<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ________)*
Interstate Hotels Company
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(Name of Issuer)
Common Stock, $.01 par value per share
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(Title of Class of Securities)
460886 10 4
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(CUSIP Number)
Rex E. Stewart
Chief Financial Officer
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75207
(214) 863-1000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
December 2, 1997
-------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [_].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13-d1(a) for other parties to whom copies are to
be sent.
(Continued on the following pages)
(Page 1 of 6 Pages)
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SCHEDULE 13D
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CUSIP NO. 460886 10 4 PAGE 2 OF 6 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Patriot American Hospitality, Inc. I.R.S. Identification No. 94-0358820
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4
00
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
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SOLE VOTING POWER
7
NUMBER OF
See response to Item 5
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
See response to Item 5
OWNED BY
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EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
See response to Item 5
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
19.9%
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TYPE OF REPORTING PERSON*
14
CO
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<PAGE>
SCHEDULE 13D
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CUSIP NO. 460886 10 4 PAGE 3 OF 6 PAGES
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ITEM 1. SECURITY AND ISSUER.
-------------------
This statement relates to the common stock, $.01 per share par value
("Common Stock"), of Interstate Hotels Company (the "Issuer"), a Pennsylvania
corporation with its principal executive offices at Foster Plaza Ten, 680
Andersen Drive, Pittsburgh, PA 15220.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
The address of the principal office and the principal business of Patriot
American Hospitality, Inc., a Delaware corporation ("Patriot"), is 1950 Stemmons
Freeway, Suite 6001, Dallas, TX 75207.
During the last five years, neither Patriot nor, to the knowledge of
Patriot, any executive officer or director of Patriot (i) has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Attached hereto as Schedule I is a list of the directors and executive
officers of Patriot which contains the following information with respect to
each such person:
(a) name;
(b) business address; and
(c) present principal occupation or employment and the name, principal
business and address of any corporation or other organization in which
such employment is conducted.
To the knowledge of Patriot, each person identified in Schedule I hereto is
a United States citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
As described in Item 5 below, Patriot has been given a proxy with respect
to, but has not purchased, shares of Common Stock of the Issuer. Patriot has not
expended any funds in connection therewith.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
On December 2, 1997, Patriot, Patriot American Hospitality Operating
Company ("PAHOC") and the Issuer entered into an Agreement and Plan of Merger
(the "Merger Agreement") which contemplates the acquisition of the Issuer by
Patriot through a merger by the Issuer with and into Patriot, with Patriot being
the surviving corporation (the "Merger"). As an inducement to Patriot and PAHOC
to enter into the Merger Agreement, the Issuer and certain shareholders of the
Issuer (the "Shareholders") entered into a shareholders agreement with Patriot
and PAHOC dated as of December 2, 1997 (the "Shareholders Agreement") pursuant
to which, among other things, each of the Shareholders appointed Patriot its
proxy to vote certain shares of Common Stock held by such Shareholder with
respect to certain matters relating to the Merger, as more fully described in
Item 5 below.
If the Merger is consummated, the registration of the Common Stock under
the Securities Exchange Act of 1934 will terminate and the Common Stock will be
delisted from the New York Stock Exchange.
Except as set forth above or in Item 5, Patriot does not have any plans or
proposals concerning the Issuer with respect to the matters set forth in
subparagraphs (a) through (j) of Item 4 of this Schedule.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 460886 10 4 PAGE 4 OF 6 PAGES
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ITEM 5. INTEREST IN SECURITIES OF ISSUER.
--------------------------------
Pursuant to the Shareholders Agreement, each of the Shareholders appointed
Patriot its proxy to vote the shares of Common Stock held by such Shareholder
with respect to certain matters relating to the Merger; provided, that the
--------
aggregate number of shares of Common Stock to which the proxy given to Patriot
applies at any time is limited to the number of shares which are entitled to
cast 19.9% of the votes entitled to be cast generally in the election of the
Issuer's directors. As of December 1, 1997, the Shareholders owned an aggregate
of 12,782,940 shares of Common Stock and the proxy given to Patriot applied to
7,048,874 of such shares.
The proxy described above generally gives Patriot the right to vote the
shares of Common Stock to which it applies in favor of the Merger Agreement and
the Merger and the other transactions contemplated by the Merger Agreement.
Patriot also has the right to vote such shares against (i) any Company Takeover
Proposal, as that term is defined in the Merger Agreement, (ii) any proposal for
any action that would result in a breach of any provision of the Merger
Agreement or which is reasonably likely to result in any of the conditions of
the Issuer's obligations under the Merger Agreement not being fulfilled, (iii)
any change in the directors of the Issuer, the present capitalization of the
Issuer, the Issuer's certificate of incorporation or bylaws, the Issuer's
corporate structure or business, or (iv) any other action which could reasonably
be expected to impede, interfere with, delay, postpone or materially adversely
affect the transactions contemplated by the Merger Agreement or the likelihood
of such transactions being consummated.
Except as described above, neither Patriot nor, to the knowledge of
Patriot, any person named in Schedule I beneficially owns any shares of Common
Stock or has effected any transactions in Common Stock during the past 60 days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
---------------------------------------------------------------------
TO SECURITIES OF THE ISSUER.
---------------------------
The information set forth under Items 4 and 5 above and the Exhibit
attached hereto is incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
The following document is filed an exhibit to this statement:
Exhibit 1 Shareholders Agreement dated as of December 2, 1997 by and among
--------- Patriot, PAHOC, the Issuer and the shareholders of the Issuer
named on the signature page thereto.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 460886 10 4 PAGE 5 OF 6 PAGES
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 11, 1997 By: /s/ Rex E. Stewart
-----------------------------------------
Rex E. Stewart
Chief Financial Officer, Treasurer and
Secretary
<PAGE>
SCHEDULE 13D
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CUSIP NO. 460886 10 4 PAGE 6 OF 6 PAGES
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SCHEDULE I
----------
The name and present principal occupation or employment of each executive
officer of Patriot is set forth below. The business address of each person is
set forth below, and the address of the corporation or organization in which
such employment is conducted is the same as his business address. All of the
persons listed below are U.S. citizens. No person is a controlling shareholder
of Patriot.
<TABLE>
<CAPTION>
Position Name Business Address
- ----------------------------------------------------------------------------
<S> <C> <C>
President and
Chief Executive Officer Paul A. Nussbaum 1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Office of the Chairman William W. Evans, III 590 Madison Ave., 22nd Floor
New York, NY 10022
Executive Vice President,
Chief Financial Officer, Rex E. Stewart 1950 Stemmons Freeway, Suite 6001
Treasurer and Secretary Dallas, Texas 75207
</TABLE>
The name and present principal occupation or employment of each director of
Patriot is set forth below. The business address of each person is set forth
below, and the address of the corporation or organization in which such
employment is conducted is the same as his business address. All of the persons
listed below are U.S. citizens. No person is a controlling shareholder of
Patriot.
<TABLE>
<CAPTION>
Name Business Address Occupation
- --------------------------------------------------------------------------------------
<S> <C> <C>
Paul A. Nussbaum Patriot Chief Executive Officer
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75207
Arch K. Jacobson Jacobson-Berger Capital Group, Inc. Consultant
4100 Alpha Road, Suite 220
Dallas, TX 75244
William W. Evans, III Patriot Office of the Chairman
590 Madison Ave., 22nd Floor
New York, NY 10022
John H. Daniels The Daniels Group Real Estate
Suite 3400, Box 50 Development and
20 Queen Street West Management
Toronto, Ontario M4H 3R3
Canada
John C. Deterding Deterding Associates Real Estate Consultant
107 N. Waterview Drive
Richardson, TX 75080
Gregory R. Dillon Hilton Hotels Corporation Vice Chairman
9336 Civic Center Drive
Beverly Hills, CA 90210
</TABLE>
<PAGE>
EXHIBIT 1
---------
SHAREHOLDERS AGREEMENT
This Shareholders Agreement, dated as of December 2, 1997 (this
"Agreement"), is among Patriot American Hospitality, Inc., a Delaware
corporation ("Patriot"), Patriot American Hospitality Operating Company, a
Delaware corporation ("OPCO"), the shareholders of the Company named on the
signature page hereto (individually, a "Shareholder" and collectively, the
"Shareholders") and, solely for purposes of Section 3.4 hereof, Interstate
Hotels Company, a Pennsylvania corporation (the "Company").
RECITALS:
A. The Shareholders consist of Milton Fine ("Mr. Fine") and six trusts
established pursuant to the trust documents described on Exhibit A;
----------
B. As of the date hereof, each Shareholder owns the number of shares (the
"Shares") of Common Stock, par value $0.01 per share ("Company Stock"), of the
Company set forth on Exhibit B;
----------
C. Patriot, OPCO and the Company are entering into an Agreement and Plan
of Merger, dated as of the date hereof (as the same may be amended from time to
time, the "Merger Agreement"), which provides, on the terms and subject to the
conditions thereof, for the merger of the Company with and into Patriot (the
"Merger"); and
D. As a condition to the willingness of Patriot to enter into the Merger
Agreement, Patriot has requested that the Shareholders agree, and, in order to
induce Patriot to enter into the Merger Agreement, the Shareholders are willing
to agree, to grant Patriot an irrevocable proxy to vote, or to otherwise cause
to be voted, certain of the Shares pursuant to the terms and conditions hereof.
NOW, THEREFORE, the parties hereto agree as follows:
I. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders hereby represent and warrant to Patriot and OPCO as
follows:
1.1 Due Authority. The Shareholders have full power and authority to
-------------
execute and deliver this Agreement and to perform their obligations hereunder.
This Agreement has been duly executed and delivered by or on behalf of the
Shareholders and, assuming its due authorization, execution and delivery by
Patriot, OPCO and the Company, constitutes a legal, valid and binding obligation
of the Shareholders.
1.2 No Conflict; Consents. (a) The execution and delivery of this
---------------------
Agreement by the Shareholders do not, and the performance by the Shareholders of
their obligations under this Agreement and the compliance by the Shareholders
with any provisions hereof do not and will
<PAGE>
not, (i) conflict with or violate any law, statute, rule, regulation, order,
writ, judgment or decree applicable to the Shareholders or the Shares, (ii)
conflict with or violate the instruments under which the Shareholders were
formed, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the Shares pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which any of the
Shareholders is a party or by which any of the Shareholders or any of the Shares
are bound.
(b) The execution and delivery of this Agreement by the Shareholders do
not, and the performance of this Agreement by the Shareholders will not, require
any consent, approval, authorization or permit of, or filing with (except for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or notification to, any government or regulatory
authority by the Shareholders.
(c) No other person or entity has or will have during the Proxy Term any
right directly or indirectly to vote or control or affect the voting of the
Shares.
1.3 Title to Shares. The Shareholders (a) are the record or beneficial
---------------
owners of the Shares as listed on Exhibit B free and clear of any proxy or
voting restriction other than pursuant to this Agreement and (b) have, and
during the Proxy Term will have, sole power of disposition with respect to the
Shares.
1.4 No Encumbrances. The Shares and the certificates representing the
---------------
Shares are now and at all times during the Proxy Term hereof will be held by the
Shareholders, or by a nominee or custodian for the benefit of the Shareholders,
free and clear of all proxies, voting trusts and voting agreements,
understandings or arrangements and free and clear of all liens, claims, security
interests and any other encumbrances whatsoever except any such encumbrances or
proxies arising under this Agreement.
1.5 Brokers. The Shareholders are not liable for, and will indemnify the
-------
Company and Patriot against, any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of any of the Shareholders.
1.6 Tax Representations. (a) Neither the issuance of Paired Shares (as
-------------------
such term is defined in the Merger Agreement) to the Shareholders in connection
with the Merger nor the other transactions contemplated by this Agreement will
cause any person to violate the restrictions on ownership and transfer contained
in Article IV of the Amended and Restated Certificate of Incorporation of
Patriot or the restrictions on ownership and transfer contained in Article IV of
the Amended and Restated Certificate of Incorporation of OPCO. The
2
<PAGE>
Shareholders will provide to Patriot such information as Patriot may reasonably
request so that Patriot may confirm the accuracy of this representation.
(b) No Shareholder has or will have at the Effective Date any present plan,
intention, or arrangement to sell or dispose of any of the Paired Shares to be
received in the Merger. For purposes of this Section 1.6, a sale or disposition
includes any "constructive sale" within the meaning of Section 1259(c)(1)(A) -
(E) of the Code.
II. REPRESENTATIONS AND WARRANTIES OF PATRIOT AND OPCO
Patriot and OPCO each hereby represent and warrant, with respect to itself
but not as to the other, to the Shareholders as follows:
2.1 Due Authority. Such party has full power, corporate or otherwise,
-------------
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
or on behalf of such party and, assuming its due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms.
2.2 No Conflict; Consents. (a) The execution and delivery of this
---------------------
Agreement by such party do not, and the performance by such party of its
obligations contemplated by this Agreement and the compliance by such party with
any provisions hereof do not and will not, (i) conflict with or violate any law,
statute, rule, regulation, order, writ, judgment or decree applicable to such
party, (ii) conflict with or violate such party's charter or bylaws, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which such party is a party or by
which such party is bound.
(b) The execution and delivery of this Agreement by such party do not, and
the performance of this Agreement by such party will not, require any consent,
approval, authorization or permit of, or filing with (except for applicable
requirements, if any, of the Exchange Act) or notification to, any governmental
or regulatory authority by such party.
III. CERTAIN COVENANTS OF THE SHAREHOLDERS
The Shareholders hereby covenant and agree with Patriot and OPCO as
follows:
3.1 Transfer of Shares. Other than as provided herein, during the Proxy
------------------
Term, the Shareholders will not (a) sell, transfer, assign or otherwise dispose
of any of the Shares, (b)
deposit the Shares into a voting trust or enter into a voting agreement or
arrangement with respect to the Shares or grant any proxy or power of attorney
with respect thereto, (c) enter into
3
<PAGE>
any contract, option or other legally binding undertaking providing for any
transaction prohibited by (a) or (b) hereof, or (d) take any action that would
make any representation or warranty of the Shareholders contained herein untrue
or incorrect or have the effect of preventing or disabling the Shareholders from
performing any of the Shareholders' obligations under this Agreement, provided,
however, that notwithstanding the foregoing the Shareholders, prior to the
mailing by the Company of its proxy statement for the stockholders' meeting at
which the Merger Agreement is to be considered, may sell pursuant to the
provisions of Rule 144 promulgated pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or contribute to an entity that is exempt from
federal income taxation pursuant to Section 501(c) of the Internal Revenue Code
of 1986, as amended, an aggregate of 360,000 Shares free of the restrictions of
this Agreement. No such transaction will be deemed to constitute a breach of any
other provision hereof. The Shareholders shall immediately notify Patriot in
writing of any such sale or contribution. Until 90 calendar days after the
Merger becomes effective (the "Effective Time"), each Shareholder will not
directly or indirectly, through any affiliate or associate, sell, assign,
transfer, pledge or otherwise dispose of or acquire, or enter into any put, call
or other contract, option or other arrangement or undertaking with respect to
the direct or indirect acquisition or sale, assignment or other disposition of,
any common stock of Patriot ("Patriot Common Stock") or common stock of OPCO
("OPCO Common Stock") received by such Shareholder in the Merger. After such 90-
day period, the Shareholders will have the benefit of the rights granted
pursuant to the Registration Rights Agreement to be executed by the
Shareholders, Patriot and OPCO prior to the Effective Time.
3.2 Proxy. (a) Each Shareholder, by this Agreement, hereby constitutes and
-----
appoints Patriot, with full power of substitution, during and for the Proxy
Term, as such Shareholder's true and lawful attorney and irrevocable proxy, for
and in Shareholder's name, place and stead, to vote each of such Shares owned by
such Shareholder as Shareholder's proxy, at every meeting of the shareholders of
the Company or any adjournment thereof or in connection with any written consent
of the Company's shareholders, (i) in favor of the adoption of the Merger
Agreement and approval of the Merger and the other transactions contemplated by
the Merger Agreement, (ii) against (x) any Company Takeover Proposal, as that
term is defined in the Merger Agreement, and any proposal for any action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or which is reasonably likely to result in any of the conditions of
the Company's obligations under the Merger Agreement not being fulfilled and (y)
any change in the directors of the Company, any change in the present
capitalization of the Company or any amendment to the Company's articles of
organization or bylaws, any other material change in the Company's corporate
structure or business, or any other action which in the case of each of the
matters referred to in this clause (y) could reasonably be expected to impede,
interfere with, delay, postpone or materially adversely affect the transactions
contemplated by the Merger Agreement or the likelihood of such transactions
being consummated, and (iii) in favor of any other matter necessary for
consummation of the transactions contemplated by the Merger Agreement which is
considered at any such meeting of shareholders or in such consent, and in
connection therewith to execute any documents which are necessary or
4
<PAGE>
appropriate in order to effectuate the foregoing, including the ability for
Patriot or its nominees to vote such Shares directly. Each Shareholder intends
the foregoing proxy to be, and it shall be, irrevocable and coupled with an
interest during the Proxy Term and hereby revokes any proxies previously granted
by such Shareholder with respect to the Shares to the extent inconsistent with
the foregoing proxy.
(b) Each Shareholder hereby further agrees, with respect to any Shares not
voted pursuant to paragraph (a) above, including without limitation any Shares
owned beneficially but not of record by such Shareholder, that during the Proxy
Term, at every meeting of the shareholders of the Company or any adjournment
thereof or in connection with any written consent of the Company's shareholders,
such Shareholder shall vote (or cause to be voted) all Shares whether or not
owned of record or beneficially by such Shareholder except as specifically
requested in writing by Patriot in advance, (i) in favor of the adoption of the
Merger Agreement and approval of the Merger and the other transactions
contemplated by the Merger Agreement, (ii) against (x) any Company Takeover
Proposal, as that term is defined in the Merger Agreement, and any proposal for
any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which is reasonably likely to result in any of the
conditions of the Company's obligations under the Merger Agreement not being
fulfilled or (y) any change in the directors of the Company, any change in the
present capitalization of the Company or any amendment to the Company's
certificate of incorporation or bylaws, any other material change in the
Company's corporate structure or business, or any other action which in the case
of each of the matters referred to in this clause (y) could reasonably be
expected to, impede, interfere with, delay, postpone or materially adversely
affect the transactions contemplated by the Merger Agreement or the likelihood
of such transactions being consummated, and (iii) in favor of any other matter
necessary for consummation of the transactions contemplated by the Merger
Agreement which is considered at any such meeting of shareholders or in such
consent, and in connection therewith to execute any documents which are
necessary or appropriate in order to effectuate the foregoing.
(c) For the purposes of this Agreement, "Proxy Term" means the period from
the date hereof until the earlier of the termination of the Merger Agreement and
the Effective Time.
(d) Notwithstanding anything in this Section 3.2 to the contrary, the
obligations of the Shareholders and the rights of Patriot under this Section 3.2
shall at all times be limited and applicable to only that number of Shares in
the aggregate as shall be entitled to cast 19.9% of the votes that are entitled
to be cast generally in the election of directors by the holders of the shares
of voting stock of the Company issued and outstanding at the time. Nothing in
this Section 3.2 shall be deemed to grant Patriot any right which would (i)
cause it to, and Patriot's rights pursuant to this Section 3.2 will, if
necessary, be reduced so that it will not, become subject to the provisions of
Chapter 25 of the Pennsylvania Business Corporation Law (the "PBCL"), including
without limitation the provisions of Subchapter 25E, 25F and 25G thereof, or
(ii) cause it to have or be deemed to have voting power on its own or with any
other person or persons over
5
<PAGE>
voting shares of the Company that would entitle it to cast 20% or more of the
votes that all shareholders of the Company would be entitled to cast in an
election of directors of the Company. Patriot and the Shareholders will agree in
writing which Shares are subject to the provisions of this Section 3.2 and which
are not, provided, however, that if they cannot so agree Patriot shall have the
right to designate the Shares which are subject to the provisions of this
Section 3.2.
3.3 Certain Events. Each Shareholder agrees that this Agreement and the
--------------
obligations hereunder will attach to the Shares and will be binding upon any
person or entity to which legal or beneficial ownership of the Shares may pass,
whether by operation of law or otherwise.
3.4 Stop Transfer. Each Shareholder agrees with, and covenants to,
-------------
Patriot that the Shareholder will not request that the Company register the
transfer (book-entry or otherwise) or any certificate or uncertificated interest
representing any of the Shares except as permitted by the terms of this
Agreement. Each Shareholder and the Company further agree that the Company
shall instruct the transfer agent for its Common Stock (i) to include on the
certificates for the Shares, which the Shareholders hereby agree to deliver to
the Company within ten days from the date hereof, legends in customary form
referring to this Agreement and (ii) to refuse to permit the transfer of the
Shares during the Proxy Term except as permitted by the terms of this Agreement.
3.5 Extension of Management Agreements. Mr. Fine hereby agrees that at
----------------------------------
the request of Patriot or OPCO he will, and will cause his affiliates to, extend
the management contracts listed on Exhibit C-1 hereto for the periods set forth
therein; such extensions shall otherwise be on terms identical to the existing
terms except to the extent, if any, Patriot or OPCO, on the one hand, and Mr.
Fine and his affiliates, on the other hand, agree in writing. In addition,
subject to his fiduciary duties, if any, Mr. Fine hereby agrees that at the
request of Patriot or OPCO he will use reasonable efforts to extend, or cause
the extension, for the time period set forth on Exhibit C-1, the management
contracts listed on Exhibit C-2, including voting for or otherwise approving all
such extensions. Mr. Fine represents and warrants that the management contracts
listed on Exhibit C-1 and C-2, along with the information disclosed on Exhibit
D, includes all equity interests, leases, and management contracts which Mr.
Fine, members of his immediate family, or his or their affiliates have, directly
or indirectly, which relate to the lodging industry.
3.6 Dissenters. The Shareholders agree that the Shareholders will not
----------
exercise or seek to exercise the dissenters rights, if any, that the
Shareholders have or may have in connection with the Merger with respect to any
of the Shares pursuant to Subchapter D of Chapter 15 of the PBCL and, without
limiting the foregoing, will not give any notice pursuant to Section 1575 of
such Subchapter D.
3.7 Agreement to Vote. For so long as the Shareholders are entitled to
-----------------
designate a director pursuant to Section 4.1 hereof, the Shareholders shall each
vote or cause to be voted all shares of Patriot Common Stock and OPCO Common
Stock which they own of record or beneficially after the Effective Date in favor
of the nominees of Patriot or OPCO or their
6
<PAGE>
respective Boards of Directors for directors at each meeting of the stockholders
of Patriot or OPCO, as the case may be, held after the Effective Date.
3.8 Agreement to Elect Cash. The Shareholders agree that they will
-----------------------
irrevocably elect to receive with respect to all of the Shares (other than any
Shares sold or disposed of prior to the Effective Time as permitted by Section
3.1 hereof), pursuant to and in accordance with the provisions of the Merger
Agreement, the maximum amount of cash permitted to be received pursuant to the
Merger Agreement for such Shares.
IV. CERTAIN COVENANTS OF PATRIOT AND OPCO
4.1 Board Representation. Patriot will take such actions as are necessary
--------------------
to elect one person designated in writing to Patriot as a director of Patriot by
a majority in interest of the Shareholders at least sixty days prior to the
Effective Time, such election to be effective promptly after the Effective Time.
In the absence of any such designation, Mr. Fine shall be deemed to have been
designated to serve as a director of Patriot. From and after the Effective Time
and until the Expiration Date (as defined below), Patriot will, with respect to
any annual meetings of its stockholders occurring after the Effective Time,
include as one of the nominees for directors of Patriot a person designated in
writing to Patriot by a majority in interest of the Shareholders at least forty-
five days prior to the mailing of the proxy statement for such meeting if one of
the directors serving on the Board of Directors of Patriot after such annual
meeting would otherwise not be any person previously designated pursuant to this
Section 4.1; provided, however, that if a person designated pursuant to this
Section 4.1 is not serving on the Board of Directors of Patriot at least sixty
days prior to such mailing, then the Shareholders shall have until ten days
after Patriot notifies them of their right to name a designee hereunder to
designate such a person in writing to Patriot. The Shareholders shall cause Mr.
Fine or any other designee pursuant to this Section 4.1 who is serving as a
director of Patriot to resign promptly at Patriot's written request on or after
the Expiration Date. Each person designated pursuant to this Section 4.1 to
serve as a director of Patriot shall be Mr. Fine or a person reasonably
acceptable to Patriot.
"Expiration Date" means, for purposes of this Section 4.1, the earlier of
(x) the later of (A) the first date on which the Shareholders own fewer than
three percent (3%) of the then outstanding shares of Patriot Common Stock and
(B) the second anniversary date of the Effective Time and (y) the first date on
which the Shareholders own fewer than fifty percent (50%) of the shares of
Patriot Common Stock received by the Shareholders in the Merger.
4.2 Tax Protection. Patriot and Mr. Fine shall have the additional rights
--------------
and obligations set forth on Exhibit E hereto titled "Lock-out Provisions."
---------
4.3 Office Space; Use of Hotels. Patriot will provide or cause to be
---------------------------
provided to Mr. Fine, for a period of three years beginning at the Effective
Time, office space in Pittsburgh, Pennsylvania for Mr. Fine to use rent free,
such space to be comparable to Mr. Fine's current
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office space. In addition, Patriot will permit Mr. Fine to stay in first class
accommodations in one or more of the Company's current hotels rent free for an
aggregate of 30 days in each year of the five-year period beginning at the
Effective Time, subject to appropriate advance notice from Mr. Fine and to
availability for the time period requested by Mr. Fine.
V. MISCELLANEOUS; GENERAL PROVISIONS
5.1 Severability. If any term or other provision of this Agreement is
------------
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other
conditions and provisions of this Agreement will nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
5.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
of the parties and supersedes all prior agreements and undertakings, both
written and oral, between the parties with respect to the subject matter hereof.
5.3 Amendments. This Agreement may not be modified, amended, waived,
----------
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereof.
5.4 Assignment. This Agreement may not be assigned by operation of law or
----------
otherwise.
5.5 Parties in Interest. This Agreement is binding upon, and shall
-------------------
inure solely to the benefit of, each party hereto and nothing in this Agreement,
express or implied, is intended to or will confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
5.6 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof or was otherwise breached. It is
accordingly agreed that the parties will be entitled to specific relief
hereunder, including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, in any state or federal court in
the Commonwealth of Pennsylvania, in addition to any other remedy to which they
may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with respect to any such remedy are hereby waived.
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5.7 Governing Law; Jurisdiction and Venue. This Agreement will be
-------------------------------------
governed by, and construed in accordance with, the internal laws of the
Commonwealth of Pennsylvania without regard to its rules of conflict of laws.
The parties hereto hereby irrevocably and unconditionally consent to and submit
to the exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania
and any court of the Western District of Pennsylvania of the United States of
America (the "Pennsylvania Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Pennsylvania
Courts and agrees not to plead or claim in any Pennsylvania Court that such
litigation brought therein has been brought in any inconvenient forum.
5.8 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
5.9 Directors and Officers. Notwithstanding anything herein to the
----------------------
contrary, the covenants and agreements set forth herein shall not prevent any
Shareholder or its representatives or designees who are serving on the Board of
Directors of the Company or who are officers of the Company from taking any
action, subject to the applicable provisions of the Merger Agreement, in his or
her capacity as a director or officer of the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ William W. Evans III
-----------------------------
Name: William W. Evans III
Title: Office of the Chairman
PATRIOT AMERICAN HOSPITALITY
OPERATING COMPANY
By: /s/ Leslie Ng
-----------------------------
Name: Leslie Ng
Title: Senior Vice President
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/s/ Milton Fine
---------------------------------
Milton Fine
Milton Fine, Trustee
U/A dated 11/11/94
FBO Milton Fine
By: /s/ Milton Fine
------------------------------
Name: Milton Fine
Title: Trustee
Milton Fine, Trustee under
The Milton Fine 1997
Charitable Remainder Unitrust
By: /s/ Milton Fine
-------------------------------
Name: Milton Fine
Title: Trustee
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David J. Fine, Trustee
U/A dated 12/15/89
FBO Sibyl Fine King
By: /s/ David J. Fine
----------------------------
Name: David J. Fine
Title: Trustee
David J. Fine, Trustee
U/A dated 12/15/89
FBO Carolyn Fine Friedman
By: /s/ David J. Fine
----------------------------
Name: David J. Fine
Title: Trustee
David J. Fine, Trustee
U/A dated 12/15/89
FBO David J. Fine
By: /s/ David J. Fine
----------------------------
Name: David J. Fine
Title: Trustee
David J. Fine, Trustee
For the Milton Fine Grantor
Annuity Trust U/A dated 3/31/96
By: /s/ David J. Fine
----------------------------
Name: David J. Fine
Title: Trustee
12
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INTERSTATE HOTELS COMPANY
By: /s/ Milton Fine
-----------------------------
Name: Milton Fine
Title: Chairman
13
