Exhibit 99.26
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") 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.
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.
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.
Patriot American Hospitality, Inc.
Wyndham International, Inc.
May 4, 1999
Page 4
Sincerely,
NationsBanc Mortgage Capital Corporation
By: /s/ Xxx Xxxxxxxxxxxx
---------------------------------
Name:
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
