UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

ALASKA U.F.C.W. PENSION TRUST, on 

Behalf of Itself and All Others Similarly 

Situated, 

Plaintiff, 

vs. 

FRED J. KLEISNER, KARIM A. ALIBHAI, 

MARC BEILINSON, LEON D. BLACK, 

LEONARD BOXER, ADELA CEPEDA, 

MILTON FINE, LEE S. HILLMAN, 

THOMAS H. LEE, ALAN M. LEVENTHAL, 

WILLIAM L. MACK, LEE S. NEIBART, 

MARC J. ROWAN, ROLF E. RUHFUS, 

LAWRENCE RUISI, SCOTT A. SCHOEN, 

SCOTT M. SPERLING, LYNN C. SWANN 

and SHERWOOD M. WEISER, 

 Defendants. 

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Civil Action No. 3:05-cv-1323-B 

CLASS ACTION

DEMAND FOR JURY TRIAL

AMENDED CLASS ACTION COMPLAINT

 

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1. This is a shareholder class action brought against the members of the Board of 

Directors of Wyndham International, Inc. (“Wyndham” or the “Company”) on behalf of the 

Company’s former public shareholders for breach of fiduciary duty arising out of defendants’ 

attempts to provide certain Wyndham insiders and directors with preferential treatment in connection 

with their efforts to complete the sale of Wyndham to The Blackstone Group (“Blackstone”) for 

$1.15 per share in cash for each share of Wyndham common stock (the “Acquisition”). 

SUMMARY OF THE ACTION 

2. In April 2005, the Company announced a $1.65 billion refinancing, and two weeks 

later announced it was undertaking a massive stock recapitalization which, if completed, would have 

converted all preferred stock into common stock. 

3. On April 15, 2005, the Company announced that, based upon the recommendation of 

the special committee formed to review and negotiate a change to the Company’s capital structure, it 

had entered into a definitive recapitalization agreement with certain investors in Wyndham’s Series 

A and B Preferred Stock (the “Recapitalization”). In the Recapitalization, the existing classification 

of Wyndham’s common stock would be eliminated, all outstanding shares of Series A and Series B 

Preferred Stock (including accrued but unpaid dividends) would be converted into common stock 

and the existing common stockholders would continue to hold shares of common stock. At the 

closing of the transaction, the holders of the Series A and Series B preferred stock would own 

approximately 85% of the outstanding common stock of Wyndham and the existing common 

stockholders would own approximately 15% of the outstanding common stock of Wyndham. 

4. In May 2005 the Company completed the $1.65 billion refinancing of its corporate 

credit facilities and the majority of its outstanding mortgage debt, including extending its corporate 

debt maturities to 2011 (90% of Wyndham’s outstanding debt) and pre-funding $100 million in 

 

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capital to be invested into the Company’s owned and leased properties. This was undertaken to 

assist the controlling preferred stock holders. 

5. The first six year term of the preferred stock agreement would expire in June 2005 

and from that point forward the Board, in compliance with its fiduciary duties, would have to 

determine if the preferred stock should get cash or stock dividends. Moreover, in June 2005 another 

provision would expire requiring that if a change in control or a liquidation of Wyndham occurred, 

any accrued dividends had to be immediately accelerated and paid. Moreover, at the end of the six 

year period in June 2005, the preferred stock was redeemable by Wyndham and the Board, in 

compliance with its fiduciary duties would be forced to decide whether or not to redeem the 

preferred stock, thus terminating the preferred dividend at a rate of 9.75% per year. 

6. The Recapitalization was never undertaken after the credit agreement was 

renegotiated. Rather than follow the advice of the only special committee created to determine what 

was fair to Wyndham’s minority shareholders, defendants agreed to the terms of the Acquisition 

which unfairly benefited the interests of the preferred shareholders to the detriment of the minority 

common stock holders. 

7. On June 14, 2005, Wyndham announced that its Board of Directors (the “Board”) had 

entered into an agreement with Blackstone wherein Blackstone would acquire all outstanding Class 

A common stock of Wyndham and all Class A and B preferred stock in a transaction valued at 

approximately $3.24 billion, including assuming $1.8 billion in debt, pursuant to terms which 

substantially benefited the preferred shareholders to the detriment of Wyndham’s common 

shareholders. 

8. The holders of the preferred stock, led by Wyndham directors affiliated with Apollo 

Management, L.P. (the “Apollo investors”), Beacon Capital Partners, Inc. (the “Beacon investors”) 

and Thomas H. Lee Partners (the “THL investors”), PaineWebber Capital Inc., Chase Capital 

 

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Partners and Walt Disney Co. CEO Michael Ovitz, received approximately $1.19 billion, or $72.17 

per share. The Acquisition netted them a substantial profit on the $1 billion the controlling 

preferred shareholders invested in Wyndham in 1999, in addition to the cash dividend payment of 

$29,250 per year that each preferred stock share had been granted since 1999.1

 The preferred 

shareholders enjoy an insurmountable voting advantage over the common stock holders as alleged 

herein. As a result, the Acquisition is subject to the entire fairness standard of review which, as 

explained herein, defendants cannot meet. 

9. The Company’s minority shareholders, the Class A common shareholders – who 

received no dividends – were forced to accept the remaining $250 million, or $1.15 per share. 

10. Bear, Stearns & Co., Inc. (“Bear Stearns”), which has long and lucrative history with 

both Wyndham and Blackstone, was initially engaged by defendants to act as the Company’s 

financial advisor in connection with any sale of the Company or other strategic alternative. On 

February 16, 2005, during a Board meeting, Bear Stearns was asked to provide financing to potential 

purchasers of the Company, in addition to its role as the Company’s financial advisor. Defendants 

permitted Bear Stearns to finance the Acquisition, negotiate the Acquisition on behalf of Wyndham 

and advise the Board on the fairness of the Acquisition despite the conflict of interest created by its 

dual role as financial advisor to the Company and financing source for the third-party Acquisition of 

the Company. As the financing source for the Acquisition, Bear Stearns had a strong incentive to 

 

1

 Pursuant to the terms of the preferred stock issued in June 1999, preferred stock dividends 

 were payable quarterly, on a cumulative basis, at a rate of 9.75% per year, for the first six 

 years with the dividends structured to ensure an aggregate fixed cash dividend payment of 

 $29,250 per year. However, Wyndham’s credit facility prohibited it from paying the cash 

 portion of the preferred stock dividend until expiration or further amendment of its credit 

 facility and the cash portion of the dividend had not been paid but had accrued since 2002. 

 As of December 31, 2004, cash dividends totaling $102.3 million on the preferred stock had 

 been in arrears and unpaid for a period of more than 60 days. 

 

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decrease or downplay the value for which the Company was ultimately sold to minimize its 

financing risks. 

11. Although they ultimately disclosed the financial projections underlying the fairness 

opinion, in hopes of coaxing the Company’s minority shareholders into going away quietly, 

defendants nevertheless disseminated a false and materially misleading Proxy Statement (the 

“Proxy”) on July 20, 2005, which misrepresented and/or omitted material information concerning 

the Acquisition necessary to ensure a fully-informed shareholder vote, including, among other 

things: (i) defendants’ reasons for considering the Acquisition to be a “change of control” for 

purposes of employment compensation benefits but not for purposes of preferred stock liquidation 

preferences; (ii) defendants’ reasons for not appointing a special committee to consider the 

Acquisition given the substantial conflicts of interest of the members of the Board and Bear Stearns; 

(iii) information regarding the steps taken by the Board to protect shareholders from the conflicts of 

interest suffered by Bear Stearns; (iv) information regarding the director defendants’ stock options 

and restricted stock units; (v) the favorable financial results of Wyndham’s second quarter of 2005 

prior to the announcement of the Acquisition; (vi); information as what percentage, if any, of the fee 

paid to J.P. Morgan Securities, Inc. (“JP Morgan”) was contingent upon consummation of the 

Acquisition; (vii) information underlying the analyses substantiating J.P. Morgan’s fairness opinion; 

(viii) information regarding the purpose and distribution of the $4 million “bonus pool” established 

in connection with the Acquisition; (ix) defendants’ reasons for not employing a “majority of the 

minority” voting structure for approval of the Acquisition; (x) any effects the restatement and 

investigation concerning the Company’s inadequate internal controls revealed; and (xi) information 

as to whether any separate consideration was paid to the holders of the preferred stock, or anyone 

else, for entering into the agreement with Blackstone to vote all of their shares in favor of the 

Acquisition (the “Voting Agreement”) – which ensured that nearly 53% of the vote was locked-up. 

 

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12. In pursuing the unlawful plan to cash out Wyndham’s public stockholders for grossly 

inadequate consideration, and pursuant to grossly inadequate terms and disclosures, each of the 

defendants violated applicable laws by directly breaching and/or aiding the other defendants’ 

breaches of their fiduciary duties of loyalty, due care, candor, independence, good faith and fair 

dealing. The Wyndham Board is not disinterested and is riddled with conflict, including the fact that 

the Class B preferred stockholders and specifically the Apollo investors, the Beacon investors and 

the THL investors, control the Board of Directors through their voting stock. 

13. The preferred stockholders used their control to negotiate a sale of Wyndham that 

disposes of Wyndham at a price and pursuant to terms which benefit preferred holders to the 

detriment of common stockholders. Moreover, as part of the Agreement and Plan of Merger by and 

between Wyndham and Blackstone (the “Merger Agreement”), defendants agreed to provisions 

which all but precluded a better offer from materializing, including unlawful “no-solicitation” and 

termination fee provisions. 

14. The defendants, as more fully detailed herein, participated in, approved and/or 

permitted the wrongs alleged herein to have occurred and participated in efforts to conceal or 

disguise those wrongs from Wyndham’s shareholders or recklessly and/or negligently disregarded 

the wrongs complained of herein, and are, therefore, not disinterested parties. Defendants’ ongoing 

pattern of misconduct and egregious breaches of fiduciary duty in connection with the Acquisition 

have caused severe injury to Wyndham’s former shareholders. Only via this action can redress be 

obtained for the Company’s former minority shareholders. 

JURISDICTION AND VENUE 

15. This Court has subject matter jurisdiction under 15 U.S.C. §77p(d)(1)(A) and 28 

U.S.C. §1332(a)(2) because complete diversity exists between the plaintiff and each defendant, and 

the amount in controversy exceeds $75,000. This action is not a collusive action designed to confer 

 

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jurisdiction on this Court that it would not otherwise have. This Court has personal jurisdiction over 

defendants because they either reside within this District and/or engaged in conduct that had a 

substantial impact within this District. 

16. Venue is proper under 28 U.S.C. §1391(a) because one or more defendants either 

resides in or maintains executive offices in this District, many of the acts and transactions 

complained of herein occurred in this District and defendants conduct business in this District. 

THE PARTIES 

17. Plaintiff Alaska U.F.C.W. Pension Trust is, and at times relevant to the allegations 

raised herein was, the owner of shares of Wyndham common stock. Plaintiff is a citizen of Alaska. 

18. Nominal party Wyndham International, Inc. is a Delaware corporation and has its 

principal place of business located at 1950 Stemmons Freeway, Suite 6001, Dallas, Texas 75207. 

19. Defendant Fred J. Kleisner (“Kleisner”) is, and at all relevant times, was a Class A 

Director of the Company. He is also the Chairman, President and Chief Executive Officer of the 

Company. Despite his glaring conflicts, including the millions of dollars he received in change of 

control benefits, the Board permitted Kleisner to lead the negotiations, along with Bear Stearns, on 

behalf of the Company. Kleisner has served as Chairman of the Board since October 13, 2000 and 

as Chief Executive Officer since March 27, 2000. From July 1999 to October 2000, defendant 

Kleisner served as President, and from July 1999 to March 2000, Kleisner also served as Chief 

Operating Officer. In 2004, Kleisner received $1.75 million in salary and bonus, including $500,000 

of a $2 million retention bonus. Pursuant to his employment agreement, Wyndham has made several 

loans to Kleisner. In 1999, the Company loaned him $500,000. The Company loaned him an 

additional $665,000 in 2001. As of December 31, 2004, $1,219,000 in principal and accrued interest 

remained outstanding on these loans. Kleisner is a citizen of Texas and can be served at 3510 Turtle 

Creek Blvd., Apt. 17A, Dallas, Texas 75219. 

 

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20. Defendant Karim A. Alibhai (“Alibhai”) is a member of the Board of the Company. 

Alibhai is, and at all relevant times, was a Class A Director of the Company. Alibhai served as a 

member of the special committee that reviewed and negotiated the Recapitalization. As a result of 

the Acquisition, Alibhai’s 30,000 stock options immediately vested. Alibhai previously served as 

Wyndham’s President and Chief Operating Officer from 1997 until May of 1999. Defendant Alibhai 

holds an ownership interest in three Wyndham hotels. In 2004, Wyndham provided over $1.3 

million worth of hotel management, franchise and other services to these hotels. Additionally, 

Alibhai is a principal of the Gencom Group. On December 22, 2004, Wyndham sold six 

Summerfield Suites hotels and a 33% interest in the Summerfield brand for $104 million to Sum 

Business Holdings, LLC. Sum Business Holdings is indirectly owned by Gencom American 

Hospitality, Inc., which is controlled by Alibhai and his family. Alibhai is a citizen of Texas and can 

be served at 5910 Laguna Falls Court, Houston, Texas 77041. 

21. Defendant Marc Beilinson (“Beilinson”) is a member of the Board of the Company. 

Defendant Beilinson is, and at all relevant times, was a Class C Director of the Company. Beilinson 

served as a member of the special committee that reviewed and negotiated the Recapitalization. As a 

result of the Acquisition, Beilinson’s 29,998 stock options immediately vested. Beilinson is a citizen 

of California and can be served at 1871 Michael Lane, Pacific Palisades, California. 90272. 

22. Defendant Leon D. Black (“Black”) is a member of the Board of the Company. 

Black is, and at all relevant times, was a Class B Director of the Company. He is also a Senior 

Partner of Apollo Management, LP. Defendant Black is one of the founding principals of Apollo 

Advisors, LP. Apollo and Wyndham have an ongoing relationship in that Apollo owns and operates 

several Wyndham hotels that generated approximately $3 million in management, franchise and 

service fees in 2004. Apollo holds the majority of Wyndham’s preferred stock. As a result of the 

 

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Acquisition, Black’s 22,500 stock options immediately vested. Black is a citizen of New York and 

can be served at 760 Park Avenue, #3, New York, New York 10021. 

23. Defendant Leonard Boxer (“Boxer”) is a member of the Board of the Company. 

Defendant Boxer is, and at all relevant times, was a Class A Director of the Company. Boxer served 

as a member of the special committee that reviewed and negotiated the Recapitalization. As a result 

of the Acquisition, Boxer’s 125,433 stock options, as well as his 172,212 deferred unit awards 

immediately vested. Boxer has served as a partner and chairman of the real estate department of the 

law firm of Stroock & Stroock & Lavan LLP. In 2004, Wyndham retained Stroock & Stroock & 

Lavan to advise the Company on numerous property transactions. During 2004, Wyndham paid 

Stroock & Stroock & Lavan approximately $352,000 in fees and Strook & Strook & Lavan has a 

bona fide expectation of receiving continuing business from the combined entity. Boxer is a citizen 

of New York and can be served at 875 Park Avenue, #5D, New York, New York 10021. 

24. Defendant Adela Cepeda (“Cepeda”) is a member of the Board of the Company. 

Defendant Cepeda is, and at all relevant times, was a Class A Director of the Company. Cepeda 

served as a member of the special committee that reviewed and negotiated the Recapitalization. As a 

result of the Acquisition, Cepeda’s 41,247 options immediately vested. Cepeda is a citizen of 

Illinois and can be served at 5016 South Greenwood Avenue, Chicago, Illinois 60615. 

25. Defendant Milton Fine (“Fine”) is a member of the Board of the Company. 

Defendant Fine is, and at all relevant times, was a Class A Director of the Company. Fine was the 

co-founder of Interstate Hotels Company in 1961. He previously served as Chairman of Interstate 

prior to its being acquired by Wyndham in 1998. Pursuant to a shareholders agreement dated 

December 2, 1997 between defendant Fine and Wyndham’s predecessor in interest Patriot, 

Wyndham must indemnify Fine for certain tax liabilities until December 2, 2007. During the first 

quarter of 2005, Wyndham paid $378,464 to certain entities related to Fine in consideration for Fine 

 

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releasing Wyndham from any continuing liability under a shareholders agreement. Additionally, 

Fine holds an ownership interest in two Wyndham hotels. In 2004, Wyndham provided 

approximately $844,188 in hotel management, franchise and other services to these hotels. As a 

result of the Acquisition, Fine’s 22,500 stock options immediately vested. Fine is a citizen of 

Pennsylvania and can be served at 145 Old Mill Road, Pittsburgh, Pennsylvania 15238. 

26. Defendant Lee S. Hillman (“Hillman”) is a member of the Board of the Company. 

Defendant Hillman is, and at all relevant times, was a Class C Director of the Company. As a result 

of the Acquisition, Hillman’s 7,499 stock options immediately vested. Hillman is a citizen of 

Illinois and can be served at 328 Shoreline Court, Glenco, Illinois 60022. 

27. Defendant Thomas H. Lee (“Lee”) is a member of the Board of the Company. 

Defendant Lee is, and at all relevant times, was a Class B Director of the Company. Lee founded 

Thomas H. Lee Company in 1974 and since then has served as its President. In 1999, the Company 

changed its name to the Thomas H. Lee Partners. Since 1999 Lee has served as Chairman and CEO 

of Thomas H. Lee Partners and as President of Thomas H. Lee Capital. As a result of the 

Acquisition, Lee’s 22,500 stock options immediately vested. Lee is a citizen of Massachusetts and 

can be served at Thomas H. Lee Company, 100 Federal Street, 35th Floor, Boston, Massachusetts 

02110. 

28. Defendant Alan M. Leventhal (“Leventhal”) is a member of the Board of the 

Company. Defendant Leventhal is, and at all relevant times, was a Class B Director of the 

Company. Leventhal is Chairman and Chief Executive Officer of Beacon Capital Partners, Inc. 

Beacon presently holds Wyndham preferred stock. As a result of the Acquisition, Leventhal’s 

22,500 stock options immediately vested. Leventhal is a citizen of Massachusetts and can be served 

at 18 Pine Road, Chestnut Hill, Massachusetts 02467. 

 

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29. Defendant William L. Mack (“Mack”) is a member of the Board of the Company. 

Defendant Mack is, and at all relevant times, was a Class B Director of the Company. He is also a 

senior partner and one of the founding principals of Apollo Real Estate Advisors, LP. As a result of 

the Acquisition, Mack’s 22,500 stock options immediately vested. Mack is a citizen of New York 

and can be served at Apollo Real Estate Advisors, Two Manhattenville Road, 2nd Floor, Purchase, 

NY 10577. 

30. Defendant Lee S. Neibart (“Neibart”) is a member of the Board of the Company. 

Defendant Neibart is, and at all relevant times, was a Class B Director of the Company. He is also a 

senior partner and one of the founding principals of Apollo Real Estate Advisors, LP. As a result of 

the Acquisition, Neibart’s 22,500 stock options immediately vested. Neibart is a citizen of New 

York and can be served at 10 Beech Hill Lane, Pound Ridge, New York 10576. 

31. Defendant Marc J. Rowan (“Rowan”) is a member of the Board of the Company. 

Defendant Rowan is, and at all relevant times, was a Class B Director of the Company. Rowan, as a 

member of the Company’s capital committee, participated in negotiations in connection with the 

Acquisition – ensuring that Apollo Advisors, LP interests were well protected. Rowan is also a 

senior partner and one of the founding principals of Apollo Advisors, LP. Rowan is a citizen of New 

York and can be served at 1601 Deerfield Road, Water Mill, New York 11976. 

32. Defendant Rolf E. Ruhfus (“Ruhfus”) is a member of the Board of the Company. 

Defendant Ruhfus is, and at all relevant times, was a Class A Director of the Company. Ruhfus was 

previously the Chief Executive Officer of Summerfield Hotel Corporation prior to its being acquired 

by Wyndham in 1998. As a result of the Acquisition, Ruhfus’ 22,500 stock options immediately 

vested. Defendant Ruhfus holds an ownership interest in seven different Summerfield Suites Hotels. 

In 2004, Wyndham provided approximately $1.1 million in hotel management, franchise and other 

 

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services to these hotels. Ruhfus is a citizen of Kansas and can be served at 565 North Broadmoor, 

Wichita, Kansas 67226. 

33. Defendant Lawrence Ruisi (“Ruisi”) is a member of the Board of the Company. 

Defendant Ruisi is, and at all relevant times, was a Class C Director of the Company. As a result of 

the Acquisition, Ruisi’s 9,374 stock options immediately vested. Ruisi is a citizen of New York and 

can be served at 121 Whippoorwill Road, Armonk, New York 10504. 

34. Defendant Scott A. Schoen (“Schoen”) is a member of the Board of the Company. 

Defendant Schoen is, and at all relevant times, was a Class B Director of the Company. Schoen has 

been employed by Thomas H. Lee Partners since 1986 and currently serves as a managing director. 

As a result of the Acquisition, Schoen’s 45,000 stock options immediately vested. Schoen is a 

citizen of Massachusetts and can be served at 191 Kings Grant Road, Weston, Massachusetts 02493. 

35. Defendant Scott M. Sperling (“Sperling”) is a member of the Board of the Company. 

Defendant Sperling is, and at all relevant times, was a Class B Director of the Company. Sperling, 

as a member of the Company’s capital committee, participated in negotiations in connection with the 

Acquisition – ensuring that TLP’s interests were well protected. As a result of the Acquisition, 

Sperling’s 22,500 stock options immediately vested. Sperling is managing director of Thomas H. 

Lee Partners and trustee and general partner of various THL equity funds. Additionally, Sperling is 

a director of Beacon Capital Partners. Sperling is a citizen of Pennsylvania and can be served at 

4 Moore Road, Sewickley, Pennsylvania 15143. 

36. Defendant Lynn C. Swann (“Swann”) is a member of the Board of the Company. 

Defendant Swann is, and at all relevant times, was a Class A Director of the Company. In 

September 2003, Wyndham entered into a two year consulting agreement with Swann. Swann 

provides Wyndham with consulting services related to the development and expansion of its 

collegiate and professional sports marketing plans and sales initiatives. He is required to make a 

 

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certain number of personal appearances a year on Wyndham’s behalf and to appear in a certain 

amount of advertisements to promote Wyndham. The agreement entitles Swann to ongoing 

payments of $250,000 per year. Additionally, defendant Swann was granted 100,000 restricted 

shares of Class A common stock upon execution of agreement. The shares vest in two equal 

installments in September 2004 and September 2005. As a result of the Acquisition, Swann’s 

147,500 stock options immediately vested. Swann is a citizen of Pennsylvania and can be served at 

Merriman Road, Sewickley, Pennsylvania 15143. 

37. Defendant Sherwood M. Weiser (“Weiser”) is a member of the Board of the 

Company. Defendant Weiser is, and at all relevant times, was a Class A Director of the Company. 

Weiser holds an ownership interest in the Holiday Inn, Dayton Mall, in Dayton, Ohio. In 2004, 

Wyndham provided approximately $76,475 in hotel management, franchise and other services to this 

hotel. Weiser served as a member of the special committee that reviewed and negotiated the 

Recapitalization. As a result of the Acquisition, Weiser’s 73,966 stock options immediately vested. 

Weisner is a citizen of Florida and can be served at 10 Edgewater Drive, Miami, Florida 33133. 

38. The defendants identified in ¶¶19-37 are sometimes collectively referred to as the 

“Individual Defendants.” 

DEFENDANTS’ FIDUCIARY DUTIES 

39. Under Delaware law, in any situation where the directors of a publicly traded 

corporation undertake a transaction that will result in either (i) a change in corporate control, or (ii) a 

break up of the corporation’s assets, the directors have an affirmative fiduciary obligation to obtain 

the highest value reasonably available for the corporation and its shareholders, and if such 

transaction will result in a change of corporate control, the corporation and its shareholders are 

entitled to receive a significant premium. To diligently comply with these duties, the directors 

and/or officers may not take any action that: 

 

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(a) adversely affects the value provided to the corporation or its shareholders; 

(b) will discourage or inhibit alternative offers to purchase control of the 

corporation or its assets; 

(c) contractually prohibits themselves from complying with their fiduciary duties; 

(d) will otherwise adversely affect their duty to search and secure the best value 

reasonably available under the circumstances for the corporation and its shareholders; and/or 

(e) will provide the directors and/or officers with preferential treatment at the 

expense of, or separate from, the corporation and its public shareholders. 

40. In accordance with their duties of loyalty and good faith, defendants, as directors 

and/or officers of Wyndham, were obligated under Delaware law to refrain from: 

(a) participating in any transaction where the directors’ or officers’ loyalties are 

divided; 

(b) participating in any transaction where the directors or officers receive, or are 

entitled to receive, a personal financial benefit not equally shared by the corporation or its public 

shareholders; and/or 

(c) benefiting themselves at the expense or to the detriment of the corporation and 

its shareholders. 

41. Plaintiff alleges herein that defendants, separately and together, in connection with 

the Acquisition, have knowingly or recklessly violated their fiduciary duties, including their duties of 

loyalty, due care, good faith, fair dealing, independence, and candor owed to Wyndham and its 

public shareholders. Defendants have engaged in self-dealing, and have obtained for themselves 

personal benefits, including personal financial benefits not shared equally by Wyndham or the Class, 

or have aided and abetted others who did so. As a result of defendants’ self-dealing and divided 

loyalties, among other things, the negotiation process for the Acquisition was tainted and unfair, and 

 

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the Class failed to receive an adequate or fair process or price for their Wyndham common stock in 

the Acquisition. 

42. Defendants also owe the Company and its stockholders a duty of truthfulness under 

Delaware law, which includes the disclosure of all material facts concerning the Acquisition. 

Defendants have knowingly or recklessly breached their fiduciary duties of candor and good faith, or 

aided and abetted others who did so, by failing to disclose all material information concerning the 

Acquisition and the true value of the Company. 

43. Because defendants have knowingly or recklessly breached their duties of loyalty, 

good faith, fair dealing, independence and candor in connection with the Acquisition or aided and 

abetted others who did so, the burden of proving the inherent or entire fairness of the Acquisition 

(including all aspects of its negotiation, structure, price and terms) is placed upon defendants as a 

matter of law. Defendants cannot meet that burden. 

THE ENTIRE FAIRNESS STANDARD 

44. In any situation where majority or controlling shareholders stand on both sides of a 

challenged transaction, the entire fairness standard is implicated, and the defendants, at least initially, 

bear the burden of demonstrating the two basic aspects of fair dealing and fair price. 

45. The concept of fair dealing embraces questions of when the transaction was timed, 

how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the 

directors and the stockholders were obtained. The concept of fair price relates to the economic and 

financial considerations of the proposed merger, including all relevant factors: assets, market value, 

earnings, future prospects and any other elements that affect the intrinsic or inherent value of a 

company’s stock. 

46. The test for fairness is not a bifurcated one as between fair dealing and price. All 

aspects of the issue must be examined as a whole since the question is one of entire fairness. 

 

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47. To demonstrate entire fairness, the defendants must present evidence of the 

cumulative manner by which they discharged all of their fiduciary duties. An entire fairness analysis 

then requires the Court to consider carefully how the board of directors discharged all of its fiduciary 

duties with regard to each aspect of the non-bifurcated components of entire fairness: fair dealing 

and fair price. 

48. The burden of proof may shift to the plaintiff, however, only if defendants can 

demonstrate an approval of the transaction by a truly independent committee of directors who have 

real bargaining power that can be exerted in dealings with a majority or controlling shareholder who 

does not dictate the terms of the merger, or the inclusion of a majority of the minority provision in 

the merger agreement – defendants can demonstrate neither in this case. As such, the burden to 

prove the entire fairness of the Acquisition will remain with defendants. 

CLASS ACTION ALLEGATIONS 

49. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules 

of Civil Procedure on behalf of all holders of Wyndham’s common stock who were harmed by 

defendants’ actions described below (the “Class”). Excluded from the Class are defendants herein 

and any person, firm, trust, corporation or other entity related to or affiliated with any defendant. 

50. This action is properly maintainable as a class action. 

51. The Class is so numerous that joinder of all members is impracticable. According to 

Wyndham’s SEC filings, there were more than 172 million shares of Wyndham common stock 

outstanding as of May 19, 2005. 

52. There are questions of law and fact which are common to the Class and which 

predominate over questions affecting any individual Class member. The common questions include, 

inter alia, the following: 

 

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(a) whether defendants breached their fiduciary duties of undivided loyalty, 

independence or due care with respect to plaintiff and the other members of the Class in connection 

with the Acquisition; 

(b) whether the Individual Defendants engaged in self-dealing in connection with 

the Acquisition and whether the Individual Defendants unjustly enriched themselves and other 

Wyndham insiders; 

(c) whether defendants have breached any of their other fiduciary duties to 

plaintiff and the other members of the Class in connection with the Acquisition, including the duties 

of loyalty, due care, good faith, diligence, honesty, candor and fair dealing, and/or other fiduciary 

duties; 

(d) whether defendants, in bad faith and for improper motives, impeded or erected 

barriers to discourage other offers for the Company or its assets; and 

(e) whether plaintiff and the other members of the Class suffered injury from the 

Acquisition being consummated. 

53. Plaintiff’s claims are typical of the claims of the other members of the Class and 

plaintiff does not have any interests adverse to the Class. 

54. Plaintiff is an adequate representative of the Class, has retained competent counsel 

experienced in litigation of this nature and will fairly and adequately protect the interests of the 

Class. 

55. The prosecution of separate actions by individual members of the Class would create 

a risk of inconsistent or varying adjudications with respect to individual members of the Class which 

would establish incompatible standards of conduct for the party opposing the Class. 

 

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56. Plaintiff anticipates that there will be no difficulty in the management of this 

litigation. A class action is superior to other available methods for the fair and efficient adjudication 

of this controversy. 

57. Defendants have acted on grounds generally applicable to the Class with respect to 

the matters complained of herein, thereby making appropriate the relief sought herein with respect to 

the Class as a whole. 

BACKGROUND TO THE ACQUISITION 

58. Wyndham was a corporation existing under the laws of the State of Delaware, with its 

principle place of business in Dallas, Texas. Wyndham offers upscale and luxury hotel and resort 

accommodations through proprietary lodging brands and a management services division. 

Wyndham owns, leases, manages and franchises hotels and resorts in the United States, Canada, 

Mexico, the Caribbean and Europe. 

59. Prior to consummation of the Acquisition, Wyndham had Class A common stock, 

Classes A and B convertible preferred stock and Class C participating preferred stock. As of June 

15, 2005, Wyndham had approximately 172.8 million shares of Class A common stock issued and 

outstanding and approximately 16.1 million shares of Class B preferred stock issued and 

outstanding. 

60. The Class B preferred stockholders control the Board of Directors through the 

structure of the Board and the special voting preferences granted to Class B stock.2

 Wyndham’s 

 

2

 Pursuant to the terms of the Class A (no voting rights) and B preferred stock issued in June 

 1999, preferred stock dividends were payable quarterly, on a cumulative basis, at a rate of 

 9.75% per year, for the first six years with the dividends structured to ensure an aggregate 

 fixed cash dividend payment of $29,250 per year. However, Wyndham’s credit facility 

 prohibited it from paying the cash portion of the preferred stock dividend until expiration or 

 further amendment of its credit facility and the cash portion of the dividend had not been paid 

 

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Board of Directors consists of 19 members represented by three separate classes: Class A, Class B 

and Class C. Class A directors consist of eight directors, who are elected by the Class A common 

stockholders. Class B directors consist of eight directors, who are elected by the Class B preferred 

stockholders. Class C directors consist of three directors, who are elected by both the Class A 

common stockholders and Class B preferred stockholders. Each share of the Class A stock is 

entitled to one vote per share while each share of the Class B stock is entitled to 12.7009 votes per 

share. Accordingly, the voting preference gives the Class B stockholders a majority of the votes in 

electing the three Class C directors. Based upon June 15, 2005 shares, Class A stockholders would 

have been entitled to cast 172.7 million votes for Class C directors while Class B stockholders would 

have been entitled to cast 204.5 million votes for Class C directors. 

61. As of May 2004, the following entities owned 100% of the Class B preferred stock: 

Apollo investors, Beacon investors, THL investors, Chase Equity Associates, L.P., CMS Investors, 

CKE Investors, PW Hotel I, LLC and PaineWebber Capital, Inc., Guayacan Investors, Strategic Real 

Estate Investors and The Bonnybrook Trust, the Franklin Trust and the Dartmouth Trust. 

Additionally, this group of investors owned 50.2% of the outstanding shares of Class A common 

stock, with an additional 9.3% of the common stock being owned by the individual directors and 

officers of the Company. The Apollo investors, the Beacon investors and the THL investors are the 

major holders of the preferred stock. Collectively they hold 91.4% of the outstanding Class B stock. 

62. Not surprisingly all eight of the Class B directors are related to either the Apollo 

investors, the Beacon investors or the THL investors as either officers, directors or partners and in 

many instances are also founding principals of the entities. Defendants Black, Rowan, Mack and 

 

but had accrued since 2002. As of December 31, 2004, cash dividends totaling $102.3 million on the 

preferred stock had been in arrears and unpaid for a period of more than 60 days. 

 

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Neibart are substantially involved with the Apollo investors. Defendant Leventhal is substantially 

involved with the Beacon investors and defendants Lee, Schoen and Sperling are substantially 

involved with the THL investors. As a result of this structure and the other employment and 

financial relationships detailed herein at ¶¶19-37, each director is beholden to the Class B preferred 

shareholders. 

63. In May 2005 it was reported that the Company had put itself up for sale. An article 

appearing in BizNewOrleans.com dated May 11, 2005 entitled “WSJ: Wyndham International 

seeking a buyer,” stated in relevant part: 

Wyndham International Inc. has put itself up for sale, according to a report today by 

The Wall Street Journal. 

Wyndham has 142 hotels and resorts in 10 countries in its franchise system, 

including 33 it owns and leases. The company operates four hotels in the greater 

New Orleans area. 

The hotel chain’s stock and debt are valued at about $3.7 billion. For the past 

several years, the company has been paying down debt by selling off its nonstrategic 

hotels, slashing administrative costs and refinancing its debt in order to slim itself 

down to a “branded hotel operating company” focusing on the Wyndham branded 

hotels, the Journal reported. 

Wyndham, which reported earnings yesterday, had first-quarter revenue of 

$282.6 million and a loss of 14 cents a share. The company said it expected to 

complete its planned $1.65 billion debt refinancing this week, extending its 

corporate-debt maturities to 2011. 

A Wyndham spokeswoman told the Journal: “We’re not commenting on 

market rumors and speculation.” 

The Dallas-based company owns, leases, manages and franchises the 

Wyndham Hotels & Resorts, Wyndham Luxury Resorts, Summerfield Suites and 

Viva Wyndham Resorts. 

64. On May 17, 2005, Wyndham filed a Form 8-K with the Securities and Exchange 

Commission (the “SEC”) advising that its previously issued financial statements for fiscal 2004 

could “no longer be relied upon”: 

 

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ITEM 4.02A NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL 

STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED 

INTERIM REVIEW 

During the quarter ended March 31, 2005, as Wyndham International, Inc. 

(the “Company” or “Wyndham”) was continuing to remediate internal controls over 

financial reporting previously disclosed in its December 31, 2004 Annual Report on 

Form 10-K, the Company identified an additional tax charge of $1.7 million related 

to 2004 and reconsidered other previously identified but deemed immaterial 

adjustments related primarily to accruals of unbilled legal and consulting fees 

aggregating $1.8 million related to 2004. The Company’s Audit Committee and 

management consider the charges to be immaterial to the Company’s financial 

position and the results of operations for the year ended December 31, 2004. 

However, even though the adjustments are only 0.14% of the first quarter 2005 

total assets, 0.15% of total liabilities, 2.5% of shareholders’ equity and 1.2% of the 

first quarter 2005 total revenues, the $3.5 million adjustments as a percentage of 

the first quarter 2005 loss from continuing operations of $48,000 are significant. 

As a result, on May 11, 2005 it was determined that the financial statements for the 

year ended December 31, 2004 should no longer be relied upon. 

The restatement resulted in the Company adjusting its previously reported 

2004 net loss of $509.5 million ($4.01 per share) to net loss of $512.9 million ($4.03 

per share). 

65. On May 17, 2005, the Company also amended its previously filed Form 10-K for the 

fiscal year ending December 31, 2004, indicating that the 10-K had not been updated based on the 

review conducted and that only the limited changes had been made as outlined in the preceding 

paragraph: 

This amended Annual Report on Form 10-K/A has not been updated except 

as required to reflect the effects of the foregoing restatement. In order to preserve the 

nature and character of the disclosures set forth in such items as originally filed, no 

attempt has been made in this amendment to modify or update the disclosures in the 

original Annual Report on Form 10-K except for the foregoing restatement. As a 

result, this amended Annual Report on Form 10-K/A contains forward-looking 

information which has not been updated for events subsequent to the date of the 

original filing, and all information contained in this amended Annual Report on 

Form 10-K/A and the original Annual Report on Form 10-K is subject to updating 

and supplementing as provided in the periodic reports that the Company has filed 

and/or will file with the SEC after the original filing date of the Annual Report on 

Form 10-K. 

66. On May 24, 2005, the fiscal 2004 10-K was once again amended to add the report of 

Wyndham’s independent accountants made in connection with the restatement: 

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors and Shareholders 

Wyndham International, Inc.: 

We have completed an integrated audit of Wyndham International Inc.’s 2004 

consolidated financial statements and of its internal control over financial reporting 

as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial 

statements in accordance with the standards of the Public Company Accounting 

Oversight Board (United States). Our opinions, based on our audits, are presented 

below. 

* * * 

As described in Note 2b to the consolidated financial statements, the 

Company has restated its 2004 consolidated financial statements. 

Internal control over financial reporting 

Also, we have audited management’s assessment, included in Management’s 

Report on Internal Control Over Financial Reporting appearing under Item 9A, that 

Wyndham International Inc. did not maintain effective internal control over 

financial reporting as of December 31, 2004, because Wyndham International, 

Inc. did not maintain effective controls over the accounting and review of income 

taxes and the determination of deferred income taxes and the related valuation 

allowance, based on criteria established in Internal Control – Integrated Framework 

issued by the Committee of Sponsoring Organizations of the Treadway Commission 

(COSO). The Company’s management is responsible for maintaining effective 

internal control over financial reporting and for its assessment of the effectiveness of 

internal control over financial reporting. Our responsibility is to express opinions on 

management’s assessment and on the effectiveness of the Company’s internal control 

over financial reporting based on our audit. 

* * * 

A material weakness is a control deficiency, or combination of control 

deficiencies, that results in more than a remote likelihood that a material 

misstatement of the annual or interim financial statements will not be prevented or 

detected. The following material weakness has been identified and included in 

management’s assessment. As of December 31, 2004, Wyndham International, Inc. 

did not maintain effective controls over the accounting and review of income taxes 

and the determination of deferred income taxes and the related valuation allowance. 

Specifically, the Company did not maintain effective controls over the reconciliation 

of its income tax assets and liabilities to the underlying differences between the tax 

basis and accounting basis of each component of the Company’s balance sheet. In 

addition, the related income tax asset valuation allowance was not reconciled to the 

underlying supporting detail. This control deficiency resulted in an audit adjustment 

to the fourth quarter 2004 consolidated financial statements. For the quarter ended 

March 31, 2005, the Company identified an additional adjustment of a write-off of 

 

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income tax receivable related to 2004, which resulted in the restatement of the 2004 

financial statements described in Note 2b. Additionally, this control deficiency 

could result in a misstatement of income taxes payable, deferred income tax assets 

and liabilities and the related income tax provision that could result in a material 

misstatement to the annual or interim financial statements that would not be 

prevented or detected. Accordingly, management determined that this control 

deficiency constitutes a material weakness. 

* * * 

/s/ PricewaterhouseCoopers LLP 

Dallas, Texas 

March 15, 2005 with respect to our opinion relating to the consolidated 

financial statements and financial statement schedules, except for Note 2b to the 

consolidated financial statements related to accounting for income taxes, as to which 

the date is May 16, 2005, and April 8, 2005 with respect to our opinions relating to 

internal control over financial reporting, except for the penultimate paragraph of 

Management’s Report on Internal Control Over Financial Reporting, as to which the 

date is May 16, 2005. 

THE WYNDHAM RECAPITALIZATION EFFORT 

67. In April 2005, the Company announced a $1.65 billion refinancing, and two weeks 

later announced it was undertaking a massive stock recapitalization which, if completed, would have 

converted all preferred stock into common stock. 

68. On April 15, 2005, the Company announced that, based upon the recommendation of 

the special committee formed to review and negotiate a change to the Company’s capital structure, it 

had entered into a definitive recapitalization agreement with certain investors in Wyndham’s Series 

A and B Preferred Stock. In the Recapitalization, the existing classification of Wyndham’s common 

stock would be eliminated, all outstanding shares of Series A and Series B Preferred Stock 

(including accrued but unpaid dividends) would be converted into common stock and the existing 

common stockholders would continue to hold shares of common stock. At the closing of the 

transaction, the holders of the Series A and Series B preferred stock would own approximately 85% 

of the outstanding common stock of Wyndham and the existing common stockholders would own 

approximately 15% of the outstanding common stock of Wyndham. 

 

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69. In May 2005 the Company completed the $1.65 billion refinancing of its corporate 

credit facilities and the majority of its outstanding mortgage debt, including extending its corporate 

debt maturities to 2011 (90% of Wyndham’s outstanding debt) and pre-funding $100 million in 

capital to be invested into the Company’s owned and leased properties. This was undertaken to 

assist the controlling preferred stock holders. 

70. The first six year term of the preferred stock agreement would expire in June 2005 

and from that point forward the Board, in compliance with its fiduciary duties, would have to 

determine if the preferred stock should get cash or stock dividends. Moreover, in June 2005 another 

provision would expire requiring that if a change in control or a liquidation of Wyndham occurred, 

any accrued dividends had to be immediately accelerated and paid. Moreover, at the end of the six 

year period in June 2005, the preferred stock was redeemable by Wyndham and the Board, in 

compliance with its fiduciary duties would be forced to decide whether or not to redeem the 

preferred stock, thus terminating the preferred dividend at a rate of 9.75% per year. 

71. The Recapitalization was never undertaken after the credit agreement was 

renegotiated. Rather than follow the advice of the only special committee created to determine what 

was fair to Wyndham’s minority shareholders, defendants agreed to the terms of the Acquisition 

which unfairly benefited the interests of the preferred shareholders to the detriment of the minority 

common stock holders. 

THE ACQUISITION 

72. On June 14, 2005, the Company issued a press release entitled, “Wyndham 

International, Inc. Announces Agreement to Be Acquired by The Blackstone Group for $1.15 Per 

Share or Approximately $3.24 Billion.” The press release stated in relevant part: 

Wyndham International, Inc. announced today that it has entered into a definitive 

Merger Agreement to be acquired by an affiliate of The Blackstone Group in a 

transaction valued at $3.24 billion. 

 

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Under the terms of the Merger Agreement, Blackstone will acquire all of the 

outstanding Common Stock of Wyndham for $1.15 per share in cash. The board of 

directors of Wyndham unanimously approved the Merger Agreement and 

recommended approval by its shareholders. 

Fred J. Kleisner, Wyndham’s chairman, president and chief executive officer, 

said, “Wyndham has followed a strategic approach to: simplify our corporate 

structure, refinance our debt and sell all non-strategic assets. We have created a 

stream-lined organization centered around 32 high quality owned and leased hotels 

and destination resorts plus the world’s pre-eminent spa, the Golden Door. All of 

this has made Wyndham a much desired and sought after company in today’s real 

estate market. In that regard, we are pleased to have signed a merger agreement with 

Blackstone.” 

Jonathan D. Gray, senior managing director of The Blackstone Group, said, 

“We are excited to acquire Wyndham International with its terrific collection of 

employees, properties and brands. We look forward to working with Wyndham’s 

franchisees, owners and partners.” 

The completion of the Merger Agreement is subject to various customary 

closing conditions, including the approval of Wyndham’s stockholders and the 

expiration of the applicable waiting period under the Hart-Scott-Rodino Act. 

Completion of the Merger Agreement is not subject to the receipt of financing by 

Blackstone. The closing of the Merger Agreement is expected to occur during the 

fourth quarter of 2005. 

Wyndham previously announced the entry into a definitive Recapitalization 

Agreement with certain investors of Wyndham’s Series B Preferred Stock in which 

all outstanding shares of Series A and Series B Preferred Stock would be converted 

into common stock. Under the terms of the Merger Agreement, the holders of shares 

of Preferred Stock will receive $72.17 per share in cash, subject to potential 

adjustment to reflect additional shares that may be issued as dividends after June 30, 

2005. 

Bear, Stearns & Co. Inc. acted as financial advisor to Wyndham in 

connection with the strategic review and this transaction. J.P. Morgan Securities Inc. 

provided a fairness opinion in connection with this transaction. Paul, Weiss, Rifkind, 

Wharton & Garrison LLP acted as legal advisor to Wyndham. Simpson Thacher & 

Bartlett LLP acted as legal advisor to Blackstone. 

73. Under the terms of the Acquisition, Wyndham’s controlling stockholders – entities 

affiliated with Apollo investors, THL investors, Beacon investors, PaineWebber Capital Inc., Chase 

Capital Partners and Walt Disney Co. CEO Michael Ovitz – will receive $72.17 a share for their 

convertible preferred, or approximately $1.19 billion. The Acquisition netted them a substantial 

profit on the $1 billion the controlling preferred shareholders invested in Wyndham in 1999, in 

 

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addition to the cash dividend payment of $29,250 per year that each preferred stock share had been 

granted since 1999. 

74. On June 14, 2004, the Apollo investors, the Beacon investors and the THL investors, 

holders of over 90% of the Class B preferred stock and approximately 49% of the Company’s 

overall voting power, entered into the Voting Agreement with Blackstone and Wyndham whereby 

they agreed to vote all of their shares in favor of the Acquisition. Eight of the directors are 

substantially involved with one of these interested entities. In addition, as of June 15, 2005, 

Wyndham’s officers and directors, and their affiliates (excluding the preferred shareholders) 

collectively held an additional 3.6% of the outstanding voting power of Wyndham – which they 

expected to vote in favor of the Acquisition. With nearly 53% of the overall vote locked-up in favor 

of the Acquisition, the outcome of the shareholder vote on the Acquisition was already determined. 

As such, the Company’s minority shareholders were forced to blindly accept the $1.15 per share 

consideration that the majority was willing to give them, without adequate disclosures and conflict 

barriers to ensure fairness. 

SELF-DEALING 

75. The Class B directors, by reason of their control over the voting power of the 

Company, had clear and material conflicts of interest and acted to better their own interests at the 

expense of Wyndham’s minority public shareholders. The Class A and Class C directors, which 

were overwhelmingly elected by the Class B preferred shareholders, acquiesced in the Class B 

directors decision in order to retain the lucrative perquisites obtained through membership on the 

Board, including, among other things, $20,000 annual retainers, at least $1,000 per board meeting 

attended, generous stock option grants and consulting agreements. By reason of the foregoing, 

defendants breached their fiduciary duties to the members of the Class. 

 

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76. A special committee of independent directors was not formed by the Wyndham Board 

to negotiate the Acquisition despite the clear and well-recognized conflicts of interest pertaining to 

the Wyndham Board and Bear Stearns. Defendants’ failure to utilize a special committee is even 

more egregious in this situation given that one was formed to review and negotiate the 

Recapitalization with the Company’s Class A and B preferred shareholders. Nonetheless, the use of 

a special committee would have been entirely irrelevant as any member would have obvious 

conflicts of interest, in light of, inter alia, their allegiance to the Class B preferred shareholders. 

Thus, the process by which the Acquisition was conducted was procedurally flawed and unfair. 

77. The Acquisition was wrongful, unfair and harmful to Wyndham’s minority public 

stockholders, and represents an effort by defendants to aggrandize their own financial position and 

interests at the expense of and to the detriment of the Class members. Through the Acquisition, 

defendants unfairly denied Wyndham’s minority shareholders their rights while usurping the same 

for the benefit of the Individual Defendants on unfair terms. 

78. In particular, defendants’ caused Wyndham to misstate its financial results, operate 

without internal controls, expend millions of dollars on professional and legal fees structuring the 

refinancing for the benefit of the preferred stock holders and agreed to terms in the Acquisition (and 

refused to negotiate in good faith with other potential acquirers) only to benefit the preferred 

shareholders rather than redeeming and/or canceling the preferred stock – which would have allowed 

the minority to continue to participate in the Company’s future growth instead of being cashed out 

for a mere $1.15 per share. 

79. The preferred stockholders used their control to negotiate a sale of Wyndham that 

disposes of Wyndham at a price and pursuant to terms which benefit preferred holders to the 

detriment of common stockholders. Moreover, as part of the Merger Agreement, defendants agreed 

 

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to provisions which all but precluded a better offer from materializing, including unlawful “nosolicitation” and termination fee provisions. 

80. Because the preferred stockholders dominated and controlled the business and 

corporate affairs of Wyndham, and all defendants were in possession of private corporate 

information concerning Wyndham’s assets, business and future prospects, there existed an imbalance 

and disparity of knowledge and economic power between them and the public minority shareholders 

of Wyndham which made it inherently unfair for them to reap such disproportionate benefits to the 

exclusion of maximizing stockholder value for the minority shareholders. 

THE CONFLICTED FINANCIAL ADVISORS 

Bear Stearns 

81. Bear Stearns was retained by the Wyndham Board to purportedly serve as its financial 

advisor. However, Bears Stearns’ own significant interest in seeing the transaction close, regardless 

of the fairness of the terms and price to Wyndham and its non-affiliated shareholders, and its 

extensive long-term relationships with Blackstone, Wyndham’s executives and the Apollo investors 

and other preferred holders, prevented it from fulfilling its fiduciary duties to Wyndham and its 

unaffiliated shareholders. 

82. In 1999, Bear Stearns advised an investor group led by an entity affiliated with the 

Apollo investors when it initially invested $1 billion in Wyndham. Bear Stearns went on to advise 

Wyndham, at the behest of the Company’s management and the preferred holder directors, in 

various divestitures of what bankers describe as “nonproprietary branded properties,” usually about 

20 hotels at a time. Bear Stearns earned tens of millions of dollars in investment banking fees along 

the way. 

83. Bear Stearns is also well acquainted with Blackstone, having been actively involved 

in the real estate business of Blackstone, Wyndham’s acquiror in the Acquisition, for years. Bear 

 

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Stearns had a financial interest adverse to Wyndham in the Acquisition, including not only a bona 

fide interest in continuing to receive future business from Blackstone, but an actual equity interest in 

Blackstone Real Estate Partners, IV – the very same Blackstone entity that acquired Wyndham – as 

well as in other Blackstone entities. 

84. Among other dealings, Bear Stearns and its affiliates have provided investment 

banking services to Blackstone, including advising Blackstone and/or providing financing or other 

services in connection with numerous Blackstone acquisitions. For example, in 2001, Blackstone 

began acquiring “extended stay” hotel assets with the acquisition of Homestead Village, Inc. 

(“Homestead”). These holdings primarily consist of efficiency units that provide guests with 

amenities suitable for periods beyond the needs of the casual vacationer (i.e. the units have built in 

stove tops and kitchens). Bear Stearns assisted in placing sophisticated financing for a significant 

portion of Blackstone’s extended stay portfolio hotels through the commercial mortgage passthrough (“CMBS”) market. 

85. On April 1, 2004, Blackstone placed $460 million in CMBS certificates sold by Bear 

Stearns Commercial Mortgage Securities Series 2004-HS2. The deal was collateralized by mortgage 

loans secured by Blackstone’s extended stay properties, and Blackstone was able to provide strong 

sponsorship to the deal through its Homestead Village Management portfolio company. Blackstone 

and Gray were advised in the Homestead acquisition by Charles Edelman (“Edelman”) and Lonnie 

Henry (“Henry”) of Bear Stearns. Bear Stearns also helped provide financing for that acquisition, 

and received millions of dollars in fees from Blackstone for its investment banking and financing 

services related to the Homestead acquisition. 

86. In May 2004, Blackstone and Gray closed another major hotel acquisition through its 

purchase of Extended Stay America (“Extended Stay”). Edelman and Henry of Bear Stearns acted 

as financial advisor to Blackstone in this $3.1 billion acquisition. Bear Stearns also helped provide 

 

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financing. Bear Stearns was paid millions in fees by Blackstone for its investment banking and 

financing services related to this acquisition. 

87. In October 2004, Blackstone and Gray closed yet another major hotel acquisition, this 

time of Prime Hospitality, Inc. (“Prime”) for $790 million. In the Prime acquisition, the Bear 

Stearns team of Edelman and Henry purported to represent Prime (similar to their representation of 

Wyndham here) rather than their long-time business associates Blackstone and Gray. In issuing an 

opinion related to the Prime acquisition, the Delaware Chancery Court described Bear Stearns as 

“clearly conflicted” in representing Prime given its long-standing and ongoing ties with Blackstone. 

The same conflicts are present here as were present in the Prime case. Moreover, at the same time 

Bear Stearns was purportedly working for Prime (as with Wyndham), it had an equity interest in 

Blackstone Real Estate Partners, IV – the very same Blackstone entity that was acquiring Prime (and 

later Wyndham) – as well as in other Blackstone entities. 

88. In December 2004, Blackstone and Gray closed another major hotel acquisition, this 

time of Boca Resorts Inc. Edelman and Henry of Bear Stearns acted as financial advisor to 

Blackstone in this $1.23 billion acquisition. Bear Stearns also helped provide financing. Bear 

Stearns was paid millions in fees by Blackstone for its investment banking and financing services 

related to this acquisition. 

89. Bear Stearns has also recently provided services to Blackstone, or entities in which 

Blackstone has or had a substantial interest, including but not limited to Vanguard Health Systems, 

Inc., Celanese Corporation, Spirit Group, Encoda Systems Holdings Inc., Hyatt Regency Maui 

Resort and Spa, and Vivendi Universal Entertainment. 

90. Bear Stearns was initially engaged by defendants to act as the Company’s financial 

advisor in connection with any sale of the Company or other strategic alternative. On February 16, 

2005, during a Board meeting, Bear Stearns was asked to provide a financing package for any 

 

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potential acquisition of the Company that it would make available to all potential purchasers, which 

it agreed to do. Defendants permitted Bear Stearns to provide financing for the Acquisition despite 

the conflict of interest created by allowing it to act as both the Company’s financial advisor and a 

possible financing source in connection with a third-party acquisition of the Company. As the 

financing source for the Acquisition, Bear Stearns had a strong incentive to decrease or downplay 

the value for which the Company was ultimately sold in order to minimize the risk it would face as a 

result of financing the Acquisition. 

91. Indeed, Blackstone only committed to a $550 million equity investment in Wyndham, 

with Bear Stearns, along with Wachovia Bank, N.A., committing to provide the other $2.8 billion in 

debt financing needed to complete the Acquisition. 

J.P. Morgan 

92. J.P. Morgan was retained by the Wyndham Board to provide a purported “fairness” 

opinion in connection with the Acquisition only after the Board approved Bear Stearns dual role as 

financial advisor/negotiator and financier. Defendants have failed to disclose what portion, if any, of 

the $1.5 million J.P. Morgan was paid to render a fairness opinion was contingent upon the 

Acquisition being consummated. 

93. J.P. Morgan has close ties to Blackstone and the preferred investors group as well. 

J.P. Morgan just advised upon and co-underwrote Blackstone’s bid for Wind, the telecoms arm of 

Italian utility Enel, in April 2005. J.P. Morgan also served as a lead arranger in Blackstone’s 

November 2004 secondary buyout (505 million EURO debt financed purchase) of Gerresheimer 

Glas. 

94. In September 2004, it was announced that J.P. Morgan and Apollo had agreed to buy 

AMC Entertainment for $2 billion. In fact, Blackstone, J.P. Morgan and the Apollo investors are all 

three Second Secured Lenders to German company PrimaCom AG. In January 2005, they obtained 

 

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an injunction from a German court permanently enjoining PrimaCom AG’s planned sale of its 

subsidiary, Multikabel, stating that the terms were unfair to them as creditors of PrimaCom AG. 

95. In September 2003, J.P. Morgan served as Apollo’s advisor in its co-purchase of 

Ondeo Nalco Co., the U.S. water treatment arm of Franco-Belgian conglomerate Suez SA, with 

Blackstone for $4.35 billion. 

96. In March 2005, J.P. Morgan and Bear Stearns advised Wyndham on its sale of 23 

hotels to a private investment fund for $366 million. J.P. Morgan and Bear Stearns were also joint 

book runners on Wyndham’s May 2005 $1.65 billion refinancing of its corporate credit facilities and 

the majority of its outstanding mortgage debt, including extending its corporate debt maturities to 

2011 (90% of Wyndham’s outstanding debt) and pre-funding $100 million in capital to be invested 

into the Company’s owned and leased properties. 

97. As of June 13, 2005, the date of its fairness opinion, a J.P. Morgan venture capital 

affiliate owned 402,673,972 shares of Wyndham series B preferred stock, representing 

approximately 2.5% of the Company’s outstanding series B preferred stock. 

98. Under the terms of their engagements to provide financial advising services to 

Wyndham in connection with the Acquisition, the fees of J.P. Morgan and Bear Stearns would both 

be significantly limited if they concluded the terms of the Acquisition were not fair to Wyndham and 

its public shareholders. 

MATERIAL NON-DISCLOSURES 

99. By reason of their positions with Wyndham, defendants were in possession of nonpublic information concerning the financial condition and prospects of Wyndham, and especially the 

true value and expected increased future value of Wyndham and its assets, which they failed to 

adequately disclose to Wyndham’s public stockholders. 

 

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100. Defendants, on July 20, 2005, filed with the SEC and disseminated to the Company’s 

public shareholders the Proxy, which misrepresented and/or omitted material information concerning 

the Acquisition necessary to ensure a fully-informed shareholder vote, including, among other 

things: 

• defendants’ reasons for considering the Acquisition to be a “change of 

control” for purposes of employment compensation benefits but not for 

purposes of preferred stock liquidation preferences; 

• defendants’ reasons for not appointing an independent special committee to 

consider the Acquisition given the substantial conflicts of interest of the 

Board members and Bear Stearns, and the fact that they formed a purportedly 

independent special committee to review, evaluate and negotiate the 

Recapitalization; 

• information regarding the steps taken by the Board to protect shareholders 

from the conflicts of interest suffered by Bear Stearns as a result of its 

agreement to provide financing for the Acquisition; 

• information regarding the director defendants’ stock options, whether vested 

or unvested, and the corresponding strike prices, as well as any restricted 

stock units, both of which were cashed out in connection with the 

Acquisition; 

• information as what percentage, if any, of the fee paid to J.P. Morgan for 

rendering a fairness opinion was contingent upon consummation of the 

Acquisition; 

• information underlying the analyses substantiating J.P. Morgan’s fairness 

opinion including, among other things, the sizes of the companies and values 

of the transactions associated with the mergers used by J.P. Morgan in its 

Selected Transaction Analysis; 

• information regarding: (i) the reason the compensation committee of the 

Board established a $4 million “bonus pool” payable to designated Wyndham 

employees upon the consummation of the Acquisition, and (ii) whether and 

to what extent any of the Company’s officers and/or directors received any of 

the $4 million; 

• defendants’ reasons for not employing a “majority of the minority” voting 

structure for approval of the Acquisition given that nearly 53% of the vote 

was locked up via the Voting Agreement; 

• any effects the restatement and investigation concerning the Company’s 

inadequate internal controls revealed; and 

 

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• information as to whether any separate consideration was paid to the investor 

parties for entering into the Voting Agreement. 

101. This information was material to Wyndham’s minority shareholders because it would 

have allowed them to make an independent and fully-informed decision as to the Board members’ 

interests and motives in approving and recommending the Acquisition, the validity and reliability of 

the fairness opinion issued in connection with the Acquisition, whether a fair sale process was 

conducted, and whether they were receiving adequate value for their interests in the Company. 

102. In addition, defendants breached their fiduciary duties of candor by failing to provide 

information regarding the favorable financial results of Wyndham’s second quarter of 2005 prior to 

the announcement of the Acquisition, thus putting an artificial cap on the Company’s common stock 

and preventing the full value of Wyndham’s common stock from being realized. 

FIRST CAUSE OF ACTION 

Claim for Breach of Fiduciary Duties 

103. Plaintiff repeats and realleges each allegation set forth herein. 

104. Defendants have violated their fiduciary duties of care, loyalty, good faith, candor and 

independence owed under applicable law to Wyndham’s public minority shareholders and have 

acted to put their personal interests ahead of the interests of Wyndham’s public minority 

shareholders. 

105. By the acts, transactions and courses of conduct alleged herein, defendants, 

individually and acting as a part of a common plan, advanced their own interests at the expense of 

and detriment to Wyndham’s public minority shareholders. 

106. The Individual Defendants violated their fiduciary duties by entering into a 

transaction with Blackstone without regard to the fairness of the transaction to Wyndham’s public 

minority shareholders. 

 

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107. The Individual Defendants also violated their fiduciary duties by failing to provide 

Wyndham’s public shareholders with material information concerning the Acquisition. 

108. As demonstrated by the allegations above, the Individual Defendants failed to 

exercise the care required, and breached their duties of loyalty, good faith, candor and independence 

owed to Wyndham’s public minority shareholders because, among other reasons: 

(a) they failed to properly value Wyndham; and 

(b) they ignored or did not protect against the numerous conflicts of interest 

resulting from their own interrelationships and financial connections, as well as those that exist 

between Bear Stearns, Blackstone and JP Morgan, in connection with the Acquisition. 

109. Because the Individual Defendants dominated and controlled the business and 

corporate affairs of Wyndham, and were in possession of private corporate information concerning 

Wyndham’s assets, business and future prospects, there exists an imbalance and disparity of 

knowledge and economic power between them, the Company and the public shareholders of 

Wyndham which made it inherently unfair for them to pursue any transaction wherein they would 

reap disproportionate benefits. 

110. By reason of the foregoing acts, practices and course of conduct, defendants failed to 

exercise ordinary care and diligence in the exercise of their fiduciary obligations toward Wyndham 

and the Class. 

111. Defendants engaged in self-dealing and acted in bad faith towards Wyndham’s 

minority shareholders and the Class. 

112. As a result of defendants’ egregious breaches of fiduciary duty, Wyndham’s public 

minority shareholders suffered substantial damages. 

 

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PRAYER FOR RELIEF 

WHEREFORE, plaintiff, on behalf of itself and all others similarly situated, demands 

damages in its favor and in favor of the Class and against defendants as follows: 

A. Declaring that this action is properly maintainable as a class action; 

B. Declaring and decreeing that the Acquisition agreement was entered into in breach of 

the fiduciary duties of the defendants and is therefore unlawful and unenforceable; 

C. Directing defendants to pay plaintiffs and other members of the Class the damages 

they incurred from defendants’ breach of their fiduciary duties; 

D. Rescinding, to the extent already implemented, the Acquisition or any of the terms 

thereof; 

E. Imposition of a constructive trust, in favor of plaintiff, upon any benefits improperly 

received by defendants as a result of their wrongful conduct, including all stock option grants and 

restricted stock units that vested upon the change of control of the Company; 

F. Awarding plaintiff the costs and disbursements of this action, including reasonable 

attorneys’ and experts’ fees, costs and expenses; and 

G. Granting such other and further equitable relief as this Court may deem just and 

proper. 

JURY DEMAND 

Plaintiff demands a trial by jury. 

DATED: December 9, 2005 PROVOST & UMPHREY LAW FIRM, LLP 

JOE KENDALL 

State Bar No. 11260700 

WILLIE C. BRISCOE 

State Bar No. 24001788 

s/ JOE KENDALL 

JOE KENDALL 

 

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3232 McKinney Avenue, Suite 700 

Dallas, TX 75204 

Telephone: 214/744-3000 

214/744-3015 (fax) 

LERACH COUGHLIN STOIA GELLER 

 RUDMAN & ROBBINS LLP 

DARREN J. ROBBINS 

RANDALL J. BARON 

A. RICK ATWOOD, JR. 

SHAUN L. GROVE 

655 West Broadway, Suite 1900 

San Diego, CA 92101 

Telephone: 619/231-1058 

619/231-7423 (fax) 

Attorneys for Plaintiff 

S:\CasesSD\Wyndham\CPT00026690.doc 

 

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CERTIFICATE OF SERVICE

I hereby certify that on December 9, 2005, I electronically filed the foregoing with the Clerk 

of the Court using the CM/ECF system which will send notification of such filing to the e-mail 

addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I have 

mailed the foregoing document or paper via the United States Postal Service to the non-CM/ECF 

participants indicated on the attached Manual Notice List. 

 s/ JOE KENDALL 

 JOE KENDALL 

PROVOST & UMPHREY LAW FIRM, LLP 

3232 McKinney Avenue, Suite 700 

Dallas, TX 75204 

Telephone: 214/744-3000 

214/744-3015 (fax)

 

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