<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1999
REGISTRATION STATEMENT NOS. 333-77271, 333-77271-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
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 (Exact Name of Registrant as Specified in its
Charter) Charter)
DELAWARE DELAWARE
(State or Other Jurisdiction of Incorporation (State or Other Jurisdiction of Incorporation
or Organization) or 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, Including Area Code, of Registrant's
Principal Executive Office)
JAMES D. CARREKER JAMES D. CARREKER
Chief Executive Officer Chairman of the Board and Chief Executive
Patriot American Hospitality, Inc. Officer
1950 Stemmons Freeway Wyndham International, Inc.
Suite 6001 1950 Stemmons Freeway
Dallas, TX 75207 Suite 6001
(214) 863-1000 Dallas, TX 75207
(214) 863-1000
(Name, Address, Including Zip Code and Telephone Number, Including Area Code, of Agent for
Service)
</TABLE>
------------------------
Copies to:
GILBERT G. MENNA, P.C.
MARTIN CARMICHAEL III, P.C.
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. / /
------------------------
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
contained in this registration statement is intended to be the combined
prospectus relating also to 43,245,475 shares registered and remaining unsold
under the registration statements on Forms S-3 (Nos. 333-58705, 333-58705-1 and
333-65339, 333-65339-1) previously filed by the registrant and declared
effective by the Commission.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1999
PATRIOT AMERICAN HOSPITALITY, INC.
111,245,475 SHARES OF COMMON STOCK
WYNDHAM INTERNATIONAL, INC.
111,245,475 SHARES OF COMMON STOCK
This prospectus covers the sale of up to 111,245,475 shares of common stock
of Patriot American Hospitality, Inc. and common stock of Wyndham International,
Inc., which are paired and traded together as one unit.
We may sell shares of paired common stock through one or more underwriters.
The underwriters may sell shares in a firm commitment underwritten offering, to
one or more investors at a fixed price, from time to time on the New York Stock
Exchange at market prices and/or through other methods. Information describing
specific sales will be contained in a prospectus supplement.
PaineWebber Financial Products Inc., NationsBanc Mortgage Capital
Corporation and UBS AG, London Branch are underwriters in connection with the
sales of shares of paired common stock delivered in settlement of the forward
equity transactions described in this prospectus.
You should read this prospectus and any supplement carefully before you
invest. This prospectus may not be used to make sales of shares of our paired
common stock unless accompanied by a prospectus supplement.
The New York Stock Exchange lists our paired common stock under the symbol
"PAH." On May 10, 1999, the reported closing sale price of our paired common
stock was $5.00 per share. Our address is 1950 Stemmons Freeway, Suite 6001,
Dallas, Texas 75207, and our telephone number is (214) 863-1000.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN MATERIAL RISKS RELEVANT
TO AN INVESTMENT IN OUR SHARES OF PAIRED COMMON STOCK.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is , 1999
<PAGE>
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information electronically with the Securities and Exchange Commission (the
"SEC" or the "Commission"). You may read and copy any of the reports, statements
or other information that we file with the SEC at the SEC's Public Reference
Room at 450 Fifth Street, N.W., in Washington, D.C. Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference Room. Our SEC
filings are also available from the New York Stock Exchange, 20 Broad Street,
New York, New York 10005, and from the Internet site maintained by the SEC at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus is part of a registration statement we filed with the SEC to
register shares of paired common stock. It does not repeat important information
that you can find in our registration statement or in the reports and other
documents that we file with the SEC. The SEC allows us to "incorporate by
reference" the information we file with them. This means that we can disclose
important information to you by referring you to other documents that are
legally considered to be part of this prospectus, and that later information
that we file with the SEC will automatically update and supersede the
information in this prospectus and the documents listed below.
We incorporate by reference the documents listed below, and any future
filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until we sell all of the shares of paired common
stock covered by this registration statement.
1. Annual Report on Form 10-K/A No. 1 of Patriot American Hospitality, Inc.
and Wyndham International, Inc. for the fiscal year ended December 31, 1998
(Nos. 001-09319, 001-09320);
2. Current Reports on Form 8-K of Patriot American Hospitality, Inc. and
Wyndham International, Inc. dated: (1) January 5, 1998 (filed January 13, 1998);
(2) February 9, 1998 (filed February 12, 1998); (3) March 23, 1998 (filed March
30, 1998); (4) April 2, 1998 (filed April 8, 1998); (5) April 20, 1998 (filed
April 22, 1998); (6) May 27, 1998, as amended (filed May 27, 1998 and Mary 28,
1998); (7) June 2, 1998, as amended (filed June 17, 1998, August 6, 1998 and
March 26, 1999); (8) November 9, 1998, as amended (filed November 9, 1998 and
November 10, 1998); (9) November 30, 1998 (filed November 30, 1998); (10)
December 16, 1998 (filed December 16, 1998); (11) December 16, 1998 (filed
December 18, 1998); (12) December 20, 1998 (filed December 22, 1998); (13)
January 29, 1999 (filed February 4, 1999); (14) February 16, 1999 (filed
February 16, 1999); (15) March 2, 1999 (filed March 2, 1999); and (16) February
26, 1999 (filed March 3, 1999); (17) March 26, 1999 (filed March 26, 1999); and
(18) March 26, 1999, as amended (filed March 29, 1999 and May 10, 1999); and
3. The description of our paired shares contained or incorporated by
reference in our registration statement on Form 8-A, as amended (Nos. 001-09319,
001-09320).
You may request a copy of these filings, but not the exhibits filed with
them, at no cost by writing or telephoning us at the following address: 1950
Stemmons Freeway, Suite 6001, Dallas, Texas 75207, attention: Shareholder
Relations (Telephone No. (214) 863-1000). You should rely only on the
information incorporated by reference or contained in this prospectus or any
supplement. We have not authorized anyone else to provide you with different or
additional information. We are not making an offer of paired shares in any state
where the offer is not permitted. You should not assume that the information in
this prospectus or any supplement is accurate as of any date other than the date
on the front of those documents.
This prospectus and the documents incorporated 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.
Our actual results could differ materially from those set forth in the
forward-looking statements. Some factors that might cause such a difference are
discussed in "Risk Factors."
<PAGE>
CERTAIN DEFINITIONS
We operate under a REIT structure involving several companies and
partnerships. In this prospectus and in any supplement to this prospectus, the
following terms have the following meanings:
"Companies" means the Corporation and the Operating Company.
"Corporation" means all of the following:
- Patriot American Hospitality, Inc.
- PAH GP, Inc. and PAH LP, Inc., which are wholly-owned subsidiaries of
Patriot American Hospitality, Inc.
- Patriot American Hospitality Partnership, L.P.
- All subsidiaries of PAH GP, Inc., and Patriot American Hospitality
Partnership, L.P.
"Operating Company" means all of the following:
- Wyndham International, Inc. (formerly known as Patriot American
Hospitality Operating Company)
- Wyndham International Partnership, L.P. (formerly known as Patriot
American Hospitality Operating Partnership, L.P.)
- All subsidiaries of Wyndham International, Inc. and Wyndham
International Partnership, L.P.
"Operating Partnership" means Wyndham International Partnership, L.P.
"Partnerships" means the Operating Partnership and the Realty Partnership.
"Realty Partnership" means Patriot American Hospitality Partnership, L.P.
2
<PAGE>
RISK FACTORS
Before investing in our paired shares, you should carefully consider the
following risk factors. Additionally, you should carefully review other
information contained in this prospectus and the information incorporated by
reference in this prospectus, including "Business and Properties" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" which appear on pages 3 through 26 and pages 35 through 56,
respectively, of our annual report on Form 10-K/A No. 1 for the fiscal year
ended December 31, 1998.
THERE ARE RISKS RELATING TO THE PROPOSED EQUITY INVESTMENT AND THE RELATED
RESTRUCTURING.
On February 18, 1999, the Corporation, the Operating Company, the Realty
Partnership, the Operating Partnership and affiliates of each of Apollo Real
Estate Advisors III, L.P., Apollo Management IV, L.P., Thomas H. Lee Company,
Beacon Capital Partners, L.P. and Rosen Consulting Group entered into a
securities purchase agreement pursuant to which the investors will purchase up
to $1 billion of a newly-issued series B convertible preferred stock of the
Operating Company.
Under the terms of the securities purchase agreement, we are required to
complete a restructuring of our existing paired share REIT structure as a
condition to the investment by the investors. We cannot assure you that we will
be able to complete the restructuring plan within the required timetable. The
proposed restructuring plan includes the following transactions: (1) the
Corporation will merge into a wholly-owned subsidiary of the Operating Company,
(2) the Pairing Agreement between the Corporation and the Operating Company will
terminate, and (3) the Corporation will terminate its status as a real estate
investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"), effective January 1, 1999.
The risks associated with the proposed equity investment and the
restructuring include, but are not limited to, the following:
- The equity investment, if consummated, will have a dilutive effect on the
Operating Company's net income per share of the Operating Company's common
stock. Under certain circumstances, the conversion price for the series B
convertible preferred stock may be adjusted downward and such adjustments
will have further dilutive effects on our existing stockholders.
- If the equity investment is consummated, the investors will have
substantial voting control over the Companies.
- If we complete the restructuring, the Corporation will no longer be a REIT
under the Code and will be subject to federal income taxes as a C
corporation. As a C corporation, the Corporation will no longer be
required to pay dividends and will likely decide to pay a substantially
lower dividend or no dividend to its common stockholders.
- We will pay quarterly dividends on the series B convertible preferred
stock at a rate of 9.75% per year, partly in cash and partly in additional
shares of preferred stock. The percentage of the dividends payable in cash
will initially be 30% and will decrease to 19.8% over time. If funds are
not available, we will have to borrow funds to pay the cash dividends.
Additionally, payment of dividends in additional shares of preferred stock
may have dilutive effects on our other stockholders.
IF WE DO NOT COMPLETE THE EQUITY INVESTMENT, THERE WILL BE NEGATIVE
CONSEQUENCES.
If our stockholders do not approve the equity investment or if the equity
investment is not made, there will be several potential negative consequences:
- If the equity investment is not made, we will not be able to cash settle
the forward transactions, and if we are required to settle the forward
transactions in stock, there will be severely dilutive
3
<PAGE>
effects on our capital stock. See "--The forward equity transactions may
severely dilute our capital stock."
- If the equity investment is not made by June 30, 1999, approximately $1.0
billion of debt will mature. Our currently proposed new credit facility is
conditioned on the closing of the equity investment, and if the equity
investment does not close by June 30, 1999, we will have to raise capital
from another source or sell assets to produce proceeds sufficient to pay
these debt maturities. If this happens, we cannot assure you that
financing would be available to us on satisfactory terms.
- If the equity investment is not made, we may have to sell significant
amounts of assets, including resort properties or Operating Company
managed properties in major cities, to meet debt maturities. Such sales
could negatively impact our strategy to expand our brand recognition and
build our hotel portfolio.
- If the equity investment is not made, we would have to secure other
sources of capital to fund our hotel development programs. In the absence
of available capital, we may have to terminate or reduce our development
activities. Any termination of development activities may result in our
forfeiture of deposits or other funds.
THERE MAY BE ADVERSE EFFECTS IF WE FAIL TO SPIN-OFF INTERSTATE'S THIRD-PARTY
HOTEL MANAGEMENT BUSINESS.
On May 27, 1998, we and Interstate Hotels Company entered into a settlement
agreement with Marriott International, Inc. The settlement agreement was
subsequently amended on August 26, 1998, October 29, 1998, January 6, 1999,
March 11, 1999 and April 23, 1999. This agreement addressed certain claims
asserted by Marriott in connection with the Corporation's then proposed merger
with Interstate. The settlement agreement provided for the dismissal of
litigation brought by Marriott, and allowed the Corporation's merger with
Interstate to close on June 2, 1998.
In addition to dismissing the Marriott litigation, the settlement agreement
provides for three principal transactions: (1) the re-branding of ten Marriott
hotels under the Wyndham name, (2) the assumption by Marriott of the management
of ten Marriott hotels formerly managed by Interstate for the remaining term of
the Marriott franchise agreement, and (3) the divestiture by us of Interstate's
third-party management business. We expect to convert the ten Marriott hotels to
the Wyndham brand over the next approximately 15 months. We must distribute
equity stock of the subsidiary conducting Interstate's third-party management
business to our stockholders (the "Spin-Off") on or prior to May 14, 1999. We
plan to complete the Spin-Off by May 14, 1999, but we can not assure you that we
will be able to complete the Spin-Off as scheduled.
If we do not complete the Spin-Off within the time table set forth above,
Marriott will be entitled to receive 110% of the fees otherwise due under the
submanagement agreements with respect to the ten hotels Marriott will manage
pursuant to the submanagement arrangement described above. Additionally, we will
be subject to other penalties, including Marriott's right to purchase, subject
to third-party consents, the hotels to be submanaged by Marriott and six
additional Marriott hotels owned by us at their then appraised values. Moreover,
subject to any defenses we may have, we would owe Marriott liquidated damages
with respect to the hotels converted to the Wyndham brand, those to be
submanaged by Marriott, and the six additional Marriott hotels Marriott would
have the option to purchase. We also anticipate that Marriott would require
third-party owners of our Marriott-branded hotels to choose an alternative
manager for their hotels. As a result, each respective hotel would either: (1)
lose the Marriott brand, at which time we would have to compensate Marriott for
any lost franchise fees or (2) terminate the management contract with us and
enter into a contract with an alternative manager. We would owe liquidated
damages on any third-party Marriott-franchised hotel which chooses to convert
its brand. We cannot assure you that if we fail to complete the Spin-Off as
scheduled, cash will be available to pay the additional fees and liquidated
damages.
4
<PAGE>
THE FORWARD EQUITY TRANSACTIONS MAY SEVERELY DILUTE OUR CAPITAL STOCK.
We are parties to forward equity contracts with three counterparties
involving the sale of an aggregate of 13.3 million paired shares, with related
price adjustment mechanisms. Our aggregate obligation under the forward equity
transactions was approximately $323.5 million at May 10, 1999. As of such date,
we had delivered an aggregate of 84.7 million paired shares to the
counterparties as collateral (including 4.0 million paired shares delivered as
dividends on collateral shares) in addition to approximately 12.5 million
original shares still owned by the counterparties or their affiliates.
We currently intend to settle in full all of the forward transactions with
part of the proceeds of the equity investment described above. If the forward
transactions are settled in cash, the counterparties must deliver to us the
paired shares then owned or held by them as collateral under the respective
forward agreements. However, we cannot assure you that the equity investment
will be completed as planned. If we do not complete the equity investment, we
will not be able to cash settle the forward transactions and the forward
counterparties will likely require us to settle these transactions in paired
shares, which would have severely dilutive effects on our capital stock.
On February 28, 1999, all three counterparties agreed, subject to specified
conditions, not to require settlement under their respective forward agreements
or to sell paired shares in connection with the forward agreements until the
earlier of (a) the closing of the equity investment and (b) June 30, 1999. Each
of the agreements provided that the standstill obligation would terminate if,
among other events, the price of the paired shares fell below a specified
threshold. As of the date hereof, the price of the paired shares has fallen
below these thresholds. As a result, each of the forward counterparties has the
right to require an immediate settlement of its forward equity transaction. We
cannot assure you that the forward counterparties will not sell paired shares or
require settlement.
If we are required to settle one or more of the forward transactions, we may
settle them by delivering either cash or paired shares. Unless we complete the
equity investment, sources of cash would not currently be available for us to
make cash settlements. Moreover, we cannot assure you that our bank lenders
would consent to any cash settlements prior to the closing of the equity
investment.
Generally, we may settle by delivering paired shares only if a registration
statement covering such paired shares is effective. Prior to the time when the
registration statement of which this prospectus is a part becomes effective,
there are effective registration statements covering the sale by the three
forward counterparties of up to 40,000,000 paired shares and the sale by UBS of
an additional 4,000,000 paired shares (of which 754,525 paired shares were sold
by UBS in December 1998) in connection with the forward equity transactions. If,
and when, the registration statement of which this prospectus is a part becomes
effective, there will be 111,245,475 paired shares covered by effective
registration statements, representing approximately 14,000,000 paired shares
more than the total number of paired shares currently owned or held as
collateral by the forward counterparties. We cannot assure you that these
registration statements will remain effective or that we will not be required to
register more paired shares in connection with the forward equity transactions.
Given the current market price of the paired shares, any settlement in paired
shares would have severely dilutive effects on our capital stock. Based on the
$5.00 closing price of the paired shares on May 10, 1999 and assuming an average
of 2% selling expenses, the forward counterparties would have to sell
approximately 66 million paired shares to settle all of the forward equity
transactions in full. The number of shares required would substantially increase
if the market price of the paired shares decreases as a result of the sales of
paired shares by the forward counterparties. If any of the counterparties sells
paired shares, the conversion price of the preferred stock to be issued to the
investors will be adjusted downward to the extent that the price recognized by
us on the sale is less than $8.75 per share.
5
<PAGE>
THERE ARE TAX RISKS RELATING TO THE CORPORATION'S QUALIFICATION AS A REIT AND
THE POSSIBLE TERMINATION OF REIT STATUS.
We operate the Corporation in a manner designed to permit it to qualify as a
REIT under the Code, but we cannot assure you that the Corporation has operated
or will be able to continue to operate in a manner so as to so 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 like the Corporation that owns hotels and
leases them to an operating company with which its stock is paired.
Qualification as a REIT also involves determination of various factual matters
and circumstances not entirely within our control or not susceptible to legal
opinion. 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
Patriot merged with the Corporation (formerly known as California Jockey Club),
with the Corporation being the surviving corporation (the "Cal Jockey Merger").
See "Certain Federal Income Tax Considerations--REIT Qualification."
On February 8, 1999, we entered into an agreement regarding the equity
investment. In connection with this investment and the required restructuring
transactions, the Corporation would become a subsidiary of the Operating Company
and convert from a REIT to a C corporation. Termination of REIT status would
have a retroactive date of January 1, 1999. Consummation of the equity
investment is subject to numerous conditions, including approval by the
Corporation's stockholders.
If the equity investment is consummated in 1999 as planned, or if the
Corporation otherwise terminates its REIT status beginning in 1999, the
Corporation will be subject to tax as a C corporation in 1999 and subsequent
years. Therefore, the Corporation will be subject to federal income tax
(including any applicable alternative minimum tax) at regular corporate tax
rates. Distributions to stockholders will no longer be deductible or required,
and the amount of distributions is likely to be reduced. The termination of the
Corporation's REIT status will also cause the Corporation to permanently lose
its special status as a grandfathered paired share REIT under the rules
described below, and the Corporation will be disqualified from re-electing REIT
status for the four taxable years following the year during which REIT
qualification is lost.
If the Corporation failed to qualify as a REIT for any year prior to 1999 or
any subsequent taxable year despite its intention to qualify as a REIT, the
Corporation would also be taxed as a C corporation beginning in such year. The
Corporation would therefore be subject to federal income tax, would lose its
status as a grandfathered paired share REIT and would be disqualified from
re-electing REIT status for the four taxable years following the year during
which REIT qualification is lost.
EXEMPTION FROM ANTI-PAIRING RULES; RECENT LEGISLATION LIMITS USE OF PAIRED
SHARE STRUCTURE
The Corporation's ability to qualify as a REIT for current and prior years
is and has been 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. Subject to the discussion below
regarding recent legislation, 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
6
<PAGE>
the grandfathering rule would not be available to the Corporation and the
Corporation would not qualify as a REIT for any taxable year.
Our ability to utilize the paired structure is limited as a result of the
Internal Revenue Service Restructuring and Reform Act of 1998 (the "Reform
Act"), which was signed into law on July 22, 1998. Included in the Reform Act is
a freeze on the grandfathered status of paired share REITs such as the
Corporation. Under this legislation, the anti-pairing rules provided in the Code
apply to real property interests acquired after March 26, 1998 by the Companies,
or by a subsidiary or partnership in which a ten percent or greater interest is
owned by the Companies (a "10-percent subsidiary"), unless (1) the real property
interests are acquired pursuant to a written agreement that was binding on March
26, 1998 and at all times thereafter or (2) the acquisition of such real
property interests was described in a public announcement or in a filing with
the SEC on or before March 26, 1998. Under an exception to the foregoing rule, a
corporation subject to federal income taxation will not be treated as a
10-percent subsidiary of the Corporation, although it may nevertheless be
treated as 10-percent subsidiary of the Operating Company. In addition, the
grandfathered status of any property under the foregoing rules will be lost if
rent payable under a lease or the renewal of a lease with respect to such
property is determined to exceed an arm's length rate. The Reform Act also
provides that a property held by the Companies that is not subject to the
anti-pairing rules will 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 (A) the
undepreciated cost of the property (prior to the improvement) or (B) in the case
of property acquired where there is a substituted basis, the fair market value
of the property on the date it was acquired by the Companies. There is an
exception for improvements placed in service before January 1, 2004 pursuant to
a binding contract in effect on December 31, 1999 and at all times thereafter.
The Reform Act generally permits us to continue our current method of operations
with respect to our existing assets. However, the legislation restricts our
ability to operate newly acquired assets within our paired share structure.
We considered various alternatives, including a possible recapitalization or
restructuring of our operations, in response to the passage of the Reform Act.
On September 16, 1998, we announced that our respective Boards of Directors had
elected to maintain our paired share structure. We will therefore remain subject
to the constraints of the paired share legislation, which will limit our ability
to acquire new assets or make substantial improvements to existing properties
that do not fall within the grandfathering rules described above. Unless the
Corporation terminates its REIT status in connection with the equity investment
or otherwise, we intend to monitor our activities and operations on an ongoing
basis for purposes of complying with the new legislation and maintaining the
Corporation's REIT qualification. However, issues may arise under the
legislation with respect to which there is little or no authority or other
guidance.
Because certain corporate subsidiaries of a REIT are not treated as
10-percent subsidiaries, the legislation permits us to hold newly acquired
assets in taxable subsidiaries, and until such time as we terminate our REIT
status we intend to proceed with future acquisition opportunities by
establishing taxable subsidiaries on an as-needed basis. Our use of such a
structure is subject to REIT income and asset test limitations for so long as we
retain our REIT status. Those income and asset test limitations could prevent us
from making acquisitions or dispositions that might otherwise be beneficial, or
could require us to sell or otherwise dispose of assets in unfavorable market
conditions or in a transaction subject to income tax, including the tax on
built-in gains inherited from a C corporation. See "Federal Income Tax
Considerations--REIT Qualification--Built-In Gain Tax." Moreover, because the
Corporation, as a REIT, may not hold 10% or more of the voting securities of a
corporate issuer, voting control of such subsidiaries will generally be held by
the Operating Company or by individual officers and/or directors of the
Companies. In addition, the taxable income generated by taxable subsidiaries
would be subject to income taxes. See "Certain Federal Income Tax
Considerations-- Effects of Compliance with REIT Requirements."
7
<PAGE>
If we retain our REIT status, there can be no assurance that the constraints
imposed by the new legislation and the REIT qualification requirements will not
have an adverse effect on us.
POTENTIAL REALLOCATION OF INCOME
Due to the paired share structure, the Companies 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
and their respective subsidiaries if it determines that such distribution,
apportionment or allocation is necessary in order to prevent evasion of taxes or
to clearly reflect income. We would have to take into account any such
adjustments in determining whether the Corporation qualified as a REIT. As a
result, such adjustments could affect the Corporation's ability to qualify as a
REIT. In addition, any challenge to the pricing of intercompany transactions
could raise issues under recent legislation affecting paired share companies and
therefore could affect the Corporation's ability to qualify as a REIT. See
"--Exemption from Anti-Pairing Rules; Recent Legislation Limits Use of Paired
Share Structure."
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 in a merger or other tax-free transaction at
a time when the Corporation qualifies as a REIT (including the January 5, 1998
acquisition by merger of Wyndham Hotel Corporation and the June 2, 1998
acquisition by merger of Interstate Hotels Company) 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.
If we retain our REIT status, 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 our Boards 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 if it retains its REIT
status) 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. We will provide stockholders with
annual statements as to the taxability of distributions.
DESCRIPTION OF FORWARD EQUITY TRANSACTIONS
We are parties to forward equity transactions with three counterparties
involving the sale of an aggregate of 13.3 million paired shares, with related
price adjustment mechanisms, as described below.
8
<PAGE>
Our aggregate obligation under the forward transactions was approximately $321.9
million at April 12, 1999. As of such date, we had delivered an aggregate of
84.7 million shares to the counterparties as collateral (including 4.0 million
paired shares delivered as dividends on collateral shares) in addition to
approximately 12.5 million original shares still owned by the counterparties or
their affiliates.
We currently intend to settle in full all of the forward transactions with
the proceeds of the equity investment. If we settle the forward transactions in
cash, the counterparties must deliver to us all paired shares then owned by them
or held by them as collateral under the respective forward agreements. However,
we cannot assure you that the equity investment will be completed as planned. If
we do not complete the equity investment, we will not be able to cash settle the
forward transactions and the forward counterparties will likely require us to
settle these transactions in paired shares, which would have severely dilutive
effects on our capital stock.
As described in "Risk Factors--The forward equity transactions may severely
dilute our capital stock," each of the counterparties has the right to require
an immediate settlement of its forward equity transaction, but as of the date
hereof, none of the counterparties has made any sale of paired shares (other
than the sale of 754,525 paired shares by UBS in December 1998) or required
settlement of its forward transaction. However, we cannot assure you that the
forward counterparties will not sell paired shares or require settlement in the
future.
DESCRIPTION OF TRANSACTIONS
PAINEWEBBER. On April 6, 1998, we entered into a forward equity transaction
with PaineWebber Incorporated and PaineWebber Financial Products Inc. Pursuant
to a Purchase Agreement dated as of April 6, 1998, we sold to PaineWebber
5,150,000 paired shares at a purchase price of $27.01125 per share, which
reflected a 2% discount to the last reported sale price of the Paired Shares on
April 3, 1998, for net proceeds of approximately $139,100,000. We used the net
proceeds to repay existing indebtedness. The paired shares purchased by
PaineWebber represent approximately 2.15% of the outstanding paired shares as of
the date of this prospectus.
In connection with PaineWebber's purchase of paired shares, we entered into
a Purchase Price Adjustment Mechanism Agreement, dated as of April 6, 1998, with
PaineWebber. The terms of the Purchase Price Adjustment Mechanism Agreement were
amended by agreements dated July 30, 1998, August 14, 1998, September 15, 1998,
September 30, 1998, October 22, 1998, February 1, 1999 and February 28, 1999.
As of April 12, 1999, our obligation to PaineWebber under the forward
transaction was approximately $150.0 million. This obligation equals the product
of the 5,150,000 paired shares owned by PaineWebber times PaineWebber's per
share reference price, which is equal to $27.5625 plus a forward accretion
reflecting an imputed return at the London Interbank Offered Rate (LIBOR) plus a
spread ranging from 140 basis points to 500 basis points, minus an adjustment to
reflect distributions on PaineWebber's owned paired shares. Because the price of
the paired shares has dropped significantly since the issuance of PaineWebber's
shares, we have from time to time delivered additional paired shares to
PaineWebber as collateral. To date, we have delivered a total of 40,189,575
paired shares to PaineWebber as collateral (including 1,892,956 paired shares
delivered as dividends on collateral shares). We adjust this number every two
weeks so that the value (based on the latest paired share closing price) of the
owned shares and collateral shares held by PaineWebber equals 125% of our
obligation to PaineWebber. In addition, we have agreed to deliver to PaineWebber
paired shares worth up to $8,437,711 in exchange for the Interstate shares which
PaineWebber will receive in the Spin-Off. PaineWebber will hold these paired
shares as additional collateral under its forward equity agreement with us. If
we settle the PaineWebber forward transaction in cash, PaineWebber must return
to us all of its purchased shares and all of the collateral shares.
9
<PAGE>
Under the forward agreement, we have a choice of settling our obligation by
paying cash or delivering paired shares to PaineWebber. If we settle in shares,
the forward agreement provides that PaineWebber shall sell the shares to the
public until the proceeds of such sales have satisfied our forward obligation.
PaineWebber must return to us any collateral shares still held by it after such
time. As discussed below, generally we may settle in shares only if we have on
file with the SEC an effective registration statement covering the sale of such
shares.
NATIONS. On February 26, 1998, we entered into a forward equity transaction
with a subsidiary of NationsBank Corporation. Pursuant to a Purchase Agreement
dated as of February 26, 1998, we sold to Nations 4,900,000 paired shares at a
purchase price of $24.8625 per share, which reflected a 2.5% discount from
$25.50, the last reported sale price of the paired shares on February 25, 1998,
for net proceeds of approximately $121,800,000. We used the net proceeds to
repay existing indebtedness. The paired shares purchased by Nations represent
approximately 2.04% of the outstanding paired shares as of the date of this
prospectus.
In connection with Nations' purchase of paired shares, we entered into a
Purchase Price Adjustment Mechanism, dated as of February 26, 1998, with
Nations. The terms of the Purchase Price Adjustment Mechanism were amended by
agreements dated August 14, 1998, November 23, 1998, December 10, 1998, January
4, 1999, February 1, 1999 and February 28, 1999.
As of April 12, 1999, our obligation to Nations under the forward
transaction was approximately $133.1 million. This obligation equals the product
of the 4,900,000 paired shares owned by Nations times Nations' per share forward
price, which is equal to $25.50 plus a forward accretion representing an imputed
return at LIBOR plus a spread ranging from 150 basis points to 500 basis points,
minus an adjustment to reflect distributions on Nations' owned paired shares.
Because the price of the paired shares has dropped significantly since the
issuance of Nations' shares, we have from time to time delivered additional
paired shares to Nations as collateral. To date, we have delivered a total of
35,285,009 paired shares to Nations as collateral (including 1,654,516 paired
shares delivered as dividends on collateral shares). We adjust this number every
two weeks so that the value (based on the latest paired share closing price) of
the owned shares and collateral shares held by Nations equals 125% of our
obligation to Nations. In addition, we have agreed to deliver to Nations paired
shares worth up to $7,478,445 in exchange for the Interstate shares which
Nations will receive in the Spin-Off. Nations will hold these paired shares as
additional collateral under its forward equity agreement with us. If we settle
the Nations forward transaction in cash, Nations must return to us all of its
purchased shares and all of the collateral shares.
Under the forward agreement, we must settle in cash at maturity (which will
be the earlier of the closing of the equity investment or June 30, 1999), but
otherwise we have a choice, subject to certain restrictions, of settling our
obligation by paying cash or delivering paired shares to Nations. Generally, to
settle in paired shares we would deliver to Nations paired shares equal in value
(valued (1) at the dollar volume weighted average price for the paired shares,
excluding the last thirty minutes of trading, over a 100-trading-day unwind
period or (2) at the net proceeds realized by Nations upon sales of paired
shares under the forward transactions, depending on the method of settlement
chosen by Nations) to our obligation at the time of settlement. Nations must
return to us any collateral shares still held by it after the unwind period has
ended. As discussed below, generally we may settle in shares only if we have on
file with the SEC an effective registration statement covering the sale of such
shares.
UBS. On December 31, 1997, we entered into a forward equity transaction
with UBS Limited and Union Bank of Switzerland, London Branch, whose successor
in interest is UBS AG, London Branch acting through its agent, Warburg Dillon
Read LLC. Pursuant to a Purchase Agreement dated as of December 31, 1997, we
sold to UBS 3,250,000 paired shares at a purchase price of $28.8125 per share
(the last reported sale price of the paired shares on December 30, 1997), for
approximately
10
<PAGE>
$91,800,000 in net proceeds. We used the net proceeds to repay existing
indebtedness. We also paid UBS a placement fee of 2%, or approximately
$1,900,000. The paired shares purchased by UBS represent approximately 1.36% of
the outstanding paired shares as of the date of this prospectus.
In connection with UBS's purchase of paired shares, we entered into a
Forward Stock Contract, dated as of December 31, 1997, with UBS. The terms of
the Forward Stock Contract were amended by agreements dated August 14, 1998,
September 11, 1998, December 14, 1998, December 18, 1998, December 22, 1998,
January 4, 1999, January 29, 1999 and February 28, 1999.
As of April 12, 1999, our obligation to UBS under the forward transaction
was approximately $38.8 million. This obligation equals the product of the
3,250,000 paired shares originally purchased by UBS times UBS's per share
forward price, which is equal to $28.8125 plus a forward accretion reflecting an
imputed return at LIBOR plus a spread ranging from 140 basis points to 500 basis
points, minus an adjustment to reflect distributions on UBS's owned paired
shares and certain other payments by us to UBS. Because the price of the paired
shares has dropped significantly since the issuance of UBS's shares, we have
from time to time delivered additional paired shares to UBS as collateral. To
date, we have delivered a total of 9,155,938 paired shares to UBS as collateral
(including 414,886 paired shares delivered as dividends on collateral shares).
We adjust this number every week so that the value (based on the latest paired
share closing price) of the owned shares and collateral shares held by UBS
equals 125% of our obligation to UBS. In addition, we have agreed to deliver to
UBS paired shares worth up to $2,168,332 in exchange for the Interstate shares
which UBS will receive in the Spin-Off. UBS will hold these paired shares as
additional collateral under its forward equity agreement with us. If we settle
the UBS forward transaction in cash, UBS must return to us all of its purchased
shares and all of the collateral shares.
Under the forward agreement, we have a choice of settling our obligation by
paying cash or delivering paired shares to UBS. If we deliver shares in
settlement, the forward agreement provides that UBS shall sell the shares to the
public until the proceeds of such sales have satisfied the forward obligation.
UBS must return to us any collateral shares still held by it after such time. As
discussed below, generally we may settle in shares only if we have on file with
the SEC an effective registration statement covering the sale of such shares.
POTENTIAL ADVERSE EFFECTS OF SETTLEMENT OF THE FORWARD EQUITY TRANSACTIONS
We may settle the forward transactions by delivering either cash or paired
shares. Generally, we may settle by delivering paired shares only if a
registration statement covering such paired shares is effective. Prior to the
time when the registration statement of which this prospectus is a part becomes
effective, there are currently effective registration statements covering the
sale by the three forward counterparties of up to 40,000,000 paired shares and
the sale by UBS of an additional 4,000,000 paired shares (of which 754,525
paired shares were sold by UBS in December 1998) in connection with the forward
equity transactions. If and when the registration statement of which this
prospectus is a part becomes effective, there will be 111,245,475 paired shares
covered by effective registration statements, representing approximately
14,000,000 paired shares more than the total number of paired shares currently
owned or held as collateral by the forward counterparties. We cannot assure you
that these registration statements will remain effective or that we will not be
required to register more paired shares in connection with the forward equity
transactions. In addition, given the current market price of the paired shares,
any settlement in paired shares would have severely dilutive effects on our
capital stock. The dilutive effects will increase if the market price of the
paired shares decreases as a result of the sales of paired shares by the forward
counterparties.
If we were required to settle one or more of the forward transactions in
cash, sources of cash would not currently be available for us to make those
payments. Moreover, we cannot assure you that our bank lenders would consent to
any cash settlements prior to the closing of the equity investment.
11
<PAGE>
Additionally, if any of the counterparties sells paired shares, the
conversion price of the preferred stock to be issued to the investors in the
equity transaction will be adjusted downward to the extent that the price we
recognize on the sale is less than $8.75 per paired share.
USE OF PROCEEDS
The net proceeds from the sale of paired shares by PaineWebber, Nations and
UBS will be used to settle the PaineWebber, Nations and UBS transactions, as
more specifically described in the prospectus supplement relating to each offer
and sale of paired shares. The net proceeds to us from the sale of the
13,300,000 shares of Paired Common Stock, after deducting discounts and offering
expenses, in the transactions referred to under "Description of Forward Equity
Transactions" were approximately $352.7 million. We used the net proceeds to
repay outstanding indebtedness under our then existing $900 million revolving
credit facility. Our $900 million revolving credit facility expires in July 2000
and bears interest at LIBOR plus 100 to 200 basis points (depending on our
leverage ratio or investment grade ratings received from the rating agencies) or
a customary alternate base rate announced from time to time plus 0 to 50 basis
points (depending on our leverage ratio). Borrowings had been made under the
credit facility to repay borrowings by the Corporation's predecessor under a
previous line of credit.
12
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain provisions that currently
govern the 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 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--There are tax risks relating to the Corporation's qualification as a
REIT and the possible termination of REIT status--Exemption from Anti-Pairing
Rules; Recent Legislation Limits Use of Paired Share Structure" for a discussion
of recent legislation affecting the Companies' ability to utilize their paired
share structure and 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 PAIRED SHARES SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS INSURANCE
COMPANIES, FINANCIAL INSTITUTIONS, BROKER-DEALERS, TAX-EXEMPT ORGANIZATIONS,
NON-U.S. STOCKHOLDERS AND HOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE
EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. STOCKHOLDERS
OF THE COMPANIES ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE
SPECIFIC TAX CONSEQUENCES APPLICABLE TO THEM, INCLUDING ANY STATE, LOCAL OR
OTHER TAX CONSEQUENCES.
REIT QUALIFICATION
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
may qualify to be treated as a REIT, in which case they generally are not taxed
at the corporate level on their "real estate investment trust taxable income" or
net capital gain 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.
We have operated the Corporation in a manner intended to allow it to qualify
as a REIT. However, as discussed below, the securities purchase agreement
entered into on February 18, 1999, relating to the equity investment
contemplates that the Corporation will terminate its status as a REIT effective
January 1, 1999. If this equity investment is consummated, or if the Corporation
otherwise terminates its REIT status or fails to qualify as a REIT, 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, distributions to
stockholders will no longer be deductible or required, and the amount of such
distributions is likely to be reduced. Unless entitled to relief under certain
Code provisions, the Corporation also would be disqualified from re-electing
REIT status for the four taxable years following the year during which
qualification was lost and would permanently lose its special status as a
grandfathered paired share REIT. 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.
13
<PAGE>
Investors should be aware that if the proposed equity investment is
completed as planned, the Corporation intends to terminate its REIT status
effective January 1, 1999. Nonetheless, because of the possibility that the
Corporation may still seek to retain its REIT status beyond December 31, 1998,
and because the Corporation would owe significant amount of unpaid taxes if it
were determined it failed to qualify as a REIT at any time prior to January 1,
1999, the following discussion includes certain federal income consequences
associated with the Corporation's status as a REIT.
Goodwin, Procter & Hoar LLP, special tax counsel to the Corporation, has
previously rendered an opinion 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 would 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 us on or about the date of such opinion as to factual matters, including
representations regarding the nature of our properties and the future conduct of
our business. Any inaccuracy in such assumptions and representations (including
as a result of our activities subsequent to the date of the opinion, such as the
closing of the equity investment or a decision by us to otherwise terminate our
REIT status) 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 our 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, including the recently enacted paired share legislation, for which
there are only limited, if any, 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--There are tax risks relating to the Corporation's qualification as a
REIT and the possible termination of REIT status." 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 to legal opinion. The Code provisions requiring
the distribution of earnings and profits as determined for federal income tax
purposes (the "E&P") inherited from C corporations depends on our accurate
calculation of such amounts, which calculations could be challenged by the IRS.
The opinion of Goodwin, Procter & Hoar LLP necessarily relies on representations
from us and assumptions as to these factual determinations. Finally,
qualification as a REIT also depends on the determination of various factual
matters and circumstances not entirely within our control. Accordingly, no
assurance can be given that the Corporation has satisfied and will satisfy the
REIT qualification tests on a continuing basis.
IMPACT OF PROPOSED EQUITY INVESTMENT ON REIT STRUCTURE
On February 18, 1999, we entered into an agreement regarding the equity
investment. In connection with the equity investment and the required
restructuring transactions, the Corporation would become a subsidiary of the
Operating Company and convert from a REIT to a C corporation. The termination of
REIT status would have a retroactive date of January 1, 1999. The consummation
of this investment is subject to numerous other conditions, including approval
by the Corporation's stockholders.
If the equity investment is consummated in 1999 as planned, or if the
Corporation otherwise terminates its REIT status beginning in 1999, the
Corporation will be subject to tax as a C corporation in 1999 and subsequent
years. Therefore, the Corporation will be subject to federal income tax
14
<PAGE>
(including any applicable alternative minimum tax) at regular corporate tax
rates. Distributions to stockholders will no longer be deductible or required,
and the amount of such distributions is likely to be reduced. Any amounts
distributed will be subject to the general rules governing distributions from a
C corporation. The termination of the Corporation's REIT status will also cause
the Corporation to permanently lose its special status as a grandfathered paired
share REIT and the Corporation will be disqualified from re-electing REIT status
for the four taxable years following the year in which REIT status is lost.
Because consummation of the equity investment and the termination of REIT
status remains subject to the satisfaction of numerous conditions, this
discussion of federal income tax consequences, except as explicitly noted,
summarizes the provisions governing the treatment of the Corporation and its
stockholders assuming that the Corporation continues to operate so as to qualify
as a REIT.
PAIRED SHARES; TAX LEGISLATION
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 would not be eligible to be taxed as a REIT. Section 269B(a)(3)
does not apply, however, if the shares of the REIT and the non-REIT were paired
on 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, subject to the limitations imposed by recent legislation discussed
below. 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.
Our ability to utilize the paired structure is limited as a result of the
Reform Act, which was signed into law on July 22, 1998. The Reform Act includes
a freeze on the grandfathered status of paired share REITs such as the
Corporation and generally requires us to modify our method of operations with
respect to newly acquired assets. In September 1998, we announced that we
elected to maintain our paired share structure despite the anti-pairing rules
contained in the Reform Act. Therefore, we will continue to be subject to the
constraints of the new legislation, which will limit our ability to acquire new
assets or make substantial improvements to our existing properties. See "Risk
Factors--There are tax risks relating to the Corporation's qualification as a
REIT and the possible termination of REIT status --Exemption from Anti-Pairing
Rules; Recent Legislation Limits Use of Paired Share Structure."
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--There are tax risks relating to
the Corporation's qualification as a REIT and the possible termination of REIT
status--Potential Reallocation of Income." In addition, any challenge to the
pricing of intercompany transactions could raise issues under recent legislation
affecting paired share companies and therefore could affect the Corporation's
ability to qualify as a REIT. See "Risk Factors--There are tax risks relating to
the Corporation's qualification as a REIT and
15
<PAGE>
the possible termination of REIT status--Exemption from Anti-Pairing Rules;
Recent Legislation Limits Use of Paired Share Structure."
BUILT-IN GAIN TAX
Under certain circumstances, if the Corporation recognizes gain on the
disposition of an asset acquired from a C corporation (including the assets
acquired from Wyndham Hotel Corporation or Interstate Hotels Company) during the
ten-year period beginning on the date of the 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 acquisition over its then tax basis), the Corporation will
be subject to tax on such gain at the highest regular corporate rate applicable,
pursuant to Treasury Regulations not yet promulgated. The Corporation would be
required to distribute 95% of the excess of the amount of recognized built-in
gain over the amount of tax paid in order to maintain the Corporation's
qualification as a REIT. The foregoing assumes that the Corporation makes an
election pursuant to IRS Notice 88-19 with respect to the acquisition. If the
election is not made, the aggregate amount of built-in gain with respect to each
of the two mergers would be subject to tax in the year of acquisition. We have
made and will generally make the election pursuant to the IRS Notice 88-19 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.
EFFECTS OF COMPLIANCE WITH REIT REQUIREMENTS
INCOME TESTS
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 least 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,
the Corporation generally leases its hotels to lessees (including 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
16
<PAGE>
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.
Even if the Corporation retains its REIT status, the Corporation has engaged
and 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. In addition, real
estate assets acquired after March 26, 1998, that are not grandfathered under
the recently enacted paired share legislation generally would generate
nonqualifying income. The Corporation may reduce the amount of nonqualifying
income by holding such assets through corporate subsidiaries subject to income
tax. See "Risk Factors--There are tax risks relating to the Corporation's
qualification as a REIT and the possible termination of REIT status--Exemption
from Anti-Pairing Rules; Recent Legislation Limits Use of Paired Share
Structure." However, if the Operating Company also holds an interest in any such
taxable subsidiary, then the Corporation might be required to take into account
as nonqualifying income any revenues attributable to the Operating Company's
interest in such subsidiary. Under the paired share legislation, nonqualifying
income also generally includes interest income received with respect to
intercompany mortgage loans (including loans made to the Operating Company or
taxable subsidiaries), unless the rate of interest does not exceed an
arm's-length rate or certain grandfathering rules apply. Until we terminate our
REIT status, we intend to monitor and manage our activities and investments so
that the amount of nonqualifying income does not exceed applicable limits. There
can be no assurance, however, that our efforts will be successful.
ASSET TESTS
The REIT requirements 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. Because of the
constraints imposed by recently enacted legislation, until we terminate our REIT
status the Corporation might use taxable corporate subsidiaries to hold newly
acquired real estate assets. See "Risk Factors--There are tax risks relating to
the Corporation's qualification as a REIT and the possible termination of REIT
status--Exemption from Anti-Paring Rules; Recent Legislation Limits Use of
Paired Share Structure." The stock and unsecured debt securities of any such
subsidiary will be treated as a non-real estate asset for REIT asset test
purposes. However, we may reduce the value of the stock of such subsidiaries
through the use of mortgage loans made by the Corporation to the subsidiary. In
addition, because the Corporation, for so long as it qualifies as a REIT, may
not hold 10% or more of the voting securities of a corporate issuer, voting
control of such subsidiaries will generally be held by the Operating Company or
by individual officers and/or directors of the Companies.
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, until we terminate our
REIT status we intend to monitor the Corporation's 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,
17
<PAGE>
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.
OTHER RESTRICTIONS
In addition to the considerations discussed above, the REIT requirements
impose a number of other restrictions on the operations of the Corporation. For
example, net income from sales of property sold to customers in the ordinary
course of business (other than inventory acquired by reason of certain
foreclosures) is subject to a 100% tax unless eligible for a certain safe
harbor. Minimum distribution requirements also generally require the Corporation
to distribute each year at least 95% of its taxable income for the year
(excluding any net capital gain). See "Risk Factors--There are tax risks
relating to the Corporation's qualification as a REIT and the possible
termination of REIT status--Adverse Effects of REIT Minimum Distribution
Requirements."
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. For so long as
the Corporation retains its REIT status, the Companies might increase the use of
taxable subsidiaries in order to make acquisitions of real estate assets that
would otherwise be subject to the recently enacted anti-pairing rules. See "Risk
Factors--There are tax risks relating to the Corporation's qualification as a
REIT and the possible termination of REIT status--Exemption from Anti-Pairing
Rules; Recent Legislation Limits Use of Paired Share Structure."
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) 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
18
<PAGE>
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 gain 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
short-term capital gain if the Corporation common stock has been held for one
year or less), assuming the 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.
Regardless of whether the Corporation qualifies as a REIT, 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, such
distributions will be included in income as long-term capital gain (or
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. For any period in which the Corporation does not qualify as a REIT,
distributions from it will be taxed in the same manner as distributions from the
Operating Company.
With respect to periods for which the Corporation qualifies as a REIT, the
Corporation may retain and pay income tax on its net long-term capital gains
recognized during the taxable year. 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
19
<PAGE>
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. We 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") altered 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. However, the Internal
Revenue Service Restructuring Reform Act of 1998 eliminated the 18 month holding
period requirement, effective for taxable years ending after December 31, 1997,
and therefore the 20% long-term capital gains rates will generally apply to
capital assets held more than one year. The Relief Act also provided for 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
until it terminates its REIT status. 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%. Similar rules will apply in
the case of designated retained capital gains (see above discussion). We 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). We 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
20
<PAGE>
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 sales of interests in
REITs, and it remains unclear how the new rules will affect such sales (if at
all). Finally, the Internal Revenue Service has not yet issued any guidance
modifying the rules set forth in the Notice to take into account the recent
elimination of the 18 month holding period required to be eligible for the
preferential 20% capital gains rate. Investors are urged to consult their own
tax advisors with respect to the rules contained in the Relief Act.
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,
and otherwise as short-term capital gain or loss. In addition, during any period
for which the Corporation qualifies as a REIT, 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"). 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,
under 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.
21
<PAGE>
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time of up to an
aggregate of 111,245,475 paired shares issuable pursuant to the respective
forward equity agreements with PaineWebber, Nations and UBS. See "Description of
Forward Equity Transactions."
PaineWebber, Nations or UBS may sell or distribute paired shares from time
to time through brokers or dealers or in a distribution by one or more
additional underwriters on a firm commitment or best efforts basis, on the NYSE,
in the over-the-counter market, on any other national securities exchange on
which our paired shares are listed or traded, in privately negotiated
transactions or otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Except
as described above, we will not receive any proceeds from sales of paired
shares.
The methods by which paired shares may be sold or distributed under the
PaineWebber forward agreement include the following: (i) an underwritten
fixed-price offering, (ii) a privately negotiated sale involving at least a
block (as defined in Rule 10b-18 under the Exchange Act) of paired shares, (iii)
a sale into the existing trading market of paired shares at other than a fixed
price, on or through the facilities of a national securities exchange or to or
through a market-maker otherwise than on a securities exchange, and (iv) sales
to any distribution reinvestment plan now or hereafter established by us, or to
any agent selling on behalf of such plan, for sale to plan participants. The
methods by which the paired shares may be sold or distributed under the Nations
forward agreement include the following: (i) an underwritten fixed-price
offering, (ii) a privately negotiated sale to one or more institutional
investors, or (iii) a sale into the existing trading market for paired shares at
other than a fixed price, on or through the facilities of a national securities
exchange or to or through a market-maker otherwise than on a securities
exchange. The forward agreement with UBS does not specify the methods by which
paired shares may be sold or distributed.
In effecting sales, brokers or dealers engaged by PaineWebber, Nations or
UBS may arrange for other brokers or dealers to participate. Any public offering
price and any discount or concessions allowed or reallowed or paid to dealers
may be changed from time to time. PaineWebber, Nations or UBS may from time to
time deliver all or a portion of the paired shares to cover short sales or upon
the exercise, settlement or closing of a call or put equivalent position.
In connection with a sale of paired shares, the following information will,
to the extent then required, be provided in the prospectus supplement relating
to such sale or in a post-effective amendment to the registration statement of
which this prospectus is a part: the number of paired shares to be sold, the
purchase price, the public offering price, the method of distribution, the name
of any underwriter, agent or broker-dealer, and any applicable commissions,
discounts or other items constituting compensation to such underwriters, agents
or broker-dealers with respect to the particular sale.
PaineWebber, Nations and UBS and the broker-dealers participating in the
distribution of the paired shares are "underwriters" within the meaning of the
Securities Act and any profit on the sale of the paired shares by any of them,
together with the returns to PaineWebber, Nations and UBS and the placement fees
described above, will be regarded as underwriting commissions under the
Securities Act. PaineWebber, Nations and UBS are entitled, under their
respective purchase agreements, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act.
We will pay all reasonable expenses in connection with the registration of
the paired shares. Except as described in "Description of Forward Equity
Transactions," the applicable underwriter will be responsible for any brokerage
or underwriting commissions and taxes of any kind (including, without
limitation, transfer taxes) due to a third party with respect to any
disposition, sale or transfer of the paired shares, and legal, accounting and
other expenses incurred by it.
22
<PAGE>
In connection with the sale or distribution of the paired shares, the rules
of the Commission permit any underwriter to engage in certain transactions that
stabilize, maintain or otherwise affect the price of the paired shares. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the paired shares.
If any underwriter creates a short position in the paired shares in
connection with the sale or distribution of the paired shares--i.e., if the
underwriter sells more paired shares than are covered by this prospectus, such
underwriter may reduce that short position by purchasing paired shares in the
open market.
Any managing underwriter(s) may also impose a penalty bid on certain
underwriters and selling group members. This means that, if any managing
underwriter purchases paired shares in the open market to reduce any
underwriter's short position, or to stabilize the price of the paired shares,
such managing underwriter may reclaim the amount of the selling concession from
any such underwriters and selling group members who sold those paired shares.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither we nor any underwriter makes any representation or prediction as to
the direction or magnitude of any effect that any of the transactions described
above may have on the price of the paired shares. In addition, neither we nor
any underwriter makes any representation that any underwriter will engage in any
such transaction or that any such transaction, once commenced, will not be
discontinued without notice.
In order to comply with the securities laws of certain states, if
applicable, the paired shares offered by this prospectus 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, have been
passed upon for the Corporation and the Operating Company by Goodwin, Procter &
Hoar LLP, Boston, Massachusetts, as corporate and securities counsel.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the: 1. (a) Combined
Financial Statements of Patriot American Hospitality, Inc. ("Patriot") and
Wyndham International, Inc. ("Wyndham") as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998, (b) the
Consolidated Financial Statements of Patriot as of December 31, 1998 and 1997
and for each of the three years in the period ended December 31, 1998 and the
related financial statement schedules, and (c) the Consolidated Financial
Statements of Wyndham as of December 31, 1998 and 1997 and for the year ended
December 31, 1998 and the six months ended December 31, 1997 included in the
Joint Annual Report on Form 10-K/A No. 1 of Patriot American Hospitality, Inc.
and Wyndham International, Inc. for fiscal year ended December 31, 1998, as set
forth in their report which is incorporated by reference in this prospectus; 2.
(a) Consolidated Financial Statement 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, 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, included
23
<PAGE>
in the Joint Current Report on Form 8-K of Patriot American Hospitality, Inc.
and Wyndham International, Inc. dated April 20, 1998 (filed April 22, 1998) as
set forth in their reports which are incorporated by reference in this
prospectus; 3. (a) Consolidated Financial Statements of SF Hotel Company, L.P.
as of January 2, 1998 and January 3, 1997 and for the years then ended, and (b)
Combined Financial Statements of SC Suites Summerfield partnerships as of
January 2, 1998 and January 3, 1997 and for the three years in the period ended
January 2, 1998, included in the Joint Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc. dated June 2, 1998,
as amended (filed June 17, 1998 and August 6, 1998), as set forth in their
reports which are incorporated by reference in this prospectus. Each of the
above referenced financial statements and schedules are incorporated herein by
reference in reliance on Ernst & Young LLP's reports, given on their authority
as experts in accounting and auditing.
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 Joint Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Wyndham International, Inc. dated January 5, 1998, which
is incorporated by reference herein, have been audited by PriceWaterhouseCoopers
LLP as set forth in their report thereon included therein and incorporated
herein by reference. The (a) 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
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, and the CHC Lease Partners
financial statements as of December 31, 1996 and the period inception (October
2, 1995) through December 31, 1995, incorporated by reference herein, by
reference to the Current Report on Form 8-K dated July 1, 1997, and the CHC
International Hospitality Division Financial Statements as of November 30, 1995,
1996 and 1997 included in the Joint Current Report on Form 8-K of Patriot
American Hospitality, Inc. and Wyndham International, Inc. dated April 20, 1998
(filed April 22, 1998), (c) financial statements of Royal Palace Associates as
of December 31, 1997 and for the year then ended incorporated by reference
herein, by reference to the Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Wyndham International, Inc., dated June 2, 1998 which is
incorporated by reference herein have been audited by PriceWaterhouseCoopers
LLP, independent accountants, as set forth in their report thereon. Each of the
above referenced financial statements have been incorporated by reference herein
in reliance upon the authority of said firm as experts in accounting and
auditing.
The financial statements of Arcadian International Limited (formerly
Arcadian International Plc) and subsidiary undertakings and Malmaison Limited
and subsidiary undertakings, incorporated in this Prospectus by reference from
the Joint Current Report on Form 8-K/A No. 2 dated June 2, 1998 of Patriot
American Hospitality, Inc. and Wyndham International, Inc. have been audited by
Arthur Andersen, chartered accountants, as indicated in their reports with
respect thereto, and are incorporated herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving such reports.
24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS. YOU SHOULD NOT RELY ON ANY SUCH OTHER INFORMATION OR
REPRESENTATIONS. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS
OR IN ANY SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT
OF SUCH DOCUMENT. WE ARE NOT MAKING AN OFFER OF SECURITIES IN ANY STATE WHERE
THE OFFER IS NOT PERMITTED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 1
Incorporation of Certain Documents by Reference........................... 1
Certain Definitions....................................................... 2
Risk Factors.............................................................. 3
Description of Forward Equity Transactions................................ 8
Use of Proceeds........................................................... 11
Certain Federal Income Tax Considerations................................. 12
Plan of Distribution...................................................... 21
Legal Matters............................................................. 22
Experts................................................................... 22
</TABLE>
PATRIOT AMERICAN
HOSPITALITY, INC.
111,245,475 SHARES OF
COMMON STOCK
WYNDHAM
INTERNATIONAL, INC.
111,245,475 SHARES OF
COMMON STOCK
---------------
PROSPECTUS
---------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
Registration fee.................................................. $ 94,520
Printing fees and expenses........................................ 15,000
Legal fees and expenses........................................... 50,000
Accounting fees and expenses...................................... 30,000
Miscellaneous..................................................... 10,000
---------
Total............................................................. $ 199,520
---------
---------
</TABLE>
- ------------------------
* Fees and expenses are estimated with the exception of the registration fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a corporation
to indemnify its directors, officers, employees and agents against certain
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, provided they act in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation. The Corporation's and the Operating Company's respective
certificates of incorporation and bylaws require the Corporation or the
Operating Company, as the case may be, to indemnify its officers and directors
to the full extent permitted by Delaware law.
Section 102 of the Delaware General Corporation Law authorizes a corporation
to limit or eliminate its directors' liability to the corporation or its
stockholders for monetary damages for breaches of fiduciary duties, other than
for (a) breaches of the duty of loyalty, (b) acts or omissions involving bad
faith, intentional misconduct or knowing violations of the law, (c) unlawful
payments of dividends, stock purchases or redemptions, or (d) transactions from
which a director derives an improper personal benefit. The Corporation's and the
Operating Company's respective certificates of incorporation contain provisions
limiting the liability of the directors of the Corporation or the Operating
Company, as the case may be, and to its stockholders to the full extent
permitted by Delaware law.
Section 145 of the Delaware General Corporation Law authorizes a corporation
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation against any liability
asserted against him and incurred by him or her in any such capacity, or arising
out of his or her status as such. The Corporation's and the Operating Company's
respective certificates of incorporation and bylaws provide that the Corporation
or the Operating Company, as the case may be, may, to the full extent permitted
by law, purchase and maintain insurance on behalf of any director, officer,
employee or agent of the Corporation or the Operating Company, as the case may
be, against any liability that may be asserted against him or her, and each of
the Companies currently maintains such insurance. Each of the Companies
currently has $75 million of liability insurance covering its directors and
officers for claims asserted against it or incurred by it in such capacity,
including claims brought under the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
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)).
4.3 Shareholder Rights Agreement, dated as of December 20, 1998, between
Patriot American Hospitality, Inc. and American Stock Transfer and Trust
Company, as Right Agent (incorporated by reference to Exhibit 4.1 to
Patriot American Hospitality, Inc.'s and Wyndham International, Inc.'s
Current Report on Form 8-K dated as of December 22, 1998) (Nos.
001-09319 and 001-09320)
5.1 Opinion of Goodwin, Procter & Hoar LLP as to legality of securities being
offered (previously filed).
23.1 Consent of Goodwin, Procter & Hoar LLP (previously filed).
*23.2 Consent of Ernst & Young LLP, Dallas, Texas.
*23.3 Consent of Ernst & Young LLP, San Juan, Puerto Rico.
*23.4 Consent of Ernst & Young LLP, Wichita, Kansas.
*23.5 Consent of PricewaterhouseCoopers LLP, Pittsburgh, Pennsylvania.
*23.6 Consent of PricewaterhouseCoopers LLP, Dallas, Texas.
*23.7 Consent of PricewaterhouseCoopers LLP, Tampa, Florida.
*23.8 Consent of PricewaterhouseCoopers LLP, Miami, Florida.
*23.9 Consent of Arthur Andersen, London, United Kingdom.
24.1 Powers of Attorney (included on signature pages to the Registration
Statement).
99.1 Purchase Agreement, dated as of April 6, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc., PaineWebber
Incorporated and PaineWebber Financial Products, Inc. (incorporated by
reference to Exhibit 10.1 to Patriot American Hospitality, Inc.'s and
Wyndham International, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998) (Nos. 001-09319 and 001-09320).
99.2 Purchase Price Adjustment Mechanism Agreement, dated as of April 6, 1998,
by and among Patriot American Hospitality, Inc., Wyndham International,
Inc., PaineWebber Incorporated and PaineWebber Financial Products, Inc.
(incorporated by reference to Exhibit 10.3 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998) (Nos. 001-09319 and
001-09320).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
99.3 Letter Agreement, dated July 30, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 10.2 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998) (Nos.
001-09319 and 001-09320).
99.4 Letter Agreement, dated August 14, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 10.4 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998) (Nos. 001-09319
and 001-09320).
99.5 Letter, dated September 15, 1998, from PaineWebber Financial Products,
Inc. to Patriot American Hospitality, Inc. and Wyndham International,
Inc. (incorporated by reference to Exhibit 10.4 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998) (Nos. 001-09319
and 001-09320).
99.6 Letter Agreement, dated September 30, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 10.5 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998) (Nos.
001-09319 and 001-09320).
99.7 Letter Agreement, dated October 22, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products Inc. (incorporated by reference to Exhibit 10.6 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the Quarter ended September 30, 1998) (Nos.
001-09319 and 001-09320).
99.8 Letter Agreement, dated February 1, 1999, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 99.2 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Current
Report on Form 8-K dated as of January 29, 1999) (Nos. 001-09319 and
001-09320).
99.9 Letter dated February 28, 1999 by and among Patriot American Hospitality,
Inc., Wyndham International, Inc. and PaineWebber Financial Products,
Inc. (incorporated by reference to Exhibit 99.1 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1998) (Nos. 001-09319
and 001-09320).
99.10 Purchase Agreement, dated as of February 26, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc., and NMS
Services, Inc. (incorporated by reference to Exhibit 10.5 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998) (Nos. 001-09319
and 001-09320).
99.11 Purchase Price Adjustment Mechanism, dated as of February 26, 1998, by and
among Patriot American Hospitality, Inc., Wyndham International, Inc.,
and NMS Services, Inc. (incorporated by reference to Exhibit 10.6 to
Patriot American Hospitality, Inc.'s and Wyndham International, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998) (Nos.
001-09319 and 001-09320).
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
99.12 Amendment to Agreements, dated as of August 14, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc. and NationsBanc
Mortgage Capital Corporation (incorporated by reference to Exhibit 10.7
to Patriot American Hospitality, Inc.'s and Wyndham International,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1998) (Nos. 001-09319 and 001-09320).
99.13 Second Amendment to Agreements, dated November 23, 1998, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc. and
NationsBanc Mortgage Capital Corporation (incorporated by reference to
Exhibit 99.3 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Current Report on Form 8-K dated as of January 29,
1999) (Nos. 001-09319 and 001-09320).
99.14 Third Amendment to Agreements, dated December 10, 1998, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc. and
NationsBanc Mortgage Capital Corporation (incorporated by reference to
Exhibit 99.4 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Current Report on Form 8-K dated as of January 29,
1999) (Nos. 001-09319 and 001-09320).
99.15 Fourth Amendment to Agreements, dated January 4, 1999, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc. and
NationsBanc Mortgage Capital Corporation (incorporated by reference to
Exhibit 99.5 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Current Report on Form 8-K dated as of January 29,
1999) (Nos. 001-09319 and 001-09320).
99.16 Fifth Amendment to Agreements, dated February 1, 1999, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc., and
NationsBanc Mortgage Capital Corporation (incorporated by reference to
Exhibit 99.6 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Current Report on Form 8-K dated as of January 29,
1999) (Nos. 001-09319 and 001-09320).
99.17 Letter dated February 28, 1999 by and among Patriot American Hospitality,
Inc., Wyndham International, Inc. and NationsBanc Mortgage (incorporated
by reference to Exhibit 99.1 to Patriot American Hospitality, Inc.'s and
Wyndham International, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1998) (Nos. 001-09319 and 001-09320).
99.18 Purchase Agreement, dated December 31, 1997, by and among Patriot American
Hospitality, Inc., Patriot American Hospitality Operating Company, UBS
Limited and Union Bank of Switzerland (incorporated by reference to
Exhibit 10.8 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998) (Nos. 001-09319 and 001-09320).
99.19 Forward Stock Contract, dated as of December 31, 1997, by and among
Patriot American Hospitality, Inc., Patriot American Hospitality
Operating Company, and Union Bank of Switzerland (incorporated by
reference to Exhibit 10.9 to Patriot American Hospitality, Inc.'s and
Wyndham International, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998) (Nos. 001-09319 and 001-09320).
99.20 Letter Agreement, dated as of August 14, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc. and UBS AG,
London Branch (incorporated by reference to Exhibit 10.10 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998) (Nos. 001-09319
and 001-09320).
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
99.21 Letter Agreement, dated September 11, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and UBS AG, London Branch
(incorporated by reference to Exhibit 10.3 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998) (Nos. 001-09319
and 001-09320).
99.22 Letter Agreement, dated December 14, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and UBS AG, London Branch
(incorporated by reference to Exhibit 99.7 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Current Report on
Form 8-K dated as of January 29, 1999) (Nos. 001-09319 and 001-09320).
99.23 Letter Agreement, dated January 29, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and UBS AG, London Branch
(incorporated by reference to Exhibit 99.8 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Current Report on
Form 8-K dated as of January 29, 1999) (Nos. 001-09319 and 001-09320).
99.24 Letter dated February 28, 1999 by and among Patriot American Hospitality,
Inc., Wyndham International, Inc. and UBS, AG, London Branch
(incorporated by reference to Exhibit 99.1 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1998) (Nos. 001-09319
and 001-09320).
*99.25 Letter dated May 4, 1999 by and among Patriot American Hospitality, Inc.,
Wyndham International, Inc., PaineWebber Financial Products Inc. and
PaineWebber Incorporated.
*99.26 Letter dated May 4, 1999 by and among Patriot American Hospitality, Inc.,
Wyndham International, Inc., and NationsBanc Mortgage Capital
Corporation.
*99.27 Letter dated May 4, 1999 by and among Patriot American Hospitality, Inc.,
Wyndham International, Inc. and UBS AG, London Branch.
</TABLE>
- ------------------------
* Filed herewith
II-5
<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-6
<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, May 13, 1999.
<TABLE>
<S> <C> <C> <C>
PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC.
By: /s/ JAMES D. CARREKER
/s/ JAMES D. CARREKER ----------------------------------------
---------------------------------------- James D. Carreker
James D. Carreker Chairman of the Board and Chief
Chief Executive Officer Executive Officer
</TABLE>
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 John P. 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 ratifying 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>
NAME TITLE DATE
- ------------------------------ ------------------------------ ---------------
<C> <S> <C>
Chief Executive Officer and
/s/ JAMES D. CARREKER Director, Patriot American
- ------------------------------ Hospitality, Inc. (Principal May 13, 1999
James D. Carreker Executive Officer)
*
- ------------------------------ Director, Patriot American May 13, 1999
Paul A. Nussbaum Hospitality, Inc.
President, Chief Operating
* Officer and Director,
- ------------------------------ Patriot American May 13, 1999
William W. Evans III Hospitality, Inc.
Executive Vice President and
* Treasurer, Patriot American
- ------------------------------ Hospitality, Inc. (Principal May 13, 1999
Lawrence S. Jones Accounting Officer)
*
- ------------------------------ Director, Patriot American May 13, 1999
John H. Daniels Hospitality, Inc.
*
- ------------------------------ Director, Patriot American May 13, 1999
John C. Deterding Hospitality, Inc.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ ------------------------------ ---------------
<C> <S> <C>
*
- ------------------------------ Director, Patriot American May 13, 1999
Gregory R. Dillon Hospitality, Inc.
*
- ------------------------------ Director, Patriot American May 13, 1999
Arch K. Jacobson Hospitality, Inc.
*
- ------------------------------ Director, Patriot American May 13, 1999
Philip J. Ward Hospitality, Inc.
*
- ------------------------------ Director, Patriot American May 13, 1999
Milton Fine Hospitality, Inc.
By: /s/ JAMES D. CARREKER
- ------------------------------
Attorney-in-fact
</TABLE>
II-8
<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 John P. 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 ratifying 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>
NAME TITLE DATE
- ------------------------------ ------------------------------ ---------------
<C> <S> <C>
Chairman of the Board of
Directors and Chief
/s/ JAMES D. CARREKER Executive Officer, Wyndham
- ------------------------------ International, Inc. May 13, 1999
James D. Carreker (Principal Executive
Officer)
*
- ------------------------------ Director, Wyndham May 13, 1999
Paul A. Nussbaum International, Inc.
* President, Chief Operating
- ------------------------------ Officer and Director, May 13, 1999
Karim Alibhai Wyndham International, Inc.
Executive Vice President and
Treasurer, Wyndham
* International, Inc.
- ------------------------------ (Principal Financial Officer May 13, 1999
Lawrence S. Jones and Principal Accounting
Officer)
*
- ------------------------------ Director, Wyndham May 13, 1999
Arch K. Jacobson International, Inc.
*
- ------------------------------ Director, Wyndham May 13, 1999
Leonard Boxer International, Inc.
*
- ------------------------------ Director, Wyndham May 13, 1999
Burton C. Einspruch, M.D. International, Inc.
*
- ------------------------------ Director, Wyndham May 13, 1999
Sherwood Weiser International, Inc.
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ ------------------------------ ---------------
<C> <S> <C>
*
- ------------------------------ Director, Wyndham May 13, 1999
James C. Leslie International, Inc.
*
- ------------------------------ Director, Wyndham May 13, 1999
Susan T. Groenteman International, Inc.
*
- ------------------------------ Director, Wyndham May 13, 1999
Rolf E. Ruhfus International, Inc.
By: /s/ JAMES D. CARREKER
- ------------------------------
Attorney-in-fact
</TABLE>
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
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)).
4.3 Shareholder Rights Agreement, dated as of December 20, 1998, between
Patriot American Hospitality, Inc. and American Stock Transfer and Trust
Company, as Right Agent (incorporated by reference to Exhibit 4.1 to
Patriot American Hospitality, Inc.'s and Wyndham International, Inc.'s
Current Report on Form 8-K dated as of December 22, 1998) (Nos.
001-09319 and 001-09320)
5.1 Opinion of Goodwin, Procter & Hoar LLP as to legality of securities being
offered (previously filed).
23.1 Consent of Goodwin, Procter & Hoar LLP (previously filed).
*23.2 Consent of Ernst & Young LLP, Dallas, Texas.
*23.3 Consent of Ernst & Young LLP, San Juan, Puerto Rico.
*23.4 Consent of Ernst & Young LLP, Wichita, Kansas.
*23.5 Consent of PricewaterhouseCoopers LLP, Pittsburgh, Pennsylvania.
*23.6 Consent of PricewaterhouseCoopers LLP, Dallas, Texas.
*23.7 Consent of PricewaterhouseCoopers LLP, Tampa, Florida.
*23.8 Consent of PricewaterhouseCoopers LLP, Miami, Florida.
*23.9 Consent of Arthur Andersen, London, United Kingdom.
24.1 Powers of Attorney (included on signature pages to the Registration
Statement).
99.1 Purchase Agreement, dated as of April 6, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc., PaineWebber
Incorporated and PaineWebber Financial Products, Inc. (incorporated by
reference to Exhibit 10.1 to Patriot American Hospitality, Inc.'s and
Wyndham International, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998) (Nos. 001-09319 and 001-09320).
99.2 Purchase Price Adjustment Mechanism Agreement, dated as of April 6, 1998,
by and among Patriot American Hospitality, Inc., Wyndham International,
Inc., PaineWebber Incorporated and PaineWebber Financial Products, Inc.
(incorporated by reference to Exhibit 10.3 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998) (Nos. 001-09319 and
001-09320).
99.3 Letter Agreement, dated July 30, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 10.2 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998) (Nos.
001-09319 and 001-09320).
99.4 Letter Agreement, dated August 14, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 10.4 to Patriot
American Hospitality, Inc.'s and Wyndham
</TABLE>
<PAGE>
<TABLE>
<C> <S>
International, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998) (Nos. 001-09319 and 001-09320).
99.5 Letter, dated September 15, 1998, from PaineWebber Financial Products,
Inc. to Patriot American Hospitality, Inc. and Wyndham International,
Inc. (incorporated by reference to Exhibit 10.4 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998) (Nos. 001-09319
and 001-09320).
99.6 Letter Agreement, dated September 30, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 10.5 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998) (Nos.
001-09319 and 001-09320).
99.7 Letter Agreement, dated October 22, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products Inc. (incorporated by reference to Exhibit 10.6 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the Quarter ended September 30, 1998) (Nos.
001-09319 and 001-09320).
99.8 Letter Agreement, dated February 1, 1999, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and PaineWebber Financial
Products, Inc. (incorporated by reference to Exhibit 99.2 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Current
Report on Form 8-K dated as of January 29, 1999) (Nos. 001-09319 and
001-09320).
99.9 Letter dated February 28, 1999 by and among Patriot American Hospitality,
Inc., Wyndham International, Inc. and PaineWebber Financial Products,
Inc. (incorporated by reference to Exhibit 99.1 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1998) (Nos. 001-09319
and 001-09320).
99.10 Purchase Agreement, dated as of February 26, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc., and NMS
Services, Inc. (incorporated by reference to Exhibit 10.5 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998) (Nos. 001-09319
and 001-09320).
99.11 Purchase Price Adjustment Mechanism, dated as of February 26, 1998, by and
among Patriot American Hospitality, Inc., Wyndham International, Inc.,
and NMS Services, Inc. (incorporated by reference to Exhibit 10.6 to
Patriot American Hospitality, Inc.'s and Wyndham International, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998) (Nos.
001-09319 and 001-09320).
99.12 Amendment to Agreements, dated as of August 14, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc. and NationsBanc
Mortgage Capital Corporation (incorporated by reference to Exhibit 10.7
to Patriot American Hospitality, Inc.'s and Wyndham International,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1998) (Nos. 001-09319 and 001-09320).
99.13 Second Amendment to Agreements, dated November 23, 1998, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc. and
NationsBanc Mortgage Capital Corporation (incorporated by reference to
Exhibit 99.3 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Current Report on Form 8-K dated as of January 29,
1999) (Nos. 001-09319 and 001-09320).
99.14 Third Amendment to Agreements, dated December 10, 1998, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc. and
NationsBanc Mortgage Capital Corporation (incorporated by reference to
Exhibit 99.4 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Current Report on Form 8-K dated as of January 29,
1999) (Nos. 001-09319 and 001-09320).
99.15 Fourth Amendment to Agreements, dated January 4, 1999, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc. and
NationsBanc Mortgage Capital Corporation (incorporated by reference to
Exhibit 99.5 to Patriot American Hospitality,
</TABLE>
<PAGE>
<TABLE>
<C> <S>
Inc.'s and Wyndham International, Inc.'s Current Report on Form 8-K
dated as of January 29, 1999) (Nos. 001-09319 and 001-09320).
99.16 Fifth Amendment to Agreements, dated February 1, 1999, by and among
Patriot American Hospitality, Inc., Wyndham International, Inc., and
NationsBanc Mortgage Capital Corporation (incorporated by reference to
Exhibit 99.6 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Current Report on Form 8-K dated as of January 29,
1999) (Nos. 001-09319 and 001-09320).
99.17 Letter dated February 28, 1999 by and among Patriot American Hospitality,
Inc., Wyndham International, Inc. and NationsBanc Mortgage (incorporated
by reference to Exhibit 99.1 to Patriot American Hospitality, Inc.'s and
Wyndham International, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1998) (Nos. 001-09319 and 001-09320).
99.18 Purchase Agreement, dated December 31, 1997, by and among Patriot American
Hospitality, Inc., Patriot American Hospitality Operating Company, UBS
Limited and Union Bank of Switzerland (incorporated by reference to
Exhibit 10.8 to Patriot American Hospitality, Inc.'s and Wyndham
International, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998) (Nos. 001-09319 and 001-09320).
99.19 Forward Stock Contract, dated as of December 31, 1997, by and among
Patriot American Hospitality, Inc., Patriot American Hospitality
Operating Company, and Union Bank of Switzerland (incorporated by
reference to Exhibit 10.9 to Patriot American Hospitality, Inc.'s and
Wyndham International, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998) (Nos. 001-09319 and 001-09320).
99.20 Letter Agreement, dated as of August 14, 1998, by and among Patriot
American Hospitality, Inc., Wyndham International, Inc. and UBS AG,
London Branch (incorporated by reference to Exhibit 10.10 to Patriot
American Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998) (Nos. 001-09319
and 001-09320).
99.21 Letter Agreement, dated September 11, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and UBS AG, London Branch
(incorporated by reference to Exhibit 10.3 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998) (Nos. 001-09319
and 001-09320).
99.22 Letter Agreement, dated December 14, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and UBS AG, London Branch
(incorporated by reference to Exhibit 99.7 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Current Report on
Form 8-K dated as of January 29, 1999) (Nos. 001-09319 and 001-09320).
99.23 Letter Agreement, dated January 29, 1998, by and among Patriot American
Hospitality, Inc., Wyndham International, Inc. and UBS AG, London Branch
(incorporated by reference to Exhibit 99.8 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Current Report on
Form 8-K dated as of January 29, 1999) (Nos. 001-09319 and 001-09320).
99.24 Letter dated February 28, 1999 by and among Patriot American Hospitality,
Inc., Wyndham International, Inc. and UBS, AG, London Branch
(incorporated by reference to Exhibit 99.1 to Patriot American
Hospitality, Inc.'s and Wyndham International, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1998) (Nos. 001-09319
and 001-09320).
*99.25 Letter dated May 4, 1999 by and among Patriot American Hospitality, Inc.,
Wyndham International, Inc., PaineWebber Financial Products Inc. and
PaineWebber Incorporated.
*99.26 Letter dated May 4, 1999 by and among Patriot American Hospitality, Inc.,
Wyndham International, Inc. and NationsBanc Mortgage Capital
Corporation.
*99.27 Letter dated May 4, 1999 by and among Patriot American Hospitality, Inc.,
Wyndham International, Inc. and UBS AG, London Branch.
</TABLE>
- ------------------------
* Filed herewith
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in Amendment No. 1 to the Joint Registration Statement on Form S-3 (Nos.
333-77271 and 333-77271-1) and the related Prospectus of Patriot American
Hospitality, Inc. and Wyndham International, Inc. ("Companies") and to the
incorporation by reference therein of our report dated March 1, 1999 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 1998 Joint Annual Report on Form 10-K/A No. 1 of Patriot
American Hospitality, Inc. and Wyndham International, Inc., filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Dallas, Texas
May 6, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in Amendment No. 1 to the Joint Registration Statement on Form S-3
(No. 333-77271 and 333-77271-1) and the related Prospectus of Patriot American
Hospitality, Inc. and Wyndham International, Inc. ("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 Wyndham International, Inc. dated April 20,
1998, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
San Juan, Puerto Rico
May 6, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in Amendment No. 1 to the Joint Registration Statement on Form S-3 (Nos.
333-77271 and 333-77271-1) and the related Prospectus of Patriot American
Hospitality, Inc. and Wyndham International, Inc. ("Companies") and to the
incorporation by reference therein of our reports (a) dated March 4, 1998
with respect to the Consolidated Financial Statements of SF Hotel Company,
L.P.; and (b) dated February 3, 1998 with respect to the Combined Financial
Statements of SC Suites Summerfield Partnerships; both of which are included
in the Joint Current Report on Form 8-K/A No. 1 of Patriot American
Hospitality, Inc. and Wyndham International, Inc. dated June 2, 1998, filed
with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Wichita, Kansas
May 6, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts"
and to the incorporation by reference in Amendment No. 1 to the Joint
Registration Statement on Form S-3 of Patriot American Hospitality, Inc. and
Wyndham International, Inc. (Nos. 333-77271 and 333-77271-1) of our report
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/ PRICEWATERHOUSECOOPERS LLP
Pittsburgh, Pennsylvania
May 12, 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts"
and to the incorporation by reference in Amendment No. 1 to the Joint
Registration Statement on Form S-3 of Patriot American Hospitality, Inc. and
Wyndham International, Inc. (Nos. 333-77271 and 333-77271-1) of our reports
(i) 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; (ii) 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 (iii) 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/ PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
May 12, 1999
<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 Amendment No. 1 to the Joint
Registration Statement on Form S-3 of Patriot American Hospitality, Inc. and
Wyndham International, Inc. (Nos. 333-77271 and 333-77271-1) of our report
dated January 23, 1998, on our audit of the financial statements of Royal
Palace Hotel Associates, included in the Current Report on Form 8-K of
Patriot American Hospitality, Inc. and Patriot American Hospitality Operating
Company dated June 2, 1998.
/s/ PRICEWATERHOUSECOOPERS LLP
Tampa, Florida
May 12, 1999
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in Amendment No. 1 to the Prospectus constituting
part of the Joint Registration Statement on Form S-3 of Patriot American
Hospitality, Inc. and of Wyndham International, Inc. (Nos. 333-77271 and
333-77271-1) of our report 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
included in the Joint Current Report on Form 8-K of Patriot American
Hospitality, Inc. and Wyndham International, Inc. dated April 18, 1998.
/s/ PRICEWATERHOUSECOOPERS LLP
Miami, Florida
May 12, 1999
<PAGE>
EXHIBIT 23.9
CONSENT OF CHARTERED ACCOUNTANTS AND REGISTERED AUDITORS
As Chartered Accountants, we hereby consent to the incorporation by reference in
Amendment No. 1 to the Joint Registration Statement on Form S-3 covering the
sales of the additional collateral shares and the related Prospectus of Patriot
American Hospitality, Inc. (Nos. 333-77271 and 333-77271-1) and Wyndham
International, Inc. of our reports on the financial statements of Arcadian
International Limited (formerly Arcadian International Plc) and subsidiary
undertakings and Malmaison Limited and subsidiary undertakings dated 22 July
1998 and 17 July 1998 respectively, except with respect to Note 1 of those
financial statements as to which the date of our reports is 24 March 1999, which
are included in the Joint Current Report on Form 8-K/A No.2 of Patriot American
Hospitality, Inc. and Wyndham International, Inc., dated 2 June 1998.
/s/ ARTHUR ANDERSEN
- ------------------------------
Arthur Andersen
1 Surrey Street
London
WC2R 2PS
13 May 1999
<PAGE>
Exhibit 99.25
May 4, 1999
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: William W. Evans III
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: William W. Evans III
Ladies and Gentlemen:
This letter agreement among Patriot American Hospitality, Inc. (the
"REIT"), Wyndham International, Inc. (the "OPCO") (each a "Company" and
collectively, the Companies"), PaineWebber Incorporated ("Purchaser") and
PaineWebber Financial Products, Inc. ("Counterparty") confirms, modifies and
amends, in part, certain of the terms and conditions of that certain Purchase
Price Adjustment Mechanism Agreement, dated April 6, 1999 (the "Agreement")
between the Companies and Counterparty, as amended to date, and sets forth
certain additional agreements between the parties hereto. Defined terms not
otherwise defined herein shall have the meanings ascribed to them under the
Agreement.
Notwithstanding the terms and conditions of the Agreement, the Companies,
Purchaser and Counterparty agree as follows:
1. SPIN-OFF. Counterparty acknowledges that the REIT intends to effect a
spin-off (the "Spin- Off") of 92% of the shares of common stock of
Interstate Hotels Management, Inc. ("IHM Stock") and that a preliminary
information statement/prospectus with respect to the Spin- Off has been
filed as part of a registration statement on Form S-1 (the "Form S-1") with
the Securities and Exchange Commission. It is currently estimated that one
share of IHM Stock will be distributed with respect to every 25 shares of
the REIT's common stock ("REIT Stock"), including the shares of REIT Stock
that comprise part of the 5,150,000 Paired Shares purchased by Purchaser
pursuant to that certain Purchase Agreement dated as of the date of the
Agreement and held by Purchaser as of the date hereof, together with the
377,649 Paired Shares issued as dividends thereon (collectively, the
"Purchased Shares") and the 39,811,926 Paired Shares previously delivered
to Counterparty as collateral, and all shares hereafter delivered as
collateral, for obligations under the Agreement (the "Collateral Shares").
The actual ratio may be more or less than the ratio
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 2
specified in the preceding sentence and will be set forth in the Form S-1
at the time it becomes effective.
2. EFFECT OF SPIN-OFF. There shall be no reduction of the Reference Price or
other change or adjustment in the rights or obligations of Counterparty or
the Companies under the Agreement as a result of the distribution of the
IHM Stock in the Spin-Off. In lieu of any such reduction or change, and in
consideration of the delivery of additional collateral as provided in
paragraph 3 below, promptly upon receipt by them of the IHM Stock
distributed with respect to the Purchased Shares and the Collateral Shares
held by them as of the record date for the Spin-Off (the "Distributed
Shares"), Purchaser and Counterparty will deliver all of the Distributed
Shares to the REIT.
3. DELIVERY OF ADDITIONAL COLLATERAL. It shall be a condition to the
obligations of Purchaser and Counterparty to deliver the Distributed Shares
to the REIT that the Companies shall have delivered to Counterparty a
number of Paired Shares, rounded upward to the nearest whole share (the
"Additional Collateral Shares"), having a value (based on the average of
the closing prices of the Paired Shares on each of the five trading days
immediately preceding the date on which the Spin-Off is completed, as
reported on Bloomberg) equal to $8,437,711; PROVIDED HOWEVER, that if, as
of the record date for the Spin-Off, the Counterparty has sold any Paired
Shares in settlement of any of the Companies' obligations under the
Agreement, then such dollar amount shall be reduced by a percentage amount
equal to the quotient (expressed as a percentage) obtained by dividing (i)
the number of such Paired Shares sold, by (ii) the total number of
Purchased Shares and Collateral Shares as of the date hereof. The
Additional Collateral Shares will be held by Counterparty as additional
Collateral Shares, on the same terms and conditions as the Collateral
Shares.
4. TAX INDEMNITY. The Companies agree to indemnify Purchaser and Counterparty
(on an after tax basis, taking into account both tax burdens and tax
benefits resulting from the indemnification payment) for any taxes payable
by either of them as a direct result of receiving IHM Stock in the
Spin-Off; provided that the amount of such indemnity shall be reduced by
any "Tax Benefits" directly attributable to (i) the receipt of the IHM
Stock and/or (ii) the return of such shares to the REIT pursuant to this
Agreement that are realized in the same tax year of Purchaser and
Counterparty as the Spin-Off. The term "Tax Benefits" means any reduction
in taxes payable by the indemnified party or its affiliates (including by
reason of any basis increase in the Purchased Shares). Purchasers' and
Counterparty's right to enforce this indemnity is conditioned on their
providing notice to the Companies and a reasonable opportunity to comment
with respect to Purchaser's and Counterparty's tax and financial reporting
of the receipt of the IHM Stock and the return
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 3
of the IHM Stock to the Companies. If Purchaser or Counterparty realizes
Tax Benefits in tax years following the year of the Spin-Off and the
Companies have made payments hereunder ("Indemnity Payments"), then
Purchaser or Counterparty will pay the amount of such Tax Benefits to the
Companies, but only to the extent that the aggregate amount so paid to the
Companies does not exceed the aggregate amount of Indemnity Payments.
Purchaser and Counterparty further agree that they will treat the Companies
as the owners of the Collateral Shares for tax purposes (unless or until
such shares are foreclosed on by us) and that none of Purchaser,
Counterparty or their affiliates will treat the distribution of IHM Stock
with respect to the Collateral Shares as a distribution to any of them for
tax or financial reporting purposes.
In the event of a dispute with any government authority with respect to the
tax treatment of the transactions contemplated hereby (a "Tax Dispute"),
Purchaser and Counterparty agree (i) to provide prompt notice of the Tax
Dispute to the Companies and (ii) not to settle the Tax Dispute without the
Companies' consent, which consent shall not be unreasonably withheld,
delayed or conditioned; provided, that the Companies' consent rights
hereunder shall apply specifically and solely to the tax treatment of the
transactions contemplated hereby. If the Companies do not consent to a
settlement of a Tax Dispute, then the Companies shall pay Purchasers' and
Counterparty's reasonable costs of continuing to defend such Tax Dispute.
5 COLLATERALIZATION. The Additional Collateral Shares shall not be included
in determining whether the Companies have satisfied their obligation to
deliver Collateral Shares under the Agreement.
6. REGISTRATION STATEMENT. The Companies will use commercially reasonable
efforts to file, prior to completion of the Spin-Off, a registration
statement with the Securities and Exchange Commission covering the sale by
Counterparty of all Collateral Shares and Purchased Shares delivered to
Purchaser and Counterparty as of the date hereof and the Additional
Collateral Shares, to the extent such shares are not already covered by an
effective registration statement and to cause it to become effective as
promptly as reasonably practicable.
7. EFFECT. Notwithstanding this letter agreement, all other provisions of the
Agreement as amended remain in full force and effect. Nothing in this
letter agreement diminishes any rights of either party under the Purchase
Agreement and the Agreement.
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 4
8. GOVERNING LAW. This letter agreement shall be governed by New York law
without reference to its conflicts of laws principles.
Sincerely,
PAINEWEBBER FINANCIAL PAINEWEBBER INCORPORATED
PRODUCTS, INC.
By: /s/ Terrence E. Fancher By: /s/ Terrence E. Fancher
---------------------------------------- ------------------------
Name: Name:
Title: Title:
AGREED TO AND ACCEPTED as of the date hereof:
Patriot American Hospitality, Inc. Wyndham International, Inc.
By: /s/ William W. Evans III By: /s/ William W. Evans III
---------------------------------------- -------------------------
Name: William W. Evans III Name: William W. Evans III
Title: President Title: Executive Vice President
<PAGE>
Exhibit 99.26
May 4, 1999
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: William W. Evans III
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: William W. Evans III
Ladies and Gentlemen:
This letter agreement among Patriot American Hospitality, Inc. (the
"REIT"), Wyndham International, Inc. (the "OPCO") (each a "Company" and
collectively, the Companies") and NationsBanc Mortgage Capital Corporation
("Nations") confirms, modifies and amends, in part, certain of the terms and
conditions of that certain Purchase Price Adjustment Mechanism, dated February
26, 1998 (the "Agreement") between the Companies and Nations, as amended to
date, and sets forth certain additional agreements between the parties hereto.
Defined terms not otherwise defined herein shall have the meanings ascribed to
them under the Agreement.
Notwithstanding the terms and conditions of the Agreement, the Companies
and Nations agree as follows:
1. SPIN-OFF. Nations acknowledges that the REIT intends to effect a spin-off
(the "Spin-Off") of 92% of the shares of common stock of Interstate Hotels
Management, Inc. ("IHM Stock") and that a preliminary information
statement/prospectus with respect to the Spin- Off has been filed as part
of a registration statement on Form S-1 (the "Form S-1") with the
Securities and Exchange Commission. It is currently estimated that one
share of IHM Stock will be distributed with respect to every 25 shares of
the REIT's common stock ("REIT Stock"), including the shares of REIT Stock
that comprise part of the 4,900,000 Paired Shares purchased by Nations
pursuant to that certain Purchase Agreement dated as of the date of the
Agreement and held by Nations as of the date hereof, together with the
359,317 Paired Shares issued as dividends thereon (collectively, the
"Purchased Shares") and the 34,925,692 Paired Shares previously delivered
to Nations as collateral, and all shares hereafter delivered to Nations as
collateral, for obligations under the Agreement (the "Collateral Shares").
The actual ratio may be more or less than the ratio specified in the
preceding sentence and will be set forth in the Form S-1 at the time it
becomes effective.
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 2
2. EFFECT OF SPIN-OFF. There shall be no reduction of the Forward Price or
other change or adjustment in the rights or obligations of Nations or the
Companies under the Agreement as a result of the distribution of the IHM
Stock in the Spin-Off. In lieu of any such reduction or change, and in
consideration of the delivery of additional collateral as provided in
paragraph 3 below, promptly upon receipt by it of the IHM Stock distributed
with respect to the Purchased Shares and the Collateral Shares held by them
as of the record date for the Spin-Off (the "Distributed Shares"), Nations
will deliver all of the Distributed Shares to the REIT.
3. DELIVERY OF ADDITIONAL COLLATERAL. It shall be a condition to the
obligation of Nations to deliver the Distributed Shares to the REIT that
the Companies shall have delivered to Nations a number of Paired Shares,
rounded upward to the nearest whole share (the "Additional Collateral
Shares"), having a value (based on the average of the closing prices of the
Paired Shares on each of the five trading days immediately preceding the
date on which the Spin-Off is completed, as reported on Bloomberg) equal to
$7,478,445; PROVIDED HOWEVER, that if, as of the record date for the
Spin-Off, Nations has sold any Paired Shares in settlement of any of the
Companies' obligations under the Agreement, then such dollar amount shall
be reduced by a percentage amount equal to the quotient (expressed as a
percentage) obtained by dividing (i) the number of such Paired Shares sold,
by (ii) the total number of Purchased Shares and Collateral Shares as of
the date hereof. The Additional Collateral Shares will be held by Nations
as additional Collateral Shares, on the same terms and conditions as the
Collateral Shares.
4. TAX INDEMNITY. The Companies agree to indemnify Nations (on an after tax
basis, taking into account both tax burdens and tax benefits resulting from
the indemnification payment) for any taxes payable by it as a direct result
of receiving IHM Stock in the Spin-Off; provided that the amount of such
indemnity shall be reduced by any "Tax Benefits" directly attributable to
(i) the receipt of the IHM Stock and/or (ii) the return of such shares to
the REIT pursuant to this Agreement that are realized in the same tax year
of Nations as the Spin-Off. The term "Tax Benefits" means any reduction in
taxes payable by the indemnified party or its affiliates (including by
reason of any basis increase in the Purchased Shares). Nations' right to
enforce this indemnity is conditioned on its providing notice to the
Companies and a reasonable opportunity to comment with respect to Nations'
tax and financial reporting of the receipt of the IHM Stock and the return
of the IHM Stock to the Companies. If Nations realizes Tax Benefits in tax
years following the year of the Spin-Off and the Companies have made
payments hereunder ("Indemnity Payments"), then Nations will pay the amount
of such Tax Benefits to the Companies, but only to the extent that the
aggregate amount so paid to the Companies does not exceed the aggregate
amount of Indemnity Payments.
Nations further agrees that it will treat the Companies as the owners of
the Collateral Shares for tax purposes (unless or until such shares are
foreclosed on by us) and that none of Nations or its affiliates will treat
the distribution of IHM Stock with respect to the Collateral Shares as a
distribution to any of them for tax or financial reporting purposes.
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 3
In the event of a dispute with any government authority with respect to the
tax treatment of the transactions contemplated hereby (a "Tax Dispute"),
Nations agrees (i) to provide prompt notice of the Tax Dispute to the
Companies and (ii) not to settle the Tax Dispute without the Companies'
consent, which consent shall not be unreasonably withheld, delayed or
conditioned; provided, that the Companies' consent rights hereunder shall
apply specifically and solely to the tax treatment of the transactions
contemplated hereby. If the Companies do not consent to a settlement of a
Tax Dispute, then the Companies shall pay Nations' reasonable costs of
continuing to defend such Tax Dispute.
5. COLLATERALIZATION. The Additional Collateral Shares shall not be included
in determining whether the Companies have satisfied their obligation to
deliver Collateral Shares under the Agreement.
6. REGISTRATION STATEMENT. The Companies will use commercially reasonable
efforts to file, prior to completion of the Spin-Off, a registration
statement with the Securities and Exchange Commission covering the sale by
Nations of all Collateral Shares and Purchased Shares delivered to Nations
as of the date hereof and the Additional Collateral Shares, to the extent
such shares are not already covered by an effective registration statement
and to cause it to become effective as promptly as reasonably practicable.
7. EFFECT. Notwithstanding this letter agreement, all other provisions of the
Agreement as amended remain in full force and effect. Nothing in this
letter agreement diminishes any rights of either party under the Purchase
Agreement and the Agreement.
8. GOVERNING LAW. This letter agreement shall be governed by New York law
without reference to its conflicts of laws principles.
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 4
Sincerely,
NationsBanc Mortgage Capital Corporation
By: /s/ Don Benningfield
---------------------------------
Name:
Title:
AGREED TO AND ACCEPTED as of the date hereof:
Patriot American Hospitality, Inc. Wyndham International, Inc.
By: /s/ William W. Evans III By: /s/ William W. Evans III
- ------------------------------------- -------------------------------
Name: William W. Evans III Name: William W. Evans III
Title: President Title: Executive Vice President
<PAGE>
Exhibit 99.27
May 4, 1999
Patriot American Hospitality, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: William W. Evans III
Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207
Attn.: William W. Evans III
Ladies and Gentlemen:
This letter agreement among Patriot American Hospitality, Inc. (the
"REIT"), Wyndham International, Inc. (the "OPCO") (each a "Company" and
collectively, the Companies") and UBS AG, London Branch (acting through its
agent Warburg Dillon Read LLC) ("Purchaser" and "Counterparty") confirms,
modifies and amends, in part, certain of the terms and conditions of that
certain Forward Stock Contract, dated December 31, 1997 (the "Agreement")
between the Companies and Counterparty (as successor to Union Bank of
Switzerland, London Branch), as amended to date, and sets forth certain
additional agreements between the parties hereto. Defined terms not otherwise
defined herein shall have the meanings ascribed to them under the Agreement.
Notwithstanding the terms and conditions of the Agreement, the Companies,
Purchaser and Counterparty agree as follows:
1. SPIN-OFF. Counterparty acknowledges that the REIT intends to effect a
spin-off (the "Spin- Off") of 92% of the shares of common stock of
Interstate Hotels Management, Inc. ("IHM Stock") and that a preliminary
information statement/prospectus with respect to the Spin- Off has been
filed as part of a registration statement on Form S-1 (the "Form S-1") with
the Securities and Exchange Commission. It is currently estimated that one
share of IHM Stock will be distributed with respect to every 25 shares of
the REIT's common stock ("REIT Stock"), including the shares of REIT Stock
that comprise part of the 3,250,000 Paired Shares purchased by Purchaser
pursuant to that certain Purchase Agreement dated as of the date of the
Agreement and held by Purchaser as of the date hereof, together with the
238,323 Paired Shares issued as dividends thereon (collectively, the
"Purchased Shares") and the 8,917,615 Paired Shares previously delivered to
Counterparty as collateral, and all shares hereafter delivered as
collateral, for obligations under the Agreement (the "Collateral Shares")
(it being acknowledged that 754,525 Paired Shares were sold under the
Agreement prior to the date hereof). The actual ratio may be more
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 2
or less than the ratio specified in the preceding sentence and will be set
forth in the Form S-1 at the time it becomes effective.
2. EFFECT OF SPIN-OFF. There shall be no reduction of the Forward Price or
other change or adjustment in the rights or obligations of Counterparty or
the Companies under the Agreement as a result of the distribution of the
IHM Stock in the Spin-Off. In lieu of any such reduction or change, and in
consideration of the delivery of additional collateral as provided in
paragraph 3 below, promptly upon receipt by them of the IHM Stock
distributed with respect to the Purchased Shares and the Collateral Shares
held by them as of the record date for the Spin-Off (the "Distributed
Shares"), Purchaser and Counterparty will deliver all of the Distributed
Shares to the REIT.
3. DELIVERY OF ADDITIONAL COLLATERAL. It shall be a condition to the
obligations of Purchaser and Counterparty to deliver the Distributed Shares
to the REIT that the Companies shall have delivered to Counterparty a
number of Paired Shares, rounded upward to the nearest whole share (the
"Additional Collateral Shares"), having a value (based on the average of
the closing prices of the Paired Shares on each of the five trading days
immediately preceding the date on which the Spin-Off is completed, as
reported on Bloomberg) equal to $2,168,332; PROVIDED HOWEVER, that if, as
of the record date for the Spin-Off, the Counterparty has sold any Paired
Shares in settlement of any of the Companies' obligations under the
Agreement, then such dollar amount shall be reduced by a percentage amount
equal to the quotient (expressed as a percentage) obtained by dividing (i)
the number of such Paired Shares sold, by (ii) the total number of
Purchased Shares and Collateral Shares as of the date hereof. The
Additional Collateral Shares will be held by Counterparty as additional
Collateral Shares, on the same terms and conditions as the Collateral
Shares.
4. TAX INDEMNITY. The Companies agree to indemnify Purchaser and Counterparty
(on an after tax basis, taking into account both tax burdens and tax
benefits resulting from the indemnification payment) for any taxes payable
by either of them as a direct result of receiving IHM Stock in the
Spin-Off; provided that the amount of such indemnity shall be reduced by
any "Tax Benefits" directly attributable to (i) the receipt of the IHM
Stock and/or (ii) the return of such shares to the REIT pursuant to this
Agreement that are realized in the same tax year of Purchaser and
Counterparty as the Spin-Off. The term "Tax Benefits" means any reduction
in taxes payable by the indemnified party or its affiliates (including by
reason of any basis increase in the Purchased Shares). Purchasers' and
Counterparty's right to enforce this indemnity is conditioned on their
providing notice to the Companies and a reasonable opportunity to comment
with respect to Purchaser's and Counterparty's tax and financial reporting
of the receipt of the IHM Stock and the return
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 3
of the IHM Stock to the Companies. If Purchaser or Counterparty realizes
Tax Benefits in tax years following the year of the Spin-Off and the
Companies have made payments hereunder ("Indemnity Payments"), then
Purchaser or Counterparty will pay the amount of such Tax Benefits to the
Companies, but only to the extent that the aggregate amount so paid to the
Companies does not exceed the aggregate amount of Indemnity Payments.
Purchaser and Counterparty further agree that they will treat the Companies
as the owners of the Collateral Shares for tax purposes (unless or until
such shares are foreclosed on by us) and that none of Purchaser,
Counterparty or their affiliates will treat the distribution of IHM Stock
with respect to the Collateral Shares as a distribution to any of them for
tax or financial reporting purposes.
In the event of a dispute with any government authority with respect to the
tax treatment of the transactions contemplated hereby (a "Tax Dispute"),
Purchaser and Counterparty agree (i) to provide prompt notice of the Tax
Dispute to the Companies and (ii) not to settle the Tax Dispute without the
Companies' consent, which consent shall not be unreasonably withheld,
delayed or conditioned; provided, that the Companies' consent rights
hereunder shall apply specifically and solely to the tax treatment of the
transactions contemplated hereby. If the Companies do not consent to a
settlement of a Tax Dispute, then the Companies shall pay Purchasers' and
Counterparty's reasonable costs of continuing to defend such Tax Dispute.
5. COLLATERALIZATION. The Additional Collateral Shares shall not be included
in determining whether the Companies have satisfied their obligation to
deliver Collateral Shares under the Agreement.
6. REGISTRATION STATEMENT. The Companies will use commercially reasonable
efforts to file, prior to completion of the Spin-Off, a registration
statement with the Securities and Exchange Commission covering the sale by
Counterparty of all Collateral Shares and Purchased Shares delivered to
Purchaser and Counterparty as of the date hereof and the Additional
Collateral Shares, to the extent such shares are not already covered by an
effective registration statement and to cause it to become effective as
promptly as reasonably practicable.
7. EFFECT. Notwithstanding this letter agreement, all other provisions of the
Agreement as amended remain in full force and effect. Nothing in this
letter agreement diminishes any rights of either party under the Purchase
Agreement and the Agreement.
<PAGE>
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 4
Sincerely,
UBS AG, London Branch UBS AG, London Branch
By: /s/ Jeffrey W. Wald By: /s/ Lawrence M. Charleson
--------------------------------------- ----------------------------
Name: Jeffrey W. Wald Name: Lawrence M. Charleson
Title: Executive Director Title: Executive Director
AGREED TO AND ACCEPTED as of the date hereof:
Patriot American Hospitality, Inc. Wyndham International, Inc.
By: /s/ William W. Evans III By: /s/ William W. Evans III
--------------------------------------- ----------------------------
Name: William W. Evans III Name: William W. Evans III
Title: President Title: Executive Vice President
