AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

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WYNDHAM INTERNATIONAL INC | WIND HOTELS HOLDINGS INC | WIND HOTELS ACQUISITION INC | WYNDHAM INTERNATIONAL, INC

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Delaware Date: 6/15/2005
Industry: Hotels and Motels Law Firm: Simpson Thacher & Bartlett LLP; Paul, Weiss, Rifkind, Wharton & Garrison LLP Sector: Services

AGREEMENT AND PLAN OF MERGER, Parties: wyndham international inc , wind hotels holdings inc , wind hotels acquisition inc , wyndham international inc

EXHIBIT 2.1

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EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

WIND HOTELS HOLDINGS INC.,

WIND HOTELS ACQUISITION INC.

AND

WYNDHAM INTERNATIONAL, INC.

DATED AS OF JUNE 14, 2005

<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE I THE MERGER...............................................2

SECTION 1.1 THE MERGER...............................................2

SECTION 1.2 CLOSING..................................................2

SECTION 1.3 EFFECTIVE TIME...........................................3

SECTION 1.4 EFFECTS OF THE MERGER....................................3

SECTION 1.5 CERTIFICATE OF INCORPORATION.............................3

SECTION 1.6 BYLAWS...................................................3

SECTION 1.7 DIRECTORS................................................3

SECTION 1.8 OFFICERS.................................................3

SECTION 1.9 OTHER TRANSACTIONS.......................................3

ARTICLE II EFFECT OF THE MERGER ON CAPITAL STOCK....................4

SECTION 2.1 CONVERSION OF CAPITAL STOCK..............................4

SECTION 2.2 SURRENDER OF CERTIFICATES................................5

SECTION 2.3 STOCK OPTIONS AND RESTRICTED UNIT AWARDS.................7

SECTION 2.4 DISSENTING SHARES........................................8

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............8

SECTION 3.1 ORGANIZATION AND POWER...................................9

SECTION 3.2 FOREIGN QUALIFICATIONS...................................9

SECTION 3.3 CORPORATE AUTHORIZATION..................................9

SECTION 3.4 ENFORCEABILITY...........................................9

SECTION 3.5 ORGANIZATIONAL DOCUMENTS................................10

SECTION 3.6 MINUTE BOOKS............................................10

SECTION 3.7 SUBSIDIARIES............................................10

SECTION 3.8 GOVERNMENTAL AUTHORIZATIONS.............................10

SECTION 3.9 NON-CONTRAVENTION.......................................11

SECTION 3.10 CAPITALIZATION; OPTIONS.................................12

SECTION 3.11 VOTING..................................................14

SECTION 3.12 SEC REPORTS.............................................14

SECTION 3.13 FINANCIAL STATEMENTS....................................15

SECTION 3.14 LIABILITIES.............................................15

SECTION 3.15 ABSENCE OF CERTAIN CHANGES..............................15

SECTION 3.16 LITIGATION..............................................16

SECTION 3.17 CONTRACTS...............................................16

SECTION 3.18 BENEFIT PLANS...........................................18

SECTION 3.19 EXECUTIVE AND DIRECTOR LOANS............................21

SECTION 3.20 LABOR RELATIONS.........................................22

SECTION 3.21 TAXES...................................................22

SECTION 3.22 ENVIRONMENTAL MATTERS...................................23

SECTION 3.23 INTELLECTUAL PROPERTY...................................24

SECTION 3.24 REAL PROPERTY...........................................25

<PAGE>

PAGE

SECTION 3.25 PERSONAL PROPERTY.......................................27

SECTION 3.26 PERMITS; COMPLIANCE WITH LAWS...........................27

SECTION 3.27 INSURANCE...............................................28

SECTION 3.28 TAKEOVER STATUTES.......................................28

SECTION 3.29 INTERESTED PARTY TRANSACTIONS...........................28

SECTION 3.30 OPINION OF FINANCIAL ADVISOR............................29

SECTION 3.31 RIGHTS AGREEMENT........................................29

SECTION 3.32 BROKERS AND FINDERS.....................................29

SECTION 3.33 INFORMATION SUPPLIED....................................29

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT................30

SECTION 4.1 ORGANIZATION AND POWER..................................30

SECTION 4.2 CORPORATE AUTHORIZATION.................................30

SECTION 4.3 ENFORCEABILITY..........................................30

SECTION 4.4 GOVERNMENTAL AUTHORIZATIONS.............................30

SECTION 4.5 NON-CONTRAVENTION.......................................31

SECTION 4.6 INTERIM OPERATIONS OF MERGER SUB........................32

SECTION 4.7 CAPITAL RESOURCES.......................................32

SECTION 4.8 ABSENCE OF LITIGATION...................................32

SECTION 4.9 BROKERS.................................................32

SECTION 4.10 GUARANTEE...............................................33

SECTION 4.11 PROXY STATEMENT.........................................33

ARTICLE V COVENANTS...............................................33

SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY......................33

SECTION 5.2 OTHER ACTIONS...........................................36

SECTION 5.3 ACCESS TO INFORMATION; CONFIDENTIALITY..................36

SECTION 5.4 NO SOLICITATION.........................................37

SECTION 5.5 NOTICES OF CERTAIN EVENTS...............................39

SECTION 5.6 COMPANY PROXY STATEMENT.................................40

SECTION 5.7 COMPANY STOCKHOLDERS MEETING............................41

SECTION 5.8 EMPLOYEES; BENEFIT PLANS................................41

SECTION 5.9 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE..43

SECTION 5.10 BEST EFFORTS............................................44

SECTION 5.11 CONSENTS; FILINGS; FURTHER ACTION.......................44

SECTION 5.12 PUBLIC ANNOUNCEMENTS....................................46

SECTION 5.13 STOCK EXCHANGE DE-LISTING...............................46

SECTION 5.14 FEES, EXPENSES AND CONVEYANCE TAXES.....................46

SECTION 5.15 TAKEOVER STATUTES.......................................46

SECTION 5.16 TAX MATTERS.............................................46

SECTION 5.17 RIGHTS PLAN.............................................47

SECTION 5.18 FINANCING...............................................47

SECTION 5.19 RESIGNATIONS............................................48

SECTION 5.20 SUMMERFIELD.............................................48

ARTICLE VI CONDITIONS..............................................49

SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT

THE MERGER..............................................49

<PAGE>

PAGE

SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB......49

SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY.................50

SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS.......................51

ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.......................51

SECTION 7.1 TERMINATION BY MUTUAL CONSENT...........................51

SECTION 7.2 TERMINATION BY EITHER PARENT OR THE COMPANY.............51

SECTION 7.3 TERMINATION BY PARENT...................................51

SECTION 7.4 TERMINATION BY THE COMPANY..............................52

SECTION 7.5 EFFECT OF TERMINATION...................................53

SECTION 7.6 EXPENSES FOLLOWING TERMINATION..........................53

SECTION 7.7 AMENDMENT...............................................54

SECTION 7.8 EXTENSION; WAIVER.......................................54

SECTION 7.9 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION

OR WAIVER...............................................55

ARTICLE VIII MISCELLANEOUS...........................................55

SECTION 8.1 CERTAIN DEFINITIONS.....................................55

SECTION 8.2 INTERPRETATION..........................................58

SECTION 8.3 SURVIVAL................................................59

SECTION 8.4 GOVERNING LAW...........................................59

SECTION 8.5 SUBMISSION TO JURISDICTION..............................59

SECTION 8.6 WAIVER OF JURY TRIAL....................................59

SECTION 8.7 NOTICES.................................................60

SECTION 8.8 ENTIRE AGREEMENT........................................61

SECTION 8.9 NO THIRD-PARTY BENEFICIARIES............................61

SECTION 8.10 SEVERABILITY............................................61

SECTION 8.11 RULES OF CONSTRUCTION...................................61

SECTION 8.12 ASSIGNMENT..............................................61

SECTION 8.13 REMEDIES................................................61

SECTION 8.14 SPECIFIC PERFORMANCE....................................62

SECTION 8.15 COUNTERPARTS; EFFECTIVENESS.............................62

iii

<PAGE>

INDEX OF DEFINED TERMS

------------------------------------------------------- ------------------------

Active Employees Section 5.8(a)

------------------------------------------------------- ------------------------

Affiliate Section 8.1(a)

------------------------------------------------------- ------------------------

Agreement Preamble

------------------------------------------------------- ------------------------

AMEX Section 8.1(b)

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Bear Stearns Section 4.7

------------------------------------------------------- ------------------------

Business Day Section 8.1(c)

------------------------------------------------------- ------------------------

Capitalization Date Section 3.10(a)

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Certificate of Merger Section 1.3

------------------------------------------------------- ------------------------

Certificates Section 2.1(c)(5)

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Class A Common Stock Recitals

------------------------------------------------------- ------------------------

Class B Common Stock Recitals

------------------------------------------------------- ------------------------

Closing Section 1.2

------------------------------------------------------- ------------------------

Closing Date. Section 1.2

------------------------------------------------------- ------------------------

Club Documents Section 3.24(g)

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COBRA Section 3.18(g)

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Code Section 2.2(e)

------------------------------------------------------- ------------------------

Commitment Letter Section 4.7

------------------------------------------------------- ------------------------

Common Stock Recitals

------------------------------------------------------- ------------------------

Company Preamble

------------------------------------------------------- ------------------------

Company Assets Section 3.9(b)

------------------------------------------------------- ------------------------

Company Benefit Plans. Section 3.18(a)

------------------------------------------------------- ------------------------

Company Board Recommendation Section 3.3

------------------------------------------------------- ------------------------

Company Contracts Section 3.9(c)

------------------------------------------------------- ------------------------

Company Disclosure Letter Article III

------------------------------------------------------- ------------------------

Company Employee Section 3.18(a)

------------------------------------------------------- ------------------------

Company Financial Advisor Section 3.30

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Company Marks Section 8.1(d)

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Company Material Adverse Effect Section 8.1(e)

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Company Organizational Documents Section 3.5

------------------------------------------------------- ------------------------

Company Permits Section 3.26(a)

------------------------------------------------------- ------------------------

Company Proxy Statement Section 3.8(b)

------------------------------------------------------- ------------------------

Company Rights Section 3.10(a)

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Company SEC Reports Section 3.12

------------------------------------------------------- ------------------------

Company Stock Section 2.1(c)(5)

------------------------------------------------------- ------------------------

Company Stock Award Section 2.3

------------------------------------------------------- ------------------------

Company Stock Award Plans Section 3.10(c)

------------------------------------------------------- ------------------------

Company Stockholders Meeting Section 3.8(b)

------------------------------------------------------- ------------------------

Company Termination Fee Section 7.6(b)

------------------------------------------------------- ------------------------

Confidentiality Agreement Section 5.3(b)

------------------------------------------------------- ------------------------

Continuation Period Section 5.8(a)

------------------------------------------------------- ------------------------

Contracts Section 8.1(f)

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<PAGE>

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Debt Financing Section 4.7

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DGCL Section 1.1

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Dissenting Shares Section 2.4(a)

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Effective Time Section 1.3

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End Date Section 7.2(a)

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Environmental Costs Section 3.22(b)(ii)

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Environmental Laws Section 3.22(a)(ii)

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Environmental Matters Section 3.22(a)(i)

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Equity Funding Letter Section 4.7

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ERISA Section 3.18(a)

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Exchange Act Section 3.8(b)

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Excluded Shares Section 2.1(b)

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Expenses Section 5.14

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Financing Section 4.7

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Foreign Competition Laws Section 3.8(e)

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Franchise Agreement Documents Section 3.24(e)

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GAAP Section 3.13(b)

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Governmental Entity Section 3.8

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Guarantee Recitals

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Guarantor Recitals

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Hazardous Substances Section 8.1(g)

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HSR Act Section 3.8(d)

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Indebtedness Section 3.17(a)(iv)

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Indemnified Parties Section 5.9(a)

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Intellectual Property Section 3.23

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IRS Section 3.18(b)

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JP Morgan Section 6.2(f)

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Knowledge Section 8.1(h)

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Laws Section 8.1(i)

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LBREP Section 5.20

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Lease Documents Section 3.24(b)

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Leased Properties Section 3.24(b)

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Legal Actions Section 3.16

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Liabilities Section 3.14

------------------------------------------------------- ------------------------

Licensed Intellectual Property Section 3.23

------------------------------------------------------- ------------------------

Liens Section 8.1(j)

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Management Agreement Documents Section 3.24(d)

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Material Contracts Section 3.17(a)(xv)

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Maximum Premium Section 5.9(c)

------------------------------------------------------- ------------------------

Merger Recitals

------------------------------------------------------- ------------------------

Merger Consideration Section 2.1(c)(3)

------------------------------------------------------- ------------------------

Merger Sub Preamble

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New Plans Section 5.8(c)

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Notice Date Section 1.2

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Old Plans Section 5.8(c)

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<PAGE>

------------------------------------------------------- ------------------------

OP Units Section 3.10(a)

------------------------------------------------------- ------------------------

Orders Section 8.1(k)

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Owned Hotels Section 3.24(a)

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Owned Intellectual Property Section 3.23

------------------------------------------------------- ------------------------

Owned Real Properties Section 3.24(a)

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P.R. Treasury Section 3.18(b)

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PAHLP Section 5.20

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Parent Preamble

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Parent Assets Section 4.5(b)

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Parent Contracts Section 4.5(c)

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Parent Disclosure Letter Article IV

------------------------------------------------------- ------------------------

Parent Material Adverse Effect Section 8.1(l)

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Paying Agent Section 2.2(a)

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Payment Fund Section 2.2(b)

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Permits Section 3.26(a)

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Permitted Liens Section 3.24(a)

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Person Section 8.1(m)

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Post-Signing Returns Section 5.16(a)

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Preferred Stock Section 3.10(a)

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PRIRC Section 3.18(a)

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Properties Section 3.24(a)

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Recapitalization and Merger Agreement Recitals

------------------------------------------------------- ------------------------

Recapitalization Merger Recitals

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Recapitalization Merger Effective Time Recitals

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Representatives Section 8.1(n)

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Requisite Company Vote Section 8.1(o)

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Rights Plan Section 3.31

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SEC Section 3.8(b)

------------------------------------------------------- ------------------------

Securities Act Section 3.12

------------------------------------------------------- ------------------------

Series A Preferred Stock Recitals

------------------------------------------------------- ------------------------

Series B Preferred Stock Recitals

------------------------------------------------------- ------------------------

Series C Participating Preferred Stock, Section 3.10(a)

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Series C Preferred Stock Section 3.10(a)

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Settlement Agreement Section 3.17(a)(xiii)

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Stock Award Consideration Section 2.3

------------------------------------------------------- ------------------------

Subsidiary Section 8.1(p)

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Superior Proposal Section 8.1(q)

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Surviving Bylaws Section 1.6

------------------------------------------------------- ------------------------

Surviving Charter Section 1.5

------------------------------------------------------- ------------------------

Surviving Corporation Section 1.1

------------------------------------------------------- ------------------------

Takeover Proposal Section 8.1(r)

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Tax Returns Section 8.1(t)

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Taxes Section 8.1(s)

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Termination Expenses Section 7.6(b)

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Third Party Flag Agreements Section 3.24(c)

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<PAGE>

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Treasury Regulations Section 8.1(u)

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Voting Agreement Recitals

------------------------------------------------------- ------------------------

Wachovia Section 4.7

------------------------------------------------------- ------------------------

WARN Section 3.20(b)

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vii

<PAGE>

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of June 14, 2005 (this

"AGREEMENT"), by and among Wind Hotels Holdings Inc., a Delaware corporation

("PARENT"), Wind Hotels Acquisition Inc., a Delaware corporation and a

wholly-owned subsidiary of Parent ("MERGER SUB" ), and Wyndham International,

Inc., a Delaware corporation (the "COMPANY" ).

RECITALS

(a) The Company and certain of its stockholders are parties to the

Recapitalization and Merger Agreement, dated as of April 14, 2005 (the

"RECAPITALIZATION AND MERGER AGREEMENT"), providing for, among other things, the

merger of a wholly owned subsidiary of the Company with and into the Company

(the "RECAPITALIZATION MERGER"), and by virtue of the Recapitalization Merger,

the conversion of (i) each share of Class A Common Stock, par value $0.01 per

share, of the Company ("CLASS A COMMON STOCK"), and Class B Common Stock, par

value $0.01 per share, of the Company ("CLASS B COMMON STOCK") that is issued

and outstanding immediately prior to the effective time of the Recapitalization

Merger (the "RECAPITALIZATION MERGER EFFECTIVE TIME") into one share of a new

class of common stock, par value $0.01 per share, of the Company ("COMMON

STOCK") and (ii) each share of Series A Preferred Stock, par value $0.01 per

share, of the Company ("SERIES A PREFERRED STOCK"), and Series B Preferred

Stock, par value $0.01 per share, of the Company ("SERIES B PREFERRED STOCK"),

that is issued and outstanding immediately prior to the Recapitalization Merger

Effective Time into that number of shares of Common Stock equal to the exchange

ratio specified therefor in the Recapitalization and Merger Agreement.

(b) The respective boards of directors of Merger Sub and the

Company have approved and declared advisable, and the board of directors of

Parent has approved, this Agreement and the merger of Merger Sub with and into

the Company (the "MERGER") upon the terms and subject to the conditions set

forth in this Agreement.

accordance with its terms, the Recapitalization Merger shall not be consummated.

(d) Concurrently with the execution of this Agreement, and as

a condition to the willingness of Parent to enter into this Agreement, certain

stockholders of the Company are entering into a voting agreement with Parent

under which, among other things, those stockholders have agreed, subject to the

terms thereof, to (i) vote their shares of Company Stock in favor of adoption of

this Agreement and (ii) take other actions in furtherance of the transactions

contemplated by this Agreement (the "VOTING AGREEMENT").

(e) Concurrently with the execution of this Agreement, and as

a condition to the willingness of the Company to enter into this Agreement,

Blackstone Real Estate Partners IV L.P. ("GUARANTOR") is entering into a

guarantee with the Company which, among other things, Guarantor has agreed to

(i) guarantee certain obligations of

<PAGE>

Parent and Merger Sub under this Agreement and (ii) take certain other actions

in furtherance of the transactions contemplated by this Agreement (the

"GUARANTEE").

(f) Certain capitalized terms used in this Agreement have the

meanings specified in Section 8.1.

Accordingly, in consideration of the mutual representations,

warranties, covenants and agreements contained in this Agreement, the parties to

this Agreement, intending to be legally bound, agree as follows:

ARTICLE I

THE MERGER

Section 1.1 THE MERGER. Upon the terms and subject to the

conditions set forth in this Agreement, and in accordance with the General

Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time,

(a) Merger Sub shall be merged with and into the Company, (b) the separate

corporate existence of Merger Sub shall cease and the Company shall continue its

corporate existence under Delaware law as the surviving corporation in the

Merger (the "SURVIVING CORPORATION") and (c) the Surviving Corporation shall

become a wholly-owned subsidiary of Parent.

Section 1.2 CLOSING. Subject to the satisfaction or waiver of all

of the conditions to closing contained in Article VI, the closing of the Merger

(the "CLOSING") shall take place (a) at the offices of Paul, Weiss, Rifkind,

Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York, at

10:00 a.m. on the third Business Day after the day on which the last of those

conditions (other than any conditions that by their nature are to be satisfied

at the Closing) is satisfied or waived in accordance with this Agreement or (b)

at such other place and time or on such other date as Parent and the Company may

agree in writing. The date on which the Closing occurs is referred to as the

"CLOSING DATE." Notwithstanding the foregoing, if at any time after the date

hereof all of the conditions contained in Article VI have been satisfied or

waived (other than those which by their terms are to be satisfied on the Closing

Date), but the approvals set forth in Section 1.2 of the Company Disclosure

Letter have not been obtained, Parent shall be entitled, by delivery of written

notice (the date of such notice, the "NOTICE DATE") to the Company within three

Business Days following receipt of a Satisfaction Notice (as defined below) from

the Company, to delay the Closing to the earlier of (x) the fifth Business Day

following the date on which all such approvals shall have been obtained and (y)

December 15, 2005; PROVIDED, HOWEVER, that from and after the Notice Date, and

notwithstanding anything to the contrary, (1) the conditions set forth in

Section 6.2(a) or 6.2(c) of this Agreement shall be deemed satisfied (and waived

by Parent and Merger Sub) for all purposes under this Agreement, (2) the

condition set forth in Section 6.2(d) shall be modified such that the officer's

certificate referred to therein shall no longer be required to provide any

certification as to the matters in Section 6.2(a) or Section 6.2(c) and (3)

neither Parent nor Merger Sub shall be entitled to assert that the condition set

forth in Section 6.2(b) was not satisfied with respect to periods on or prior to

the Notice Date. On any date upon which the conditions set forth in Sections 6.1

and 6.2(a), 6.2(b)

<PAGE>

and 6.2(c) (with references in Sections 6.2(a), 6.2(b) and 6.2(c) to the

"Closing Date" being deemed to be references to such date) are satisfied (or

waived by Parent), the Company shall deliver written notice (a "Satisfaction

Notice") to Parent certifying to the satisfaction (or waiver) of such conditions

as of such date.

Section 1.3 EFFECTIVE TIME. At the Closing, Parent and the

Company shall cause a certificate of merger (the "CERTIFICATE OF MERGER") to be

executed, signed, acknowledged and filed with the Secretary of State of the

State of Delaware as provided in Section 251 of the DGCL. The Merger shall

become effective when the Certificate of Merger has been duly filed with the

Secretary of State of the State of Delaware or at such other subsequent date or

time as Parent and the Company may agree and specify in the Certificate of

Merger in accordance with the DGCL (the "EFFECTIVE TIME").

Section 1.4 EFFECTS OF THE MERGER. The Merger shall have the

effects set forth in Section 259 of the DGCL.

Section 1.5 CERTIFICATE OF INCORPORATION. The certificate of

incorporation of the Company shall, at the Effective Time, be amended to read in

its entirety as set forth on Exhibit A and, as so amended, shall be the

certificate of incorporation of the Surviving Corporation (the "SURVIVING

CHARTER") until amended as provided in the Surviving Charter or by applicable

Laws.

Section 1.6 BYLAWS. The bylaws of the Company in effect

immediately prior to the Effective Time shall be, from and after the Effective

Time, the bylaws of the Surviving Corporation (the "SURVIVING BYLAWS") until

amended as provided in the Surviving Charter, in the Surviving Bylaws or by

applicable Laws.

Section 1.7 DIRECTORS. The parties shall take all requisite

action so that the directors of Merger Sub immediately prior to the Effective

Time shall be, from and after the Effective Time, the directors of the Surviving

Corporation until their successors are duly elected and qualified or until their

earlier death, resignation or removal in accordance with the Surviving Charter,

the Surviving Bylaws and the DGCL.

Section 1.8 OFFICERS. The officers of the Merger Sub immediately

prior to the Effective Time shall be, from and after the Effective Time, the

officers of the Surviving Corporation until their successors are duly elected or

appointed and qualified or until their earlier death, resignation or removal in

accordance with the Surviving Charter, the Surviving Bylaws and the DGCL.

Section 1.9 OTHER TRANSACTIONS. Parent shall have the option, in

its sole discretion and without requiring the further consent of the Company or

the board of directors or stockholders of the Company, upon reasonable notice to

the Company, to request that the Company, immediately prior to the Closing, (a)

convert one or more Subsidiaries that are organized as corporations into limited

liability companies and one or more Subsidiaries that are organized as limited

partnerships into limited liability companies, on the basis of organizational

documents as reasonably requested by Parent, and (b) sell all of the stock,

limited partnership interests or limited liability interests

<PAGE>

owned, directly or indirectly, by the Company in one or more Subsidiaries at a

price designated by Parent; PROVIDED, however, that (i) the Company shall not be

required to take any action in contravention of any organizational document or

other Material Contract relating to any applicable Subsidiary, (ii) any such

actions or transactions shall be contingent upon the receipt by the Company of a

written notice from Parent confirming that all of the conditions set forth in

Section 6.1 and 6.2 have been satisfied or waived and that Parent and Merger Sub

are prepared to proceed immediately with the Closing (it being understood that

in any event the transactions described in clauses (a) and (b) will be deemed to

have occurred prior to the Closing), and (iii) such actions (or the inability to

complete such actions) shall not affect or modify in any respect the obligations

of Parent or Merger Sub under this Agreement, including payment of the Merger

Consideration. Parent shall, promptly upon request by the Company, reimburse the

Company for all reasonable out-of-pocket costs incurred by the Company in

connection with any actions taken by the Company in accordance with this Section

1.9. Parent and Merger Sub shall, on a joint and several basis, indemnify and

hold harmless the Company and its Representatives for and against any and all

liabilities, losses, damages, claims, costs, expenses, interest, awards,

judgments and penalties suffered or incurred by them in connection with such

actions. Without limiting the foregoing, none of the representations, warranties

or covenants of the Company shall be deemed to apply to, or deemed breached or

violated by, any of the transactions contemplated by this Section 1.9.

ARTICLE II

EFFECT OF THE MERGER ON CAPITAL STOCK

Section 2.1 CONVERSION OF CAPITAL STOCK. At the Effective Time,

by virtue of the Merger and without any action on the part of Parent, Merger

Sub, the Company or the holder of any shares of capital stock of Merger Sub or

the Company:

(a) CONVERSION OF MERGER SUB CAPITAL STOCK. Each share of common

stock, par value $0.01 per share, of Merger Sub issued and outstanding

immediately prior to the Effective Time shall be converted into and become one

fully paid and non-assessable share of common stock, par value $0.01 per share,

of the Surviving Corporation.

(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each

share of Company Stock owned by the Company or any of its wholly-owned

Subsidiaries or by Parent or any of its wholly-owned Subsidiaries immediately

prior to the Effective Time (collectively, the "EXCLUDED SHARES") shall be

canceled automatically and shall cease to exist, and no consideration shall be

paid for those Excluded Shares.

(1) Each share of Series A Preferred Stock and Series B

Preferred Stock issued and outstanding immediately prior to the Effective Time

shall be converted into the right to receive an amount in cash, without

interest, equal to

<PAGE>

the quotient obtained by dividing (a) $1,195,033,723 by (b) the aggregate number

of issued and outstanding shares of Series A Preferred Stock and Series B

Preferred Stock immediately prior to the Effective Time (rounded to the nearest

cent); provided, that the per share Merger Consideration for each share of

Preferred Stock shall in no event exceed $72.17 per share;

(2) Each share of Class A Common Stock issued and

outstanding immediately prior to the Effective Time shall be converted into the

right to receive $1.15 in cash, without interest;

(3) Each share of Class B Common Stock issued and

outstanding immediately prior to the Effective Time shall be converted into the

right to receive $1.15 in cash, without interest;

in the case of clauses (1)-(3), above, other than Excluded Shares and Dissenting

Shares (the applicable consideration to be paid pursuant to either Section

2.1(c) is referred to herein as the "MERGER CONSIDERATION"); and

(4) All accrued and unpaid dividends on issued and

outstanding shares of Series A Preferred Stock and Series B Preferred Stock if

any, shall, as of the Effective Time, be cancelled without any consideration

being payable in respect thereof.

(5) All shares of Common Stock, Class A Common Stock,

Class B Common Stock, Series A Preferred Stock and Series B Preferred Stock

(collectively, "COMPANY STOCK") that have been converted pursuant to Section

2.1(c) shall be canceled automatically and shall cease to exist, and the holders

of certificates which immediately prior to the Effective Time represented those

shares ("CERTIFICATES") shall cease to have any rights with respect to those

shares, other than the right to receive the Merger Consideration upon surrender

of their Certificates in accordance with Section 2.2.

Section 2.2 SURRENDER OF CERTIFICATES.

(a) PAYING AGENT. Prior to the Effective Time, Parent shall (i)

select a bank or trust company, satisfactory to the Company in its reasonable

discretion, to act as the paying agent in the Merger (the "PAYING AGENT") and

(ii) enter into a paying agent agreement with the Paying Agent, the terms and

conditions of which are satisfactory to the Company in its reasonable

discretion.

(b) PAYMENT FUND. Promptly following the Effective Time, on the

Closing Date, Parent shall provide funds to the Paying Agent in amounts

necessary for the payment of the aggregate Merger Consideration payable under

Section 2.1(c) upon surrender of Certificates. Such funds provided to the Paying

Agent are referred to as the "PAYMENT FUND."

<PAGE>

(i) LETTER OF TRANSMITTAL. Promptly after the Effective

Time, Parent shall cause the Paying Agent to mail to each holder of

record of a Certificate (A) a letter of transmittal in customary form,

specifying that delivery shall be effected, and risk of loss and title

to the Certificates shall pass, only upon proper delivery of

Certificates to the Paying Agent and (B) instructions for surrendering

Certificates.

(ii) SURRENDER OF CERTIFICATES. Upon surrender of a

Certificate for cancellation to the Paying Agent, together with a duly

executed letter of transmittal and any other documents reasonably

required by the Paying Agent, the holder of that Certificate shall be

entitled to receive in exchange therefor the Merger Consideration

payable in respect of that Certificate less any required withholding of

Taxes. Any Certificates so surrendered shall be canceled immediately.

No interest shall accrue or be paid on any amount payable upon

surrender of Certificates.

(iii) UNREGISTERED TRANSFEREES. If any Merger Consideration

is to be paid to a Person other than the Person in whose name the

surrendered Certificate is registered, then the Merger Consideration

may be paid to such a transferee so long as (A) the surrendered

Certificate is accompanied by all documents required to evidence and

effect that transfer and (B) the Person requesting such payment (1)

pays any applicable transfer Taxes or (2) establishes to the

satisfaction of Parent and the Paying Agent that any such Taxes have

already been paid or are not applicable.

(iv) NO OTHER RIGHTS. Until surrendered in accordance with

this Section 2.2(c), each Certificate shall be deemed, from and after

the Effective Time, to represent only the right to receive the

applicable Merger Consideration. Any Merger Consideration paid upon the

surrender of any Certificate shall be deemed to have been paid in full

satisfaction of all rights pertaining to that Certificate and the

shares of Company Stock formerly represented by it.

(d) NO FURTHER TRANSFERS. At the Effective Time, the stock

transfer books of the Company shall be closed and there shall be no further

registration of transfers of the shares of Company Stock that were outstanding

immediately prior to the Effective Time.

(e) REQUIRED WITHHOLDING. Parent, the Surviving Corporation and

the Paying Agent shall be entitled to deduct and withhold from any Merger

Consideration payable under this Agreement such amounts as may be required to be

deducted or withheld therefrom under (i) the Internal Revenue Code of 1986 (the

"CODE"), (ii) any applicable state, local or foreign Tax Laws or (iii) any other

applicable Laws. To the extent that any amounts are so deducted and withheld,

those amounts shall be treated as

<PAGE>

having been paid to the Person in respect of whom such deduction or withholding

was made for all purposes under this Agreement.

(f) NO LIABILITY. None of Parent, the Surviving Corporation or the

Paying Agent shall be liable to any holder of Certificates for any amount

properly paid to a public official under any applicable abandoned property,

escheat or similar Laws.

(g) INVESTMENT OF PAYMENT FUND. The Paying Agent shall invest the

Payment Fund as directed by Parent. Any interest and other income resulting from

such investment shall become a part of the Payment Fund, and any amounts in

excess of the amounts payable under Section 2.1(c) shall be paid promptly to

Parent.

(h) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund

that remains unclaimed by the holders of Certificates one year after the

Effective Time shall be delivered by the Paying Agent to Parent upon demand.

Thereafter, any holder of Certificates who has not complied with this Article II

shall look only to Parent for payment of the applicable Merger Consideration.

(i) LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificate is

lost, stolen or destroyed, upon the making of an affidavit of that fact by the

Person claiming such Certificate to be lost, stolen or destroyed and the posting

by such Person of a bond in the form and amount reasonably required by Parent as

indemnity against any claim that may be made against Parent on account of the

alleged loss, theft or destruction of such Certificate, the Paying Agent shall

pay the applicable Merger Consideration to such Person in exchange for such

lost, stolen or destroyed Certificate.

Section 2.3 STOCK OPTIONS AND RESTRICTED UNIT AWARDS. The Company

shall take all requisite action so that, as of the Effective Time, each

restricted unit award and each option to acquire shares of Class A Common Stock

or Common Stock, as applicable (each, a "COMPANY STOCK AWARD"), outstanding

immediately prior to the Effective Time, whether or not then exercisable or

vested, by virtue of the Merger and without any action on the part of Parent,

Merger Sub, the Company or the holder of that Company Stock Award, shall be

converted into the right to receive an amount in cash, without interest, equal

to the Stock Award Consideration multiplied by the aggregate number of shares of

Class A Common Stock or Common Stock, as applicable in respect of such

restricted unit awards and options, immediately prior to the Effective Time.

"STOCK AWARD CONSIDERATION" means (x) in the case of an option, the excess, if

any, of the Merger Consideration payable in respect of Common Stock or Class A

Common Stock, as applicable, over the per share exercise or purchase price of

the applicable Company stock option and (y) in the case of a restricted unit

award, Merger Consideration payable in respect of Common Stock or Class A Common

Stock, as applicable, as the same is required to be paid in respect of the

restricted unit award in accordance with the terms thereof. The payment of the

Stock Award Consideration to the holder of a Company Stock Award shall be

reduced by any income or employment Tax withholding required under (i) the Code,

(ii) any applicable state, local or foreign Tax Laws or (iii) any other

applicable Laws. To the extent that any amounts are so withheld, those amounts

shall be treated as having been paid to the holder of that Company Stock Award

for all purposes

<PAGE>

under this Agreement. All Company Stock Awards shall be cancelled and all

Company Stock Award Plans shall terminate at the Effective Time.

Section 2.4 DISSENTING SHARES.

(a) Notwithstanding any provision of this Agreement to the

contrary, any shares of Company Stock outstanding immediately prior to the

Effective Time for which the holder thereof (i) has not voted in favor of the

Merger or consented to it in writing and (ii) has demanded the appraisal of such

shares in accordance with, and has complied in all respects with, Section 262 of

the DGCL (collectively, the "DISSENTING SHARES") shall not be converted into the

right to receive the Merger Consideration in accordance with Section 2.1(c). At

the Effective Time, (x) all Dissenting Shares shall be cancelled and cease to

exist and (y) the holder or holders of Dissenting Shares shall be entitled only

to such rights as may be granted to them under Section 262 of the DGCL.

(b) Notwithstanding the provisions of Section 2.4(a), if any

holder of Dissenting Shares effectively withdraws or loses such appraisal rights

(through failure to perfect such appraisal rights or otherwise), then that

holder's shares (i) shall no longer be deemed to be Dissenting Shares and (ii)

shall be treated as if they had been converted automatically at the Effective

Time into the right to receive the Merger Consideration, without interest

thereon, upon surrender of the Certificate formerly representing such shares in

accordance with Section 2.2.

for appraisal of any shares of Company Stock, the withdrawals of such demands,

and any other instrument served on the Company under the provisions of Section

262 of the DGCL and (ii) the right to participate in all negotiations and

proceedings with respect to demands for appraisal under the DGCL. The Company

shall not offer or agree to make or make any payment with respect to any demands

for appraisal or offer to settle or settle any such demands without the prior

written consent of Parent.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure letter (with reference to the

section of this Agreement to which the information stated in such disclosure

letter relates; provided that any fact or condition disclosed in any section of

such disclosure letter in such a way as to make its relevance to another section

of such disclosure letter that relates to a representation or representations

made elsewhere in Article III of this Agreement reasonably apparent shall be

deemed to be an exception to such representation or representations

notwithstanding the omission of a reference or cross reference thereto)

delivered by the Company to Parent prior to the execution of this Agreement (the

"COMPANY DISCLOSURE LETTER"), the Company represents and warrants to Parent and

Merger Sub that:

<PAGE>

Section 3.1 ORGANIZATION AND POWER. Each of the Company and its

Subsidiaries is a corporation, limited liability company or other legal entity

duly organized, validly existing and in good standing under the laws of its

jurisdiction of organization. Each of the Company and its Subsidiaries has the

requisite power and authority to own, lease and operate its assets and

properties and to carry on its business as now conducted.

Section 3.2 FOREIGN QUALIFICATIONS. Each of the Company and its

Subsidiaries is duly qualified or licensed to do business as a foreign

corporation, limited liability company or other legal entity and is in good

standing in each jurisdiction where the character of the assets and properties

owned, leased or operated by it or the nature of its business makes such

qualification or license necessary, except where failures to be so qualified or

licensed or in good standing would not have a Company Material Adverse Effect.

Section 3.3 CORPORATE AUTHORIZATION. The Company has all

necessary corporate power and authority to enter into and perform its

obligations under this Agreement and, subject to adoption of this Agreement by

the Requisite Company Vote, to consummate the transactions contemplated by this

Agreement. The board of directors of the Company has adopted resolutions: (a)

approving and declaring advisable the Merger, this Agreement and the

transactions contemplated by this Agreement; (b) declaring that it is in the

best interests of the stockholders of the Company that the Company enters into

this Agreement and consummate the Merger upon the terms and subject to the

conditions set forth in this Agreement; (c) directing that adoption of this

Agreement be submitted to a vote at a meeting of the stockholders of the

Company; and (d) recommending to the stockholders of the Company that they adopt

this Agreement (collectively, the "COMPANY BOARD RECOMMENDATION"). The Company

Board Recommendation was adopted prior to the execution of this Agreement

unanimously by those directors present at the meeting at which this Agreement

was adopted. The Class B Directors (as defined in the Restated Certificate of

Incorporation of the Company) have unanimously voted to determine that none of

the execution, delivery or performance of this Agreement or the Voting Agreement

or the consummation of the transactions contemplated hereby or thereby shall

constitute a "Change in Control" for purposes of the Certificate of Designation

of the Company's Series A Convertible Preferred Stock or the Certificate of

Designation of the Company's Series B Convertible Preferred Stock. The

execution, delivery and performance of this Agreement by the Company and the

consummation by the Company of the transactions contemplated by this Agreement

have been duly and validly authorized by all necessary corporate action on the

part of the Company, subject to the Requisite Company Vote.

Section 3.4 ENFORCEABILITY. This Agreement has been duly executed

and delivered by the Company and, assuming the due authorization, execution and

delivery of this Agreement by Parent and Merger Sub, constitutes a legal, valid

and binding agreement of the Company, enforceable against the Company in

accordance with its terms, subject to the effect of any applicable bankruptcy,

insolvency (including all

<PAGE>

laws related to fraudulent transfers), reorganization, moratorium or similar

laws affecting creditors' rights generally and subject to the effect of general

principles of equity.

Section 3.5 ORGANIZATIONAL DOCUMENTS. The Company has made

available to Parent correct and complete copies of the certificates of

incorporation and bylaws (or the equivalent organizational documents), each as

amended to date, of the Company and each of its material Subsidiaries, in each

case as in effect on the date of this Agreement (collectively, the "COMPANY

ORGANIZATIONAL DOCUMENTS"). Neither the Company nor any Subsidiary is, nor has

the Company been, in violation of any of the Company Organizational Documents in

any material respect.

Section 3.6 MINUTE BOOKS. The Company has made available to

Parent correct and complete copies of the minutes of all meetings of the

stockholders, the boards of directors and each committee of the boards of

directors of the Company and each of its Subsidiaries held since January 1,

2003; provided that the Company shall not be obligated to make available any

minutes of meetings to the extent they relate to other bidders in connection

with any potential sale of the Company or any of its material assets or

otherwise related to deliberations by the board of directors of the Company with

respect to the consideration of strategic alternatives.

Section 3.7 SUBSIDIARIES. A correct and complete list of all

Subsidiaries of the Company and other Persons in which the Company owns,

directly or indirectly, capital stock or other equity interests, together with

their respective jurisdictions of organization and the percentage of the

outstanding capital stock or other equity interests of each such Subsidiary or

other Person that is held by the Company or any Subsidiary of the Company is set

forth in Section 3.7 of the Company Disclosure Letter. Except as set forth in

Section 3.7 of the Company Disclosure Letter, (a) each of the Subsidiaries of

the Company is wholly-owned by the Company, directly or indirectly, free and

clear of any Liens and (b) the Company does not own, directly or indirectly, any

capital stock or other equity interest of, or any other securities convertible

or exchangeable into or exercisable for capital stock or other equity interest

of, any Person other than the Subsidiaries of the Company.

Section 3.8 GOVERNMENTAL AUTHORIZATIONS. Except as set forth in

Section 3.8 of the Company Disclosure Letter, the execution, delivery and

performance of this Agreement by the Company and the consummation by the Company

of the transactions contemplated by this Agreement (other than the

Recapitalization Merger) do not and will not require any consent, approval or

other authorization of, or filing with or notification to, any international,

national, federal, state, provincial or local governmental, regulatory or

administrative authority, agency, commission, court, tribunal, arbitral body or

self-regulated entity, whether domestic or foreign (each, a "GOVERNMENTAL

ENTITY"), other than:

(a) the filing of the Certificate of Merger with the Secretary of

State of the State of Delaware;

<PAGE>

(b) the filing with the Securities and Exchange Commission (the

"SEC") of (i) an amendment to the Company's proxy statement/prospectus filed

with the SEC in connection with the Recapitalization Merger (the "COMPANY PROXY

STATEMENT"), so that it will also relate to the special meeting of the

stockholders of the Company to be held to consider the adoption of this

Agreement (the "COMPANY STOCKHOLDERS Meeting") and (ii) any other filings and

reports that may be required in connection with this Agreement and the

transactions contemplated by this Agreement under the Securities Exchange Act of

1934 (the "EXCHANGE ACT") or the Securities Act;

(d) the pre-merger notification required under the

Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT");

(e) compliance with applicable foreign competition laws

(collectively, "FOREIGN COMPETITION LAWS");

(f) any applicable state, federal or foreign Laws governing gaming

activities or the sale of liquor; and

(g) where the failure to obtain such consents, approvals,

authorizations or permits, or to make such filings or notifications, would not

have a Company Material Adverse Effect.

Notwithstanding anything to the contrary in this Agreement, the failure to

obtain approvals, consents or authorizations in respect of or related to the

matters referred to in Section 3.8(f) shall not be a condition to the Closing or

be deemed, individually or in the aggregate, to have, result in, or cause a

Company Material Adverse Effect.

Section 3.9 NON-CONTRAVENTION. The execution, delivery and

performance of this Agreement by the Company and the consummation by the Company

of the transactions contemplated by this Agreement do not and will not:

(a) contravene or conflict with, or result in any violation or

breach of, any provision of the Company Organizational Documents;

(b) contravene or conflict with, or result in any violation or

breach of, any Laws or Orders applicable to the Company or any of its

Subsidiaries or by which any assets of the Company or any of its Subsidiaries,

including Intellectual Property ("COMPANY ASSETS"), are bound (in each case,

assuming that all consents, approvals, authorizations, filings and notifications

described in Section 3.8 have been obtained or made), other than as would not

have a Company Material Adverse Effect;

(with or without notice or lapse of time or both) or result in a material loss

of a material benefit under, any Contracts to which the Company or any of its

Subsidiaries is a party or by which any Company Assets are bound (collectively,

"COMPANY CONTRACTS") or any

<PAGE>

Company Permit, other than as set forth in Section 3.9(c) of the Company

Disclosure Letter or as would not have a Company Material Adverse Effect;

(d) require any consent, approval or other authorization of, or

filing with or notification to, any Person under any Company Contracts or any

Company Permits, other than as set forth in Section 3.9(d) of the Company

Disclosure Letter or as would not have a Company Material Adverse Effect;

(e) give rise to any termination, cancellation, amendment,

modification or acceleration of any rights or obligations or give rise to a

right or obligation to purchase or sell assets or securities under any Company

Contracts, other than as set forth in Section 3.9(e) of the Company Disclosure

Letter or as would not have a Company Material Adverse Effect; or

(f) cause the creation or imposition of any Liens on any Company

Assets, other than as set forth in Section 3.9(f) of the Company Disclosure

Letter or as would not have a Company Material Adverse Effect.

Section 3.10 CAPITALIZATION; OPTIONS.

(a) As of the date of this Agreement, the Company's authorized

capital stock consists solely of 750,000,000 shares of Class A Common Stock,

750,000,000 shares of Class B Common Stock, and 150,000,000 shares of preferred

stock, par value $.0l per share (the "PREFERRED STOCK"). As of June 9, 2005 (the

"CAPITALIZATION DATE"), 172,791,295 shares of Class A Common Stock were issued

and outstanding, an additional 4,931,692 shares of restricted stock issued under

the Company Stock Award Plans were subject to vesting restrictions as of such

date, no shares of the Company's Class B Common Stock were issued and

outstanding and 16,181,124.78 shares of Preferred Stock were issued and

outstanding, of which 74,167.71 shares are designated Series A Preferred Stock

and 16,106,957.07 shares are designated Series B Preferred Stock. As of the

Capitalization Date, (i) options to purchase 8,230,037 shares of Class A Common

Stock at a weighted average per share exercise price of $5.07 were outstanding

and 16,305,874 shares of Class A Common Stock were available for future issuance

in connection with stock options under the Company Stock Award Plans (including

8,230,037 shares reserved pursuant to outstanding options), (ii) there were

320,910 partnership units in Patriot American Hospitality Partnership, L.P. or

Wyndham International Operating Partnership, L.P. outstanding (collectively, the

"OP UNITS") and 320,910 shares of Class A Common Stock are reserved for issuance

upon the redemption of the OP Units and (iii) there were 11,000,000 shares of

Class A Common Stock reserved for issuance in connection with the Stipulation of

Settlement, dated as of February 28, 2005 relating to In re: Patriot American

Hospitality, Inc. Securities Litigation. Under the Company's Rights Plan, the

board of directors of the Company created a series of 5,000,000 shares of

preferred stock designated as the "SERIES C PARTICIPATING PREFERRED Stock," par

value $0.01 per share (the "SERIES C PREFERRED STOCK"), which are issuable in

connection with the rights to purchase those shares (the "COMPANY RIGHTS")

issued under the Rights Plan. No Company Stock is held in the treasury of the

Company or by any Subsidiary. Since the Capitalization Date through the

<PAGE>

date of this Agreement, other than in connection with the issuance of shares of

Class A Common Stock pursuant to the exercise of, or lapse of restrictions

under, Company Stock Awards outstanding as of the Capitalization Date, there has

been no change in the number of shares of outstanding capital stock of the

Company or the number of outstanding Company Stock Awards. Except as set forth

above or as set forth in Section 3.10(a) of the Company Disclosure Letter, as of

the date hereof, there are no shares of capital stock or securities convertible

into or exchangeable for or rights to acquire shares of capital stock of the

Company authorized, issued, outstanding or reserved for issuance. Assuming the

Recapitalization Merger Effective Time had occurred immediately prior to the

execution and delivery of this Agreement, the holders of Class A Common Stock

would hold an aggregate of 172,791,295 shares of Common Stock, the holders of

Series A Preferred Stock would hold an aggregate of 4,763,086.67 shares of

Common Stock, the holders of Series B Preferred Stock would hold an aggregate of

1,034,396,672.33 shares of Common Stock and no shares of Common Stock would be

issued in respect of Class B Common Stock, in each case, subject to the exercise

of applicable dissenter rights. As of the date of this Agreement, the shares of

Series A Preferred Stock, in the aggregate, (i) had an aggregate Liquidation

Preference (as such term is defined in the Certificate of Designation of Series

A Preferred Stock of the Company) equal to $7,919.628 and (ii) were convertible

into an aggregate of 863,312.14 shares of Class A Common Stock. As of the date

of this Agreement, the shares of Series B Preferred Stock, in the aggregate, (i)

had an aggregate Liquidation Preference (as such term is defined in the

Certificate of Designation of Series B Preferred Stock of the Company) equal to

$1,719,900,876 and (ii) were convertible into an aggregate of 187,484,980.30

shares of Class B Common Stock.

(b) All shares of Company Stock that are outstanding are, and all

shares of Company Stock (including all shares of Common Stock to be issued in

the Recapitalization Merger) that are subject to issuance, upon issuance prior

to the Effective Time upon the terms and subject to the conditions specified in

the instruments under which they are issuable will be, duly authorized, validly

issued, fully paid and non-assessable and not subject to any pre-emptive rights.

copies of all stock award plans set forth on Section 3.10(c) of the Company

Disclosure Letter (the "COMPANY STOCK AWARD PLANS") and all forms of options and

other stock-based awards issued under those Company Stock Award Plans.

(d) Each outstanding share of capital stock, each limited

liability company membership interest and each partnership interest of each

Subsidiary of the Company is duly authorized, validly issued, fully paid and

non-assessable and not subject to any pre-emptive rights, other than as set

forth in Section 3.10(d) of the Company Disclosure Letter.

(e) Except as set forth in this Section 3.10 and as set forth in

Section 3.10(e) of the Company Disclosure Letter, there are no outstanding

contractual obligations of the Company or any of its Subsidiaries (i) to

repurchase, redeem or

<PAGE>

otherwise acquire any shares of Company Stock or capital stock of any Subsidiary

of the Company or (ii) to provide any funds to, make any investment in (whether

in the form of a loan, capital contribution or otherwise) or provide any

guarantee with respect to (A) any Subsidiary of the Company or (B) any other

Person.

(f) As of the date of this Agreement, the only outstanding

Indebtedness for borrowed money of the Company and the Subsidiaries is set forth

in Section 3.10(f) of the Company Disclosure Letter.

Section 3.11 VOTING.

(a) The Requisite Company Vote is the only vote of the holders of

any class or series of the capital stock of the Company or any of its

Subsidiaries necessary (under the Company Organizational Documents, the DGCL,

other applicable Laws or otherwise) to approve and adopt this Agreement, the

Merger and the transactions contemplated thereby, except as may be required

under the Recapitalization and Merger Agreement.

(b) Except as set forth in Section 3.11(b) of the Company

Disclosure Letter, there are no stockholders agreements, registration rights

agreements, voting trusts, proxies or similar agreements, arrangements or

commitments to which the Company or any of its Subsidiaries is a party or of

which the Company has Knowledge with respect to any shares of capital stock or

other equity interests of the Company or any of its Subsidiaries or any other

Contract relating to disposition, voting or dividends with respect to any equity

securities of the Company or of any Subsidiary, other than the Voting Agreement.

There are no bonds, debentures, notes or other instruments of Indebtedness of

the Company or any of its Subsidiaries that have the right to vote, or that are

convertible or exchangeable into or exercisable for securities having the right

to vote, on any matters on which stockholders of the Company may vote.

Section 3.12 SEC REPORTS. The Company has timely filed with the

SEC, and has made available to Parent correct and complete copies of, all forms,

reports, schedules, statements and other documents required to be filed by the

Company with the SEC since January 1, 2002 (collectively, the "COMPANY SEC

REPORTS"). The Company SEC Reports (a) were prepared in accordance with the

requirements of the Securities Act of 1933 (the "SECURITIES ACT"), the Exchange

Act and other applicable Laws and (b) did not, at the time they were filed, or

if amended or restated, at the time of such later amendment or restatement,

contain any untrue statement of a material fact or omit to state a material fact

required to be stated therein or necessary in order to make the statements

therein, in the light of the circumstances under which such statements were

made, not misleading. No Subsidiary of the Company is subject to the periodic

reporting requirements of the Exchange Act or is otherwise required to file any

forms, reports, schedules, statements or other documents with the SEC, any

foreign Governmental Entity that performs a similar function to that of the SEC

or any securities exchange or quotation service. The Company has made available

to Parent copies of all material correspondence between the SEC, on the one

hand, and the Company and any of the Subsidiaries, on the other hand, since

January 1, 2003 through the date of this Agreement.

<PAGE>

Section 3.13 FINANCIAL STATEMENTS. The audited consolidated

financial statements and unaudited consolidated interim financial statements of

the Company and its consolidated Subsidiaries included or incorporated by

reference in the Company SEC Reports (including, in each case, any notes

thereto):

(a) complied in all material respects with applicable accounting

requirements and the rules and regulations of the SEC;

(b) were prepared in accordance with United States generally

accepted accounting principles ("GAAP") applied on a consistent basis (except as

may be indicated in the notes to those financial statements); and

Company and its consolidated Subsidiaries as of the dates thereof and their

consolidated results of operations and cash flows for the periods then ended

(subject, in the case of any unaudited interim financial statements, to normal

year-end adjustments). Except as set forth in Section 3.13(c) of the Company

Disclosure Letter, all of the Subsidiaries are consolidated for accounting

purposes.

Section 3.14 LIABILITIES. There are no liabilities or obligations

of any kind, whether accrued, contingent, absolute, inchoate or otherwise

(collectively, "LIABILITIES") of the Company or any of its Subsidiaries which

are required to be recorded or reflected on a balance sheet, including the

footnotes thereto, under GAAP, other than:

(a) Liabilities disclosed in the consolidated balance sheet of the

Company and its consolidated Subsidiaries as of March 31, 2005 or the footnotes

thereto set forth in the Company's Quarterly Report on Form 10-Q for the fiscal

quarter ended March 31, 2005;

(b) Liabilities incurred since March 31, 2005 in the ordinary

course of business consistent with past practices that would not have a Company

Material Adverse Effect; and

Disclosure Letter.

Section 3.15 ABSENCE OF CERTAIN CHANGES. Except as set forth in

Company SEC Reports filed at least two Business Days prior to the date of this

Agreement, since March 31, 2005, the Company and each of its Subsidiaries have

conducted their business in the ordinary course consistent with past practices

and:

(a) there has not been any Company Material Adverse Effect; and

(b) neither the Company nor any of its Subsidiaries has taken any

action which, if taken after the date of this Agreement, would be prohibited by

Section 5.1, other than as set forth in Section 3.15 of the Company Disclosure

Letter or any action described in clause (ii) of Section 5.1(k).

<PAGE>

Section 3.16 LITIGATION. Except as set forth in Company SEC

Reports filed at least two Business Days prior to the date of this Agreement,

and except as set forth in Section 3.16 of the Company Disclosure Letter, there

are no legal actions, claims, demands, arbitrations, hearings, charges,

complaints, investigations, examinations, indictments, litigations, suits or

other civil, criminal, administrative or investigative proceedings

(collectively, "LEGAL ACTIONS") pending or, to the Knowledge of the Company,

threatened against (a) the Company or any of its Subsidiaries or the Company

Assets or (b) any director, officer or employee of the Company or any of its

Subsidiaries or other Person for whom the Company or any of its Subsidiaries may

be liable, in each case other than Legal Actions that would not have a Company

Material Adverse Effect. There are no Orders outstanding against the Company or

any of its Subsidiaries or the Company Assets other than Orders that would not

have a Company Material Adverse Effect. Other than pursuant to Company

Organizational Documents or as set forth in Section 3.18(a) of the Company

Disclosure Letter, no Contract between the Company or any Subsidiary and any

current or former director or officer exists that provides for indemnification.

Section 3.17 CONTRACTS.

(a) Section 3.17(a) of the Company Disclosure Letter contains a

list of the following Company Contracts as of the date hereof:

(i) any lease of real or personal property, with third

parties other than the Company or any Subsidiaries, providing for annual

rentals of $500,000 or more;

(ii) any Contract, with the exception of the management

agreements set forth in Section 3.24(c) or (d) of the Company Disclosure

Letter and the franchise agreements set forth in Section 3.24(c) or (e) of

the Company Disclosure Letter, for the purchase of materials, supplies,

goods, services, equipment or other assets that is not terminable without

material penalty on 90 days notice by the Company or the Subsidiaries and

that provides for or is reasonably likely to require either (A) annual

payments from the Company and the Subsidiaries of $500,000 or more, or (B)

aggregate payments from the Company and the Subsidiaries of $5,000,000 or

more;

(iii) any partnership, limited liability company agreement,

joint venture or other similar agreement or arrangement relating to the

formation, creation, operation, management or control of any partnership or

joint venture which is not a wholly-owned Subsidiary of the Company;

(iv) any Contract (other than among consolidated

Subsidiaries) under which Indebtedness for borrowed money is (including

guarantees) outstanding or may be incurred or pursuant to which any

property or asset of the Company or any of its Subsidiaries is mortgaged,

pledged or otherwise subject to a Lien, or any Contract restricting the

incurrence of Indebtedness or the incurrence of Liens or restricting the

payment of

<PAGE>

dividends or the transfer of any Property (except, with respect to the

transfer of Leased Properties, restrictions contained in the Lease

Documents). "INDEBTEDNESS" means, without duplication, (A) indebtedness for

borrowed money (excluding any interest thereon), secured or unsecured, (B)

obligations under conditional sale or other title retention Contracts

relating to purchased property, (C) capitalized lease obligations, (D)

obligations under interest rate cap, swap, collar or similar transactions

or currency hedging transactions (valued at the termination value thereof),

and (E) guarantees of any Indebtedness of the foregoing of any other

person;

(v) any Contract currently required to be filed as an

exhibit to the Company's Annual Report on Form 10-K pursuant to Item

601(b)(10) of Regulation S-K under the Securities Act;

(vi) any Contract that purports to limit in any material

respect the right of the Company or the Subsidiaries (A) to engage in any

line of business, or (B) to compete with any person or operate in any

location;

(vii) any Contract providing for the sale or exchange of,

or option to sell or exchange, any Property, or for the purchase or

exchange of, or option to purchase or exchange, any real estate entered

into in the past 18 months or in respect of which the applicable

transaction had not been consummated;

(viii) any Contract entered into in the past 18 months or in

respect of which the applicable transaction had not been consummated for

the acquisition or disposition, directly or indirectly (by merger or

otherwise), of assets (other than Contracts referenced in clause (vii) of

this Section 3.17(a)) or capital stock or other equity interests of another

person for aggregate consideration in excess of $500,000, in each case

other than in the ordinary course of business and in a manner consistent

with past practice;

(ix) any Contract pursuant to which the Company or any of

its Subsidiaries manages any real property;

(x) other than Contracts for ordinary repair and

maintenance, any Contract relating to the development or construction of,

or additions or expansions to, the Properties, under which the Company or

any of its Subsidiaries has, or expects to incur, an obligation in excess

of $1,000,000 in the aggregate that has not been satisfied as of the date

hereof;

(xi) any advertising or other promotional Contract

providing for payment by the Company or any Subsidiary of $750,000 or more;

<PAGE>

(xii) the Recapitalization and Merger Agreement or any

related Contract with any of the parties thereto;

(xiii) any Contract to which the Company or any of its

Subsidiaries has continuing indemnification obligations (other than

Contracts entered into in the ordinary course of business) or potential

liability under any purchase price adjustment that, in each case, could

reasonably be expected to result in future payments of more than $1,000,000

or any Contract (a "SETTLEMENT AGREEMENT") relating to the settlement or

proposed settlement of any Legal Action, which involves the issuance of

equity securities or the payment of an amount, in any such case, having a

value of more than $1,000,000;

(xiv) any license, royalty or other Contract concerning

Intellectual Property which is material to the Company and its

Subsidiaries; and

(xv) any Contract (other than Contracts referenced in

clauses (i) through (xiv) of this Section 3.17(a)) which by its terms calls

for payments by the Company and the Subsidiaries in excess of $5,000,000

(the Contracts described in clauses (i) through (xv) and those required to

be identified in Sections 3.17(c), 3.18(a), 3.19, 3.20(a), 3.24(b),

3.24(c), 3.24(d) and 3.24(e) and 3.24(h) of the Company Disclosure Letter,

in each case together with all exhibits and schedules thereto being, the

"MATERIAL CONTRACTS");

(b) Except as would not have a Company Material Adverse Effect,

(i) neither the Company nor any Subsidiary is and, to the Company's Knowledge,

no other party is in breach or violation of, or default under, any Material

Contract, (ii) none of the Company or any of the Subsidiaries has received any

claim of default under any such Material Contract, and (iii) to the Company's

Knowledge, no event has occurred which would result in a breach or violation of,

or a default under, any Material Contract (in each case, with or without notice

or lapse of time or both). Except as would not have a Company Material Adverse

Effect, each Material Contract is valid, binding and enforceable in accordance

with its terms and is in full force and effect. The Company has made available

to Parent true and complete copies of all Material Contracts, including any

amendments thereto.

Form S-4 filed May 2, 2005, there are no Contracts or material transactions

between the Company or any Subsidiary, on the one hand, and any (i) officer or

director of the Company or any Subsidiary, (ii) record or beneficial owner of

five percent or more of the voting securities of the Company, or (iii) associate

(as defined in Rule 12b-2 under the Exchange Act) or affiliate of any such

officer, director or record or beneficial owner, on the other hand, except those

of a type available to employees generally or as set forth in Section 3.18 of

the Company Disclosure Letter.

Section 3.18 BENEFIT PLANS.

<PAGE>

(a) Section 3.18(a) of the Company Disclosure Letter contains a

correct and complete list of (i) each "employee benefit plan" within the meaning

of Section 3(3) of the Employee Retirement Income Security Act of 1974

("ERISA"), including multiemployer plans within the meaning of Section 3(37) of

ERISA and (ii) each other stock purchase, stock option, severance, employment,

consulting, change-of-control, collective bargaining, bonus, incentive, deferred

compensation and other benefit plan, agreement, program, policy, commitment or

other arrangement, whether or not subject to ERISA (including any related

funding mechanism now in effect or required in the future), whether formal or

informal, oral or written, legally binding or not, under which (A) any past or

present director, officer, employee or consultant of the Company (each a

"COMPANY EMPLOYEE") has any present or future right to benefits or (B) the

Company has any present or future Liabilities. All such plans, agreements,

programs, policies, commitments and arrangements (whether or not set forth in

Section 3.18(a) of the Company Disclosure Letter) are collectively referred to

as the "COMPANY BENEFIT PLANS." All references to the "Company" in this Section

3.18 shall refer to the Company and any member of its "controlled group" within

the meaning of Section 414 of the Code and Section 1028 of the Puerto Rico

Internal Revenue Code ("PRIRC").

(b) With respect to each Company Benefit Plan, if applicable, the

Company has made available to Parent correct and complete copies of: (i) all

plan texts and agreements and related trust agreements (or other funding

vehicles); (ii) the most recent summary plan descriptions and material employee

communications; (iii) the most recent annual report (including all schedules);

(iv) the most recent actuarial valuation report (if any), annual audited

financial statements and opinion; (v) the Form 5500 and attached schedules; (vi)

if the plan is intended to qualify under Section 401(a) of the Code, the most

recent determination letter received from the Internal Revenue Service (the

"IRS"); (vii) under Section 1165(a) of the PRIRC, the most recent determination

letter received from the Puerto Rico Treasury Department (the "P.R. TREASURY");

(viii) if the plan is intended to qualify under Section 1046 of the PRIRC, the

most recent determination letter from the P.R. Treasury; and (ix) all material

communications with any Governmental Entity given or received within the past

three years.

Company Benefit Plan have been properly reflected in the most recent financial

statements contained in the Company SEC Reports, to the extent required by GAAP.

Since the date of such financial statements, there has been no amendment or

change in interpretation by the Company relating to any Company Benefit Plan

which would materially increase the cost of such Company Benefit Plan.

(d) The Company Disclosure Letter, the Company does not maintain

or contribute to, and has not within the preceding five years maintained or

contributed to, or had during such period the obligation to maintain or

contribute to, nor does the Company have any unsatisfied obligation with respect

to, any Company Benefit Plan that constitutes a "single employer plan" within

the meaning of Section 4001(a)(15) of ERISA. Except as would not, individually

or in the aggregate, reasonably be expected to result in a Company Material

Adverse Effect, the Company does not maintain or

<PAGE>

contribute to, and has not within the preceding five years maintained or

contributed to, or had during such period the obligation to maintain or

contribute to, or have any unsatisfied obligation with respect to, any

"multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) or any

"multiple employer plan" (within the meaning of the Code or ERISA).

(e) Each Company Benefit Plan has been established and

administered in compliance in all material respects with its terms and all

applicable Laws. Each Company Benefit Plan that requires registration with a

Governmental Entity has been so registered. Except as set forth in Section

3.18(e) of the Company Disclosure Letter, with respect to each Company Benefit

Plan which is intended to qualify under Section 401(a) of the Code or 1165 of

the PRIRC, as the case may be, (i) such plan has been issued a favorable

determination letter by the IRS and P.R. Treasury, as the case may be, with

respect to such qualification, (ii) its related trust has been determined to be

exempt from taxation under Section 501(a) of the Code and under Section 1165 of

the PRIRC and (iii) no event has occurred since the date of such qualification

or exemption that would adversely affect such qualification or exemption. With

respect to each Company Benefit Plan, except as set forth in Section 3.18(e)(z)

of the Company Disclosure Letter, which is intended to qualify under Section

1046 of the PRIRC, such plan has been issued the corresponding approval from the

P.R. Treasury. With respect to each Company Benefit Plan, (x) no Legal Actions

(other than routine claims for benefits in the ordinary course) are pending or,

to the Knowledge of the Company, threatened, (y) no facts or circumstances exist

that could reasonably be expected to give rise to any such Legal Actions, and

(z) no administrative investigation, audit or other administrative proceeding by

the Department of Labor, the PBGC, the Internal Revenue Service or other

Governmental Entities are pending, in progress or, to the Knowledge of the

Company, threatened (including any routine requests for information from the

PBGC).

(f) Each Company Benefit Plan which is a "group health plan"

within the meaning of Section 607(1) of ERISA is in compliance in all material

respects with the provisions of the Consolidated Omnibus Budget Recommendation

Act of 1985 ("COBRA"), the Health Insurance Portability and Accountability Act

of 1996 and other applicable Laws.

(g) Except as set forth in Section 3.18(g) of the Company

Disclosure Letter, there are no: (i) Company Benefit Plans under which welfare

benefits are provided to Company Employees beyond their retirement or other

termination of service, other than coverage mandated by COBRA, Section 4980B of

the Code, Title I of ERISA or any similar state group health plan continuation

Laws (collectively, "COBRA"), the cost of which is fully paid by such Company

Employees or their dependents; or (ii) unfunded Company Benefit Plan obligations

with respect to any Company Employees that are not fairly reflected by reserves

shown on the most recent financial statements contained in the Company SEC

Reports. The provision of postretirement welfare benefits under any Company

Benefit Plan (other than those required to be provided under COBRA or any

employment agreement set forth in Section 3.18(a) of the Company

<PAGE>

Disclosure Letter) may be terminated at any time by the Company without

Liability to the Company.

(h) Except as set forth in Section 3.18(h) of the Company

Disclosure Letter, neither the execution and delivery of this Agreement nor the

consummation of the transactions contemplated hereby will (either alone or in

combination with another event) (i) result in any payment becoming due, or

increase the amount of any compensation due, to any Company Employee; (ii)

increase any benefits otherwise payable under any Company Benefit Plan; (iii)

result in the acceleration of the time of payment or vesting of any such

compensation or benefits; (iv) result in a non-exempt "prohibited transaction"

within the meaning of Section 406 of ERISA or section 4975 of the Code, (v)

cause the Company to record additional compensation expense on its income

statement with respect to any outstanding stock option or other equity based

award, or (vi) result in the payment of any amount that could, individually or

in combination with any other such payment, constitute an "excess parachute

payment," as defined in section 280G(b)(1) of the Code.

(i) Neither the Company nor any Company Benefit Plan, nor to the

Knowledge of the Company any "disqualified person" (as defined in Section 4975

of the Code) or "party in interest" (as defined in Section 3(18) of ERISA), has

engaged in any non-exempt prohibited transaction (within the meaning of Section

4975 of the Code or Section 406 of ERISA) which, individually or in the

aggregate, has resulted or could reasonably be expected to result in any

material liability to the Company or any of its Subsidiaries.

(j) Except as provided in Section 3.18(j) of the Company

Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to

any Contract providing a future obligation, or has communicated any intention to

any Company Employee, to create any additional Company Benefit Plans or to

modify any existing Company Benefit Plan.

(k) Except as disclosed in Section 3.18(k) of the Company

Disclosure Letter, no capital stock or other securities of the Company or any of

its Subsidiaries forms or has formed a material part of the assets of any

Company Benefit Plan.

(l) Except as set forth in Section 3.18(l) of the Company

Disclosure Letter, no Company Benefit Plan is maintained outside the

jurisdiction of the United States or Puerto Rico or covers Company Employees

outside of the United States and Puerto Rico.

Section 3.19 EXECUTIVE AND DIRECTOR LOANS. Except as set forth in

Section 3.19 of the Company Disclosure Letter, there are no outstanding loans

made by the Company or any of its Subsidiaries to any executive officer (within

the meaning of Rule 3b-7 under the Exchange Act) or director of the Company.

Since the enactment of the Sarbanes-Oxley Act of 2002, neither the Company nor

any of its Subsidiaries has made

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