at the direction of Plaintiffs' counsel nor to participate in any private action arising under 15 U.S.C. §§78 a, et. seq.
4. I am willing to serve as a plaintiff class representative, including providing testimony at deposition and trial, if necessary.
5. During the Class Period specified in the Complaint, I made the following transaction(s) in securities that are the subject of this action: I owned paired shares of California Jockey Club and Bay Meadows Operating Company, which I exchanged as part of a merger with Patriot American Hospitality, Inc. Pursuant to the merger stock exchange on July 1, 1997, I acquired and currently own 33,232 shares of Patriot American Hospitality, Inc., as well as Patriot American Hospitality Operating Company, which is now called Wyndham International, Inc.
6. During the three year period prior to the date of this certification, I have neither sought to serve nor served as a representative party on behalf of a class in any action under the Securities Exchange Act of 1934.
7. I agree not to accept any payment for serving as a representative party on behalf of the class beyond my pro rata share of any recovery, except such reasonable costs and expenses (including loss wages) directly relating to the representation of the class, as ordered or approved by the Court.
I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed this ___ day of May 1999 at ____________________, California.
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Source: File to epost from Cotchett, Pitre & Simon