<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1998
Registration Statement Nos. 333-_____, 333-_____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
--------------------
<TABLE>
<S> <C>
PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter) (Exact Name of Registrant as Specified in its Charter)
DELAWARE DELAWARE
(State or Other Jurisdiction of Incorporation or (State or Other Jurisdiction of Incorporation or
Organization) Organization)
94-0358820 94-2878485
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
1950 Stemmons Freeway 1950 Stemmons Freeway
Suite 6001 Suite 6001
Dallas, TX 75207 Dallas, TX 75207
(214) 863-1000 (214) 863-1000
(Address, Including Zip Code and Telephone Number, (Address, Including Zip Code and Telephone Number,
Including Area Code, of Registrant's Principal Executive Including Area Code, of Registrant's Principal Executive
Office) Office)
PAUL A. NUSSBAUM JAMES D. CARREKER
Chairman of the Board and Chief Executive Officer Chairman of the Board and Chief Executive Officer
Patriot American Hospitality, Inc. Wyndham International, Inc.
1950 Stemmons Freeway 1950 Stemmons Freeway
Suite 6001 Suite 6001
Dallas, TX 75207 Dallas, TX 75207
(214) 863-1000 (214) 863-1000
(Name, Address, Including Zip Code and Telephone (Name, Address, Including Zip Code and Telephone
Number, Including Area Code, of Agent for Service) Number, Including Area Code, of Agent for Service)
</TABLE>
--------------------
Copies to:
GILBERT G. MENNA, P.C.
KATHRYN I. MURTAGH, ESQ.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
(617) 570-1000
--------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
==================================================================================================================
Proposed Proposed
Amount to Maximum Maximum
Title of Shares to be Registered be Aggregate Price Aggregate Offering Amount of
Registered Per Unit(1) Price(1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share,
of Patriot American Hospitality, Inc.
paired with
Common Stock, par value $.01 per share, of
Wyndham International, Inc. 134,654 $24.69 $3,324,608 $981
==================================================================================================================
</TABLE>
(1) This estimate is based on the average of the high ($25) and low
($24.375) sales prices on the New York Stock Exchange on April 22, 1998 of
the common stock of Patriot American Hospitality, Inc., which is paired
with and trades as a unit with common stock of Wyndham International, Inc.
This estimate is made pursuant to rule 457(c) under the Securities Act of
1933, as amended, and is made solely for purposes of determining the
registration fee.
--------------------
The registrant hereby amends this registration statement on such dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+ REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+ SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY+
+ OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+ BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL +
+ OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+ SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+ UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 29, 1998
Patriot American Hospitality, Inc.
134,654 Shares of Common Stock
Wyndham International, Inc.
134,654 Shares of Common Stock
For purposes of this Prospectus, unless the context otherwise requires, (i)
the term "Corporation" includes Patriot American Hospitality, Inc., a Delaware
corporation, PAH GP, Inc. ("PAH GP"), PAH LP, Inc. ("PAH LP"), each of which is
a Delaware corporation and a wholly-owned subsidiary of Patriot American
Hospitality, Inc., a Delaware corporation, Patriot American Hospitality
Partnership, L.P., a Virginia limited partnership (the "Realty Partnership"),
and their respective subsidiaries, (ii) the term "Operating Company" includes
Wyndham International, Inc. (formerly known as Patriot American Hospitality
Operating Company), a Delaware corporation, and Patriot American Hospitality
Operating Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership" and, together with the Realty Partnership, the "Partnerships"), and
their respective subsidiaries, and (iii) the term "Companies" includes the
Corporation and the Operating Company.
Shares of common stock ("Corporation Common Stock"), $.01 par value, of the
Corporation and shares of common stock ("Operating Company Common Stock"), $.01
par value, of the Operating Company are "paired" and trade as units consisting
of one share of Corporation Common Stock and one share of Operating Company
Common Stock (the "Paired Common Stock"). All of the shares of Paired Common
Stock offered hereby are being registered for the account of certain
stockholders of the Companies named herein (collectively, the "Selling
Stockholders"). See "Plan of Distribution" and "Selling Stockholders." Each of
the Selling Stockholders, directly or through agents, dealers or underwriters
designated from time to time, may sell all or a portion of the shares of Paired
Common Stock offered hereby from time to time on terms to be determined at the
time of sale. To the extent required, the specific shares of Paired Common
Stock to be sold, the names of the Selling Stockholders, the respective purchase
prices and public offering prices, the names of any such agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement.
See "Plan of Distribution." Each Selling Stockholder reserves the sole right to
accept and, together with such Selling Stockholder's agents, dealers or
underwriters from time to time, to reject, in whole or in part, any proposed
purchase of shares of Paired Common Stock to be made directly or through agents,
dealers or underwriters.
The aggregate proceeds to the Selling Stockholders from the sale of the
shares of Paired Common Stock offered hereby (the "Offering") will be the
purchase price of the shares of Paired Common Stock sold less the aggregate
agents' commissions and underwriters' discounts, if any, and other expenses of
issuance and distribution to borne by the Companies. The Companies will pay all
of the expenses of the Offering other than agents' commissions and underwriters'
discounts with respect to the shares of Paired Common Stock offered hereby, and
transfer taxes, if any. The Companies will not receive any proceeds from the
sale of the shares of Paired Common Stock offered hereby by the Selling
Stockholders.
The Selling Stockholders and any agents, dealers or underwriters that
participate with the Selling Stockholders in the distribution of the shares of
Paired Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), in which case any
commissions received by such agents, dealers or underwriters and any profit on
the resale of the shares of Paired Common Stock purchased by them may be deemed
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for indemnification arrangements between the Companies and the
Selling Stockholders.
The Paired Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "PAH." On April 24, 1998, the reported closing
sale price of the Paired Common Stock on the NYSE was $25.06 per share.
See "Risk Factors" beginning on page 5 for certain factors relevant to an
investment in the shares of Paired Common Stock.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is ________, 1998
<PAGE>
AVAILABLE INFORMATION
The Companies have filed with the Securities and Exchange Commission (the
"SEC" or "Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act, with respect to the Securities. This
Prospectus, which constitutes part of the Registration Statement, omits certain
of the information contained in the Registration Statement and the exhibits
thereto on file with the Commission pursuant to the Securities Act and the rules
and regulations of the Commission thereunder. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Registration Statement, including exhibits thereto, may be
inspected and copies obtained from the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Companies file
information electronically with the Commission, and the Commission maintains a
Web Site that contains reports, proxy and information statements and other
information regarding registrants (including the Companies) that file
electronically with the Commission. The address of the Commission's Web Site is
(http://www.sec.gov).
The Companies are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports and proxy statements and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained by mail from the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, reports, proxy and information statements and
other information concerning the Companies can be inspected at the offices of
the New York Stock Exchange (the "NYSE"), 20 Broad Street, New York, New York
10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
Corporation and Operating Company
1. Annual Report on Form 10-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. (Nos. 001-09319, 001-09320) for the fiscal year
ended December 31, 1997;
2. Current Reports on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. dated: (i) July 1, 1997 (Nos. 001-
09319, 001-09320 filed July 15, 1997); (ii) July 15, 1997 (Nos. 001-09319, 001-
09320 filed July 21, 1997); (iii) July 22, 1997 (Nos. 001-09319, 001-09320 filed
July 22, 1997); (iv) September 17, 1997; (Nos. 001-09319, 001-09320 filed
September 17, 1997); (v) September 30, 1997, as amended (Nos. 001-09319, 001-
09320 filed October 14, 1997 and October 28, 1997); (vi) September 30, 1997
(Nos. 001-09319, 001-09320 filed November 12, 1997); (vii) December 2, 1997
(Nos. 001-09319, 001-09320 filed December 4, 1997); (viii) December 10, 1997
(Nos. 001-09319, 001-09320 filed December 10, 1997); (ix) January 5, 1998,
(Nos. 001-09319, 001-09320 filed January 13, 1998); (x) February 9, 1998
(Nos. 001-09319, 001-09320 filed February 12, 1998); (xi) March 23, 1998
(Nos. 001-09319, 001-09320 filed March 30, 1998); (xii) April 2, 1998
(Nos. 001-09319, 001-09320 filed April 8, 1998); and (xiii) April 20, 1998
(Nos. 001-09319, 001-09320 filed April 22, 1998); and
3. The description of the paired shares of Corporation Common Stock and
Operating Company Common Stock contained or incorporated by reference in Patriot
2
<PAGE>
American Hospitality, Inc.'s and Wyndham International, Inc.'s Registration
Statement on Form 8-A (Nos. 001-09319, 001-09320), including any amendments
thereto.
Patriot American Hospitality, Inc. (Patriot)
1. Current Reports on Form 8-K of Patriot American Hospitality, Inc.,
dated: (i) January 16, 1997, as amended (No. 001-13898 filed January 31,
1997, February 21, 1997, April 8, 1997, April 9, 1997 and May 19, 1997);
(ii) February 24, 1997 (No. 001-13898 filed March 3, 1997); (iii) April 14,
1997, as amended (No. 001-13898 filed April 17, 1997 and April 18, 1997); and
(iv) June 6, 1997 (No. 001-13898 filed June 7, 1997).
3
<PAGE>
All other documents filed with the Commission by the Corporation or the
Operating Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination of
the offering of the Securities are to be incorporated herein by reference and
such documents shall be deemed to be a part hereof from the date of filing of
such documents. Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents. Written requests
should be mailed to 1950 Stemmons Freeway, Suite 6001, Dallas, TX 75207,
Attention: Shareholder Relations (Telephone No. (214) 863-1000).
4
<PAGE>
This Prospectus and the documents incorporated herein by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Companies' actual results could differ materially from those
set forth in the forward-looking statements. Certain factors that might cause
such a difference are discussed in the section entitled "Risk Factors" below.
RISK FACTORS
Real Estate Investment Trust Tax Risks
The Corporation operates in a manner designed to permit it to qualify as a
real estate investment trust (a "REIT") under the Internal Revenue Code of 1986,
as amended (the "Code"), but no assurance can be given that the Corporation has
operated or will be able to continue to operate in a manner so as to qualify or
remain so qualified. Qualification as a REIT involves the application of highly
technical and complex provisions of the Code, for which there are only limited
judicial or administrative interpretations. The complexity of these provisions
is greater in the case of a REIT that owns hotels and leases them to an
operating company with which its stock is paired. Qualification as a REIT also
involves the determination of various factual matters and circumstances not
entirely within the Corporation's control. Qualification of the Corporation as a
REIT also generally depends on the REIT qualification of Patriot American
Hospitality, Inc., a Virginia corporation ("Patriot"), for periods prior to July
1, 1997, at which time the Corporation (formerly known as California Jockey
Club) merged with Patriot, with the Corporation being the surviving corporation
(the "Cal Jockey Merger").
If the Corporation fails to qualify as a REIT, the Corporation will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at corporate rates. In addition, unless entitled to relief
under certain statutory provisions and subject to the discussion below regarding
the impact if the Corporation failed to qualify as a REIT in 1983, the
Corporation also will be disqualified from re-electing REIT status for the four
taxable years following the year during which qualification is lost. Failure to
qualify as a REIT would reduce the net earnings of the Corporation available for
distribution to stockholders because of the additional tax liability to the
Corporation for the year or years involved. In addition, distributions would no
longer be required to be made. To the extent that distributions to stockholders
would have been made in anticipation of the Corporation's qualifying as a REIT,
the Corporation might be required to borrow funds or to liquidate certain of its
investments to pay the applicable tax. The failure to qualify as a REIT would
also constitute a default under certain debt obligations of the Corporation.
Exemption from Anti-Pairing Rules; Risks of Adverse Legislation
The Corporation's ability to qualify as a REIT is dependent upon its
continued exemption from the anti-pairing rules of Section 269B(a)(3) of the
Code. Section 269B(a)(3) of the Code would ordinarily prevent a corporation
from qualifying as a REIT if its stock is paired with the stock of a corporation
whose activities are inconsistent with REIT status, such as the Operating
Company. The "grandfathering" rules governing Section 269B generally provide,
however, that Section 269B(a)(3) does not apply to a paired REIT if the REIT and
its paired operating company were paired on June 30, 1983. There are, however,
no judicial or administrative authorities interpreting the application of this
grandfathering rule in the context of a merger into a grandfathered REIT or
otherwise. Moreover, although the Corporation's and the Operating Company's
respective predecessors, California Jockey Club ("Cal Jockey") and Bay Meadows
Operating Company ("Bay Meadows"), were paired on June 30, 1983, if for any
reason Cal Jockey failed to qualify as a REIT in 1983 the benefit of the
grandfathering rule would not be available to the Corporation and the
Corporation would not qualify as a REIT for any taxable year.
The Corporation's exemption from the anti-pairing rules could be lost, or
its ability to utilize the paired structure could be revoked or limited, as a
result of future legislation. In this regard, on February 2, 1998, the
Department of Treasury released an explanation of the revenue proposals included
in the Clinton Administration's fiscal 1999 budget (the "President's Tax
Proposals"). The President's Tax Proposals, among other things, include a
freeze on the grandfathered status of paired share REITs such as the
Corporation. Under the President's Tax Proposals, the Corporation and the
Operating Company would be treated as one entity with respect to properties
acquired on or after the date of the first Congressional committee action with
respect to such proposal and with respect to activities or services relating to
such properties that are undertaken or performed by one of the paired entities
on or after such date. The President's Tax Proposals would also prohibit REITs
from holding stock of a corporation possessing more than 10% of the vote or
value of all classes of stock of the corporation. This proposal would be
effective with respect to the stock acquired on or after the date of first
Congressional committee action with respect to the proposal; provided that the
proposal would not apply to stock acquired before such effective date if, on or
after such date, the subsidiary corporation engaged in a new trade or business
or acquired substantial new assets.
On March 26, 1998, William Archer, Chairman of the Ways and Means Committee
of the United States House of Representatives and William V. Roth, Jr., Chairman
of the Finance Committee of the United States Senate, introduced identical
legislation (the "Proposed Legislation") in both the House of Representatives
and the Senate to limit the existing grandfathering rule of Section 269B(a)(3).
Under the Proposed Legislation, the anti-pairing rules provided in the Code
generally would apply for certain of the REIT qualification requirements to real
property interests acquired directly or indirectly after March 26, 1998 by the
Corporation or the Operating Company, or a subsidiary or partnership in which a
10% or greater interest is owned by the Corporation or the Operating Company
(collectively, the "REIT Group"), unless (i) the real property interests are
acquired pursuant to a written agreement which is binding on March 26, 1998 and
all times thereafter or (ii) the acquisition of such real property interests
was described in a public announcement or in a filing with the Commission on or
before March 26, 1998. In addition, the Proposed Legislation also provides that
a property held by the Corporation or the Operating Company that is not subject
to the anti-pairing rules would become subject to such rules in the event of an
improvement placed in service after December 31, 1999 that changes the use of
the property and the cost of which is greater than 200 percent of (x) the
undepreciated cost of the property (prior to the improvement) or (y) in the case
of property acquired where there is a substituted basis, the fair market value
of the property on the day it was acquired by the Corporation and the Operating
Company. There is an exception for improvements placed in service before January
1, 2004 pursuant to a binding contract in effect as of December 31, 1999 and at
all times thereafter. On April 23, 1998, the Senate Finance Committee reported
favorably on the Internal Revenue Service Restructuring and Reform Act of 1998,
incorporating language substantially identical to the Proposed Legislation. In
addition, immediately prior to the introduction of the Proposed Legislation,
Representative Mac Collins introduced legislation that would simply terminate
the existing grandfathering rule.
The above discussion is based solely on the President's Tax Proposals and
the Proposed Legislation. It is impossible at this time to determine all of the
ramifications which could result from enactment of the Proposed Legislation or
the President's Tax Proposals. However, the Corporation believes that its
ability to close pending acquisitions pursuant to binding agreements entered
into or announced on or before March 26, 1998 will be unaffected by the Proposed
Legislation. The Corporation is evaluating the impact of the Proposed
Legislation (if enacted in its current form) on the Corporation's proposed
method of operations and future acquisitions, as well as the Corporation's
response to such legislation if enacted, and investors should be aware that the
Proposed Legislation could have an adverse impact on the Corporation. In
addition, if the Proposed Legislation were modified prior to enactment, it is
possible that action taken by the Corporation since March 26, 1998 in reliance
on the Proposed Legislation as currently drafted, could adversely affect the
Corporation's ability to qualify as a REIT.
5
<PAGE>
Potential Reallocation of Income
Due to the paired share structure, the Corporation, the Operating Company,
the Realty Partnership, the Operating Partnership, and their respective
subsidiary entities are and will be controlled by the same interests. As a
result, the Internal Revenue Service (the "IRS") could, pursuant to Section 482
of the Code, seek to distribute, apportion or allocate gross income, deductions,
credits or allowances between or among them if it determines that such
distribution, apportionment or allocation is necessary in order to prevent
evasion of taxes or to clearly reflect income. The Corporation would have to
take into account any such adjustments in determining whether it qualified as a
REIT. As a result, such adjustments could affect the Corporation's ability to
qualify as a REIT.
Adverse Effects of REIT Minimum Distribution Requirements
In order to qualify as a REIT, the Corporation is generally required
each year to distribute to its stockholders at least 95% of its taxable income
(excluding any net capital gain). In addition, if the Corporation acquires
assets from a taxable C corporation, and during the ten-year period following
such acquisition the Corporation disposes of any such assets, then the
Corporation will be required to distribute at least 95% of the amount of any
"built-in gain" attributable to such assets (determined as of the date of the
acquisition of the assets) that the Corporation recognizes in the disposition,
less the amount of any tax paid with respect to such recognized built-in gain.
See "Certain Federal Income Tax Considerations-- REIT Qualification--Built-In
Gain Tax." The Corporation is subject to a 4% nondeductible excise tax on the
amount, if any, by which certain distributions paid by it with respect to any
calendar year are less than the sum of (i) 85% of its ordinary income for that
year, (ii) 95% of its capital gain net income for that year, and (iii) 100% of
its undistributed income from prior years.
6
<PAGE>
The Corporation's income will consist primarily of its share of the income
of the Realty Partnership, and the Corporation's cash available for distribution
will consist primarily of its share of cash distributions from the Realty
Partnership. Differences in timing between the recognition of taxable income and
the receipt of cash available for distribution and the seasonality of the hotel
industry could require the Corporation to borrow funds on a short-term basis to
meet the 95% distribution requirement or avoid the nondeductible excise tax.
Distributions by the Companies will be determined by their respective Board
of Directors and depend on a number of factors, including the amount of cash
available for distribution and the financial condition of the Companies, any
decision by either Board of Directors to reinvest funds rather than to
distribute such funds, capital expenditures, the annual distribution
requirements under the REIT provisions of the Code (in the case of the
Corporation) and such other factors as either Board of Directors deems relevant.
For federal income tax purposes, distributions paid to stockholders may consist
of ordinary income, capital gains (in the case of the Corporation), nontaxable
return of capital, or a combination thereof. The Companies will provide
stockholders with annual statements as to the taxability of distributions.
Accumulated Earnings and Profits
On January 5, 1998, the Corporation consummated its acquisition by
merger (the "Wyndham Acquisition") of Wyndham Hotel Corporation ("Wyndham")
through which the Corporation acquired Wyndham's portfolio of owned and leased
hotels and management and franchise agreements for certain of Wyndham's hotels.
See "The Companies--The Corporation."
On December 2, 1997, the Corporation and the Operating Company entered
into an Agreement and Plan of Merger (the "Interstate Merger Agreement") with
Interstate Hotels Corporation ("Interstate"), pursuant to which Interstate will
merge with and into the Corporation, with the Corporation being the surviving
company (the "Interstate Merger").
To maintain its qualification as a REIT subsequent to the Wyndham
Acquisition, the Corporation is required to distribute with respect to the
Corporation's taxable year ending December 31, 1998 the earnings and profits of
Wyndham at the time of the Wyndham Acquisition (as determined for federal income
tax purposes). In addition, to maintain its qualification as a REIT following
the Interstate Merger, the Corporation will be required to distribute the
current and accumulated earnings and profits of Interstate at the time of the
Interstate Merger (as determined for federal income tax purposes). Any such
distributions will be taken into account by the Corporation's U.S. Stockholders
(as hereinafter defined) as ordinary income and will not be eligible for the
dividends received deduction generally available for corporations. See "Certain
Federal Income Tax Considerations--Federal Income Taxation of Holders of Paired
Shares."
If the IRS were to determine that Wyndham's or Interstate's actual earnings
and profits exceeded the amount distributed, the Corporation could be
disqualified as a REIT.
Possible Adverse Effects of Failure to Consummate the Interstate Merger or the
Summerfield Acquisition
On March 23, 1998, the Companies entered into an agreement to acquire all of
the partnership interests in SF Hotel Company, L.P. ("Summerfield") for
approximately $170 million. The purchase price is to be paid with a combination
of cash and issuance of a total of approximately 4,590,000 OP Units of the
Operating Partnerships and/or Paired Shares (the "Summerfield Acquisition"). The
final transaction price is subject to adjustment based on (i) the market price
of the Paired Shares through the end of 1998 and (ii) achievement of certain
performance criteria for the Summerfield portfolio through 2001. As a result of
the Summerfield Acquisition, the Companies will acquire four Summerfield Suites
hotels and lease or manage 33 Summerfield Suites and Sierra Suites hotels.
On March 30, 1998, Marriott International, Inc. ("Marriott") sued Interstate
in the United States District Court for the District of Maryland (the "Marriott
Litigation") seeking an injunction against the Interstate Merger. After a series
of appeals, on April 8, 1998, the United States Court of Appeals for the Fourth
Circuit remanded the case to the District Court for reconsideration and
expedited resolution.
No assurances can be given that the Summerfield Acquisition will be
consummated. No assurances can be made regarding whether, or upon what terms,
the Interstate Merger will be consummated. Neither can any assurances be made
regarding the timing of any potential consummation of the Interstate Merger.
Additionally, no assurances can be made regarding the probable outcome of the
Marriott Litigation, or the impact of any potential resolution of the Marriott
Litigation upon the financial condition or results of operations of Patriot. If
the Interstate Merger is not consummated, the Companies will not acquire all of
the hotels currently owned or leased by Interstate. If the Summerfield
Acquisition is not consummated, the Companies will not acquire the four
Summerfield Suites hotels or lease or manage the 33 Summerfield Suites and
Sierra Suites hotels.
Failure to Manage Rapid Growth and Integrate Operations; New Businesses
The Corporation is currently experiencing a period of rapid growth. The
Companies are or will be responsible for the management and operation of several
new businesses, including direct hotel management, branding and franchising and
thoroughbred racing, which were previously not part of the operations of
Patriot. In addition, the Companies may acquire other new businesses in the
future. The integration of departments, systems and procedures presents a
significant management challenge, and the failure to integrate new acquisitions
into existing management and operating structures could have a material adverse
effect on the results of operations and financial condition of the Corporation
and the Operating Company.
7
<PAGE>
Substantial Debt Obligations; No Limits on Indebtedness; Variable Rate Debt
The Companies have obtained an unsecured revolving line of credit that
expires on July 18, 2000 (the "Revolving Credit Facility") and a term loan that
expires on January 31, 1999 (the "Term Loan") from certain lenders. As of April
24, 1998 the Companies' combined debt was approximately $2.0 billion and the
Companies' ratio of combined debt to total market capitalization was
approximately 38.0%. The Companies also may borrow additional amounts from the
same or other lenders in the future, may assume debt in connection with
acquisitions, or may issue corporate debt securities in public or private
offerings. The Companies' organizational documents do not limit the amount of
indebtedness the Companies may incur. Further, substantially all of the
Companies' combined debt bears interest at a variable rate. Economic conditions
could result in higher interest rates, which could increase debt service
requirements on variable rate debt and could adversely affect the Companies'
ability to make distributions.
There can be no assurance that the Companies will be able to meet their debt
service obligations and, to the extent that they cannot, the Companies risk the
loss of some or all of their assets, including the hotels. Adverse economic
conditions could cause the terms on which borrowings become available to be
unfavorable. In such circumstances, if the Corporation or the Operating Company
is in need of funds to repay indebtedness in accordance with its terms or
otherwise, it could be required to liquidate one or more investments in
properties at times which may not permit realization of the maximum return on
such investments.
The foregoing risks associated with debt obligations of the Companies may
inhibit the ability of the Companies to raise capital in both the public and
private markets.
Potential Conflicts of Interest Between The Corporation and the Operating
Company
The Corporation and the Operating Company are separate corporate entities
with separate Boards of Directors and executive officers. Although the Companies
have several of the same directors, a majority of the directors and officers of
each of the Corporation and the Operating Company do not serve as directors or
officers of the other company. In addition, the Corporation and the Operating
Company generally have different employees, separate creditors and are subject
to different state law licensing and regulatory requirements. Since the
consummation of the Wyndham Acquisition on January 5, 1998, the Companies have
also had separate Chairmen of the Board and Chief Executive Officers. As a
result, the interests of the Corporation Board and the Operating Company Board
may conflict, and such conflicts may possibly rise to disputes between the
Companies. The Corporation and the Operating Company have entered into the
Cooperation Agreement, dated December 18, 1997, between the Corporation and the
Operating Company (the "Cooperation Agreement"), which the Companies believe
will help decrease the possibility of disagreements. There can be no assurance,
however, that such disagreements will not arise. In addition, there can be no
assurance that the interests of the officers and/or directors of one company who
also serve as officers and/or directors of the other company will not conflict
with their interests as officers and/or directors of such other company or that
their actions as officers and/or directors of one company will not adversely
affect the interests of the other company. Any such disagreements or conflicts
could have a material adverse affect on the results of operations of the
Corporation and the Operating Company.
8
<PAGE>
Dependence on Lessees and Payments under the Participating Leases
The Corporation leases substantially all of its existing hotels to the
Operating Company and to lessees (the "Lessees") pursuant to separate
participating leases (the "Participating Leases"). The Corporation's ability to
make distributions to stockholders depends primarily upon the ability of the
Operating Company or the Lessees to make rent payments under the Participating
Leases (which is dependent primarily on the Operating Company's and the Lessees'
ability to generate sufficient revenues from those hotels which are leased to
them). A failure or delay to make such payments may be caused by reductions in
revenue from such hotels or in the net operating income of the Operating Company
or the Lessees or otherwise. Any failure or delay by the Operating Company or
the Lessees in making rent payments may adversely affect the Corporation's
ability to make distributions to stockholders.
Lack of Control Over Operations of Certain Hotels Leased or Managed by Third
Parties
The Corporation is dependent on the ability of the Operating Company, the
Lessees and the hotel management entities that manage the hotels (the
"Operators") to manage the operations of hotels that are leased or operated by
them. Under the terms of the Participating Leases, the Corporation has the
authority to review annual budgets for the hotels which are leased to the
Lessees and to approve certain items. However, the Corporation is unable to
directly implement strategic business decisions with respect to the setting of
room rates, repositioning of a franchise, redevelopment of food and beverage
operations and certain similar decisions with respect to such hotels.
Hotel Industry Risks
Operating Risks
The primary businesses of the Companies are buying, selling, leasing and
managing hotels, which are subject to operating risks common to the hotel
industry. These risks include, among other things, (i) competition for guests
from other hotels, a number of which may have greater marketing and financial
resources and experience than the Companies and the Lessees, (ii) increases in
operating costs due to inflation and other factors, which increases may not have
been offset in past years, and may not be offset in future years, by increased
room rates, (iii) dependence on business and commercial travelers and tourism,
which business may fluctuate and be seasonal, (iv) increases in energy costs and
other expenses of travel, which may deter travelers and (v) adverse effects of
general and local economic conditions. These factors could adversely affect the
ability of the Lessees and the Operating Company to generate revenues and to
make lease payments and therefore the Corporation's ability to make
distributions to stockholders.
The Companies are also subject to the risk that in connection with the
acquisition of hotels and hotel operating companies it may not be possible to
transfer certain operating licenses, such as food and beverage licenses, to the
Lessees, the Operators or the Operating Company, or to obtain new licenses in a
timely manner in the event such licenses cannot be transferred. Although hotels
can provide alcoholic beverages under interim licenses or licenses obtained
prior to the acquisition of these hotels, there can be no assurance that these
licenses will remain in effect until the Corporation or the Operating Company
obtains new licenses or that new licenses will be obtained. The failure to have
alcoholic beverages licenses or other operating licenses could adversely affect
the ability of the affected Lessees, Operators or the Operating Company to
generate revenues and make lease payments to the Corporation.
Operating Costs and Capital Expenditures; Hotel Renovation
Hotels, in general, have an ongoing need for renovations and other capital
improvements, particularly in older structures, including periodic replacement
or refurbishment of furniture, fixtures and equipment ("F, F & E"). Under the
terms of the Participating Leases, the Corporation is obligated to establish a
reserve to pay the cost of certain capital expenditures at its hotels and pay
for periodic replacement or refurbishment of F, F & E. If capital expenditures
exceed the Corporation's expectations, the additional cost could have an adverse
effect on the Corporation's cash available for distribution. In addition, the
Corporation may acquire hotels where significant renovation is either required
or desirable. Renovation of hotels involves certain risks,
9
<PAGE>
including the possibility of environmental problems, construction cost overruns
and delays, uncertainties as to market demand or deterioration in market demand
after commencement of renovation and the emergence of unanticipated competition
from other hotels.
Competition for Hotel Acquisition Opportunities
The Companies may be competing for investment opportunities with entities
that have substantially greater financial resources. These entities may
generally be able to accept more risk than the Companies can prudently manage,
including risks with respect to the creditworthiness of a hotel operator or the
geographic proximity of its investments. Competition may generally reduce the
number of suitable investment opportunities offered to the Companies and
increase the bargaining power of property owners seeking to sell.
Additionally, the Companies' ability to acquire additional hotels could be
negatively impacted by the paired share ownership structure because hotel
management companies, franchisees and others who historically approached Patriot
with acquisition opportunities in hopes of establishing lessee or management
relationships may not do so in the future out of concern that the Corporation
will rely primarily on the Operating Company to lease and/or manage the acquired
properties. Such persons may instead provide such acquisition opportunities to
hotel companies that will allow them to manage the properties following the
sale. This could have a negative impact on the Companies' acquisition activities
in the future.
Seasonality
The hotel industry is seasonal in nature. Revenues at certain hotels are
greater in the first and second quarters of a calendar year and at other hotels
in the second and third quarters of a calendar year. Seasonal variations in
revenue at hotels may cause quarterly fluctuations in the operating revenues of
the Operating Company and the lease revenues of the Corporation.
Real Estate Investment Risks
General Risks
The Companies' investments will be subject to varying degrees of risk
generally incident to the ownership of real property. The underlying value of
the Corporation's real estate investments and the Companies' income and ability
to make distributions to its stockholders will be dependent upon the ability of
the Lessees, the Operators and the Operating Company to operate the
Corporation's hotels in a manner sufficient to maintain or increase revenues and
to generate sufficient income in excess of operating expenses to make rent
payments under their leases with the Corporation. Income from the Corporation's
hotels may be adversely affected by changes in national economic conditions,
changes in local market conditions due to changes in general or local economic
conditions and neighborhood characteristics, changes in interest rates and in
the availability, cost and terms of mortgage funds, the impact of present or
future environmental legislation and compliance with environmental laws, the
ongoing need for capital improvements, particularly in older structures, changes
in real estate tax rates and other operating expenses, adverse changes in
governmental rules and fiscal policies, adverse changes in zoning laws, civil
unrest, acts of God, including earthquakes and other natural disasters (which
may result in uninsured losses), acts of war and other factors which are beyond
the control of the Companies.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of the
Corporation to vary its portfolio in response to changes in economic and other
conditions will therefore be limited. If the Corporation must sell an
investment, there can be no assurance that the Corporation will be able to
dispose of it in the time period it desires or that the sales price of any
investment will recoup or exceed the amount of the Corporation's investment.
10
<PAGE>
Property Taxes
The Companies' hotels and racing facilities are subject to real property
taxes. The real property taxes on hotel properties in which the Corporation
invests as well as the Corporation's racing facilities may increase or decrease
as property tax rates change and as the value of the properties are assessed or
reassessed by taxing authorities. If property taxes increase, the Companies'
ability to make distributions to its stockholders could be adversely affected.
Consents of Ground Lessor Required for Sale of Certain Hotels
Certain of the Corporation's hotels and the land upon which the Bay Meadows
Racecourse (the "Racecourse"), is situated are subject to ground leases
with third party lessors. In addition, the Corporation may acquire hotels in the
future that are subject to ground leases. Any proposed sale of a property that
is subject to a ground lease by the Corporation or any proposed assignment of
the Corporation's leasehold interest in the ground lease may require the consent
of third party lessors. As a result, the Corporation may not be able to sell,
assign, transfer or convey its interest in any such property in the future
absent the consent of such third parties, even if such transaction may be in the
best interests of the stockholders.
Environmental Matters
The operating costs of the Companies may be affected by the obligation to
pay for the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of complying with future legislation. Under
various federal, state and local environmental laws, ordinances and regulations,
a current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances on, under, or
in such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. In addition, the presence of hazardous or toxic substances, or
the failure to remediate such property properly, may adversely affect the
owner's ability to borrow by using such real property as collateral. Persons who
arrange for the transportation, disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment facility, whether or not such facility
is or ever was owned or operated by such person. Certain environmental laws and
common law principles could be used to impose liability for releases of
hazardous materials, including asbestos-containing materials ("ACMs"), into the
environment, and third parties may seek recovery from owners or operators of
real properties for personal injury associated with exposure to released ACMs or
other hazardous materials. Environmental laws may also impose restrictions on
the manner in which a property may be used or transferred or in which businesses
may be operated, and these restrictions may require expenditures. In connection
with the ownership and operation of any of the Corporation's hotels, the
Companies, the Lessees or the Operators may be potentially liable for any such
costs. The cost of defending against claims of liability or remediating
contaminated property and the cost of complying with environmental laws could
materially adversely affect the Corporation's results of operations and
financial condition. Phase I environmental site assessments ("ESAs") have been
conducted at substantially all of the Corporation's hotels and the Racecourse by
qualified independent environmental engineers. The purpose of Phase I ESAs is to
identify potential sources of contamination for which any of the Corporation's
hotels or the Racecourse may be responsible and to assess the status of
environmental regulatory compliance. The ESAs have not revealed any
environmental liability or compliance concerns that the Corporation believes
would have a material adverse effect on its business, assets, results of
operations or liquidity, nor is the Corporation aware of any such liability or
concerns. Nevertheless, it is possible that these ESAs did not reveal all
environmental liabilities or compliance concerns or that material environmental
liabilities or compliance concerns exist of which the Corporation is currently
unaware. The Corporation has not been notified by any governmental authority,
and has no other knowledge of, any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental substances in
connection with any of the hotels or the Racecourse.
11
<PAGE>
Compliance with Americans with Disabilities Act
Under the Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. A determination that the Companies are not
in compliance with the ADA could result in the imposition of fines or an award
of damages to private litigants. If the Companies were required to make
modifications to comply with the ADA, the ability of the Companies to make
expected distributions to their stockholders could be adversely affected.
Uninsured and Underinsured Losses
Each of the Participating Leases specifies comprehensive insurance to be
maintained on each of the applicable leased hotels, including liability, fire
and extended coverage. The Corporation believes such specified coverage is of
the type and amount customarily obtained for or by an owner of hotels. Leases
for subsequently acquired hotels (including those leased to the Operating
Company) will contain similar provisions. However, there are certain types of
losses, generally of a catastrophic nature, such as earthquakes and floods, that
may be uninsurable or not economically insurable. The Board of Directors and
management of each of the Companies will use their discretion in determining
amounts, coverage limits and deductibility provisions of insurance, with a view
to maintaining appropriate insurance coverage on the investments of the
Corporation or the Operating Company, as the case may be, at a reasonable cost
and on suitable terms. This may result in insurance coverage that, in the event
of a substantial loss, would not be sufficient to pay the full current market
value or current replacement cost of the lost investment of the Corporation or
the Operating Company, as the case may be. Inflation, changes in building codes
and ordinances, environmental considerations, and other factors also might make
it infeasible to use insurance proceeds to replace the property after such
property has been damaged or destroyed. Under such circumstances, the insurance
proceeds received by the Corporation or the Operating Company might not be
adequate to restore its economic position with respect to such property.
Acquisition and Development Risks
The Companies currently intend to pursue acquisitions of additional hotels
and hotel operating companies and, under appropriate circumstances, may pursue
development opportunities. Acquisitions entail risks that such acquired hotels
or hotel operating companies will fail to perform in accordance with
expectations and that estimates of the cost of improvements necessary to market,
acquire and operate properties will prove inaccurate as well as general risks
associated with any new real estate or operating company acquisition. In
addition, hotel development is subject to numerous risks, including risks of
construction delays or cost overruns that may increase project costs, new
project commencement risks such as receipt of zoning, occupancy and other
required governmental approvals and permits and the incurrence of development
costs in connection with projects that are not pursued to completion. The fact
that the Corporation generally must distribute 95% of its ordinary taxable
income in order to maintain its qualification as a REIT may limit the
Corporation's ability to rely upon lease income from its hotels or subsequently
acquired properties to finance acquisitions or new developments. As a result, if
debt or equity financing were not available on acceptable terms, further
acquisitions or development activities might be curtailed or the Corporation's
cash available for distribution might be adversely affected.
Dependence on Management Contracts
Management contracts are acquired, terminated, renegotiated or converted to
franchise agreements in the ordinary course of the Companies' business. While,
as of April 10, 1998, the average remaining term of the Companies' management
contracts was approximately 13 years, these management contracts generally may
be terminated by the owner of the hotel property if the hotel manager fails to
meet certain performance standards, if the property is sold to a third party, if
the property owner defaults on indebtedness encumbering the property and/or upon
a foreclosure of the property. Other grounds for termination of the Companies'
upscale hotel management contracts include a hotel owner's election to close a
hotel and certain business combinations involving the Companies in which the
Companies' name or current management team does not survive.
There can be no assurance that the Companies will be able to replace
terminated management contracts, or that the terms of renegotiated or converted
contracts will be as favorable as the terms that existed before
12
<PAGE>
such renegotiation or conversion. The Companies also will be subject to the risk
of deterioration in the financial condition of a hotel owner and such owner's
ability to pay management fees to the Companies. In addition, in certain
circumstances, the Companies may be required to make loans to or capital
investments or advances in hotel properties in connection with management
contracts. A material deterioration in the operating results of one or more of
these hotel properties and/or a loss of the related management contracts could
adversely affect the value of the Companies' investment in such hotel
properties.
Risks of Operating Hotels Under Franchise or Brand Affiliations
Certain of the Corporation's hotels are operated under franchise or brand
affiliations. In addition, hotels in which the Corporation subsequently invests
may be operated pursuant to franchise or brand affiliations. The continuation of
the franchise licenses relating to the franchised hotels (the "Franchise
Licenses") is subject to specified operating standards and other terms and
conditions. The continued use of a brand is generally contingent upon the
continuation of the management agreement related to that hotel with the branded
Operator. Franchisors typically inspect licensed properties periodically to
confirm adherence to operating standards. Action on the part of any of the
Companies, the Lessees or the Operators could result in a breach of such
standards or other terms and conditions of the Franchise Licenses and could
result in the loss or cancellation of a Franchise License. It is possible that a
franchisor could condition the continuation of a Franchise License on the
completion of capital improvements which the Corporation's Board of Directors
determines are too expensive or otherwise unwarranted in light of general
economic conditions or the operating results or prospects of the affected hotel.
In that event, the Corporation's Board of Directors may elect to allow the
Franchise License to lapse which could under certain circumstance result in the
Corporation incurring significant costs for terminating such Franchise License.
In any case, if a franchise or brand affiliation is terminated, the Corporation
and the Lessee may seek to obtain a suitable replacement franchise or brand
affiliation, or to operate the hotel independent of a franchise or brand
affiliation. The loss of a franchise or brand affiliation could have a material
adverse effect upon the operations or the underlying value of the hotel covered
by the franchise or brand affiliation because of the loss of associated name
recognition, marketing support and centralized reservation systems provided by
the franchisor or brand owner.
Horse Racing Industry Risks
The Operating Company is engaged in the business of conducting and offering
pari-mutuel wagering in thoroughbred horse racing at the Racecourse. Such
operations are contingent upon the continued governmental acceptance of such
operations as forms of legalized gambling. As a form of gambling, pari-mutuel
wagering is subject to extensive licensing and regulatory control by the
California Horse Racing Board (the "CHRB") and other California authorities.
These regulatory authorities have broad powers with respect to the licensing of
gaming operations, and may revoke, suspend, condition or limit the gaming
operations of the Operating Company. The CHRB also has the discretion to limit
the number of days and dates on which the Operating Company may conduct live
horse racing. No assurance can be given as to how many, or which, horse racing
days the CHRB will allocate to the Operating Company in the future, nor can
there by any assurance that an issued license will not be modified or revoked.
Any change in CHRB regulations or how many, or which, horse racing days are
allocated to the Operating Company could have a material adverse effect on the
Operating Company's financial condition and results of operations.
Although the Operating Company has retained certain members of Bay Meadows'
former management and personnel to continue to manage these horse racing
operations, there can be no assurance that the Operating Company will be able to
continue to employ said management and personnel. Failure to retain such
management and personnel could have a material adverse effect on the results of
operations and financial condition of the Operating Company.
13
<PAGE>
THE COMPANIES
The Corporation
The Corporation is a self-administered REIT under the Code. The Corporation
owns interests in a portfolio of hotels which are diversified by franchise or
brand affiliation and serve primarily major U.S. business centers, including
Atlanta, Boston, Chicago, Cleveland, Dallas, Denver, Houston, Miami, San
Francisco and Seattle. In addition to hotels catering primarily to business
travelers, the Corporation's portfolio also includes world-class resort hotels
in Scottsdale and Tucson, Arizona; Carmel, California; and Telluride, Colorado
and prominent hotels in major tourist destinations, including Fort Lauderdale,
Florida; New Orleans, San Antonio and San Diego. The Corporation also leases
approximately 174 acres of land in San Mateo, California upon which the
Racecourse is situated.
Pursuant to the Wyndham Acquisition, which was consummated on January 5,
1998, the Corporation acquired Wyndham's portfolio of owned and leased hotels,
management and franchise agreements for Wyndham's managed and franchised
properties throughout North America, management and franchise agreements for
properties which are currently closed for renovation or construction or are in
the process of being converted to the Wyndham brand, and Wyndham's proprietary
brand names, including Wyndham/SM/, Wyndham Garden(R) and Wyndham Hotels and
Resorts/SM/. In connection with the Wyndham Acquisition, the Corporation also
acquired certain full-service Wyndham-branded hotels from partnerships
affiliated with members of the Trammell Crow family.
14
<PAGE>
As part of their ongoing businesses, the Companies continually engage in
discussions with public and private real estate entities, including, without
limitation, current lessees of the Companies' hotels, regarding possible
portfolio or single asset acquisitions, as well as the acquisition of hotel
leasing and management operations. No assurances can be made that the Companies
will acquire any such acquisition opportunities.
The Corporation conducts substantially all of its operations through the
Realty Partnership, which owns, directly and through its subsidiaries, the
Corporation's interests in each of its hotels. Through PAH GP and PAH LP, the
Corporation holds the sole general partnership interest and a limited
partnership interest, respectively, in the Realty Partnership.
Since 1983, the shares of Corporation Common Stock have been paired and
have traded together with the shares of Operating Company Common Stock as a
single unit pursuant to a stock pairing agreement. The terms of the stock
pairing agreement are set forth in the Pairing Agreement, dated as of
February 17, 1983 and amended from time to time thereafter, by and between the
Corporation and the Operating Company (the "Pairing Agreement"). Since the
Merger, the Paired Common Stock has been listed on the NYSE under the symbol
"PAH."
The Corporation's principal executive offices are located at 1950 Stemmons
Freeway, Suite 6001, Dallas, Texas 75207 and its telephone number at that
location is (214) 863-1000.
The Operating Company
The Corporation leases certain of its hotels to the Operating Company. The
Operating Company is also engaged in the business of conducting and offering
pari-mutuel wagering on thoroughbred horse racing at the Racecourse. As
described above, shares of Operating Company Common Stock are paired and trade
together with the shares of Corporation Common Stock as a single unit on the
NYSE pursuant to the Pairing Agreement. The Operating Company conducts
substantially all of its operations through the Operating Partnership, which
owns, directly and through its subsidiaries, the Operating Company's assets. The
Operating Company holds the sole general partnership interest and a limited
partnership interest in the Operating Partnership.
The Operating Company's principal executive offices are located at 1950
Stemmons Freeway, Suite 6001, Dallas, Texas 75207 and its telephone number at
that location is (214) 863-1000.
DESCRIPTION OF CAPITAL STOCK
The rights of stockholders of the Corporation and the Operating Company are
governed by the Amended and Restated Certificate of Incorporation of the
Corporation (the "Corporation Charter") and the Amended and Restated Certificate
of Incorporation of the Operating Company (the "Operating Company Charter" and,
together with the Corporation Charter, the "Charters") and the Amended and
Restated Bylaws of the Corporation (the "Corporation Bylaws") and the Amended
and Restated Bylaws of the Operating Company (the "Operating Company Bylaws"
and, together with the Corporation Bylaws, the "Bylaws"). The rights of such
stockholders are also governed by the terms of the Pairing Agreement and the
Cooperation Agreement. The following discussion summarizes certain of the key
terms of the Charters, the Bylaws, the Pairing Agreement and the Cooperation
Agreement. This summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the Pairing Agreement, the Cooperation
Agreement, the Charters and the Bylaws.
Under the Charters, each of the Corporation and the Operating Company have
the authority to issue 650,000,000 shares of Corporation Common Stock and
Operating Company Common Stock, respectively, 100,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"), and 750,000,000 shares
of excess stock, par value $.01 per share (the "Excess Stock").
15
<PAGE>
Issuances of shares of Corporation Common Stock, Operating Company Common
Stock and other equity securities of the Corporation and the Operating Company
are subject to the terms and conditions of the Pairing Agreement and the
Cooperation Agreement.
Common Stock
The holders of Common Stock are entitled to one vote per share on all
matters voted on by stockholders, including elections of directors. Except as
otherwise required by law, by the terms of Patriot Series A Preferred Stock (see
discussion below), by the Charters with respect to Excess Stock or as provided
in any resolution adopted by either of the Corporation Board or the Operating
Company Board with respect to any series of Preferred Stock, the holders of
Paired Common Stock exclusively possess all voting power. The Charters do not
provide for cumulative voting in the election of directors. Subject to the terms
of the Patriot Series A Preferred Stock and any preferential rights of any
outstanding series of Preferred Stock and the rights of holders of Excess Stock,
the holders of shares of Paired Common Stock are entitled to such dividends as
may be declared from time to time by the Corporation Board and the Operating
Company Board from funds available for such purpose, and upon liquidation are
entitled to receive pro rata all assets of the Corporation and the Operating
Company available for distribution to such holders. All shares of Paired Common
Stock will, when issued, be fully paid and nonassessable, and the holders
thereof will not have preemptive rights.
Holders of Paired Common Stock have no conversion, sinking fund or
redemption rights, or preemptive rights to subscribe for any securities of the
Corporation or the Operating Company.
Each of the Corporation and the Operating Company intends to furnish its
stockholders with annual reports containing audited consolidated financial
statements and an opinion thereon expressed by an independent public accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information.
Pursuant to the Delaware General Corporation Law (the "DGCL"), a merger or
consolidation involving either of the Corporation or the Operating Company
requires the approval of a majority of the outstanding shares of the constituent
corporation to the transaction entitled to vote on such a matter.
Preferred Stock
Each of the Corporation Board and the Operating Company Board is
authorized, subject to the provisions of the Cooperation Agreement (see
discussion below), to provide for the issuance of shares of Preferred Stock in
one or more series, to establish the number of shares in each series and to fix
the designation, powers, preferences and rights of each such series and the
qualifications, limitations or restrictions thereof. Because each of the
Corporation Board and the Operating Company Board has the power to establish the
preferences and rights of each class or series of Preferred Stock, each such
Board of Directors may afford the holders of any series or class of Preferred
Stock preferences, powers and rights, voting or otherwise, senior to the rights
of holders of shares of Corporation Common Stock or Operating Company Common
Stock, respectively. The issuance of shares of Preferred Stock could have the
effect of delaying or preventing a change in control of the Corporation or the
Operating Company.
Patriot Series A Preferred Stock
In connection with the Wyndham Acquisition, the Corporation issued
4,860,876 shares of Patriot Series A Preferred Stock to CF Securities, L.P., the
principal shareholder of Wyndham prior to the Wyndham Acquisition, which shares
have the rights and privileges set forth in the Certificate of Designation for
the Patriot Series A Preferred Stock (the "Certificate of Designation"). The
Patriot Series A Preferred Stock is a series designated out of the Preferred
Stock of the Corporation. The following is a summary of certain provisions of
the Patriot Series A Preferred Stock. This summary does not purport to be
complete and is subject to, and qualified in its entirety by, the provisions of
the Corporation Charter and the Certificate of Designation.
Each share of Patriot Series A Preferred Stock is entitled to dividends
when, as and if declared and paid on the shares of Paired Common Stock in an
amount equal to the sum of the dividends paid on a share of Paired
16
<PAGE>
Common Stock. Dividends on the Patriot Series A Preferred Stock will rank pari
passu with dividends on the shares of Paired Common Stock.
The Patriot Series A Preferred Stock is entitled to one vote per share,
voting together as a class with the shares of the Corporation Common Stock, on
any matter submitted for a vote of the stockholders of the Corporation. The
Patriot Series A Preferred Stock is convertible at any time into shares of
Paired Common Stock on a one-for-one basis by the holders thereof, subject to
the Ownership Limit provisions set forth in the Charters. In addition, the
Patriot Series A Preferred Stock is mandatorily convertible at any time and in
any amount upon notice by the Corporation, provided that the amount so converted
will not cause a violation of the Ownership Limit provisions set forth in the
Charters.
Upon a liquidation, dissolution or winding up of the Corporation, each
holder of Patriot Series A Preferred Stock is entitled to receive, on a per
share basis, (i) the Dissolution Preference (as defined below) and (ii) a
ratable share, together with the holders of Corporation Common Stock, in the
assets of the Corporation available for distribution on the Corporation Common
Stock. The term "Dissolution Preference" means, as applicable, either (A) if the
Operating Company has previously been or is simultaneously liquidated, dissolved
or wound up, a preference equal to the amount per share of Operating Company
Common Stock which was or will be received by the holders of Operating Company
Common Stock upon the liquidation, dissolution or winding up of the Operating
Company or (B) if the Operating Company has not previously been or is not
simultaneously liquidated, dissolved or wound up, a preference per share equal
to an amount determined by an independent investment banker selected by the
Corporation Board (with the agreement of the majority holder of the Patriot
Series A Preferred Stock, if there is one at such time) to be equal to the then
current value of a share of Operating Company Common Stock, without regard to
the paired share structure of the Companies. If the Operating Company has been
previously liquidated, dissolved or wound up, then any Dissolution Preference
will accrue interest at the applicable federal rate from the date the
liquidating distributions were made on the Operating Company Common Stock unless
and until paid.
Excess Stock
Upon the violation of certain transfer restrictions contained in the
Charters, shares of any class or series of outstanding capital stock of the
Corporation and the Operating Company (collectively, "Equity Stock") will
automatically be converted into an equal number of shares of Excess Stock of the
Corporation or the Operating Company, as the case may be, and transferred to a
trust (a "Trust"). See "Restrictions on Transfer of Capital Stock." Such shares
of Excess Stock held in trust shall remain outstanding shares of stock of the
Corporation and the Operating Company and shall be held by the trustee of the
Trust (the "Trustee") for the benefit of a charitable beneficiary (a
"Beneficiary"). The Trustee and the Beneficiary shall be designated pursuant to
the terms of the Pairing Agreement. Each share of Excess Stock shall entitle the
holder to the number of votes the holder would have if such share of Excess
Stock was a share of Equity Stock of the same class or series from which such
Excess Stock was converted, on all matters submitted to a vote at any meeting of
stockholders. The Trustee, as record holder of the Excess Stock, shall be
entitled to vote all shares of Excess Stock. Each share of Excess Stock shall be
entitled to the same dividends and distributions (as to timing and amount) as
may be declared by the Corporation Board or the Operating Company Board, as the
case may be, as shares of the class or series of Equity Stock from which such
Excess Stock was converted. The Trustee of the Trust, as record holder of the
shares of the Excess Stock, shall be entitled to receive all dividends and
distributions and shall hold such dividends and distributions in trust for the
benefit of the Beneficiary of the Trust. Upon the sale of the shares of Excess
Stock to either a permitted transferee under the Charters (a "Permitted
Transferee") or to the Corporation or the Operating Company, as the case may be,
such shares of Excess Stock will be automatically converted into an equal number
of shares of Equity Stock of the same class or series from which such Excess
Stock was converted. Pursuant to the Pairing Agreement, the conversion of Equity
Stock of the Corporation or the Operating Company into Excess Stock, or the
conversion of Excess Stock of the Corporation or the Operating Company into
Equity Stock, requires conversion of the corresponding share of the Corporation
or the Operating Company, as the case may be.
The Pairing Agreement
Under the Pairing Agreement, shares of Corporation Common Stock and
Operating Company Common
17
<PAGE>
Stock shall not be transferrable or transferred on the books of such company
unless a simultaneous transfer is made by the same transferor to the same
transferee of an equal number of shares of common stock of the other company.
Neither the Corporation nor the Operating Company may issue shares of
Corporation Common Stock or Operating Company Common Stock, as the case may be,
unless provision has been made for the simultaneous issuance or transfer to the
same person of the same number of shares of common stock of the other company
and for the pairing of such shares. Each certificate issued for Corporation
Common Stock or Operating Company Common Stock must be issued "back-to-back"
with a certificate evidencing the same number of shares of common stock of the
other company. Each certificate must bear a conspicuous legend on its face
referring to the restrictions on ownership and transfer under the Pairing
Agreement. The Pairing Agreement provides that each of the Corporation and the
Operating Company may issue shares of capital stock of any class or series
(other than Corporation Common Stock and Operating Company Common Stock),
irrespective of whether such shares are convertible into shares of Corporation
Common Stock and Operating Company Common Stock, without making provision for
the simultaneous issuance or transfer to the same person of the same number of
shares of that same class or series of capital stock of the other company and
for the pairing of such shares.
In addition, pursuant to the Pairing Agreement, neither the Corporation nor
the Operating Company may declare a stock dividend consisting in whole or in
part of Corporation Common Stock or Operating Company Common Stock, issue any
rights or warrants to purchase any shares of Corporation Common Stock or
Operating Company Common Stock or subdivide, combine or otherwise reclassify the
shares of Corporation Common Stock or Operating Company Common Stock unless the
other company simultaneously takes the same or equivalent action.
Pursuant to the Pairing Agreement, as desired from time to time, but no
less than once each calendar year, the Corporation and the Operating Company are
required to jointly arrange for the determination of the fair market value of
the Operating Company Common Stock outstanding on such valuation date. Such
valuation may be used from time to time by the Corporation and the Operating
Company to change the allocation between the companies of the net proceeds from
any issuance of paired equity. The Pairing Agreement may be terminated by the
Board of Directors of either the Corporation or the Operating Company upon 30
days written notice to the other company that such termination has been approved
by the affirmative vote of the holders of a majority of the outstanding shares
of common stock of the company seeking to terminate the agreement. In the event
the Pairing Agreement is terminated, the Corporation and the Operating Company
have agreed to cooperate to effect a separation of the paired shares of both
companies so as to permit the separate issuance and transfer thereof.
The Cooperation Agreement
Although a paired share structure may result in stockholders of the paired
companies realizing certain economic benefits not realizable by stockholders of
companies not having a paired share structure, each paired company is a separate
corporate entity with a separate Board of Directors and different management
teams. Accordingly, the interests of the Board of Directors and management of
the paired companies may conflict and such conflicts may possibly rise to
disputes between the companies. Prior to the Cal Jockey Merger, Cal Jockey and
Bay Meadows experienced certain disagreements and disputes, some of which
resulted in litigation between the companies. The Corporation and the Operating
Company believe that these disagreements and disputes compromised the ability of
Cal Jockey and Bay Meadows to operate the companies in a manner designed to
maximize the potential economic benefits that could be realized for stockholders
of the paired companies. The Corporation and the Operating Company believe that
to increase the likelihood that the stockholders of the two Companies may fully
realize the economic benefits of the paired share structure, it is in the best
interests of the Companies and their respective stockholders that the risk of
potential conflicts between the two Companies be minimized. Accordingly, the
Corporation and the Operating Company have entered into the Cooperation
Agreement.
Under the terms of the Cooperation Agreement, the Corporation and Operating
Company are obligated to cooperate to the fullest extent possible in the conduct
of their respective operations and to take all necessary action to preserve the
paired share structure and to maximize the economic and tax advantages
associated therewith. One of the primary objectives of the Cooperation Agreement
is to set forth the understanding of the
18
<PAGE>
Companies that the Corporation shall have the sole right and power to authorize,
effect and control issuances of paired equity (including securities convertible
into paired equity) of the two companies. The Cooperation Agreement provides for
a number of corporate governance mechanisms designed to accomplish this
objective and the other objectives set forth therein. These mechanisms include
(i) the establishment of a cooperation committee that normally considers and
proposes the agenda listing the matters to be considered at any joint meeting of
the Corporation Board and the Operating Company Board, (ii) the establishment of
corporate matters categories and procedures for the consideration and
reconsideration of matters brought before the Corporation Board and the
Operating Company Board, (iii) the establishment of a hotel acquisitions
committee that is to analyze, evaluate and consider potential acquisitions by
the Companies of hotel properties and related assets, (iv) provisions that
govern the sole authority of the Corporation to authorize, effect and control
issuances of paired equity (including securities convertible into paired equity)
of the two companies, and (v) the establishment of an unpaired equity committee
that will have the sole authority to authorize and approve issuances of unpaired
equity by the Operating Company. Unless earlier terminated at any time by the
mutual consent of the Corporation and the Operating Company, the Cooperation
Agreement will terminate on the date that is 12 months after the date on which
the Pairing Agreement is no longer in effect. In the event of any termination of
the Cooperation Agreement neither the Corporation nor the Operating Company (or
any of its directors, officers, employees or agents will have any liability or
further obligation to any other party under the Cooperation Agreement.
Transfer Agent
The transfer agent and registrar for the Paired Common Stock is American
Stock Transfer & Trust Company of New York, New York.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Corporation to qualify as a REIT under the Code, among other
things, not more than 50% in value of its outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (defined in the Code
to include certain entities) during the last half of a taxable year, and such
capital stock must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months or during a proportionate part of a
shorter taxable year (in each case, other than the first such year). In
addition, the Corporation must meet certain requirements regarding the nature of
its gross income in order to qualify as a REIT. One such requirement is that at
least 75% of the Corporation's gross income for each year must consist of rents
from real property and income from certain other real property investments. The
rents received by Realty Partnership and its subsidiary partnerships from the
Lessees will not qualify as rents from real property if the Corporation owns,
actually or constructively, 10% or more of the ownership interests in any Lessee
within the meaning of Section 856(d)(2)(B) of the Code, the result of which
would be the loss of REIT status for the Corporation. See "Certain Federal
Income Tax Considerations--REIT Qualification."
In order to protect the Corporation against the risk of losing its status
as a REIT and to otherwise protect the Corporation from the consequences of a
concentration of ownership among its stockholders, the Charters provide, subject
to certain exceptions, that no single person (which includes a "group" of
persons) (other than an entity that is either a trust as described in Section
401(a) of the Code and exempt from tax under Section 501(a) of the Code or a
person that is registered under the Investment Company Act of 1940 (a "Look-
Through Entity")) may Beneficially Own or Constructively Own (as those terms are
defined below) in excess of 8.0% of the outstanding shares of any class or
series of Equity Stock of the Corporation or the Operating Company (the
"Ownership Limit"), unless the Ownership Limit is waived by the Board of
Directors of the relevant company in accordance with the Charters. Any transfer
of Equity Stock of the Corporation or the Operating Company that would (i)
result in any person or entity owning, directly or indirectly, shares of Equity
Stock of the Corporation or the Operating Company in excess of the Ownership
Limit, unless the Ownership Limit is waived by the Board of Directors of the
relevant corporation in accordance with the Charters, (ii) result in the capital
stock of the Corporation being beneficially owned (within the meaning of
Section 856(a)(5) of the Code) by fewer than 100 persons within the meaning of
Section 856(a)(5) of the Code, (iii) result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code or (iv) cause the
Corporation to own, actually or constructively, 10% or more of the ownership
interests in a tenant of the real property of the
19
<PAGE>
Corporation or a subsidiary of the Corporation within the meaning of Section
856(d)(2)(B) of the Code, shall be void ab initio, and the intended transferee
will acquire no right or interest in such shares of Equity Stock. For purposes
of the Charters, "Beneficial Ownership" means, with respect to any individual or
entity, ownership of shares of Equity Stock equal to the sum of (i) the shares
of Equity Stock directly or indirectly owned by such individual or entity, (ii)
the number of shares of Equity Stock treated as owned directly or indirectly by
such individual or entity through the application of the constructive ownership
rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the
Code, and (iii) the number of shares of Equity Stock which such individual or
entity is deemed to beneficially own pursuant to Rule 13d-3 under the Exchange
Act. The Charters provide that pension plans described in Section 401(a) of the
Code and mutual funds registered under the Investment Company Act of 1940 are
treated as Look-Through Entities that are subject to a 9.8% "Look-Through
Ownership Limit." Pension plans and mutual funds are among the entities that are
not treated as holders of stock under the "five or fewer" requirement and the
beneficial owners of such entities will be counted as holders for this purpose.
For purposes of computing the percentage of shares of any class or series of
Equity Stock of the Corporation or the Operating Company Beneficially Owned by
any person or entity, any shares of Equity Stock of the Corporation or the
Operating Company which are deemed to be Beneficially Owned by such person or
entity pursuant to Rule 13d-3 of the Exchange Act but which are not outstanding
shall be deemed to be outstanding. The terms "Beneficial Owner," "Beneficially
Owns" and "Beneficially Owned" shall have correlative meanings. Also for
purposes of the Charters, "Constructive Ownership" means ownership of shares of
Equity Stock by an individual or entity who is or would be treated as a direct
or indirect owner of such shares of Equity Stock through the application of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns" and "Constructively Owned" shall
have correlative meanings.
Upon the occurrence of a purported transfer of shares that would result in
a violation of any of the foregoing transfer restrictions, that number of shares
that violate the transfer restrictions shall be automatically converted into an
equal number of shares of Excess Stock and transferred to a Trust for the
benefit of the Beneficiary, effective on the Trading Day (as defined below)
prior to the date of the purported transfer of such shares, and the record
holder of the shares of Equity Stock that are converted into shares of Excess
Stock (a "Prohibited Owner") shall submit such number of shares of Equity Stock
to the Corporation or the Operating Company, as the case may be, for
registration in the name of the Trustee. In the case of Equity Stock that is
paired, upon the conversion of a share of Equity Stock into a share of Excess
Stock, the corresponding paired share of that same class or series of Equity
Stock of the other company shall simultaneously be converted into a share of
Excess Stock; such shares of Excess Stock shall be paired and shall be
simultaneously transferred to a Trust. Upon the occurrence of such a conversion
of shares of any class or series of Equity Stock into an equal number of shares
of Excess Stock, such shares of Equity Stock shall be automatically retired and
canceled, without any action required by the Board of Directors of either of the
Corporation as the Operating Company, and shall thereupon be restored to the
status of authorized but unissued shares of the particular class or series of
Equity Stock from which such Excess Stock was converted and may be reissued as
that particular class or series of Equity Stock.
Shares of Equity Stock that are converted into shares of Excess Stock and
transferred to a Trust shall be held in trust for the exclusive benefit of the
Beneficiary. Shares of Excess Stock will remain issued and outstanding shares of
stock. Each share of Excess Stock shall be entitled to the same dividends and
distributions (as to both timing and amount) as may be declared by the
Corporation Board or the Operating Company Board, as the case may be, as shares
of the class or series of Equity Stock from which such Excess Stock was
converted. The Trustee, as record holder of the shares of Excess Stock, shall be
entitled to receive all dividends and distributions and shall hold all such
dividends or distributions in trust for the benefit of the Beneficiary. The
Prohibited Owner with respect to such shares of Excess Stock shall repay to the
Trust the amount of any dividends or distributions received by it (i) that are
attributable to any shares of Equity Stock that have been converted into shares
of Excess Stock and (ii) the record date of which was on or after the date that
such shares were converted into shares of Excess Stock. The Corporation and the
Operating Company shall take all measures that they determine reasonably
necessary to recover the amount of any such dividend or distribution paid to a
Prohibited Owner, including, if necessary, withholding any portion of future
dividends or distributions payable on shares of Equity Stock beneficially owned
or constructively owned by the person who, but for the restrictions on transfer,
would constructively own or beneficially own the shares of Excess Stock and, as
soon as reasonably practicable following receipt or withholding thereof, shall
pay over to the Trust for the benefit
20
<PAGE>
of the Beneficiary the dividends so received or withheld, as the case may be.
In the event of any voluntary or involuntary liquidation of, or winding up
of, or any distribution of the assets of, the Corporation or the Operating
Company, each holder of shares of Excess Stock shall be entitled to receive,
ratably with each other holder of shares of Equity Stock of the same class or
series from which the Equity Stock was converted, that portion of the assets of
the Corporation or the Operating Company, as the case may be, that is available
for distribution to the holders of such class or series of Equity Stock. The
Trust shall distribute to the Prohibited Owner the amounts received upon such
liquidation, dissolution, or winding up, or distribution; provided, however,
that the Prohibited Owner shall not be entitled to receive amounts in excess of,
in the case of a purported transfer in which the Prohibited Owner gave value for
shares of Equity Stock and which transfer resulted in the conversion of the
shares into shares of Excess Stock, the price per share, if any, such Prohibited
Owner paid for the shares of Equity Stock (which, in the case of Equity Stock
that is paired, shall equal the price paid per share multiplied by the most
recent Valuation Percentage (as defined below)) and, in the case of a non-
transfer event or transfer in which the Prohibited Owner did not give value for
such shares (e.g., if the shares were received through a gift or devise) and
which non-transfer event or transfer, as the case may be, resulted in the
conversion of the shares into shares of Excess Stock, the price per share equal
to the Market Price (as defined below) on the date of such non-transfer event or
transfer. Any remaining amount in such Trust shall be distributed to the
Beneficiary.
Each share of Excess Stock shall entitle the holder to the number of votes
the holder would have, if such share of Excess Stock was a share of Equity Stock
of the same class or series from which such Excess Stock was converted, on all
matters submitted to a vote at any meeting of stockholders. The holders of
shares of Excess Stock converted from the same class or series of Equity Stock
shall vote together with the holders of such Equity Stock as a single class on
all such matters. The Trustee, as record holder of the shares of Excess Stock,
shall be entitled to vote all shares of Excess Stock. Any vote taken by a
Prohibited Owner prior to the discovery by the Corporation or the Operating
Company, as the case may be, that the shares of Equity Stock were exchanged for
shares of Excess Stock will be rescinded as void ab initio.
The Trustee shall have the exclusive and absolute right to designate one or
more Permitted Transferees of any and all shares of Excess Stock if the
Corporation or the Operating Company or both, in the case of Excess Stock that
is paired, to exercise its or their option with respect to such shares as
described below; provided, however, that (i) the Permitted Transferee so
designated purchases for valuable consideration (whether in a public or private
sale) the shares of Excess Stock (which, in the case of Excess Stock that is
paired, shall equal the price paid per share multiplied by the most recent
Valuation Percentage) and (ii) the Permitted Transferee so designated may
acquire such shares of Excess Stock without violating any of the aforementioned
transfer restrictions and without such acquisition resulting in the exchange of
such shares of Equity Stock so acquired for shares of Excess Stock and the
transfer of such shares of Excess Stock to a Trust. Upon the designation by the
Trustee of a Permitted Transferee, the Trustee shall cause to be transferred to
the Permitted Transferee that number of shares of Excess Stock of the
Corporation or the Operating Company, as the case may be, acquired by the
Permitted Transferee. Upon such transfer of the shares of Excess Stock to the
Permitted Transferee, such shares of Excess Stock shall be automatically
converted into an equal number of shares of Equity Stock of the same class and
series from which such Excess Stock was converted. In the case of Equity Stock
that is paired, upon the conversion of a share of Excess Stock into a share of
Equity Stock of the same class or series from which such Excess Stock was
converted, the corresponding paired share of Excess Stock of the other company
shall simultaneously be converted into a share of Equity Stock of the same class
or series from which such Excess Stock was converted and such shares of Equity
Stock shall be paired. Upon the occurrence of such a conversion of shares of
Excess Stock into an equal number of shares of Equity Stock, such shares of
Excess Stock shall be automatically retired and canceled, without any action
required by the Corporation Board or the Operating Company Board, and shall
thereupon be restored to the status of authorized but unissued shares of Excess
Stock and may be reissued as such. The Trustee shall (i) cause to be recorded on
the stock transfer books of the Corporation or the Operating Company or both, in
the case of Excess Stock that is paired, that the Permitted Transferee is the
holder of record of such number of shares of Equity Stock and (ii) distribute to
the Beneficiary any and all amounts held with respect to the shares of Excess
Stock after making payment to the Prohibited Owner. If the transfer of shares of
Excess Stock to a purported Permitted Transferee shall violate any of the
aforementioned transfer restrictions including, without limitation, the
Ownership Limit or the Look-Through Ownership Limit, as the case may be, such
transfer shall be void ab
21
<PAGE>
initio as to that number of shares of Excess Stock that cause the violation of
any such restriction when such shares are converted into shares of Equity Stock
and the purported Permitted Transferee shall be deemed to be a Prohibited Owner
and shall acquire no rights in such shares of Excess Stock. Such shares of
Equity Stock shall be automatically re-converted into Excess Stock and
transferred to the Trust from which they were originally sold. Such conversion
and transfer to the Trust shall be effective as of the close of trading on the
Trading Day prior to the date of the transfer to the purported Permitted
Transferee and the provisions of the Charters regarding compensation to a
Prohibited Owner shall apply to such shares with respect to any future transfer
of such shares by the Trust.
A Prohibited Owner shall be entitled to receive from the Trustee following
the sale or other disposition of such shares of Excess Stock the lesser of (i)
(a) in the case of a purported transfer in which the Prohibited Owner gave value
for shares of Equity Stock and which transfer resulted in the conversion of such
shares into shares of Excess Stock, the price per share, if any, such Prohibited
Owner paid for the shares of Equity Stock (which, in the case of Excess Stock
that is paired, shall be determined based on the Valuation Percentage) and (b)
in the case of a non-transfer event or transfer in which the Prohibited Owner
did not give value for such shares (e.g., if the shares were received through a
gift or devise) and which non-transfer event or transfer, as the case may be,
resulted in the conversion of such shares into shares of Excess Stock, the price
per share equal to the Market Price on the date of such non-transfer event or
transfer and (ii) the price per share (which, in the case of Excess Stock that
is paired, shall be determined based on the Valuation Percentage) received by
the Trustee from the sale or other disposition of such shares of Excess Stock.
Any amounts received by the Trustee in respect of such shares of Excess Stock
and in excess of such amounts to be paid the Prohibited Owner shall be
distributed to the Beneficiary.
Shares of Excess Stock shall be deemed to have been offered for sale by a
Trust to the Corporation or the Operating Company or both, in the case of Excess
Stock that is paired, or a designee of such company or companies, at a price per
share equal to the lesser of (i) the price per share (which, in the case of
Excess Stock that is paired, shall be determined based on the Valuation
Percentage) in the transaction that created such shares of Excess Stock (or, in
the case of devise, gift or non-transfer event, the Market Price at the time of
such devise, gift or non-transfer event) or (ii) the Market Price on the date
either company or both companies, in the case of Excess Stock that is paired,
accept such offer. Either company or both companies, in the case of Excess Stock
that is paired, shall have the right to accept such offer for a period of 90
days following the later of (a) the date of the non-transfer event or purported
transfer which results in such shares of Excess Stock or (b) the date on which
either company or both companies, in the case of Excess Stock that is paired,
determine in good faith that a transfer or non-transfer event resulting in
shares of Excess Stock has previously occurred, if either company or both
companies, in the case of Excess Stock that is paired, do not receive a notice
of such transfer or non-transfer event. In the case of Excess Stock that is
paired, neither the Corporation nor the Operating Company shall accept such an
offer with respect to its shares of Excess Stock without the agreement of the
other company to accept such offer with respect to the corresponding shares of
its Excess Stock.
"Market Price" on any date shall mean the average of the Closing Price for
the five consecutive Trading Days ending on such date. "Closing Price" on any
date shall mean the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the NYSE or,
if the shares of Equity Stock are not listed or admitted to trading on the NYSE,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the shares of Equity Stock are listed or admitted to trading or, if the
shares of Equity Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation System
or, if such system is no longer in use, the principal other automated quotation
system that may then be in use or, if the shares of Equity Stock are not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the shares of Equity
Stock. In the case of Equity Stock that is paired, "Market Price" shall mean the
"Market Price" for a share of Paired Common Stock multiplied by a fraction
(expressed as a percentage) determined by dividing the value for such Equity
Stock most recently determined under the Pairing Agreement over the value of a
share of Paired Common Stock most recently determined under the Pairing
Agreement (the "Valuation Percentage"). "Trading Day" shall mean
22
<PAGE>
a day on which the principal national securities exchange on which the shares of
Equity Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Equity Stock are not listed or admitted to trading
on any national securities exchange, shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
Any person or entity that acquires or attempts to acquire shares of Equity
Stock in violation of the aforementioned transfer restrictions, or any person or
entity that owned shares of Equity Stock that were transferred to a Trust, shall
immediately give written notice to the Corporation or the Operating Company or
both, in the case of Equity Stock that is paired, of such event and shall
provide such other information as the appropriate company or both companies, as
the case may be, may request to determine the effect, if any, of such violation
on Patriot's status as a REIT.
Each person or entity that is an owner, actually or constructively, of
shares of Equity Stock and each person or entity that (including the stockholder
of record) is holding shares of Equity Stock for such an owner shall provide to
the Corporation or the Operating Company or both, in the case of Equity Stock
that is paired, a written statement or affidavit stating such information as the
appropriate company or both companies, as the case may be, may request to
determine the Corporation status as a REIT and to ensure compliance with the
Ownership Limit or the Look-Through Ownership Limit, as the case may be. In
addition, every person or entity that owns of record, actually or
constructively, more than 5%, or such lower percentages as required pursuant to
regulations under the Code, of the outstanding shares of any class or series of
Equity Stock of the Corporation or the Operating Company shall, within 30 days
after January 1 of each year, provide to the Corporation or the Operating
Company or both, in the case of Equity Stock that is paired, a written statement
or affidavit stating the name and address of such owner, the number of shares of
Equity Stock owned, actually or constructively, and a description of how such
shares are held.
All certificates representing shares of Equity Stock shall bear a legend
referring to the aforementioned transfer restrictions. The transfer restrictions
will continue to apply until the Corporation Board determines that it is no
longer in the best interests of the Corporation to attempt to qualify, or to
continue to qualify, as a REIT.
The restrictions on transfer contained in the Charters could have the
effect of discouraging a takeover or other transaction in which holders of some,
or a majority, of shares of Equity Stock might receive a premium from their
shares of Equity Stock over the then prevailing Market Price or which such
holders might believe to be otherwise in their best interest.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain provisions that currently
govern United States federal income tax treatment of the Corporation and its
U.S. Stockholders (as defined below in "--Federal Income Taxation of Holders of
Paired Shares--Taxation of Taxable U.S. Stockholders") as well as certain other
tax considerations for U.S. holders of Paired Common Stock (also referred to
herein as "Paired Shares"). The following discussion is based upon current
provisions of the Code, existing temporary and final regulations thereunder and
current administrative rulings and court decisions, all of which are subject to
change, possibly on a retroactive basis. See "Risk Factors -- Real Estate
Investment Trust Tax Risks -- Exemption from Anti-Pairing Rules; Risks of
Adverse Legislation" for a discussion of certain legislative proposals that, if
enacted, would alter the tax treatment of the Companies and could jeopardize the
Corporation's ability to qualify as a REIT. No attempt has been made to comment
on all United States federal income tax consequences that may be relevant to
stockholders of the Companies. The tax discussion set forth below is included
for general information only. It is not intended to be, nor should it be
construed to be, legal or tax advice to any particular stockholder of the
Companies. References to the "Corporation" in this section regarding certain
federal income tax considerations include only Patriot American Hospitality,
Inc. and references herein to the "Operating Company" include only Wyndham
International, Inc. unless in either case the context otherwise requires.
THE FOLLOWING DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS
OF SHARES OF CORPORATION COMMON STOCK OR OPERATING COMPANY COMMON STOCK SUBJECT
TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS
23
<PAGE>
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, BROKER-DEALERS, TAX-EXEMPT
ORGANIZATIONS, NON-U.S. STOCKHOLDERS AND HOLDERS WHOSE SHARES WERE ACQUIRED
PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS
COMPENSATION. STOCKHOLDERS OF THE COMPANIES ARE URGED TO CONSULT THEIR TAX
ADVISORS TO DETERMINE THEIR SPECIFIC TAX CONSEQUENCES, INCLUDING ANY STATE,
LOCAL OR OTHER TAX CONSEQUENCES.
REIT Qualification
General
If certain detailed conditions imposed by the provisions of the Code are
met, entities such as the Corporation that invest primarily in real estate and
that otherwise would be treated for federal income tax purposes as corporations
generally are not taxed at the corporate level on their "real estate investment
trust taxable income" that is currently distributed to stockholders. This
treatment substantially eliminates the "double taxation" on earnings (i.e., at
both the corporate and stockholder levels) that ordinarily results from the use
of corporations.
The Corporation has been and will continue to be operated in a manner
intended to allow it to qualify as a REIT. The Corporation in the future intends
to operate in a manner so that the Corporation will continue to qualify as a
REIT. If the Corporation fails to qualify as a REIT in any taxable year, the
Corporation will be subject to federal income taxation as if it were a domestic
corporation, and the Corporation's stockholders will be taxed in the same manner
as stockholders of ordinary corporations. In this event, the Corporation could
be subject to potentially significant tax liabilities, and the amount of cash
available for distribution to stockholders would be reduced and possibly
eliminated. Unless entitled to relief under certain Code provisions, and subject
to the discussion below regarding Section 269B(a)(3) of the Code, the
Corporation also would be disqualified from re-electing REIT status for the four
taxable years following the year during which qualification was lost. Failure of
the Corporation's predecessor, Patriot, to have qualified as a REIT also could
cause the Corporation to be disqualified as a REIT and/or subject the
Corporation to significant tax liabilities.
Goodwin, Procter & Hoar, LLP, special tax counsel to the Corporation, has
rendered an opinion dated April 28, 1998 to the Corporation to the effect that
commencing with the taxable year ending December 31, 1983 to the date of such
opinion, the Corporation has been organized and operated in conformity with the
requirements for qualification and taxation as a REIT under the Code, and that
as of the date of such opinion the Corporation's proposed method of operation
will enable it to continue to meet the requirements for qualification and
taxation as a REIT under the Code. Investors should be aware, however, that
opinions of counsel are not binding upon the IRS or any court. Goodwin, Procter
& Hoar LLP's opinion is based on various assumptions and is conditioned upon
certain representations made by the Corporation on or about the date of such
opinion as to factual matters, including representations regarding the nature of
the Corporation's properties and the future conduct of the Corporation's
business. Any inaccuracy in such assumptions and representations (including as a
result of activities of the Corporation subsequent to the date of the opinion)
could adversely affect this opinion. Qualification and taxation as a REIT
depends upon the Corporation's having met and continuing to meet, through actual
annual operating results, the distribution levels, stock ownership, and other
various qualification tests imposed under the Code. Goodwin, Procter & Hoar LLP
has not reviewed and will not review the Corporation's compliance with those
tests. Moreover, testing the Corporation's compliance with the REIT
qualification requirements involves the application of highly technical and
complex Code provisions for which there are only limited judicial or
administrative interpretations. The complexity of these provisions is greater in
the case of a REIT that owns hotels and leases them to a corporation with which
its stock is paired. See "Risk Factors--Real Estate Investment Trust Tax Risks."
In addition, some of these Code provisions, such as the provisions regarding the
characterization of the Corporation's property as other than "dealer property,"
and the characterization of loans by the Corporation as debt for tax purposes,
require factual determinations not susceptible of legal opinion. The opinion of
Goodwin, Procter & Hoar LLP necessarily relies on representations from the
Corporation as to these factual determinations. Finally, qualification as a REIT
also depends on the determination of various factual matters and circumstances
not entirely within the Corporation's control. Accordingly, no assurance can be
given that the Corporation will satisfy the REIT qualification tests on a
continuing basis.
Paired Shares
Section 269B(a)(3) of the Code provides that if the shares of a REIT and a
non-REIT are paired, then the REIT and the non-REIT shall be treated as one
entity for purposes of determining whether either company qualifies as a REIT.
If Section 269B(a)(3) applied to the Corporation and the Operating Company, then
the Corporation then would not be eligible to be taxed as a REIT.
Section 269B(a)(3) does not apply, however, if
24
<PAGE>
the shares of the REIT and the non-REIT were paired on June 30, 1983 and the
REIT was taxable as a REIT on June 30, 1983. As a result of this grandfathering
rule, Section 269B(a)(3) does not apply to the Corporation. There are, however,
no judicial or administrative authorities interpreting this grandfathering rule
in the context of a merger into a grandfathered REIT or otherwise, and this
interpretation, as well as the opinion of Goodwin, Procter & Hoar LLP regarding
the Corporation's qualification as a REIT, is based solely on the literal
language of the statute. Moreover, if for any reason the Corporation failed to
qualify as a REIT in 1983, the benefit of the grandfathering rule would not be
available to the Corporation, and the Corporation would not qualify as a REIT
for any taxable year. Recently proposed amendments to these grandfathering
provisions, if enacted, would severely limit the Companies' ability to utilize
the paired structure to operate hotels and could adversely affect the
Corporation's ability to qualify as a REIT. See "Risk Factors -- Real Estate
Investment Trust Tax Risks -- Exemption from Anti-Pairing Rules; Risk of Adverse
Legislation."
Potential Reallocation of Income
Due to the paired share structure, the Companies are controlled by the same
interests. As a result, the IRS could, pursuant to Section 482 of the Code, seek
to distribute, apportion or allocate gross income, deductions, credits or
allowances between or among them if it determines that such distribution,
apportionment or allocation is necessary in order to prevent evasion of taxes or
to clearly reflect income. See "Risk Factors--Potential Reallocation of
Income."
Built-In Gain Tax
If the Corporation recognizes gain on the disposition of an asset acquired
from Wyndham during the ten-year period beginning on the date of the Wyndham
Acquisition then to the extent of the asset's "built-in gain" (i.e., the
excess of the fair market value of such asset at the time of the Wyndham
Acquisition over its then tax basis), the Corporation will be subject to tax on
such gain at the highest regular corporate rate applicable, pursuant to Treasury
Regulations not yet promulgated. The Corporation would be required to distribute
95% of the excess of the amount of recognized built-in gain over the amount of
tax paid in order to maintain the Corporation's qualification as a REIT. The
built-in gain taxes also will apply to any assets of Interstate that are sold
during the ten-year period following the Interstate Merger. The foregoing
assumes that the Corporation makes an election pursuant to IRS Notice 88-19 with
respect to the Interstate Merger and the Wyndham Acquisition. The Corporation
will make the election pursuant to the IRS Notice 88-19 with respect to the
Interstate Merger and the Wyndham Acquisition if such election is available.
Classification of the Realty Partnership as a Publicly Traded Partnership
Section 7704 of the Code treats certain "publicly traded partnerships" as
corporations. If the Realty Partnership were taxed as a corporation under these
rules, the Corporation would be disqualified as a REIT. A partnership is a
publicly traded partnership if interests in such partnership are either traded
on an established securities market or are "readily tradable on a secondary
market (or the substantial equivalent thereof)." The Realty Partnership relies
on restrictions on transfers and redemptions of limited partner interests in
order to avoid being taxed as a corporation under Section 7704 of the Code. The
Operating Partnership relies on similar restrictions to avoid taxation as a
corporation. There can be no assurance that efforts to avoid taxation as a
corporation under these provisions have been or will be successful.
25
<PAGE>
Effects of Compliance with REIT Requirements
In general, in order to qualify as a REIT, the Corporation must derive at
least 95% of its gross income from real estate sources and certain passive
investments, and the Corporation must derive at lease 75% of its gross income
from real estate sources. Operating income derived from hotels or a racetrack
does not constitute qualifying income under the REIT requirements. Accordingly,
substantially all of the Corporation's hotels have been leased to lessees
(including the Operating Company) and the Corporation will continue to lease
such hotels after the date of this Prospectus. Similarly, the Corporation has
subleased the land underlying the Racecourse and leased the related improvements
to the Operating Company. Rent derived from such leases will be qualifying
income under the REIT requirements, provided several requirements are satisfied.
Among other requirements, a lease may not have the effect of giving the
Corporation a share of the net income of the lessee, and the amount of personal
property leased under the lease must not exceed a defined low level. In
addition, all leases must also qualify as "true" leases for federal income tax
purposes (as opposed to service contracts, joint ventures or other types of
arrangements). There are, however, no controlling Treasury Regulations,
published rulings, or judicial decisions that discuss whether the Corporation's
leases constitute "true" leases. Therefore, there can be no complete assurance
that the IRS will not successfully assert a contrary position. The Corporation
(excluding certain corporate subsidiaries) also may not provide services, other
than customary services and de minimis non-customary services, to the lessees or
their subtenants.
Payments under a lease will not constitute qualifying income for purposes
of the REIT requirements if the Corporation owns, directly or indirectly, 10% or
more of the ownership interests in the relevant lessee. Constructive ownership
rules apply, such that, for instance, the Corporation is deemed to own the
assets of stockholders who own 10% or more in value of the stock of the
Corporation. The Charters are therefore designed to prevent a stockholder of the
Corporation from owning Corporation stock or Operating Company stock that would
cause the Corporation to own, actually or constructively, 10% or more of the
ownership interests in a lessee (including the Operating Company and the
Operating Partnership). Thus, the Corporation should never own, actually or
constructively, 10% or more of a lessee. However, because the relevant
constructive ownership rules are broad and it is not possible to monitor
continually direct and indirect transfers of Paired Shares, and because the
charter provisions referred to above may not be effective, no absolute assurance
can be given that such transfers, or other events of which the Corporation has
no knowledge, will not cause the Corporation to own constructively 10% or more
of one or more lessees at some future date.
The Corporation will from time to time engage in activities that generate
nonqualifying income. The Corporation's foreign investments could generate
foreign currency gains which also would not constitute qualifying income. The
Corporation intends to monitor and manage these activities and investments so
that the amount of nonqualifying income does not exceed applicable limits. There
can be no assurance, however, that these efforts will be successful.
The REIT requirements also impose certain asset tests which limit the value
of the non-real estate assets held by the Corporation. The asset tests also
prevent the Corporation from holding 10% or more of the voting securities of a
corporate issuer. The asset tests must be satisfied at the close of each quarter
(or, to the extent not satisfied at the close of the quarter, within the 30-day
period following the close of the quarter). Although the Corporation holds and
will continue to hold substantial non-real estate assets, and also holds or
will hold at times voting securities in excess of the 10% limit, the Corporation
intends to manage its assets so that it does not hold assets in violation of the
applicable limits on the relevant testing dates (or the expiration of applicable
cure periods). There can be no assurance, however, that the IRS will not
challenge the Corporation's compliance with these tests. If the Corporation
holds assets in violation of applicable limits, it would be disqualified as a
REIT.
In addition to the considerations discussed above, the REIT requirements
impose a number of other
26
<PAGE>
restrictions on the operations of the Corporation. For example, net income from
sales of property sold to customers in the ordinary course of business (other
than inventory acquired by reason of certain foreclosures) is subject to a 100%
tax unless eligible for a certain safe harbor. Minimum distribution requirements
also generally require the Corporation to distribute each year at least 95% of
its taxable income for the year (excluding any net capital gain). See "Risk
Factors--Adverse Effects of REIT Minimum Distribution Requirements" and
"Accumulated Earnings and Profits."
Impact of Proposed Tax Legislation
The Corporation's exemption of the anti-pairing rules and its ability to
utilize the paired structure could be revoked or limited as a result of future
legislation. See "Risk Factors--Exemption from Anti-Pairing Rules; Risks of
Adverse Litigation."
There can be no assurance that such legislation or other legislation
affecting REIT qualification or operations will not be enacted, and any such
legislation could have a material effect on the operations of the Companies.
Taxation of the Operating Company; Corporate Subsidiaries
As C corporations under the Code, the Operating Company and its corporate
subsidiaries are subject to United States federal income tax on their taxable
income at corporate rates. Certain corporate subsidiaries of the Corporation and
the Realty Partnership also are subject to federal income tax.
State and Local Taxation
The Companies and their stockholders or partners may be subject to state
and local taxes in various jurisdictions, including those in which it or they
transact business, own property or reside. The state and local tax treatment of
such entities or persons may not conform to the federal income tax consequences
discussed above. Consequently, stockholders should consult their own tax
advisors regarding the effect of state and local tax laws on the ownership of
Paired Shares.
Federal Income Taxation of Holders of Paired Shares
Separate Taxation
Notwithstanding that Paired Shares may only be transferred as a unit,
holders of Paired Shares will be treated for United States federal income tax
purposes as holding equal numbers of shares of Corporation Common Stock and of
Operating Company Common Stock. The tax treatment of distributions to
stockholders and of any gain or loss upon sale or other disposition of the
Paired Shares (as well as the amount of gain or loss)
27
<PAGE>
must therefore be determined separately with respect to each share of
Corporation Common Stock and each share of Operating Company Common Stock
contained within each Paired Share. The tax basis and holding period for each
share of Corporation Common Stock and each share of Operating Company Common
Stock also must be determined separately. Upon a taxable sale of a Paired Share,
the amount realized should be allocated between the Corporation Common Stock and
the Operating Company Common Stock based on their then-relative values.
Taxation of Taxable U.S. Stockholders
As used herein, the term "U.S. Stockholder" means a holder of Paired Shares
that for United States federal income tax purposes (A) is (i) a citizen or
resident of the United States, (ii) a corporation, partnership, or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate, the income of which is subject to United
States federal income taxation regardless of its source or (iv) a trust, if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust and (B) is not an
entity that has a special status under the Code (such as a tax-exempt
organization or a dealer in securities).
As long as the Corporation qualifies as a REIT, distributions made to the
Corporation's taxable U.S. Stockholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by such U.S. Stockholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. For
purposes of determining whether distributions on Corporation Common Stock are
out of current or accumulated earnings and profits, the earnings and profits of
the Corporation will be allocated first to the Corporation's outstanding
preferred stock (if any) and then allocated to the Corporation's Common Stock.
Subject to the discussion below regarding changes to the capital gains tax
rates, distributions that are designated as capital gain dividends will be taxed
as capital gains (to the extent they do not exceed the Corporation's actual net
capital gain for the taxable year) without regard to the period for which the
stockholder has held his or her Corporation Common Stock. However, corporate
stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Distributions in excess of current and accumulated
earnings and profits will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of the stockholder's Corporation Common
Stock, but rather will reduce the adjusted basis of such stock. To the extent
that such distributions in excess of current and accumulated earnings and
profits exceed the adjusted basis of a stockholder's Corporation Common Stock,
such distributions will be included in income as long-term capital gain (or, in
the case of individuals, trusts and estates, mid-term capital gain if the
Corporation Common Stock has been held for more than 12 months but not more than
18 months or in the case of all taxpayers short-term capital gain if the
Corporation Common Stock has been held for one year or less) assuming shares are
a capital asset in the hands of the stockholder. In addition, any distribution
declared by the Corporation in October, November or December of any year and
payable to a stockholder of record on a specified date in any such month shall
be treated as both paid by the Corporation and received by the stockholder on
December 31 of such year, provided that the distribution is actually paid by the
Corporation during January of the following calendar year.
Distributions from the Operating Company up to the amount of the Operating
Company's current or accumulated earnings and profits (less any earnings and
profits allocable to distributions on any preferred stock of the Operating
Company) will be taken into account by U.S. Stockholders as ordinary income and
generally will be eligible for the dividends-received deduction for corporations
(subject to certain limitations). Distributions in excess of the Operating
Company's current and accumulated earnings and profits will not be taxable to a
stockholder to the extent that they do not exceed the adjusted basis of the
stockholder's Operating Company Common Stock, but rather will reduce the
adjusted basis of such Operating Company Common Stock. To the extent that such
distributions exceed the adjusted basis of a stockholder's Operating Company
Common Stock they will be included in income as long-term capital gain (or, in
the case of individuals, trusts and estates, mid-term capital gain if the
Operating Company Common Stock has been held for more than one year but not more
than 18 months or in the case of all taxpayers short-term capital gain if the
Operating Company Common Stock has been held for one year or less) assuming the
shares are a capital asset in the hands of the stockholder.
28
<PAGE>
The Corporation may retain and pay income tax on its net long-term
capital gains recognized during the taxable year. For taxable years beginning
after December 31, 1997, if the Corporation so elects for a taxable year, its
stockholders would include in income as capital gain their proportionate share
of such portion of the Corporation's net capital gains as the Corporation may
designate. Such retained capital gains may be further designated by the
Corporation as 20% rate gain, unrecaptured Section 1250 gain, or 28% rate gain,
as discussed below. Stockholders must account for their share of such retained
capital gains in accordance with such further designation; if no such further
designation is made, the retained capital gains are treated as 28% rate gain. A
stockholder would be deemed to have paid its share of the tax paid by the
Corporation, which would be credited or refunded to the stockholder. The
stockholder's basis in its shares of Corporation Common Stock would be increased
by the amount of undistributed capital gains (less the capital gains tax paid by
the Corporation) included in the stockholder's capital gains.
Taxable distributions from the Corporation or the Operating Company and
gain or loss from the disposition of shares of Corporation Common Stock and
Operating Company Common Stock will not be treated as passive activity income
and, therefore, stockholders generally will not be able to apply any passive
activity losses (such as losses from certain types of limited partnerships in
which the stockholder is a limited partner) against such income. In addition,
taxable distributions from the Corporation or the Operating Company generally
will be treated as investment income for purposes of the investment interest
deduction limitations. Capital gain dividends, capital gains (other than short-
term capital gains) from the disposition of Paired Shares and actual or deemed
distributions from either company treated as such, including capital gains
(other than short-term capital gains) recognized on account of nontaxable
distributions in excess of a stockholder's basis or any deemed capital gain
distributions to a Corporation stockholder on account of retained capital gains
of the Corporation, will be treated as investment income for purposes of the
investment interest deduction limitations only if and to the extent the
stockholder so elects, in which case such capital gains will be taxed at
ordinary income rates to the extent of the election. The Corporation and the
Operating Company will notify stockholders after the close of the Companies'
taxable years as to the portions of the distributions attributable to that year
that constitute ordinary income, return of capital, and (in the case of the
Corporation) capital gain. Stockholders may not include in their individual
income tax returns any net operating losses or capital losses of the Corporation
or of the Operating Company.
The Taxpayer Relief Act of 1997 (the "Relief Act") alters the taxation of
capital gain income. Under the Relief Act, individuals, trusts and estates that
hold certain investments for more than 18 months may be taxed at a maximum long-
term capital gain rate of 20% on the sale or exchange of those investments.
Individuals, trusts and estates that hold certain assets for more than one year
but not more than 18 months may be taxed at a maximum mid-term capital gain rate
of 28% on the sale or exchange of those investments. The Relief Act also
provides a maximum rate of 25% for "unrecaptured Section 1250 gain" for
individuals, trusts and estates, special rules for "qualified 5-year gain," as
well as other changes to prior law. The Relief Act allows the IRS to prescribe
regulations on how the Relief Act's new capital gain rates will apply to sales
of capital assets by (or interests in) "pass-thru entities," which include REITs
such as the Corporation. IRS Notice 97-64 sets forth guidance on certain of
these issues pending the release of regulations and provides, among other
things, that a REIT may designate a capital gains dividend as a 20% rate gain
distribution, an unrecaptured Section 1250 gain distribution, or a 28% rate gain
distribution. Absent any such designation, a capital gains dividend will be
treated as a 28% rate gain distribution. In general, the Notice provides that a
REIT must determine the maximum amounts which may be designated in each class of
capital gain dividends as if the REIT were an individual whose ordinary income
is subject to a marginal tax rate of at least 28 percent. Similar rules will
apply in the case of designated retained capital gains (see above discussion).
The Corporation will notify stockholders after the close of the Corporation's
taxable year as to the portions of the distributions attributable to that year
that constitute ordinary income, return of capital, and capital gain (and, with
respect to capital gain dividends, the portions constituting 20% rate gain
distributions, unrecaptured Section 1250 gain distributions, and 28% rate gain
distributions). The Corporation also will notify stockholders of the amounts of
any designated retained capital gains (including the amounts thereof
constituting 20% rate gain, unrecaptured Section 1250 gain, and 28% rate gain)
and the Corporation's taxes with respect to any designated retained capital
gains. Final regulations when issued may alter the rules of the temporary
regulations. In addition, the IRS has not prescribed regulations regarding the
application of the new rates to sale of interests in REITs such as the
Corporation, and it remains unclear how the new rules will affect such sales (if
at all). Investors are urged to consult their own tax advisors with respect to
the new rules contained in the Relief Act.
29
<PAGE>
Taxation of Stockholders on the Disposition of Paired Shares
Subject to the discussion above regarding the Relief Act, in general, and
assuming the taxpayer has the same holding period for the Corporation Common
Stock and the Operating Company Common Stock that comprise his or her Paired
Share, any gain or loss realized upon a taxable disposition of Paired Shares by
a stockholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the Paired Shares have been held for more than one year,
(or, in the case of individuals, trusts and estates, mid-term capital gain or
loss if the Paired Shares have been held for more than one year but not more
than 18 months, and long-term capital gain or loss if the Paired Shares have
been held for more than 18 months) and otherwise as short-term capital gain or
loss. In addition, any loss upon a sale or exchange of Corporation Common Stock
by a stockholder who has held such stock for six months or less (after applying
certain holding period rules), will be treated as a long-term capital loss to
the extent of distributions from the Corporation or undistributed capital gains
required to be treated by such stockholder as long-term capital gain. All or a
portion of any loss realized upon a taxable disposition of Paired Shares may be
disallowed if other Paired Shares are purchased within 30 days before or after
the disposition.
Information Reporting Requirements and Backup Withholding
The Corporation and the Operating Company will each report to their U.S.
Stockholders and the IRS the amount of distributions paid during each calendar
year, and the amount of tax withheld, if any. Under the backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to distributions paid unless such holder (i) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact or (ii) provides a taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholding rules. A stockholder who does
not provide the Corporation and the Operating Company with his, her or its
correct taxpayer identification number also may be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, the Corporation may be required
to withhold a portion of capital gain distributions to any stockholders who fail
to certify their non-foreign status to the Corporation.
Taxation of Tax-Exempt Stockholders
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. They are, however, subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, amounts distributed by the Corporation
to Exempt Organizations generally should not constitute UBTI, nor should
dividends paid by the Operating Company generally constitute UBTI. However, if
an Exempt Organization finances its acquisition of Paired Shares with debt, a
portion of its income from the Corporation and the Operating Company will
constitute UBTI pursuant to the "debt-financed property" rules. Furthermore,
social clubs, voluntary employee benefit associations, supplemental unemployment
benefit trusts, and qualified group legal services plans that are exempt from
taxation under paragraphs (7), (9), (17), and (20), respectively, section 501(c)
of the Code are subject to different UBTI rules, which generally will require
them to characterize distributions from the Corporation and the Operating
Company as UBTI.
30
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Selling Stockholders, including the number of shares of Paired Common Stock
beneficially owned by each Selling Stockholder, the number of shares of Paired
Common Stock registered hereby and the percentage of shares of Paired Common
Stock held by them. There can be no assurance that all or any of the shares of
Paired Common Stock offered hereby will be sold. If any are sold, each Selling
Stockholder will receive all of the net proceeds from the sale of his, her or
its respective shares of Paired Common Stock offered hereby.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
of Paired Common Stock Owned of Paired Common Stock
Selling Stockholder Before the Offering Being Registered (1)
------------------- ----------------------- -------------------
<S> <C> <C>
Metro Hotels, Inc. 15,842 15,842
Metro Hotels Leasing Corporation 118,812 118,812
</TABLE>
________________________
(1) As of April 24, 1998, the aggregate number of shares of Paired Common
Stock being registered (134,654) represented approximately .12% of
all outstanding shares of Paired Common Stock of the Companies.
Metro Hotels, Inc. ("MHI") received its 15,842 shares of Paired Common
Stock (which number is subject to upward or downward adjustment depending upon
the closing price of a share of Paired Common Stock on the date immediately
prior to the date on which the Registration Statement is declared effective by
the Commission) as consideration for entering into a Termination Agreement dated
February 20, 1998 by Walker G. Harman, CHC Lease Partners ("CHC") and MHI,
whereby MHI agreed to terminate that certain Hotel Management Agreement, dated
September 1995, between MHI and CHC.
Metro Hotels Leasing Corporation ("MHLC") received its 118,812 shares of
Paired Common Stock (which number is subject to upward or downward adjustment
depending upon the closing price of a share of Paired Common Stock on the date
immediately prior to the date on which the Registration Statement is declared
effective by the Commission) as consideration for entering into a Termination
Agreement dated February 20, 1998 by PA Hunt Valley Investors, L.P. ("PAHVI"),
MHLC and Walker G. Harman, whereby MHLC agreed to terminate that certain Lease
Agreement, dated May 15, 1995, between MHLC and PAHVI.
31
<PAGE>
PLAN OF DISTRIBUTION
The Companies will not receive any of the proceeds from this Offering. The
shares of Paired Common Stock offered hereby may be sold from time to time on
the NYSE on terms to be determined at the time of such sales. The Selling
Stockholders may also make private sales directly or through a broker or
brokers. Alternatively, the Selling Stockholders may from time to time offer
shares of Paired Common Stock to or through underwriters, dealers or agents, who
may receive consideration in the form of discounts and commissions; such
compensation, which may be in excess of ordinary brokerage commissions, may be
paid by the Selling Stockholders and/or the purchasers of the shares of Paired
Common Stock offered hereby for whom such underwriters, dealers or agents may
act. The Selling Stockholders and any dealers or agents that participate in the
distribution of the shares of Paired Common Stock offered hereby may be deemed
to be "underwriters" as defined in the Securities Act, and any profit on the
sale of such shares of Paired Common Stock offered hereby by them and any
discounts, commissions or concessions received by any such dealers or agents
might be deemed to be underwriting discounts and commissions under the
Securities Act. The aggregate proceeds to the Selling Stockholders from sales
of the shares of Paired Common Stock by the Selling Stockholders hereby will be
the purchase price of such Paired Common Stock less any broker's commissions.
To the extent required, the specific shares of Paired Common Stock to be
sold, the names of the Selling Stockholders, the respective purchase prices and
public offering prices, the names of any such agent, dealer or underwriter, and
any applicable commissions or discounts with respect to a particular offer will
be set forth in an accompanying prospectus supplement.
The shares of Paired Common Stock offered hereby may be sold from time to
time in one or more transactions at a fixed offering price, which may be
changed, or at varying prices determined at the time of sale or at negotiated
prices.
In order to comply with the securities laws of certain states, if
applicable, the shares of Paired Common Stock offered hereby will be sold in
such jurisdictions only through registered or licensed brokers or dealers.
LEGAL MATTERS
Certain legal matters, including the legality of the securities and federal
income tax considerations, have been passed upon for the Corporation and the
Operating Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts, as
corporate, securities and tax counsel.
32
<PAGE>
EXPERTS
The (a) Combined Financial Statements of Patriot American Hospitality, Inc.
(the "Corporation") and Wyndham International, Inc. (the "Operating Company"),
as of December 31, 1997 and 1996 and for the years ended December 31, 1997 and
1996 and the period October 2, 1995 (inception of operations) through December
31, 1995, (b) the Consolidated Financial Statements of the Corporation as of
December 31, 1997 and 1996 and for the years ended December 31, 1997 and 1996
and the period October 2, 1995 (inception of operations) through December 31,
1995 and the related financial statement schedules, and (c) the Consolidated
Financial Statements of the Operating Company as of December 31, 1997 and for
the six months ended December 31, 1997 appearing in the Joint Annual Report on
Form 10-K of Patriot American Hospitality, Inc. and Wyndham International, Inc.
for fiscal year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. The Financial Statements of NorthCoast Hotels,
L.L.C. as of December 31, 1996 and the period April 2, 1996 (inception of
operations) through December 31, 1996 appearing in the Joint Current Report on
Form 8-K of Patriot American Hospitality, Inc. and Patriot American Hospitality
Operating Company dated July 1, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. The (a) Consolidated Financial Statements of
Resorts Limited Partnership as of and for the years ended December 31, 1996 and
1995, (b) the Financial Statements of CV Ranch Limited Partnership as of and for
the years ended December 31, 1996 and 1995, and (c) the Financial Statements of
Telluride Resort and Spa Limited Partnership as of and for the years ended
December 31, 1996 and 1995, appearing in Patriot's Current Report on Form 8-K,
dated January 16, 1997, as amended (filed January 31, 1997, February 21, 1997,
April 8, 1997, April 9, 1997, and May 19, 1997) have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference. The (a) Consolidated Financial
Statements of GAH-II, L.P. as of December 31, 1996 and 1995 and for the years
then ended, (b) the Financial Statements of G.B.H. Joint Venture (d/b/a Grand
Bay Hotel) as of December 31, 1996 and 1995 and for the years then ended, (c)
the Financial Statements of River House Associates (d/b/a Sheraton Gateway
Hotel) as of December 31, 1996 and 1995 and for the years then ended, and (d)
the Financial Statements of W-L Tampa, Ltd. (the Sheraton Grand Hotel) as of
December 31, 1996 and 1995 and for the years then ended, appearing in the Joint
Current Report on Form 8-K of Patriot American Hospitality, Inc. and Patriot
American Hospitality Operating Company dated September 30, 1997, as amended
(filed October 14, 1997 and October 28, 1997), have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference. The (a) Consolidated Financial
Statements of WHG Resorts & Casinos Inc. as of June 30, 1997 and 1996, and for
each of the three years in the period ended June 30, 1997 and the related
financial statement schedule, (b) the Financial Statements of Posadas de San
Juan Associates as of June 30, 1997 and 1996, and for each of the three years in
the period ended June 30, 1997 and the related financial statement schedule, (c)
the Financial Statements of WKA El Con Associates as of June 30, 1997 and 1996,
and for each of the three years in the period ended June 30, 1997,
33
<PAGE>
and (d) the Financial Statements of El Conquistador Partnership L.P. as of March
31, 1997 and 1996, and for each of the three years in the period ended March 31,
1997, appearing in the Joint Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Patriot American Hospitality Operating Company dated April
20, 1998 (filed April 22, 1998) have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Each of the above referenced financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
The Combined Financial Statements of Snavely Hotels as of December 31, 1996
and for the year then ended, the Combined Financial Statements of Minneapolis
Hotels as of December 31, 1996 and for the year then ended, and the combined
statement of Direct Revenue and Direct Operating Expenses for the Met Life
Hotels for the year ended December 31, 1996, included in the Report on Form 8-K
dated September 17, 1997, and the Financial Statements of SCP Inc. as of
December 31, 1996 and for the year then ended, included in the Report on Form 8-
K/A No. 1 dated September 30, 1997, the financial statements of Royal Palace
Hotel Associates as of December 31, 1995 and 1996 and for the years then ended,
included in the Joint Current Report on Form 8-K dated December 10, 1997,
incorporated by reference in this Prospectus, and the consolidated financial
statements of Interstate Hotels Company as of December 31, 1995 and 1996 and for
each of the three years in the period ended December 31, 1996 included in the
Report on Form 8-K dated December 10, 1997, the financial statements of Sheraton
City Centre as of December 31, 1996 and for the year then ended and the
Statement of Direct Revenues and Direct Operating Expenses for the Wyndham
Emerald Plaza for the year ended December 31, 1996, included in the Current
Report on Form 8-K dated January 5, 1998, and (a) the Consolidated Financial
Statements of Wyndham Hotel Corporation as of December 31, 1996 and 1997 and for
each of the three years in the period ended December 31, 1997, and (b) the
Consolidated Financial Statements of Interstate Hotels Company as of December
31, 1996 and 1997 and for each of the three years in the period ended December
31, 1997 included in Interstate's 1997 Annual Report on Form 10-K dated March
31, 1998 included in the Current Report on Form 8-K dated April 20, 1998, which
is incorporated by reference herein have been audited by Coopers & Lybrand
L.L.P., independent accountants, as set forth in their reports thereon. Each of
the above-referenced financial statements have been incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
The combined financial statements of the Partnerships of Acquired Hotels as
of December 31, 1996 and 1995 and for each of the two years in the period ended
December 31, 1996, incorporated in this Prospectus by reference from the report
on Form 8-K/A No. 1 dated September 30, 1997 of Patriot American Hospitality,
Inc. and Patriot American Hospitality Operating Company have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The Financial Statements of Historic Hotel Partners of Birmingham Limited
Partnership as of December 31, 1994 and 1995 and for the years then ended, the
Financial Statements of Historic Hotel Partners of Chicago, Limited Partnership
as of December 31, 1996 and for the year then ended, and the Financial
Statements of Historic Hotel Partners of Nashville, Limited Partnership as of
December 31, 1996 and for the year then ended incorporated by reference in this
Prospectus, have been audited by Pannell Kerr Forster PC, independent auditors,
as set forth in their reports thereon. Each of the above-referenced financial
statements have been incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing.
The CHC Lease Partners financial statements as of December 31, 1996 and
1995 and for the year ended December 31, 1996 and the period inception (October
2, 1995) through December 31, 1995, incorporated by reference in this
Prospectus, by reference to the Current Report on Form 8-K dated July 1, 1997,
and the CHC International, Inc. Hospitality Division financial statements as of
November 30, 1997 and 1996 and for each of the years ended November 30, 1995,
1996 and 1997, incorporated by reference in this Prospectus, by reference to the
Current Report on Form 8-K dated April 20, 1998, have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
The Combined Financial Statements of the Crow Family Hotel Partnerships
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving such
reports.
34
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Companies or any other
person. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Companies since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered Securities to which it
relates.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain
Documents by Reference................................................... 2
Risk Factors.............................................................. 5
The Companies............................................................. 14
Description of Capital Stock.............................................. 15
Restrictions on Transfers of Capital Stock................................ 19
Certain Federal Income Tax Considerations................................. 23
Selling Stockholders...................................................... 31
Plan of Distribution...................................................... 32
Legal Matters............................................................. 32
Experts................................................................... 33
</TABLE>
================================================================================
================================================================================
Patriot American
Hospitality, Inc.
134,654 Shares of
Common Stock
Wyndham
International, Inc.
134,654 Shares of
Common Stock
----------------
PROSPECTUS
----------------
________, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
<TABLE>
<S> <C>
Registration fee............................................. $ 985
Printing fees and expenses................................... 15,000
Legal fees and expenses...................................... 50,000
Accounting fees and expenses................................. 30,000
Miscellaneous................................................ 50,000
Total........................................................ $145,985
</TABLE>
* Fees and expenses are estimated with the exception of the registration fee.
Item 15. Indemnification of Directors and Officers.
Pursuant to Section 145 of the DGCL, each of the Corporation Charter and
the Operating Company Charter includes a provision which eliminates any personal
liability for a director to the Corporation or the Operating Company, as the
case may be, and to the stockholders, for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or the Operating Company, as the
case may be, or to the stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) in connection with certain unlawful dividend payments or stock redemptions
or repurchases or (iv) for any transaction from which such director derived an
improper personal benefit. In addition, the Corporation Charter and the
Operating Company Charter each provide that if the DGCL is amended to authorize
the further elimination or limitation of the personal liability of directors,
then the liability of a director of the Corporation or the Operating Company
shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended.
Article VII of each of the Corporation Bylaws and the Operating Company
Bylaws provides for indemnification by the Corporation or the Operating Company,
as the case may be, of their respective officers, directors and the officers and
directors of their respective subsidiaries to the fullest extent permitted by
Section 145 of the DGCL, as amended from time to time and the Corporation and
the Operating Company may, by action of their respective Board of Directors,
indemnify all other persons the Corporation or the Operating Company may
indemnify under the DGCL.
II-1
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4.1(1) -- Agreement (the "Pairing Agreement"), dated February 15, 1983 and
as amended February 18, 1988, between Bay Meadows Operating
Company and California Jockey Club (f/k/a Bay Meadows Realty
Enterprises, Inc.), as amended (incorporated by reference to
Exhibit 4.3 to California Jockey Club's and Bay Meadows Operating
Company's Registration Statement on Form S-2, and to Exhibit 4.2
to California Jockey Club's and Bay Meadows Operating Company's
Annual Report on Form 10-K for the year ended December 31, 1987
(Nos. 001-09319 and 001-09320).
4.1(2) -- Amendment No. 2 to the Pairing Agreement (incorporated by
reference to Exhibit 4.2 to Patriot American Hospitality, Inc.'s
and Wyndham International, Inc.'s Registration Statement on
Form S-4 (Nos. 333-39875 and 333-39875-01)).
4.1(3) -- Amendment No. 3 to the Pairing Agreement (incorporated by
reference on Exhibit 4.3 to Patriot American Hospitality, Inc.'s
and Wyndham International, Inc.'s Registration Statement on
Form S-4 (Nos. 333-44203 and 333-44203-01)).
4.2 -- Cooperation Agreement, dated December 18, 1997, between Patriot
American Hospitality, Inc. and Wyndham International, Inc.
(incorporated by reference to Exhibit 4.4 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Registration
Statement on Form S-4 (Nos. 333-44203 and 333-44203-01)).
*5.1 -- Opinion of Goodwin, Procter & Hoar LLP as to legality of
securities being offered.
*8.1 -- Opinion of Goodwin, Procter & Hoar LLP as to Tax Matters.
23.1 -- Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
and Exhibit 8.1).
*23.2 -- Consent of Ernst & Young LLP, Dallas, Texas.
*23.3 -- Consent of Ernst & Young LLP, Seattle, Washington.
*23.4 -- Consent of Ernst & Young LLP, Phoenix, Arizona.
*23.5 -- Consent of Ernst & Young LLP, Miami, Florida.
*23.6 -- Consent of Ernst & Young LLP, San Juan, Puerto Rico.
*23.7 -- Consent of Coopers & Lybrand L.L.P., Pittsburgh, Pennsylvania.
*23.8 -- Consent of Coopers & Lybrand L.L.P., Dallas, Texas.
*23.9 -- Consent of Coopers & Lybrand L.L.P., Phoenix, Arizona.
*23.10 -- Consent of Coopers & Lybrand L.L.P., Tampa, Florida.
*23.11 -- Consent of Pannell Kerr Forster PC, Alexandria, Virginia.
*23.12 -- Consent of Price Waterhouse LLP, Miami, Florida.
*23.13 -- Consent of Deloitte & Touche LLP, Houston, Texas.
*23.14 -- Consent of Arthur Andersen LLP, Dallas, Texas.
24.1 -- Powers of Attorney (included on signature pages to the
Registration Statement).
*99.1 -- Registration Rights Agreement, dated April 1, 1998, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc.,
Metro Hotels, Inc. and Metro Hotels Leasing Corporation.
</TABLE>
- ----------------
* Filed herewith
II-2
<PAGE>
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, April 28, 1998.
PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC.
By: /s/ Paul A. Nussbaum /s/ James D. Carreker
--------------------------------- -----------------------------------
Paul A. Nussbaum James D. Carreker
Chairman of the Board, and Chief Chairman of the Board and
Executive Officer Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated, each of whom also constitutes and
appoints Paul A. Nussbaum and John Bohlmann and each of them singly, his true
and lawful attorney-in-fact and agent, for him, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement and to
file the same and all exhibits thereto, and any other documents in connection
therewith with the Securities and Exchange Commission, granting unto each
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intent
and purposes as he might or could do in person, hereby retifying and confirming
all that each attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Paul A. Nussbaum Chairman of the Board of Directors April 28, 1998
- ------------------------------ and Chief Executive Officer,
Paul A. Nussbaum Patriot American Hospitality, Inc.
(Principal Executive Officer)
/s/ William W. Evans III President, Chief Operating Officer April 28, 1998
- ------------------------------ and Director, Patriot American
William W. Evans III Hospitality, Inc.
/s/ Anne L. Raymond Chief Financial Officer and Executive April 28, 1998
- ------------------------------ Vice President, Patriot American
Anne L. Raymond Hospitality, Inc. (Principal Financial
Officer)
/s/ Lawrence S. Jones Executive Vice President and April 28, 1998
- ------------------------------ Treasurer, Patriot American
Lawrence S. Jones Hospitality, Inc. (Principal
Accounting Officer)
/s/ John H. Daniels Director, Patriot American April 28, 1998
- ------------------------------ Hospitality, Inc.
John H. Daniels
/s/ John C. Deterding Director, Patriot American April 28, 1998
- ------------------------------ Hospitality, Inc.
John C. Deterding
/s/ Gregory R. Dillon Director, Patriot American April 28, 1998
- ------------------------------ Hospitality, Inc.
Gregory R. Dillon
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Arch K. Jacobson Director, Patriot American April 28, 1998
- ------------------------------ Hospitality, Inc.
Arch K. Jacobson
/s/ James D. Carreker Director, Patriot American April 28, 1998
- ------------------------------ Hospitality, Inc.
James D. Carreker
/s/ Philip J. Ward Director, Patriot American April 28, 1998
- ------------------------------ Hospitality, Inc.
Philip J. Ward
/s/ Harlan R. Crow Director, Patriot American April 28, 1998
- ------------------------------ Hospitality, Inc.
Harlan R. Crow
</TABLE>
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated, each of whom also constitutes and
appoints James D. Carreker and Carla Moreland and each of them singly, his true
and lawful attorney-in-fact and agent, for him, with ful power of substitution
and resolution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement and to
file the same and all exhibits thereto, and any other documents in connection
therewith with the Securities and Exchange Commission, granting unto each
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intent
and purpose as he might or could do in person, hereby retifying and confirming
all that each attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James D. Carreker Chairman of the Board of Directors April 28, 1998
- -------------------------------- and Chief Executive Officer,
James D. Carreker Wyndham International, Inc.
(Principal Executive Officer)
/s/ Paul A. Nussbaum Director, Wyndham International, Inc. April 28, 1998
- --------------------------------
Paul A. Nussbaum
/s/ Karim Alibhai President, Chief Operating Officer and April 28, 1998
- -------------------------------- Director, Wyndham International, Inc.
Karim Alibhai
/s/ Lawrence S. Jones Executive Vice President and Treasurer, April 28, 1998
- -------------------------------- Wyndham International, Inc.
Lawrence S. Jones (Principal Financial Officer
and Principal Accounting Officer)
/s/ Arch K. Jacobson Director, Wyndham International, Inc. April 28, 1998
- --------------------------------
Arch K. Jacobson
/s/ Leonard Boxer Director, Wyndham International, Inc. April 28, 1998
- --------------------------------
Leonard Boxer
/s/ Russ Lyon, Jr. Director, Wyndham International, Inc. April 28, 1998
- --------------------------------
Russ Lyon, Jr.
/s/ Burton C. Einspruch, M.D. Director, Wyndham International, Inc. April 28, 1998
- --------------------------------
Burton C. Einspruch, M.D.
/s/ Sherwood Weiser Director, Wyndham International, Inc. April 28, 1998
- --------------------------------
Sherwood Weiser
/s/ James C. Leslie Director, Wyndham International, Inc. April 28, 1998
- --------------------------------
James C. Leslie
/s/ Susan T. Groenteman Director, Wyndham International, Inc. April 28, 1998
- --------------------------------
Susan T. Groenteman
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4.1(1) -- Agreement (the "Pairing Agreement"), dated February 15, 1983 and
as amended February 18, 1988, between Bay Meadows Operating
Company and California Jockey Club (f/k/a Bay Meadows Realty
Enterprises, Inc.), as amended (incorporated by reference to
Exhibit 4.3 to California Jockey Club's and Bay Meadows Operating
Company's Registration Statement on Form S-2, and to Exhibit 4.2
to California Jockey Club's and Bay Meadows Operating Company's
Annual Report on Form 10-K for the year ended December 31, 1987
(Nos. 001-09319 and 001-09320).
4.1(2) -- Amendment No. 2 to the Pairing Agreement (incorporated by
reference to Exhibit 4.2 to Patriot American Hospitality, Inc.'s
and Wyndham International, Inc.'s Registration Statement on
Form S-4 (Nos. 333-39875 and 333-39875-01)).
4.1(3) -- Amendment No. 3 to the Pairing Agreement (incorporated by
reference on Exhibit 4.3 to Patriot American Hospitality, Inc.'s
and Wyndham International, Inc.'s Registration Statement on
Form S-4 (Nos. 333-44203 and 333-44203-01)).
4.2 -- Cooperation Agreement, dated December 18, 1997, between Patriot
American Hospitality, Inc. and Wyndham International, Inc.
(incorporated by reference to Exhibit 4.4 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Registration
Statement on Form S-4 (Nos. 333-44203 and 333-44203-01)).
*5.1 -- Opinion of Goodwin, Procter & Hoar LLP as to legality of
securities being offered.
*8.1 -- Opinion of Goodwin, Procter & Hoar LLP as to Tax Matters.
23.1 -- Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
and Exhibit 8.1).
*23.2 -- Consent of Ernst & Young LLP, Dallas, Texas.
*23.3 -- Consent of Ernst & Young LLP, Seattle, Washington.
*23.4 -- Consent of Ernst & Young LLP, Phoenix, Arizona.
*23.5 -- Consent of Ernst & Young LLP, Miami, Florida.
*23.6 -- Consent of Ernst & Young LLP, San Juan, Puerto Rico.
*23.7 -- Consent of Coopers & Lybrand L.L.P., Pittsburgh, Pennsylvania.
*23.8 -- Consent of Coopers & Lybrand L.L.P., Dallas, Texas.
*23.9 -- Consent of Coopers & Lybrand L.L.P., Phoenix, Arizona.
*23.10 -- Consent of Coopers & Lybrand L.L.P., Tampa, Florida.
*23.11 -- Consent of Pannell Kerr Forster PC, Alexandria, Virginia.
*23.12 -- Consent of Price Waterhouse LLP, Miami, Florida.
*23.13 -- Consent of Deloitte & Touche LLP, Houston, Texas.
*23.14 -- Consent of Arthur Andersen LLP, Dallas, Texas.
24.1 -- Powers of Attorney (included on signature pages to the
Registration Statement).
*99.1 -- Registration Rights Agreement, dated April 1, 1998, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc.,
Metro Hotels, Inc. and Metro Hotels Leasing Corporation.
</TABLE>
- ----------------
* Filed herewith
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF GOODWIN, PROCTER & HOAR LLP]
April 28, 1998
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75207
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75207
Re: Legality of Securities to be Registered
under Registration Statement on Form S-3
----------------------------------------
Ladies and Gentlemen:
This opinion is furnished in connection with the registration on Form S-3
(the "Registration Statement") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), of 134,654 additional shares of common stock,
par value $.01 per share, of Patriot American Hospitality, Inc., a Delaware
corporation (the "Corporation"), and 134,654 additional shares of common stock,
par value $.01 per share, of Wyndham International, Inc., a Delaware corporation
(the "Operating Company" and, together with the Corporation, the "Companies"),
which shares are paired and trade as a single unit (the "Registration Shares),
to be sold for the account of certain stockholders of the Companies (the
"Selling Stockholders").
In connection with rendering this opinion, we have examined the Certificate
of Incorporation of each of the Companies, as amended to the date hereof and on
file with the Secretary of State of the State of Delaware, the Bylaws of each of
the Companies, such records of the corporate proceedings of the Companies as we
deemed material, the Registration Statement and the exhibits thereto, and such
other certificates, receipts, records and documents as we considered necessary
for the purposes of this opinion. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as certified, photostatic or
facsimile copies, the authenticity of the originals of such copies and the
authenticity of telephone confirmations of public officials and others. As to
facts material to our opinion, we have relied upon certificates or telephonic
confirmations of public officials and certificates, documents, statements and
other information of the Companies or representatives or officers thereof.
We are attorneys admitted to practice in the Commonwealth of Massachusetts.
We express no opinion concerning the laws of any jurisdictions other than the
laws of the United States of America and the Delaware General Corporation Law,
and also express no opinion with respect to the blue sky or securities laws of
any state, including Delaware.
Based upon the foregoing, we are of the opinion that under the Delaware
General Corporation Law, pursuant to which the Companies are incorporated, the
Registration Shares being registered for the account of the Selling Stockholders
have been validly issued and are fully paid and nonassessable.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us with respect to this opinion
under the heading "Legal Matters" in the Prospectus which is a part of such
Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
Exhibit 8.1
[GOODWIN, PROCTER & HOAR LLP LETTERHEAD APPEARS HERE]
April 28, 1998
Patriot American Hospitality, Inc.
Wyndham International, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, TX 75207
Re: Certain Federal Income Tax Matters
----------------------------------
Ladies and Gentlemen:
This opinion is delivered to you in our capacity as counsel to Patriot
American Hospitality, Inc., a Delaware corporation (the "Company"), and Wyndham
International, Inc., a Delaware corporation ("Wyndham International," and,
together with the Company, the "Companies"), in connection with the Companies'
registration statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to 134,654 shares of common stock, $.01 par value, of the
Company and shares of common stock, $.01 par value, of Wyndham International
which are "paired" and traded as units consisting of one share of common stock
of the Company and one share of common stock of Wyndham International.
On July 1, 1997, the Company merged (the "Cal Jockey Merger") with
Patriot American Hospitality, Inc., a Virginia corporation ("Old Patriot"),
pursuant to an Agreement and Plan of Merger dated as of February 24, 1997, as
amended and restated as of May 28, 1997 (the "Cal Jockey Merger Agreement")
among Old Patriot, Patriot American Hospitality Partnership, L.P., a Virginia
limited partnership, the Company and Wyndham International. Pursuant to the Cal
Jockey Merger Agreement, the Company was the surviving company in the Cal Jockey
Merger and changed its name to Patriot American Hospitality, Inc.
This opinion letter relates to (i) the qualification of the Company as a
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended (the "Code") and (ii) the accuracy of certain statements in the
Registration Statement.
<PAGE>
[GOODWIN, PROCTER & HOAR LLP LETTERHEAD APPEARS HERE]
Patriot American Hospitality, Inc.
Wyndham International, Inc.
April 28, 1998
Page 2
In rendering the following opinions, we have reviewed the Registration
Statement and the descriptions set forth therein of the Company and its current
and proposed investments and activities. We also have examined (i) the Amended
and Restated Certificate of Incorporation of the Company, as of the beginning of
the first taxable year for which it elected to be a REIT and as amended to date,
and the Amended and Restated Bylaws of the Company, (ii) the Pairing Agreement
dated as of February 17, 1983, as amended, by and between the Company and
Wyndham International, and (iii) such other records, certificates and documents
as we have deemed necessary or appropriate for purposes of rendering the
opinions set forth herein. The foregoing documents, including the Registration
Statement, are referred to herein as the "Documents."
In rendering our opinions, we have relied upon certain representations of
the Company set forth in a representation letter delivered to us in connection
with this opinion letter regarding the manner in which the Company has been
owned and operated and will be owned and operated, and the manner in which Old
Patriot was owned and operated for periods ending on and including the effective
time of the Cal Jockey Merger. We also have relied on the statements contained
in the Documents regarding the operation and ownership of the Company, Old
Patriot and their affiliates. We have neither independently investigated nor
verified such representations or statements, and we assume that such
representations and statements are true, correct and complete and that all
representations and statements made "to the best of the knowledge and belief" of
any person(s) or party(ies) or with similar qualification are and will be true,
correct and complete as if made without such qualification.
In rendering the opinions set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to us, (vii) the factual accuracy of all
representations, warranties and other statements made by all parties, and (viii)
the continued accuracy of all documents, certificates, warranties and covenants
on which we have relied in rendering the opinions set forth below and that were
given or dated earlier than the date of this letter, insofar as relevant to the
opinions set forth herein, from such earlier date through and including the
date of this letter. We also have assumed that the Companies'
<PAGE>
[GOODWIN, PROCTER & HOAR LLP LETTERHEAD APPEARS HERE]
Patriot American Hospitality, Inc.
Wyndham International, Inc.
April 28, 1998
Page 3
characterization of any instrument or arrangement as indebtedness will be
respected for federal income tax purposes and that, on or prior to April 30,
1998, the Company will contribute its direct and indirect interests in Williams
Hospitality Group, Inc. to a corporation in which the Company holds none of the
voting stock.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Company has been organized and operated in conformity with the
requirements for qualification and taxation as a REIT under the Code
beginning with the Company's taxable year ending December 31, 1983 and
for subsequent taxable years through the date hereof, and the
Company's proposed form of organization and method of operation will
enable it to continue to meet the requirements for qualification and
taxation as a REIT under the Code (including for periods following the
Merger).
(ii) The discussion set forth under the caption "Certain Federal Income Tax
Considerations" in the Registration Statement, to the extent that such
discussion constitutes matters of law, summaries of legal matters or
legal conclusions, is accurate in all material respects.
****
We express no opinion herein other than the opinions expressly set forth
above. You should recognize that our opinions are not binding on a court or the
Internal Revenue Service and that a court or the Internal Revenue Service may
disagree with the opinions contained herein. The discussion and conclusions set
forth above are based upon current provisions of the Code and the Income Tax
Regulations and Procedure and Administration Regulations promulgated thereunder
and existing administrative and judicial interpretations thereof, all of which
are subject to change. Changes in applicable law could adversely affect our
opinions. In particular, reference is made to certain pending legislation that
would impose limits on the operation of paired REITs such as the Company as well
as modify other rules governing REITs as discussed in the Registration Statement
under the caption "Risk Factors - Exemption from Anti-Pairing Rules; Risks of
Adverse Legislation." We express no opinion herein regarding the consequences to
the Company if these or any other proposals are enacted.
<PAGE>
[GOODWIN, PROCTER & HOAR LLP LETTERHEAD APPEARS HERE]
Patriot American Hospitality, Inc.
Wyndham International, Inc.
April 28, 1998
Page 4
We consent to being named as counsel to the Company in the Registration
Statement, to the references in the Registration Statement to our firm,
including the references under the captions "Certain Federal Income Tax
Considerations" and "Legal Matters," and to the inclusion of a copy of this
opinion letter as an exhibit to the Registration Statement.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Registration Statement on Form S-3 and the related Prospectus of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) for the registration of 134,654 shares
of paired common stock of the Companies and to the incorporation by reference
therein of our reports (a) dated February 9, 1998 with respect to the
Consolidated Financial Statements and financial statement schedules of Patriot
American Hospitality, Inc., the Consolidated Financial Statements of Wyndham
International, Inc. and the Combined Financial Statements of Patriot American
Hospitality, Inc. and Wyndham International, Inc. included in the 1997 Joint
Annual Report on Form 10-K of Patriot American Hospitality, Inc., and Wyndham
International, Inc.; and (b) dated January 23, 1997 (except for Note 8, as to
which the date is September 30, 1997) with respect to the Consolidated Financial
Statements of GAH-II, L.P. for the years ended December 31, 1996 and 1995,
included in the Joint Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Patriot American Hospitality Operating Company dated
September 30, 1997, as amended, all filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
Dallas, Texas
April 27, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Registration Statement on Form S-3 and the related Prospectus of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) for the registration of 134,654 shares
of paired common stock of the Companies and to the incorporation by reference
therein of our report dated March 5, 1997 with respect to the Financial
Statements of NorthCoast Hotels, L.L.C. included in the Joint Current Report on
Form 8-K of Patriot American Hospitality, Inc. and Patriot American Hospitality
Operating Company dated July 1, 1997 filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
Seattle, Washington
April 27, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Registration Statement on Form S-3 and the related Prospectus of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) for the registration of 134,654 shares
of paired common stock of the Companies and to the incorporation by reference
therein of our reports (a) dated March 14, 1997 with respect to the Consolidated
Financial Statements of Resorts Limited Partnership included in the Current
Report on Form 8-K of Patriot American Hospitality, Inc., dated January 16,
1997, as amended; (b) dated February 13, 1997, with respect to the Financial
Statements of CV Ranch Limited Partnership included in the Current Report on
Form 8-K of Patriot American Hospitality, Inc., dated January 16, 1997, as
amended; and (c) dated February 12, 1997 with respect to the Financial
Statements of Telluride Resort and Spa Limited Partnership included in the
Current Report on Form 8-K of Patriot American Hospitality, Inc., dated January
16, 1997, as amended, all filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
April 27, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the Joint
Registration Statement on Form S-3 and the related Prospectus of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) for the registration of 134,654 shares
of paired common stock of the Companies and to the incorporation by reference
therein of our reports (a) dated March 13, 1997 (except for the third paragraph
of Note 7, as to which the date is April 2, 1997) with respect to the Financial
Statements of G.B.H. Joint Venture (d/b/a Grand Bay Hotel) for the years ended
December 31, 1995 and 1996; (b) dated September 23, 1997 with respect to the
Financial Statements of River House Associates (d/b/a Sheraton Gateway Hotel)
for the years ended December 31, 1995 and 1996; and (c) dated September 19,1997
with respect to the Financial Statements of W-L Tampa, Ltd. (the Sheraton Grand
Hotel) for the years ended December 31, 1995 and 1996; all of which are included
in the Joint Current Report on Form 8-K/A No.1 of Patriot American Hospitality,
Inc. and Patriot American Hospitality Operating Company dated September 30,
1997, as amended, and all filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Miami, Florida
April 27, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Registration Statement on Form S-3 and the related Prospectus of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) for the registration of 134,654 shares
of paired common stock of the Companies and to the incorporation by reference
therein of our reports (a) dated August 7, 1997 (except for Note 18, as to which
the date is September 17, 1997) with respect to the Consolidated Financial
Statements of WHG Resorts & Casinos Inc. and related financial statement
schedule; (b) dated August 7, 1997 with respect to the financial statements of
Posadas de San Juan Associates and related financial statement schedule; (c)
dated August 11, 1997 with respect to the financial statements of WKA El Con
Associates; and (d) dated May 2, 1997 with respect to the financial statements
of El Conquistador Partnership L.P.; all of which are included in the Joint
Current Report on Form 8-K of Patriot American Hospitality, Inc. and Patriot
American Hospitality Operating Company, dated April 20, 1998, all filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
San Juan, Puerto Rico
April 27, 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Joint Registration Statement on Form S-3 of
Patriot American Hospitality, Inc. and Wyndham International, Inc. of our
reports (i) dated February 12, 1997, except for Note 21, Note 22 and the last
paragraph of Note 2, as to which the date is December 1, 1997, on our audit of
the consolidated financial statements of Interstate Hotels Company as of
December 31, 1995 and 1996, and for the three years in the period ended December
31, 1996 included in the Report on Form 8-K dated December 10, 1997; (ii) dated
February 11, 1998, except for Note 21, as to which the date is March 1, 1998,
and Note 3, as to which the date is March 30, 1998, on our audit of the
consolidated financial statements of Interstate Hotels Company as of December
31, 1996 and 1997, and for the three years in the period ended December 31,
1997, included in the Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Wyndham International, Inc. dated April 20, 1998.
/s/ Coopers & Lybrand L.L.P.
Pittsburgh, Pennsylvania
April 27, 1998
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Joint Registration Statement on Form S-3 of
Patriot American Hospitality, Inc. and Wyndham International, Inc. of our
reports (i) dated May 12, 1997, on our audit of the Combined Financial
Statements of the Minneapolis Hotels as of and for the year ended December 31,
1996, included in the Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Patriot American Hospitality Operating company dated
September 17, 1997; (ii) dated June 27, 1997, on our audit of the Combined
Statement of Direct Revenue and Direct Operating Expenses of the Met Life Hotels
for the year ended December 31, 1996, included in the Current Report on Form 8-K
of Patriot American Hospitality, Inc. and Patriot American Hospitality Operating
Company dated September 17, 1997; (iii) dated September 8, 1997, on our audit of
the Combined Financial Statement of the Snavely Hotels as of and for the year
ended December 31, 1996, included on the Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Patriot American Hospitality Operating Company
dated September 17, 1997; (iv) dated December 12, 1997, on our audit of
financial statements of Sheraton City Centre as of and for the year ended
December 31, 1996, included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc. dated January 5,
1998; (v) dated December 12, 1997, on our audit of the Statement of Direct
Revenue and Direct Operating Expenses of Wyndham Emerald Plaza for the year
ended December 31, 1996, included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc. dated January 5, 1998
and (vi) dated February 12, 1998, on our audit of Wyndham Hotel Corporation as
of December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997 included in the Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc. dated April 20, 1998.
/s/ Coopers & Lybrand L.L.P.
Dallas, Texas
April 28, 1998
<PAGE>
EXHIBIT 23.9
CONSENT OF INDEPENDENT ACCOUNTANT
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Joint Registration Statement on Form S-3 of
Patriot American Hospitality, Inc, and Wyndham International, Inc. of our report
dated March 7, 1997 except for note 12 as to which the date is October 7, 1997
on our audit of the Financial Statements of SCP (Buttes), Inc., as of and for
the year ended December 31, 1996, included in the Current Report on Form 8-K/A
No. 1 of Patriot American Hospitality Operating Company dated September 30,
1997.
/s/ Coopers & Lybrand L.L.P.
Phoenix, Arizona
April 28, 1998
<PAGE>
EXHIBIT 23.10
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Joint Registration Statement on Form S-3 of
Patriot American Hospitality, Inc. and Wyndham International, Inc. of our report
dated January 17, 1997, except for Note 7, as to which the date is November 25,
1997, on our audit of the financial statements of Royal Palace Hotel Associates
included in the Current Report on Form 8-K of Patriot Hospitality, Inc. and
Patriot American Operating Company dated December 10, 1997.
/s/ Coopers & Lybrand L.L.P.
Tampa, Florida
April 28, 1998
<PAGE>
EXHIBIT 23.11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and the
incorporation by reference in the Joint Registration Statement on Form S-3 and
Prospectus of Patriot American Hospitality, Inc. and Wyndham International, Inc.
of our report dated March 1, 1996 on the financial statements of Historic Hotel
Partners of Birmingham, Limited Partnership, our reports dated October 8, 1997
and February 28, 1997 on the financial statements of Historic Hotel Partners of
Chicago Limited Partnership, and our reports dated October 8, 1997 and February
21, 1997 on the financial statements of Historic Hotel Partners of Nashville
Limited Partnership.
/s/ Pannell Kerr Forster PC
Alexandria, Virginia
April 28, 1998
<PAGE>
EXHIBIT 23.12
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Joint Registration Statement on Form S-3 of Patriot
American Hospitality, Inc. and Wyndham International, Inc. (formerly Patriot
American Hospitality Operating Company) of our reports (a) dated February 27,
1998 relating to the financial statements of CHC International Inc. Hospitality
Division as of November 30, 1996 and 1997 and for each of the years ended
November 30, 1995, 1996 and 1997 which appears in the Current Report on Form 8-K
of Patriot American Hospitality, Inc. and Wyndham International, Inc. dated
April 20, 1998; and (b) dated February 13, 1997, except as to Note 4, which is
as of March 18, 1997, relating to the financial statements of CHC Lease Partners
for the year ended December 31, 1996 and the period inception (October 2, 1995)
through December 31, 1995 which appears in the Current Report on Form 8-K of
Patriot American Hospitality, Inc. and Patriot American Hospitality Operating
Company dated July 1, 1997. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Miami, Florida
April 28, 1998
<PAGE>
EXHIBIT 23.13
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Patriot American Hospitality, Inc. and Wyndham International, Inc.
(formerly known as Patriot American Hospitality Operating Company) of our report
dated September 30, 1997 (relating to the financial statements of Partnerships
of Acquired Hotels as of December 31,1996 and 1995 and for each of the two years
in the period ended December 31,1996) appearing in the report on Form 8-K/A No.
1 dated September 30, 1997 of Patriot American Hospitality, Inc. and Patriot
American Hospitality Operating Company and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
April 27, 1998
<PAGE>
EXHIBIT 23.14
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated September 17, 1997, on the combined financial statements of the Crow
Family Hotel Partnerships (and to all references to our Firm), incorporated by
reference into the Joint Registration Statement on Form S-3 of Patriot American
Hospitality, Inc. and Wyndham International, Inc.
/s/ Arthur Andersen LLP
Dallas, Texas
April 28, 1998
<PAGE>
EXHIBIT 99.1
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is entered into as of
April 1, 1998 by and between Patriot American Hospitality, Inc., a Delaware
corporation (the "REIT"), Wyndham International, Inc., a Delaware corporation
(the "Operating Company" and, collectively with the REIT, the "Companies") and
Metro Hotels, Inc. ("Metro") and Metro Hotel Leasing Corporation ("MHLC") (Metro
and MHLC hereinafter collectively referred to as the "Holders").
WHEREAS, the Holders are to receive a number of paired shares of REIT's
common stock, $.01 par value, and the Operating Company's common stock, $.01 par
value (collectively, the "Paired Shares"), issued without registration (the
"Registrable Shares") under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Termination Agreement dated as of February 20,
1998 by and among Walker G. Harman, PA Hunt Valley Investors, L.P. and MHLC with
respect to the lease at the Embassy Suites in Hunt Valley, Maryland, and a
Termination Agreement dated as of February 20, 1998 by and among Walker G.
Harman, CHC Lease Partners, and Metro, with respect to the management agreement
at the Holiday Inn North Dallas, Dallas, Texas (collectively, the "Termination
Agreements").
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Registration.
------------
(a) Registration Statement Covering Issuance of Registrable Shares.
--------------------------------------------------------------
The Companies shall use reasonable efforts to file as soon as is reasonably
practicable a resale shelf registration statement (the "Shelf Registration
Statement") under Rule 415 under the Securities Act relating to the issuance to
Holders of the Registrable Shares and to cause such Shelf Registration Statement
to be declared effective by the SEC on April 1, 1998 or as soon as is reasonably
practicable thereafter.
2. Registration Procedures.
-----------------------
(a) The Companies shall notify the Holders of the effectiveness of the
Shelf Registration Statement and shall furnish to the Holders such number of
copies of the Shelf Registration Statement (including any amendments,
supplements and exhibits), the prospectus contained therein (including each
preliminary prospectus), any documents incorporated by reference in the Shelf
Registration Statement and such other documents as Holders may reasonably
request in order to facilitate its sale of the Registrable Shares in the manner
described in the Shelf Registration Statement.
(b) The Companies shall prepare and file with the SEC from time to
time such amendments and supplements to the Shelf Registration Statement and
prospectus used in connection therewith as may be necessary to keep the Shelf
Registration Statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all the
<PAGE>
Registrable Shares until such time as all of the Registrable Shares have been
issued or disposed of in accordance with the intended methods of disposition by
the Holders as set forth in the Shelf Registration Statement. Upon ten (10)
business days' notice, the Companies shall file any supplement or post-effective
amendment to the Shelf Registration Statement with respect to the Holders'
interests in or plan of distribution of Registrable Shares that is reasonably
necessary to permit the sale of the Holders' Registrable Shares pursuant to the
Shelf Registration Statement and the Companies shall file any necessary listing
applications or amendments to the existing applications to cause the shares to
be then listed or quoted on this primary exchange or quotation system on which
the Paired Shares are then listed or quoted.
(c) The Companies shall promptly notify the Holders of, and confirm in
writing, any request by the SEC for amendments or supplements to the Shelf
Registration Statement or the prospectus related thereto or for additional
information. In addition, the Companies shall promptly notify the Holders of,
and confirm in writing, the filing of the Shelf Registration Statement, any
prospectus supplement related thereto or any post-effective amendment to the
Shelf Registration Statement and the effectiveness of any post-effective
amendment.
(d) The Companies shall promptly notify the Holders at any time when a
prospectus relating to the Shelf Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Shelf Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. In such event and subject to paragraph 7 of this Agreement, the
Companies shall prepare and furnish to the Holders a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Registrable Shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
3. State Securities Laws. Subject to the conditions set forth in this
----------------------
Agreement, the Companies shall, promptly upon the filing of the Shelf
Registration Statement, file such documents as may be necessary to register or
qualify the Registrable Shares under the securities or "Blue Sky" laws of such
states as the Holders may reasonably request, and the Companies shall use
reasonable efforts to cause such filings to become qualified; provided, however,
-------- -------
that neither of the Companies shall be obligated to qualify as a foreign
corporation to do business under the laws of any such state in which it is not
then qualified or to file any general consent to service of process in any such
state. Once qualified, the Companies shall use reasonable efforts to keep such
filings qualified until the earlier of (a) such time as all of the Registrable
Shares have been disposed of in accordance with the intended methods of
disposition by the Holders as set forth in the Shelf Registration Statement, (b)
in the case of a particular state, the Holders has notified the Companies that
it no longer requires qualified filing in such state in accordance with its
original request for filing or (c) the date on which the Shelf Registration
Statement ceases to be effective with the SEC. The Companies shall promptly
notify the Holders of, and confirm in writing, the receipt by the Companies of
any notification with respect to the suspension of the qualification of
2
<PAGE>
the Registrable Shares for sale under the securities or "Blue Sky" laws of any
jurisdiction or the initiation or threat of any proceeding for such purpose.
4. Expenses. The Companies shall bear all expenses incurred in connection
--------
with the registration of the Registrable Shares pursuant to Section 1(a) of this
Agreement. Such expenses shall include, without limitation, all printing, legal
and accounting expenses incurred by the Companies and all registration and
filing fees imposed by the SEC, and state securities commission or the New York
Stock Exchange or, if the Paired Shares are not then listed on the New York
Stock Exchange, the principal national securities exchange or national market
system on which the Paired Shares are then traded or quoted. The Holders shall
be responsible for any brokerage or underwriting commissions and taxes of any
kind (including, without limitation, transfer taxes) with respect to any
disposition, sale or transfer of Registrable Shares and for any legal,
accounting and other expenses incurred by them in connection with any
registration statement.
5. Indemnification by the Companies. Each of the Companies agrees to
--------------------------------
indemnify the Holders and their respective officers, directors, employees,
agents, representatives and affiliates, and each person or entity, if any, that
controls the Holders within the meaning of the Securities Act, and each other
person or entity, if any, subject to liability because of his, her or its
connection with the Holders, and any underwriter and any person who controls the
underwriter within the meaning of the Securities Act (an "Indemnitee") against
any and all losses, claims, damages, actions, liabilities, costs and expenses
(including without limitation reasonable attorneys' fees, expenses and
disbursements documented in writing), joint or several, arising out of or based
upon any untrue or alleged untrue statement of material fact contained in the
Shelf Registration Statement or any prospectus contained therein, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as and
to the extent that such statement or omission arose out of or was based upon
information regarding the Indemnitee or its plan of distribution which was
furnished to the Companies by the Indemnitee in writing for use therein,
provided, further that the Companies shall not be liable to any person who
participates as an underwriter in the offering or sale or Registrable Shares or
any other person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in such Shelf Registration Statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with information furnished in
writing to the Companies for use in connection with the Shelf Registration
Statement or the prospectus contained therein by such Indemnitee or (ii) such
Indemnitee's failure to send or give a copy of the final prospectus furnished to
it by the Companies at or prior to the time such action is required by the
Securities Act to the person claiming an untrue statement or alleged untrue
statement or omission or alleged omission if such statement or omission was
corrected in such final prospectus. The obligations of the Companies under this
Section 5 shall survive the completion of any offering of Registrable Shares
pursuant to the Shelf Registration Statement under this Agreement or otherwise
and shall survive the termination of this Agreement.
3
<PAGE>
6. Covenants of Holders. The Holders hereby agree (a) to cooperate with
--------------------
the Companies and to furnish to the Companies all such information in connection
with the preparation of the Shelf Registration Statement and any filings with
any state securities commissions as the Companies may reasonably request, (b) to
the extent required by the Securities Act, to deliver or cause delivery of the
prospectus contained in the Shelf Registration Statement to any purchaser of the
shares covered by the Shelf Registration Statement from the Holders, (c) to
notify the Companies of any sale of the Registrable Shares by the Holders and
(d) to indemnify the Companies, their respective officers, directors, employees,
agents, representatives and affiliates, and each person, if any, who controls
either of the Companies within the meaning of the Securities Act, and each other
person, if any, subject to liability because of his connection with the
Companies, against any and all losses, claims, damages, actions, liabilities,
costs and expenses arising out of or based upon (i) any untrue statement or
alleged untrue statement of material fact contained in either the Shelf
Registration Statement or the prospectus contained therein, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, if and to the extent that such statement
or omission arose out of or was based upon information regarding the Holders or
its plan of distribution which was furnished to the Companies by the Holders in
writing for use therein, or (ii) the failure by the Holders to deliver or cause
to be delivered the prospectus contained in the Shelf Registration Statement (as
amended or supplemented, if applicable) furnished by the Companies to the
Holders to any purchaser of the shares covered by the Shelf Registration
Statement from the Holders. Notwithstanding the foregoing, (i) in no event will
the Holders have any obligation under this Section 6 for amounts the Companies
pay in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holders (which consent shall
not be unreasonably withheld) and (ii) the total amount for which the Holders
shall be liable under this Section 6 shall not in any event exceed the aggregate
proceeds received by him or it from the sale of the Holders' Registrable Shares
in such registration. The obligations of the Holders under this Section 6 shall
survive the completion of any offering of Registrable Shares pursuant to a Shelf
Registration Statement under this Agreement or otherwise and shall survive the
termination of this Agreement.
7. Suspension of Shelf Registration Requirement.
--------------------------------------------
(a) The Companies shall promptly notify the Holders of, and confirm in
writing, the issuance by the SEC of any stop order suspending the effectiveness
of the Shelf Registration Statement or the initiation of any proceedings for
that purpose. The Companies shall use reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of the Shelf Registration
Statement as soon as practicable.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Companies' obligation under this Agreement to use reasonable
efforts to cause the Shelf Registration Statement and any filings with any state
securities commission to be made or to become effective or to amend or
supplement the Shelf Registration Statement shall be suspended in the event and
during such period pending negotiations relating to, or consummation of, a
transaction or the occurrence of an event that would require additional
disclosure of material information by the Companies in the Shelf Registration
Statement or such filing (such
4
<PAGE>
circumstances being hereinafter referred to as a "Suspension Event") that would
make it impractical or unadvisable to cause the Shelf Registration Statement or
such filings to be made or to become effective or to amend or supplement the
Shelf Registration Statement, but such suspension shall continue only for so
long as such event or its effect is continuing but in no event will that
suspension exceed ninety (90) days. The Companies agree not to exercise the
rights set forth in this Section 7(b) more than twice in any twelve month
period.
(c) The Holders of Registrable Shares whose Registrable Shares are
covered by the Shelf Registration Statement filed pursuant to Section 1 hereof
agrees, if requested by the Companies in the case of a nonunderwritten offering
(a "Nonunderwritten Offering") or if requested by the managing underwriter or
underwriters in an underwritten offering (an "Underwritten Offering,"
collectively with Nonunderwritten Offering, the "Offering"), not to effect any
public sale or distribution of any of the securities of the Companies of any
class included in such Offering, including a sale pursuant to Rule 144 or Rule
144A under the Securities Act (except as part of such Offering), during the
15-day period prior to, and during the 90-day period (or such longer period as
may be required by the managing underwriter or underwriters) beginning on, the
date of pricing of each Offering, to the extent timely notified in writing by
the Companies or the managing underwriters. Furthermore, notwithstanding
anything to the contrary set forth in this Agreement, the Companies' obligations
under this Agreement to use reasonable efforts to cause the Shelf Registration
Statement and any filings with any state securities commission to be made or to
become effective or to amend or supplement the Shelf Registration Statement
shall be suspended in the event and during such period as the Companies are
proceeding with an Underwritten Offering if the Companies are advised by the
underwriters that the sale of the Registrable Shares under the Shelf
Registration Statement would have a material adverse effect on the Underwritten
Offering.
8. Black-Out Period. Following the effectiveness of the Shelf
----------------
Registration Statement and the filings with any state securities commissions,
the Holders agree that they will not effect any sales of the Registrable Shares
pursuant to the Shelf Registration Statement or any such filings at any time
after they have received notice from the Companies to suspend sales (i) as a
result of the occurrence or existence of any Suspension Event, (ii) during any
Offering, or (iii) so that the Companies may correct or update the Shelf
Registration Statement or such filing pursuant to Section 2(c) or 2(d). The
Holders may recommence effecting sales of the Registrable Shares pursuant to the
Shelf Registration Statement or such filings following further notice to such
effect from the Companies, which notice shall be given by the Companies no later
than five (5) business days after the conclusion of any such Suspension Event of
Offering.
9. Additional Shares. The Companies, at their option, may register, under
-----------------
any registration statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued Paired Shares or any
Paired Shares owned by any other shareholder or shareholders of the Companies.
10. Contribution. If the indemnification provided for in Sections 5 and 6
------------
is unavailable to an indemnified party with respect to any losses, claims,
damages, actions, liabilities, costs or expenses referred to therein or is
insufficient to hold the indemnified party harmless as contemplated therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
5
<PAGE>
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, actions, liabilities, costs or expenses
in such proportion as is appropriate to reflect the relative fault of the
Companies, on the one hand, and the Holders, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
actions, liabilities, costs or expenses as well as any other relevant equitable
considerations. The relative fault of the Companies, on the one hand, and of the
Holders, on the other hand, shall be determined by reference to, among other
factors, whether the untrue or alleged untrue statement of a material fact or
omission to state a material fact relates to information supplied by the
Companies or by the Holders and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission;
provided, however, that in no event shall the obligation of any indemnifying
- -------- -------
party to contribute under this Section 10 exceed the amount that such
indemnifying party would have been obligated to pay by way of indemnification if
the indemnification provided for under Sections 5 or 6 hereof had been available
under the circumstances.
The Companies and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 10 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No indemnified party guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty of such fraudulent
misrepresentations.
11. No Other Obligation to Register. Except as otherwise expressly
-------------------------------
provided in this Agreement, the Companies shall have no obligation to the
Holders to register the Registrable Shares under the Securities Act.
12. Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented without the prior written consent of each of
the Companies and the Holders.
13. Notices. Except as set forth below, all notices and other
-------
communications provided for or permitted hereinafter shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by telex
or telecopier, registered or certified mail (return receipt requested), postage
prepaid or courier or overnight delivery service to the Companies at the
following addresses and to the Holders at the address set forth on his signature
page to this Agreement (or at such other address for any party as shall be
specified by like notice, provided that notices of a change of address shall be
effective only upon receipt thereof), and further provided that in case of
directions to amend the Shelf Registration Statement pursuant to Section 2(b) or
Section 6, the Holders must confirm such notice in writing by overnight express
delivery with confirmation of receipt:
6
<PAGE>
If to the REIT: Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75207
Attn: Paul A. Nussbaum
Chief Executive Officer
Telephone: (214) 863-1000
Telecopy: (214) 863-1527
If to the
Operating Company: Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75207
Attn: James D. Carrecker
Chief Executive Officer
Telephone: (214) 863-1000
Telecopy: (214) 863-1527
With a copy to: Goodwin, Procter & Hoar L.L.P.
Exchange Place
Boston, MA 02109
Attn: Gilbert G. Menna, P.C.
Kathryn L. Murtagh, Esq.
Telephone: (617) 570-1000
Telecopy: (617) 523-1231
In addition to the manner of notice permitted above, notices given pursuant to
Sections 1, 7 and 8 hereof may be effected telephonically and confirmed in
writing thereafter in the manner described above.
14. Successors and Assigns. This Agreement shall be binding upon and
-----------------------
inure to the benefit of the successors and assigns of the Companies. This
Agreement may not be assigned by the Holders and any attempted assignment hereof
by the Holders will be void and of no effect and shall terminate all
obligations of the Companies hereunder with respect to the Holders.
15. Counterparts. This Agreement may be executed in any number of
-------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Copied or telecopied
signatures may be attached as a counterpart hereto and shall have the same legal
and binding effect as original signatures.
16. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed wholly within said State.
7
<PAGE>
17. Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
18. Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[Remainder of Page Intentionally Left Blank]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
PATRIOT AMERICAN HOSPITALITY, INC.
/s/ ANNE RAYMOND
---------------------------------------
Name: Anne Raymond
Title: Executive Vice President and
Chief Financial Officer
WYNDHAM INTERNATIONAL, INC.
/s/ REX STEWART
---------------------------------------
Name: Rex Stewart
Title: Executive Vice President and
Chief Financial Officer
9
<PAGE>
REGISTRATION RIGHTS AGREEMENT
HOLDERS SIGNATURE PAGE
HOLDERS
METRO HOTELS, INC.
By: /s/ WALKER G. HARMAN
-------------------------------------
Name: Walker G. Harman
Title: President
Address: 8080 North Central Expressway
Suite 1600, LB 82
Dallas, Texas 75206-1819
METRO HOTEL LEASING CORPORATION
By: /s/ WALKER G. HARMAN
-------------------------------------
Name: Walker G. Harman
Title: President
Address: 8080 North Central Expressway
Suite 1600, LB 82
Dallas, Texas 75206-1819
96689 v4
10
