Exhibit 99.25
May 4, 1999
Patriot American Hospitality, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn.: Xxxxxxx X. Xxxxx III
Wyndham International, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn.: Xxxxxxx X. Xxxxx 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
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
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.
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/ Xxxxxxxx X. Xxxxxxx By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------------------- ------------------------
Name: Name:
Title: Title:
AGREED TO AND ACCEPTED as of the date hereof:
Patriot American Hospitality, Inc. Wyndham International, Inc.
By: /s/ Xxxxxxx X. Xxxxx III By: /s/ Xxxxxxx X. Xxxxx III
---------------------------------------- -------------------------
Name: Xxxxxxx X. Xxxxx III Name: Xxxxxxx X. Xxxxx III
Title: President Title: Executive Vice President
