PATRIOT AMERICAN HOSPITALITY INC/DE
POS AM, 1997-10-31
REAL ESTATE
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<PAGE>
 
    As filed with the Securities and Exchange Commission on October 31, 1997

                             Registration Statement Nos. 333-28085, 333-28085-01
================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                        POST-EFFECTIVE AMENDMENT NO. 1 ON
                                   FORM S-3 TO
                             REGISTRATION STATEMENT
                                   ON FORM S-4
                                      UNDER
                           THE SECURITIES ACT OF 1933

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

<TABLE>
<S>                                                       <C>
          PATRIOT AMERICAN HOSPITALITY, INC.                           PATRIOT AMERICAN HOSPITALITY
                                                                             OPERATING COMPANY
(Exact Name of Registrant as Specified in its Charter)    (Exact Name of Registrant as Specified in its Charter)
                       DELAWARE                                                  DELAWARE
           (State or Other Jurisdiction of                            (State or Other Jurisdiction of
            Incorporation or Organization)                             Incorporation or Organization)
                      94-0358820                                                94-2878485
         (I.R.S. Employer Identification No.)                      (I.R.S. Employer Identification No.)
                   3030 LBJ Freeway                                          3030 LBJ Freeway
                      Suite 1500                                                Suite 1500
                   Dallas, TX 75234                                          Dallas, TX 75234
                    (972) 888-8000                                            (972) 888-8000
      (Address, Including Zip Code, and Telephone               (Address, Including Zip Code, and Telephone
            Number, Including Area Code, of                           Number, Including Area Code, of
       Registrant's Principal Executive Offices)                 Registrant's Principal Executive Offices)
                   PAUL A. NUSSBAUM                                          PAUL A. NUSSBAUM
    Chairman of the Board, Chief Executive Officer           Chairman of the Board and Chief Executive Officer
                     and President                            Patriot American Hospitality Operating Company
          Patriot American Hospitality, Inc.                                 3030 LBJ Freeway
                   3030 LBJ Freeway                                          Dallas, TX 75234
                   Dallas, TX 75234                                           (972) 888-8000
                    (972) 888-8000                                (Name, Address, Including Zip Code, and
        (Name, Address, Including Zip Code, and                  Telephone Number, Including Area Code and
        Telephone Number, Including Area Code,                             of Agent for Service)
                 of Agent for Service)
</TABLE>


                              --------------------
                                   copies to:

                             GILBERT G. MENNA, P.C.
                            KATHRYN I. MURTAGH, ESQ.
                           Goodwin, Procter & Hoar LLP
                                 Exchange Place
                              Boston, MA 02109-2881
                                 (617) 570-1000

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

     Approximate date of commencement of proposed sale to public: As soon as
practicable after this registration statement becomes effective.

     If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]

     If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

================================================================================

<PAGE>
 
                                   PROSPECTUS

                    7,535,827 Shares of Paired Common Stock

                       Patriot American Hospitality, Inc.

                 Patriot American Hospitality Operating Company


    For purposes of this Prospectus, unless the context otherwise requires, (i)
the term "Corporation" includes Patriot American Hospitality, Inc., a Delaware
Corporation, PAH GP, Inc. ("PAH GP"), PAH LP, Inc. ("PAH LP"), each of which is
a Delaware corporation and a wholly-owned subsidiary of Patriot American
Hospitality, Inc., a Delaware corporation, Patriot American Hospitality
Partnership, L.P., a Virginia limited partnership (the "Realty Partnership"),
and their respective subsidiaries, (ii) the term "Operating Company" includes
Patriot American Hospitality Operating Company, a Delaware Corporation, and
Patriot American Hospitality Operating Partnership, L.P., a Delaware limited
partnership (the "Operating Partnership" and, together with the Realty
Partnership, the "Partnerships"), and their respective subsidiaries, (iii) the
term "Companies" includes the Corporation and the Operating Company, (iv) the
term "Unit Pair" means a unit of limited partnership interest in the Realty
Partnership (a "Realty Partnership Unit") and a unit of limited partnership
interest in the Operating Partnership (an "Operating Partnership Unit") and (v)
the term "Unitholder" means either a holder of Realty Partnership Units (a
"Realty Partnership Unitholder") or a holder of Operating Partnership Units (an
"Operating Partnership Unitholder").

    This prospectus (the "Prospectus") relates to the possible issuance from
time to time by the Companies of up to 7,535,827 shares of common stock
("Corporation Common Stock"), $.01 par value, of the Corporation and 7,535,827
shares of common stock ("Operating Company Common Stock"), $.01 par value, of
the Operating Company, which are "paired" and trade as units consisting of one
share of Corporation Common Stock and one share of Operating Company Common
Stock (the "Paired Common Stock"), if and to the extent that Realty Partnership
Unitholders of up to 7,535,827 Realty Partnership Units exercise their
Redemption Right (as defined below) and such Realty Partnership Units are
exchanged for shares of Corporation Common Stock or Operating Partnership
Unitholders of up to 7,535,827 Operating Partnership Units exercise their
Redemption Right and such Operating Partnership Units are exchanged for shares
of Operating Company Common Stock.

    Pursuant to each of the Second Amended and Restated Agreement of Limited
Partnership of the Realty Partnership, as amended to date (the "Realty
Partnership Agreement"), and the Agreement of Limited Partnership of the
Operating Partnership, as amended to date (the "Operating Partnership Agreement"
and, together with the Realty Partnership Agreement, the "Partnership
Agreements"), and subject to certain limitations, a Realty Partnership
Unitholder or an Operating Partnership Unitholder, as the case may be, may
tender all or a portion of its Realty Partnership Units to the Realty
Partnership or its Operating Partnership Units to the Operating Partnership,
respectively, for redemption for cash equal in value to one share of Corporation
Common Stock or Operating Company Common Stock, as the case may be (subject to
certain adjustments in the case of stock splits, stock dividends or similar
distributions)  (the "Redemption Right"); provided, however, that each of the
Companies may, in its sole and absolute discretion, acquire any Realty
Partnership Units and Operating Partnership Units, respectively, so tendered for
one share of Corporation Common Stock or Operating Company Common Stock, as the
case may be (subject to certain adjustments in the case of stock splits, stock
dividends or similar distributions), or for cash in the amount described above.

    Each of the Partnership Agreements provides, however, that a Realty
Partnership Unitholder may not exercise its Redemption Right unless it is
entitled to exercise and simultaneously exercises its Redemption Right with
respect to an equal number of Operating Partnership Units of the same class or
series, or that an Operating Partnership Unitholder may not exercise its
Redemption Right unless is entitled to exercise and simultaneously exercises its
Redemption Right with respect to an equal number of Realty Partnership Units of
the same class or series (the "Redemption Limitation"), as the case may be, so
that the Companies may elect, upon the exercise of a Redemption Right, to
deliver shares of Paired Common Stock in redemption of such Realty Partnership
Units and Operating Partnership Units in lieu of paying cash.  Furthermore, each
of the Partnership Agreements provides that neither of the Companies may elect
to acquire a Unit Pair tendered for redemption for a share of Paired Common
Stock unless the other company also so elects.  If the Companies do not agree to
acquire such Unit Pair for a share of Paired Common Stock, the Unit Pair shall
be redeemed by each of the Companies for cash.

                                       2
<PAGE>
 
    Each of the Companies anticipates that it generally will elect to acquire
any Unit Pairs tendered for redemption by the issuance of shares of Paired
Common Stock pursuant to this Prospectus rather than paying cash.  As a result,
the Companies may from time to time issue up to 7,535,827 shares of Paired
Common Stock upon the acquisition of Realty Partnership Units and Operating
Partnership Units tendered to the Realty Partnership and the Operating
Partnership, respectively, for redemption.  Accordingly, the Companies are
registering the shares of Paired Common Stock to provide Realty Partnership
Unitholders and Operating Partnership Unitholders with freely tradeable
securities upon redemption.  All shares of Paired Common Stock offered hereby
are being sold by the Companies.

    The Unitholders and any agents, dealers or underwriters that participate
with the Unitholders in the distribution of the shares of Paired Common Stock
offered hereby may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), in which case any
commissions received by such agents, dealers or underwriters and any profit on
the resale of shares of Paired Common Stock purchased by them may be deemed
underwriting commissions or discounts under the Securities Act.  See "Plan of
Distribution" for indemnification arrangements between the Companies and the
Realty Partnership Unitholders and the Operating Partnership Unitholders.

    The Companies will not receive any proceeds from the issuance of any shares
of Paired Common Stock, but will acquire Unit Pairs tendered to the Realty
Partnership or the Operating Partnership, respectively, for redemption for which
the Companies elect to issue shares of Paired Common Stock.  With each such
acquisition, the Corporation's and Operating Company's interest in the Realty
Partnership and the Operating Partnership, respectively, will increase.

    See "Risk Factors" beginning on page 6 for certain factors relevant to an
investment in the shares of Paired Common Stock.



    THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
           AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
             NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
             UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY
             REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
                                        


                The date of this Prospectus is __________, 1997

                                       3
<PAGE>
 
                             AVAILABLE INFORMATION

    The Companies have filed with the Securities and Exchange Commission (the
"SEC" or "Commission") a Registration Statement on Form S-4, as amended by this
Post-Effective Amendment on Form S-3 (the "Registration Statement") under the
Securities Act, with respect to the Securities. This Prospectus, which
constitutes part of the Registration Statement, omits certain of the information
contained in the Registration Statement and the exhibits thereto on file with
the Commission pursuant to the Securities Act and the rules and regulations of
the Commission thereunder. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. The Registration
Statement, including exhibits thereto, may be inspected and copies obtained from
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
7 World Trade Center, 13th Floor, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material may be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Companies file information electronically with
the Commission, and the Commission maintains a Web Site that contains reports,
proxy and information statements and other information regarding registrants
(including the Companies) that file electronically with the Commission. The
address of the Commission's Web Site is (http://www.sec.gov).

    The Companies are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports and proxy statements and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained by mail from the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, reports, proxy and information statements and
other information concerning the Companies can be inspected at the offices of
the New York Stock Exchange (the "NYSE"), 20 Broad Street, New York, New York
10005.


                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

    The following documents are incorporated herein by reference:

Corporation and Operating Company

    1.  Current Reports on Form 8-K of Patriot American Hospitality, Inc. and
Patriot American Hospitality Operating Company dated (i) July 1, 1997 (Nos. 001-
09319, 001-09320 filed July 15, 1997), (ii) July 15, 1997 (Nos. 001-09319, 001-
09320 filed July 21, 1997), (iii) July 22, 1997 (Nos. 001-09319, 001-09320 filed
July 22, 1997), (iv) September 17, 1997 (Nos. 001-09319, 001-09320 filed
September 17, 1997) and (v) September 30, 1997, as amended (Nos. 001-09319, 001-
09320 filed October 14, 1997 and October 28, 1997);

    2.  Quarterly Report on Form 10-Q of Patriot American Hospitality, Inc. and
Patriot American Hospitality Operating Company (Nos. 001-09319, 001-09320) for
the fiscal quarter ended June 30, 1997; and

    3.  The description of the paired shares of Corporation Common Stock and
Operating Company Common Stock contained or incorporated by reference in the
Corporation's and the Operating Company's Registration Statement on Form 8-A
(Nos. 001-09319, 001-09320), including any amendments thereto.

California Jockey Club and Bay Meadows Operating Company

    1.  Annual Report on Form 10-K of California Jockey Club and Bay Meadows
Operating Company (Nos. 001-09319, 001-09320) for the fiscal year ended December
31, 1996;

    2.  Current Reports on Form 8-K of California Jockey Club and Bay Meadows
Operating Company dated (i) February 24, 1997 (Nos. 001-09319, 001-09320 filed
March 3, 1997) and (ii) May 28, 1997 (Nos. 001-09319, 001-09320 filed June 5,
1997);

                                       4
<PAGE>
 
    3.  Quarterly Report on Form 10-Q of California Jockey Club and Bay Meadows
Operating Company (Nos. 001-09319, 001-09320) for the fiscal quarter ended March
31, 1997; and

    4.  Quarterly Report on Form 10-Q/A of California Jockey Club and Bay
Meadows Operating Company (Nos. 001-09319, 001-09320) for the fiscal quarter
ended March 31, 1997 (filed May 16, 1997).

Patriot American Hospitality, Inc. (Patriot)

    1.  Annual Report on Form 10-K of Patriot American Hospitality, Inc., (No.
001-13898) for the fiscal year ended December 31, 1996;

    2.  Current Reports on Form 8-K of Patriot American Hospitality, Inc.,
dated: (i) April 2, 1996, as amended (No. 001-13898 filed April 17, 1996 and
June 14, 1996) reporting the acquisition of certain assets, (ii) December 5,
1996 (No. 001-13898 filed December 5, 1996) reporting the acquisition of certain
assets, (iii) January 16, 1997, as amended (No. 001-13898 filed January 31,
1997, February 21, 1997, April 8, 1997, April 9, 1997 and May 19, 1997),
reporting the consummation of the acquisition of Carefree Resorts Corporation
and Resorts Limited Partnership and certain other assets, (iv) February 24, 1997
(No. 001-13898 filed March 3, 1997) reporting the execution of a merger
agreement between Patriot and California Jockey Club and (v) April 14, 1997, as
amended (No. 001-13898 filed April 17, 1997 and April 18, 1997), reporting the
execution of a merger agreement between Patriot and Wyndham Hotel Corporation
and the related stock purchase agreement and the execution of agreements with
partnerships affiliated with members of the Trammell Crow family providing for
the acquisition by the Corporation of 11 full- service Wyndham-branded hotels;
and

    3.  Quarterly Report on Form 10-Q of Patriot American Hospitality, Inc. (No.
001-13898) as of and for the fiscal quarter ended March 31, 1997.

    All other documents filed with the Commission by the Corporation or the
Operating Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination of
the offering of the Securities are to be incorporated herein by reference and
such documents shall be deemed to be a part hereof from the date of filing of
such documents. Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

    Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents. Written requests
should be mailed to 3030 LBJ Freeway, Suite 1500, Dallas, TX 75234, Attention:
Shareholder Relations (Telephone No. 972-888-8000).

                                       5
<PAGE>
 
    This Prospectus and the documents incorporated herein by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  The Companies' actual results could differ materially from those
set forth in the forward-looking statements. Certain factors that might cause
such a difference are discussed in the section entitled "Risk Factors" below.


                                  RISK FACTORS

    Unitholders should carefully consider the following information in
conjunction with the other information contained in this Prospectus in
considering whether to exercise their Redemption Right.

Real Estate Investment Trust Tax Risks

    Dependence on Qualification as a Real Estate Investment Trust

    The Corporation will operate in a manner designed to permit it to qualify as
a real estate investment trust (a "REIT") under the Internal Revenue Code of
1986, as amended (the "Code"), but no assurance can be given that the
Corporation will be able to continue to operate in a manner so as to qualify or
remain so qualified. Qualification as a REIT involves the application of highly
technical and complex provisions of the Code, for which there are only limited
judicial or administrative interpretations. The complexity of these provisions
is greater in the case of a REIT that owns hotels and leases them to an
operating company with which its stock is paired. Qualification as a REIT also
involves the determination of various factual matters and circumstances not
entirely within the Corporation's control. In addition, the Corporation's
ability to qualify as a REIT is dependent upon its continued exemption from the
anti-pairing rules of Section 269B(a)(3) of the Code. Section 269B(a)(3) of the
Code would ordinarily prevent a corporation from qualifying as a REIT if its
stock is paired with the stock of a corporation whose activities are
inconsistent with REIT status, such as the Operating Company. The
"grandfathering" rules governing Section 269B generally provide, however, that
Section 269B(a)(3) does not apply to a paired REIT if the REIT and its paired
operating company were paired on June 30, 1983. There are, however, no judicial
or administrative authorities interpreting this "grandfathering" rule. Moreover,
if for any reason the Corporation had failed to qualify as a REIT in 1983, the
benefit of the "grandfathering" rule would not be available to it, in which case
the Corporation would not qualify as a REIT for any taxable year. In addition,
no assurance can be given that new legislation, new regulations, administrative
interpretations or court decisions will not change the tax laws with respect to
qualification as a REIT (including the "grandfathering" rules of Section 269B)
or the federal income tax consequences of such qualification.

    If the Corporation fails to qualify as a REIT, the Corporation will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at corporate rates. In addition, unless entitled to relief
under certain statutory provisions and subject to the discussion above regarding
the impact if the Corporation failed to qualify as a REIT in 1983, the
Corporation also will be disqualified from re-electing REIT status for the four
taxable years following the year during which qualification is lost. Failure to
qualify as a REIT would reduce the net earnings of the Corporation available for
distribution to stockholders because of the additional tax liability to the
Corporation for the year or years involved. In addition, distributions would no
longer be required to be made. To the extent that distributions to stockholders
would have been made in anticipation of the Corporation's qualifying as a REIT,
the Corporation might be required to borrow funds or to liquidate certain of its
investments to pay the applicable tax. The failure to qualify as a REIT would
also constitute a default under certain debt obligations of the Corporation.

    In order for the Corporation to maintain its qualification as a REIT, not
more than 50% in value of its outstanding stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities). In addition, rents paid by the Operating Company to the
Corporation will not constitute qualifying income for purposes of the REIT
income tests if any person actually or constructively owns 10% or more of the
outstanding Paired Common Stock. For the purpose of preserving the Corporation's
qualification as a REIT, the Amended and Restated Certificate of Incorporation
of the Corporation (the "Corporation Charter") and the Amended and Restated
Certificate of Incorporation of the Operating Company (the "Operating Company
Charter" and, together with the Corporation Charter, the "Charters"), prohibit
actual or constructive ownership of more than 9.8% of the outstanding shares of
any class or series of the common stock or preferred stock (collectively, the
"Equity Stock") of the Corporation or the Operating Company (the "Ownership
Limit").  The constructive ownership rules are complex and may cause Equity
Stock owned, actually or constructively, by a group of related or unrelated
individuals 

                                       6
<PAGE>
 
and/or entities to be deemed to be constructively owned by one individual or
entity. As a result, the acquisition of less than 9.8% of the outstanding Paired
Common Stock (or the acquisition of an interest in an entity which owns Paired
Common Stock) by an individual or entity could cause that individual or entity
(or another individual or entity) to own constructively in excess of 9.8% of the
outstanding Paired Common Stock, and thus subject such Paired Common Stock to
the Ownership Limit. Actual or constructive ownership of Paired Common Stock in
excess of the Ownership Limit would cause the violative transfer or ownership to
be void or cause such shares to be transferred to a charitable trust and then
sold to the Companies or to a person or entity who can own such shares without
violating the Ownership Limit. See "Restrictions on Transfers of Capital Stock."
In addition, because the relevant constructive ownership rules are broad and it
is not possible to monitor continually direct and indirect transfers of shares,
no absolute assurance can be given that the foregoing provisions will be
effective to prevent a violation of the Ownership Limit and the consequent
failure of the Corporation to qualify as a REIT.

    Adverse Effects of REIT Minimum Distribution Requirements

    In order to qualify as a REIT, the Corporation will be generally required
each year to distribute to its stockholders at least 95% of its taxable income
(excluding any net capital gain). In addition, if the Corporation disposes of
assets acquired from a taxable C corporation during the ten-year period
following such acquisition, the Corporation will be required to distribute at
least 95% of the amount of built-in gain attributable to such assets (determined
as of the date of the acquisition of the assets) that the Corporation recognizes
in the subsequent disposition, less the amount of any tax paid with respect to
such recognized built-in gain. See "Certain Federal Income Tax Considerations--
REIT Qualification--Built-In Gain Tax." The Corporation will be subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid by it with respect to any calendar year are less than the sum of (i) 85% of
its ordinary income for that year, (ii) 95% of its capital gain net income for
that year, and (iii) 100% of its undistributed income from prior years.

    The Corporation intends to make distributions to its stockholders to comply
with the 95% distribution requirement and to avoid the nondeductible excise tax.
The Corporation's income will consist primarily of its share of the income of
the Realty Partnership, and the Corporation's cash available for distribution
will consist primarily of its share of cash distributions from the Realty
Partnership. Differences in timing between the recognition of taxable income and
the receipt of cash available for distribution and the seasonality of the hotel
industry could require the Corporation to borrow funds on a short-term basis to
meet the 95% distribution requirement and to avoid the nondeductible excise tax.

    Distributions by the Companies will be determined by their respective Board
of Directors and depend on a number of factors, including the amount of cash
available for distribution and the financial condition of the Companies, any
decision by either Board of Directors to reinvest funds rather than to
distribute such funds, capital expenditures, the annual distribution
requirements under the REIT provisions of the Code (in the case of the
Corporation) and such other factors as either Board of Directors deems relevant.
For federal income tax purposes, distributions paid to stockholders may consist
of ordinary income, capital gains (in the case of the Corporation), nontaxable
return of capital, or a combination thereof. The Companies will provide
stockholders with annual statements as to the taxability of distributions.

     Accumulated Earnings and Profits

     On April 14, 1997, the Corporation entered into a merger agreement with 
Wyndham Hotel Corporation ("Wyndham") through which the Corporation agreed to 
acquire Wyndham's portfolio of owned and leased hotels and management and 
franchise agreements for certain of Wyndham's hotels (the "Wyndham 
Acquisition"). See "The Companies--The Corporation."

    To maintain its qualification as REIT subsequent to the Wyndham Acquisition,
the Corporation will be required to distribute to its stockholders following the
Wyndham Acquisition for the Corporation's taxable year ending December 31, 1997 
(assuming the Wyndham Acquisition is consummated on or prior to December 31,
1997) current and accumulated earnings and profits of Wyndham (as determined for
federal income tax purposes). The dividend made to the Corporation's taxable
U.S. Stockholders (as hereinafter defined) will be taken into account by such
U.S. Stockholders as ordinary income to the extent it is made out of current or
accumulated earnings and profits, and will not be eligible for the dividends
received deduction generally available for corporations. See "Certain Federal
Income Tax Considerations--Federal Income Taxation of Holders of Paired Shares."

    Wyndham has agreed that, at the closing date of the Wyndham Acquisition,
Wyndham will deliver to the Corporation a statement of accumulated and current
earnings and profits of Wyndham (as determined for federal income tax purposes)
as of a date not more than 30 days prior to the closing date of the Wyndham
Acquisition, together with evidence of such accumulated and current earnings and
profits of Wyndham (as determined for federal income tax purposes) in a form
reasonably satisfactory to the Corporation, and a statement of estimated
accumulated and current earnings and profits of Wyndham (as determined for
federal income tax purposes) as of the closing date of the Wyndham Acquisition.
Wyndham further agreed that prior to the closing date of the Wyndham
Acquisition, (i) it will deliver to the Corporation, prior to December 25, 1997,
a statement of accumulated and current earnings and profits of Wyndham (as
determined for federal income tax purposes) at the effective time of the Wyndham
Acquisition and (ii) that the Corporation shall be entitled to rely on such
statement for purposes of preparing and filing its federal, state, local and
foreign tax returns required to be filed by it, determining the amount of
dividends to be paid to stockholders and paying any taxes owned by it.

If the Internal Revenue Service (the "IRS") were to determine that Wyndham's
actual earnings and profits exceeded the amount distributed, the Corporation
would be disqualified as a REIT.

Failure to Manage Rapid Growth and Integrate Operations; New Businesses

    The Corporation is currently experiencing a period of rapid growth.  The
Companies are or will be responsible for the management and operation of several
new businesses, including direct hotel management, branding and franchising and
thoroughbred racing, which were previously not part of the operations of the
Corporation's predecessor, Patriot American Hospitality, Inc., a Virginia
corporation  ("Patriot").  In addition, the Companies may acquire other new
businesses in the future. The integration of departments, systems and procedures
presents a significant management challenge, and the failure to integrate new
acquisitions into existing management and operating structures could have a
material adverse effect on the results of operations and financial condition of
the Corporation and the Operating Company.

Substantial Debt Obligations; No Limits on Indebtedness; Variable Rate Debt

    As of September 30, 1997, the Companies' combined debt was approximately
$727.2 million and the Companies' ratio of combined debt to total market
capitalization was approximately 21.7%.  The Companies also may borrow
additional amounts from the same or other lenders in the future, may assume debt
in connection with acquisitions, or may issue corporate debt securities in
public or private offerings. The Companies' organizational documents do not
limit the amount of indebtedness the Companies may incur. Further, substantially
all of the Companies' combined debt bears interest at a variable rate.  Economic
conditions could result in higher interest rates, which could increase debt
service requirements on variable rate debt and could adversely affect the
Companies' ability to make distributions.

                                       7
<PAGE>
 
    There can be no assurance that the Companies will be able to meet their debt
service obligations and, to the extent that they cannot, the Companies risk the
loss of some or all of their assets, including the hotels. Adverse economic
conditions could cause the terms on which borrowings become available to be
unfavorable. In such circumstances, if the Corporation or the Operating Company
is in need of funds to repay indebtedness in accordance with its terms or
otherwise, it could be required to liquidate one or more investments in
properties at times which may not permit realization of the maximum return on
such investments.

    The foregoing risks associated with debt obligations of the Companies may
inhibit the ability of the Companies to raise capital in both the public and
private markets.

Lack of Experience in Hotel Management Business

    The Corporation leases certain existing hotels and intends to lease other
existing hotels and a significant portion of its newly-acquired hotels to the
Operating Company. Although certain executives of the Corporation have hotel
management experience, the Operating Company has no prior experience in the
hotel management business. The future success of the Operating Company and its
ability to operate hotels as well as manage future growth depend in large part
on its ability to attract and retain key executive officers and other highly
qualified personnel, especially in the area of hotel operations. There can be no
assurance that the Operating Company will be able to attract and retain
qualified personnel and the inability to do so could have a material adverse
effect on the results of operations and financial condition of the Companies.

Potential Conflicts of Interest Between the Corporation and the Operating
Company

    The Corporation and the Operating Company are separate corporate entities
with separate Boards of Directors. A majority of the directors of each of the
Corporation and the Operating Company do not serve as directors or officers of
the other company. In addition, the Corporation and the Operating Company
generally have different employees, separate creditors and are subject to
different state law licensing and regulatory requirements. As a result, the
interests of the Board of Directors of each company may conflict and such
conflicts may possibly rise to disputes between the companies. No assurance can
be given that conflicts will not arise between the companies or that such
conflicts will not have a material adverse effect on the results of operations
and financial condition of the Corporation and the Operating Company. The
Corporation and the Operating Company have the same Chief Executive Officer and
Chief Financial Officer as well as two of the same directors. The Companies
believe this overlap in management will help decrease the possibility of
disagreements between the two companies. No assurance can be given, however,
that these individuals' interests as officers and/or directors of one company
will not conflict with their interests as officers and/or directors of the other
company or that their actions as officers and/or directors of one company will
not adversely affect the interests of the other company.

Dependence on Lessees and Payments under the Participating Leases

    The Corporation leases each of its existing hotels, except the Crowne Plaza
Ravinia Hotel, the Marriott WindWatch Hotel and the hotels leased to the
Operating Company, to lessees (the "Lessees") pursuant to separate participating
leases (the "Participating Leases"). The Corporation's ability to make
distributions to stockholders depends primarily upon the ability of the Lessees
to make rent payments under the Participating Leases (which is dependent
primarily on the Lessees' ability to generate sufficient revenues from those
hotels which are leased to them). A failure or delay to make such payments may
be caused by reductions in revenue from such hotels or in the net operating
income of the Lessees or otherwise. Any failure or delay by the Lessees in
making rent payments may adversely affect the Corporation's ability to make
distributions to stockholders.

Lack of Control Over Operations of the Leased Hotels

    The Corporation is dependent on the ability of the Lessees and the hotel
management entities that manage the hotels (the "Operators") to manage the
operations of hotels that are leased or operated by them. Under the terms of the
Participating Leases, the Corporation has the authority to review annual budgets
for the hotels which are leased to the Lessees and to approve certain items.
However, the Corporation is unable to directly implement strategic business
decisions with respect to the setting of room rates, repositioning of a
franchise, redevelopment of food and beverage operations and certain similar
decisions with respect to such hotels.

                                       8
<PAGE>
 
Risk of Investment in Subsidiaries Controlled by Other Parties

    The Crowne Plaza Ravinia Hotel, the Marriott WindWatch Hotel and certain
non-leasable assets related to the Carefree Resorts are each owned through a
special purpose entity, specifically PAH Ravinia, Inc., PAH WindWatch, LLC and
PAH Boulders, Inc., respectively (the "Non-Controlled Subsidiaries"). The equity
securities of each of the Non-Controlled Subsidiaries are divided into two
classes: voting securities and non-voting securities. The Realty Partnership
owns all of the non-voting securities in each of the Non-Controlled
Subsidiaries. With respect to PAH Ravinia, Inc. ("PAH Ravinia") and PAH
WindWatch, LLC ("PAH WindWatch"), the Realty Partnership also owns, indirectly,
4% of the voting securities. Certain executive officers and/or directors of the
Companies own, directly or indirectly, all of the voting securities of PAH
Boulders, Inc. and the remaining 96% of the voting securities of PAH Ravinia and
PAH WindWatch. Although the ownership interests of the Realty Partnership
represent an approximately 99% economic interest in each of the Non-Controlled
Subsidiaries, the Realty Partnership is not able to elect directors or managers.
As a result, the Non-Controlled Subsidiaries may implement business policy
decisions that would not have been implemented by the Corporation and that are
adverse to the interests of the Corporation or that lead to adverse financial
results. The Corporation intends to restructure the Non-Controlled Subsidiaries
so that the Crowne Plaza Ravinia Hotel and the Marriott WindWatch Hotel may be
leased to the Operating Company and certain non-leasable assets relating to the
Carefree Resorts may be sold to the Operating Company. To effect such
restructurings and asset sales, the Corporation will be required to obtain,
along with any other third-party consents which may be required, the approval of
those executive officers and/or directors of the Companies who have voting
control over such Non-Controlled Subsidiaries. No assurances can be made that
the executive officers will consent to such restructurings or asset sales.

Hotel Industry Risks

    Operating Risks

    The primary businesses of the Companies are buying, selling, leasing and
managing hotels, which are subject to operating risks common to the hotel
industry. These risks include, among other things, (i) competition for guests
from other hotels, a number of which may have greater marketing and financial
resources and experience than the Companies and the Lessees, (ii) increases in
operating costs due to inflation and other factors, which increases may not have
been offset in past years, and may not be offset in future years by increased
room rates, (iii) dependence on business and commercial travelers and tourism,
which business may fluctuate and be seasonal, (iv) increases in energy costs and
other expenses of travel, which may deter travelers and (v) adverse effects of
general and local economic conditions. These factors could adversely affect the
ability of the Lessees and the Operating Company to generate revenues and to
make lease payments and therefore the Corporation's ability to make
distributions to stockholders.

    The Companies are also subject to the risk that in connection with the
acquisition of hotels and hotel operating companies it may not be possible to
transfer certain operating licenses, such as food and beverage licenses, to the
Lessees, the Operators or the Operating Company, or to obtain new licenses in a
timely manner in the event such licenses cannot be transferred. Although hotels
can provide alcoholic beverages under interim licenses or licenses obtained
prior to the acquisition of these hotels, there can be no assurance that these
licenses will remain in effect until the Corporation or the Operating Company
obtains new licenses or that new licenses will be obtained. The failure to have
alcoholic beverages licenses or other operating licenses could adversely affect
the ability of the affected Lessees, Operators or the Operating Company to
generate revenues and make lease payments to the Corporation.

    Operating Costs and Capital Expenditures; Hotel Renovation

    Hotels, in general, have an ongoing need for renovations and other capital
improvements, particularly in older structures, including periodic replacement
or refurbishment of furniture, fixtures and equipment ("F, F & E"). Under the
terms of the Participating Leases, the Corporation is obligated to establish a
reserve to pay the cost of certain capital expenditures at its hotels and pay
for periodic replacement or refurbishment of F, F & E. If capital expenditures
exceed the Corporation's expectations, the additional cost could have an adverse
effect on the Corporation's cash available for distribution. In addition, the
Corporation may acquire hotels where significant renovation is either required
or desirable. Renovation of hotels involves certain risks, including the
possibility of environmental problems, construction cost overruns and delays,
uncertainties as to market demand or deterioration in market demand after
commencement of renovation and the emergence of unanticipated competition from
other hotels.

                                       9
<PAGE>
 
    Competition for Hotel Acquisition Opportunities

    The Companies may be competing for investment opportunities with entities
that have substantially greater financial resources. These entities may
generally be able to accept more risk than the Companies can prudently manage,
including risks with respect to the creditworthiness of a hotel operator or the
geographic proximity of its investments. Competition may generally reduce the
number of suitable investment opportunities offered to the Companies and
increase the bargaining power of property owners seeking to sell.

    Additionally, the Corporation's ability to acquire additional hotels could
be negatively impacted by the paired share ownership structure because hotel
management companies, franchisees and others who historically approached Patriot
with acquisition opportunities in hopes of establishing lessee or management
relationships may not do so in the future out of concern that the Corporation
will rely on the Operating Company to lease and/or manage the acquired
properties. Such persons may instead provide such acquisition opportunities to
hotel companies that will allow them to manage the properties following the
sale. This could have a negative impact on the Corporation's acquisition
activities in the future.

    Seasonality

    The hotel industry is seasonal in nature. Revenues at certain hotels are
greater in the first and second quarters of a calendar year and at other hotels
in the second and third quarters of a calendar year. Seasonal variations in
revenue at hotels may cause quarterly fluctuations in the operating revenues of
the Operating Company and the lease revenues of the Corporation.

Real Estate Investment Risks

    General Risks

    The Corporation's investments will be subject to varying degrees of risk
generally incident to the ownership of real property. The underlying value of
the Corporation's real estate investments and the Corporation's income and
ability to make distributions to its stockholders will be dependent upon the
ability of the Lessees, the Operators and the Operating Company to operate the
Corporation's hotels in a manner sufficient to maintain or increase revenues and
to generate sufficient income in excess of operating expenses to make rent
payments under their leases with the Corporation. Income from the Corporation's
hotels may be adversely affected by changes in national economic conditions,
changes in local market conditions due to changes in general or local economic
conditions and neighborhood characteristics, changes in interest rates and in
the availability, cost and terms of mortgage funds, the impact of present or
future environmental legislation and compliance with environmental laws, the
ongoing need for capital improvements, particularly in older structures, changes
in real estate tax rates and other operating expenses, adverse changes in
governmental rules and fiscal policies, adverse changes in zoning laws, civil
unrest, acts of God, including earthquakes and other natural disasters (which
may result in uninsured losses), acts of war and other factors which are beyond
the control of the Companies.

    Value and Illiquidity of Real Estate

    Real estate investments are relatively illiquid. The ability of the
Corporation to vary its portfolio in response to changes in economic and other
conditions will therefore be limited. If the Corporation must sell an
investment, there can be no assurance that the Corporation will be able to
dispose of it in the time period it desires or that the sales price of any
investment will recoup or exceed the amount of the Corporation's investment.

    Property Taxes

    The Companies' hotels and racing facilities are subject to real property
taxes. The real property taxes on hotel properties as well as the racing
facilities in which the Corporation invests may increase or decrease as property
tax rates change and as the value of the properties are assessed or reassessed
by taxing authorities. If property taxes increase, the Companies' ability to
make distributions to its stockholders could be adversely affected.

    Consents of Ground Lessor Required for Sale of Certain Hotels

    Certain of the Corporation's hotels and the land upon which the Bay Meadows
Racecourse, which is located in San Mateo, California and is operated by the
Operating Company (the "Racecourse"), is situated are subject to 

                                       10
<PAGE>
 
ground leases with third party lessors. In addition, the Corporation may acquire
hotels in the future that are subject to ground leases. Any proposed sale of a
property that is subject to a ground lease by the Corporation or any proposed
assignment of the Corporation's leasehold interest in the ground lease may
require the consent of third party lessors. As a result, the Corporation may not
be able to sell, assign, transfer or convey its interest in any such property in
the future absent the consent of such third parties, even if such transaction
may be in the best interests of the stockholders.

    Environmental Matters

    The operating costs of the Companies may be affected by the obligation to
pay for the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of complying with future legislation. Under
various federal, state and local environmental laws, ordinances and regulations,
a current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances on, under, or
in such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. In addition, the presence of hazardous or toxic substances, or
the failure to remediate such property properly, may adversely affect the
owner's ability to borrow by using such real property as collateral. Persons who
arrange for the transportation, disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment facility, whether or not such facility
is or ever was owned or operated by such person. Certain environmental laws and
common law principles could be used to impose liability for releases of
hazardous materials, including asbestos-containing materials ("ACMs"), into the
environment, and third parties may seek recovery from owners or operators of
real properties for personal injury associated with exposure to released ACMs or
other hazardous materials. Environmental laws may also impose restrictions on
the manner in which a property may be used or transferred or in which businesses
may be operated, and these restrictions may require expenditures. In connection
with the ownership and operation of any of the Corporation's hotels, the
Companies, the Lessees or the Operators may be potentially liable for any such
costs. The cost of defending against claims of liability or remediating
contaminated property and the cost of complying with environmental laws could
materially adversely affect the Corporation's results of operations and
financial condition. Phase I environmental site assessments ("ESAs") have been
conducted at all of the Corporation's hotels and the Racecourse by qualified
independent environmental engineers. The purpose of Phase I ESAs is to identify
potential sources of contamination for which any of the Corporation's hotels or
the Racecourse may be responsible and to assess the status of environmental
regulatory compliance. The ESAs have not revealed any environmental liability or
compliance concerns that the Corporation believes would have a material adverse
effect on its business, assets, results of operations or liquidity, nor is the
Corporation aware of any such liability or concerns. Nevertheless, it is
possible that these ESAs did not reveal all environmental liabilities or
compliance concerns or that material environmental liabilities or compliance
concerns exist of which the Corporation is currently unaware. The Corporation
has not been notified by any governmental authority, and has no other knowledge
of, any material noncompliance, liability or claim relating to hazardous or
toxic substances or other environmental substances in connection with any of the
hotels or the Racecourse.

    Uninsured and Underinsured Losses

    Each of the Participating Leases specifies comprehensive insurance to be
maintained on each of the applicable leased hotels, including liability, fire
and extended coverage. The Corporation believes such specified coverage is of
the type and amount customarily obtained for or by an owner of hotels. Leases
for subsequently acquired hotels (including those leased to the Operating
Company) will contain similar provisions. However, there are certain types of
losses, generally of a catastrophic nature, such as earthquakes and floods, that
may be uninsurable or not economically insurable. The Board of Directors and
management of each of the Companies will use their discretion in determining
amounts, coverage limits and deductibility provisions of insurance, with a view
to maintaining appropriate insurance coverage on the investments of the
Corporation or the Operating Company, as the case may be, at a reasonable cost
and on suitable terms. This may result in insurance coverage that, in the event
of a substantial loss, would not be sufficient to pay the full current market
value or current replacement cost of the lost investment of the Corporation or
the Operating Company, as the case may be. Inflation, changes in building codes
and ordinances, environmental considerations, and other factors also might make
it infeasible to use insurance proceeds to replace the property after such
property has been damaged or destroyed. Under such circumstances, the insurance
proceeds received by the Corporation or the Operating Company might not be
adequate to restore its economic position with respect to such property.

                                       11
<PAGE>
 
    Acquisition and Development Risks

    The Companies currently intend to pursue acquisitions of additional hotels
and hotel operating companies and, under appropriate circumstances, may pursue
development opportunities. Acquisitions entail risks that such acquired hotels
or hotel operating companies will fail to perform in accordance with
expectations and that estimates of the cost of improvements necessary to market,
acquire and operate properties will prove inaccurate as well as general risks
associated with any new real estate or operating company acquisition. In
addition, hotel development is subject to numerous risks, including risks of
construction delays or cost overruns that may increase project costs, new
project commencement risks such as receipt of zoning, occupancy and other
required governmental approvals and permits and the incurrence of development
costs in connection with projects that are not pursued to completion. The fact
that the Corporation generally must distribute 95% of its ordinary taxable
income in order to maintain its qualification as a REIT may limit the
Corporation's ability to rely upon lease income from its hotels or subsequently
acquired properties to finance acquisitions or new developments. As a result, if
debt or equity financing were not available on acceptable terms, further
acquisitions or development activities might be curtailed or the Corporation's
cash available for distribution might be adversely affected.


Risks of Operating Hotels Under Franchise or Brand Affiliations

    Certain of the Corporation's hotels are operated under franchise or brand
affiliations. In addition, hotels in which the Corporation subsequently invests
may be operated pursuant to franchise or brand affiliations. The continuation of
the franchise licenses relating to the franchised hotels (the "Franchise
Licenses") is subject to specified operating standards and other terms and
conditions. The continued use of a brand is generally contingent upon the
continuation of the management agreement related to that hotel with the branded
Operator. Franchisors typically inspect licensed properties periodically to
confirm adherence to operating standards. Action on the part of any of the
Companies, the Lessees or the Operators could result in a breach of such
standards or other terms and conditions of the Franchise Licenses and could
result in the loss or cancellation of a Franchise License. It is possible that a
franchisor could condition the continuation of a Franchise License on the
completion of capital improvements which the Corporation's Board of Directors
determines are too expensive or otherwise unwarranted in light of general
economic conditions or the operating results or prospects of the affected hotel.
In that event, the Corporation's Board of Directors may elect to allow the
Franchise License to lapse which could under certain circumstance result in the
Corporation incurring significant costs for terminating such Franchise License.
In any case, if a franchise or brand affiliation is terminated, the Corporation
and the Lessee may seek to obtain a suitable replacement franchise or brand
affiliation, or to operate the hotel independent of a franchise or brand
affiliation. The loss of a franchise or brand affiliation could have a material
adverse effect upon the operations or the underlying value of the hotel covered
by the franchise or brand affiliation because of the loss of associated name
recognition, marketing support and centralized reservation systems provided by
the franchisor or brand owner.

Horse Racing Industry Risks

    The Operating Company is engaged in the business of conducting and offering
pari-mutuel wagering in thoroughbred horse racing at the Racecourse.  Such
operations are contingent upon the continued governmental acceptance of such
operations as forms of legalized gambling. As a form of gambling, pari-mutuel
wagering is subject to extensive licensing and regulatory control by the
California Horse Racing Board (the "CHRB") and other California authorities.
These regulatory authorities have broad powers with respect to the licensing of
gaming operations, and may revoke, suspend, condition or limit the gaming
operations of the Operating Company. Any such change in regulations may have a
material adverse effect on the Operating Company's financial condition and
results of operations.

    On July 1, 1997, the Corporation (formerly known as California Jockey Club,
"Cal Jockey") merged (the "Merger") with Patriot, with the Corporation being the
surviving corporation.  Prior to the Merger, the Operating Company (then known
as Bay Meadows Operating Company, "Bay Meadows") was licensed by the CHRB for
its 1997 horse racing season to hold a split thoroughbred horse racing meet at
the Racecourse and to accept pari-mutuel wagers. The CHRB has approved an
amendment to permit the Operating Company to conduct the horse racing operations
at the Racecourse during the remainder of the 1997 horse racing meet. The racing
license must be renewed on an annual basis and the CHRB has broad discretion to
reject any application for a license. In addition, California law requires that
each of the directors and certain employees of the Operating Company must be
licensed with the CHRB. No assurances can be given that the CHRB will grant
licenses to each of the directors and each of such employees of the Operating
Company. If a director or employee required to be licensed were denied a license
by the 

                                       12
<PAGE>
 
CHRB, the Operating Company would have to replace such director or employee 
with a director or employee who was so licensed.

    The CHRB also has the discretion to limit the number of days and dates on
which the Operating Company may conduct live horse racing. No assurance can be
given as to how many, or which, horse racing days the CHRB will allocate to the
Operating Company in the future, nor can there be any assurance that an issued
license will not be modified or revoked.

Lack of Experience in the Horse Racing Business; Reliance on Bay Meadows
Management

    The Operating Company manages the Racecourse's horse racing operations, an
area in which it has no prior experience. Although the Operating Company has
retained certain members of Bay Meadows' former management and personnel to
continue to manage these horse racing operations, there can be no assurance that
the Operating Company will be able to continue to employ said management and
personnel. Failure to retain such management and personnel could have a material
adverse effect on the results of operations and financial condition of the
Operating Company.


                                 THE COMPANIES

    On July 1, 1997, the Corporation  (formerly known as Cal Jockey) and Patriot
consummated the Merger, with the Corporation being the surviving corporation.
Upon completion of the Merger, the Corporation and the Operating Company were
the surviving entities, each with a limited partnership subsidiary which holds
substantially all of its assets and conducts substantially all of its
operations. Following the Merger, the surviving entities have continued the
operations of Patriot, the Corporation and the Operating Company.  As a result
of the Merger, the Corporation became one of two hotel REITs with the paired
share ownership structure.

The Corporation

    The Corporation is a self-administered REIT under the Code. The Corporation
owns interests in a portfolio of hotels which are diversified by franchise or
brand affiliation and serve primarily major U.S. business centers, including
Atlanta, Boston, Chicago, Cleveland, Dallas, Denver, Houston, Miami, San
Francisco and Seattle. In addition to hotels catering primarily to business
travelers, the Corporation's portfolio also includes world-class resort hotels
in Scottsdale and Tucson, Arizona; Carmel, California; and Telluride, Colorado
and prominent hotels in major tourist destinations, including Fort Lauderdale,
Florida; New Orleans, San Antonio and San Diego.  The Corporation also leases
approximately 174 acres of land in San Mateo, California upon which the
Racecourse is situated.

    On April 14, 1997, the Corporation entered into the Wyndham Acquisition,
through which the Corporation agreed to acquire Wyndham's portfolio of owned and
leased hotels, management and franchise agreements for Wyndham's managed and
franchised properties throughout North America, management and franchise
agreements for properties which are currently closed for renovation or
construction or are in the process of being converted to the Wyndham brand, and
Wyndham's proprietary brand names, including Wyndham/SM/, Wyndham Garden(R) and
Wyndham Hotels and Resorts/SM/. Terms of the Wyndham Acquisition provide for
Wyndham stockholders to receive 1.372 shares of Paired Common Stock for each
share of Wyndham common stock (subject to adjustment under certain
circumstances), with up to $100 million of such consideration payable in cash,
at the option of Wyndham's stockholders. The Corporation will also assume or
retire all of Wyndham's outstanding indebtedness, which totaled approximately
$151 million as of June 30, 1997.

    In connection with the proposed Wyndham Acquisition, the Corporation also
entered into a definitive agreement with partnerships affiliated with members of
the Trammell Crow family providing for the Corporation's acquisition of certain
full-service Wyndham-branded hotels (the "Crow Properties Acquisition" and,
collectively with the Wyndham Acquisition, the "Wyndham Transactions") for an
aggregate purchase price of approximately $332 million in cash, plus up to $14
million in additional cash consideration if two of the hotels meet certain cash
flow targets. The Corporation expects that the Wyndham Transactions will be
completed in the fourth quarter of 1997.  The Wyndham Transactions are subject
to various closing conditions, including approval of the Wyndham Acquisition by
the stockholders of the Companies and Wyndham.  Accordingly, no assurances can
be given that the Wyndham Transactions will be consummated.

                                       13
<PAGE>
 
    As part of their ongoing businesses, the Companies continually engage in
discussions with public and private real estate entities, including, without
limitation, current lessees of the Companies' hotels, regarding possible
portfolio or single asset acquisitions, as well as the acquisition of hotel
leasing and management operations.  No assurances can be made that the Companies
will acquire any such acquisition opportunities.

    The Corporation conducts substantially all of its operations through the
Realty Partnership, which owns, directly and through its subsidiaries, the
Corporation's interests in each of its hotels. Through PAH GP and PAH LP, the
Corporation holds the sole general partnership interest and a limited
partnership interest, respectively, in the Realty Partnership.

    Since 1983, the shares of Corporation Common Stock have been paired and have
traded together with the shares of Operating Company Common Stock as a single
unit pursuant to a stock pairing agreement. The terms of the stock pairing
agreement are set forth in the Pairing Agreement, dated as of February 17, 1983
and amended from time to time thereafter, by and between the Corporation and the
Operating Company (the "Pairing Agreement"). Since the Merger, the Paired Common
Stock has been listed on the NYSE under the symbol "PAH."

    The Corporation's principal executive offices are located at 3030 LBJ
Freeway, Suite 1500, Dallas, Texas 75234 and its telephone number at that
location is (972) 888-8000.

The Operating Company

    The Corporation leases certain of its hotels to the Operating Company.   The
Operating Company is also engaged in the business of conducting and offering
pari-mutuel wagering on thoroughbred horse racing at the Racecourse.  As
described above, shares of Operating Company Common Stock are paired and trade
together with the shares of Corporation Common Stock as a single unit on the
NYSE pursuant to the Pairing Agreement.  The Operating Company conducts
substantially all of its operations through the Operating Partnership, which
owns, directly and through its subsidiaries, the Operating Company's assets.
The Operating Company holds the sole general partnership interest and a limited
partnership interest in the Operating Partnership.

    The Operating Company's principal executive offices are located at 3030 LBJ
Freeway, Suite 1500, Dallas, Texas 75234 and its telephone number at that
location is (972) 888-8000.


                       DESCRIPTION OF PAIRED COMMON STOCK

    The statements below describing the Paired Common Stock are in all respects
subject to and qualified in their entirety by reference to the applicable
provisions of the Charters, the Amended and Restated Bylaws of the Corporation
(the "Corporation Bylaws") and the Amended and Restated Bylaws of the Operating
Company (the "Operating Company Bylaws" and, together with the Corporation
Bylaws, the "Bylaws").

General

    The Corporation Charter authorizes the Corporation to issue up to 650
million shares of Corporation Common Stock, 100 million shares of preferred
stock, $.01 par value, and 750 million shares of excess stock, $.01 par value
(the "Excess Stock"), and the Operating Company Charter authorize the Operating
Company to issue up to 650 million shares of Operating Company Common Stock, 100
million shares of preferred stock, $.01 par value,  and 750 million shares of
Excess Stock.

    Pursuant to the Pairing Agreement, neither the Corporation nor the Operating
Company may issue shares of Corporation Common Stock or Operating Company Common
Stock, respectively, unless provision has been made for the simultaneous
issuance or transfer to the same person of the same number of shares of that
same class or series of common stock or preferred stock that is paired of the
other company and for the pairing of such shares. Each certificate issued for
shares of Paired Common Stock must be issued "back-to-back" with a certificate
evidencing the same number of shares of the other company. Each certificate must
bear a conspicuous legend on its face referring to the restrictions on ownership
and transfer under the Bylaws.  In addition, neither the Corporation nor the
Operating Company may declare a stock dividend, issue any rights or warrants or
otherwise reclassify shares unless the other company simultaneously takes the
same or equivalent action.

                                       14
<PAGE>
 
    The Paired Common Stock is currently listed on the NYSE under the symbol
"PAH." As of October 28, 1997, there were 68,005,704 shares of Paired Common
Stock outstanding. The Paired Common Stock will, when issued, be fully paid and
nonassessable and will have no preemptive rights.

Terms

    Subject to the preferential rights of any other class or series of stock,
holders of shares of Paired Common Stock will be entitled to receive dividends
and other distributions in cash, stock or property of the Corporation or the
Operating Company, as the case may be, as and when authorized and declared by
the respective Board of Directors of each company out of assets legally
available therefor and to share ratably in the assets of the respective company
legally available for distribution to its respective stockholders in the event
of its liquidation, dissolution or winding up after payment of, or adequate
provision for, all known debts and liabilities of the Corporation or the
Operating Company, as the case may be.

    Each outstanding share of Paired Common Stock entitles its holder to one
vote on all matters submitted to a vote of stockholders of the Corporation or
the Operating Company, as the case may be, including the election of directors
and, except as otherwise required by law or except as provided with respect to
any other class or series of stock, the holders of Paired Common Stock will
possess the exclusive voting power.

    Holders of Paired Common Stock have no conversion, sinking fund or
redemption rights, or preemptive rights to subscribe for any securities of the
Corporation or the Operating Company.

    Each of the Corporation and the Operating Company intends to furnish its
stockholders with annual reports containing audited consolidated financial
statements and an opinion thereon expressed by an independent public accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information.

    All shares of Paired Common Stock have equal dividend, distribution,
liquidation and other rights, and will have no preference, appraisal or exchange
rights.

    Pursuant to the Delaware General Corporation Law (the "DGCL"), a merger or
consolidation involving either of the Corporation or the Operating Company
requires the approval of a majority of the outstanding shares of the constituent
corporation to the transaction entitled to vote on such a matter.

Restrictions on Ownership

    For the Corporation to qualify as a REIT under the Code, not more than 50%
in value of its outstanding capital stock may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year. To assist the Corporation in
meeting this requirement, the Corporation and the Operating Company may take
certain actions to limit the beneficial ownership, directly or indirectly, by a
single person of the outstanding equity securities of the Corporation or the
Operating Company. See "Restrictions on Transfers of Capital Stock."

Transfer Agent

    The transfer agent and registrar for the Paired Common Stock is American
Stock Transfer & Trust Company of New York, New York.


                   RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK

    For the Corporation to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year, and such
capital stock must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months or during a proportionate part of a
shorter taxable year (in each case, other than the first such year).

    The Charters prohibit actual or constructive ownership of shares of Equity
Stock of the Corporation or the Operating Company in excess of the Ownership
Limit unless the Ownership Limit is waived by the Board of Directors 

                                       15
<PAGE>
 
of the relevant corporation in accordance with the Charters. Any transfer of
shares of Equity Stock of the Corporation or the Operating Company that would
(i) result in any person or entity owning, directly or indirectly, shares of
Equity Stock of the Corporation or the Operating Company in excess of the
Ownership Limit, unless the Ownership Limit is waived by the Board of Directors
of the relevant corporation in accordance with the Charters, (ii) result in the
capital stock of the Corporation being beneficially owned (within the meaning of
Section 856(a)(5) of the Code) by fewer than 100 persons within the meaning of
Section 856(a)(5) of the Code, (iii) result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code or (iv) cause the
Corporation to own, actually or constructively, 10% or more of the ownership
interests in a tenant of the real property of the Corporation or a subsidiary of
the Corporation within the meaning of section 856(d)(2)(B) of the Code, shall be
void ab initio, and the intended transferee will acquire no right or interest in
such shares of Equity Stock.

    Upon the violation of any of the foregoing transfer restrictions contained
in the Charters, that number of shares which violate any of such transfer
restrictions shall automatically be converted into an equal number of shares of
Excess Stock of the Corporation or the Operating Company, as the case may be,
and transferred to a trust (a "Trust"). Such shares of Excess Stock held in
trust shall remain outstanding shares of stock of the Corporation and the
Operating Company and shall be held by the trustee of the Trust (the "Trustee")
for the benefit of a charitable beneficiary (a "Beneficiary"). In the case of
Equity Stock that is paired, upon the conversion of a share of Equity Stock into
a share of Excess Stock, the corresponding paired share of that same class or
series of Equity Stock of the other company shall simultaneously be converted
into a share of Excess Stock; such shares of Excess Stock shall be paired and
shall be simultaneously transferred to a Trust. Upon the occurrence of such a
conversion of shares of any class or series of Equity Stock into an equal number
of shares of Excess Stock, such shares of Equity Stock shall be automatically
retired and canceled, without any action required by the Board of Directors of
either of the Corporation or the Operating Company, and shall thereupon be
restored to the status of authorized but unissued shares of the particular class
or series of Equity Stock from which such Excess Stock was converted and may be
reissued as that particular class or series of Equity Stock. The Trustee and the
Beneficiary shall be designated pursuant to the terms of the Pairing Agreement.
Each share of Excess Stock shall entitle the holder to the number of votes the
holder would have if such share of Excess Stock was a share of Equity Stock of
the same class or series from which such Excess Stock was converted, on all
matters submitted to a vote at any meeting of stockholders. The Trustee, as
record holder of the Excess Stock, shall be entitled to vote all shares of
Excess Stock. Each share of Excess Stock shall be entitled to the same dividends
and distributions (as to timing and amount) as may be declared by the Board of
Directors of the Corporation or the Operating Company, as the case may be, as
shares of the class or series of Equity Stock from which such Excess Stock was
converted. The Trustee of the Trust, as record holder of the shares of the
Excess Stock, shall be entitled to receive all dividends and distributions and
shall hold such dividends and distributions in trust for the benefit of the
Beneficiary of the Trust.

    Pursuant to the Charters, the Trustee shall have the exclusive and absolute
right to designate a permitted transferee (a "Permitted Transferee") of any and
all shares of Excess Stock if the Corporation or the Operating Company or both,
in the case of paired shares, fail to exercise its or their option with respect
to such shares as described below; provided, however, that (i) the Permitted
Transferee so designated purchases for consideration (whether in a public or
private sale) the shares of Excess Stock and (ii) the Permitted Transferee so
designated may acquire such shares of Excess Stock without violating any of the
aforementioned transfer restrictions and without such acquisition resulting in
the exchange of such shares of Equity Stock so acquired for shares of Excess
Stock and the transfer of such shares of Excess Stock to a Trust. Upon the
designation by the Trustee of a Permitted Transferee, the Trustee shall cause to
be transferred to the Permitted Transferee that number of shares of Excess Stock
of the Corporation or the Operating Company, as the case may be, acquired by the
Permitted Transferee. Upon such transfer of the shares of Excess Stock to the
Permitted Transferee, such shares of Excess Stock shall be automatically
converted into an equal number of shares of Equity Stock of the same class and
series from which such Excess Stock was converted. In the case of Equity Stock
that is paired, upon the conversion of a share of Excess Stock into a share of
Equity Stock of the same class or series from which such Excess Stock was
converted, the corresponding paired share of Excess Stock of the other company
shall simultaneously be converted into a share of Equity Stock of the same class
or series from which such Excess Stock was converted and such shares of Equity
Stock shall be paired. Upon the occurrence of such a conversion of shares of
Excess Stock into an equal number of shares of Equity Stock, such shares of
Excess Stock shall be automatically retired and canceled, without any action
required by the Board of Directors of the Corporation or the Operating Company,
and shall thereupon be restored to the status of authorized but unissued shares
of Excess Stock and may be reissued as such. The Trustee shall (i) cause to be
recorded on the stock transfer books of the Corporation or the Operating Company
or both, in the case of paired shares, that the Permitted Transferee is the
holder of record of such number of shares of Equity Stock and (ii) distribute to
the Beneficiary any and all amounts held with respect to the shares of Excess
Stock after making payment to the record holders of the shares of Equity Stock
that were converted into Excess Stock (each, a "Prohibited Owner"). If the

                                       16
<PAGE>
 
transfer of shares of Excess Stock to a purported Permitted Transferee shall
violate any of the aforementioned transfer restrictions including, without
limitation, the Ownership Limit, such transfer shall be void ab initio as to
that number of shares of Excess Stock that cause the violation of any such
restriction when such shares are converted into shares of Equity Stock and the
purported Permitted Transferee shall be deemed to be a Prohibited Owner and
shall acquire no rights in such shares of Excess Stock. Such shares of Equity
Stock shall be automatically re-converted into Excess Stock and transferred to
the Trust from which they were originally sold.

    A Prohibited Owner shall be entitled to receive from the Trustee following
the sale or other disposition of such shares of Excess Stock the lesser of (i)
(a) in the case of a purported transfer in which the Prohibited Owner gave value
for shares of Equity Stock and which transfer resulted in the conversion of such
shares into shares of Excess Stock, the price per share, if any, such Prohibited
Owner paid for the shares of Equity Stock and (b) in the case of a non-transfer
event or transfer in which the Prohibited Owner did not give value for such
shares (e.g., if the shares were received through a gift or devise) and which
non-transfer event or transfer, as the case may be, resulted in the conversion
of such shares into shares of Excess Stock, the price per share equal to the
Market Price (as determined in the manner set forth in the Charters) on the date
of such non-transfer event or transfer and (ii) the price per share received by
the Trustee from the sale or other disposition of such shares of Excess Stock.
Any amounts received by the Trustee in respect of such shares of Excess Stock
and in excess of such amounts to be paid the Prohibited Owner shall be
distributed to the Beneficiary.

    In addition, shares of Excess Stock shall be deemed to have been offered for
sale by a Trust to the Corporation or the Operating Company or both, in the case
of paired shares, or a designee of such company or companies, at a price per
share equal to the lesser of (i) the price per share in the transaction that
created such shares of Excess Stock (or, in the case of devise, gift or non-
transfer event, the Market Price at the time of such devise, gift or non-
transfer event) or (ii) the Market Price on the date either company or both
companies, in the case of paired shares, accept such offer. Either company or
both companies, in the case of paired shares, shall have the right to accept
such offer for a period of 90 days following the later of (a) the date of the
non-transfer event or purported transfer which results in such shares of Excess
Stock or (b) the date on which either company or both companies, in the case of
paired shares, determine in good faith that a transfer or non-transfer event
resulting in shares of Excess Stock has previously occurred, if either company
or both companies, in the case of paired shares, do not receive a notice of such
transfer or non-transfer event. In the case of shares of Excess Stock that are
paired, neither the Corporation nor the Operating Company shall accept such an
offer with respect to its shares of Excess Stock without the agreement of the
other company to accept such offer with respect to the corresponding paired
shares of its Excess Stock.

    Any person or entity that acquires or attempts to acquire shares of Equity
Stock in violation of the aforementioned transfer restrictions, or any person or
entity that owned shares of Equity Stock that were transferred to a Trust, shall
immediately give written notice to the Corporation or the Operating Company or
both, in the case of paired shares, of such event and shall provide such other
information as the appropriate company or both companies, as the case may be,
may request to determine the effect, if any, of such violation, on the
Corporation's status as a REIT.

    Each person or entity that is an owner, actually or constructively, of
shares of Equity Stock and each person or entity that (including the stockholder
of record) is holding shares of Equity Stock for such an owner shall provide to
the Corporation or the Operating Company or both, in the case of paired shares,
a written statement or affidavit stating such information as the appropriate
company or both companies, as the case may be, may request to determine the
Corporation's status as a REIT and to ensure compliance with the Ownership
Limit. In addition, every person or entity that owns of record, actually or
constructively, more than 5%, or such lower percentages as required pursuant to
regulations under the Code, of the outstanding shares of any class or series of
Equity Stock of the Corporation or the Operating Company shall, within 30 days
after January 1 of each year, provide to the Corporation or the Operating
Company or both, in the case of paired shares, a written statement or affidavit
stating the name and address of such owner, the number of shares of Equity Stock
owned, actually or constructively, and a description of how such shares are
held.

    All certificates representing shares of Equity Stock shall bear a legend
referring to the aforementioned transfer restrictions. The transfer restrictions
will continue to apply until the Board of Directors of the Corporation
determines that it is no longer in the best interests of the Corporation to
attempt to qualify, or to continue to qualify, as a REIT.

    The restrictions on transfer contained in the Charters could have the effect
of delaying, deferring or preventing the acquisition of control of the
Corporation and the Operating Company, including certain acquisitions that
stockholders might deem to be in their best interest.

                                       17
<PAGE>
 
    DESCRIPTION OF REALTY PARTNERSHIP UNITS AND OPERATING PARTNERSHIP UNITS
                         AND REDEMPTION OF UNIT PAIRS

General

    This Prospectus, and this section in particular, provides a summary of the
material terms of the Partnership Agreements.  The discussion and description of
the material terms of the Partnership Agreements are subject to and qualified in
their entirety by reference to the Partnership Agreements themselves, each of
which is on file with the Commission and is incorporated by reference herein.

    Each Unitholder may, subject to certain limitations contained i n the
Partnership Agreements, exercise its Redemption Right with respect to a Unit
Pair and require that the Partnerships redeem all or a portion of such
Unitholder's Unit Pairs.  This Redemption Right shall be exercised pursuant to a
notice of redemption (the "Notice of Redemption") delivered to the Partnerships,
with a copy delivered to the general partner of each of the Partnerships
(collectively, the "General Partners") by the Unitholder exercising the
Redemption Right.  Upon redemption, a Unitholder will receive for each Unit Pair
redeemed cash in an amount equal to the market value of one share of Paired
Common Stock (subject to certain adjustments in the case of stock splits, stock
dividends or similar distributions); provided, however, that the Companies may,
in their sole discretion, by notice to the redeeming Unitholder no less than
five business days prior to the first business day that is at least 60 business
days after the receipt by the Companies of the Notice of Redemption, elect to
acquire any Unit Pair presented to the Partnerships for redemption for one share
of Paired Common Stock (subject to certain adjustments in the case of stock
splits, stock dividends or similar distributions) or for cash in the amount
described above.  Each of the Partnership Agreements provides that neither of
the Companies may elect to acquire a Unit Pair tendered for redemption for a
share of Paired Common Stock unless the other company also so elects.  If the
Companies do not agree to acquire such Unit Pair for a share of Paired Common
Stock, the Unit Pair shall be redeemed by each of the Companies for cash.

    Each of the Companies anticipates that it generally will elect to acquire
any Unit Pairs presented to the Partnerships for redemption by the issuance of
shares of Paired Common Stock pursuant to this Prospectus rather than by paying
cash.  However, under the terms of the Partnership Agreements, no redemption can
occur if the delivery of shares of Paired Common Stock would be prohibited under
the provisions of the Corporation's Charter that protect the Corporation's
qualification as a REIT.  See "Restrictions on Transfers of Capital Stock."  In
this circumstance, the Companies may elect to acquire any Unit Pairs presented
for redemption for cash, in lieu of Paired Common Stock.

Tax Consequences of Redemption

    The following discussion summarizes certain federal income tax
considerations that may be relevant to a Unitholder who exercises his Redemption
Right.

    Separate Taxation.  Notwithstanding that Unit Pairs may be tendered for
redemption only in tandem - i.e., as a unit - holders of Unit Pairs will be
                            ---                                            
treated for U.S. federal income tax purposes as holding an equal number of units
of limited partnership interest of the Realty Partnership and units of limited
partnership interest of the Operating Partnership. The tax treatment of
distributions to holders of Unit Pairs and of any gain or loss recognized upon a
sale or other disposition of Unit Pairs must therefore be determined separately
with respect to each unit contained within a Unit Pair. The tax basis and
holding period for each unit contained within a Unit Pair also must be
determined separately.

    Tax Treatment of Exchange or Redemption of Unit Pairs.  If the Companies
elect to purchase Unit Pairs tendered for redemption, the REIT will purchase the
Realty Partnership Units that comprise the tendered Unit Pairs, and the
Operating Company will purchase the Operating Partnership Units that comprise
the tendered Unit Pairs. Each of the Partnership Agreements provides that the
redeeming Unitholder, the issuing partnership and the purchasing company shall
treat the transaction between the redeeming Unitholder and such company as a
sale of the purchased units by the Unitholder to such company at the time of
such redemption.  Each such sale will be fully taxable to the redeeming
Unitholder and such redeeming Unitholder will be treated as realizing for tax
purposes on each sale an amount equal to the sum of (i) the cash value or the
value of the shares of Corporation Common Stock received (in the case of the
purchase of the Realty Partnership Units that comprise the tendered Unit Pairs)
or the cash value or the value of the shares of Operating Company Common Stock
received (in the case of the purchase of the Operating Partnership Units that
comprise the tendered Unit Pairs) plus (ii) the amount of any liabilities
allocable to the redeemed units at the time of the redemption (which in the case
of Realty Partnership Units includes liabilities of the Realty Partnership only
and in the case of Operating Partnership Units includes liabilities of the
Operating 

                                       18
<PAGE>
 
Partnership only).  The determination of the amount of gain or loss is 
discussed more fully below.  If the Companies do not elect to purchase a
Unitholder's Unit Pairs tendered for redemption, the Realty Partnership will
redeem the Realty Partnership Units that comprise the tendered Unit Pairs, and
the Operating Partnership will redeem the Operating Partnership Units that
comprise the tendered Unit Pairs.  If a partnership redeems its units for cash
that the respective company contributes to the partnership to effect such
redemption, the redemption likely would be treated for tax purposes as a sale of
such units to such company in a fully taxable transaction, although the matter
is not free from doubt.  In that event, the redeeming Unitholder would be
treated as realizing on such deemed sale an amount equal to the sum of the cash
received for such units in the exchange plus the amount of any liabilities
allocable to such units at the time of the redemption.  The determination of the
amount and character of gain or loss in the event of such a sale is discussed
more fully below.  See "--Tax Treatment of Disposition of Unit Pairs by a
Unitholder Generally."

    If the Companies do not elect to purchase Unit Pairs tendered for redemption
and a partnership redeems units for cash that is not contributed by the
respective company to effect the redemption, the tax consequences would be the
same as described in the previous paragraph, except that if the partnership
redeems less than all of a Unitholder's units in that partnership, the
Unitholder would not be permitted to recognize any loss occurring on the
transaction and would recognize taxable gain only to the extent that the cash,
plus the amount of any liabilities allocable to the redeemed Units, exceeded the
Unitholder's adjusted basis in all of such Unitholder's units in such
partnership immediately before the redemption.  The same tax consequences would
result if a company contributed cash to the respective partnership to effect a
redemption, and the form of the transaction were respected for tax purposes (so
that the redemption transaction were treated as the redemption of units by the
partnership rather than a sale of units to such company).

    As noted above, if the Companies do not elect to purchase Unit Pairs
tendered for redemption, the Realty Partnership will redeem the Realty
Partnership Units that comprise the tendered Unit Pairs, and the Operating
Partnership will redeem the Operating Partnership Units that comprise the
tendered Unit Pairs.  There can be no assurance that the Partnerships will fund
their respective redemptions in the same manner.  For example, one of the
Partnerships could fund its redemption of its Units that comprise the tendered
Unit Pairs with cash contributed by the respective company, which as noted
likely would be taxed as if the company purchased such units directly from the
tendering Unitholder, while the other partnership might fund its redemption out
of its own funds (not contributed by the respective company), which could have
different tax consequences as described above.

    Tax Treatment of Disposition of Units by a Unitholder Generally.  If a unit
is disposed of in a manner that is treated as a sale of the unit, or a
Unitholder otherwise disposes of a unit, the determination of gain or loss from
the sale or other disposition will be based on the difference between the amount
considered realized for tax purposes and the tax basis in such unit.  See "--
Basis of Units."  Upon the sale of a unit, the "amount realized" will be
measured by the sum of the cash and fair market value of other property received
plus the amount of any liabilities allocable to the unit  sold.  To the extent
that the amount of cash or property received plus the allocable share of any
liabilities exceeds the Unitholder's basis for the units disposed of, such
Unitholder will recognize gain.  It is possible that the amount of gain
recognized or even the tax liability resulting from such gain could exceed the
amount of cash and/or the value of any other property received upon such
disposition.

    Except as described below, any gain recognized upon a sale or other
disposition of a unit will be treated as gain attributable to the sale or
disposition of a capital asset.  To the extent, however, that the amount
realized upon the sale of a unit attributable to a Unitholder's share of
"unrealized receivables" of the issuing partnership (as defined in Section 751
of the Code) exceeds the basis attributed to those assets, such excess will be
treated as ordinary income. Unrealized receivables with respect to a particular
unit, include, to the extent not previously included in the income of the
issuing partnership, any rights to payment for services rendered or to be
rendered.  Unrealized receivables also include amounts that would be subject to
recapture as ordinary income if the issuing partnership had sold its assets at
their fair market value at the time of the transfer of the unit.

    As noted below in "Certain Federal Income Tax Considerations--Federal
Income Taxation of Holders of Paired Shares--Taxation of Taxable U.S.
Stockholders," the Taxpayer Relief Act of 1997 alters the taxation of capital
gain income for individuals as well as estates and trusts. This Act allows the
IRS to prescribe regulations governing the application of the new capital gains
rates to sales of interests in partnerships. To date, regulations
have not yet been prescribed and it remains unclear how these new rates will
apply to sales or other dispositions of units.

    Basis of Units.  In general, a Unitholder who acquired units in one of the
Partnerships by contribution of property and/or money to that partnership had an
initial tax basis ("Initial Basis") in those units equal to the sum of (i) the
amount of money contributed (or deemed contributed as described below) and (ii)
the Unitholder's adjusted 

                                       19
<PAGE>
 
tax basis in any other property contributed in exchange for such units, and less
the amount of any money distributed (or deemed distributed, as described below)
in connection with the acquisition of such units. The Initial Basis of units
acquired by other means would have been determined under the general rules of
the Code, including the partnership provisions, governing the determination of
tax basis. Other rules, including the "disguised sale" rules discussed below,
also may affect Initial Basis. Unitholders are urged to consult their own tax
advisors regarding their Initial Basis.

    A Unitholder's Initial Basis in its units in one of the Partnerships
generally is increased by (i) such Unitholder's share of that partnership's
taxable and tax-exempt income and (ii) increases in such Unitholder's allocable
share of liabilities of that partnership (including any increase in its share of
liabilities occurring in connection with the acquisition of its units).
Generally, such Unitholder's basis in its units in one of the Partnerships is
decreased (but not below zero) by (i) such Unitholder's share of that
partnership's distributions (ii) decreases in such Unitholder's allocable share
of liabilities of that partnership (including any decrease in its share of
liabilities of such partnership occurring in connection with the acquisition of
its units), (iii) such Unitholder's share of losses of that partnership and (iv)
such Unitholder's share of nondeductible expenditures of that partnership that
are not chargeable to capital account.

    Initial Basis of Operating Partnership Units Issued in Connection with the
Merger.  In connection with the Merger, the Realty Partnership distributed to
its Unitholders (other than the Corporation) an Operating Partnership Unit for
each Realty Partnership Unit held by each such Unitholder.  The Companies
believe that the Operating Partnership Units so distributed were subject to
special rules applicable to distributions of "marketable securities" under
Section 731(c) of the Code.  As a result, the Companies believe that a Realty
Partnership Unitholder's initial basis in any Operating Partnership Units
distributed to it in connection with the Merger generally would equal the sum of
(i) the adjusted basis of such Operating Partnership Unit to the Realty
Partnership immediately before such distribution, but not in excess of the
adjusted basis of the Realty Partnership Unitholder's interest in the Realty
Partnership plus (ii) the amount of gain recognized by the Realty Partnership
Unitholder upon the distribution of such Operating Partnership Units to it
(calculated as the excess of (a) the then fair market value of the Operating
Partnership Units distributed to the Realty Partnership Unitholder over (b) the
Realty Partnership Unitholder's tax basis in his Realty Partnership Units
immediately prior to the distribution).  The Realty Partnership Unitholder's
adjusted tax basis in his Realty Partnership Units at the time of such
distribution would be reduced by the amount described in clause (i) of the
preceding sentence.  The operation of these rules should provide a Realty
Partnership Unitholder with an Initial Basis in the Operating Partnership Units
so distributed equal to the price paid by the Realty Partnership for such
Operating Partnership Units.

    Potential Application of the Disguised Sale Regulations to a Redemption of
Unit Pairs.  There is a risk that a redemption by the issuing partnership of
units issued in exchange for a contribution of property to that partnership may
cause the original transfer of property to that partnership in exchange for
units to be treated as a "disguised sale" of property.  Section 707 of the Code
and the Treasury Regulations thereunder (the "Disguised Sale Regulations")
generally provide that, unless one of the prescribed exceptions is applicable, a
partner's contribution of property to a partnership and a simultaneous or
subsequent transfer of money or other consideration (which may include the
assumption of or taking subject to a liability) from the partnership to the
partner will be presumed to be a sale, in whole or in part, of such property by
the partner to the partnership.  Further, the Disguised Sale Regulations provide
generally that, in the absence of an applicable exception, if money or other
consideration is transferred by a partnership to a partner within two years of
the partner's contribution of property, the transactions are presumed to be a
sale of the contributed property unless the facts and circumstances clearly
establish that the transfers do not constitute a sale.  In addition, the
Disguised Sale Regulations require that any such transfer of money or other
consideration within the two year period must be reported to the IRS. The
Disguised Sale Regulations also provide that if two years have passed between
the transfer of money or other consideration and the contribution of property,
the transactions will be presumed not to be a sale unless the facts and
circumstances clearly establish that the transfers constitute a sale.

    Accordingly, if a unit is redeemed by the issuing partnership from a
Unitholder who holds units that were issued in exchange for a contribution of
property to that partnership, the IRS could contend that the Disguised Sale
Regulations apply because the Unitholder will thus receive cash subsequent to a
previous contribution of property to such partnership.  In that event, the IRS
could contend that the contribution was taxable as a disguised sale under the
Disguised Sale Regulations.  Any gain recognized thereby may be eligible for
installment reporting under Section 453 of the Code, subject to certain
limitations.  In addition, in such event, the Disguised Sale Regulations might
apply to cause a portion of the proceeds received by a redeeming Unitholder to
be characterized as original issue discount on a deferred obligation which would
be taxable as interest income in accordance with the provisions of Section 1272

                                       20
<PAGE>
 
of the Code.  Each Unitholder is advised to consult its own tax advisors to
determine whether redemption of its units could be subject to the Disguised Sale
Regulations.

    Relative Values of Corporation Common Stock and Operating Company Common
Stock.  As discussed above, if the Companies elect to purchase Unit Pairs
tendered for a redemption in exchange for shares of Corporation Common Stock and
shares of Operating Company Common Stock, the amount of gain or loss recognized
by the Unitholder with respect to the Realty Partnership Units that comprise the
tendered Unit Pairs will depend in part on the then value of the shares of
Corporation Common Stock received, and the amount of gain or loss recognized
with respect to the Operating Partnership Units that comprise the tendered Unit
Pairs will depend in part on the then value of the shares of Operating Company
Common Stock received.  Under the terms of the Pairing Agreement, the
Corporation and the Operating Company are obligated to agree on the relative
values of a share of Corporation Common Stock and a share of Operating Company
Common Stock that comprise a Paired Share.  As of the date of this Registration
Statement, the Companies previously had agreed that the value of a share of
Operating Company Common Stock represents 5% of the value of a Paired Share.
There can be no assurance, however, that these relative values will not have
changed at the time a Unitholder tenders Unit Pairs or that the IRS will not
challenge this valuation.

Comparison of Ownership of Units and Paired Common Stock

    The nature of any investment in Paired Common Stock of the Companies is
generally economically equivalent to an investment in Units in the Partnerships.
There are, however, some differences between ownership of Units and ownership of
Paired Common Stock, some of which may be material to investors.  The
information below highlights a number of significant differences between the
Partnerships and the Companies relating to, among other things, form of
organization, policies and restrictions, management structure, compensation and
fees, investor rights and federal income taxation and compares certain legal
rights associated with ownership of Units and Paired Common Stock. These
comparisons are intended to assist Unitholders in understanding how their
investment will be changed if they exercise their Redemption Right and their
Unit Pairs are acquired by the Companies for shares of Paired Common Stock.
This discussion is summary in nature and does not constitute a complete
discussion of these matters, and holders of Unit Pairs should carefully review
the balance of this Prospectus and the registration statement of which this
Prospectus is a part for additional important information about the Companies.

    Form of Organization and Assets Owned.  The Realty Partnership is organized
as a Virginia limited partnership. A substantial amount of the Corporation's
operations are conducted through the Realty Partnership.  The Operating
Partnership is organized as a Delaware limited partnership.  A substantial
amount of the Operating Company's operations are conducted through the Operating
Partnership.

    The Corporation is organized under the laws of the State of Delaware.  The
Corporation, through PAH LP and PAH GP, maintains both a limited partner
interest and the sole general partner interest, respectively, in the Realty
Partnership, which gives the Corporation an indirect investment in the assets
owned by the Realty Partnership.  As of October 28, 1997, the Corporation,
through PAH LP and PAH GP, held an approximate 83.56% economic interest in the
Realty Partnership, and such interest will increase as Realty Partnership Units
are redeemed for cash or acquired by the Corporation.

    The Operating Company is organized under the laws of  the State of Delaware.
The Operating Company maintains both a limited partner interest and a general
partner interest in the Operating Partnership, which gives the Operating Company
an indirect investment in the properties and other assets owned by the Operating
Partnership. As of October 28, 1997, the Operating Company held an approximate
82.13% economic interest in the Operating Partnership, and such interest will
increase as Operating Partnership Units are redeemed for cash or acquired by the
Operating Company.

    Length of Investment.  Each of the Partnerships has a stated termination
date of December 31, 2050, although each may be terminated earlier under certain
circumstances.  Each of the Companies has a perpetual term and intends to
continue its operations for an indefinite time period.

    Nature of Investment and Distribution Rights.  Realty Partnership Units and
Operating Partnership Units constitute equity interests entitling each
Unitholder to his pro rata share of cash distributions made to the Unitholders
of the Partnerships.  Each of the Corporation and the Operating Company is
entitled to receive its pro rata share of distributions made by the Realty
Partnership and the Operating Partnership, respectively, with respect to its
interest therein.

                                      21
<PAGE>
 
    Shares of Paired Common Stock constitute an equity interest in the
Companies.  Each stockholder will be entitled to his pro rata share of any
dividends or distributions paid with respect to shares of Paired Common Stock.
The dividends payable to the stockholders are not fixed in amount and are only
paid if, when and as declared by the Board of Directors of each Company.  To
qualify as a REIT, the Corporation must distribute at least 95% of its taxable
income (excluding capital gains), and any taxable income (including capital
gains) not distributed will be subject to corporate income tax.

    As partnerships, the Realty Partnership and Operating Partnership are not
subject to federal income taxation. In determining their federal income tax,
partners of each of the Partnerships, including Unitholders, must take into
account their allocable share of partnership income, gain, deduction and loss
(regardless of whether distributed), and otherwise are subject to the rules
governing the taxation of partnerships and partners.  By contrast, Unitholders
who receive shares of Paired Common Stock upon exercise of their Redemption
Right will be taxed on such investment in accordance with the rules governing
REITs.  See "Certain Federal Income Tax Considerations."

    Issuance of Additional Equity.  The Realty Partnership is authorized to
issue Realty Partnership Units and other partnership interests to its partners
or to other persons for such consideration and on such terms and conditions as
PAH GP, as general partner, in its sole discretion, may deem appropriate.  The
Operating Partnership is authorized to issue Operating Partnership Units and
other partnership interests to its partners or to other persons for such
consideration and on such terms and conditions as the Operating Company, as
general partner, in its sole discretion, may deem appropriate.

    The Board of Directors of each of the Companies may authorize the issuance
of shares of capital stock of any class or series, whether now or hereafter
authorized, or securities or rights, convertible into shares of capital stock,
for such consideration as the respective Board of Directors may deem advisable,
subject to such restrictions or limitations as may be set forth in the
respective Bylaws.  As long as each of the Realty Partnership and the Operating
Partnership is in existence, the proceeds of all equity capital raised by the
Corporation or the Operating Company will be contributed to the Realty
Partnership and the Operating Partnership, respectively, in exchange for Realty
Partnership Units or Operating Partnership Units or other interests in the
respective Partnerships.

    Liquidity.  Subject to certain exceptions, pursuant to the Partnership
Agreements, a Unitholder may transfer all or any portion of its Realty
Partnership Units or Operating Partnership Units, as the case may be, with or
without the consent of the respective General Partners.  However, each of the
General Partners, in its sole and absolute discretion, may or may not consent to
the admission as a Unitholder of any transferee of Realty Partnership Units or
Operating Partnership Units, as the case may be.  If the general partner of the
Realty Partnership or the Operating Partnership, as the case may be, does not
consent to the admission of a permitted transferee, the transferee shall be
considered an assignee of an economic interest in the respective partnership but
will not be a Unitholder for any other purpose; as such, the assignee will not
be permitted to vote on any affairs or issues on which a Unitholder may vote.

    The Paired Common Stock is listed on the NYSE.  The breadth and strength of
this market will depend, among other things, upon the number of shares
outstanding, the Companies' financial results and prospects, the general
interest in the Companies' and other real estate investments and the Companies'
dividend yield compared to that of other debt and equity securities.

    Purpose and Permitted Investments.  The purpose of the Realty Partnership
includes the conduct of any business that may be lawfully conducted by a limited
partnership organized under the laws of the Commonwealth of Virginia, except
that the Realty Partnership Agreement requires the business of the Realty
Partnership to be conducted in such a manner that will permit the Corporation to
qualify as a REIT for federal income tax purposes.  The Realty Partnership may,
subject to the foregoing limitation, invest or enter into partnerships, joint
ventures or similar arrangements and may own interests in any other entity.  The
purpose of the Operating Partnership includes the conduct of any business that
may be lawfully conducted by a limited partnership organized under the laws of
the State of Delaware.  The Operating Partnership may invest or enter into
partnerships, joint ventures or similar arrangements and may own interests in
any other entity.

    Under the Charters, each of the Corporation and the Operating Company may
engage in any lawful activity permitted under the DGCL.

    Borrowing Policies.  The Realty Partnership has no restrictions on
borrowings, and PAH GP, its general partner, which is controlled by the
Corporation, has full power and authority to borrow money on behalf of the
Realty 

                                      22
<PAGE>
 
Partnership.  The Operating Partnership has no restrictions on borrowings
and the Operating Company, its general partner, has full power and authority to
borrow money on behalf of the Operating Partnership.

    Neither of the Companies is restricted under its governing instruments from
incurring borrowings.  The Companies have entered into a revolving credit
facility for a three-year unsecured revolving line of credit (the "Revolving
Credit Facility").  The agreements evidencing the Revolving Credit Facility
contain certain restrictive covenants including, without limitation, covenants
with respect to indebtedness, certain investments, merger or other
consolidation, liquidation or dissolution and the sale of assets.

    Other Investment Restrictions.  Other than restrictions precluding
investments by the Realty Partnership that would adversely affect the
qualification of the Corporation as a REIT, there are no restrictions upon the
authority of the Partnerships to enter into certain transactions, including,
among others, making investments, lending funds of the Partnerships, or
reinvesting the Partnerships' cash flow and net sale or refinancing proceeds.

    Other than restrictions precluding investments by the Corporation and the
Operating Company that would adversely affect the qualification of the
Corporation as a REIT, the Charters and the Bylaws do not impose any
restrictions upon the types of investments made by the Companies.

    Management Control.  All management powers over the business and affairs of
the Realty Partnership and the Operating Partnership are vested in the
respective General Partners and no Unitholder has any right to participate in or
exercise control or management power over the business and affairs of the
Partnerships.  The Partnership Agreements provide that the respective General
Partners of each of the Partnerships shall be reimbursed for all expenses
incurred by it relating to the management and business of the Partnerships.

    The Board of Directors of each of the Companies has exclusive control over
such company's business and affairs subject only to the restrictions in such
company's certificate of incorporation and bylaws.  The Board of Directors of
each of the Companies is classified into three classes.  At each annual meeting
of the stockholders, the successors of the class of directors whose terms expire
at that meeting will be elected.  The policies adopted by the Board of Directors
of each of the Companies may be altered or eliminated without advice of the
stockholders. Accordingly, except for their vote in the elections of directors,
stockholders have no control over the ordinary business policies of the
Companies.

    Management Liability and Indemnification.  The Partnership Agreements
generally provide that the General Partners will incur no liability to their
respective Partnerships or any Unitholder for losses sustained or liabilities
incurred as a result of errors in judgment or of any act or omission if such
general partner acted in good faith.  In addition, neither of the General
Partners is responsible for any misconduct or negligence on the part of its
agents provided such general partner appointed such agents in good faith.  The
Partnership Agreements also provide for indemnification of each of the
respective General Partners, its affiliates, and such other persons as such
general partner may from time to time designate, against any and all losses,
claims, damages, liabilities, joint or several expenses (including reasonable
legal fees and expenses), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, that relate to the operations of such
partnership in which such person may be involved.

    Each of the Companies' Charters, in conjunction with the DGCL, eliminates a
director's personal liability to the Corporation or the Operating Company, as
the case may be, or their respective stockholders for breach of fiduciary duty,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or the Operating Company, as the case may be, or their respective
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.

    The DGCL permits, but does not require, a company to indemnify its
directors, officers, employees or agents and expressly provides that the
indemnification provided for under the DGCL shall not be deemed exclusive of any
indemnification right under any bylaw, vote of stockholders or disinterested
directors, or otherwise.  The DGCL permits indemnification against expenses and
certain other liabilities arising out of legal actions brought or threatened
against such persons for their conduct on behalf of the company, provided that
each such person acted in good faith and in a manner that he reasonably believed
was in or not opposed to the company's best interests and in the case of a
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful.  The DGCL does not allow indemnification of directors in the case of
an action by or in the right of the company (including stockholder derivative
suits) unless the directors successfully defend the action or indemnification is
ordered by the court.  The Bylaws 


                                      23
<PAGE>
 
provide for indemnification to the fullest extent authorized by the DGCL and,
therefore, these statutory indemnification rights are available to the
directors, officers, employees and agents of the Corporation and the Operating
Company.

    Anti-takeover Provisions.  Except in limited circumstances, the General
Partners have exclusive management power over the business and affairs of their
respective Partnerships.  The General Partners may not be removed by the
Unitholders of their respective Partnerships with or without cause.

    The Charters and the Bylaws and the DGCL contain a number of provisions that
may have the effect of delaying or discouraging an unsolicited proposal for the
acquisition of each of the Companies or the removal of incumbent management of
each of the Companies.

    Voting Rights.  Under each of the Partnership Agreements, the Unitholders do
not have voting rights relating to the operation and management of the
respective Partnerships, except in connection with matters, as described more
fully below, involving certain amendments to the respective Partnership
Agreements.

    Stockholders of each of the Companies have the right to vote on, among other
things, certain amendments to the Charters, a merger or sale of substantially
all of the assets of the Corporation or the Operating Company, as the case may
be, and the dissolution of the Corporation or the Operating Company, as the case
may be.  Under the DGCL and the Charters, the sale of all or substantially all
of the assets of the Corporation or the Operating Company, as the case may be,
or any merger or consolidation of the Corporation or the Operating Company
requires the approval of the Board of Directors and holders of a majority of the
outstanding shares of common stock of the respective company.  Similarly, under
the DGCL, the Board of Directors of each of the Companies must obtain approval
of holders of a majority of all outstanding shares entitled to vote of the
company in question in order to dissolve such company.  Each of the Companies is
managed and controlled by a Board of Directors consisting of three classes
having staggered terms of office.  Each class is to be elected by the
stockholders at annual meetings of the respective company.  Each share of Paired
Common Stock has one vote relative to each of the Companies, and the Charters
permit the Board of Directors of each of the Companies to classify and issue
preferred stock in one or more series having voting power which may differ from
that of the Paired Common Stock.

    Amendment of the Partnership Agreements or the Companies' Charters.
Generally, each of the Partnership Agreements may be amended by the General
Partners of the respective Partnerships without the consent of the Unitholders,
except that certain amendments which alter or change the distribution rights or
redemption rights of a Unitholder shall require the consent of the Unitholders
holding more than a majority in interest of Realty Partnership Units or
Operating Partnership Units, as the case may be.

    The Charters provide that, with the exception of certain provisions
concerning business combinations with interested stockholders which require the
approval of a greater proportion, each of the Charters may be amended in the
manner prescribed by the DGCL, which requires the approval of the Board of
Directors and the approval of the stockholders by the affirmative vote of a
majority of the outstanding shares entitled to vote on such amendment.

    Compensation, Fees and Distributions.  The General Partners are not entitled
to receive any compensation for their services as general partner of their
respective Partnerships.  As a partner in their respective Partnerships,
however, the General Partners have the same right to allocations and
distributions as other partners of the Partnerships.  In addition, each of the
Partnerships will reimburse its respective general partner for administrative
expenses incurred relating to the ongoing operation of such general partner and
certain other expenses arising in connection with its role as general partner.

    The directors and officers of each of the Companies receive compensation for
their services.

    Liability of Investors.  Under the Realty Partnership Agreement and
applicable Virginia law, the liability of the limited partners for the Realty
Partnership's debts and obligations is generally limited to the amount of their
investment in the Realty Partnership.  Under the Operating Partnership Agreement
and applicable Delaware law, the liability of the limited partners for the
Operating Partnership's debts and obligations is generally limited to the amount
of their investment in the Operating Partnership.

    Under the DGCL, stockholders generally are not personally liable for the
debts or obligations of the Companies.

                                      24
<PAGE>
 
                              REGISTRATION RIGHTS

    The registration of the shares of Paired Common Stock pursuant to the
registration statement, of which this Prospectus is a part, will discharge the
Corporation's obligations under the terms of each Registration Rights Agreement
it has entered into prior to July 1, 1997 with certain Realty Partnership
Unitholders (collectively, the "Registration Rights Agreements").  The following
summary does not purport to be complete and is qualified in its entirety by
reference to each individual Registration Rights Agreement.

    Pursuant to the Registration Rights Agreements, the Corporation has agreed
to pay all expenses of effecting the registration of the Corporation Common
Stock (other than brokerage and underwriting commissions and taxes of any kind
and other than for any legal, accounting and other expenses incurred by a Realty
Partnership Unitholder thereunder).  The Corporation also has agreed to
indemnify each Realty Partnership Unitholder under the Registration Rights
Agreements and its officers, directors and other affiliated persons and any
person who controls any holder against certain losses, claims, damages and
expenses arising under the securities laws in connection with the registration
statement or this Prospectus, subject to certain limitations.  In addition,
certain of the Realty Partnership Unitholders under the Registration Rights
Agreements have agreed to indemnify the Corporation and its respective
directors, officers and any person who controls the Corporation against all
losses, claims, damages and expenses arising under the securities laws insofar
as such loss, claim, damage or expense relates to written information furnished
to the Corporation by such Realty Partnership Unitholders for use in the
registration statement or Prospectus or an amendment or supplement thereto or
the failure by such Realty Partnership Unitholders to deliver or cause to be
delivered this Prospectus or any amendment or supplement thereto to any
purchaser of shares covered by the registration statement from such holder
through no fault of the Corporation.


                   CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

    The following is a general summary of certain provisions that currently
govern United States federal income tax treatment of the Corporation and its
U.S. Stockholders (as defined below in "--Federal Income Taxation of Holders of
Paired Shares--Taxation of Taxable U.S. Stockholders") as well as certain other
tax considerations for U.S. holders of Paired Common Stock (also referred to
herein as "Paired Shares").  The following discussion is based upon current
provisions of the Code, existing, temporary and final regulations thereunder and
current administrative rulings and court decisions, all of which are subject to
change, possibly on a retroactive basis.  No attempt has been made to comment on
all United States federal income tax consequences that may be relevant to
stockholders of the Companies.  The tax discussion set forth below is included
for general information only.  It is not intended to be, nor should it be
construed to be, legal or tax advice to any particular stockholder of the
Companies.  References to the "Corporation" in this section regarding certain
Federal Income Tax Considerations include only Patriot American Hospitality,
Inc. and references herein to the "Operating Company" include only Patriot
American Hospital Operating Company unless the context otherwise requires.

    THE FOLLOWING DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS
OF SHARES OF CORPORATION COMMON STOCK OR OPERATING COMPANY COMMON STOCK SUBJECT
TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS INSURANCE COMPANIES, FINANCIAL
INSTITUTIONS, BROKER-DEALERS, TAX-EXEMPT ORGANIZATIONS, NON-U.S. STOCKHOLDERS
AND HOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION. STOCKHOLDERS OF THE COMPANIES ARE
URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THEIR SPECIFIC TAX
CONSEQUENCES, INCLUDING ANY STATE, LOCAL OR OTHER TAX CONSEQUENCES.

REIT Qualification

   General

    If certain detailed conditions imposed by the provisions of the Code are
met, entities such as the Corporation that invest primarily in real estate and
that otherwise would be treated for federal income tax purposes as corporations
generally are not taxed at the corporate level on their "real estate investment
trust taxable income" that is currently distributed to stockholders.  This
treatment substantially eliminates the "double taxation" on earnings (i.e., at
both the corporate and stockholder levels) that ordinarily results from the use
of corporations.


                                      25
<PAGE>
 
    The Corporation has been and will continue to be operated in a manner
intended to allow it to qualify as a REIT.  The Corporation in the future
intends to operate in a manner so that the Corporation will continue to qualify
as a REIT.  If the Corporation fails to qualify as a REIT in any taxable year,
the Corporation will be subject to federal income taxation as if it were a
domestic corporation, and the Corporation's stockholders will be taxed in the
same manner as stockholders of ordinary corporations.  In this event, the
Corporation could be subject to potentially significant tax liabilities, and the
amount of cash available for distribution to stockholders would be reduced and
possibly eliminated.  Unless entitled to relief under certain Code provisions,
and subject to the discussion below regarding Section 269B(a)(3) of the Code,
the Corporation also would be disqualified from re-electing REIT status for the
four taxable years following the year during which qualification was lost.
Failure of the Corporation's predecessor, Patriot, to have qualified as a REIT
also could cause the Corporation to be disqualified as a REIT and/or subject the
Corporation to significant tax liabilities.

    Goodwin, Procter & Hoar, LLP, special tax counsel to the Corporation, has
rendered an opinion to the Corporation to the effect that commencing with the
taxable year ending December 31, 1983, the Corporation has been organized and
operated in conformity with the requirements for qualification and taxation as a
REIT under the Code, and the Corporation's proposed method of operation will
enable it to continue to meet the requirements for qualification and taxation as
a REIT under the Code.  Investors should be aware, however, that opinions of
counsel are not binding upon the IRS or any court.  Goodwin, Procter & Hoar
LLP's opinion is based on various assumptions and is conditioned upon certain
representations made by the Corporation as to factual matters, including
representations regarding the nature of the Corporation's properties, and the
future conduct of the Corporation's business.  Any inaccuracy in such
assumptions and representations could adversely affect this opinion.
Qualification and taxation as a REIT depends upon the Corporation's having met
and continuing to meet, through actual annual operating results, the
distribution levels, stock ownership, and other various qualification tests
imposed under the Code.  Goodwin, Procter & Hoar LLP has not reviewed and will
not review the Corporation's compliance with those tests on a continuing basis.
Moreover, qualification as a REIT involves the application of highly technical
and complex Code provisions for which there are only limited judicial or
administrative interpretations and the determination of various factual matters
and circumstances not entirely within the Corporation's control.  The complexity
of these provisions is greater in the case of a REIT that owns hotels and leases
them to a corporation with which its stock is paired.  See "Risk Factors--Real
Estate Investment Trust Tax Risks." Accordingly, no assurance can be given that
the Corporation will satisfy such tests on a continuing basis.

   Paired Shares

    Section 269B(a)(3) of the Code provides that if the shares of a REIT and a
non-REIT are paired, then the REIT and the non-REIT shall be treated as one
entity for purposes of determining whether either company qualifies as a REIT.
If Section 269B(a)(3) applied to the Corporation and the Operating Company, then
the Corporation then would not be eligible to be taxed as a REIT.  Section
269B(a)(3) does not apply, however, if the shares of the REIT and the non-REIT
were paired on or before June 30, 1983 and the REIT was taxable as a REIT on or
before June 30, 1983. As a result of this "grandfathering" rule, Section
269B(a)(3) does not apply to the Corporation.  There are, however, no judicial
or administrative authorities interpreting this "grandfathering" rule and this
interpretation, as well as the opinion of Goodwin, Procter & Hoar llp regarding
the Corporation's qualification as a REIT, is based solely on the literal
language of the statute.  Moreover, if for any reason the Corporation failed to
qualify as a REIT in 1983, the benefit of the "grandfathering" rule would not be
available to the Corporation, and the Corporation would not qualify as a REIT
for any taxable year.

   Potential Reallocation of Income

    Due to the paired share structure, the Companies, and their respective
subsidiary entities are controlled by the same interests.  As a result, the IRS
could, pursuant to Section 482 of the Code, seek to distribute, apportion or
allocate gross income, deductions, credits or allowances between or among them
if it determines that such distribution, apportionment or allocation is
necessary in order to prevent evasion of taxes or to clearly reflect income.
The Corporation and the Operating Company believe that all material transactions
between the Corporation and the Operating Company, and among them and/or their
subsidiary entities, will be negotiated and structured with the intention of
achieving an arm's-length result.  The Corporation and the Operating Company
believe that all material transactions between them have been similarly
negotiated and structured with the intention of achieving an arm's-length
result.  If true, the potential application of Section 482 of the Code should
not have a material effect on the Corporation and the Operating Company.  There
can be no assurance, however, that the IRS will not challenge the terms of such
transactions, or that such challenge would not be successful.

   Built-In Gain Tax

    If the Corporation recognizes gain on the disposition of an asset acquired
from Wyndham during the ten-year period beginning on the date of the Wyndham
Acquisition, then to the extent of the asset's "built-in gain" (i.e., the excess
of the fair market value of such asset at the time of the Wyndham Acquisition
over its then tax basis), the Corporation will be subject to tax on such gain at
the highest regular corporate rate applicable, pursuant to Treasury Regulations
not yet promulgated. The Corporation would be required to distribute 95% of the
excess of the amount of recognized built-in gain over the amount of tax paid in
order to maintain the Corporation's qualification as a REIT. The foregoing
assumes that the Corporation makes an election pursuant to IRS Notice 88-19 with
respect to the Wyndham Acquisition.

   Classification of the Realty Partnership as a Publicly Traded Partnership

    Section 7704 of the Code treats certain "publicly traded partnerships" as
corporations.  If the Realty Partnership were taxed as a corporation under these
rules, the Corporation would be disqualified as a REIT.  A partnership is a
publicly traded partnership if interests in such partnership are either traded
on an established securities market or are "readily tradable on a secondary
market (or at least the substantial equivalent thereof)."  Interests in the
Realty Partnership have not and will not be traded on an established securities
market.  Currently, the Realty Partnership relies on restrictions on transfers
and redemptions recently included in its partnership agreement in order to avoid
being taxed as a corporation under Section 7704 of the Code.  Prior to such
amendments, the Realty Partnership relied on an exemption from the publicly
traded partnership rules based on the nature of its income as well as a safe
harbor based on the number of its partners.  There can be no assurance that
efforts to avoid taxation as a corporation under these provisions have been or
will be successful.

                                      26
<PAGE>
 
Sale of Land by the Corporation

    The sale of certain land to an affiliate of PaineWebber Incorporated (the
"PaineWebber Land Sale") was structured to qualify as a tax-deferred like-kind
exchange. There can be no assurances, however, that such transaction will
qualify as a tax-deferred like-kind exchange. If and to the extent the sale
cannot be qualified as a tax-deferred like-kind exchange, any capital gain
recognized by the Corporation will be taxed to the Corporation at applicable
capital gains rates unless the Corporation distributes such gains to its
stockholders. For a discussion of the tax consequences to stockholders of
distributed and retained capital gains, see "--Federal Income Taxation of
Holders of Paired Shares." To the extent that the gain does not qualify for
capital gains treatment, the gain will be combined with the Corporation's other
taxable income, 95% of which must be distributed each year in order to maintain
the Corporation's status as a REIT.

    Notwithstanding the foregoing, in the event that the property in the
PaineWebber Land Sale constituted "dealer property," then the sale thereof would
not be eligible for tax-deferred like-kind exchange treatment, the gain would be
subject to a 100% tax, and the amount of gain would constitute nonqualifying
income that likely would disqualify the Corporation as a REIT. Although the
Corporation believes that the PaineWebber Land Sale did not constitute a sale of
dealer property, whether or not such sale constituted a sale of dealer property
is a factual determination not susceptible of legal opinion, and the Corporation
did not receive opinions from counsel on such determination. As a result, the
opinion rendered by Goodwin, Procter & Hoar llp regarding the Corporation's
qualification as a REIT necessarily relies on representations from the
Corporation to the effect that the sale did not constitute a sale of dealer
property.

Effects of Compliance with REIT Requirements

    Operating income derived from hotels or a racetrack does not constitute
qualifying income under the REIT requirements.  Accordingly, all of the
Corporation's hotels, other than hotels held by taxable entities in which the
Corporation does not hold voting control (currently the Crowne Plaza Ravinia
Hotel and the Marriott WindWatch Hotel), have been leased to lessees and the
Corporation will continue to lease such hotels after the filing of this
Prospectus.  Similarly, the Corporation has subleased the land underlying the
Racecourse and leased the related improvements to the Operating Company.  Rent
derived from such leases will be qualifying income under the REIT requirements,
provided several requirements are satisfied.  Among other requirements, a lease
may not have the effect of giving the Corporation a share of the net income of
the lessee, and the amount of personal property leased under the lease must not
exceed a defined, low level.  The Corporation also may not provide services,
other than customary services and (beginning in 1998) de minimus non-customary
services, to lessees or their subtenants.  In addition, all leases must also
qualify as "true" leases for federal income tax purposes (as opposed to service
contracts, joint ventures or other types of arrangements).  There are, however,
no controlling Treasury Regulations, published rulings, or judicial decisions
that discuss whether leases similar to the Companies leases constitute "true"
leases. Therefore, there can be no complete assurance that the IRS will not
successfully assert a contrary position.

    Payments under a lease will not constitute qualifying income for purposes of
the REIT requirements if the Corporation owns, directly or indirectly, 10% or
more of the ownership interests in the relevant lessee.  Constructive ownership
rules apply, such that, for instance, the Corporation is deemed to own the
assets of stockholders who own 10% or more in value of the stock of the
Corporation.  The Charters are therefore designed to prevent a stockholder of
the Corporation from owning Corporation stock or Operating Company stock that
would cause the Corporation to own, actually or constructively, 10% or more of
the ownership interests in a lessee (including the Operating Company).  Thus,
the Corporation should never own, actually or constructively, 10% or more of a
lessee.  However, because the relevant constructive ownership rules are broad
and it is not possible to monitor continually direct and indirect transfers of
Paired Shares, and because the charter provisions referred to above may not be
effective, no absolute assurance can be given that such transfers, or other
events of which the Corporation has no knowledge, will not cause the Corporation
to own constructively 10% or more of one or more lessees at some future date.

    In addition to the considerations discussed above, the REIT requirements
will impose a number of other restrictions on the operations of the Corporation.
For example, net income from sales of property sold to customers in the ordinary
course of business (other than inventory acquired by reason of certain
foreclosures) is subject to a 100% tax unless eligible for a certain safe
harbor.  Minimum distribution requirements also generally require the
Corporation to distribute each year at least 95% of its taxable income for the
year (excluding any net capital gain). In addition, certain asset tests limit
the Corporation's ability to acquire non-real estate assets.


                                      27
<PAGE>
 
Taxation of the Operating Company; Non-Controlled Subsidiaries

    As a "C" corporation under the Code, the Operating Company will be subject
to United States federal income tax on its taxable income at corporate rates.
As non-REIT subsidiaries, the corporate subsidiaries of the Realty Partnership
that are not controlled by it also will be subject to federal income tax.

State and Local Taxation

    The Companies and their stockholders or partners may be subject to state and
local taxes in various jurisdictions, including those in which it or they
transact business, own property or reside.  The state and local tax treatment of
such entities or persons may not conform to the federal income tax consequences
discussed above. Consequently, the Corporation, the Operating Company and their
stockholders should consult their own tax advisors regarding the effect of state
and local tax laws on the ownership of Paired Shares.

Federal Income Taxation of Holders of Paired Shares

   Separate Taxation

    Notwithstanding that Paired Shares may only be transferred as a unit,
holders of Paired Shares will be treated for U.S. federal income tax purposes as
holding equal numbers of shares of Corporation Common Stock and of Operating
Company Common Stock.  The tax treatment of distributions to stockholders and of
any gain or loss upon sale or other disposition of the Paired Shares (as well as
the amount of gain or loss) must therefore be determined separately with respect
to each share of Corporation Common Stock and each share of Operating Company
Common Stock contained within each Paired Share.  The tax basis and holding
period for each share of Corporation Common Stock and each share of Operating
Company Common Stock also must be determined separately.  See "--Tax
Consequences of Redemption."  Upon a taxable sale of a Paired Share, the amount
realized should be allocated between the Corporation Common Stock and the
Operating Company Common Stock based on their then relative values.

   Taxation of Taxable U.S. Stockholders

    As used herein, the term "U.S. Stockholder" means a holder of Paired Shares
that for United States federal income tax purposes is (i) a citizen or resident
of the United States, (ii) a corporation, partnership, or other entity created
or organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate, the income of which is subject to United
States federal income taxation regardless of its source or (iv) a trust, if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust and (v) is not an
entity that has a special status under the Code (such as a tax-exempt
organization or a dealer in securities).

    As long as the Corporation qualifies as a REIT, distributions made to the
Corporation's taxable U.S. Stockholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by such U.S. Stockholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations.  For
purposes of determining whether distributions on Corporation Common Stock are
out of earnings and profits, earnings and profits will be allocated first to any
outstanding preferred stock of the Corporation and then allocated to its Common
Stock.  Subject to the discussion below regarding changes to the capital gains
tax rates, distributions that are designated as capital gain dividends will be
taxed as capital gains 


                                      28
<PAGE>
 
(to the extent they do not exceed the Corporation's actual net capital gain for
the taxable year) without regard to the period for which the stockholder has
held his Corporation Common Stock. However, corporate stockholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's Corporation Common Stock, but rather will
reduce the adjusted basis of such stock. To the extent that such distributions
in excess of current and accumulated earnings and profits exceed the adjusted
basis of a stockholder's Corporation Common Stock, such distributions will be
included in income as long-term capital gain (or, in the case of individuals,
trusts and estates, mid-term capital gain if the Corporation Common Stock has
been held for more than 12 months but not more than 18 months or in the case of
all tax payers short-term capital gain if the Corporation Common Stock has been
held for one year or less) assuming shares are a capital asset in the hands of
the stockholder. In addition, any distribution declared by the Corporation in
October, November or December of any year and payable to a stockholder of record
on a specified date in any such month shall be treated as both paid by the
Corporation and received by the stockholder on December 31 of such year,
provided that the distribution is actually paid by the Corporation during
January of the following calendar year.

    Distributions from the Operating Company up to the amount of the Operating
Company's current or accumulated earnings and profits (less any earnings and
profits allocable to distributions on any preferred stock of the Operating
Company) will be taken into account by U.S. Stockholders as ordinary income and
generally will be eligible for the dividends-received deduction for corporations
(subject to certain limitations).  Distributions in excess of the Operating
Company's current and accumulated earnings and profits will not be taxable to a
holder to the extent that they do not exceed the adjusted basis of the holder's
the Operating Company's Common Stock, but rather will reduce the adjusted basis
of such Operating Company Common Stock.  To the extent that such distributions
exceed the adjusted basis of a holder's the Operating Company Common Stock they
will be included in income as long-term capital gain (or, in the case of
individuals, trusts and estates, mid-term capital gain if the Operating Company
Common Stock has been held for more than 12 months but not more than 18 months
or in the case of all tax payers short-term capital gain if the Operating
Company Common Stock has been held for one year or less) assuming the shares are
a capital asset in the hands of the stockholder.

    The Corporation may elect to retain and pay income tax on net long-term
capital gains recognized during the taxable year.  For taxable years beginning
after December 31, 1997, if the Corporation so elects for a taxable year, its
stockholders would include in income as capital gain their proportionate share
of such of its long-term capital gains as the Corporation may designate.  A
stockholder would be deemed to have paid its share of the tax paid by the
Corporation, which would be credited or refunded to the stockholder.  The
stockholders' basis in its shares of Corporation Common Stock would be increased
by the amount of undistributed capital gains (less the capital gains tax paid by
the Corporation) included in the stockholder's capital gains.

    Taxable distributions from the Corporation or the Operating Company and gain
or loss from the disposition of shares of Corporation Common Stock and Operating
Company Common Stock will not be treated as passive activity income and,
therefore, stockholders generally will not be able to apply any passive activity
losses (such as losses from certain types of limited partnerships in which the
stockholder is a limited partner) against such income. In addition, taxable
distributions from the Corporation or the Operating Company generally will be
treated as investment income for purposes of the investment interest deduction
limitations. Capital gain dividends, capital gains (other than short-term
capital gains) from the disposition of Paired Shares and actual or deemed 
distributions from either company treated as such, including capital gains
(other than short-term capital gains) recognized on account of nontaxable
distributions in excess of a stockholder's basis on any deemed capital gain
distributions to a Corporation stockholder on account of retained capital gains
of the Corporation, will be treated as investment income for purposes of the
investment interest deduction limitations only if and to the extent the
stockholder so elects, in which case such capital gains will be taxed at
ordinary income rates to the extent of the election. The Corporation and the
Operating Company will notify stockholders after the close of their taxable
years as to the portions of the distributions attributable to that year that
constitute ordinary income, return of capital, and (in the case of the
Corporation) capital gain. Stockholders may not include in their individual
income tax returns any net operating losses or capital losses of the Corporation
or of the Operating Company.

    The Taxpayer Relief Act of 1997 (the "Relief Act") alters the taxation of
capital gain income. Under the Relief Act, individuals, trusts and estates that
hold certain investments for more than 18 months may be taxed at a maximum long-
term capital gain rate of 20% on the sale or exchange of those investments.
Individuals, trusts and estates that hold certain assets for more than 12 months
but not more than 18 months may be taxed at a maximum mid-term capital gain rate
of 28% on the sale or exchange of those investments. The Relief Act also
provides a maximum rate of 25% for "unrecaptured section 1250 gain" for
individuals, trusts and estates, special rules for "qualified 5-year gain," as
well as other changes to prior law. The Relief Act allows the IRS to prescribe
regulations on how the Relief Act's new capital gain rates will apply to sales
of capital assets by (or interests in) "pass-thru entities," which include REITs
such as the Corporation. To date regulations have not yet been prescribed, and
it remains unclear how the Relief Act's new rates will apply to capital gain
dividends or undistributed capital gains, including for example the extent, if
any, to which capital gain dividends or undistributed capital gains from the
Corporation will be taxed to individuals, trusts and estates at the new rates
for mid-term capital gains and unrealized section 1250 recapture, rather than
the long-term capital gain rates. Investors are urged to consult their own tax
advisors with respect to the new rules contained in the Relief Act.


                                      29
<PAGE>
 
   Taxation of Stockholders on the Disposition of Paired Shares

    In general, and assuming the taxpayer has the same holding period for the
Corporation Common Stock and the Operating Company Common Stock, any gain or
loss realized upon a taxable disposition of Paired Shares by a stockholder who
is not a dealer in securities will be treated as long-term capital gain or loss
if the Paired Shares have been held for more than 12 months, (or, in the case of
individuals, trusts and estates, mid-term capital gain or loss if the Paired
Shares have been held for more than 12 months but not more than 18 months, and
long-term capital gain or loss if the Paired Shares have been held for more than
18 months) and otherwise as short-term capital gain or loss.  In addition, any
loss upon a sale or exchange of Corporation Common Stock by a stockholder who
has held such stock for six months or less (after applying certain holding
period rules), will be treated as a long-term capital loss to the extent of
distributions from the Corporation or undistributed capital gains required to be
treated by such stockholder as long-term capital gain.  All or a portion of any
loss realized upon a taxable disposition of Paired Shares may be disallowed if
other Paired Shares are purchased within 30 days before or after the
disposition.

   Information Reporting Requirements and Backup Withholding

    The Corporation and the Operating Company will each report to their U.S.
Stockholders and the IRS the amount of distributions paid during each calendar
year, and the amount of tax withheld, if any.  Under the backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to distributions paid unless such holder (i) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact or (ii) provides a taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholding rules.  A stockholder who does
not provide the Corporation and the Operating Company with his, her or its
correct taxpayer identification number also may be subject to penalties imposed
by the IRS.  Any amount paid as backup withholding will be creditable against
the stockholder's income tax liability.  In addition, the Corporation may be
required to withhold a portion of capital gain distributions to any stockholders
who fail to certify their non-foreign status to the Corporation.

   Taxation of Tax-Exempt Stockholders

    Tax-exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts ("Exempt Organizations"), generally
are exempt from federal income taxation.  They are, however, subject to taxation
on their unrelated business taxable income ("UBTI").  While many investments in
real estate generate UBTI, amounts distributed by the Corporation to Exempt
Organizations generally should not constitute UBTI, nor should dividends paid by
the Operating Company generally constitute UBTI.  However, if an Exempt
Organization finances its acquisition of Paired Shares with debt, a portion of
its income from the Corporation and the Operating Company will constitute UBTI
pursuant to the "debt-financed property" rules.  Furthermore, social clubs,
voluntary employee benefit associations, supplemental unemployment benefit
trusts, and qualified group legal services plans that are exempt from taxation
under paragraphs (7), (9), (17), and (20), respectively, of Code section 501(c)
are subject to different UBTI rules, which generally will require them to
characterize distributions from the Corporation and the Operating Company as
UBTI.


                                      30
<PAGE>
 
                             PLAN OF DISTRIBUTION

    The Companies will not receive any proceeds from the issuance of any shares
of Paired Common Stock, but will acquire Unit Pairs tendered to the Partnerships
for redemption for which they elect to issue shares of Paired Common Stock, the
Operating Company doing so directly and the Corporation doing so through PAH LP
and PAH GP.

    The Companies will pay substantially all the expenses incurred by the
Unitholders and the Companies incident to the offering and sale of the shares of
Paired Common Stock registered hereby, but excluding any underwriting discounts,
commissions, and transfer taxes.

    The Companies have agreed to indemnify the Unitholders against certain
liabilities, including liabilities under the Securities Act.


                                 LEGAL MATTERS

    Certain legal matters, including the legality of the securities and federal
income tax considerations, have been passed upon for the Corporation and the
Operating Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts, as
corporate, securities and tax counsel.  Gilbert G. Menna, an officer of PAH GP,
Inc., a wholly-owned subsidiary of the Corporation, is the sole shareholder of
Gilbert G. Menna, P.C., which is a partner in Goodwin, Procter & Hoar LLP.
Joseph L. Johnson III, an officer of PAH GP, is a partner in Goodwin, Procter &
Hoar LLP.  Kathryn I. Murtagh, an officer of the Corporation, the Operating
Company and PAH GP is a partner in Goodwin, Procter & Hoar LLP.


                                    EXPERTS

    The Separate and Combined Financial Statements of Cal Jockey and Bay Meadows
and its subsidiary as of December 31, 1996 and 1995, and for each of the three
years in the period ended December 31, 1996, incorporated by reference in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report with respect thereto (which expresses an unqualified
opinion and includes an explanatory paragraph relating to a proposed merger and
certain disagreements between Cal Jockey and Bay Meadows) and are incorporated
by reference herein.  The combined financial statements of the Partnerships of
Acquired Hotels as of December 31, 1996 and 1995 and for each of the two years
in the period ended December 31, 1996, incorporated in this Prospectus by
reference from the report on Form 8-K/A No. 1 dated September 30, 1997 of
Patriot American Hospitality, Inc. and Patriot American Hospitality Operating
Company have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference.  Each of the
above referenced financial statements are incorporated herein by reference in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.

    The (a) Consolidated Financial Statements of Patriot as of December 31, 1996
and 1995 and for the year ended December 31, 1996 and the period October 2, 1995
(inception of operations) through December 31, 1995 and the related financial
statement schedules, (b) the Combined Financial Statements of the Initial Hotels
as of December 31, 1994 and for the year ended December 31, 1994 and the period
January 1, 1995 through October 1, 1995, and (c) the Financial Statements of
NorthCoast Hotels, L.L.C. as of December 31, 1996 and the period April 2, 1996
(inception of operations) through December 31, 1996 appearing in Patriot's 1996
Annual Report on Form 10-K (and with respect to the Consolidated Financial
Statements of Patriot referred to above also appearing in the Joint Current
Report on Form 8-K of Patriot American Hospitality Inc. and Patriot American
Hospitality Operating Company dated July 1, 1997), have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon included
therein and 


                                      31
<PAGE>
 
incorporated herein by reference. The (a) Statement of Direct Revenue and Direct
Operating Expenses of the Mayfair Suites Hotel for the year ended December 31,
1995, (b) Statement of Direct Revenue and Direct Operating Expenses of Marriott
Windwatch Hotel for the year ended December 29, 1995, and (c) the Financial
Statements of Concorde O'Hare Limited Partnership as of December 29, 1995 and
for the year then ended appearing in Patriot's Current Report on Form 8-K, dated
December 5, 1996 (filed December 5, 1996), have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference. The (a) Consolidated Financial
Statements of Resorts Limited Partnership as of and for the years ended December
31, 1996 and 1995, (b) the Financial Statements of CV Ranch Limited Partnership
as of and for the years ended December 31, 1996 and 1995, and (c) the Financial
Statements of Telluride Resort and Spa Limited Partnership as of and for the
years ended December 31, 1996 and 1995, appearing in Patriot's Current Report on
Form 8-K, dated January 16, 1997, as amended (filed January 31, 1997, February
21, 1997, April 8, 1997, April 9, 1997, and May 19, 1997) have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference. The (a) Consolidated
Financial Statements of GAH-II, L.P. as of December 31, 1996 and 1995 and for
the years then ended, (b) the Financial Statements of G.B.H. Joint Venture
(d/b/a Grand Bay Hotel) as of December 31, 1996 and 1995 and for the years then
ended, (c) the Financial Statements of River House Associates (d/b/a Sheraton
Gateway Hotel) as of December 31, 1996 and 1995 and for the years then ended,
and (d) the Financial Statements of W-L Tampa, Ltd. (the Sheraton Grand Hotel)
as of December 31, 1996 and 1995 and for the years then ended, appearing in the
Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and
Patriot American Hospitality Operating Company dated September 30, 1997, as
amended (filed October 14, 1997 and October 28, 1997), have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference. Each of the above
referenced financial statements are incorporated herein by reference in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.

    The Financial Statements of Certain of the Initial Hotels as of December 31,
1994 and for the period from January 1, 1995 to October 1, 1995 and for the year
ended December 31, 1994, the Financial Statements of Troy Hotel Investors as of
October 1, 1995 and for the period January 1, 1995 to October 1, 1995 and Troy
Park Associates as of December 29, 1994 and for the period January 1, 1994
through December 29, 1994 included in Patriot's 1996 Annual Report on Form 10-K,
the statement of Direct Revenue and Direct Operating Expenses for the Holiday
Inn--Miami Airport for the year ended August 31, 1996 included in Patriot's
Current Report on Form 8-K dated December 5, 1996, the Consolidated Financial
Statements of Wyndham Hotel Corporation as of December 31, 1995 and 1996 and for
each of the three years in the period ended December 31, 1996, included in the
Report on Form 10-K dated March 26, 1997 of Wyndham Hotel Corporation, the
Combined Financial Statements of Snavely Hotels as of December 31, 1996 and for
the year then ended, the Combined Financial Statements of Minneapolis Hotels as
of December 31, 1996 and for the year then ended, and the combined statement of
Direct Revenue and Direct Operating Expenses for the Met Life Hotels for the
year ended December 31, 1996, included in the Report on Form 8-K dated September
17, 1997, and the Financial Statements of SCP ("Buttes") Inc. as of December 31,
1996 and for the year then ended, included in the Report on Form 8-K/A No, 1,
incorporated by reference in this Prospectus, have been audited by Coopers &
Lybrand, L.L.P., independent accountants, as set forth in their reports thereon.
Each of the above-referenced financial statements have been incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing.

    The Financial Statements of Historic Hotel Partners of Birmingham Limited
Partnership as of December 31, 1994 and 1995 and for the years then ended, the
Financial Statements of Historic Hotel Partners of Chicago, Limited Partnership
as of December 31, 1996 and for the year then ended, and the Financial
Statements of Historic Hotel Partners of Nashville, Limited Partnership as of
December 31, 1996 and for the year then ended incorporated by reference in this
Prospectus, have been audited by Pannell Kerr Forster PC, independent auditors,
as set forth in their reports thereon. Each of the above-referenced financial
statements have been incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing.

    The CHC Lease Partners financial statements as of December 31, 1996 and 1995
and for the year ended December 31, 1996 and the period inception (October 2,
1995) through December 31, 1995, incorporated by reference in this Prospectus,
by reference to the Current Report on Form 8-K dated July 1, 1997, and the CHC
International, Inc. Hospitality Division financial statements as of November 30,
1996 and 1995 and for the years then ended, incorporated by reference in this
Prospectus, by reference to the Current Report on Form 8-K dated September 30,
1997, as amended, have been so incorporated in reliance on the reports of Price
Waterhouse LLP, independent certified public accountants, given on the authority
of said firm as experts in auditing and accounting.


                                      32
<PAGE>
 
    The Combined Financial Statements of the Crow Family Hotel Partnerships
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving such
reports.


                                      33
<PAGE>
 
================================================================================

    No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Companies or any other
person.  Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Companies since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered Securities to which it
relates.



                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
 
                                                                            Page
                                                                            ----
<S>                                                                        <C>
 
Available Information........................................................  4
 
Incorporation of Certain
  Documents by Reference.....................................................  4
 
Risk Factors.................................................................  6
 
The Companies................................................................ 13
 
Description of Paired Common Stock........................................... 14
 
Restrictions on Transfers of Capital Stock................................... 15
 
Description of Realty Partnership Units and
Operating Partnership Units and Redemption
 of Unit Pairs............................................................... 18
 
Registration Rights.......................................................... 25
 
Certain Federal Income Tax Considerations.................................... 25
 
Plan of Distribution......................................................... 31
 
Legal Matters................................................................ 31
 
Experts...................................................................... 31
</TABLE>

================================================================================


                              7,535,827 Shares of
                              Paired Common Stock


                               Patriot American 
                               Hospitality, Inc.


                         Patriot American Hospitality
                               Operating Company


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

                                   PROSPECTUS

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


                                __________, 1997

================================================================================

<PAGE>
 
                                    PART II
                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14.  Other Expenses of Issuance and Distribution.*
<TABLE>
<CAPTION>
 
 
<S>                                                                <C>
Registration fee..................................................  $385,132
Printing fees and expenses........................................   100,000
Legal fees and expenses...........................................   100,000
Accounting fees and expenses......................................    30,000
Miscellaneous.....................................................    50,000
 
Total.............................................................  $665,132
</TABLE>
* Fees and expenses are estimated with the exception of the registration fee.

Item 15.  Indemnification of Directors and Officers.

    Pursuant to Section 145 of the DGCL, each of the Corporation Charter and the
Operating Company Charter includes a provision which eliminates any personal
liability for a director to the Corporation or the Operating Company, as the
case may be, and to the stockholders, for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or the Operating Company, as the
case may be, or to the stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) in connection with certain unlawful dividend payments or stock redemptions
or repurchases or (iv) for any transaction from which such director derived an
improper personal benefit.  In addition, the Corporation Charter and the
Operating Company Charter each provide that if the DGCL is amended to authorize
the further elimination or limitation of the personal liability of directors,
then the liability of a director of the Corporation or the Operating Company
shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended.

    Article VII of each of the Corporation Bylaws and the Operating Company
Bylaws provides for indemnification by the Corporation or the Operating Company,
as the case may be, of their respective officers, directors and the officers and
directors of their respective subsidiaries to the fullest extent permitted by
Section 145 of the DGCL, as amended from time to time and the Corporation and
the Operating Company may, by action of their respective Board of Directors,
indemnify all other persons the Corporation or the Operating Company may
indemnify under the DGCL.


                                     II-1
<PAGE>
 
Item 16.      Exhibits.
<TABLE> 
<CAPTION> 
 Exhibit
 Number       Exhibit
 ------       -------
<S>           <C> 

    3.1       --  Amended and Restated Certificate of Incorporation of Patriot
                  American Hospitality, Inc., incorporated by reference to
                  Exhibit 3.1 to the Registration Statement on Form S-3 of
                  Patriot American Hospitality, Inc. and Patriot American
                  Hospitality Operating Company (Nos. 333-29671 and 333-29671-
                  01).

    3.2       --  Amended and Restated Bylaws, as amended, of Patriot American
                  Hospitality, Inc., incorporated by reference to Exhibit 3.2 to
                  the Registration Statement on Form S-3 of Patriot American
                  Hospitality, Inc. and Patriot American Hospitality Operating
                  Company (Nos. 333-29671 and 333-29671-01).

    3.3       --  Amended and Restated Certificate of Incorporation, of Patriot
                  American Hospitality Operating Company, incorporated by
                  reference to Exhibit 3.3 to the Registration Statement on Form
                  S-3 of Patriot American Hospitality, Inc. and Patriot American
                  Hospitality Operating Company (Nos. 333-29671 and 333-29671-
                  01).

    3.4       --  Amended and Restated Bylaws, of Patriot American Hospitality
                  Operating Company, incorporated by reference to Exhibit 3.4 to
                  the Registration Statement on Form S-3 of Patriot American
                  Hospitality, Inc. and Patriot American Hospitality Operating
                  Company (Nos. 333-29671 and 333-29671-01).

    5.1       --  Opinion of Goodwin, Procter & Hoar LLP as to legality of
                  securities being offered.

    8.1       --  Opinion of Goodwin, Procter & Hoar LLP as to Tax Matters.

   23.1       --  Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
                  5.1 and Exhibit 8.1).

  *23.2       --  Consent of Deloitte & Touche LLP, San Francisco, California.

  *23.3       --  Consent of Ernst & Young LLP, Dallas, Texas.

  *23.4       --  Consent of Ernst & Young LLP, Seattle, Washington.

  *23.5       --  Consent of Ernst & Young LLP, Phoenix, Arizona.

  *23.6       --  Consent of Coopers & Lybrand L.L.P., Fort Lauderdale, Florida.

  *23.7       --  Consent of Coopers & Lybrand L.L.P., Pittsburgh, Pennsylvania.

  *23.8       --  Consent of Coopers & Lybrand L.L.P., Dallas, Texas.

  *23.9       --  Consent of Pannell Kerr Forster PC.

 *23.10       --  Consent of Price Waterhouse LLP.

 *23.11       --  Consent of Coopers & Lybrand L.L.P., Newport Beach,
                  California.

 *23.12       --  Consent of Ernst & Young LLP, Miami, Florida.

 *23.13       --  Consent of Deloitte & Touche LLP, Houston, Texas.

 *23.14       --  Consent of Coopers & Lybrand L.L.P., Phoenix, Arizona.

   24.1       --  Powers of Attorney (included on Signature Pages to the
                  Registration Statement).

   99.1       --  Second Amended and Restated Agreement of Limited Partnership
                  of Patriot American Hospitality Partnership, L.P.
                  (incorporated by reference to Exhibit 10.1(1) of the
                  Registration Statement on Form S-4 (Nos. 333-28085, 333-28085-
                  01) dated May 30, 1997).
</TABLE> 
                                     II-2
<PAGE>
 
<TABLE> 
<S>           <C> 
   99.2       --  Agreement of Limited Partnership of Patriot American
                  Hospitality Operating Partnership, L.P. (incorporated by
                  reference to Exhibit 10.2 of the Registration Statement on
                  Form S-4 (Nos. 333-28085, 333-28085-01 ) dated May 30, 1997).

   99.3       --  Redemption and Registration Rights Agreement dated April 1,
                  1996 by and between Patriot American Hospitality, Inc. and the
                  Holders of Partnership Units of Patriot American Hospitality
                  Partnership, L.P. received in connection with the purchase of
                  certain hotels managed by WestCoast Hotels, Inc. (incorporated
                  by reference to Exhibit 4.3 to Patriot American Hospitality,
                  Inc.'s Registration Statement on Form S-11 (No. 333-04587)).

   99.4       --  Registration Rights Agreement dated May 15, 1996, by and
                  between Patriot American Hospitality, Inc. and LaSalle
                  Advisors Limited Partnership (incorporated by reference to
                  Exhibit 4.5 of Patriot American Hospitality, Inc.'s
                  Registration Statement on Form S-11 (No. 333-04587)).

   99.5       --  Registration Rights Agreement dated July 11, 1996, by and
                  between Patriot American Hospitality, Inc. and Houston
                  Greenspoint Hotel Associates (incorporated by reference to
                  Exhibit 4.6 of Patriot American Hospitality, Inc.'s
                  Registration Statement on Form S-11 (No. 333-04587)).

  *99.6       --  Registration Rights Agreement dated November 15, 1996, by and
                  between Patriot American Hospitality, Inc. and the Holders of
                  Partnership Units of Patriot American Hospitality Partnership,
                  L.P. received in connection with the purchase of the Tutwiler
                  Hotel.

  *99.7       --  Registration Rights Agreement dated January 16, 1997, by and
                  between Patriot American Hospitality, Inc. and Lyon RLP
                  Investments Partnership.

  *99.8       --  Registration Rights Agreement dated January 17, 1997, by and
                  between Patriot American Hospitality, Inc. and the Morgan
                  Stanley Real Estate Fund, L.P., MS California Corporation and
                  MS Colorado Corporation.
</TABLE> 
- - ----------------

*    Filed herewith

                                     II-3
<PAGE>
 
Item 17.   Undertakings.

     (a)   The undersigned registrant hereby undertakes:

           (1)   To file, during any period in which offers or sales are being
                 made, a post-effective amendment to this registration
                 statement:

           (i)   To include any prospectus required by Section 10(a)(3) of the
                 Securities Act of 1933;

           (ii)  To reflect in the prospectus any facts or events arising after
                 the effective date of the registration statement (or the most
                 recent post-effective amendment thereof) which, individually or
                 in the aggregate, represent a fundamental change in the
                 information set forth in the registration statement.
                 Notwithstanding the foregoing, any increase or decrease in
                 volume of securities offered (if the total dollar value of
                 securities offered would not exceed that which was registered)
                 and any deviation from the low or high and of the estimated
                 maximum offering range may be reflected in the form of
                 prospectus filed with the Commission pursuant to Rule 424(b)
                 if, in the aggregate, the changes in volume and price represent
                 no more than 20 percent change in the maximum aggregate
                 offering price set forth in the "Calculation of Registration
                 Fee" table in the effective registration statement; and

           (iii) To include any material information with respect to the plan of
                 distribution not previously disclosed in the registration
                 statement or any material change to such information in the
                 registration statement;

     provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
     apply if the information required to be included in a post-effective
     amendment by those paragraphs is contained in periodic reports filed with
     or furnished to the Commission by the registrant pursuant to Section 13 or
     Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
     by reference in the registration statement;

           (2)   That, for the purpose of determining any liability under the
                 Securities Act of 1933, each such post-effective amendment
                 shall be deemed to be a new registration statement relating to
                 the securities offered therein, and the offering of such
                 securities at that time shall be deemed to be the initial bona
                 fide offering thereof; and

           (3)   To remove from registration by means of a post-effective
                 amendment any of the securities being registered which remain
                 unsold at the termination of the offering.

     (b)   The undersigned registrant hereby undertakes that, for purposes of
           determining any liability under the Securities Act of 1933, each
           filing of the registrant's annual report pursuant to Section 13(a) or
           15(d) of the Securities Exchange Act of 1934 that is incorporated by
           reference in the Registration Statement shall be deemed to be a new
           registration statement relating to the securities offered therein,
           and the offering of such securities at that time shall be deemed to
           be the initial bona fide offering thereof.

     (c)   Insofar as indemnification for liabilities arising under the
           Securities Act of 1933 may be permitted to directors, officers and
           controlling persons of the registrant pursuant to the foregoing
           provisions, or otherwise, the registrant has been advised that in the
           opinion of the Securities and Exchange Commission such
           indemnification is against public policy as expressed in the Act and
           is, therefore, unenforceable. In the event that a claim for
           indemnification against such liabilities (other than the payment by
           the registrant of expenses incurred or paid by a director, officer,
           or controlling person of the registrant in the successful defense of
           any action, suit or proceeding) is asserted by such director, officer
           or controlling person in connection with the securities being
           registered, the registrant will, unless in the opinion of its counsel
           the matter has been settled by controlling precedent, submit to a
           court of appropriate jurisdiction the question whether such
           indemnification by it is against public policy as expressed in the
           Securities Act of 1933 and will be governed by the final adjudication
           of such issue.

                                     II-4
<PAGE>
 
                                  SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, October 31, 1997.

PATRIOT AMERICAN HOSPITALITY, INC.          PATRIOT AMERICAN HOSPITALITY
                                            OPERATING COMPANY

By:/s/ Paul A. Nussbaum                     By:/s/ Paul A. Nussbaum
   --------------------------------------      ---------------------------------
   Paul A. Nussbaum                            Paul A. Nussbaum
   Chairman of the Board, Chief Executive      Chairman of the Board and Chief 
   Officer and President                       Executive Officer

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE> 
<CAPTION> 
      Signature                       Title                                 Date
      ---------                       -----                                 ----
<S>                         <C>                                        <C> 
            *               Chairman of the Board of Directors,        October 31, 1997
- - -------------------------   Chief Executive Officer and President,
Paul A. Nussbaum            Patriot American Hospitality, Inc.
                            (Principal Executive Officer)
                         
                         
            *               Chief Financial Officer and Treasurer,     October 31, 1997
- - -------------------------   Patriot American Hospitality, Inc.
Rex E. Stewart              (Principal Financial Officer and
                            Principal Accounting Officer)
                         
                         
/s/ William W. Evans III    Office of the Chairman and Director,       October 31, 1997
- - -------------------------   Patriot American Hospitality, Inc.
William W. Evans III                          
                         
            *               Director, Patriot American                 October 31, 1997
- - -------------------------   Hospitality, Inc.
John H. Daniels             
                         
                         
            *               Director, Patriot American                 October 31, 1997
- - -------------------------   Hospitality, Inc.
John C. Deterding           
                         
                         
            *               Director, Patriot American                 October 31, 1997
- - -------------------------   Hospitality, Inc.
Gregory R. Dillon           
                         
                         
            *               Director, Patriot American                 October 31, 1997
- - -------------------------   Hospitality, Inc.
Thomas H. Foley             
                         
                         
            *               Director, Patriot American                 October 31, 1997
- - -------------------------   Hospitality, Inc.
Arch K. Jacobson            
</TABLE> 

                                     II-5
<PAGE>
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE> 
<CAPTION> 
        Signature                           Title                           Date
        ---------                           -----                           ----

<S>                         <C>                                        <C> 
/s/ Paul A. Nussbaum        Chairman of the Board of Directors          October 31, 1997
- - -------------------------   and Chief Executive Officer,
Paul A. Nussbaum            Patriot American Hospitality Operating
                            Company (Principal Executive Officer)


/s/ Karim Alibhai           President, Chief Operating Officer and      October 31, 1997
- - -------------------------   Director, Patriot American Hospitality
Karim Alibhai               Operating Company


            *               Chief Financial Officer and Treasurer,      October 31, 1997
- - -------------------------   Patriot American Hospitality Operating
Rex E. Stewart              Company (Principal Financial Officer
                            and Principal Accounting Officer)


            *               Director, Patriot American                  October 31, 1997
- - -------------------------   Hospitality Operating Company
Arch K. Jacobson 

            *               Director, Patriot American                  October 31, 1997
- - -------------------------   Hospitality Operating Company
Leonard Boxer            


            *               Director, Patriot American                  October 31, 1997
- - -------------------------   Hospitality Operating Company
Russ Lyon, Jr.           


            *               Director, Patriot American                  October 31, 1997
- - -------------------------   Hospitality Operating Company
Burton C. Einspruch         


/s/ Sherwood Weiser         Director, Patriot American Hospitality      October 31, 1997
- - -------------------------   Operating Company
Sherwood Weiser                           

</TABLE> 
*By:  /s/ Paul A. Nussbaum
      -----------------------------
      Paul A. Nussbaum
      Attorney-in-fact

                                     II-6
<PAGE>
 
                                 EXHIBIT INDEX
<TABLE> 
<CAPTION> 
 Exhibit
 Number       Exhibit
 ------       -------
<S>           <C> 

    3.1       --  Amended and Restated Certificate of Incorporation of Patriot
                  American Hospitality, Inc., incorporated by reference to
                  Exhibit 3.1 to the Registration Statement on Form S-3 of
                  Patriot American Hospitality, Inc. and Patriot American
                  Hospitality Operating Company (Nos. 333-29671 and 333-29671-
                  01).

    3.2       --  Amended and Restated Bylaws, as amended, of Patriot American
                  Hospitality, Inc., incorporated by reference to Exhibit 3.2 to
                  the Registration Statement on Form S-3 of Patriot American
                  Hospitality, Inc. and Patriot American Hospitality Operating
                  Company (Nos. 333-29671 and 333-29671-01).

    3.3       --  Amended and Restated Certificate of Incorporation, of Patriot
                  American Hospitality Operating Company, incorporated by
                  reference to Exhibit 3.3 to the Registration Statement on Form
                  S-3 of Patriot American Hospitality, Inc. and Patriot American
                  Hospitality Operating Company (Nos. 333-29671 and 333-29671-
                  01).

    3.4       --  Amended and Restated Bylaws, of Patriot American Hospitality
                  Operating Company, incorporated by reference to Exhibit 3.4 to
                  the Registration Statement on Form S-3 of Patriot American
                  Hospitality, Inc. and Patriot American Hospitality Operating
                  Company (Nos. 333-29671 and 333-29671-01).

    5.1       --  Opinion of Goodwin, Procter & Hoar LLP as to legality of
                  securities being offered.

    8.1       --  Opinion of Goodwin, Procter & Hoar LLP as to Tax Matters.

   23.1       --  Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
                  5.1 and Exhibit 8.1).

  *23.2       --  Consent of Deloitte & Touche LLP, San Francisco, California.

  *23.3       --  Consent of Ernst & Young LLP, Dallas, Texas.

  *23.4       --  Consent of Ernst & Young LLP, Seattle, Washington.

  *23.5       --  Consent of Ernst & Young LLP, Phoenix, Arizona.

  *23.6       --  Consent of Coopers & Lybrand L.L.P., Fort Lauderdale, Florida.

  *23.7       --  Consent of Coopers & Lybrand L.L.P., Pittsburgh, Pennsylvania.

  *23.8       --  Consent of Coopers & Lybrand L.L.P., Dallas, Texas.

  *23.9       --  Consent of Pannell Kerr Forster PC.

 *23.10       --  Consent of Price Waterhouse LLP.

 *23.11       --  Consent of Coopers & Lybrand L.L.P., Newport Beach,
                  California.

 *23.12       --  Consent of Ernst & Young LLP, Miami, Florida.

 *23.13       --  Consent of Deloitte & Touche LLP, Houston, Texas.

 *23.14       --  Consent of Coopers & Lybrand L.L.P., Phoenix, Arizona.

   24.1       --  Powers of Attorney (included on Signature Pages to the
                  Registration Statement).

   99.1       --  Second Amended and Restated Agreement of Limited Partnership
                  of Patriot American Hospitality Partnership, L.P.
                  (incorporated by reference to Exhibit 10.1(1) of the
                  Registration Statement on Form S-4 (Nos. 333-28085, 333-28085-
                  01) dated May 30, 1997).
</TABLE> 

                                     II-7
<PAGE>
 
<TABLE> 
<S>           <C> 
   99.2       --  Agreement of Limited Partnership of Patriot American
                  Hospitality Operating Partnership, L.P. (incorporated by
                  reference to Exhibit 10.2 of the Registration Statement on
                  Form S-4 (Nos. 333-28085, 333-28085-01 ) dated May 30, 1997).

   99.3       --  Redemption and Registration Rights Agreement dated April 1,
                  1996 by and between Patriot American Hospitality, Inc. and the
                  Holders of Partnership Units of Patriot American Hospitality
                  Partnership, L.P. received in connection with the purchase of
                  certain hotels managed by WestCoast Hotels, Inc. (incorporated
                  by reference to Exhibit 4.3 to Patriot American Hospitality,
                  Inc.'s Registration Statement on Form S-11 (No. 333-04587)).

   99.4       --  Registration Rights Agreement dated May 15, 1996, by and
                  between Patriot American Hospitality, Inc. and LaSalle
                  Advisors Limited Partnership (incorporated by reference to
                  Exhibit 4.5 of Patriot American Hospitality, Inc.'s
                  Registration Statement on Form S-11 (No. 333-04587)).

   99.5       --  Registration Rights Agreement dated July 11, 1996, by and
                  between Patriot American Hospitality, Inc. and Houston
                  Greenspoint Hotel Associates (incorporated by reference to
                  Exhibit 4.6 of Patriot American Hospitality, Inc.'s
                  Registration Statement on Form S-11 (No. 333-04587)).

  *99.6       --  Registration Rights Agreement dated November 15, 1996, by and
                  between Patriot American Hospitality, Inc. and the Holders of
                  Partnership Units of Patriot American Hospitality Partnership,
                  L.P. received in connection with the purchase of the Tutwiler
                  Hotel.

  *99.7       --  Registration Rights Agreement dated January 16, 1997, by and
                  between Patriot American Hospitality, Inc. and Lyon RLP
                  Investments Partnership.

  *99.8       --  Registration Rights Agreement dated January 17, 1997, by and
                  between Patriot American Hospitality, Inc. and the Morgan
                  Stanley Real Estate Fund, L.P., MS California Corporation and
                  MS Colorado Corporation.
</TABLE> 
- - ----------------

*    Filed herewith


                                     II-8

<PAGE>
 
                                                                 EXHIBIT 23.2



INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in Registration Statement Nos. 333-
28085 and 333-28085-01 on form S-4 of Patriot American Hospitality Operating
Company and Patriot American Hospitality, Inc. of our report dated March 28,
1997 (which expresses an unqualified opinion and includes an explanatory
paragraph relating to a proposed merger and certain disagreement between the
Companies), appearing in the Annual Report on Form 10-K of Bay Meadows Operating
Company and of California Jockey Club for the year ended December 31, 1996 and
to the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.

/s/ Deloitte & Touche LLP

San Francisco, California
October 29, 1997

<PAGE>
 
                                                                    EXHIBIT 23.3

                        CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in this Post-Effective Amendment No. 1 on Form S-3 to
the Joint Registration Statement on Form S-4 (No. 333-28085 and No. 333-28085-
01) and the related Prospectus of Patriot American Hospitality, Inc. and Patriot
American Hospitality Operating Company of our reports (a) dated January 31, 1997
(except for Note 14, as to which the date is March 18, 1997) with respect to the
Consolidated Financial Statements and financial statement schedules of Patriot
American Hospitality, Inc. included in its 1996 Annual Report on Form 10-K and
included in the Joint Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Patriot American Hospitality Operating Company dated July
1, 1997; (b) dated February 16, 1996, with respect to the Combined Financial
Statements of the Initial Hotels (which is based in part on the reports of
Coopers & Lybrand L.L.P., independent accountants, as set forth in their reports
on Certain of the Initial Hotels and Troy Hotel Investors) included in Patriot
American Hospitality, Inc.'s 1996 Annual Report on Form 10-K; (c) dated March
5, 1996, with respect to the Financial Statements of Buckhead Hospitality Joint
Venture included in the Current Report on Form 8-K of Patriot American
Hospitality, Inc., dated April 2, 1996, as amended; (d) dated March 1, 1996
(except for Note 7, as to which the date is April 2, 1996) with respect to the
Combined Financial Statements of Gateway Hotel Limited Partnership and Wenatchee
Hotel Limited Partnership included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc., dated April 2, 1996, as amended; (e) dated February
28, 1996 (except for Note 5, as to which the date is April 2, 1996) with respect
to the Statement of Direct Revenue and Direct Operating Expenses of Plaza Park
Suites Hotel included in the Current Report on Form 8-K of Patriot American
Hospitality, Inc., dated April 2, 1996, as amended; (f) dated February 26, 1996
(except for Note 5, as to which the date is April 2, 1996) with respect to the
Statement of Direct Revenue and Direct Operating Expenses of Roosevelt Hotel
included in the Current Report on Form 8-K of Patriot American Hospitality,
Inc., dated April 2, 1996, as amended; (g) dated April 10, 1996 with respect to
the Statement of Direct Revenue and Direct Operating Expenses of Marriott
WindWatch Hotel for the year ended December 29, 1995 included in the Current
Report on Form 8-K of Patriot American Hospitality, Inc., dated December 5,
1996; (h) dated August 30, 1996 with respect to the Financial Statements of
Concord O'Hare Limited Partnership for the year ended December 29, 1995 included
in the Current Report on Form 8-K of Patriot American Hospitality, Inc., dated
December 5, 1996; (i) dated September 10, 1996 with respect to the Statements of
Direct Revenue and Direct Operating Expenses of the Mayfair Suites Hotel for the
year ended December 31, 1995 included in the Current Report on Form 8-K of
Patriot American Hospitality, Inc., dated December 5, 1996; and (j) dated
January 23, 1997 (except for Note 8, as to which the date is September 30, 1997)
with respect to the Consolidated Financial Statements of GAH-II, L.P. for the
years ended December 31, 1996 and 1995, included in the Joint Current Report on
Form 8-K of Patriot American Hospitality, Inc. and Patriot American Hospitality
Operating Company dated September 30, 1997, as amended, all filed with the
Securities and Exchange Commission.

                                            ERNST & YOUNG LLP

Dallas, Texas
October 28, 1997

<PAGE>
 

                                                                    EXHIBIT 23.4


                        CONSENT OF INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in this Post-Effective Amendment No. 1 on Form S-3 to
the Joint Registration Statement on Form S-4 (No. 333-28085 and No. 333-28085-
01) and the related Prospectus of Patriot American Hospitality, Inc. and Patriot
American Hospitality Operating Company of our report dated March 5, 1997 with
respect to the Financial Statements of NorthCoast Hotels, L.L.C. included in
Patriot American Hospitality, Inc.'s 1996 Annual Report on Form 10-K filed with
the Securities and Exchange Commission.


                                            ERNST & YOUNG LLP



Seattle, Washington
October 28, 1997


<PAGE>
 

                                                                    EXHIBIT 23.5


                        CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the 
incorporation by reference in this Post-Effective Amendment No. 1 on Form S-3 to
the Joint Registration Statement on Form S-4 (No. 333-28085 and No. 
333-28085-01) and the related Prospectus of Patriot American Hospitality, Inc. 
and Patriot American Hospitality Operating Company of our reports (a) dated 
March 14, 1997 with respect to the Consolidated Financial Statements of Resorts 
Limited Partnership included in the Current Report on Form 8-K of Patriot 
American Hospitality, Inc., dated January 16, 1997, as amended; (b) dated 
February 13, 1997, with respect to the Financial Statements of CV Ranch Limited 
Partnership included in the Current Report on Form 8-K of Patriot American 
Hospitality, Inc., dated January 16, 1997, as amended; and (c) dated February 
12, 1997 with respect to the Financial Statements of Telluride Resort and Spa 
Limited Partnership included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc., dated January 16, 1997, as amended, all filed with
the Securities and Exchange Commission.

                                             ERNST & YOUNG LLP



Phoenix, Arizona
October 28, 1997

<PAGE>
 
                                                                    EXHIBIT 23.6

                      CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the 
incorporation by reference in Post-Effective Amendment No. 1 on Form S-3 to the 
Registration Statement on Form S-4 and Prospectus (File No. 333-28085 and 333-
28085-01) of Patriot American Hospitality, Inc. and Patriot American
Hospitality Operating Company of our report dated January 15, 1996, on our audit
of the financial statements of Certain of the Initial Hotels.

                                             /s/ Coopers & Lybrand, L.L.P.

Fort Lauderdale, Florida
October 30, 1997

<PAGE>
 
                                                                    EXHIBIT 23.7

                      CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in Post Effective Amendment No. 1 on Form S-3 to the
Registration Statement on Form S-4 and Prospectus (File No. 333-28085 and 
333-28085-01) of Patriot American Hospitality, Inc. and Patriot American
Hospitality Operating Company of our report dated January 17, 1996, on our audit
of the financial statements of Troy Hotel Inventors and our report dated
February 7, 1995, on our audit of the financial statements of Troy Park
Associates.

                                               /s/ Coopers & Lybrand, L.L.P.

Pittsburgh, Pennsylvania
October 30, 1997


<PAGE>

                                                                    EXHIBIT 23.8

                      CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the 
incorporation by reference in Post-Effective Amendment No. 1 on Form S-3 to the 
Registration Statement on Form S-4 Prospectus (File No. 333-28085 and 
333-28085-01) of Patriot American Hospitality, Inc. and Patriot American 
Hospitality Operating Company of our reports (i) dated October 15, 1996, on our 
audit of the statement of Direct Revenue and Direct Operating Expenses of the 
Holiday Inn Miami Airport; (ii) dated February 19, 1997, on our audits of the 
consolidated financial statements of Wyndham Hotel Corporation as of December 
31, 1996 and 1995, and for the years ended December 31, 1996, 1995 and 1994, 
(iii) dated May 12, 1997 on our audit of the Combined Financial Statements of 
the Minneapolis Hotels as of and for the year ended December 31, 1996, (iv) 
dated June 27, 1997 on our audit of the Combined Statement of Direct Revenue and
Direct Operating Expenses of the Met Life Hotels for the year ended December 31,
1996, and (v) dated September 8, 1997 on our audit of the Combined Financial 
Statements of the Snavoly Hotels as of and for the year ended December 31, 
1996.

                                             /s/ Coopers & Lybrand, L.L.P.

Dallas, Texas
October 30, 1997

<PAGE>
 
                                                                    Exhibit 23.9

                      CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and the 
incorporation by reference in Post Effective Amendment No. 1 on Form S-3 to the 
Registration Statement on Form S-4 and Prospectus of Patriot American 
Hospitality, Inc. and Patriot American Hospitality Operating Company of our 
report dated March 1, 1996 on the financial statements of Historic Hotel 
Partners of Birmingham, Limited Partnership, our reports dated October 8, 1997 
and February 28, 1997 on the financial statements of Historic Hotel Partners of 
Chicago Limited Partnership, and our reports dated October 8, 1997 and February 
21, 1997 on the financial statements of Historic Hotel Partners of Nashville 
Limited Partnership.


                                       /s/ Pannell Kerr Forster PC

Alexandria, Virginia
October 30, 1997

<PAGE>
 
                                                                  Exhibit 23.10

              Consent of Independent Certified Public Accountants


We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Post-Effective Amendment No. 1 on Form S-3 to
Registration Statement on Form S-4 (No. 333-28085 and 333-28085-01) of Patriot
American Hospitality, Inc. and Patriot American Hospitality Operating Company of
our reports (a) dated October 3, 1997 relating to the financial statements of
CHC International Inc. Hospitality Division as of and for the years ended
November 30, 1995 and 1996 which appears in the Current Report on Form 8-K of
Patriot American Hospitality, Inc. and Patriot American Hospitality Operating
Company dated September 30, 1997; and (b) dated February 13, 1997, except as to
Note 4, which is as of March 18, 1997, relating to the financial statements of
CHC Lease Partners for the year ended December 31, 1996 and the period inception
(October 2, 1995) through December 31, 1995 which appears in the Current Report
on Form 8-K of Patriot American Hospitality, Inc. and Patriot American
Hospitality Operating Company dated July 1, 1997. We also consent to the
reference to us under the heading "Experts" in such Prospectus.




PRICE WATERHOUSE LLP

Miami, Florida
October 30, 1997

<PAGE>

                                                                   EXHIBIT 23.11

                      CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in Post-Effective Amendment No.1 on Form S-3 to the
Registration Statement on Form S-4 and Prospectus (File No. 333-28085 and 333-
28085-01) of Patriot American Hospitality, Inc. and Patriot American Hospitality
Operating Company of our report dated March 8, 1996, related to the financial
statements of Newporter Beach Hotel Investments L.L.C. as of December 31, 1995,
and for the period from March 10, 1995 through December 31, 1995.

                                                   /s/ Coopers & Lybrand, L.L.P.

Newport Beach, California
October 30, 1997

<PAGE>
 
                                                                   EXHIBIT 23.12

              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the 
incorporation by reference in this Post-Effective Amendment No. 1 on Form S-3 to
the Joint Registration Statement on Form S-4 (No. 333-28085 and No. 
333-28085-01) and the related Prospectus of Patriot American Hospitality, Inc. 
and Patriot American Hospitality Operating Company of our reports (a) dated 
March 13, 1997 (except for the third paragraph of Note 7, as to which the date 
is April 2, 1997) with respect to the Financial Statements of G.B.H. Joint 
Venture (d/b/a Grand Bay Hotel) for the years ended December 31, 1995 and 1996; 
(b) dated September 23, 1997 with respect to the Financial Statements of River 
House Associates (d/b/a Sheraton Gateway Hotel) for the years ended December 31,
1995 and 1996; and (c) dated September 19, 1997 with respect to the Financial 
Statements of W-L Tampa, Ltd. (the Sheraton Grand Hotel) for the years ended 
December 31, 1995 and 1996; all of which are included in the Joint Current 
Report on Form 8-K/A No. 1 of Patriot American Hospitality, Inc. and Patriot 
American Hospitality Operating Company, dated September 30, 1997, as amended, 
and all filed with the Securities and Exchange Commission.


                                                       ERNST & YOUNG LLP

Miami, Florida
October 27, 1997

<PAGE>
 
                                                                   Exhibit 23.13

                         INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement Nos. 333-
28085 and 333-28085-01 of Patriot American Hospitality, Inc. and Patriot
American Hospitality Operating Company, of our report dated September 30, 1997
(relating to the financial statements of Partnerships of Acquired Hotels as of
December 31, 1996 and 1995 and for each of the two years in the period ended
December 31, 1996) appearing in the report on Form 8-K/A No.1 dated September
30, 1997 of Patriot American Hospitality, Inc. and Patriot American Hospitality
Operating Company and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.


/s/ DELOITTE & TOUCHE LLP
    Houston, Texas

    October 27, 1997


<PAGE>
 
                             

                                                                   Exhibit 23.14


                      CONSENT OF INDEPENDENT ACCOUNTANTS


We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in Post Effective Amendment No. 1 on Form S-3 to the
Registration Statement on Form S-4 and Prospectus (File No. 333-28085 and 333-
28085-01) of Patriot American Hospitality, Inc. and Patriot American Hospitality
Operating Company of our report (i) dated March 7, 1997 except for note 12 as to
which the date is October 7, 1997 on our audit of the Financial Statements of
SCP (Buttes), Inc., as of and for the year ended December 31, 1996.


                                                   /s/ Coopers & Lybrand, L.L.P.

Phoenix, Arizona
October 30, 1997
 

<PAGE>
 
                                                                    Exhibit 99.6

                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

     This Registration Rights Agreement (this "Agreement") is entered into as of
November 15, 1996 by and between Patriot American Hospitality, Inc., a Virginia 
corporation (the "Company") and each of the parties executing a signature page 
hereto (each a "Holder" and collectively the "Holders").

     WHEREAS, the Holders are to receive units of limited partnership interest 
("Units") in Patriot American Hospitality Partnership, L.P., a Virginia limited 
partnership (the "Operating Partnership") which may be redeemed for cash, or at 
the option of the Company, for an equivalent number of shares of the Company's 
common stock, no par value ("Common Stock") issued without registration under 
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to an 
Agreement of Purchase and Sale dated September 13, 1996 by and between the 
Holders and the Operating Partnership (the "Purchase and Sale Agreement").

     NOW, THEREFORE, in consideration of the mutual promises and agreements set 
forth herein, and other valuable consideration, the receipt and sufficiency of 
which are hereby acknowledged, the parties hereto hereby agree as follows:

     1.  Registration.
         ------------

     (a) Demand Registration.
         -------------------

         (i)  On any two (2) occasions after November 16, 1997 until the 
earlier of (i) the third anniversary of this Agreement or (ii) the date on which
all of the Registrable Shares (as hereinafter defined) have become eligible for
sale pursuant to Rule 144 promulgated under the Securities Act, subject to the 
conditions set forth in this Agreement, including without limitation the 
conditions set forth in Section 1(a)(ii) below, any Holder or Holders may 
request that the Company cause to be filed a registration statement (a "Demand 
Registration Statement") under Rule 415 under the Securities Act relating to the
sale by such holders of their previously or concurrently issued Registrable 
Shares in accordance with the terms hereof. As used in this Agreement, the term 
"Registrable Shares" means shares of Common Stock issued or to be issued to the 
Holders upon redemption or in exchange for their Units, excluding (A) Common 
Stock for which a Registration Statement relating to the sale thereof shall have
become effective under the Securities Act, (B) Common Stock sold pursuant to 
Rule 144 under the Securities Act or (C) Common Stock eligible for sale pursuant
to Rule 144 under the Securities Act. Upon receipt of any such request, the 
Company shall give written notice of such proposed registration to all Holders 
of Units and Registrable Shares. Such Holders shall have the right, by giving 
written notice to the Company within fifteen (15) business days after such 
notice referred to in the preceding sentence has been given by the Company to 
elect to have included in the Demand Registration Statement such of their
<PAGE>
 
Registrable Shares as each Holder may request in such notice of election. 
Thereupon, the Company shall use reasonable efforts to cause such Demand 
Registration Statement to be filed and declared effective by the Securities and 
Exchange Commission (the "SEC") for all Registrable Shares which the Company has
been requested to register as soon as practicable thereafter. The Company agrees
to use reasonable efforts to keep the Demand Registration Statement continuously
effective until the earliest of (a) the date on which the Holders no longer hold
any Registrable Shares registered under the Demand Registration Statement, (b)
the date on which the Registrable Shares may be sold by the Holders pursuant to
Rule 144 promulgated under the Securities Act or (c) the date which is six (6)
months from the effective date of such Demand Registration Statement. The
Company shall not be required to file and effect a new Demand Registration
Statement pursuant to this Section 1(a) until a period of twelve (12) months has
elapsed from the termination of the registration statement with respect to
Registrable Shares covered by a prior registration request.

           (ii)   The Company shall have no obligation under Section 1(a)(i) 
unless the following conditions are satisfied:

                  (A) Any Holder who requests that the Company cause to be filed
     a Demand Registration Statement pursuant to Section 1(a)(i) must provide to
     the Company a certificate (the "Authorizing Certificate"), substantially in
     the form of Exhibit A hereto, that is signed by the Holders of at least
                 ---------
     twenty-five percent (25%) of the aggregate number of all outstanding
     Registrable Shares, at the time such request is made. The Authorizing
     Certificate shall set forth (i) the name of each Holder signing such
     Authorizing Certificate, (ii) the number of Registrable Shares held by each
     such Holder, and, if different, the number of Registrable Shares such
     Holder has elected to have registered, and (iii) a certification from each
     such Holder that it is requesting the registration of only those shares of
     Common Stock received by such Holder upon the redemption of its Units
     pursuant to the Purchase and Sale Agreement. Any Holder whose Registrable
     Shares have become eligible for sale pursuant to Rule 144 promulgated under
     the Securities Act shall not be included for purposes of calculating the
     percentage of Holders required to sign an Authorizing Certificate. If the
     Company determines that a Holder's Shares have become eligible for sale
     pursuant to Rule 144, the Company shall at the request of such Holder,
     deliver to such Holder an opinion of counsel to such effect.
     
     (b) Piggyback Registration. If at any time while any Registrable Shares are
         ----------------------
outstanding the Company proposes to file a registration statement under the 
Securities Act with respect to an offering of Common Stock solely for cash 
(other than a registration statement (i) on Form S-8 or any successor form or in
connection with any employee or director welfare, benefit or compensation plan, 
(ii) on Form S-4 or any successor form or in connection with an exchange offer, 
(iii) in connection with a rights offering or a dividend reinvestment and share

                                       2

<PAGE>
 
purchase plan offered exclusively to existing holders of Common Stock, (iv) in
connection with an offering solely to employees of the Company or its
affiliates, (v) relating to a transaction pursuant to Rule 145 of the Securities
Act, or (vi) a shelf registration on Form S-3 or any successor form), whether or
not for its own account (a "Piggyback Registration Statement"), the Company
shall give to the Holders of Units and Registrable Shares written notice of such
proposed filing at least ten (10) business days before filing. The notice
referred to in the preceding sentence shall offer Holders the opportunity to
register such amount of Registrable Shares as each Holder may request (a
"Piggyback Registration"). Subject to the provisions of Section 2 below, the
Company shall include in such Piggyback Registration all Registrable Shares
requested to be included in the registration for which the Company has received
written requests for inclusion therein within five (5) business days after the
notice referred to above has been given by the Company to the Holders. Holders
of Registrable Shares shall be permitted to withdraw all or part of the
Registrable Shares from a Piggyback Registration at any time prior to the
effective date of such Piggyback Registration. If a Piggyback Registration is an
underwritten registration on behalf of the Company and the managing underwriter
advises the Company that the total number of shares of Common Stock requested to
be included in such registration exceeds the number of shares of Common Stock
which can be sold in such offering, the Company will include in such
registration in the following priority: (i) first, all shares of Common Stock
the Company proposes to sell and (ii) second, up to the full number of
applicable Registrable Shares requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without
adversely affecting the price range or probability of success of such offering,
which shall be allocated among the Holders requesting registration and all other
stockholders requesting registration on a pro rata basis. No Registrable
Securities or other shares of Common Stock requested to be included in a
registration pursuant to demand registration rights shall be excluded from the
underwriting unless all securities other than such securities are first
excluded.

     (c) Registration Statement Covering Issuance of Common Stock. In lieu of 
         --------------------------------------------------------
the registration rights set forth in Section 1(a) and 1(b) above, the Company
may, in its sole discretion, prior to the first date upon which the Units held
by the Holders may be redeemed (or such other date as may be required under
applicable provisions of the Securities Act) file a registration statement 
("the Shelf Registration Statement") under Rule 415 under the Securities Act
relating to the issuance to Holders of shares of Common Stock upon the
redemption or in exchange for their Units. Thereupon, the Company shall use
reasonable efforts to cause such Registration Statement to be declared effective
by the SEC for all shares of Common Stock covered thereby. The Company agrees to
use reasonable efforts to keep the Shelf Registration Statement continuously
effective until the date on which each Holder has redeemed or exchanged such
Holder's Units for Common Stock. In the event that the Company is unable to
cause such Registration Statement to be declared effective by the SEC or is
unable to keep such Registration Statement effective until the date on which
each Holder has redeemed or exchanged such Holder's Units for Common Stock, then
the rights of each Holder set forth in

                                       3

<PAGE>
 
Section 1(a) and 1(b) above shall be restored.  Any Demand Registration 
Statement, Piggyback Registration Statement or Shelf Registration Statement is 
sometimes referred to as a "Registration Statement." 


     2.    Registration Procedures.
           -----------------------

     (a)   The Company shall notify each Holder requesting registration of the
effectiveness of the Registration Statement filed pursuant thereto and shall
furnish to each such Holder such number of copies of the Registration Statement
(including any amendments, supplements and exhibits), the prospectus contained
therein (including each preliminary prospectus), any documents incorporated by
reference in the Registration Statement and such other documents as such Holder
may reasonably request in order to facilitate its sale of the Registrable 
Shares in the manner described in the Registration Statement.

     (b)   The Company shall prepare and file with the SEC from time to time 
such amendments and supplements to the Registration Statement and prospectus 
used in connection therewith as may be necessary to keep the Registration 
Statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all the Registrable Shares until the earlier of 
(i) such time as all of the Registrable Shares have been issued or disposed of 
in accordance with the intended methods of disposition by the Holders as set 
forth in the Registration Statement or (ii) the date on which the Registration 
Statement ceases to be effective in accordance with the terms of Section 1.  
Upon ten (10) business days' notice, the Company shall file any supplement or 
post-effective amendment to the Registration Statement with respect to such 
Holder's interests in or plan of distribution of Registrable Shares that is 
reasonably necessary to permit the sale of the Holder's Registrable Shares that 
is reasonably necessary to permit the sale of the Holder's Registrable Shares 
pursuant to the Registration Statement and the Company shall file any necessary 
listing applications or amendments to the existing applications to cause the 
shares to be then listed or quoted on the primary exchange or quotation system 
on which the Common Stock is then listed or quoted.

     (c)   The Company shall promptly notify each Holder requesting registration
of, and confirm in writing, any request by the SEC for amendments or supplements
to the Registration Statement or the prospectus related thereto or for
additional information. In addition, the Company shall promptly notify each such
Holder of, and confirm in writing, the filing of the Registration Statement, any
prospectus supplement related thereto or any post-effective amendment to the
Registration Statement and the effectiveness of any post-effective amendment.

     (d)   The Company shall promptly notify each Holder requesting 
registration, at any time when a prospectus relating to the Registration 
Statement is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in the Registration 
Statement, as then in effect, includes an untrue statement of a material fact
 
                                       4

<PAGE>
 
or omits to state any material fact required to be stated therin or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In such event and subject to paragraph 7 of this 
Agreement, the Company shall prepare and furnish to each such Holder a 
reasonable number of copies of a supplement to or an amendment of such 
prospectus as may be necessary so that, as thereafter delivered to the 
purchasers of Registrable Shares, such prospectus shall not include an untrue 
statement of a material fact or omit to state a material fact required to be 
stated therein or necessary to make the statements therein, in light of the 
circumstances under which they are made, not misleading.

     3.    State Securities Laws. Subject to the conditions set forth in this 
           ---------------------
Agreement, the Company shall, promptly upon the filing of a Registration 
Statement including Registrable Shares, file such documents as may be necessary 
to register or qualify the Registrable Shares under the securities or "Blue Sky"
laws of such states as any Holder requesting registration may reasonably 
request, and the Company shall use reasonable efforts to cause such filings to 
become qualified; provided, however, that the Company shall not be obligated to 
                  --------  -------
qualify as a foreign corporation to do business under the laws of any such state
in which it is not then qualified or to file any general consent to service of 
process in any such state. Once qualified, the Company shall use reasonable 
efforts to keep such filings qualified until the earlier of (a) such time as all
of the Registrable Shares have been disposed of in accordance with the intended 
methods of disposition by the Holder as set forth in the Registration Statement,
(b) in the case of a particular state, a Holder has notified the Company that it
no longer requires qualified filing in such state in accordance with its 
original request for filing or (c) the date on which the Registration Statement 
ceases to be effective with the SEC. The Company shall promptly notify each 
Holder requesting registration of, and confirm in writing, the receipt by the 
Company of any notification with respect to the suspension of the qualification 
of the Registrable Shares for sale under the securities or "Blue Sky" laws of 
any jurisdiction or the initiation or threat of any proceeding for such purpose.

     4.    Expenses. The Company shall bear all expenses incurred in connection 
           --------
with the registration of the Registrable Shares pursuant to Section 1(b) and 
Section 1(c) of this Agreement. Additionally, the Company shall bear all 
expenses incurred in connection with the registration of the Registrable Shares 
pursuant to Section 1(a) of this Agreement for each Registration Statement 
registering One Million Dollars ($1 million) or more of Registrable Shares. The 
Holders shall bear their ratable share of all expenses incurred by the Company 
in connection with a registration in which the Holders are included pursuant to 
Section 1(a) of this Agreement based on the number of Registrable Shares 
included to the total number of shares of Common Stock so registered for each 
Registration Statement registering less than One Million Dollars ($1 million) of
Registrable Shares. Such expenses shall include, without limitation, all 
printing, legal and accounting expenses incurred by the Company and all 
registration and filing fees imposed by the SEC, any state securities commission
or the New


                                       5
<PAGE>
 
York Stock Exchange or, if the Common Stock is not then listed on the New York 
Stock Exchange, the principal national securities exchange or national market 
system on which the Common Stock is then traded or quoted. In addition, Holders 
shall be responsible for any brokerage or underwriting commissions and taxes of 
any kind (including, without limitation, transfer taxes) with respect to any 
disposition, sale or transfer of Registrable Shares and for any legal,
accounting and other expenses incurred by them in connection with any
Registration Statement.

     5.   Indemnification by the Company. The Company agrees to indemnify each 
          ------------------------------
of the Holders and their respective officers, directors, employees, agents, 
representatives and affiliates, and each person or entity, if any, that controls
a Holder within the meaning of the Securities Act, and each other person or 
entity, if any, subject to liability because of his, her or its connection with 
a Holder, and any underwriter and any person who controls the underwriter 
within the meaning of the Securities Act (an "Indemnitee") against any and all
losses, claims, damages, actions, liabilities, costs and expenses (including 
without limitation reasonable attorneys' fees, expenses and disbursements 
documented in writing), joint or several, arising out of or based upon any 
untrue or alleged untrue statement of material fact contained in the 
Registration Statement or any prospectus contained therein, or any omission or 
alleged omission to state therein a material fact required to be stated therein 
or necessary to make the statements therein, in light of the circumstances 
under which they were made, not misleading, except insofar as and to the extent
that such statement or omission arose out of or was based upon information 
regarding the Indemnitee or its plan of distribution which was furnished to the 
Company by the Indemnitee for use therein, provided, further that the Company 
shall not be liable to any person who participates as an underwriter in the 
offering or sale of Registrable Shares or any other person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case to 
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon (i) an untrue 
statement or alleged untrue statement or omission or alleged omission made in 
such Registration Statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity 
with information furnished to the Company for use in connection with the 
Registration Statement or the prospectus contained therein by such Indemnitee or
(ii) such Indemnitee's failure to send or give a copy of the final prospectus 
furnished to it by the Company at or prior to the time such action is required 
by the Securities Act to the person claiming an untrue statement or alleged 
untrue statement or omission or alleged omission if such statement or omission 
was corrected in such final prospectus.  The obligations of the Company under 
this Section 5 shall survive the completion of any offering of Registrable 
Shares pursuant to a Registration Statement under this Agreement or otherwise 
and shall survive the termination of this Agreement.

     6.   Covenants of Holders. Each of the Holders hereby agrees (a) to 
          --------------------
cooperate with the Company and to furnish to the Company all such information in
connection with the

                                       6
<PAGE>
 
preparation of the Registration Statement and any filings with any state
securities commissions as the Company may reasonably request, (b) to the extent
required by the Securities Act, to deliver or cause delivery of the prospectus
contained in the Registration Statement to any purchaser of the shares covered
by the Registration Statement from the Holder, (c) to notify the Company of any
sale of Registrable Shares by such Holder and (d) to indemnify the Company, its
officers, directors, employees, agents, representatives and affiliates, and each
person, if any, who controls the Company within the meaning of the Securities
Act, and each person, if any, who controls the Company within the meaning of the
Securities Act, and each other person, if any, subject to liability because of
his connection with the Company, against any and all losses, claims, damages,
actions, liabilities, costs and expenses arising out of or based upon (i) any
untrue statement or alleged untrue statement of material fact contained in
either the Registration Statement or the prospectus contained therein, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, if and to the extent
that such statement or omission arose out of or was based upon information
regarding the Holder or its plan of distribution which was furnished to the
Company by the Holder for use therein, or (ii) the failure by the Holder to
deliver or cause to be delivered the prospectus contained in the Registration
Statement (as amended or supplemented, if applicable) furnished by the Company
to the Holder to any purchaser of the shares covered by the Registration
Statement from the Holder. Notwithstanding the foregoing, (i) in no event will a
Holder have any obligation under this Section 6 for amounts the Company pays in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder (which consent shall
not be unreasonably withheld) and (ii) the total amount for which a Holder shall
be liable under this Section 6 shall not in any event exceed the aggregate
proceeds received by him or it from the sale of the Holder's Registrable Shares
in such registration. The obligations of the Holders under this Section 6 shall
survive the completion of any offering of Registrable Shares pursuant to a
Registration Statement under this Agreement or otherwise and shall survive the
termination of this Agreement.

     7.  Suspension of Registration Requirement.
         --------------------------------------

     (a) The Company shall promptly notify each Holder requesting registration 
of, and confirm in writing, the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any 
proceedings for that purpose. The Company shall use reasonable efforts to obtain
the withdrawal of any order suspending the effectiveness of the Registration 
Statement as soon as practicable.

     (b) Notwithstanding anything to the contrary set forth in this Agreement, 
the Company's obligation under this Agreement to use reasonable efforts to 
cause the Registration Statement and any filings with any state securities 
commission to be made or to become effective or to amend or supplement the 
Registration Statement shall be suspended in the event 

                                       7
<PAGE>
 
and during such period pending negotiations relating to, or consummation of, a 
transaction or the occurrence of an event that would require additional 
disclosure of material information by the Company in the Registration Statement 
or such filing (such circumstances being hereinafter referred to as a
"Suspension Event") that would make it impractical or unadvisable to cause the
Registration Statement or such filings to be made or to become effective or to
amend or supplement the Registration Statement, but such suspension shall
continue only for so long as such event or its effect is continuing but in no
event will that suspension exceed ninety (90) days. The Company agrees not to
exercise the rights set forth in this Section 7(b) more than twice in any twelve
month period. In the event any Holder requests registration during a Suspension
Event, the Company shall notify the Holder of the existence of such Suspension
Event.

     (c)   Each holder of Registrable Shares whose Registrable Shares are 
covered by a Registration Statement filed pursuant to Section 1 hereof agrees, 
if requested by the Company in the case of a nonunderwritten offering
(a "Nonunderwritten Offering") or if requested by the managing underwriter or 
underwriters in an underwritten offering (an "Underwritten Offering," 
collectively with Nonunderwritten Offering, the "Offering"), not to effect any
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act (except as part of such Offering), during the 15-day
period prior to, and during the 90-day period (or such longer period as may be
required by the managing underwriter or underwriters) beginning on, the date of
pricing of each Offering, to the extent timely notified in writing by the
Company or the managing underwriters. Furthermore, notwithstanding anything to
the contrary set forth in this Agreement, the Company's obligation under this
Agreement to use reasonable efforts to cause the Registration Statement and any
filings with any state securities commission to be made or to become effective
or to amend or supplement the Registration Statement shall be suspended in the
event and during such period as the Company is proceeding with an Underwritten
Offering if the Company is advised by the underwriters that the sale of
Registrable Shares under a Registration Statement would have a material adverse
effect on the Underwritten Offering.

     8.    Black-Out Period.  Following the effectiveness of the Registration 
           ----------------
Statement and the filings with any state securities commissions, the Holders 
agree that they will not effect any sales of the Registrable Shares pursuant to 
the Registration Statement or any such filings at any time after they have 
received notice from the Company to suspend sales (i) as a result of the 
occurrence or existence of any Suspension Event, (ii) during any Offering, or 
(iii) so that the Company may correct or update the Registration Statement 
or such filing pursuant to Section 2(c) or 2(d).  The Holder may recommence 
effecting sales of the Registrable Shares pursuant to the Registration Statement
or such filings following further notice to such effect from the Company, which 
notice shall be given by the Company not later than five (5) business days after
the conclusion of any such Suspension Event or Offering.
         
                                   8        
<PAGE>
 
     9.   Additional Shares. The Company, at its option, may register, under any
          -----------------
registration statement and any filings with any state securities commissions 
filed pursuant to this Agreement, any number of unissued shares of Common Stock 
or any shares of Common Stock owned by any other shareholder or shareholders of 
the Company.

     10.  Contribution. If the indemnification provided for in Sections 5 and 6 
          ------------
is unavailable to an indemnified party with respect to any losses, claims, 
damages, actions, liabilities, costs or expenses referred to therein or is 
insufficient to hold the indemnified party harmless as contemplated therein, 
then the indemnifying party, in lieu of indemnifying such indemnified party, 
shall contribute to the amount paid or payable by such indemnified party as a 
result of such losses, claims, damages, actions, liabilities, costs or expenses 
in such proportion as is appropriate to reflect the relative fault of the 
Company, on the one hand, and the Holder, on the other hand, in connection with 
the statements or omissions which resulted in such losses, claims, damages, 
actions, liabilities, costs or expenses as well as any other relevant equitable 
considerations. The relative fault of the Company, on the one hand, and of the 
Holder, on the other hand, shall be determined by reference to, among other 
factors, whether the untrue or alleged untrue statement of a material fact or 
omission to state a material fact relates to information supplied by the Company
or by the Holder and the parties' relative intent, knowledge, access to 
information and opportunity to correct or prevent such statement or omission; 
provided, however, that in no event shall the obligation of any indemnifying 
- - --------  -------
party to contribute under this Section 10 exceed the amount that such 
indemnifying party would have been obligated to pay by way of indemnification if
the indemnification provided for under Sections 5 or 6 hereof had been available
under the circumstances.

     The Company and the Holders agree that it would not be just and equitable 
if contribution pursuant to this Section 10 were determined by pro rata 
allocation or by any other method of allocation that does not take account of 
the equitable considerations referred to in the immediately preceding paragraph.

     No indemnified party guilty of fraudulent misrepresentation (within the 
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty of such fraudulent
misrepresentation.

     11.  No Other Obligation to Register. Except as otherwise expressly 
          -------------------------------
provided in this Agreement, the Company shall have no obligation to the Holders 
to register the Units or the Registrable Shares under the Securities Act.

     12.  Amendments and Waivers. The provisions of this Agreement may not be 
          ----------------------
amended, modified or supplemented without the prior written consent of the 
Company and Holders holding in excess of 50% of the Registrable Shares.

                                       9
<PAGE>
 
     13.  Notices. Except as set forth below, all notices and other 
          ------- 
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or 
telecopier, registered or certified mail (return receipt requested), postage 
prepaid or courier or overnight delivery service to the Company at the following
address and to the Holder at the address set forth on his or her signature page 
to this Agreement (or at such other address for any party as shall be specified 
by like notice, provided that notices of a change of address shall be effective
only upon receipt thereof), and further provided that in case of directions to
amend the Registration Statement pursuant to Section 2(b) or Section 6, a Holder
must confirm such notice in writing by overnight express delivery with
confirmation of receipt:

          If to the Company:  Patriot American Hospitality, Inc.
                              3030 LBJ Freeway, Suite 1500
                              Dallas, TX 75234
                              Attn:  Paul A. Nussbaum
                                     Chief Executive Officer

                              Telephone: (214) 888-8000
                              Telecopy:  (214) 888-8065

                              With a copy to:
      
                              Goodwin, Procter & Hoar LLP
                              Exchange Place
                              Boston, MA 02109
                              Attn: Gilbert G. Menna, P.C.

                              Telephone: (617) 570-1000
                              Telecopy:  (617) 523-1231

In addition to the manner of notice permitted above, notices given pursuant to 
Sections 1, 7 and 8 hereof may be effected telephonically and confirmed in 
writing thereafter in the manner described above.

     14.  Successors and Assigns. This Agreement shall be binding upon and 
          ----------------------
inure to the benefit of the successors and assigns of the Company. This 
Agreement may not be assigned by any Holder and any attempted assignment hereof 
by any Holder will be void and of no effect and shall terminate all obligations 
of the Company hereunder with respect to such Holder.

                                      10
<PAGE>
 
     15.  Counterparts. This Agreement may be executed in any number of 
          ------------
counterparts and by the parties hereto in separate counterparts, each of which 
when so executed shall be deemed to be an original and all of which taken 
together shall constitute one and the same agreement.

     16.  Governing Law. This Agreement shall be governed by and construed in 
          -------------
accordance with the laws of the Commonwealth of Virginia applicable to contracts
made and to be performed wholly within said Commonwealth.

     17.  Severability. In the event that any one or more of the provisions 
          ------------
contained herein, or the application thereof in any circumstances, is held 
invalid, illegal or unenforceable in any respect for any reason, the validity, 
legality and enforceability of any such provision in every other respect and of 
the remaining provisions contained herein shall not be in any way impaired 
thereby, it being intended that all of the rights and privileges of the parties 
hereto shall be enforceable to the fullest extent permitted by law.

     18.  Entire Agreement. This Agreement is intended by the parties as a final
          ----------------
expression of their agreement and intended to be the complete and exclusive 
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises, 
warranties or undertakings, other than those set forth or referred to herein, 
with respect to such subject matter. This Agreement supersedes all prior 
agreements and understandings between the parties with respect to such subject 
matter.

                 [Remainder of Page Intentionally Left Blank]

                                      11
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of 
the date first written above.

                                 PATRIOT AMERICAN HOSPITALITY, INC.

                                 /s/ Thomas W. Lattin  
                                 ----------------------------------
                                 Name:  Thomas W. Lattin 
                                 Title: President
                               

                                      12
<PAGE>
 
Registration Rights Agreement
Holder Signature Page


                                  Holder

                                  /s/ Paul E. Denyer, Trustee 
                                  ---------------------------------------
                                  Name: Paul E. Denyer, Trustee of the 
                                        Denyer Family Trust u/a dated
                                        August 29, 1990

                                  Address for Notice:

                                  P.O. Box 7709
                                  Incline Village, NV 89452
                   


                                      13
<PAGE>
 
Registration Rights Agreement
Holder Signature Page



                                                HOLDER



                                                /s/ David R. Burrus
                                                --------------------------------
                                                Name: David R. Burrus


                                                Address for Notice:


                                                7301 West Roadway Drive
                                                New Orleans, Louisiana 70124
<PAGE>
 
Registration Rights Agreement
Holder Signature Page





                                       HOLDER


                                       /s/ George J. Newton
                                       -----------------------------------------
                                       Name: George J. Newton

                                       Address for Notice:

                                       Burrus Investment Group, Inc.
                                       4241 Veterans Boulevard, Suite 200
                                       Metaririe, Louisiana 70006
<PAGE>
 
Registration Rights Agreement
Holder Signature Page




                                        HOLDER


                                        /s/ John W. Cullen
                                        ----------------------------------------
                                        Name: John W. Cullen, IV
                                        
                                        Address for Notice:

                                        Grand Heritage Hotel Company
                                        410 Severn Avenue, Suite 406
                                        Annapolis, Maryland 21403
<PAGE>
 
 
Registration Rights Agreement
Holder Signature Page




                                        HOLDER


                                        /s/ William F. Burruss, Jr.
                                        ----------------------------------------
                                        Name: William F. Burruss, Jr.
                                        
                                        Address for Notice:

                                        Grand Heritage Hotel Company
                                        410 Severn Avenue, Suite 406
                                        Annapolis, Maryland 21403


<PAGE>
 
                                                                    Exhibit 99.7

                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------


     This Registration Rights Agreement (this "Agreement") is entered into as of
January 16, 1997 by and between Patriot American Hospitality, Inc., a Virginia 
corporation (the "Company") and Lyon RLP Investments Partnership, an Arizona 
general partnership (the "Holder").

     WHEREAS, the Holder is to receive units of limited partnership interest 
("Units") in Patriot American Hospitality Partnership, L.P., a Virginia limited 
partnership (the "Operating Partnership") which may be redeemed for cash, or at 
the option of the Company, for an equivalent number of shares of the Company's 
common stock, no par value ("Common Stock") issued without registration under 
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to an 
Agreement for Purchase and Sale of Resort Entities dated December 9, 1996 by and
between the general partners of the Holder and the Operating Partnership (the 
"Purchase and Sale Agreement").

     NOW, THEREFORE, in consideration of the mutual promises and agreements set 
forth herein, and other valuable consideration, the receipt and sufficiency of 
which are hereby acknowledged, the parties hereto hereby agree as follows:

     1.   Registration.
          ------------

     (a)  Demand Registration.
          -------------------

          (i)  On any two (2) occasions after January 16, 1998 until the earlier
of (i) the eighth anniversary of this Agreement or (ii) the date on which all of
the Registrable Shares (as hereinafter defined) have become eligible for sale 
pursuant to Rule 144 promulgated under the Securities Act, subject to the 
conditions set forth in this Agreement, including without limitation the 
conditions set forth in Section 1(a)(ii) below, any Holder or Holders may 
request that the Company cause to be filed a registration statement (a "Demand 
Registration Statement") under Rule 415 under the Securities Act relating to the
sale by such Holders of their previously or concurrently issued Registrable 
Shares in accordance with the terms hereof. As used in this Agreement, the term 
"Registrable Shares" means shares of Common Stock issued or to be issued to the 
Holders upon redemption or in exchange for their Units, excluding (A) Common 
Stock for which a Registration Statement relating to the sale thereof shall have
become effective under the Securities Act, (B) Common Stock sold pursuant to 
Rule 144 under the Securities Act or (C) Common Stock eligible for sale pursuant
to Rule 144 under the Securities Act. Upon receipt of any such request, the 
Company shall give written notice of such proposed registration to all Holders 
of Units and Registrable Shares. Such Holders shall have the right, by giving 
written notice to the Company within fifteen (15) business days after such 
notice referred to in the preceding sentence has been given by the Company to 
elect to have included in the Demand Registration Statement such of their 
Registrable Shares as each Holder may request in such notice of election. 
Thereupon, the Company shall use reasonable efforts to cause such Demand 
Registration Statement to be filed and declared effective by the Securities and 
Exchange Commission (the "SEC") for all 
<PAGE>
 
Registrable Shares which the Company has been requested to register as soon as 
practicable thereafter.  The Company agrees to use reasonable efforts to keep 
the Demand Registration Statement continuously effective until the earliest of 
(a) the date on which the Holders no longer hold any Registrable Shares 
registered under the Demand Registration Statement, (b) the date on which the 
Registrable Shares may be sold by the Holders pursuant to Rule 144 promulgated 
under the Securities Act or (c) the date which is six (6) months from the 
effective date of such Demand Registration Statement.  The Company shall not be 
required to file and effect a new Demand Registration Statement pursuant to this
Section 1(a) until a period of twelve (12) months has elapsed from the 
termination of the registration statement with respect to Registrable Shares 
covered by a prior registration request.

           (ii)   The Company shall have no obligation under Section 1(a)(i) 
unless the following conditions are satisfied:

                  (A)   Any Holder who requests that the Company cause to be 
     filed a Demand Registration Statement pursuant to Section 1(a)(i) must
     provide to the Company a certificate (the "Authorizing Certificate"),
     substantially in the form of Exhibit A hereto, that is signed by the
                                  ---------
     Holders of at least twenty-five percent (25%) of the aggregate number of
     all outstanding Registrable Shares, at the time such request is made. The
     Authorizing Certificate shall set forth (i) the name of each Holder signing
     such Authorizing Certificate, (ii) the number of Registrable Shares held by
     each such Holder, and, if different, the number of Registrable Shares such
     Holder has elected to have registered, and (iii) a certification from each
     such Holder that it is requesting the registration of only those shares of
     Common Stock received by such Holder upon the redemption of its Units
     pursuant to the Purchase and Sale Agreement. Any Holder whose Registrable
     Shares have become eligible for sale pursuant to Rule 144 promulgated under
     the Securities Act shall not be included for purposes of calculating the
     percentage of Holders required to sign an Authorizing Certificate. If the
     Company determines that a Holder's Shares have become eligible for sale
     pursuant to Rule 144, the Company shall, at the request of such Holder,
     deliver to such Holder an opinion of counsel to such effect.

     (b)   Piggyback Registration.  If at any time while any Registrable Shares 
           ----------------------
are outstanding the Company proposes to file a registration statement under the 
Securities Act with respect to an offering of Common Stock solely for cash 
(other than a registration statement (i) on Form S-8 or any successor form or in
connection with any employee or director welfare, benefit or compensation plan, 
(ii) on Form S-4 or any successor form or in connection with an exchange offer 
or any transaction pursuant to Rule 145, or (iii) in connection with a rights 
offering or a dividend reinvestment and share purchase plan offered exclusively 
to existing holders of Common Stock), whether or not for its own account (a 
"Piggyback Registration Statement"), the Company shall give to the Holders of 
Units and Registrable Shares written notice of such proposed filing at least 
ten (10) business days before filing.  The notice referred to in the preceding 
sentence shall offer Holders the opportunity to register such amount of 
Registrable Shares as each Holder may request (a "Piggyback Registration"). 
Subject to the

                                       2
<PAGE>
 
provisions of Section 2 below, the Company shall include in such Piggyback
Registration all Registrable Shares requested to be included in the registration
for which the Company has received written requests for inclusion therein within
five (5) business days after the notice referred to above has been given by the
Company to the Holders. Holders of Registrable Shares shall be permitted to
withdraw all or part of the Registrable Shares from a Piggyback Registration at
any time prior to the effective date of such Piggyback Registration. If a
Piggyback Registration is an underwritten registration on behalf of the Company
and the managing underwriter advises the Company that the total number of shares
of Common Stock requested to be included in such registration exceeds the number
of shares of Common Stock which can be sold in such offering, the Company will
include in such registration in the following priority: (i) first, all shares of
Common Stock the Company proposes to sell and (ii) second, up to the full number
of applicable Registrable Shares requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without
adversely affecting the price range or probability of success of such offering,
which shall be allocated among the Holders requesting registration and all other
stockholders requesting registration on a pro rata basis. No Registrable Shares
or other shares of Common Stock requested to be included in a registration
pursuant to demand registration rights shall be excluded from the underwriting
unless all securities requested to be included in a registration pursuant to
piggyback registration rights are first excluded.

     (c)  Registration Statement Covering Issuance of Common Stock.  In lieu of 
          --------------------------------------------------------
the registration rights set forth in Section 1(a) and 1(b) above, the Company 
many, in its sole discretion, prior to the first date upon which the Units held 
by the Holders may be redeemed (or such other date as may be required under 
applicable provisions of the Securities Act) file a registration statement (the 
"Shelf Registration Statement") under Rule 415 under the Securities Act relating
to the issuance to Holders of shares of Common Stock upon the redemption or in
exchange for their Units. Thereupon, the Company shall use reasonable efforts to
cause such Registration Statement to be declared effective by the SEC for all 
shares of Common Stock covered thereby. The Company agrees to use reasonable 
efforts to keep the Shelf Registration Statement continuously effective until 
the date on which each Holder has redeemed or exchanged such Holder's Units for 
Common Stock. In the event that the Company is unable to cause such Registration
Statement to be declared effective by the SEC or is unable to keep such 
Registration Statement effective until the date on which each Holder has 
redeemed or exchanged such Holder's Units for Common Stock, then the rights of 
each Holder set forth in Section 1(a) and 1(b) above shall be restored. Any 
Demand Registration Statement, Piggyback Registration Statement or Shelf 
Registration Statement is sometimes referred to as a "Registration Statement."

     2.   Registration Procedures.
          -----------------------

     (a)  The Company shall notify each Holder requesting registration of the 
effectiveness of the Registration Statement filed pursuant thereto and shall 
furnish to each such Holder such number of copies of the Registration Statement 
(including any amendments, supplements and exhibits), the prospectus contained 
therein (including each preliminary

                                       3
<PAGE>
 
prospectus), any documents incorporated by reference in the Registration
Statement and such other documents as such Holder may reasonably request in
order to facilitate its sale of the Registrable Shares in the manner described
in the Registration Statement.

     (b)   The Company shall prepare and file with the SEC from time to time
such amendments and supplements to the Registration Statement and prospectus
used in connection therewith as may be necessary to keep the Registration
Statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all the Registrable Shares until the earlier of
(i) such time as all of the Registrable Shares have been issued or disposed of
in accordance with the intended methods of disposition by the Holders as set
forth in the Registration Statement or (ii) the date on which the Registration
Statement ceases to be effective in accordance with the terms of Section 1. Upon
ten (1) business days' notice, the Company shall file any supplement or post-
effective amendment to the Registration Statement with respect to such Holder's
interests in or plan of distribution of Registrable Shares that is reasonably
necessary to permit the sale of the Holder's Registrable Shares pursuant to the
Registration Statement and the Company shall file any necessary listing
applications or amendments to the existing applications to cause the shares to
be then listed or quoted on the primary exchange or quotation system on which
the Common Stock is then listed or quoted.

     (c)   The Company shall promptly notify each Holder requesting registration
of, and confirm in writing, any request by the SEC for amendments or supplements
to the Registration Statement or the prospectus related thereto or for
additional information. In addition, the Company shall promptly notify each such
Holder of, and confirm in writing, the filing of the Registration Statement, any
prospectus supplement related thereto or any post-effective amendment to the
Registration Statement and the effectiveness of any post-effective amendment.

     (d)   The Company shall promptly notify each Holder requesting
registration, at any time when a prospectus relating to the Registration
Statement is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In such event the subject to paragraph 7 of this
Agreement, the Company shall prepare and furnish to each such Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of Registrable Shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.

     3.    State Securities Laws. Subject to the conditions set forth in this
           ---------------------
Agreement, the Company shall, promptly upon the filing of a Registration
Statement including Registrable Shares, file such documents as may be necessary
to register or qualify the Registrable Shares

                                       4
<PAGE>
 
under the securities or "Blue Sky" laws of such states as any Holder requesting 
registration may reasonably request, and the Company shall use reasonable 
efforts to cause such filings to become qualified; provided, however, that 
                                                   --------  -------
the Company shall not be obligated to qualify as a foreign corporation to do 
business under the laws of any such state in which it is not then qualified or 
to file any general consent to service of process in any such state. Once 
qualified, the Company shall use reasonable efforts to keep such filings 
qualified until the earlier of (a) such time as all of the Registrable Shares 
have been disposed of in accordance with the intended methods of disposition by 
the Holder as set forth in the Registration Statement, (b) in the case of a 
particular state, a Holder has notified the Company that it no longer requires 
qualified filing in such state in accordance with its original request for 
filing or (c) the date on which the Registration Statement ceases to be
effective with the SEC. The Company shall promptly notify each Holder requesting
registration of, and confirm in writing, the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Shares for sale under the securities or "Blue Sky" laws of any
jurisdiction or the initiation or threat of any proceeding for such purpose.

     4.  Expenses. The Company shall bear all expenses incurred in connection 
         -------- 
with the registration of the Registrable Shares pursuant to Section 1(b) and 
Section 1(c) of this Agreement. Additionally, the Company shall bear all
expenses incurred in connection with the registration of the Registrable Shares
pursuant to Section 1(a) of this Agreement for each Registration Statement
registering One Million Dollars ($1 million) or more of Registrable Shares. The
Holders shall bear their ratable share of all expenses incurred by the Company
in connection with a registration in which the Holders are included pursuant to
Section 1(a) of this Agreement based on the number of Registrable Shares
included to the total number of shares of Common Stock so registered for each
Registration Statement registering less than One Million Dollars ($1 million) of
Registrable Shares. Such expenses shall include, without limitation, all
printing, legal and accounting expenses incurred by the Company and all
registration and filing fees imposed by the SEC, and state securities commission
or the New York Stock Exchange or, if the Common Stock is not then listed on the
New York Stock Exchange, the principal national securities exchange or national
market system on which the Common Stock is then traded or quoted. In addition,
Holders shall be responsible for any brokerage or underwriting commissions and
taxes of any kind (including, without limitation, transfer taxes) with respect
to any disposition, sale or transfer of Registrable Shares and for any legal,
accounting and other expenses incurred by them in connection with any
Registration Statement.

     5.  Indemnification by the Company. The Company agrees to indemnify each 
         ------------------------------
of the Holders and their respective officers, directors, employees, agents, 
partners, trustees representatives and affiliates, and each person or entity, if
any, that controls a Holder within the meaning of the Securities Act, and each
other person or entity, if any, subject to liability because of his, her or its
connection with a Holder, and any underwriter and any person who controls the
underwriter within the meaning of the Securities Act (an "Indemnitee") against
any and all losses, claims, damages, actions, liabilities, costs, and expenses
(including without limitation reasonable attorneys' fees, expenses and
disbursements documented in writing),

                                       5
<PAGE>
 
joint or several, arising out of or based upon any untrue or alleged untrue 
statement of material fact contained in the Registration Statement or any 
prospectus contained therein, or any omission or alleged omission to state 
therein a material fact required to be stated therein or necessary to make the 
statements therein, in light of the circumstances under which they were made, 
not misleading, except insofar as and to the extent that such statement or 
omission arose out of or was based upon information regarding the Indemnitee or 
its plan of distribution which was furnished to the Company by the Indemnitee 
for use therein, provided, further that the Company shall not be liable to any
person who participates as an underwriter in the offering or sale of Registrable
Shares or any other person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with information furnished to
the Company for use in connection with the Registration Statement or the
prospectus contained therein by such Indemnitee or (ii) such Indemnitee's
failure to send or give a copy of the final prospectus furnished to it by the
Company at or prior to the time such action is required by the Securities Act to
the person claiming an untrue statement or alleged untrue statement or omission
or alleged omission if such statement or omission was corrected in such final
prospectus. The obligations of the Company under this Section 5 shall survive
the completion of any offering of Registrable Shares pursuant to a Registration
Statement under this Agreement or otherwise and shall survive the termination of
this Agreement.

     6.    Covenants of Holders. Each of the Holders hereby agrees (a) to
           --------------------
cooperate with the Company and to furnish to the Company all such information in
connection with the preparation of the Registration Statement and any filings
with any state securities commissions as the Company may reasonably request, 
(b) to the extent required by the Securities Act, to deliver or cause delivery 
of the prospectus contained in the Registration Statement to any purchaser of
the shares covered by the Registration Statement from the Holder, (c) to notify
the Company of any sale of Registrable Shares by such Holder and (d) to
indemnify the Company, its officers, directors, employees, agents,
representatives and affiliates, and each person, if any, who controls the
Company within the meaning of the Securities Act, and each other person, if any,
subject to liability because of his connection with the Company, against any and
all losses, claims, damages, actions, liabilities, costs and expenses arising
out of or based upon (i) any untrue statement or alleged untrue statement of
material fact contained in either the Registration Statement or the prospectus
contained therein, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, if and to the extent that such statement or omission arose out of or
was based upon information regarding the Holder or its plan of distribution
which was furnished to the Company by the Holder for use therein, or (ii) the
failure by the Holder to deliver or cause to be delivered the prospectus
contained in the Registration Statement (as amended or supplemented, if
applicable) furnished by the Company to the Holder to any purchaser of the

                                       6




     
<PAGE>
 
shares covered by the Registration Statement from the Holder. Notwithstanding 
the foregoing, (i) in no event will a Holder have any obligation under this 
Section 6 for amounts the Company pays in settlement of any such loss, claim, 
damage, liability or action if such settlement is effected without the consent 
of the Holder (which consent shall not be unreasonably withheld) and (ii) the 
total amount for which a Holder shall be liable under this Section 6 shall not 
in any event exceed the aggregate proceeds received by him or it from the sale 
of the Holder's Registrable Shares in such registration. The obligations of the 
Holders under this Section 6 shall survive the completion of any offering of 
Registrable Shares pursuant to a Registration Statement under this Agreement or
otherwise and shall survive the termination of this Agreement.

     7.   Suspension of Registration Requirement.
          --------------------------------------

     (a)  The Company shall promptly notify each Holder requesting registration 
of, and confirm in writing, the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any 
proceedings for that purpose. The Company shall use reasonable efforts to obtain
the withdrawal of any order suspending the effectiveness of the Registration 
Statement as soon as practicable.

     (b)  Notwithstanding anything to the contrary set forth in this Agreement, 
the Company's obligation under this Agreement to use reasonable efforts to cause
the Registration Statement and any filings with any state securities commission 
to be made or become effective or to amend or supplement the Registration 
Statement shall be suspended in the event and during such period pending 
negotiations relating to, or consummation of, a transaction or the occurrence of
an event that would require additional disclosure of material information by the
Company in the Registration Statement or such filing (such circumstances being 
hereinafter referred to as a "Suspension Event") that would make it impractical 
or unadvisable to cause the Registration Statement or such filings to be made or
to become effective or to amend or supplement the Registration Statement, but 
such suspension shall continue only for so long as such event or its effect is 
continuing but in no event will that suspension exceed ninety (90) days. The 
Company agrees not to exercise the rights set forth in this Section 7(b) more 
than twice in any twelve month period. In the event any Holder requests 
registration during a Suspension Event, the Company shall notify the Holder of 
the existence of such Suspension Event. If any Registration Statement is 
suspended pursuant to this Section 7(b), the period during which the Company 
agrees to use reasonable efforts to keep a Demand Registration Statement 
continuously effective pursuant to Section 1(a) hereof shall be extended by the 
number of days of such suspension and if such Registration Statement is 
withdrawn, it shall not count as a Registration Statement for purposes of this 
Agreement.

     (c)  Each holder of Registrable Shares whose Registrable Shares are covered
by a Registration Statement filed pursuant to Section 1 hereof agrees, if 
requested by the Company in the case of a nonunderwritten offering (a 
"Nonunderwritten Offering") or if requested by the managing underwriter or 
underwriters in an underwritten offering (an "Underwritten Offering," 
collectively with Nonuderwritten Offering, the "Offering"), not to effect any

                                       7

<PAGE>
 
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A 
under the Securities Act (except as part of such Offering), during the 15-day 
period prior to, and during the 90-day period (or such longer period as may be 
required by the managing underwriter or underwriters) beginning on, the date of 
pricing of each Offering, to the extent timely notified in writing by the 
Company or the managing underwriters. Furthermore, notwithstanding anything to 
the contrary set forth in this Agreement, the Company's obligation under this 
Agreement to use reasonable efforts to cause the Registration Statement and any 
filings with any state securities commission to be made or to become effective 
or to amend or supplement the Registration Statement shall be suspended in the 
event and during such period as the Company is proceeding with an Underwritten 
Offering if the Company is advised by the underwriters that the sale of 
Registrable Shares under a Registration Statement would have a material adverse 
effect on the Underwritten Offering.

      8.    Black-Out Period. Following the effectiveness of the Registration
            ----------------
Statement and the filings with any state securities commissions, the Holders
agree that they will not effect any sales of the Registrable Shares pursuant to
the Registration Statement or any such filings at any time after they have
received notice from the Company to suspend sales (i) as a result of the
occurrence or existence of any Suspension Event, (ii) during any Offering, or
(iii) so that the Company may correct or update the Registration Statement or
such filing pursuant to Section 2(c) or 2(d). The Holder may recommence
effecting sales of the Registrable Shares pursuant to the Registration Statement
or such filings following further notice to such effect from the Company, which
notice shall be given by the Company not later than five (5) business days after
the conclusion of any such Suspension Event or Offering. If sales are suspended
pursuant to Section 8, the period during which the Company agrees to use
reasonable efforts to keep a Demand Registration Statement continuously
effective pursuant to Section 1(a) hereof shall be extended by the number of
days of such suspension.

      9.    Additional Shares. The Company, at its option, may register, under
            -----------------
any registration statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.

      10.   Contribution. If the indemnification provided for in Sections 5 and 
            ------------
6 is unavailable to an indemnified party with respect to any losses, claims, 
damages, actions, liabilities, costs or expenses referred to therein or is 
insufficient to hold the indemnified party harmless as contemplated therein, 
then the indemnifying party, in lieu of indemnifying such indemnified party, 
shall contribute to the amount paid or payable by such indemnified party as a 
result of such losses, claims, damages, actions, liabilities, costs or expenses 
in such proportion as is appropriate to reflect the relative fault of the 
Company, on the one hand, and the Holder, on the other hand, in connection with
the statements or omissions which resulted in such losses, claims, damages,
actions, liabilities, costs or expenses as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holder, on the other hand, shall be determined by reference to, among other
factors,

                                       8
<PAGE>
 
whether the untrue or alleged untrue statement of a material fact or omission to
state a material fact relates to information supplied by the Company or by the 
Holder and the parties' relative intent, knowledge, access to information and 
opportunity to correct or prevent such statement or omission; provided, however,
                                                              --------  -------
that in no event shall the obligation of any indemnifying party to contribute 
under this Section 10 exceed the amount that such indemnifying party would have 
been obligated to pay by way of indemnification if the indemnification provided 
for under Sections 5 or 6 hereof had been available under the circumstances.

     The Company and the Holders agree that it would not be just and equitable 
if contribution pursuant to this Section 10 were determined by pro rata 
allocation or by any other method of allocation that does not take account of 
the equitable considerations referred to in the immediately preceding paragraph.

     No indemnified party guilty of fraudulent misrepresentation (within the 
meaning of Section 11(f) of the Securities Act) shall be entitled to 
contribution from any indemnifying party who was not guilty of such fraudulent 
misrepresentation.

     11.  No Other Obligation to Register. Except as otherwise expressly 
          -------------------------------
provided in this Agreement, the Company shall have no obligation to the Holders 
to register the Units or the Registrable Shares under the Securities Act.

     12.  Amendments and Waivers. The provisions of this Agreement may not be 
          ----------------------
amended, modified or supplemented without the prior written consent of the 
Company and Holders holding in excess of 50% of the Registrable Shares.

     13.  Notices. Except as set forth below, all notices and other 
          -------
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by registered 
or certified mail (return receipt requested), postage prepaid or courier or 
overnight delivery service to the Company at the following address and to the 
Holder at the address set forth on his or her signature page to this Agreement 
(or at such other address for any party as shall be specified by like notice, 
provided that notices of a change of address shall be effective only upon 
receipt thereof), and further provided that in case of directions to amend the 
Registration Statement pursuant to Section 2(b) or Section 6, a Holder must make
such notice in writing by overnight express delivery with confirmation of 
receipt:

          If to the Company:  Patriot American Hospitality, Inc.
                              3030 LBJ Freeway, Suite 1500
                              Dallas, TX 75234
                              Attn: Paul A. Nussbaum
                                    Chief Executive Officer

                              Telephone:  (214) 888-8000
                              Telecopy:   (214) 888-8065

                                       9
<PAGE>
 
                                With a copy to:

                                Goodwin, Procter & Hoar LLP 
                                Exchange Place
                                Boston, MA 02109
                                Attn:   Gilbert G. Menna, P.C.

                                Telephone:   (617) 570-1000
                                Telecopy:    (617) 523-1231

In addition to the manner of notice permitted above, notices given pursuant to 
Sections 1, 7 and 8 hereof may be effected telephonically and confirmed in 
writing thereafter in the manner described above.

     14.   Successors and Assigns.  This Agreement shall be binding upon and 
           ----------------------
inure to the benefit of the successors and assigns of the Company.  This 
Agreement may not be assigned by any Holder and any attempted assignment hereof 
by any Holder will be void and of no effect.

     15.   Counterparts.  This Agreement may be executed in any number of 
           ------------
counterparts and by the parties hereto in separate counterparts, each of which 
when so executed shall be deemed to be an original and all of which taken 
together shall constitute one and the same agreement.

     16.   Governing Law.  This Agreement shall be governed by and construed in 
           -------------
accordance with the laws of the Commonwealth of Virginia applicable to 
contracts made and to be performed wholly within said Commonwealth.

     17.   Severability.  In the event that any one or more of the provisions 
           ------------
contained herein, or the application thereof in any circumstances, is held 
invalid, illegal or unenforceable in any respect for any reason, the validity, 
legality and enforceability of any such provision in every other respect and of 
the remaining provisions contained herein shall not be in any way impaired 
thereby, it being intended that all of the rights and privileges of the parties 
hereto shall be enforceable to the fullest extent permitted by law.  

     18.   Entire Agreement.  This Agreement is intended by the parties as a 
           ----------------
final expression of their agreement and intended to be the complete and 
exclusive statement of the agreement and understanding of the parties hereto in 
respect of the subject matter contained herein.  There are no restrictions, 
promises, warranties or undertakings, other than those set forth or referred to 
herein, with respect to such subject matter.  This Agreement supersedes all 
prior agreements and understandings between the parties with respect to such 
subject matter.

                                      10
        
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of 
the date first written above.

                                  PATRIOT AMERICAN HOSPITALITY, INC.

                                  /s/ Michael Murphy
                                  ---------------------------------
                                  Name: Michael Murphy
                                  Title: Senior Vice President


                                      11
<PAGE>
 
                         Registration Rights Agreement
                             Holder Signature Page

                                       Lyon RLP Investments Partnership

                                       /s/ Roy A. Brown
                                       ---------------------------------------
                                       By:  Roy A. Brown
                                       Its: General Partner

                                       Address for Notice:

                                       11411 North Tatum Boulevard
                                       Phoenix, AZ 85028-2399


                                      12
<PAGE>
 
                                   EXHIBIT A

                                                                          [Date]

                        FORM OF AUTHORIZING CERTIFICATE

     Each of the undersigned Holders, together holding at least twenty-five 
percent (25%) of the aggregate number of all of the Holders' Registrable Shares,
hereby certifies that:

     1.  Such Holder's name is set forth below, and the number of Registrable
         Shares held by such Holder and the number of Registrable Shares, if
         different, such Holder would like to have registered is set forth
         opposite such Holder's name.

<TABLE> 
<CAPTION> 
                 Number of              Number of Registrable
     Name        Registrable Shares     Shares Desired to be Registered
     ----        ------------------     -------------------------------
     <S>         <C>                    <C> 

</TABLE> 

     2.  Such Holder is requesting the registration of only those shares of
         Common Stock received by such Holder upon the redemption of its Units
         pursuant to the Purchase and Sale Agreement.

     EXECUTED as of the date set forth above.

                     
                                        [Signatures of Holders]

                                      13

<PAGE>
 
                                                                    Exhibit 99.8

                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

     This Registration Rights Agreement (this "Agreement") is entered into as 
of January 17, 1997 by and between Patriot American Hospitality, Inc., a 
Virginia corporation (the "Company") and each of the parties executing a 
signature page hereto (each a "Holder" and collectively the "Holders"). 

     WHEREAS, the Holders are to receive units of limited partnership interest 
("Units") in Patriot American Hospitality Partnership, L.P., a Virginia limited 
partnership (the "Operating Partnership") which may be redeemed for cash, or at 
the option of the Company, for an equivalent number of shares of the Company's 
common stock, no par value ("Common Stock"), pursuant to a Contribution 
Agreement dated January 17, 1997 by and among the Holders, the Operating 
Partnership, the Company and the general partner of the Operating Partnership 
(the "Contribution Agreement").

     NOW, THEREFORE,  in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of 
which are hereby acknowledged, the parties hereto hereby agree as follows:

     1.   Registration.
          ------------

     (a)  Demand Registration.
          -------------------

          (i) In the event the provisions of this Section are effective pursuant
to Section 1(c) hereof, on any two (2) occasions after August 15, 1997 until the
earlier of (i) the third anniversary of this Agreement or (ii) the date on which
all of the Registrable Shares (as hereinafter defined) have become eligible for 
sale pursuant to Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act") without any volume or manner of sale limitations,
subject to the conditions set forth in this Agreement, including without
limitation the conditions set forth in Section 1(a) (ii) below, any Holder or
Holders may request that the Company cause to be filed a registration statement
(a "Demand Registration Statement") under Rule 415 under the Securities Act
relating to the sale by such Holders of their previously or concurrently issued
Registrable Shares in accordance with the terms hereof. As used in this
Agreement, the term "Registrable Shares" means shares of Common Stock issued or
to be issued to the Holders upon redemption or in exchange for their Units,
excluding (A) Common Stock for which a Registration Statement relating to the
sale thereof shall have become effective under the Securities Act or (C) Common
Stock eligible for sale pursuant to Rule 144 under the Securities Act without
any volume or manner of sale limitations. Upon receipt of any such request, the
Company shall give written notice of such proposed registration to all Holders
of Units and Registrable Shares. Such Holders shall have the right, by giving
written notice to the Company within fifteen (15) business days after such
notice referred to in the preceding sentence has been given by the Company to
elect to have included in the Demand Registration Statement such of their
Registrable Shares as each Holder may request in such notice of election.
Thereupon, the Company shall use reasonable efforts to cause such Demand
Registration Statement to             
<PAGE>
 
be filed and declared effective by the Securities and Exchange Commission (the 
"SEC") (provided that such Demand Registration Statement shall not be required 
to be declared effective before September 30, 1997) for all Registrable Shares 
which the Company has been requested to register as soon as practicable 
thereafter.  The Company agrees to use reasonable efforts to keep the Demand 
Registration Statement continuously effective until the earliest of (a) the date
on which the Holders no longer hold any Registrable Shares registered under the 
Demand Registration Statement, (b) the date on which the Registrable Shares may 
be sold by the Holders pursuant to Rule 144 promulgated under the Securities Act
without any volume or manner of sale limitations or (c) the date which is twelve
(12) months from the effective date of such Demand Registration Statement.  The 
Company shall not be required to file and effect a new Demand Registration 
Statement pursuant to this Section 1(a) until a period of twelve (12) months has
elapsed from the termination of the registration statement with respect to 
Registrable Shares covered by a prior registration request.  A registration 
demanded pursuant to this Section 1(a)(i) shall not be deemed to have been 
effected (i) unless a registration statement with respect thereto has become 
effective for such period as is described above, and (ii) if after it has become
effective, such registration is interfered with by any stop order, injunction or
other order or requirement of the Securities and Exchange Commission or other 
governmental authority.

        (ii)  The Company shall have no obligation under Section 1(a)(i) unless 
the following conditions are satisfied:

              (A)  Any Holder who requests that the Company cause to be filed a 
     Demand Registration Statement pursuant to Section 1(a)(i) must provide to
     the Company a certificate (the "Authorizing Certificate"), substantially in
     the form of Exhibit A hereto, that is signed by the Holders of at least 
                 ---------
     twenty-five percent (25%) of the aggregate number of all outstanding
     Registrable Shares, at the time such request is made. The Authorizing
     Certificate shall set forth (i) the name of each Holder signing such
     Authorizing Certificate, (ii) the number of Registrable Shares held by each
     such Holder, and, if different, the number of Registrable Shares such
     Holder has elected to have registered, and (iii) a certification from each
     such Holder that it is requesting the registration of only those shares of
     Common Stock received by such Holder upon the redemption of its Units
     acquired pursuant to the Contribution Agreement. Any Registrable Shares
     eligible for sale pursuant to Rule 144 promulgated under the Securities Act
     without any volume or manner of sale limitations shall not be included for
     purposes of calculating the percentage of Holders required to sign an
     Authorizing Certificate. If the Company determines that a Holder's Shares
     have become eligible for sale pursuant to Rule 144 without any volume or
     manner of sale limitations, the Company shall, at the request of such
     Holder, deliver to such Holder an opinion of counsel to such effect.

     (b)  Piggyback Registration.  If at any time while the provisions of this 
          ----------------------
Section are effective pursuant to Section 1(c) hereof any Registrable Shares are
outstanding the Company proposes to file a registration statement under the
Securities Act with respect to an offering of Common Stock solely for cash
(other than a registration statement (i) on Form S-8

                                     - 2 -
<PAGE>
 
or any successor form or in connection with any employee or director welfare,
benefit or compensation plan, (ii) on Form S-4 or any successor form or in
connection with an exchange offer, (iii) in connection with a rights offering or
a dividend reinvestment and share purchase plan offered exclusively to existing
holders of Common Stock, (iv) in connection with an offering solely to employees
of the Company or its affiliates, or (v) relating to a transaction pursuant to
Rule 145 of the Securities Act, whether or not for its own account (a "Piggyback
Registration Statement"), the Company shall give to the Holders of Units and
Registrable Shares written notice of such proposed filing at least ten (10)
business days before filing. The notice referred to in the preceding sentence
shall offer Holders the opportunity to register such amount of Registrable
Shares as each Holder may request (a "Piggyback Registration"). Subject to the
provisions of Section 2 below, the Company shall include in such Piggyback
Registration all Registrable Shares requested to be included in the registration
for which the Company has received written requests for inclusion therein within
five (5) business days after the notice referred to above has been given by the
Company to the Holders. Holders of Registrable Shares shall be permitted to
withdraw all or part of the Registrable Shares from a Piggyback Registration at
any time prior to the effective date of such Piggyback Registration. If a
Piggyback Registration is an underwritten registration on behalf of the Company
and the managing underwriter advises the Company that the total number of shares
of Common Stock requested to be included in such registration exceeds the number
of shares of Common Stock which can be sold in such offering, the Company will
include in such registration in the following priority: (i) first, all shares of
Common Stock the Company proposes to sell and (ii) second, up to the full number
of applicable Registrable Shares requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without
adversely affecting the price range or probability of success of such offering,
which shall be allocated among the Holders requesting registration and all other
stockholders requesting registration on a pro rata basis. No Registrable
Securities or other shares of Common Stock requested to be included in a
registration pursuant to demand registration rights shall be excluded from the
underwriting unless all securities other than such securities are first
excluded.

     (c)  Registration Statement Covering Issuance of Common Stock. 
          --------------------------------------------------------
Notwithstanding the registration rights set forth in Section 1(a) and 1(b) 
above, unless the Company shall have delivered to the Holders an irrevocable 
election to pay cash to the Holders upon the redemption or exchange of their 
Units the Company shall, prior to August 15, 1997 request clearance from the SEC
to file and shall file a registration statement (the "Shelf Registration 
Statement") under Rule 415 under the Securities Act relating to the issuance to 
Holders of shares of Common Stock upon the redemption or in exchange for their 
Units. Thereupon, the Company shall use reasonable efforts to cause such 
Registration Statement to be declared effective by the SEC for all shares of 
Common Stock covered thereby on or before September 30, 1997. The Company agrees
to use reasonable efforts to keep the Shelf Registration Statement continuously 
effective until the date on which each Holder has redeemed or exchanged such 
Holder's Units for Common Stock. In the event that the Company is unable to 
cause such Registration Statement to be declared effective by the SEC or is 
unable to keep such Registration Statement effective until the date on which 
each


                                     - 3 -
<PAGE>
 
Holder has redeemed or exchanged such Holder's Units for Common Stock, then the 
rights of each Holder set forth in Section 1(a) and 1(b) above shall be 
effective. Any Demand Registration Statement, Piggyback Registration Statement 
or Shelf Registration Statement is sometimes referred to as a "Registration 
Statement."

     2.   Registration Procedures.
          -----------------------

     (a)  The Company shall notify each Holder requesting registration of the 
effectiveness of the Registration Statement filed pursuant thereto and shall 
furnish to each such Holder such number of copies of the Registration Statement 
(including any amendments, supplements and exhibits), the prospectus contained 
therein (including each preliminary prospectus), any documents incorporated by 
reference in the Registration Statement and such other documents as such Holder 
may reasonably request in order to facilitate its sale of the Registrable Shares
in the manner described in the Registration Statement.

     (b)  The Company shall prepare and file with the SEC from time to time such
amendments and supplements to the Registration Statement and prospectus used in 
connection therewith as may be necessary to keep the Registration Statement 
effective and to comply with the provisions of the Securities Act with respect 
to the disposition of all the Registrable Shares until the earlier of (i) such 
time as all of the Registrable Shares have been issued or disposed of in 
accordance with the intended methods of disposition by the Holders as set forth 
in the Registration Statement or (ii) the date on which the Registration 
Statement ceases to be effective in accordance with the terms of Section 1. Upon
ten (10) business days' notice, the Company shall file any supplement or 
post-effective amendment to the Registration Statement with respect to such 
Holder's interests in or plan of distribution of Registrable Shares that is 
reasonably necessary to permit the sale of the Holder's Registrable Shares 
pursuant to the Registration Statement and the Company shall file any necessary 
listing applications or amendments to the existing applications to cause the 
shares to be then listed or quoted on the primary exchange or quotation system 
on which the Common Stock is then listed or quoted.

     (c)  The Company shall promptly notify each Holder requesting registration 
of, and confirm in writing, any request by the SEC for amendments or supplements
to the Registration Statement or the prospectus related thereto or for 
additional information. In addition, the Company shall promptly notify each such
Holder of, and confirm in writing, the filing of the Registration Statement, any
prospectus supplement related thereto or any post-effective amendment to the 
Registration Statement and the effectiveness of any post-effective amendment.

     (d)  The Company shall promptly notify each Holder requesting registration,
at any time when a prospectus relating to the Registration Statement is required
to be delivered under the Securities Act, of the happening of any event as a 
result of which the prospectus included in the Registration Statement, as then 
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements 
therein, in light of the circumstances under which they were made, not 
misleading. In such event 

                                     - 4 -
<PAGE>
 
and subject to paragraph 7 of this Agreement, the Company shall prepare and 
furnish to each such Holder a reasonable number of copies of a supplement to or 
an amendment of such prospectus as may be necessary so that, as thereafter 
delivered to the purchasers of Registrable Shares, such prospectus shall not 
include an untrue statement of a material fact or omit to state a material fact 
required to be stated therein or necessary to make the statements therein, in 
light of the circumstances under which they are made, not misleading.  

     3.    State Securities Laws.  Subject to the conditions set forth in this
           ----------------------
Agreement, the Company shall, promptly upon the filing of a Registration 
Statement including Registrable Shares, file such documents as may be necessary 
to register or qualify the Registrable Shares under the securities or "Blue Sky"
laws of such states as any Holder requesting registration may reasonably 
request, and the Company shall use reasonable efforts to cause such filings to 
become qualified; provided, however, that the Company shall not be obligated to 
                  --------  -------
qualify as a foreign corporation to do business under the laws of any such state
in which it is not then qualified or to file any general consent to service of 
process in any such state.  Once qualified, the Company shall use reasonable 
efforts to keep such filings qualified until the earlier of (a) such time as all
of the Registrable Shares have been disposed of in accordance with the intended 
methods of disposition by the Holder as set forth in the Registration Statement,
(b) in the case of a particular state, a Holder has notified the Company that it
no longer requires qualified filing in such state in accordance with its
original request for filing or (c) the date on which the Registration Statement
ceases to be effective with the SEC. The Company shall promptly notify each
Holder requesting registration of, and confirm in writing, the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Registrable Shares for sale under the securities or "Blue Sky" laws of
any jurisdiction or the initiation or threat of any proceeding for such purpose.

     4.    Expenses.  The Company shall bear all expenses incurred in connection
           --------
with the registration of the Registrable Shares pursuant to Section 1(b) and
Section 1(c) of this Agreement. Additionally, the Company shall bear all
expenses incurred in connection with the registration of the Registrable Shares
pursuant to Section 1(a) of this Agreement for each Registration Statement
registering One Million Dollars ($1 million) or more of Registrable Shares. The
Holders shall bear their ratable share of all expenses incurred by the Company
in connection with a registration in which the Holders are included pursuant to
Section 1(a) of this Agreement based on the number of Registrable Shares
included to the total number of shares of Common Stock so registered for each
Registration Statement registering less than One Million Dollars ($1 million) of
Registrable Shares. Such expenses shall include, without limitation, all
printing, legal and accounting expenses incurred by the Company and all
registration and filing fees imposed by the SEC, any state securities commission
or the New York Stock Exchange or, if the Common Stock is not then listed on the
New York Stock Exchange, the principal national securities exchange or national
market system on which the Common Stock is then traded or quoted. In addition,
Holders shall be responsible for any brokerage or underwriting commissions and
taxes of any kind (including, without limitation, transfer taxes) with respect
to any disposition, sale or transfer of Registrable

                                     - 5 -
<PAGE>
 
Shares and for any legal, accounting and other expenses incurred by them in 
connection with any Registration Statement.

     5.    Indemnification by the Company.  The Company agrees to indemnify each
           ------------------------------
of the Holders and their respective officers, directors, employees, agents, 
representatives and affiliates, and each person or entity, if any, that controls
a Holder within the meaning of the Securities Act, and each other person or 
entity, if any, subject to liability because of his, her or its connection with 
a Holder, and any underwriter and any person who controls the underwriter within
the meaning of the Securities Act (an "Indemnitee") against any and all losses, 
claims, damages, actions, liabilities, costs and expenses (including without 
limitation reasonable attorneys' fees, expenses and disbursements documented in 
writing), joint or several, arising out of or based upon any untrue or alleged 
untrue statement of material fact contained in the Registration Statement or any
prospectus contained therein, or any omission or alleged omission to state 
therein a material fact required to be stated therein or necessary to make the 
statements therein, in light of the circumstances under which they were made, 
not misleading, except insofar as and to the extent that such statement or 
omission arose out of or was based upon information regarding the Indemnitee or 
its plan of distribution which was furnished in writing to the Company by the 
Indemnitee for use therein, provided, further that the Company shall not be 
liable to any person who participates as an underwriter in the offering or sale 
of Registrable Shares or any other person, if any, who controls such underwriter
within the meaning of the Securities Act, in any such case to the extent that 
any such loss, claim, damage, liability (or action or proceeding in respect 
thereof) or expense arises out of or is based upon (i) an untrue statement or 
alleged untrue statement or omission or alleged omission made in such
Registration Statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information furnished in writing to the Company for use in connection with
the Registration Statement or the prospectus contained therein by such
Indemnitee or (ii) such Indemnitee's failure to send or give a copy of the final
prospectus furnished to it by the Company at or prior to the time such action is
required by the Securities Act to the person claiming an untrue statement or
alleged untrue statement or omission or alleged omission if such statement or
omission was corrected in such final prospectus. The obligations of the Company
under this Section 5 shall survive the completion of any offering of Registrable
Shares pursuant to a Registration Statement under this Agreement or otherwise
and shall survive the termination of this Agreement.

     6.    Covenants of Holders.  Each of the Holders hereby agrees (a) to 
           --------------------
cooperate with the Company and to furnish to the Company all such information in
connection with the preparation of the Registration Statement and any filings 
with any state securities commissions as the Company may reasonably request, (b)
to the extent required by the Securities Act, to deliver or cause delivery of
the prospectus contained in the Registration Statement to any purchaser of the
shares covered by the Registration Statement from the Holder, (c) to notify the
Company of any sale of Registrable Shares by such Holder and (d) to indemnify
the Company, its officers, directors, employees, agents, representatives and
affiliates, and each person, if any, who controls the Company within the meaning
of the
                                     - 6 -

<PAGE>
 
Securities Act, and each other person, if any, subject to liability because of 
his connection with the Company, against any and all losses, claims, damages, 
actions, liabilities, costs and expenses arising out of or based upon (i) any 
untrue statement or alleged untrue statement of material fact contained in 
either the Registration Statement or the prospectus contained therein, or any 
omission or alleged omission to state therein a material fact required to be 
stated therein or necessary to make the statements therein, in light of the 
circumstances under which they were made, not misleading, if and to the extent 
that such statement or omission arose out of or was based upon information 
regarding the Holder or its plan of distribution which was furnished in writing 
to the Company by the Holder for use therein. Notwithstanding the foregoing, (i)
in no event will a Holder have any obligation under this Section 6 for amounts 
the Company pays in settlement of any such loss, claim, damage, liability or 
action if such settlement is effected without the consent of the Holder (which 
consent shall not be unreasonably withheld) and (ii) the total amount for which 
a Holder shall be liable under this Section 6 shall not in any event exceed the 
aggregate proceeds received by him or it from the sale of the Holder's 
Registrable Shares in such registration. The obligations of the Holders under 
this Section 6 shall survive the completion of any offering of Registrable 
Shares pursuant to a Registration Statement under this Agreement or otherwise 
and shall survive the termination of this Agreement. 

     7.  Suspension of Registration Requirement.
         --------------------------------------

     (a) The Company shall promptly notify each Holder requesting registration 
of, and confirm in writing, the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any 
proceedings for that purpose. The Company shall use reasonable efforts to obtain
the withdrawal of any order suspending the effectiveness of the Registration 
Statement as soon as practicable. 

     (b) Notwithstanding anything to the contrary set forth in this Agreement, 
the Company's obligation under this Agreement to use reasonable efforts to cause
the Registration Statement and any filings with any state securities commission 
to be made or to become effective or to amend or supplement the Registration 
Statement shall be suspended in the event and during such period pending 
negotiations relating to, or consummation of, a transaction or the occurrence of
an event that would require additional disclosure of material information by the
Company in the Registration Statement or such filing (such circumstances being 
hereinafter referred to as a "Suspension Event") that in the judgment of the 
Board of Directors of the Company would make it impractical or unadvisable to 
cause the Registration Statement or such filings to be made or to become 
effective or to amend or supplement the Registration Statement, but such 
suspension shall continue only for so long as such event or its effect is 
continuing but in no event will that suspension exceed sixty (60) days. The 
Company agrees not to exercise the rights set forth in this Section 7(b) more 
than twice in any twelve month period. In the event any Holder requests 
registration during a Suspension Event, the Company shall notify the Holder of 
the existence of such Suspension Event.

     (c) Each holder of Registrable Shares whose Registrable Shares are covered 
by a Registration Statement filed pursuant to Section 1 hereof

                                     - 7 -
<PAGE>
 
agrees, if requested by the Company in the case of a nonunderwritten offering (a
"Nonunderwritten Offering") or if requested by the managing underwriter or 
underwriters in an underwritten offering (an "Underwritten Offering," 
collectively with Nonunderwritten Offering, the "Offering"), not to effect any 
public sale or distribution of any of the securities of the Company of any class
included in such Offering, including a sale pursuant to Rule 144 or Rule 144A 
under the Securities Act (except as part of such Offering), during the 15-day 
period prior to, and in the case of an Underwritten Offering during the 90-day 
period (or such longer period as may be required by the managing underwriter or 
underwriters) beginning on, the date of pricing of each Offering, to the extent 
timely notified in writing by the Company or the managing underwriters; provided
in the case of a Nonunderwritten Offering the Company may make this request only
once during each six month period. Furthermore, notwithstanding anything to the 
contrary set forth in this Agreement, the Company's obligation under this 
Agreement to use reasonable efforts to cause the Registration Statement and any 
filings with any state securities commission to be made or to become effective 
or to amend or supplement the Registration Statement shall be suspended in the 
event and during such period as the Company is proceeding with an Underwritten 
Offering if the Company is advised by the underwriters that the sale of 
Registrable Shares under a Registration Statement would have a material adverse 
effect on the Underwritten Offering.

     8.   Black-Out Period.  Following the effectiveness of the Registration 
          ----------------
Statement and the filings with any state securities commissions, the Holders 
agree that they will not effect any sales of the Registrable Shares pursuant to 
the Registration Statement or any such filings at any time after they have 
received notice from the Company to suspend sales (i) as a result of the 
occurrence or existence of any Suspension Event, (ii) during any Offering if the
Company or the managing underwriter has requested the Holders to not effect 
public sales under Section 7(c), or (iii) so that the Company may correct or 
update the Registration Statement or such filing pursuant to Section 2(c) or 
2(d). The Holder may recommence effecting sales of the Registrable Shares 
pursuant to the Registration Statement or such filings following further notice 
to such effect from the Company, which notice shall be given by the Company not 
later than five (5) business days after the conclusion of any such Suspension 
Event or Offering. The Company will extend the period any Registration Statement
must remain effective by the number of days during which Holders must suspend 
sales under this Section 8.

     9.   Additional Shares.  The Company, at its option, may register, under 
          -----------------
any registration statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock 
or any shares of Common Stock owned by any other shareholder or shareholders of 
the Company.

     10.  Contribution.  If the indemnification provided for in Sections 5 and 6
          ------------
is unavailable to an indemnified party with respect to any losses, claims, 
damages, actions, liabilities, costs or expenses referred to therein or is 
insufficient to hold the indemnified party harmless as contemplated therein, 
then the indemnifying party, in lieu of indemnifying such indemnified party, 
shall contribute to the amount paid or payable by such indemnified party as a 
result of such losses, claims, damages,

                                     - 8 -
<PAGE>
 
actions, liabilities, costs or expenses in such proportion as is appropriate to 
reflect the relative fault of the Company, on the one hand, and the Holder, on 
the other hand, in connection with the statements or omissions which resulted 
in such losses, claims, damages, actions, liabilities, costs or expenses as well
as any other relevant equitable considerations. The relative fault of the 
Company, on the one hand, and of the Holder, on the other hand, shall be 
determined by reference to, among other factors, whether the untrue or alleged 
untrue statement of a material fact or omission to state a material fact 
relates to information supplied by the Company or by the Holder and the parties'
relative intent, knowledge, access to information and opportunity to correct or 
prevent such statement or omission; provided, however, that in no event shall 
                                    --------  -------
the obligation of any indemnifying party to contribute under this Section 10 
exceed the amount that such indemnifying party would have been obligated to pay 
by way of indemnification if the indemnification provided for under Sections 5 
or 6 hereof had been available under the circumstances.

     The Company and the Holders agree that it would not be just and equitable 
if contribution pursuant to this Section 10 were determined by pro rata 
allocation or by any other method of allocation that does not take account of 
the equitable considerations referred to in the immediately preceding paragraph.

     No indemnified party guilty of fraudulent misrepresentation (within the 
meaning of Section 11(f) of the Securities Act) shall be entitled to 
contribution from any indemnifying party who was not guilty of such fraudulent 
misrepresentation.

     11.  No Other Obligation to Register. Except as otherwise expressly 
          -------------------------------
provided in this Agreement, the Company shall have no obligation to the Holders 
to register the Units or the Registrable Shares under the Securities Act.

     12.  Amendments and Waivers. The provisions of this Agreement may not be 
          ----------------------
amended, modified or supplemented without the prior written consent of the 
Company and Holders holding in excess of 50% of the Registrable Shares.

     13.  Notices. Except as set forth below, all notices and other 
          -------
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or 
telecopier, registered or certified mail (return receipt requested), postage 
prepaid or courier or overnight delivery service to the Company at the following
address and to the Holder at the address set forth on his or her signature page 
to this Agreement (or at such other address for any party as shall be specified 
by like notice, provided that notices of a change of address shall be effective 
only upon receipt thereof), and further provided that in case of directions to 
amend the Registration Statement pursuant to Section 2(b) or Section 6, a Holder
must confirm such notice in writing by overnight express delivery with 
confirmation of receipt:


                                     - 9 -
<PAGE>
 
If to the Company: Patriot American Hospitality, Inc.
                   3030 LBJ Freeway, Suite 1500
                   Dallas, TX 75234
                   Attn:  Paul A. Nussbaum
                         Chief Executive Officer

                   Telephone:  (972) 888-8000
                   Telecopy:   (972) 888-8065

                   With a copy to:

                   Goodwin, Proctor & Hoar LLP
                   Exchange Place
                   Boston, MA 02109
                   Attn:  Gilbert G. Menna, P.C.

                   Telephone: (617) 570-1000
                   Telecopy:  (617) 523-1231

In addition to the manner of notice permitted above, notices given pursuant to 
Sections 1, 7 and 8 hereof may be effected telephonically and confirmed in 
writing thereafter in the manner described above.

     14.  Successors and Assigns. This Agreement shall be binding upon and inure
          ----------------------
to the benefit of the successors and assigns of the Company. This Agreement may 
not be assigned by any Holder except to a constituent partner or shareholder of 
such Holder which is an accredited investor and any attempted assignment hereof 
by any Holder will be void and of no effect and shall terminate all obligations 
of the Company hereunder with respect to such Holder.

     15.  Counterparts. This Agreement may be executed in any number of 
          ------------
counterparts and by the parties hereto in separate counterparts, each of which 
when so executed shall be deemed to be an original and all of which taken 
together shall constitute one and the same agreement.
             
     16.  Governing Law. This Agreement shall be governed by and construed in 
          -------------
accordance with the laws of the Commonwealth of Virginia applicable to contracts
made and to be performed wholly within said Commonwealth.

     17.  Severability. In the event that any one or more of the provisions 
          ------------
contained herein, or the application thereof in any circumstances, is held 
invalid, illegal or unenforceable in any respect for any reason, the validity, 
legality and enforceability of any such provision in every other respect and of 
the remaining provisions contained herein shall not be in any way impaired 
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

     18.  Entire Agreement. This Agreement is intended by the parties as a final
          ----------------
expression of their agreement and intended to be the complete and exclusive 
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises, 
warranties, or undertakings, other than those set

                                     -10-
 















<PAGE>
 
forth or referred to herein, with respect to such subject matter. This Agreement
supersedes all prior agreements and understandings between the parties with 
respect to such subject matter.

                 [Remainder of Page Intentionally Left Blank]





                                    - 11 -
<PAGE>
 
     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of 
the date first written above.

                                       PATRIOT AMERICAN HOSPITALITY, INC.

                                       /s/ Michael Murphy
                                       ------------------------------------
                                       Name: Michael Murphy
                                       Title: Senior Vice President




                                    - 12 -
<PAGE>
 
                         Registration Rights Agreement
                             Holder Signature Page

                                    HOLDERS

                                    The Morgan Stanley Real Estate Fund, L.P.

                                    By: MSREF I, L.L.C., its general partner
 
                                    By: Morgan Stanley Real Estate Fund, Inc.,
                                        its MS Member

                                            By:/s/ Christian B. Malone
                                               ------------------------------
                                            Its: Vice President
                                                -----------------------------

                                    MS California Corporation

                                    By:/s/ Christian B. Malone
                                       --------------------------------------
                                    Its: Vice President
                                        -------------------------------------

                                    MS Colorado Corporation

                                    By:/s/ Christian B. Malone
                                       --------------------------------------
                                    Its: Vice President
                                        -------------------------------------

                                    /s/ Christian B. Malone
                                    -----------------------------------------
                                    Name:
                         
                                    Address for Notice:

                                    1585 Broadway, 37th Floor
                                    New York, New York   10036-8293
                                    Facsimile: (212) 761-0512
                                    Attention: Michael Happel

                                    - 13 -
<PAGE>
 

                                  EXHIBIT A 
                                                                       [Date]

                        FORM OF AUTHORIZING CERTIFICATE

     Each of the undersigned Holders, together holding at least twenty-five 
percent (25%) of the aggregate number of all of the Holders' Registrable 
Shares, hereby certifies that:

     1.   Such Holder's name is set forth below, and the number of 
          Registrable Shares held by such Holder and the number of
          Registrable Shares, if different, such Holder would like to have
          registered is set forth opposite such Holder's name.

                  Number of                    Number of Registrable
     Name         Registrable Shares           Shares Desired to be Registered
     ----         ------------------           -------------------------------

     2.   Such Holder is requesting the registration of only those shares
          of Common Stock received by such Holder upon the redemption of
          its Units pursuant to the Contribution Agreement.

     EXECUTED as of the date set forth above.

                                   [Signatures of Holders]

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