PATRIOT AMERICAN HOSPITALITY INC/DE, DEF 14A, 1997-10-20

PATRIOT AMERICAN HOSPITALITY INC/DE
DEF 14A, 1997-10-20
REAL ESTATE

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SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [_]

Check the appropriate box:

[_]Preliminary Proxy Statement

[X]Definitive Proxy Statement

[_]Definitive Additional Materials

[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

PATRIOT AMERICAN HOSPITALITY, INC. PATRIOT AMERICAN HOSPITALITY
OPERATING COMPANY
- ------------------------------------- -------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN (NAME OF REGISTRANT AS SPECIFIED IN
ITS CHARTER) ITS CHARTER)

- -------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[_] Fee paid previously with preliminary materials:

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

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PATRIOT AMERICAN HOSPITALITY, INC.
3030 LBJ FREEWAY, SUITE 1500
DALLAS, TX 75234

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 5, 1997

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

NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of Patriot American Hospitality, Inc. (the "Company") will
be held on Wednesday, November 5, 1997 at 9:00 a.m., local time at the Holiday
Inn Select North Dallas, Farmers Branch (Dallas), Texas for the following
purposes:

1. To elect three directors of the Company to serve until the 2000 Annual
Meeting of Stockholders and until their respective successors are duly
elected and qualified;

2. To consider and vote upon a proposal to approve the Patriot American
Hospitality, Inc. 1997 Incentive Plan (the "REIT Incentive Plan");

3. To ratify the selection of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1997; and

4. To consider and act upon any other matters that may properly be
brought before the Annual Meeting and at any adjournments or postponements
thereof.

Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or
later adjournment, the Annual Meeting may be adjourned, or to which the Annual
Meeting may be postponed.

The Board of Directors of the Company has fixed the close of business on
October 15, 1997 as the record date for determining the stockholders entitled
to notice of and to vote at the Annual Meeting and at any adjournments or
postponements thereof. Only stockholders of record of the Company's Common
Stock, par value $.01 per share, at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting and at any
adjournments or postponements thereof.

You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Directors of the Company, and to mail it
promptly in the enclosed postage-prepaid envelope. Any proxy may be revoked by
delivery of a later dated proxy. Stockholders of record who attend the Annual
Meeting may vote in person, even if they have previously delivered a signed
proxy.

By Order of the Board of Directors

Rex E. Stewart
Secretary
Patriot American
Hospitality, Inc.

Dallas, Texas
October 17, 1997

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
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PATRIOT AMERICAN HOSPITALITY OPERATING COMPANY
3030 LBJ FREEWAY, SUITE 1500
DALLAS, TX 75234

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 5, 1997

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

NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of Patriot American Hospitality Operating Company (the
"Operating Company") will be held on Wednesday, November 5, 1997 at 10:00
a.m., local time at the Holiday Inn Select North Dallas, Farmers Branch
(Dallas), Texas for the following purposes:

1. To elect three directors of the Operating Company to serve until the
2000 Annual Meeting of Stockholders and until their respective successors
are duly elected and qualified;

2. To consider and vote upon a proposal to approve the Patriot American
Hospitality Operating Company 1997 Incentive Plan (the "Operating Company
Incentive Plan");

3. To ratify the selection of Ernst & Young LLP as the independent
auditors of the Operating Company for the fiscal year ending December 31,
1997; and

4. To consider and act upon any other matters that may properly be
brought before the Annual Meeting and at any adjournments or postponements
thereof.

The Board of Directors of the Operating Company has fixed the close of
business on October 15, 1997 as the record date for determining the
stockholders entitled to notice of and to vote at the Annual Meeting and at
any adjournments or postponements thereof. Only stockholders of record of the
Operating Company's Common Stock, par value $.01 per share, at the close of
business on that date will be entitled to notice of and to vote at the Annual
Meeting and at any adjournments or postponements thereof.

You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Directors of the Operating Company, and to
mail it promptly in the enclosed postage-prepaid envelope. Any proxy may be
revoked by delivery of a later dated proxy. Stockholders of record who attend
the Annual Meeting may vote in person, even if they have previously delivered
a signed proxy.

By Order of the Board of Directors

Rex E. Stewart
Secretary
Patriot American
Hospitality Operating
Company

Dallas, Texas
October 17, 1997

PATRIOT AMERICAN HOSPITALITY, INC. PATRIOT AMERICAN HOSPITALITY
3030 LBJ FREEWAY, SUITE 1500 OPERATING COMPANY
DALLAS, TX 75234 3030 LBJ FREEWAY, SUITE 1500
DALLAS, TX 75234

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

JOINT PROXY STATEMENT

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

FOR 1997 ANNUAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 5, 1997

October 17, 1997

This Joint Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Patriot American Hospitality, Inc.
(the "Company") for use at the 1997 Annual Meeting of Stockholders of the
Company to be held on Wednesday, November 5, 1997, and at any adjournments or
postponements thereof (the "Company Annual Meeting"). At the Company Annual
Meeting, stockholders will be asked to vote (1) to elect three directors of
the Company, (2) to approve the Patriot American Hospitality, Inc. 1997
Incentive Plan (the "REIT Incentive Plan"), (3) to ratify the selection of
Ernst & Young LLP as the independent auditors of the Company for the fiscal
year ending December 31, 1997 and (4) to act upon any other matters properly
brought before them.

This Joint Proxy Statement also is furnished in connection with the
solicitation of proxies by the Board of Directors of Patriot American
Hospitality Operating Company (the "Operating Company") (the Company and the
Operating Company are sometimes collectively referred to as the "Companies")
for use at the 1997 Annual Meeting of Stockholders of the Operating Company to
be held on Wednesday, November 5, 1997, and at any adjournments or
postponements thereof (sometimes separately referred to as the "Operating
Company Annual Meeting" and collectively with the Company Annual Meeting, as
the "Annual Meetings"). At the Operating Company Annual Meeting, stockholders
will be asked to vote (1) to elect three directors of the Operating Company,
(2) to approve the Patriot American Hospitality Operating Company 1997
Incentive Plan (the "Operating Company Incentive Plan"), (3) to ratify the
selection of Ernst & Young LLP as the independent auditors of the Operating
Company for the fiscal year ending December 31, 1997 and (4) to act upon any
other matters properly brought before them.

The outstanding shares of Common Stock, $.01 par value per share, of the
Company ("Company Common Stock"), are "paired" with the outstanding shares of
Common Stock, $.01 par value per share, of the Operating Company ("Operating
Company Common Stock"), so that they are transferable and tradable only in
combination as units, each unit consisting of one share of Company Common
Stock and one share of Operating Company Common Stock ("Paired Common Stock").
The pairing is evidenced by "back-to-back" stock certificates and the
certificates bear a legend referring to the restrictions of transfer imposed
by the by-laws of each company.

The Company and the Operating Company emerged from the merger (the "Merger")
on July 1, 1997, of Patriot American Hospitality, Inc., a Virginia corporation
("Patriot"), with and into California Jockey Club, a Delaware corporation
("Cal Jockey"), with Cal Jockey being the surviving company. Since 1983, Cal
Jockey's shares of Common Stock, $.01 par value per share ("Cal Jockey Common
Stock"), had been paired and traded together with the shares of Common Stock,
par value $.01 per share ("Bay Meadows Common Stock"), of Bay Meadows
Operating Company, a Delaware corporation ("Bay Meadows"), as a single unit
pursuant to a stock pairing arrangement. By operation of the Merger, the
outstanding shares of Patriot Common Stock were exchanged for "paired-shares"
of Cal Jockey Common Stock and Bay Meadows Common Stock, resulting in the
stockholders of Cal Jockey, Bay Meadows and Patriot holding Paired Common
Stock of the surviving

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entities. In connection with the consummation of the Merger and related
transactions, Cal Jockey changed its name to "Patriot American Hospitality,
Inc." and Bay Meadows changed its name to "Patriot American Hospitality
Operating Company." Following completion of the Merger and related
transactions, the Company and the Operating Company continued the operations
of Patriot, Cal Jockey and Bay Meadows within the paired shares ownership
structure. Because certain information in this Joint Proxy Statement relates
to the year ended December 31, 1996, and Cal Jockey, Bay Meadows and Patriot
all existed at that time, information regarding Cal Jockey and Bay Meadows is
included in this Joint Proxy Statement. By operation of the Merger, Patriot no
longer exists and was merged into Cal Jockey.

This Joint Proxy Statement and the accompanying Notices of Annual Meeting
and Proxy Cards are first being sent to stockholders on or about October 17,
1997. The Board of Directors of the Company and the Operating Company have
fixed the close of business on October 15, 1997 as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meetings (the "Record Date"). Only stockholders of record of the Paired Common
Stock at the close of business on the Record Date will be entitled to notice
of and to vote at the Annual Meetings. As of the Record Date, there were
66,274,286 shares of Paired Common Stock outstanding and entitled to vote at
the Annual Meetings. Holders of the Paired Common Stock outstanding as of the
close of business on the Record Date will be entitled to one vote for each
share held by them.

THE PRESENCE IN PERSON OR BY PROPERLY EXECUTED PROXY OF THE HOLDERS OF A
MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF THE COMPANY COMMON STOCK
ENTITLED TO VOTE AT THE COMPANY ANNUAL MEETING IS NECESSARY TO CONSTITUTE A
QUORUM AT THE COMPANY ANNUAL MEETING, AND THE PRESENCE IN PERSON OR BY
PROPERLY EXECUTED PROXY OF THE HOLDERS OF A MAJORITY OF THE ISSUED AND
OUTSTANDING SHARES OF THE OPERATING COMPANY COMMON STOCK ENTITLED TO VOTE AT
THE OPERATING COMPANY ANNUAL MEETING IS NECESSARY TO CONSTITUTE A QUORUM AT
THE OPERATING COMPANY ANNUAL MEETING. ABSTENTIONS AND BROKER NON-VOTES WILL BE
TREATED AS SHARES THAT ARE PRESENT AT THE ANNUAL MEETINGS FOR PURPOSES OF
DETERMINING WHETHER A QUORUM EXISTS. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
PLURALITY OF THE SHARES OF THE COMPANY COMMON STOCK AT THE COMPANY ANNUAL
MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED FOR THE ELECTION OF
DIRECTORS. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A PLURALITY OF THE SHARES OF
THE OPERATING COMPANY COMMON STOCK AT THE OPERATING COMPANY ANNUAL MEETING AT
WHICH A QUORUM IS PRESENT IS REQUIRED FOR THE ELECTION OF DIRECTORS. THE
RATIFICATION OF THE COMPANY'S AUDITORS, THE APPROVAL OF THE REIT INCENTIVE
PLAN AND THE APPROVAL OF ANY OTHER MATTERS PROPERLY PRESENTED AT THE COMPANY
ANNUAL MEETING FOR STOCKHOLDER APPROVAL MUST RECEIVE THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF SHARES PRESENT IN PERSON OR BY PROXY OF THE
COMPANY COMMON STOCK ENTITLED TO VOTE THEREON, AND THE RATIFICATION OF THE
OPERATING COMPANY'S AUDITORS, THE APPROVAL OF THE OPERATING COMPANY INCENTIVE
PLAN AND THE APPROVAL OF ANY OTHER MATTERS PROPERLY PRESENTED AT THE OPERATING
COMPANY ANNUAL MEETING FOR STOCKHOLDER APPROVAL MUST RECEIVE THE AFFIRMATIVE
VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF THE OPERATING COMPANY COMMON
STOCK ENTITLED TO VOTE THEREON. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE
EFFECT OF VOTES AGAINST THE APPROVAL OF EACH OF THE MATTERS PRESENTED AT THE
COMPANY ANNUAL MEETING AND THE OPERATING COMPANY ANNUAL MEETING.

STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO
THE VOTE AT THE COMPANY ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE
COMPANY ANNUAL MEETING AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY
IS SUBMITTED AND NO INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE
ELECTION OF THE THREE NOMINEES FOR DIRECTORS OF THE COMPANY NAMED IN THIS
JOINT PROXY STATEMENT, FOR THE APPROVAL OF THE REIT INCENTIVE PLAN AND FOR
RATIFICATION OF THE BOARD OF DIRECTOR'S SELECTION OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN THE JOINT
PROXY STATEMENT WILL BE PRESENTED AT THE COMPANY ANNUAL MEETING. IF OTHER
MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION
OF THE PROXY HOLDERS.

STOCKHOLDERS OF THE OPERATING COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-
PREPAID ENVELOPE. SHARES REPRESENTED BY A PROPERLY

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EXECUTED PROXY RECEIVED PRIOR TO THE VOTE AT THE OPERATING COMPANY ANNUAL
MEETING AND NOT REVOKED WILL BE VOTED AT THE OPERATING COMPANY ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE THREE
NOMINEES FOR DIRECTORS OF THE OPERATING COMPANY NAMED IN THIS JOINT PROXY
STATEMENT, FOR THE APPROVAL OF THE OPERATING COMPANY INCENTIVE PLAN AND FOR
RATIFICATION OF THE BOARD OF DIRECTOR'S SELECTION OF ERNST & YOUNG LLP AS THE
OPERATING COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER
31, 1997. IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN
THE JOINT PROXY STATEMENT WILL BE PRESENTED AT THE OPERATING COMPANY ANNUAL
MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE
WITH THE DISCRETION OF THE PROXY HOLDERS.

A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the appropriate
company at the addresses of the Company and the Operating Company set forth
above, by filing a duly executed proxy bearing a later date, or by appearing
in person and voting by ballot at the Annual Meetings. Any stockholder of
record as of the Record Date attending the Annual Meetings may vote in person
whether or not a proxy has been previously given, but the presence (without
further action) of a stockholder at the Annual Meetings will not constitute
revocation of a previously given proxy.

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PROPOSAL 1: ELECTION OF DIRECTORS FOR THE COMPANY

The Board of Directors of the Company is divided into three classes. Each
class has a term of three years and the terms are staggered so that each year,
only one class of directors is elected.

At the Annual Meeting, three directors of the Company will be elected to
serve until the 2000 Annual Meeting and until their successors are duly
elected and qualified. The Board of Directors of the Company has nominated
Paul A. Nussbaum, Arch K. Jacobson and William W. Evans III to serve as Class
I directors for the Company (collectively, the "Company Nominees"). The Board
of Directors of the Company anticipates that each of the Company Nominees will
serve, if elected, as a director. However, if any person nominated by the
Board of Directors of the Company is unable to accept election, the proxies
will be voted for the election of such other person or persons as the Board of
Directors of the Company may recommend.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE COMPANY
NOMINEES.

PROPOSAL 2: ELECTION OF DIRECTORS OF THE OPERATING COMPANY

The Board of Directors of the Operating Company is divided into three
classes. Each class has a term of three years and the terms are staggered so
that each year, only one class of directors is elected.

At the Annual Meeting, three directors of the Operating Company will be
elected to serve until the 2000 Annual Meeting and until their successors are
duly elected and qualified. The Board of Directors of the Operating Company
has nominated Paul A. Nussbaum, Arch K. Jacobson and Karim Alibhai to serve as
Class I directors for the Operating Company (collectively, the "Operating
Company Nominees"). The Board of Directors of the Operating Company
anticipates that each of the Operating Company Nominees will serve, if
elected, as a director. However, if any person nominated by the Board of
Directors of the Operating Company is unable to accept election, the proxies
will be voted for the election of such other person or persons as the Board of
Directors of the Operating Company may recommend.

THE BOARD OF DIRECTORS OF THE OPERATING COMPANY RECOMMENDS A VOTE FOR THE
OPERATING COMPANY NOMINEES.

INFORMATION REGARDING THE NOMINEES AND THE DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANIES

The following biographical descriptions set forth certain information with
respect to the nominees for election as Class I directors of each of the
Companies at the Annual Meetings, the continuing directors of each of the
Companies whose terms expire at the annual meetings of stockholders in 1998
and 1999 and the executive officers of each of the Companies who are not
directors, based on information furnished to the Company and the Operating
Company by each director and officer.

THE COMPANY

Class I Company Nominees for Election at 1997 Annual Meeting--Term to Expire
in 2000

PAUL A. NUSSBAUM became Chairman of the Board of Directors and Chief
Executive Officer of Patriot in April 1995 and assumed the positions of
Chairman, Chief Executive Officer and President of the Company in July 1997
following the Merger. Mr. Nussbaum is 50 years old. Mr. Nussbaum founded the
Patriot American group of companies ("Patriot American") in 1991 and has been
its Chief Executive Officer since its inception. Mr. Nussbaum is also
President of Panco Services, a firm that provides management and consulting
services to various real estate investment entities operating under the
Patriot American name. Prior to his association with Patriot American, Mr.
Nussbaum practiced real estate and corporate law in New York for 20 years, the
last 12 years of which as chairman of the real estate department of Schulte
Roth & Zabel. He currently serves as a member of the Board of Directors of the
Dallas Symphony and is a member of the Urban Land Institute, the American
College of Real Estate Lawyers and the Advisory Board of the Real Estate
Center of the Wharton School of Business, University of Pennsylvania. Mr.
Nussbaum is a member of the Board of Visitors of the Georgetown University Law
Center and an Overseer of Colby College, Waterville, Maine. He holds a B.A.
from the State University of New York at Buffalo and a J.D. from the
Georgetown University Law Center.

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ARCH K. JACOBSON became a director of Patriot in September 1995 and became a
director of the Company in July 1997 following the Merger. Mr. Jacobson is 69
years old. He has served as Chairman of Jacobson-Berger Capital Group, Inc., a
commercial mortgage banking firm, since 1993. From 1986 to 1993, Mr. Jacobson
was Chairman of Union Pacific Realty Co., a real estate management and
development company. He served in various capacities with the Real Estate
Department of The Prudential Insurance Company from 1955 to 1980 and was
President and Chief Executive Officer of the Prudential Development Company (a
subsidiary of the Prudential Insurance Company) from 1982 to 1986. Mr.
Jacobson currently serves as a director of Walden Residential Properties,
Inc., a publicly traded multifamily apartment REIT. He was formerly a director
of LaQuinta Limited Partners, and served on the committee of independent
directors that negotiated the tender offer for and purchase of that company in
1994. Mr. Jacobson holds a B.S. from Texas A&M University.

WILLIAM W. EVANS III began serving in the Office of the Chairman of Patriot
in February 1997 and assumed the same position with the Company in July 1997
following the Merger. Mr. Evans is 45 years old and has been a director of the
Company since July, 1997. Previously, Mr. Evans was a Managing Director in
PaineWebber's Real Estate Group with responsibility for the origination and
structuring of principal transactions. He joined PaineWebber as a result of
the firm's acquisition of Kidder, Peabody and Co. Incorporated in December
1994. Prior to joining Kidder, Peabody in 1992, Mr. Evans was a First Vice
President and head of the Real Estate Financing Division of Swiss Bank
Corporation, responsible for all real estate activities of the U.S.
organization of the bank. Mr. Evans is a graduate of the University of
Virginia.

Class II Continuing Company Directors--Term to Expire in 1998

GREGORY R. DILLON became a director of Patriot in September 1995 and became
a director of the Company in July 1997 following the Merger. Mr. Dillon is 74
years old. He has been Vice Chairman Emeritus of Hilton Hotels Corporation
("Hilton") since 1993. He has been a director of Hilton since 1977 and was
elected Vice Chairman in 1990. Mr. Dillon served as an Executive Vice
President of Hilton from 1980 until 1993. Mr. Dillon was also Executive Vice
President of Hilton's franchise company, Hilton Inns, Inc., from 1971 to 1986.
He is a director of the Conrad N. Hilton Foundation and is a founding member
of the American Hotel Association's Industry Real Estate Financing Advisory
Council and the National Association of Corporate Real Estate Executives
(NACORE). In addition to his undergraduate degree, Mr. Dillon holds an L.L.B.
from DePaul University.

THOMAS S. FOLEY became a director of Patriot in September 1995 and became a
director of the Company in July 1997 following the Merger. Mr. Foley is 68
years old. He has been a partner in the Washington, D.C. office of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. since January 1995. From 1965 through 1994, Mr.
Foley served 15 terms in the U.S. House of Representatives. Mr. Foley was
Speaker of the U.S. House of Representatives from June 1989 through December
1994. Mr. Foley currently is a director of the H.J. Heinz Company, and he
serves on the Global Advisory Board of Coopers & Lybrand L.L.P., the Board of
Advisors for the Center for Strategic and International Studies and the Board
of Directors for the Center for National Policy. Mr. Foley holds a B.A. and
L.L.B. from the University of Washington.

Class III Continuing Company Directors--Term to Expire in 1999

JOHN H. DANIELS became a director of Patriot in September 1995 and became a
director of the Company in July 1997 following the Merger. Mr. Daniels is 71
years old. He has served as President of The Daniels Group Inc., a real estate
development and management company, since 1984. Mr. Daniels has also served as
Vice Chairman of Patriot American since its inception in 1991. Prior to
forming The Daniels Group Inc., Mr. Daniels served as Chairman and Chief
Executive Officer of Cadillac Fairview Corporation, a publicly held real
estate development and management company. Mr. Daniels has over 40 years of
real estate development and management experience. Mr. Daniels is also a
director of Cineplex-Odeon Corporation, Consolidated H.C.I. Corporation,
Samoth Capital Corporation and Anitech Enterprises Inc. Mr. Daniels holds a
B.S. in Architecture from the University of Toronto.

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JOHN C. DETERDING became a director of Patriot in September 1995 and became
a director of the Company in July 1997 following the Merger. Mr. Deterding is
65 years old. He has been the owner of Deterding Associates, a real estate
consulting company, since June 1993. From 1975 until June 1993, he served as
Senior Vice President and General Manager of the Commercial Real Estate
division of General Electric Capital Corporation ("GECC"). In directing the
real estate activities at GECC, he was responsible for both domestic and
international lending activities, portfolio purchases, joint ventures, asset
management and real estate securitization. From November 1989 to June 1993,
Mr. Deterding served as Chairman of the General Electric Real Estate
Investment Company, a privately held REIT. He also served as Director of GECC
Financial Corporation from 1986 to 1993. Mr. Deterding is also a former member
and trustee of the Urban Land Institute and is a director of BlackRock Asset
Investors, a closed-end investment company registered under the Investment
Company Act of 1940. He holds a B.S. from the University of Illinois.

EXECUTIVE OFFICERS OF THE COMPANY WHO ARE NOT DIRECTORS

REX E. STEWART became Executive Vice President and Chief Financial Officer
of Patriot in April 1995 and assumed the positions of Chief Financial Officer,
Treasurer and Secretary with the Company in July 1997 following the Merger.
Mr. Stewart is 49 years old. From 1993 until joining Patriot, he served as
Chief Financial Officer and Treasurer of Metro Joint Venture, an independent
hotel management company based in Dallas, Texas, which currently manages the
Holiday Inn Select, North Dallas and the Embassy Suites, Hunt Valley. He
served in the same capacities for Metro Hotels, Inc. from 1986 until 1993.
Previously, Mr. Stewart was the Chief Financial Officer of Lincoln Hotel
Corporation, which owned and operated a chain of upscale and luxury hotels
across the United States. Prior to his employment with Lincoln Hotel
Corporation, Mr. Stewart was an audit manager with Arthur Andersen & Co. in
Dallas, Texas. He holds a B.B.A. from Texas A&M University and an M.B.A. from
the University of Southern California. He is a certified public accountant.

THE OPERATING COMPANY

Class I Operating Company Nominees for Election at 1997 Annual Meeting--Term
to Expire in 2000

PAUL A. NUSSBAUM became Chairman of the Board of Directors and Chief
Executive Officer of the Operating Company in July 1997 following the Merger.
For biographical information on Mr. Nussbaum, see "--The Company."

ARCH K. JACOBSON was named a director of the Operating Company in July 1997
following the Merger. For biographical information on Mr. Jacobson, see "--The
Company."

KARIM ALIBHAI became a director of the Operating Company and the President
and Chief Operating Officer of the Operating Company on October 1, 1997. Mr.
Alibhai is 33 years old. For the last 11 years, Mr. Alibhai has been a
principal of the Gencom Group, an affiliated group of companies that acquired,
developed, renovated, leased and managed hotel properties in the United States
and Canada through Gencom American Hospitality. Most recently, Mr. Alibhai was
the President and Chief Executive Officer of the Gencom Group. Gencom's
investment portfolio consisted of more than 50 owned, leased and managed
hotels, representing in excess of 13,000 guest rooms in the United States and
Canada. He holds a B.A. from Rice University.

Class II Continuing Operating Company Directors--Term to Expire in 1998

RUSS LYON, JR. became a director of Patriot in January 1997 and became a
director of the Operating Company in July 1997 following the Merger. Mr. Lyon
is 67 years old. He has been a managing general partner of Westcor Partners, a
shopping center development and management concern since 1970. From 1989 until
January 1997, Mr. Lyon was a managing general partner of Carefree Resorts, a
resort development and management firm. He served in the U.S. Air Force as a
fighter pilot. Mr. Lyon attended Arizona State University.

SHERWOOD M. WEISER became a director of the Operating Company on October 1,
1997. Mr. Weiser is 66 years old. Currently, Mr. Weiser is the Chairman and
Chief Executive Officer of Carnival Hotels and Casinos, a hotel and gaming
management and development firm. In 1970, Mr. Weiser founded the Company
formerly

6
<PAGE>

known as The Continental Companies ("T.C.C."). Carnival Hotels and Casinos was
a successor to T.C.C. In September 1997, Carnival Hotels & Casinos ("CHC")
entered into a merger agreement for part of CHC with the Company and the
Operating Company. Prior to September 1997, CHC had 17,000 employees and more
than 75 hotels under management or development comprising approximately 19,000
rooms. After the merger, CHC will retain its resort/gaming and development
business. Mr. Weiser is a director of Carnival Corporation, United National
Bank and Winsloew Furniture Group. He is a graduate of the Ohio State
University School of Business and holds a J.D. from the Case Western Reserve
University School of Law.

Class III Continuing Operating Company Directors--Term to Expire in 1999

LEONARD BOXER was a director of Patriot from September 1995 and became a
director of the Operating Company in July 1997 following the Merger. Mr. Boxer
is 58 years old. He has been a partner and chairman of the real estate
department of the law firm of Stroock & Stroock & Lavan in New York, New York
since 1987. Previously, he was a founder and managing partner and head of the
real estate department of Olnick Boxer Blumberg Lane & Troy, a real estate law
firm in New York. Mr. Boxer is a member of the Board of Trustees of New York
University Law School. He is a member of the New York Regional Cabinet of the
United States Holocaust Memorial Museum. He received his B.A. and L.L.B. from
New York University.

BURTON C. EINSPRUCH became a director of Patriot in January 1997 and became a
director of the Operating Company in July 1997 following the Merger. Dr.
Einspruch is 62 years old. He has been a physician and medical consultant with
his own practice since 1966. He has also been the Medical Director of First
Southwest Corp., a national brokerage firm since 1991. Dr. Einspruch also
serves as a director for the Dallas National Bank. Dr. Einspruch holds a B.A.
from Southern Methodist University, a Sc.B. from the Southern Methodist
University and a M.D. from Southwestern Medical School.

EXECUTIVE OFFICERS OF THE OPERATING COMPANY WHO ARE NOT DIRECTORS

THOMAS W. LATTIN was named President and Chief Operating Officer of Patriot
in April 1995 and became President and Chief Operating Officer in such capacity
for the Operating Company in July 1997 following the Merger. Effective
September 30, 1997, Mr. Lattin assumed the position of Executive Vice President
of the Operating Company and is no longer the President and Chief Operating
Officer of the Operating Company. He has more than 25 years of experience in
the hotel industry as an executive and consultant. From 1976 through 1983, Mr.
Lattin served as President of the Mariner Corporation, a hotel development and
management company based in Houston, Texas. During his tenure, Mariner's hotel
portfolio of owned and managed properties grew from two hotels to 25 hotels. In
1984, he founded Great West Hotels, a hotel management and consulting company,
and served as President and Chief Executive Officer through 1987. From 1987
through 1994, he served as the National Partner of the hospitality industry
consulting practice of Laventhol & Horwath and subsequently as a partner in the
national hospitality consulting group of Coopers & Lybrand L.L.P. In 1994, he
joined the Hospitality Group of Kidder, Peabody & Co. Incorporated as a Senior
Vice President and later served as a Senior Vice President with PaineWebber,
following PaineWebber's acquisition of certain assets of Kidder, Peabody & Co.
Mr. Lattin is a contributing author of an introductory textbook on hotel
management, which is used by colleges and universities worldwide. Mr. Lattin
holds a B.S. and M.S. in Hotel Management from the Cornell School of Hotel
Administration. He is a certified public accountant.

REX E. STEWART became the Chief Financial Officer, Treasurer and Secretary of
the Operating Company in July 1997 following the Merger. For biographical
information on Mr. Stewart, see "--The Company."

PAUL NOVAK was named Executive Vice President--Acquisitions and Development
in June 1997. From 1994 through June 1997, Mr. Novak was President and Chief
Executive Officer of Bedrock Partners, a private investment group established
in 1994 to acquire hotel properties and convert them to Wyndham Hotels or
Wyndham Garden Hotels. From 1992 through 1994, Mr. Novak was a principal in his
own consulting firm where he directed real estate development, marketing and
acquisition assignments from numerous clients. Prior thereto,

7
<PAGE>

he was with Marriott Corporation, where from 1981 until 1992, he served as a
senior vice president of development and was responsible for developing more
than 400 properties. Mr. Novak also developed and initiated the introduction
of two lodging brands, Courtyard by Marriott, and Fairfield Inn by Marriott
and as a member of the management committees for Courtyard and the Fairfield
divisions, was actively involved in the strategic planning and policy making
for each division. In addition to overseeing product development and
introduction, Mr. Novak also directed negotiations for management contracts,
individual hotel and chain acquisitions and site acquisitions for Courtyard by
Marriott, Residence Inn and Fairfield Inn by Marriott and Marriott Hotels and
resorts throughout North America, the United Kingdom, France and Germany.
Before joining Marriott, Mr. Novak served as director of real estate for La
Quinta Motor Inns of San Antonio, Texas and had worked previously for Holiday
Inns, Inc. Accommodation Services, Inc. and Pannell Kerr Forster & Company.
Mr. Novak is a member of the Urban Land Institute, The National Realty
Committee and the Travel and Tourism Research Association (TTRA). He received
a B.A. from Michigan State University.

MICHAEL D. MURPHY became Senior Vice President--Acquisitions of Patriot in
April 1996 and continued in such capacity for the Operating Company in July
1997 following the Merger. From 1994 through 1996, Mr. Murphy was Chief
Executive Officer and Founder of The Stonebridge Group, Inc., a company
specializing in structuring and negotiating capital market financing
transactions. From 1988 to 1994, Mr. Murphy was a Principal of Affirmative
Equities Company, a New York real estate and advising firm. Mr. Murphy
graduated from Williams College, Williamstown, Massachusetts and holds a J.D.
from Fordham University School of Law, New York.

LESLIE NG became Senior Vice President--Acquisitions of Patriot in June 1995
and continued in such capacity for the Operating Company in July 1997
following the Merger. From 1992 to June 1995, he served as Senior Vice
President, Development of CHC International, Inc. From 1987 until 1992, Mr. Ng
was Vice President, Real Estate of Tobishima Associates, Ltd., a multinational
real estate investment and development company. Prior to his association with
Tobishima Associates, Ltd., Mr. Ng was a management consultant at Deloitte &
Touche from 1985 to 1987 and a structural engineer at Burns and Roe, Inc., an
engineering and construction management company, from 1980 to 1983. Mr. Ng
holds a B.E. in civil engineering from The Cooper Union and an M.B.A. from the
Wharton School, University of Pennsylvania.

INFORMATION REGARDING THE BOARD OF DIRECTORS OF THE COMPANY AND ITS COMMITTEES

Meetings. The Board of Directors of Patriot and the Company held 11 and 17
meetings, respectively, during 1996. Other than Mr. Foley, no director of
Patriot attended less than 75% of the aggregate number of meetings held during
1996 of the Board of Directors and any Board Committee of which he was a
member.

Audit Committee. Currently, the Audit Committee consists of three
Independent Directors: Messrs. Deterding, Dillon and Foley. An "Independent
Director" is a director who is not an officer or employee of the Company, any
affiliate of an officer or employee or any affiliate of (i) any advisor to the
Company under an advisory agreement, (ii) any lessee of any property of the
Company, (iii) any subsidiary of the Company or (iv) any partnership which is
an affiliate of the Company. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the audit engagement,
approves professional services provided by the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. The Audit Committee of the Company held one
meeting during 1996, and the Audit Committee of Patriot held one meeting
during 1996.

Compensation Committee. As of the effective date of the Merger, the
Compensation Committee consists of three Independent Directors: Messrs.
Dillon, Deterding and Jacobson. The Compensation Committee determines
compensation of the Company's executive officers, and administered the Patriot
American Hospitality, Inc. 1995 Incentive Plan (the "Incentive Plan") and will
administer the REIT Incentive Plan. The

8
<PAGE>

Compensation Committee of the Company was formed in connection with the Merger
and held no meetings during 1996, but the Compensation Committee of Patriot
held three meetings during 1996.

Investment Committee. As of the effective date of the Merger, the Investment
Committee members are Messrs. Deterding and Jacobson who are Independent
Directors and Mr. Daniels who is a non-employee director. Mr. Nussbaum, as
Chairman of the Board, serves as an ex-officio member of the committee. The
Investment Committee was formed to make recommendations concerning the
acquisition of hotel investments. The Investment Committee of the Company was
formed in connection with the Merger and held no meetings during 1996. The
Investment Committee of Patriot held no meetings during 1996 because the Board
of Directors of Patriot assumed all of the duties of the Investment Committee.

INFORMATION REGARDING THE BOARD OF DIRECTORS OF THE OPERATING COMPANY AND ITS
COMMITTEES

Meetings. The Board of Directors of the Operating Company held 38 meetings
during 1996. No director attended less than 75% of the aggregate number of
meetings held during 1996 of the Board of Directors and any Board Committee of
which he was a member.

Audit Committee. Currently, the Audit Committee consists of three
Independent Directors: Messrs. Boxer, Einspruch and Lyon. An "Independent
Director" is a director who is not an officer or employee of the Operating
Company, any affiliate of an officer or employee or any affiliate of (i) any
advisor to the Operating Company under an advisory agreement, (ii) any lessee
of any property of the Operating Company, (iii) any subsidiary of the
Operating Company or (iv) any partnership which is an affiliate of the
Operating Company. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Operating Company's
internal accounting controls. The Audit Committee held no meetings during
1996.

Compensation Committee. The Compensation Committee currently consists of two
Independent Directors: Messrs. Jacobson and Boxer. The Compensation Committee
determines compensation of the Operating Company's executive officers and will
administer the Operating Company Incentive Plan. The Compensation Committee
held no meetings during 1996.

DIRECTOR COMPENSATION FOR THE COMPANY

Currently, any director who is not an employee of the Company is paid an
annual retainer fee of $25,000. In 1996, Patriot's non-employee directors
received an annual retainer fee of $12,500. In addition, each such director of
Patriot was paid, and each such director of the Company will be paid, $1,250
for attendance at each meeting of the Board of Directors, $1,000 for
participating in each telephonic Board meeting and $750 for attendance at each
meeting of a committee of the Board of which such director is a member. The
annual retainer fee and meeting fees are paid in cash, but the directors may
elect in advance to defer the receipt of all or part of the fees and to
receive such deferred fees at a later date in the form of shares of Paired
Common Stock. In 1996, the annual retainer fee was paid half in cash and half
in shares of Common Stock. Directors who are employees of the Company do not
receive any fees for their service on the Board of Directors or a committee
thereof. In addition, the Company reimburses directors for their out-of-pocket
expenses incurred in connection with their service on the Board of Directors.

For 1996, members of the Board of Directors of the Company received an
annual fee of $12,000 for 12 months of service, adjusted pro rata to reflect
actual months served. In 1996, the Chairman of the Audit Committee earned $500
for each Audit Committee Meeting attended and each of the other members of the
Audit Committee received $350 for each meeting attended. During 1996, each
director was also provided a food and beverage allowance of $1,000 for use by
the director and his or her guests in the Directors Room and Turf Club at Bay
Meadows Racecourse.

9
<PAGE>

On May 23, 1996, Messrs. Boxer, Daniels, Deterding, Dillon, Foley and
Jacobson were each granted a non-qualified option under the Patriot American
Hospitality, Inc. Non-Employee Directors' Incentive Plan to acquire 5,000
shares of Patriot Common Stock at an exercise price of $14.18 per share. In
the future, on the date of each annual meeting of the Company's stockholders,
each non-employee director then in office will receive a grant of non-
qualified options to purchase an additional 10,000 shares of Paired Common
Stock at the then current market price. All options granted to non-employee
directors vest immediately upon the date of grant. On August 20, 1996, Messrs.
Boxer, Daniels, Deterding, Dillion, Foley and Jacobson were each awarded 8,000
shares of restricted Patriot Common Stock. The market price on the date of
grant was $15.50 and the restrictions on all of the shares of Common Stock
lapse in four equal annual installments beginning August 20, 1997 and ending
August 20, 2000. Messrs. Boxer, Daniels, Deterding, Dillion, Foley and
Jacobson are entitled to receive dividends on the total stock award during the
vesting period.

DIRECTOR COMPENSATION FOR THE OPERATING COMPANY

Currently, any director who is not an employee of the Operating Company is
paid an annual fee of $25,000. In addition, each such director is paid $1,250
for attendance at each meeting of the Operating Company's Board of Directors,
$1,000 for participating in each telephonic board meeting and $750 for
attendance at each meeting of a committee of the Operating Company's Board of
which such director is a member. The annual retainer fee and meeting fees are
paid in cash, but the directors may elect in advance to defer the receipt of
all or part of the fees and to receive such deferred fees at a later date in
the form of shares of Paired Common Stock. Directors who are employees of the
Operating Company do not receive any fees for their service on the Board of
Directors or a committee thereof. In addition, the Operating Company
reimburses directors for their out-of-pocket expenses incurred in connection
with their service on the Board of Directors.

On the date of each annual meeting of the Operating Company's stockholders,
each non-employee director then in office will receive a grant of non-
qualified options to purchase an additional 10,000 shares of Paired Common
Stock at the then current market price. All options granted to non-employee
directors vest immediately upon the date of grant.

Prior to the Merger, members of the Board of Directors of the Operating
Company received an annual fee of $12,000 each. Eugene F. Barsotti, Jr. and F.
Jack Liebau, as employees of the Operating Company, received no such annual
fee. The directors who were appointed to various committees served in such
capacities without compensation for their services. During 1996, each director
was also provided a food and beverage allowance of $1,000 for use by the
director and his or her guests in the Directors Room and Turf Club at Bay
Meadows Racecourse.

EXECUTIVE COMPENSATION FOR THE COMPANY

Prior to the Merger, the Company did not compensate its executive officers
for their services. Consequently, there was no Compensation Committee and no
report by the Compensation Committee on executive compensation for the Company
for any time period prior to the Merger.

10
<PAGE>

EXECUTIVE COMPENSATION FOR PATRIOT

Patriot was organized as a Virginia corporation in April 1995. Accordingly,
Patriot did not pay any cash compensation to its executive officers for the
year ended December 31, 1994. The following table sets forth the base
compensation that Patriot paid in 1995 and 1996 to its Chairman and Chief
Executive Officer and to the four executive officers other than the Chief
Executive Officer of Patriot collectively, the "Patriot Named Executive
Officers" whose base salary, on an annualized basis, and bonus exceeded
$100,000 during the fiscal year ending December 31, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------- --------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL STOCK UNDERLYING
POSITION YEAR SALARY ($) BONUS ($) AWARDS (#) OPTIONS (#)(K)
------------------ ---- ---------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Paul A. Nussbaum(a)..... 1996 $247,500(b) $200,000(g) -- 150,002(i)
Chairman and Chief
Executive Officer 1995 45,000(b) 45,000(g) -- 500,008(j)
Thomas W. Lattin(a)..... 1996 $205,625(c) $ 75,000(g) 80,001(h) 54,000(i)
President and Chief
Operating Officer 1995 126,000(c) 33,750(g) -- 200,003(j)
Rex E. Stewart(a)....... 1996 $174,250(d) $ 75,000(g) 60,000(h) 40,000(i)
Executive Vice 1995 88,000(d) 25,500(g) -- 170,002(j)
President and Chief
Financial Officer
Leslie Ng(a)............ 1996 $143,500(e) $ 50,000 40,000(h) 25,000(i)
Senior Vice President--
Acquisitions 1995 81,000(e) 21,000 -- 130,002(j)
Michael D. Murphy(a).... 1996 $ 93,333(f) $ 30,000 40,000(h) 25,000(i)
Senior Vice President--
Acquisitions
</TABLE>
- --------
(a) Pursuant to the Merger, Patriot was merged out of existence and Mr.
Nussbaum became the President and Chief Executive Officer of the Company
and Chief Executive Officer of the Operating Company, Mr. Lattin became the
President and Chief Operating Officer of the Operating Company, Mr. Stewart
became the Chief Financial Officer, Treasurer and Secretary of the Company
and the Operating Company and Mr. Murphy and Mr. Ng each became a Senior
Vice President--Acquisitions of the Operating Company. Effective September
30, 1997, Mr. Lattin assumed the position of Executive Vice President of
the Operating Company. Currently, Mr. Karim Alibhai is the President and
Chief Executive Officer of the Operating Company.
(b) For 1996, reflects an increase in annual base salary to $315,000 effective
July 1, 1996. For 1995, reflects amount paid from October 1995 through
December 1995 based on an annual salary of $180,000. Salary prior to
October 1995 was paid by Patriot American.
(c) For 1996, reflects an increase in annual base salary to $236,250 effective
July 1, 1996. For 1995, reflects amount paid from April 1995 through
December 1995 based on an annual salary of $175,000.
(d) For 1996, reflects an increase in annual base salary to $178,500 effective
July 1, 1996. For 1995, reflects amount paid from July 1995 through
December 1995 based on an annual salary, since October 1, 1995, of
$170,000. Salary prior to July 1995 was paid by Metro Joint Venture.
(e) For 1996, reflects an increase in annual base salary to $147,000 effective
July 1, 1996. For 1995, reflects amount paid from June 1995 through
December 1995 based on an annual salary, since October 1, 1995, of
$140,000.
(f) Represents amount paid from April 1996 through December 1996 based on an
annual salary of $140,000.
(g) Bonus compensation in an amount equal to 25% of Mr. Nussbaum's, 19% of Mr.
Lattin's annual base salary and 15% of Mr. Stewart's annual base salary was
approved for 1995, but payment of the bonus was deferred at the election of
the executive officer until 1996. The bonus compensation included in the
table for Messrs. Nussbaum, Stewart and Lattin was approved for 1996, but
payment of the bonus was deferred at the election of the executive officer
until 1997.

11
<PAGE>

(h) On July 25, 1996, Patriot awarded 80,001 shares of restricted Common Stock
to Mr. Lattin; 60,000 shares of restricted Common Stock to Mr. Stewart and
40,000 shares of restricted Common Stock to both Mr. Murphy and Mr. Ng.
The market price of Patriot's Common Stock on the date of grant was
$14.125 and the restrictions on all of the shares of Common Stock lapse in
four equal annual installments beginning July 25, 1997 and ending July 25,
2000. Messrs. Lattin, Stewart, Murphy and Ng are entitled to receive
dividends on the total stock award during the vesting period.
(i) In April 1996, Patriot granted non-qualified options to purchase Common
Stock to Messrs. Nussbaum, Lattin, Stewart, Ng and Murphy. The options of
Messrs. Nussbaum, Lattin, Stewart and Ng vest in seven equal annual
installments beginning April 19, 1997 and ending April 19, 2003. The
options of Mr. Murphy vest in seven equal annual installments beginning
April 29, 1997 and ending April 29, 2003.
(j) In connection with its initial public offering, Patriot granted incentive
stock options ("ISOs") and nonqualified options to Messrs. Nussbaum,
Lattin, Stewart and Ng to purchase shares of Common Stock. Of the 500,008
options granted to Mr. Nussbaum, 416,687 are nonqualified stock options,
34,724 of which vested on the date of grant and the remainder become
exercisable in 11 quarterly installments, and 83,321 are ISOs, which vest
in equal annual installments each January 1, beginning January 1, 1996 and
ending on January 1, 2005. Of the 200,003 options granted to Mr. Lattin,
116,683 are non-qualified stock options, 9,724 of which vested on the date
of grant and the remainder become exercisable in eleven quarterly
installments, and 83,320 are ISOs which vest in equal annual installments
each January 1, beginning January 1, 1996 and ending on January 1, 2005.
Of the 170,002 options granted to Mr. Stewart, 86,681 are non-qualified
stock options, 7,222 of which vested on the date of grant and the
remainder become exercisable in eleven quarterly installments, and 83,321
are incentive stock options which vest in equal annual installments each
January 1, beginning January 1, 1996 and ending on January 1, 2005. Of the
130,002 options granted to Mr. Ng, 46,681 are non-qualified stock options,
3,890 of which vested on the date of grant and the remainder become
exercisable in eleven quarterly installments, and 83,321 are incentive
stock options which vest in equal annual installments each January 1,
beginning January 1, 1996 and ending on January 1, 2005.
(k) The number of shares of Common Stock reflected in the table take into
account the 2-for-1 stock split effected in the form of a stock dividend
distributed on March 18, 1997 to stockholders of record on March 7, 1997,
the conversion ratio in connection with the Merger, and the 1.927-for-1
stock split effected in the form of a stock dividend distributed on July
25, 1997 to stockholders of record on July 15, 1997.

OPTION GRANTS IN FISCAL YEAR 1996 FOR PATRIOT

The following table sets forth the options granted with respect to the
fiscal year ended December 31, 1996 to the Patriot Named Executive Officers:

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF SHARE
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------------------- ---------------------
NUMBER OF PERCENT OF TOTAL
SHARES UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES EXERCISE OR BASE EXPIRATION
NAME GRANTED (#)(A) IN FISCAL YEAR PRICE ($/SH)(B) DATE 5% ($) 10% ($)
---- ----------------- ---------------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul A Nussbaum......... 150,002 42% $13.43 4/19/2006 $1,268,000 $3,212,000
Thomas W. Lattin........ 54,001 15% $13.43 4/19/2006 456,000 1,156,000
Rex E. Stewart.......... 40,001 11% $13.43 4/19/2006 338,000 857,000
Michael D. Murphy....... 25,000 7% $14.13 4/29/2006 211,000 535,000
Leslie Ng............... 25,000 7% $13.43 4/19/2006 211,000 535,000
</TABLE>
- --------
(a) The nonqualified options vest in equal annual installments over a seven-
year vesting period beginning in April 1997.
(b) Represents the closing market price of the Common Stock on the grant date
of April 19, 1996, except for Mr. Murphy for whom the grant date was April
29, 1996.

12
<PAGE>

OPTION EXERCISES AND YEAR-END HOLDINGS FOR PATRIOT

The following table sets forth the value of options held at the end of 1996
by the Patriot Named Executive Officers:

<TABLE>
<CAPTION>
VALUE OF IN-
SHARES VALUE NUMBER OF UNEXERCISED OPTIONS MONEY OPTIONS AT
ACQUIRED ON REALIZED AT DECEMBER 31, 1996 DECEMBER 31, 1996(A)
NAME EXERCISE (#) ($) #EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
Paul A. Nussbaum........ -- -- 181,952/468,059 $1,739,913/$4,260,187
Thomas W. Lattin........ -- -- 56,950/197,055 $ 544,581/$1,806,708
Rex E. Stewart.......... -- -- 44,449/165,554 $ 425,047/$1,525,610
Michael D. Murphy....... -- -- 0/ 25,000 $ 0/$ 185,941
Leslie Ng............... -- -- 27,782/127,220 $ 265,670/$1,180,604
</TABLE>
- --------
(a) Represents the number of shares of Common Stock underlying the options
(excluding options the exercise price of which was more than the market
value of the underlying securities) times the market price at December 31,
1996 of $21.56, minus the exercise price.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY

This Compensation Committee report relates to compensation decisions made by
Patriot's Compensation Committee which upon the Merger, became the Company's
Compensation Committee. All of Patriot's executive officers became executive
officers of the Company and/or the Operating Company. This Compensation
Committee report shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 (the "Securities Act") or under the Exchange
Act, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.

Objectives of Executive Compensation. The Company's executive compensation
program is intended to attract, retain and reward experienced, highly
motivated executives who are capable of leading the Company effectively and
continuing its long-term growth. The compensation program for executives is
comprised of base salary, annual incentives and long-term incentive awards.
Base salary is targeted to be within a reasonable range of compensation for
comparable companies and for comparable levels of expertise by executives.
Annual incentives are based upon the achievement of one or more performance
goals. Under certain circumstances, if performance goals are exceeded, the
annual incentive may be higher than that of comparable companies. The Company
also utilizes equity-based compensation as a long-term incentive.

Compensation Committee Procedures. The Compensation Committee of the Board
of Directors establishes the general compensation policies of the Company,
establishes the compensation plans and specific compensation levels for
executive officers and administers the Company Incentive Plan and will
administer the REIT Incentive Plan. The Compensation Committee is composed of
three Independent Directors. Final compensation determinations for each fiscal
year are generally made after the end of the fiscal year, after audited
financial statements for such year become available. At that time, bonuses, if
any, are determined for the past year's performance, base salaries for the
following fiscal year are set and option grants, if any, are generally made.

The Compensation Committee engaged a compensation consultant in March 1996
to advise the Committee with respect to executive compensation matters,
including compensation amounts and the relative allocation of compensation
among base salary, annual incentive compensation and long-term incentive
compensation. The consultant presented the Compensation Committee with a Final
Report on April 18, 1996. Due to the growth of the Company in 1996, the
consultant presented a new updated Final Report on January 29, 1997, which
took into consideration an expanded group of peer companies more closely
aligned with the current size of the Company. The Compensation Committee,
working with this compensation consultant and in collaboration with senior
management, is also establishing new quantitative and qualitative performance
targets for the year ending

13
<PAGE>

December 31, 1997 for both annual and long-term compensation awards. The
results of this review will be reflected in the annual incentive and long-term
incentive compensation decisions for the fiscal year ending December 31, 1997
and in the base salary levels for the fiscal year ending December 31, 1998.

In setting base salary and determining annual incentive and long-term
incentive awards, the Compensation Committee reviews compensation levels of
executive officers at real estate investment trusts with revenues closely
comparable to those of the Company. Some of these companies are the same
companies that comprise the NAREIT Total Return Equity Index to which the
Company's stock performance is compared in this proxy statement. The
Compensation Committee believes that the compensation information for these
groups is comparable since both groups contain real estate investment trusts
of similar size, make-up and performance.

As part of its review of executive compensation in 1997, the Compensation
Committee reviewed comparative data for a number of other real estate
investment trusts, both within and outside the hospitality sector, as well as
other hospitality companies. Although these entities have operated as public
companies for various periods of time, the Committee believes this data is a
reliable indication of competitive compensation. The Compensation Committee
also reviewed data contained in published surveys on executive compensation.
The Compensation Committee based its decisions regarding 1997 base salary and
annual cash bonus amounts for the year ended December 31, 1996 upon its review
of such data.

Members of the Compensation Committee consult periodically by telephone
prior to the meeting at which compensation decisions are made. The
Compensation Committee exercises its independent discretion in determining the
compensation of the executive officers. With respect to the compensation of
the executive officers other than Mr. Nussbaum, the Compensation Committee
reviews the recommendations of Mr. Nussbaum.

Each element of the executive compensation, as well as the compensation of
the Chief Executive Officer, is discussed separately below.

Base Salary. Base salaries are determined by the Compensation Committee
after reviewing salaries paid by real estate investment trusts of similar
size, makeup and performance. The Compensation Committee generally sets base
salaries at a level to weight total compensation in favor of annual and long-
term performance-based compensation.

For 1996, the Compensation Committee set the 1996 base salaries for the
executive officers in accordance with the policy stated above. For the year
ended December 31, 1996, the executive officers (other than its Chief
Executive Officer, who is discussed separately below) received the following
annualized base salaries: Thomas W. Lattin $205,625, Rex E. Stewart $174,250,
Michael D. Murphy $93,333 and Leslie Ng $143,500.

Annual Incentives. Annual incentives are provided in the form of cash
bonuses. Annual incentives are designed to reward executives and management
for the annual growth and achievement of the Company. The Compensation
Committee awards cash bonuses based primarily upon the Company's total
earnings and earnings growth, including growth in funds from operations.

The Compensation Committee awarded cash bonuses to the executive officers
for the fiscal year ended December 31, 1996. These cash bonuses were
determined in accordance with the policy stated above. For the year ended
December 31, 1996, the executive officers (other than the Chief Executive
Officer, who is discussed separately below) were awarded the following cash
bonuses: Rex E. Stewart $75,000; Thomas W. Lattin $75,000; Michael D. Murphy
$30,000; and Leslie Ng $50,000.

Long-Term Incentives. Long-term incentives are provided through the grant of
restricted stock awards and stock options. These grants are designed to align
executives with the long-term goals of the Company and the interests of the
Company's stockholders and encourage high levels of stock ownership among
executives. Long-term incentive compensation depends upon quantitative and
objective, as well as qualitative, measures of

14
<PAGE>

corporate performance. The Compensation Committee uses long-term incentive
compensation awards to reward management for achieving favorable results based
on predefined performance measures. Primary emphasis of the total compensation
package for all executives is placed on the long-term component.

Restricted Stock Awards. The Compensation Committee believes that the grant
of restricted stock awards align the executive's long-term objectives with
those of the Company's stockholders. The Company's REIT Incentive Plan will be
administered by the Compensation Committee, which will have the power to
determine those individuals to whom restricted stock awards will be granted.

The Compensation Committee awarded restricted stock awards for the year
ended December 31, 1996 in accordance with the policy stated above, after
reviewing the recommendations of its consultant. The executive officers (other
than its Chief Executive Officer, who is discussed separately below) received
the following restricted stock awards: Thomas W. Lattin 80,001, Rex E. Stewart
60,000, Michael D. Murphy 40,000 and Leslie Ng 40,000.

Stock Options. The Compensation Committee believes that the grant of stock
options align the executive's long-term objectives with those of the Company's
stockholders. The Company's REIT Incentive Plan will be administered by the
Compensation Committee, which will have the power to determine those
individuals to whom options will be granted, the number of shares, the type of
options and other terms and conditions of the options.

The Compensation Committee awarded stock options for the fiscal year ended
December 31, 1996 in accordance with the policy stated above, after reviewing
the recommendations of its consultant. The executive officers (other than its
Chief Executive Officer, who is discussed separately below) received options
to purchase the following number of shares of Common Stock: Thomas W. Lattin
54,000, Rex E. Stewart 40,000, Michael D. Murphy 25,000 and Leslie Ng 25,000.

Compensation of Chief Executive Officer. The Compensation Committee set Mr.
Nussbaum's base salary for the year ended December 31, 1996 substantially in
accordance with the policies described above relating to all executive
officers. Mr. Nussbaum's 1996 annualized base salary was $315,000, an amount
that represents an increase of 75% over his 1995 annualized base salary.

Mr. Nussbaum's cash bonus for 1996 was determined by the Compensation
Committee substantially in accordance with the policies described above
relating to all executive officers. Additionally, the Compensation Committee
considered a subjective evaluation of Mr. Nussbaum's ability to influence the
Company's long-term growth and profitability. For the year ended December 31,
1996, the Company awarded Mr. Nussbaum a $200,000 cash bonus.

The Compensation Committee determined Mr. Nussbaum's grant of stock options
for the year ended December 31, 1996 substantially in accordance with the
policies described above relating to all executive officers. Mr. Nussbaum
received options to purchase 150,002 shares of Common Stock relating to the
year ended December 31, 1996.

In determining Mr. Nussbaum's total compensation package, the Compensation
Committee noted Patriot's stellar performance since its initial public
offering in September 1995, including achievement of the second highest
stockholder return in 1996 in its peer group of high performing REITs and
lodging corporations. The Compensation Committee also considered the
successful completion of a secondary public offering of the Company's Common
Stock resulting in net proceeds of approximately $152 million. In addition,
the Compensation Committee considered Patriot's acquisition program and, in
particular, the successful bid for Cal Jockey/Bay Meadows. The Compensation
Committee believed that much of Patriot's extraordinary performance in 1996
was attributable to the leadership of Mr. Nussbaum. Therefore, the
Compensation Committee believed that the increase in Mr. Nussbaum's total
compensation package was more than commensurate with his efforts.

15
<PAGE>

Tax Deductibility of Compensation. Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), limits the deductibility on the
Company's tax return of compensation over $1 million to any of the executive
officers unless, in general, the compensation is paid pursuant to a plan which
is performance-related, non-discretionary and has been approved by the
Company's stockholders. The Compensation Committee's policy with respect to
Section 162(m) is to make every reasonable effort to ensure that compensation
is deductible to the extent permitted while simultaneously providing
executives with appropriate rewards for their performance. The Company did not
pay any compensation during 1996 that would be subject to Section 162(m).

Submitted by the Compensation Committee:

Arch K. Jacobson
John C. Deterding
Gregory R. Dillon

EXECUTIVE COMPENSATION FOR THE OPERATING COMPANY

The following table sets forth the base compensation awarded to the
Operating Company's President and Chief Executive Officer and each executive
officer of the Operating Company at the end of 1996, whose aggregate cash
compensation in 1996 exceeded $100,000 (all such executive officers, including
the President and Chief Executive Officer, are collectively referred to as the
"Operating Company Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------- ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
------------------ ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
F. Jack Liebau(a)(b)..... 1996 $258,900(c) $35,000 20,000 $11,250(e)
President and Chief
Executive Officer 1995 225,000 50,000(d) 25,000 11,250(e)
1994 206,250 50,000(d) 20,000 15,750(e)
Frank Trigeiro(a)(b)..... 1996 $125,900(c) $ 5,000 7,500 $ 8,750(e)
Vice President--Finance 1995 115,000 7,500 8,625(e)
</TABLE>
- --------
(a) Mr. Trigeiro was employed by the Operating Company beginning in March
1995. In connection with the Merger, Mr. Liebau became a director and the
President of an affiliate of the Operating Company, and Mr. Trigeiro
became Vice President of Finance of an affiliate of the Operating Company.
(b) In July 1997, Mr. Liebau was paid $695,000 as a severance payment and Mr.
Trigeiro was paid $120,000 as a severance payment.
(c) During 1996, Messrs. Liebau and Trigeiro were each provided living
accommodations by the Operating Company valued at $25,300 and $12,600,
respectively. Messrs. Liebau and Trigeiro each also had the use of an
automobile owned by the Operating Company.
(d) Bonus attributable to services rendered during the indicated year, which
was paid in 1996.
(e) Contribution to pension plan.

16
<PAGE>

OPTION GRANTS IN FISCAL YEAR 1996 FOR THE OPERATING COMPANY

The following table sets forth the options granted with respect to the
fiscal year ended December 31, 1996 to the Operating Company Named Executive
Officers:

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF SHARE
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------ ----------------------
NUMBER OF PERCENT OF TOTAL
SHARES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ----------- ---------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
F. Jack Liebau(a)....... 20,000 38.10% $14.75 3/2/2001 $ 185,524 $ 470,154
Frank Trigeiro(a)....... 7,500 14.29 14.75 3/29/2001 169,571 176,308
</TABLE>
- --------
(a) In connection with the Merger, Mr. Liebau became a director and the
President of an affiliate of the Operating Company and Mr. Trigeiro became
the Vice President of Finance of an affiliate of the Operating Company.

OPTIONS EXERCISES AND YEAR-END HOLDINGS FOR THE OPERATING COMPANY

The following table sets forth the value of options held at the end of 1996
by the Operating Company's Named Executive Officers:

<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 1996 DECEMBER 31, 1996(B)
ON EXERCISE REALIZED #EXERCISABLE/ #EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------------- --------------------
<S> <C> <C> <C> <C>
F. Jack Liebau(a)....... -- -- 167,006/16,059 $3,542,922/340,203
Frank Trigeiro(a)....... -- -- 14,452/0 $306,563/0
</TABLE>
- --------
(a) The stock option agreements underlying these options provides that vesting
of these options will accelerate upon a change in control of the Operating
Company. Accordingly, the options became exercisable when the Merger was
consummated.
(b) Represents the number of shares of Common Stock underlying the options
(excluding options the exercise price of which was more than the market
value of the underlying securities) times the market price at December 31,
1996 of $40.88, minus the exercise price.

THE OPERATING COMPANY PENSION PLAN

The table that follows shows the estimated annual benefits payable upon
retirement to non-union employees of the Operating Company under the
California Race Track Pension Plan. Participants are fully vested after five
years of service.

<TABLE>
<CAPTION>
VERAGE ANNUALA
EARNINGS 5 YEARS 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- -------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 50,000........................ $ 6,250 $12,500 $25,000 $ 37,500 $ 50,000
100,000........................ 12,500 25,000 50,000 75,000 100,000
150,000 and over............... 18,750 37,500 75,000 112,500 118,000(a)
</TABLE>
- --------
(a) In accordance with Section 415 Limits--IRS Code.

The compensation covered by the above plan is annual earnings of an
employee. The covered compensation is the same as the compensation reported in
the Summary Compensation Table for the Operating Company under the Salary
column (up to a maximum of $150,000 per year). The pension table above sets
forth estimated annual

17
<PAGE>

retirement benefits payable as a straight-life annuity, assuming retirement at
age 65, using the normal form of benefit under the above plan. The benefits
listed are not subject to any deduction for social security or other offset
amounts.

The number of years of credited service at December 31, 1996, for the
Operating Company Named Executive Officers is as follows: Mr. F. Jack Liebau
(four years) and Frank Trigeiro (two years).

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE
OPERATING COMPANY

This Compensation Committee report shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange Act,
except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.

The current members of the Compensation Committee of the Operating Committee
were appointed in connection with the Merger in July 1997. Compensation
decisions for 1996 with respect to the old executive officers of the Operating
Company were made by the former Compensation Committee in accordance with its
policies. On a going forward basis, the Compensation Committee will follow the
same policies discussed above for the Company.

Submitted by the Compensation Committee:

Leonard Boxer
Arch K. Jacobson

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION FOR THE COMPANY
AND THE OPERATING COMPANY

None.

COMPANY AND OPERATING COMPANY EMPLOYMENT AGREEMENTS

The Company entered into an employment agreement as of April 14, 1997 with
Mr. Nussbaum, pursuant to which Mr. Nussbaum serves as Chairman and Chief
Executive Officer of the Company for a term of five years from April 14, 1997
until the fifth anniversary of the effective date of the merger of Wyndham
Hotel Corporation into the Company (the "Wyndham Merger"). The Agreement is
automatically extended for additional two year terms unless either party
elects by notice in writing at least 90 days prior to the expiration of a term
to terminate the Agreement or if the Agreement is otherwise terminated. Mr.
Nussbaum's initial annual base compensation is $500,000, subject to any
increases in base compensation approved by the Compensation Committee.
Additionally, Mr. Nussbaum is eligible to receive incentive compensation to be
determined by the Compensation Committee of an amount up to 100% of his base
compensation.

The Operating Company entered into an employment agreement as of October 1,
1997 with Mr. Alibhai, pursuant to which Mr. Alibhai serves as the President
and Chief Operating Officer of the Operating Company for a term of three years
from September 30, 1997. The Agreement is automatically extended for
additional two year terms unless either party elects by notice in writing at
least 45 days prior to the expiration of a term to terminate the Agreement or
if the Agreement is otherwise terminated. Mr. Alibhai's initial annual base
compensation is $350,000, subject to any increases in base compensation
approved by the Compensation Committee. Additionally, Mr. Alibhai is eligible
to receive incentive compensation to be determined by the Compensation
Committee of an amount up to 80% of his compensation, but in no event in
excess of $75,000.

Upon termination of employment of Mr. Nussbaum or Mr. Alibhai (each
respectively, an "Executive") due to death, the Company or the Operating
Company, as applicable, is obligated, within 90 days of his death, to pay in a
lump sum amount to their respective designee or estate, accrued and unpaid
base and incentive

18
<PAGE>

compensation. All unvested stock options and stock-based grants will
immediately vest and will be exercisable for one year. Additionally, the
Company or the Operating Company, as applicable, will pay health insurance
premiums for one year and any payments to be made under any employee benefit
plans or arrangement will be paid in accordance with the terms of such plans
or arrangement.

Each Executive's employment may be terminated for disability once such
Executive is absent from his duties on a full-time basis for 180 calendar days
in any 12 month period. During such period, such Executive will continue to
receive his base and incentive compensation. All unvested stock options and
stock-based grants will immediately vest and will be exercisable for one year.
Additionally, the Company or the Operating Company, as applicable will pay
health insurance premiums for one year.

If an Executive's employment is terminated by such Executive for good
reason, or if the Company or the Operating Company, as applicable, terminates
his employment without cause, the Company or the Operating Company, as
applicable, will pay such Executive his base and incentive compensation
through the date of such termination and a severance payment (the "Severance
Payment") in accordance with the Company's or the Operating Company's, as
applicable, then current severance policies, provided that, at a minimum, Mr.
Nussbaum will receive a severance payment equal to three times the sum of his
average base compensation (determined in accordance with the Agreement) and
average incentive compensation (determined in accordance with the Agreement)
and Mr. Alibhai will receive a severance payment equal to two times the sum of
his average base compensation (determined in accordance with the Agreement)
and average incentive compensation (determined in accordance with the
Agreement). Additionally, for a period of three years, the Company will
provide Mr. Nussbaum with an office and related facilities and an assistant at
a location of Mr. Nussbaum's choosing. For a period of one year, the Company
or the Operating Company, as applicable, will pay for the cost of executive
out placement services and will pay health insurance premiums. All stock
options and other stock-based grants in which Mr. Nussbaum otherwise would
have vested if he had remained employed for three years will immediately
become exercisable or nonforfeitable. If Mr. Nussbaum is not nominated and
elected to serve as a member of the Board of Directors, then Mr. Nussbaum may
terminate his employment, which termination will be deemed to be for good
reason.

If a "Change in Control" (as defined below) occurs and Mr. Nussbaum's or Mr.
Alibhai's employment is terminated for any reason other than death, disability
or voluntary resignation within 18 months of such Change in Control, the
Company or the Operating Company, as applicable, must pay the Executives a
lump sum amount equal to the Severance Payment and all stock options and other
stock-based awards will become immediately exercisable or non-forfeitable. In
addition, the Company will provide Mr. Nussbaum with a tax gross-up payment to
cover any excise tax due. Within 15 days after the occurrence of the first
event constituting a Change in Control, the Company will place the funds
necessary to pay Mr. Nussbaum in escrow. For purposes of the Agreements,
"Change in Control" means an event which shall be deemed to have occurred if
(i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or the Operating Company, as applicable, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company or the
Operating Company, as applicable, representing 25% or more of the combined
voting power of the Company's or the Operating Company's, as applicable, then
outstanding securities; or (ii) individuals who at the commencement date of
the Agreement constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the Company or
the Operating Company, as applicable, to effect a transaction described in
clauses (i) or (iii) of this paragraph) whose election by the Board or
nomination for election by the Company's or the Operating Company's, as
applicable, stockholders was approved by a vote of at least 80% of the
directors then still in office who either were directors at the commencement
date of the Agreement or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the
Board; or (iii) the stockholders of the Company approve a merger or
consolidation of the Company or the Operating Company, as applicable, with or
into any other corporation, other than a merger or consolidation of the
Company or the Operating Company, as applicable,

19
<PAGE>

which would result in the voting securities of the Company or the Operating
Company, as applicable, outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting power
of the voting securities of the Company or the Operating Company, as
applicable, or such surviving entity outstanding immediately after such merger
or consolidation; or (iv) the stockholders of the Company or the Operating
Company, as applicable, approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company or the Operating
Company, as applicable, of all or substantially all of the Company's or the
Operating Company's, as applicable, assets.

In June 1997, the Company entered into an Employment Agreement with Paul
Novak, pursuant to which Mr. Novak served as Executive Vice President--
Acquisitions and Development of the Company for a three-year term beginning
June 1997. This Employment Agreement was assigned to the Operating Company
shortly after completion of the Merger, and Mr. Novak is currently an employee
of the Operating Company. Mr. Novak's initial annual base compensation is
$250,000. If the Company completes a Carnival transaction prior to January 1,
1998, Mr. Novak's base compensation is increased to $275,000. Thereafter, Mr.
Novak's compensation is subject to any increases approved by the Compensation
Committee. Additionally, Mr. Novak is eligible to receive incentive
compensation to be determined by the Compensation Committee of an amount up to
80% of his base compensation. For 1997, Mr. Novak will be entitled to a
minimum incentive compensation of 60% of his base compensation, less any
incentive compensation that he receives from The Hampstead Group for services
rendered in 1997. The other terms of Mr. Novak's Agreement are substantially
similar to those of Messrs. Nussbaum and Alibhai, except that if Mr. Novak's
employment is terminated by Mr. Novak for good reason, or if the Company
terminates his employment without cause, the Company will pay Mr. Novak his
base and incentive compensation through the date of such termination and a
severance payment (the "Severance Payment") in accordance with the Company's
then current severance policies, provided that, at a minimum, Mr. Novak will
receive a severance payment equal to 24 months of his average base
compensation (determined in accordance with the Agreement) and average
incentive compensation (determined in accordance with the Agreement) or the
sum of the average base and incentive compensation payable for the remaining
length of the original three-year term of the Agreement, whichever is greater.
Additionally, for a period of six months, the Company will pay for the cost of
executive out placement services and for two years will pay health insurance
premiums. All stock options in which Mr. Novak would have vested if he had
remained employed by the Company for 18 months or if termination occurs within
the first 18 months, the remaining length of the original three-year term of
the Agreement, will immediately become exercisable and non-forfeitable and all
restricted stock awards in which Mr. Novak otherwise would have vested if he
had remained employed for a period of 24 months or if termination of
employment occurs within the first 12 months, the remaining length of the
original three-year term, will immediately become exercisable and non-
forfeitable.

In February 1997, the Company entered into an Employment Agreement with
William W. Evans III, pursuant to which Mr. Evans serves as Office of the
Chairman of the Company for a term beginning March 1, 1997 until February 29,
2000 (the "Initial Term"), unless otherwise terminated or unless either party
elects to terminate the Agreement at least 90 days prior to the end of the
Initial Term, or at least 90 days prior to December 31 of each subsequent
year, the term of the agreement will be automatically renewed for successive
one-year terms. The Company agreed to initially pay Mr. Evans an annual base
salary of $300,000, and Mr. Evans' cash bonus must be at least 30% of the base
salary for the first year of the Initial Term. In the event Mr. Evans'
employment is terminated due to death or disability: (i) Mr. Evans' estate or
legal representative will be entitled to any accrued but unpaid compensation
and benefits, (ii) beneficiaries will receive the proceeds under applicable
insurance policies, (iii) all stock options and other stock-based awards will
become immediately exercisable or non-forfeitable and (iv) for a period of one
year, Mr. Evan's spouse and dependants will receive medical and related health
benefits under the Company's existing plans.

In the event Mr. Evans is terminated for cause or Mr. Evans voluntarily
terminates his employment, he shall be entitled to receive any accrued but
unpaid cash compensation and benefits through the date of termination and all
vested options will continue to be exercisable for their exercise term, as if
he had not been terminated. If

20
<PAGE>

the Company terminates Mr. Evans for cause or if Mr. Evans terminates his
employment due to a "Constructive Termination" (as defined in the Agreement):
(i) Mr. Evans will receive any accrued but unpaid compensation and benefits
through the date of termination, (ii) Mr. Evans, or his estate or his
beneficiary, will be entitled to receive the proceeds under applicable
insurance policies, (iii) all stock options and other stock-based awards will
become immediately exercisable or non-forfeitable, (iv) for the longer of one
year or the remaining length of the term of the Agreement, Mr. Evans and his
spouse and dependants will receive medical and related health benefits under
the Company's existing plans and (v) the Company will pay Mr. Evans within 30
days after the date of termination, a lump sum equal to base salary and
average incentive compensation (as determined in accordance with the terms of
the Agreement) multiplied by the greater of one year or the remaining length
of the term of the Agreement. Mr. Evans is entitled to the same benefits as
Messrs. Nussbaum, Alibhai and Novak in the event of a "Change in Control."

In October 1995, the Company entered into employment agreements with Messrs.
Lattin, Stewart and Ng, pursuant to which Mr. Lattin serves as President and
Chief Operating Officer, Mr. Stewart serves as Executive Vice President and
Chief Financial Officer and Mr. Ng serves as Senior Vice President--
Acquisitions, each for a term of three years, at an annual base salary of
$170,000, $175,000 and $140,000, respectively, subject to any increases in
base compensation approved by the Compensation Committee. The Compensation
Committee has increased the base salaries of Messrs. Lattin, Stewart and Ng to
$250,000, $210,000 and $162,000, respectively, effective February 1, 1997.
Upon termination other than for cause or death or disability, including a
termination within 60 days after a Change in Control (as defined in the
agreements), each of such officers will be entitled to receive severance
benefits in an amount to be determined by the Compensation Committee.
Additionally, upon a Change in Control, all stock options and other stock-
based awards will become immediately exercisable or non-forfeitable.

21
<PAGE>

STOCK PERFORMANCE GRAPH FOR THE COMPANY AND THE OPERATING COMPANY

The following graph provides a comparison of the cumulative total
stockholder return for the five year period ended December 31, 1996 (assuming
reinvestment of any dividends) of the Paired Common Stock, the Standard &
Poor's ("S&P") 500 Index and the National Association of Real Estate
Investment Trusts ("NAREIT") Total Return Equity Index.

COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY/OPERATING COMPANY, INDUSTRY INDEX AND BROAD MARKET

[PERFORMANCE GRAPH APPEARS HERE]

Company/ NAREIT -
Measurement period Operating All REIT
(Fiscal Year Covered) Company S&P 500 Index
- --------------------- --------- ------- --------

Measurement PT - 12/31/91 $100.00 $100.00 $100.00

FYE 12/31/92 $94.230 $107.64 $112.17
FYE 12/31/93 $109.805 $118.50 $132.98
FYE 12/31/94 $131.287 $120.06 $134.05
FYE 12/31/95 $139.429 $165.18 $158.59
FYE 12/31/96 $398.347 $203.11 $215.29

22
<PAGE>

STOCK PERFORMANCE GRAPH FOR PATRIOT

The following graph provides a comparison of the cumulative total
stockholder return for the period from September 27, 1995 to December 31,1996
(assuming reinvestment of any dividends) among Patriot, the Standard & Poor's
("S&P") 500 Index and the National Association of Real Estate Investment
Trusts ("NAREIT") Total Return Equity Index. In connection with the Merger,
Patriot was merged with and into the Company.

COMPARISON OF CUMULATIVE TOTAL RETURN
OF PATRIOT, INDUSTRY INDEX AND BROAD MARKET

[PERFORMANCE GRAPH APPEARS HERE]

NAREIT -
Measurement period All REIT
(Fiscal Year Covered) Patriot S&P 500 Index
- --------------------- --------- ------- --------

Measurement PT - 9/27/95 $100.00 $100.00 $100.00

FYE 12/29/95 $106.018 $106.541 $104.584
FYE 12/31/96 $188.917 $131.362 $141.977

23
<PAGE>

BENEFICIAL OWNERSHIP OF PAIRED COMMON STOCK.

Except as otherwise noted, the following table sets forth certain
information as of October 15, 1997 as to the security ownership of those
persons owning of record or known to the Company and the Operating Company to
be the beneficial owner of more than five percent of the Paired Common Stock
and the security ownership of Paired Common Stock by each of the directors of
the Company and the Operating Company, Director nominees and each of the
executive officers of the Company and the Operating Company, and all Directors
and executive officers of the Company and the Operating Company as a group.
All information with respect to beneficial ownership has been furnished by the
respective Director, Director nominees, executive officer or five percent
beneficial owner, as the case may be. Unless otherwise indicated, the persons
named below have sole voting and investment power with respect to the number
of shares set forth opposite their names. Beneficial ownership of the Paired
Common Stock has been determined for this purpose in accordance with
applicable rules and regulations promulgated under the Exchange Act. Except as
otherwise described below, all shares of Paired Common Stock are owned
directly and the indicated person has sole voting and investment power. The
number of shares of Paired Common Stock also includes the number of shares
that the person could receive if he redeemed his Paired OP Units and Preferred
A, B and C Operating Company OP Units under certain circumstances.

As of October 15, 1997 (and after restatement to reflect the impact of the
2-for-1 stock split effected in the form of a stock dividend distributed on
March 18, 1997 to shareholders of record on March 7, 1997 and the 1.927-for-1
stock split effected in the form of a stock dividend distributed on July 25,
1997 to shareholders of record on July 15, 1997), there were 66,274,286 shares
of Paired Common Stock; 6,101,014 options to purchase a like number of shares
of Paired Common Stock; 11,362,230 Paired OP Units (excluding Paired OP Units
held by subsidiaries of the Company); 931,972 Preferred A Operating Company OP
Units; 1,324,804 Preferred B Operating Company OP Units; and 476,682 Preferred
C Operating Company OP Units.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS(1)
- ------------------------ --------------------- ----------
<S> <C> <C>
Paul A. Nussbaum............................. 1,137,912(2) 1.3%
Thomas W. Lattin............................. 244,667(3) *
Rex E. Stewart............................... 177,665(4) *
Michael D. Murphy............................ 43,232(5) *
Leslie Ng.................................... 110,105(6) *
John H. Daniels.............................. 169,622(7) *
Leonard Boxer................................ 32,384(7) *
John C. Deterding............................ 29,998(7) *
Gregory R. Dillon............................ 29,998(7) *
Thomas S. Foley.............................. 28,000(7) *
Arch K. Jacobson............................. 29,998(7) *
Burton C. Einspruch.......................... 1,400 *
William W. Evans III......................... 340,002(8) *
Karim Alibhai................................ 1,799,235(9) 2.0%
Paul Novak................................... 74,285(10) *
Sherwood M. Weiser........................... 61,780 *
Executive officers and directors as a group
(17 persons)................................ 4,248,503 4.7%
Fidelity Management and Research Company .... 5,698,711(11) 6.2%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>

24
<PAGE>

- --------
* Less than 1%.
(1) Assumes that all Paired OP Units and Preferred A, B and C Operating
Company OP Units held by each person are redeemed for a share of Paired
Common Stock. The total number of shares outstanding in calculating the
percentage assumes that none of the Paired OP Units and Preferred A, B
and C Operating Company OP Units held by other persons are redeemed for
shares of Paired Common Stock. Also assumes that all vested and unvested
options to purchase shares of Paired Common Stock are exercised. The
total number of shares outstanding used in calculating the percentage
assumes that no other vested or unvested options held by other persons
are exercised.
(2) Includes options to purchase 3,250,051 shares of Common Stock issued to
Mr. Nussbaum, of which 454,778 are currently exercisable. The number of
shares beneficially owned by Mr. Nussbaum also includes 24,572 Paired OP
Units owned by trusts for the benefit of Mr. Nussbaum's sons. Mr.
Nussbaum disclaims beneficial ownership as to all such 24,572 OP Units.
The number of shares also includes 17,818 Paired OP Units owned by
current and former executives of Patriot American through limited
partnerships of which an affiliate of Mr. Nussbaum serves as the general
partner. Mr. Nussbaum also disclaims beneficial ownership of these Paired
OP Units. The number of shares beneficially owned by Mr. Nussbaum also
includes 207,479 Paired OP Units owned by a Company wholly-owned by Mr.
Nussbaum and the 83,335 of Paired OP Units held in the SEP for the
benefit of Mr. Nussbaum. Mr. Nussbaum also disclaims beneficial ownership
of these 83,335 Paired OP Units.
(3) Includes options to purchase 254,002 shares of Common Stock issued to Mr.
Lattin, of which 102,170 are currently exercisable.
(4) Includes options to purchase 210,002 shares of Common Stock issued to Mr.
Stewart, of which 80,165 are currently exercisable.
(5) Includes options to purchase 25,000 shares of Common Stock issued to Mr.
Murphy, of which 3,572 are currently exercisable.
(6) Includes options to purchase 155,001 shares of Common Stock issued to Mr.
Ng, of which 51,356 are currently exercisable.
(7) Includes options to purchase 20,000 shares of Common Stock issued to each
non-employee director all of which are currently exercisable.
(8) Includes options to purchase 560,009 shares of Paired Common Stock issued
to Mr. Evans of which 93,334 are currently excercisable.
(9) The number of shares beneficially owned by Mr. Alibhai includes an
aggregate of 421,161 OP Units beneficially owned by Gencom Interests, a
family corporation for which he serves as Vice President and of which he
owns 30% of the outstanding capital stock. Mr. Alibhai disclaims
beneficial ownership of these OP Units, except to the extent of his 30%
ownership interest in such corporation. The number of shares also
includes 35,162 OP Units owned by employees of Gencom through a limited
partnership of which Mr. Alibhai serves as the general partner. Mr.
Alibhai also disclaims beneficial ownership of these OP Units. Includes
options to purchase 280,000 shares of Paired Common Stock issued to Mr.
Alibhai of which 26,263 are currently excercisable.
(10) Includes options to purchase 100,001 shares of Paired Common Stock issued
to Mr. Novak of which 14,285 are currently excerisable.
(11) Beneficial ownership information is based on the Schedule 13G filed by
Fidelity Management and Research Company on February 14, 1997.

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<PAGE>

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Exchange Act, requires the Companies' officers,
Directors and persons who beneficially own more than ten percent of the Paired
Common Stock to file reports of securities ownership and changes in such
ownership with the SEC. Officers, Directors and greater than ten percent
beneficial owners also are required by rules promulgated by the SEC to furnish
the Companies with copies of all Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to the
Companies, or written representations that no Form 5 filings were required,
the Company and the Operating Company believe that during 1996 all Section
16(a) filing requirements applicable to its officers, Directors and greater
than ten percent beneficial owners were complied with except that: (i) Mr.
Deterding inadvertently failed to file a Form 4 with the SEC with respect to
one acquisition of common stock; (ii) Mr. G. Terry Huntzicker, Vice
President--Design and Construction, inadvertently failed to file a Form 3 on a
timely basis with the SEC when he became a reporting person; and (iii) Mr.
Murphy inadvertently failed to file a Form 3 on a timely basis with the SEC
when he became a reporting person. Mr. Deterding has reported his acquisition
of common stock on a Form 5 filed on a timely basis with the SEC.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

OVERLAP OF MANAGEMENT

Mr. Nussbaum is Chairman of the Board and Chief Executive Officer of the
Company and the Operating Company. Mr. Stewart is the Chief Financial Officer
and Treasurer of the Company and the Operating Company.

ACQUISITION OF INTERESTS IN CERTAIN OF THE COMPANY'S HOTELS

One or more of Mr. Nussbaum and certain related trusts and affiliates of Mr.
Daniels and Mr. Stewart owned equity interests in certain of the hotels
contributed to Patriot in connection with its initial public offering. Such
persons, trusts and affiliates received an aggregate of 169,836 OP Units and
approximately $156,000 in cash in exchange for their interests in certain of
the hotels (excluding cash used to repay certain indebtedness collateralized
by such interests). Upon exercise of their rights to redeem such OP Paired
Units (which rights are not exercisable until October 1998), such persons and
entities may receive an aggregate of 169,836 shares of Paired Common Stock or,
at the Company's option, cash in the amount of approximately $5,349,834 based
on the current market price of the Common Stock. In connection with the
issuance of title insurance policies on certain of the Company's hotels, a
title insurance agency owned by Mr. Nussbaum, certain members of his family
and certain related trusts have received approximately $278,000 in fees.

SUBLEASE AND SERVICES AGREEMENT

The Company has entered into a sublease and services agreement with an
affiliate, pursuant to which such affiliate provides the Company with office
space and limited support personnel for the Company's headquarters at 3030 LBJ
Freeway, Dallas, Texas, for an annual fee of approximately $141,000 through
February 1998.

OFFICERS' OTHER INTERESTS IN HOTEL PROPERTIES

Mr. Nussbaum has minority ownership interests in the following hotels: the
Marriott Residence Inn in Houston, Texas (4.0% profits interest); the
Astrodomain Holiday Inn (2.6% ownership interest); the Astrodomain Sheraton
Hotel (2.6% ownership interest); and the Astrodomain Days Inn (2.6% ownership
interest) in Houston, Texas. Mr. Nussbaum has agreed not to increase ownership
interest in any of these hotels, which represent his only interests in hotel
properties apart from his interest in the Company. No other executive officer
of the Companies owns an interest in a hotel property.

INTERESTS OF DIRECTORS AND OFFICERS

Thomas S. Foley, a director of the Company, is a partner in Akin, Gump,
Strauss, Hauer & Feld, L.L.P., a law firm that has advised the Company on
certain matters relating to the acquisition of the hotels. Leonard Boxer,

26
<PAGE>

a director of the Operating Company, is a partner in Stroock & Stroock &
Lavan, a law firm that has advised the Company on certain matters relating to
the acquisition of certain real property. William W. Evans III, became a
director and officer of the Company in 1997 and prior thereto was a Managing
Director of PaineWebber, which provided investment banking services to an
affiliate of the Company.

PRIOR TO THE MERGER

In July 1992, Northern California Off-Track Wagering, Inc. ("N.C.O.T.W.
Inc.") was formed to act as the guest associations' pari-mutuel manager for
satellite wagering, and Bay Meadows became a 25% stockholder in N.C.O.T.W.
Inc. Bay Meadows reimbursed N.C.O.T.W. Inc. $4,235,000, $3,742,000 and
$3,671,000 in 1996, 1995 and 1994, respectively, for satellite wagering
expenses N.C.O.T.W. Inc. incurred on behalf of Bay Meadows. These expenses
were included in Bay Meadows' direct operating costs. Included in Bay Meadows'
accounts receivable at December 31, 1996 was a receivable from N.C.O.T.W. Inc.
for $81,000. At December 31, 1995, included in Bay Meadows' accounts payable
and accrued liabilities was a payable to N.C.O.T.W. Inc. of $742,000.

From time to time, Cal Jockey loaned funds on a short-term basis to Bay
Meadows to allow Bay Meadows to meet operational needs in the off-season.
There were no borrowings as of December 31, 1996. As of December 31, 1995, the
balance due to Cal Jockey was $600,000 which was reflected in the inter-
company payable/receivable account. For the years ended December 31, 1996 and
1995, Bay Meadows paid Cal Jockey $8,000 and $45,000 in interest related to
these borrowings.

Because a director of Cal Jockey was also a director of Santa Anita Realty
Enterprises, trading restrictions applicable to such director may have been
imputed to Cal Jockey. Consequently, there may have been periods of time when
Cal Jockey's investment in Santa Anita Realty Enterprises was illiquid.

During 1996, Bay Meadows made purchases from Harris Ranch Beef Company in
the amount of $72,000. John C. Harris is Owner and Chief Executive Officer of
Harris Ranch Beef Company and was also a director of Bay Meadows.

IN CONNECTION WITH THE MERGER

On May 28, 1997, the Cal Jockey Board agreed to pay its members, Kjell H.
Qvale, James M. Harris, James P. Conn, David M. Gjerdrum and Ronald J. Volkman
and the sole employee of Cal Jockey, Ray Kuratek, the aggregate sum of
$600,000 to be allocated by the Cal Jockey Board of Directors at a subsequent
Board meeting. The Cal Jockey Board of Directors agreed to pay such amount as
compensation for services previously rendered to Cal Jockey by such
individuals, particularly in recognition of their significant contributions to
the Merger process. The $600,000 was paid to such individuals in July 1997.

Bay Meadows entered into individual severance agreements (the "Severance
Agreements") with six key members of management (the "Officers"), including
Eugene F. Barsotti, Jr. Each of the Severance Agreements provides that, if
following a change in control of Bay Meadows, the Officer's employment is
terminated prior to January 1, 1998 or within 24 months following a change in
control of Bay Meadows prior to January 1998, he or she will be entitled to
receive (i) payments of full base salary, and accrued vacation and personal
holidays from the date of notice of termination to the date of termination
(not to be less than 30 days) at the highest rate in effect during the 12
months immediately preceding notice of termination, (ii) an amount equal to
his or her annual base salary at the highest rate in effect during the 12
months immediately preceding notice of termination (or, with respect to
Messrs. Liebau and Barsotti, two times such amount) and (iii) an amount equal
to the amount of any bonus or other incentive compensation paid during the 12
months immediately preceding notice of termination or calendar year 1996,
whichever is higher (or, with respect to Messrs. Liebau and Barsotti, two
times such amount). In addition to the payments that would be made to the
Officers pursuant to clauses (i) through (iii) above, each of the Officers is
entitled to receive under his or her respective Severance Agreement (a)
continued contribution by Bay Meadows into any pension or retirement plan in
effect with regard to the

27
<PAGE>

Officer, as well as continued designation as an employee for this purpose,
until January 1, 1998 at the highest rate in effect during the 12 months
immediately preceding notice of termination or a lump sum payment of the
actuarial equivalent of such continued contribution, (b) the right to purchase
the Bay Meadows automobile assigned to him or her for book value, (c) payment
of all legal fees and expenses incurred as the result of termination and (d)
two years of continued coverage under Bay Meadows' health care and welfare
benefit plans. In accordance with such Severance Agreements, in July 1997,
Messrs. Barsotti, Liebau and Trigeiro were each paid $141,000, $695,000 and
$120,000, respectively.

As of May 28, 1997, Bay Meadows granted to the Officers a total of 137,500
options to purchase shares of Paired Common Stock, including 24,087, 183,075
and 14,452 to Messrs. Barsotti, Liebau and Trigeiro, respectively. A total of
126,668 of the options granted to the Officers were vested as of May 28, 1997,
including 11,667, 86,667 and 7,500 options of Messrs. Barsotti, Liebau and
Trigeiro, respectively. According to the terms of such options, all of the
options listed above which were not currently vested became fully vested and
immediately exercisable in connection with the Merger.

James P. Conn, a director of Cal Jockey through July 1997, served as
President and Chief Executive Officer of Bay Meadows from March 1988 to
November 1992. In connection with such service, Mr. Conn held a fully vested
stock option for 20,000 shares of Paired Common Stock. Mr. Conn exercised his
option in August 1997.

PROPOSAL 3: APPROVAL OF PATRIOT AMERICAN HOSPITALITY, INC.
1997 INCENTIVE PLAN

The Company's Board of Directors is proposing for approval the Patriot
American Hospitality, Inc. 1997 Incentive Plan (the "REIT Incentive Plan") to
the stockholders. If approved by the stockholders, the number of shares of
Paired Common Stock available for issuance under the Company's REIT Incentive
Plan shall (subject to adjustment in the event of a stock split, stock
dividend or other change in capitalization) be the sum of (i) 3,000,000 shares
plus (ii) 10 percent of any future net increase in the total number of
outstanding shares of Paired Common Stock, after giving effect to the issuance
of shares of Paired Common Stock upon the exchange of all outstanding limited
partnership units.

REASONS FOR THE REIT INCENTIVE PLAN PROPOSAL

The Compensation Committee of the Company's Board of Directors (the
"Compensation Committee") believes that the REIT Incentive Plan is an
important incentive in attracting, maintaining and motivating the caliber of
directors, officers and other employees necessary to continue the Company's
success and growth. The Company's Compensation Committee believes that the
ability to grant additional options and alternative forms of stock-based
awards will help retain and attract directors, officers and other employees
who are in a position to contribute to the successful conduct of the business
and affairs of the Company and, in addition, will help stimulate in such
individuals an increased desire to render greater service to the Company.

By using long-term stock incentives that vest over time as a significant
component of total compensation, the Company's Compensation Committee believes
the interests of the Company's executives will be more closely aligned with
the interests of the Company's stockholders. The Company's Compensation
Committee also believes that for a fast-growing company like the Company, it
is important to attract and retain talent by paying competitive total
compensation. Using stock-based compensation as a significant component of
total compensation will allow the Company's executives to receive at or above
competitive salary levels if the Company's performance continues to be
superior. Apart from the REIT Incentive Plan that is the subject of this
proposal, the Company does not currently maintain another stock incentive
plan. In this connection, it should be noted that while the Company has
assumed the outstanding awards under the old Patriot American Hospitality,
Inc. Incentive Plan, no new grants will be made under such plan.

The closing price of each Paired Share as reported on the NYSE on October
15, 1997 was $31.50 per share.

28
<PAGE>

THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE REIT
INCENTIVE PLAN PROPOSAL BE APPROVED, AND THEREFORE RECOMMENDS A VOTE "FOR"
THIS PROPOSAL.

SUMMARY OF THE REIT INCENTIVE PLAN

The material terms of the REIT Incentive Plan are summarized below. The
summary is qualified in its entirety by the full text of the REIT Incentive
Plan.

Plan Administration; Eligibility. The REIT Incentive Plan is administered by
the Company's Compensation Committee. All members of the Compensation
Committee must be "non-employee directors" as that term is defined under the
rules promulgated by the Securities Exchange Commission and "outside
directors" as defined in Section 162(m) of the Code and the regulations
promulgated thereunder.

The Compensation Committee has full power to select, from among the persons
eligible for awards, the individuals to whom awards will be granted, to make
any combination of awards to participants, and to determine the specific terms
of each award, subject to the provisions of the REIT Incentive Plan. Persons
eligible to participate in the REIT Incentive Plan are generally those
employees and consultants of the Company and its subsidiaries whose efforts
contribute to the performance or success of the Company and its subsidiaries,
as selected from time to time by the Compensation Committee. Independent
Directors of the Company are also eligible for awards under the REIT Incentive
Plan and may elect to take all or a portion of their fees in the form of
Deferred Paired Share Units. Each award granted under the REIT Incentive Plan
will be evidenced by a written agreement containing such provisions not
inconsistent with the REIT Incentive Plan as the Compensation Committee shall
approve.

Available Shares. Under the REIT Incentive Plan, the aggregate number of
shares of Paired Common Stock available for grants of awards shall (subject to
adjustment in the event of a stock split, stock dividend or other change in
capitalization) be the sum of (i) 3,000,000 shares plus (ii) 10 percent of any
future net increase in the total number of shares of Paired Common Stock,
after giving effect to the issuance of shares of Paired Common Stock upon the
exchange of all outstanding limited partnership units. Any issuance of Awards
from the Operating Company Incentive Plan will reduce the shares of Paired
Common Stock available to be granted from the REIT Incentive Plan.

In order to comply with Section 162(m) of the Code, the maximum number of
shares of Paired Common Stock with respect to which awards may be granted to
any person under the REIT Incentive Plan in any calendar year is 1,500,000
shares of Paired Common Stock and the maximum number of shares of Paired
Common Stock for which Restricted Paired Unit Awards, Paired Share Awards and
Deferred Paired Unit Awards that may be granted under both the REIT Incentive
Plan and the Patriot Incentive Plan may not exceed 40 percent of the reserved
pool, in each case subject to adjustment as described above.

Paired Options. The REIT Incentive Plan permits the granting of Paired
Options to purchase shares of Paired Common Stock that do not so qualify as
incentive stock options under Section 422 of the Code.

The option exercise price of each Paired Option will be determined by the
Company's Compensation Committee, but may not be less than 100 percent of the
fair market value of the shares on the date of grant. The Paired Option price
may not be reduced after the date of grant, except in the case of stock split,
stock dividend or other change in capitalization.

The term of each Paired Option will be fixed by the Company's Compensation
Committee and may not exceed ten years from the date of grant. The Company's
Compensation Committee will determine at what time or times each option may be
exercised and the period of time, if any, after retirement, death, disability
or termination of employment during which options may be exercised. Options
may be made exercisable in installments, and the exercisability of options may
be accelerated by the Company's Compensation Committee in connection with the
death, disability or other termination of a participant.

29
<PAGE>

Upon exercise of a Paired Option, the option exercise price must be paid in
full either in cash or in the form of cash equivalent acceptable to the
Company's Compensation Committee or, if the Company's Compensation Committee
so permits, by delivery of shares of Paired Common Stock already owned by the
optionee or by means of a promissory note. The exercise price may also be
delivered to the Company's by a broker pursuant to irrevocable instructions to
the broker from the optionee.

Each Independent Director of the Company will automatically be granted a
Non-Qualified Stock Option, immediately exercisable in full, to acquire 10,000
shares of Paired Common Stock at an exercise price per Paired Share equal to
the fair market value of a Paired Share on the date of the grant. These grants
to Independent Directors will occur on the day of the first Board meeting
after each annual meeting of stockholders, beginning with the 1997 annual
meeting. The Compensation Committee may also make separate grants of Paired
Options to Independent Directors in its discretion.

Restricted Paired Unit Awards. The Company's Compensation Committee may also
award Restricted Paired Unit Awards to eligible participants subject to such
conditions and restrictions as the Company's Compensation Committee may
determine ("Restricted Paired Unit Awards"). These conditions and
restrictions, which will be specified in the agreement relating to such
Restricted Paired Unit Award, may include the achievement of certain
performance objectives and/or continued employment with the Company through a
specified restricted period. These performance objectives may include return
on equity, funds from operations, cash available for distribution, earnings
per share, return on assets or capital, or increase in fair market value of
shares of Paired Common Stock. The Restricted Paired Units have no voting
rights. The purchase price, if any, of Restricted Paired Unit Awards will be
determined by the Company's Compensation Committee. If the performance
objectives and other restrictions are not attained, the participants may
forfeit their Restricted Paired Unit Awards. If the restrictions are attained,
the participants will be entitled to receive shares of Paired Common Stock.
The recipient of Restricted Paired Unit Awards will not have rights as a
stockholder until the Restricted Paired Unit Awards are earned and settled by
the issuance of shares of Paired Common Stock.

Paired Share Awards. The Company's Compensation Committee may also grant
Paired Share Awards (at no cost or for a purchase price determined by the
Company's Compensation Committee) which are free from any restrictions under
the REIT Incentive Plan. Unrestricted shares of Paired Common Stock may be
issued to eligible participants in recognition of past services or other valid
consideration, and may be issued as incentive compensation in lieu of cash
compensation otherwise payable to a participant.

Deferred Paired Share Unit Awards. Subject to the approval of the Company's
Compensation Committee, an eligible participant may, pursuant to an advance
written election, receive all or a portion of his compensation in Deferred
Paired Share Units. These Deferred Paired Share Units would have the same fair
market value as shares of Paired Common Stock on the date the compensation
would otherwise be paid. The terms and conditions of the deferral are as
agreed upon by the participant and the Compensation Committee and set forth in
an agreement.

Deferred Paired Share Unit Awards are settled in one or more installments of
shares of Paired Common Stock and the cash equivalent of any fractional share
of Paired Common Stock. The recipient of Deferred Paired Share Units will not
have rights as a shareholder until the Deferred Pair Shares Units are settled
by the issuance of shares of Paired Common Stock.

Dividend Equivalent Rights. The Company's Compensation Committee may grant
Dividend Equivalent Rights, which entitle the recipient to receive credits for
cash dividends that would have been paid if the recipient had held specified
shares of Paired Common Stock. Dividend Equivalent Rights may be granted as a
component of another award or as a freestanding award. Dividend equivalents
credited under the REIT Incentive Plan may be paid currently or may be deemed
to be reinvested in additional shares of Paired Common Stock, which may
thereafter accrue additional dividend equivalents at fair market value at the
time of deemed reinvestment or such other price as may then apply under a
dividend reinvestment plan sponsored by the Company, if any. Dividend
Equivalent Rights may be settled in cash, shares of Paired Common Stock, or a
combination thereof, in a single

30
<PAGE>

installment or installments, as specified in the award. The recipient of an
award of Dividend Equivalent Rights will not have any rights as a stockholder
until the Dividend Equivalent Rights are earned and settled by the issuance of
shares of Paired Common Stock.

Change of Control Provisions. The REIT Incentive Plan provides that in the
event of a Change of Control of the Company, unless otherwise provided in the
applicable award agreement, all Paired Options shall automatically become
fully exercisable and any risk of forfeiture included in any other Awards
shall lapse.

Adjustments Upon Change in shares of Paired Common Stock. The Company's
Compensation Committee will make appropriate adjustments in outstanding awards
to reflect stock dividends, stock split-ups and similar events. In the event
of a merger, liquidation or similar event, the Company's Compensation
Committee in its discretion may provide for substitution or adjustments or may
terminate such awards upon payment or other consideration for the vested
portion of any awards as the Company's Compensation Committee deems equitable
in the circumstances.

Amendments and Termination. The Company's Board of Directors may amend or
terminate the REIT Incentive Plan from time to time, and the Company's
Compensation Committee may at any time amend or cancel outstanding awards for
the purpose of satisfying changes in the law or for any other lawful purpose.
However, no such action may be taken which adversely affects any rights under
outstanding awards without the holder's consent. Further, amendments to the
REIT Incentive Plan shall be subject to approval by the stockholders if (i)
the amendment increases the aggregate number of shares of Paired Common Stock
that may be issued under the REIT Incentive Plan, (ii) the amendment changes
the class of individuals eligible to become participants, or (iii) the
amendment materially increases the benefits that may be provided under the
REIT Incentive Plan.

STOCKHOLDERS' VOTE REQUIRED TO APPROVE PROPOSAL

The REIT Incentive Plan will become effective upon the affirmative vote of
the holders of a majority of the shares of Paired Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote on the matter so
long as the holders of at least 50 percent of the outstanding shares of Paired
Common Stock vote on the matter.

NEW PLAN BENEFITS TABLE

All employees and non-employee directors are eligible to participate in the
REIT Incentive Plan. As of October 15, 1997, no grants have been made under
the REIT Incentive Plan.

TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE

The following is a brief summary of the principal federal income tax
consequences of awards made under the REIT Incentive Plan. It does not
describe all federal tax consequences under the REIT Incentive Plan, nor does
it describe state or local tax consequences.

Paired Options. No taxable income is realized by the optionee upon the grant
of a Paired Option. Upon the exercise of the Paired Option, ordinary income is
realized by the optionee in an amount equal to the difference between the
option price and the fair market value of the shares of Paired Common Stock on
the date of exercise, and the Company's receives a tax deduction for the same
amount. Upon subsequent disposition of the shares of Paired Common Stock,
appreciation or depreciation after the date of exercise is treated as either
short-term or long-term capital gain or loss depending on how long the shares
of Paired Common Stock have been held. Special rules will apply where all or a
portion of the exercise price of the Paired Option is paid by tendering shares
of Paired Common Stock.

Payments in Respect of a Change of Control. The REIT Incentive Plan provides
for acceleration or payment of awards and related shares in the event of a
Change of Control. Such acceleration or payment may cause the consideration
involved to be treated in whole or in part as "parachute payments" under the
Code. Acceleration of benefits under other Company stock and benefit plans and
other contracts with employees in the event of a Change of Control could be
subject to being combined with REIT Incentive Plan accelerations for

31
<PAGE>

"parachute payment" purposes. Any such "parachute payments" may be non-
deductible to the Company in whole or in part, and the recipient may be subject
to a 20% excise tax on all or part of such payments (in addition to other taxes
ordinarily payable).

Limitation on the Company's Deduction. As a result of Section 162(m) of the
Code, the REIT's tax deduction for certain awards under the REIT Incentive Plan
may be limited to the extent that a "covered employee" (e.g., the chief
executive officer and four other executives named in the Summary Compensation
Table) receives compensation in excess of $1,000,000 in a taxable year of the
Company's (other than performance-based compensation that otherwise meets the
requirements of Section 162(m) of the Code).

PROPOSAL 4: APPROVAL OF PATRIOT AMERICAN HOSPITALITY OPERATING COMPANY
1997 INCENTIVE PLAN

The Operating Company Board of Directors is proposing for approval the
Patriot American Hospitality Operating Company 1997 Incentive Plan (the
"Operating Company Incentive Plan") to the stockholders. If approved by the
stockholders, the number of shares of Operating Company shares of Paired Common
Stock available for issuance under the Operating Company Incentive Plan shall
(subject to adjustment in the event of a stock split, stock dividend or other
change in capitalization) be the sum of (i) 3,000,000 shares plus (ii) 10
percent of any future net increase in the total number of outstanding shares of
Paired Common Stock, after giving effect to the issuance of shares of Paired
Common Stock upon the exchange of all outstanding limited partnership units.

REASONS FOR THE OPERATING COMPANY INCENTIVE PLAN PROPOSAL

The Compensation Committee of the Operating Company Board of Directors (the
"Operating Company Compensation Committee") believes that the Operating Company
Incentive Plan is an important incentive in attracting, maintaining and
motivating the caliber of directors, officers and other employees necessary to
continue Operating Company's success and growth. The Operating Company
Compensation Committee believes that the ability to grant additional options
and alternative forms of stock-based awards will help retain and attract
directors, officers and other employees who are in a position to contribute to
the successful conduct of the business and affairs of Operating Company and, in
addition, will help stimulate in such individuals an increased desire to render
greater service to Operating Company.

By using long-term stock incentives that vest over time as a significant
component of total compensation, the Operating Company Compensation Committee
believes the interests of the Operating Company's executives will be more
closely aligned with the interests of the Operating Company's stockholders. The
Operating Company Compensation Committee also believes that for a fast-growing
company like the Operating Company, it is important to attract and retain
talent by paying competitive total compensation. Using stock-based compensation
as a significant component of total compensation will allow the Operating
Company's executives to receive at or above competitive salary levels if the
Operating Company's performance continues to be superior. Apart from the
Operating Company Incentive Plan that is the subject of this proposal, the
Operating Company does not currently maintain another stock incentive plan. In
this connection, it should be noted that while the Operating Company has
assumed the outstanding options under the Bay Meadows Operating Company 1988
Stock Option Plan, no new grants will be made under such plan.

The closing price of each Paired Share as reported on the NYSE on October 15,
1997 was $31.50 per share.

THE OPERATING COMPANY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
OPERATING COMPANY INCENTIVE PLAN PROPOSAL BE APPROVED, AND THEREFORE RECOMMENDS
A VOTE "FOR" THIS PROPOSAL.

SUMMARY OF THE OPERATING COMPANY INCENTIVE PLAN

The material terms of the Operating Company Incentive Plan are summarized
below. The summary is qualified in its entirety by the full text of the
Operating Company Incentive Plan.

32
<PAGE>

Plan Administration; Eligibility. The Operating Company Incentive Plan is
administered by the Operating Company Compensation Committee. All members of
the Compensation Committee must be "non-employee directors" as that term is
defined under the rules promulgated by the Securities Exchange Commission and
"outside directors" as defined in Section 162(m) of the Code and the
regulations promulgated thereunder.

The Operating Company Compensation Committee has the full power to select,
from among the persons eligible for awards, the individuals to whom awards will
be granted, to make any combination of awards to participants, and to determine
the specific terms of each award, subject to the provisions of the Operating
Company Incentive Plan. Persons eligible to participate in the Operating
Company Incentive Plan are generally those employees and consultants of the
Operating Company and its subsidiaries whose efforts contribute to the
performance or success of the Operating Company and its subsidiaries, as
selected from time to time by the Operating Company Compensation Committee.
Independent Directors of the Operating Company are also eligible for awards
under the Operating Company Incentive Plan and may elect to take all or a
portion of their fees in the form of Deferred Paired Share Units. Each award
granted under the Operating Company Incentive Plan will be evidenced by a
written agreement containing such provisions not inconsistent with the
Operating Company Incentive Plan as the Operating Company Compensation
Committee shall approve.

Available Shares. Under the Operating Company Incentive Plan, the aggregate
number of shares of Paired Common Stock available for grants of awards shall
(subject to adjustment in the event of a stock split, stock dividend or other
change in capitalization) be the sum of (i) 3,000,000 shares plus (ii) 10
percent of any future net increase in the total number of shares of Paired
Common Stock, after giving effect to the issuance of shares of Paired Common
Stock upon the exchange of all outstanding limited partnership units. Any
issuance of Awards from the Patriot Incentive Plan will reduce the shares of
Paired Common Stock available to be granted from the Operating Company
Incentive Plan.

In order to comply with Section 162(m) of the Code, the maximum number of
shares of Paired Common Stock with respect to which awards may be granted to
any person under the Operating Company Incentive Plan in any calendar year is
1,500,000 shares of Paired Common Stock and the maximum number of shares of
Paired Common Stock for which Restricted Paired Unit Awards, Paired Share
Awards and Deferred Paired Unit Awards that may be granted under both the
Operating Company Incentive Plan and the Patriot Incentive Plan may not exceed
40 percent of the reserved pool, in each case subject to adjustment as
described above.

Paired Options. The Operating Company Incentive Plan permits the granting of
Paired Options to purchase shares of Paired Common Stock that do not so qualify
as incentive stock options under Section 422 of the Code.

The option exercise price of each Paired Option will be determined by the
Operating Company Compensation Committee, but may not be less than 100 percent
of the fair market value of the shares on the date of grant. The Paired Option
price may not be reduced after the date of grant, except in the case of stock
split, stock dividend or other change in capitalization.

The term of each Paired Option will be fixed by the Operating Company
Compensation Committee and may not exceed ten years from the date of grant. The
Operating Company Compensation Committee will determine at what time or times
each option may be exercised and the period of time, if any, after retirement,
death, disability or termination of employment during which options may be
exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Operating Company
Compensation Committee in connection with the death, disability or other
termination of a participant.

Upon exercise of a Paired Option, the option exercise price must be paid in
full either in cash or in the form of a cash equivalent acceptable to the
Operating Company Compensation Committee or, if the Operating Company
Compensation Committee so permits, by delivery of shares of Paired Common Stock
already owned by the optionee or by means of a promissory note. The exercise
price may also be delivered to the Operating Company by a broker pursuant to
irrevocable instructions to the broker from the optionee.

33
<PAGE>

Each Independent Director of the Operating Company will automatically be
granted a Non-Qualified Stock Option, immediately exercisable in full, to
acquire 10,000 shares of Paired Common Stock at an exercise price per Paired
Share equal to the fair market value of a Paired Share on the date of the
grant. These grants to Independent Directors will occur on the day of the first
Board meeting after each annual meeting of shareholders, beginning with the
1997 annual meeting. The Compensation Committee may also make separate grants
of Paired Options to Independent Directors in its discretion.

Restricted Paired Unit Awards. The Operating Company Compensation Committee
may also award Restricted Paired Unit Awards to eligible participants subject
to such conditions and restrictions as the Operating Company Compensation
Committee may determine ("Restricted Paired Unit Awards"). These conditions and
restrictions, which will be specified in the agreement relating to such
Restricted Paired Unit Award, may include the achievement of certain
performance objectives and/or continued employment with Operating Company
through a specified restricted period. These performance objectives may include
return on equity, funds from operations, cash available for distribution,
earnings per share, return on assets or capital, or increase in fair market
value of shares of Paired Common Stock. The Restricted Paired Units have no
voting rights. The purchase price, if any, of Restricted Paired Unit Awards
will be determined by the Operating Company Compensation Committee. If the
performance objectives and other restrictions are not attained, the
participants may forfeit their Restricted Paired Unit Awards. If the
restrictions are attained, the participants will be entitled to receive shares
of Paired Common Stock. The recipient of Restricted Paired Unit Awards will not
have rights as a shareholder until the Restricted Paired Unit Awards are earned
and settled by the issuance of shares of Paired Common Stock.

Paired Share Awards. The Operating Company Compensation Committee may also
grant Paired Share Awards (at no cost or for a purchase price determined by the
Operating Company Compensation Committee) which are free from any restrictions
under the Operating Company Incentive Plan. Unrestricted shares of Paired
Common Stock may be issued to eligible participants in recognition of past
services or other valid consideration, and may be issued as incentive
compensation in lieu of cash compensation otherwise payable to a participant.

Deferred Paired Share Unit Awards. Subject to the approval of the Operating
Company Compensation Committee, an eligible participant may, pursuant to an
advance written election, receive all or a portion of his compensation in
Deferred Paired Share Units. These Deferred Paired Share Units would have the
same fair market value as shares of Paired Common Stock on the date the
compensation would otherwise be paid. The terms and conditions of the deferral
are as agreed upon by the participant and the Compensation Committee and set
forth in an agreement.

Deferred Paired Share Unit Awards are settled in one or more installments of
shares of Paired Common Stock and the cash equivalent of any fractional Paired
Share. The recipient of Deferred Paired Share Units will not have rights as a
shareholder until the Deferred Pair Shares Units are settled by the issuance of
shares of Paired Common Stock.

Dividend Equivalent Rights. The Operating Company Compensation Committee may
grant Dividend Equivalent Rights, which entitle the recipient to receive
credits for cash dividends that would have been paid if the recipient had held
specified shares of Paired Common Stock. Dividend Equivalent Rights may be
granted as a component of another award or as a freestanding award. Dividend
equivalents credited under the Operating Company Incentive Plan may be paid
currently or may be deemed to be reinvested in additional shares of Paired
Common Stock, which may thereafter accrue additional dividend equivalents at
fair market value at the time of deemed reinvestment or such other price as may
then apply under a dividend reinvestment plan sponsored by Operating Company,
if any. Dividend Equivalent Rights may be settled in cash, shares of Paired
Common Stock, or a combination thereof, in a single installment or
installments, as specified in the award. The recipient of an award of Dividend
Equivalent Rights will not have any rights as a shareholder until the Dividend
Equivalent Rights are earned and settled by the issuance of shares of Paired
Common Stock.

Change of Control Provisions. The Operating Company Incentive Plan provides
that in the event of a Change of Control of the Operating Company, unless
otherwise provided in the applicable award agreement, all Paired Options shall
automatically become fully exercisable and any risk of forfeiture included in
any other Awards shall lapse.

34
<PAGE>

Adjustments Upon Change in shares of Paired Common Stock. The Operating
Company Compensation Committee will make appropriate adjustments in outstanding
awards to reflect stock dividends, stock split-ups and similar events. In the
event of a merger, liquidation or similar event, the Operating Company
Compensation Committee in its discretion may provide for substitution or
adjustments or may terminate such awards upon payment or other consideration
for the vested portion of any awards as the Operating Company Compensation
Committee deems equitable in the circumstances.

Amendments and Termination. The Operating Company Board of Directors may
amend or terminate the Operating Company Incentive Plan from time to time, and
the Operating Company Compensation Committee may at any time amend or cancel
outstanding awards for the purpose of satisfying changes in the law or for any
other lawful purpose. However, no such action may be taken which adversely
affects any rights under outstanding awards without the holder's consent.
Further, amendments to the Operating Company Incentive Plan shall be subject to
approval by the stockholders if (i) the amendment increases the aggregate
number of shares of Paired Common Stock that may be issued under the Operating
Company Incentive Plan, (ii) the amendment changes the class of individuals
eligible to become participants, or (iii) the amendment materially increases
the benefits that may be provided under the Operating Company Incentive Plan.

STOCKHOLDERS' VOTE REQUIRED TO APPROVE PROPOSAL

The Operating Company Incentive Plan will become effective upon the
affirmative vote of the holders of a majority of the shares of Paired Common
Stock present in person or by proxy at the Annual Meeting and entitled to vote
on the matter so long as the holders of at least 50 percent of the outstanding
shares of Paired Common Stock vote on the matter.

NEW PLAN BENEFITS TABLE

All employees and non-employee directors are eligible to participate in the
Operating Company Incentive Plan. As of October 15, 1997, the following grants
have been made under the Operating Company Incentive Plan. No other grants have
been made under the Operating Company Incentive Plan.

PATRIOT AMERICAN HOSPITALITY OPERATING COMPANY

1997 INCENTIVE PLAN

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
DOLLAR VALUE STOCK OPTIONS DEFERRED STOCK UNITS
------------ ------------- --------------------
<S> <C> <C> <C>
Karim Alibhai
President and Chief Executive
Officer..................... $ -- 280,000(1) 0
Executive Group............... $147,357(3) 0 4,678(2)
Non-Executive Director Group.. $ 0 0 0
</TABLE>
- --------
(1) Includes a ten-year option to purchase 280,000 shares of Paired Common
Stock with an exercise price of $32.0625 per share, the closing price of
each share of Paired Common Stock as reported on NYSE on October 1, 1997.
Such option will be exercisable with respect to 8 1/2% of the number of
shares of Paired Common Stock underlying the option on the first day of
each quarter, beginning with October 1, 1997.
(2) The deferred stock units were granted on October 1, 1997 and will vest with
respect to one third of the amounts on the next three anniversary dates of
grant.
(3) Valuation is based on the October 15, 1997 closing price of each paired
share as reported on the NYSE of $31.50.

TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE

The following is a brief summary of the principal federal income tax
consequences of awards made under the Operating Company Incentive Plan. It does
not describe all federal tax consequences under the Operating Company Incentive
Plan, nor does it describe state or local tax consequences.

35
<PAGE>

Paired Options. No taxable income is realized by the optionee upon the grant
of a Paired Option. Upon the exercise of the Paired Option, ordinary income is
realized by the optionee in an amount equal to the difference between the
option price and the fair market value of the shares of Paired Common Stock on
the date of exercise, and the Operating Company receives a tax deduction for
the same amount. Upon subsequent disposition of the shares of Paired Common
Stock, appreciation or depreciation after the date of exercise is treated as
either short-term or long-term capital gain or loss depending on how long the
shares of Paired Common Stock have been held. Special rules will apply where
all or a portion of the exercise price of the Paired Option is paid by
tendering shares of Paired Common Stock.

Payments in Respect of a Change of Control. The Operating Company Incentive
Plan provides for acceleration or payment of awards and related shares in the
event of a Change of Control. Such acceleration or payment may cause the
consideration involved to be treated in whole or in part as "parachute
payments" under the Code. Acceleration of benefits under other Operating
Company stock and benefits plans and other contracts with employees in the
event of a Change of Control could be subject to being combined with Operating
Company Incentive Plan accelerations for "parachute payment" purposes. Any such
"parachute payments" may be non-deductible to the Operating Company in whole or
in part, and the recipient may be subject to a 20 percent excise tax on all or
part of such payments (in addition to other taxes ordinarily payable).

Limitation on Operating Company's Deduction. As a result of Section 162(m) of
the Code, the Operating Company's tax deduction for certain awards under the
Operating Company Incentive Plan may be limited to the extent that a "covered
employee" (e.g., the chief executive officer and four other executives named in
the Summary Compensation Table) receives compensation in excess of $1,000,000
in a taxable year of the Operating Company (other than performance-based
compensation that otherwise meets the requirements of Section 162(m) of the
Code).

36
<PAGE>

PROPOSAL 5: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

The Board of the Company, upon the recommendation of the Audit Committee has
selected the accounting firm of Ernst & Young LLP to serve as independent
auditors of the Company for the fiscal year ending December 31, 1997. Ernst &
Young LLP has served as the Company's independent auditors since July 1997 and
is considered by management of the Company to be well qualified. The Company
has been advised by that firm that neither it nor any member thereof has any
financial interest, direct or indirect, in the Company or any of it
subsidiaries in any capacity. A representative of Ernst & Young LLP will be
present at the Annual Meeting, will be given the opportunity to make a
statement if he or she so desires and will be available to respond to
appropriate questions.

Although the Company is not required to submit the ratification of the
selection of its independent auditors to a vote of stockholders, the Board of
Directors of the Company believes that it is a sound policy to do so. In the
event that the majority of the votes cast are against the selection of Ernst &
Young LLP, the directors will consider the vote and the reasons therefor in
future decisions on the selection of independent auditors.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THIS PROPOSAL.

PROPOSAL 6: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

The Board of the Operating Company, upon the recommendation of the Audit
Committee has selected the accounting firm of Ernst & Young LLP to serve as
independent auditors of the Operating Company for the fiscal year ending
December 31, 1997. Ernst & Young LLP has served as the Operating Company's
independent auditors since July 1997 and is considered by management of the
Operating Company to be well qualified. The Operating Company has been advised
by that firm that neither it nor any member thereof has any financial
interest, direct or indirect, in the Company or any of it subsidiaries in any
capacity. A representative of Ernst & Young LLP will be present at the Annual
Meeting, will be given the opportunity to make a statement if he or she so
desires and will be available to respond to appropriate questions.

Although the Operating Company is not required to submit the ratification of
the selection of its independent auditors to a vote of stockholders, the Board
of Directors of the Operating Company believes that it is a sound policy to do
so. In the event that the majority of the votes cast are against the selection
of Ernst & Young LLP, the directors will consider the vote and the reasons
therefor in future decisions on the selection of independent auditors.

THE BOARD OF DIRECTORS OF THE OPERATING COMPANY RECOMMENDS A VOTE FOR THIS
PROPOSAL.

OTHER MATTERS

SOLICITATION OF PROXIES

The cost of solicitation of proxies in the form enclosed herewith will be
paid by the Companies. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Companies may also solicit proxies
personally or by telephone without additional compensation for such
activities. The Companies will also request persons, firms and corporations
holding shares in their names or in the names of their nominees, which are
beneficially owned by others, to send proxy materials to and obtain proxies
from such beneficial owners. The Companies will reimburse such holders for
their reasonable expenses. In addition, McKenzie Partners, Inc. has been
engaged by the Companies to act as proxy solicitors and will receive a fee of
approximately $4,000.00 plus expenses.

37
<PAGE>

STOCKHOLDER PROPOSALS

For a proposal of a stockholder to be presented to the Companies' 1998
annual meetings and included in the Companies proxy statements' pursuant to
Rule 14a-8 of the Exchange Act ("Rule 14a-8"), each Secretary of the Companies
must receive written notice thereof on or before November 24, 1997. Such a
proposal must also comply with the requirements as to form and substance of
the SEC.

For a proposal of a stockholder to be presented to the Companies' 1998
annual meeting of stockholders, other than a stockholder proposal included in
the Companies' proxy statement pursuant to Rule 14a-8, the Secretary of the
Companies must receive written notice thereof on or before the date specified
in the Companies' By-laws, and the proponent or a representative of the
proponent must attend the annual meeting. The Companies' By-laws provide that
any stockholder wishing to nominate a director or have a stockholder proposal,
other than a stockholder proposal included in the Companies' proxy statement
pursuant to Rule 14a-8, considered at an annual meeting must provide written
notice of such proposal and appropriate supporting documentation, as set forth
in the By-laws, to the Companies no later than 90 days prior to the
anniversary of the immediately preceding annual meeting of stockholders (the
"Anniversary Date"); provided, however, that in the event that the annual
meeting is scheduled to be held more than 30 calendar days prior to the
Anniversary Date or more than 60 days after the Anniversary Date, such
nominations or proposals must be delivered to the Companies not later than the
close of business on the later of (x) the 90th day prior to the scheduled date
of such annual meeting or (y) the 15th day following the day on which the
Company first publicly announces the date of such annual meeting. Any such
proposal should be mailed to: Patriot American Hospitality, Inc., 3030 LBJ
Freeway, Suite 1500, Dallas, Texas 75238, Attn: Secretary; and Patriot
American Hospitality Operating Company, 3030 LBJ Freeway, Suite 1500, Dallas,
Texas 75238, Attn: Secretary.

OTHER MATTERS

The respective Boards of Directors of the Companies do not know of any
matters other than those described in this Joint Proxy Statement that will be
presented for action at the Annual Meetings. If other matters are presented,
proxies will be voted in accordance with the best judgment of the proxy
holders.

38
<PAGE>

PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!

ANNUAL MEETING OF STOCKHOLDERS
PATRIOT AMERICAN HOSPITALITY OPERATING COMPANY

NOVEMBER 5, 1997

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

A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.

[_] FOR all nominees listed below (except as marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all nominees listed below

1. To elect three Directors of the Company to serve until the 2000 Annual
Meeting of Stockholders and until their respective successors are duly
elected and qualified.

(INSTRUCTION: To withhold authority to vote for any individual nominee, put a
line through that nominee's name.)

NOMINEES: Paul A. Nussbaum
Arch K. Jacobson
Karim Alibhai

2. To consider and vote upon a proposal to approve the Patriot American
Hospitality Operating Company 1997 Incentive Plan.

FOR AGAINST ABSTAIN
[_] [_] [_]

3. To ratify the selection of Ernst & Young LLP as the independent auditors of
the Company for the fiscal year ending December 31, 1997.

FOR AGAINST ABSTAIN
[_] [_] [_]

4. To consider and act upon any other matters that may be properly brought
before the Annual Meeting and at any adjournments or postponements thereof.

THE UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF A COPY OF THE ACCOMPANYING
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND THE JOINT PROXY STATEMENT WITH
RESPECT THERETO AND HEREBY REVOKE(S) ANY PROXY OR PROXIES HERETOFORE GIVEN. THIS
PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.

PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD.

SIGNATURES____________________________________________ Dated:____________

SIGNATURES____________________________________________ Dated:____________
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.

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

<PAGE>

PROXY
PATRIOT AMERICAN HOSPITALITY OPERATING COMPANY
3030 LBJ Freeway, Suite 1500, Dallas, TX 75234
Proxy for Annual Meeting of Stockholders to be held on November 5, 1997
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints Paul A. Nussbaum, Thomas W.
Lattin and Rex E. Stewart, and each of them, as Proxies of the undersigned, with
full power of substitution, to vote all shares of Common Stock of Patriot
American Hospitality Operating Company (the "Company") held of record by the
undersigned as of the close of business on October 15, 1997, on behalf of the
undersigned at the Annual Meeting of Stockholders (the "Annual Meeting") to be
held at the Holiday Inn Select, North Dallas, Texas, 10:00 a.m. local time, on
Wednesday, November 5, 1997, and at any adjournments or postponements thereof.

WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VESTED FOR THE THREE NOMINEES OF THE BOARD OF DIRECTORS LISTED IN
PROPOSAL 1 AND FOR PROPOSAL 2 AND FOR PROPOSAL 3. IN THEIR DISCRETION, THE
PROXIES ARE EACH AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. A
STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS NEED ONLY SIGN AND DATE THEIR PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE.

PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.

__________________
|SEE REVERSE SIDE|
__________________
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!

ANNUAL MEETING OF STOCKHOLDERS
PATRIOT AMERICAN HOSPITALITY, INC.

NOVEMBER 5, 1997

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

A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.

[_] FOR all nominees listed below (except as marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all nominees listed below

1. To elect three Directors of the Company to serve until the 2000 Annual
Meeting of Stockholders and until their respective successors are duly
elected and qualified.

(INSTRUCTION: To withhold authority to vote for any individual nominee, put a
line through that nominee's name.)

NOMINEES: Paul A. Nussbaum
Arch K. Jacobson
William W. Evans III

2. To consider and vote upon a proposal to approve the Patriot American
Hospitality, Inc. 1997 Incentive Plan.

FOR AGAINST ABSTAIN
[_] [_] [_]

3. To ratify the selection of Ernst & Young LLP as the independent auditors of
the Company for the fiscal year ending December 31, 1997.

FOR AGAINST ABSTAIN
[_] [_] [_]

4. To consider and act upon any other matters that may be properly brought
before the Annual Meeting and at any adjournments or postponements thereof.

PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD.

SIGNATURES____________________________________________ Dated:____________

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

<PAGE>

PROXY
PATRIOT AMERICAN HOSPITALITY INC.
3030 LBJ Freeway, Suite 1500, Dallas, TX 75234
Proxy for Annual Meeting of Stockholders to be held on November 5, 1997
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints Paul A. Nussbaum, Thomas W.
Lattin and Rex E. Stewart, and each of them, as Proxies of the undersigned, with
full power of substitution, to vote all shares of Common Stock of Patriot
American Hospitality, Inc. (the "Company") held of record by the undersigned as
of the close of business on October 15, 1997, on behalf of the undersigned at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Holiday Inn Select, North Dallas, Texas, 9:00 a.m. local time, on Wednesday,
November 5, 1997, and at any adjournments or postponements thereof.

WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE THREE NOMINEES OF THE BOARD OF DIRECTORS LISTED IN
PROPOSAL 1 AND FOR PROPOSAL 2 AND FOR PROPOSAL 3. IN THEIR DISCRETION, THE
PROXIES ARE EACH AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. A
STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS NEED ONLY SIGN AND DATE THEIR PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE.

PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.

__________________
|SEE REVERSE SIDE|
__________________