<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                           --------------------------
 
                                   FORM 10-Q
 
(MARK ONE)
 
  /X/    JOINT QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
 
                                       OR
 
  / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
      FOR THE TRANSITION PERIOD FROM ________________ TO ________________
 
<TABLE>
<S>                                                   <C>
           COMMISSION FILE NUMBER 1-9319                         COMMISSION FILE NUMBER 1-9320
 
         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)
</TABLE>
 
<TABLE>
<S>                        <C>                        <C>                        <C>
        DELAWARE                  94-0358820                  DELAWARE                  94-2878485
-------------------------  -------------------------  -------------------------  -------------------------
     (State or other           (I.R.S. Employer            (State or other           (I.R.S. Employer
     jurisdiction of          Identification No.)          jurisdiction of          Identification No.)
    incorporation or                                      incorporation or
      organization)                                         organization)
 
 1950 STEMMONS FREEWAY,                                1950 STEMMONS FREEWAY,
       SUITE 6001                                            SUITE 6001
      DALLAS, TEXAS                  75207                  DALLAS, TEXAS                  75207
-------------------------  -------------------------  -------------------------  -------------------------
  (Address of principal           (Zip Code)            (Address of principal           (Zip Code)
   executive offices)                                    executive offices)
</TABLE>
 
<TABLE>
<S>                                                   <C>
                   (214) 863-1000                                        (214) 863-1000
----------------------------------------------------  ----------------------------------------------------
(Registrant's telephone number, including area code)  (Registrant's telephone number, including area code)
 
                        N/A                                                   N/A
----------------------------------------------------  ----------------------------------------------------
(Former name, former address and former fiscal year,  (Former name, former address and former fiscal year,
           if changed since last report)                         if changed since last report)
</TABLE>
 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/  No / /
 
The number of shares outstanding of each registrant's classes of common stock,
par value $.01 per share, as of the close of business on November 20, 1998, was
as follows:
 
<TABLE>
<S>                                                   <C>
                     REGISTRANT                                         NUMBER OF SHARES
----------------------------------------------------  ----------------------------------------------------
         Patriot American Hospitality, Inc.                               179,232,121
            Wyndham International, Inc.                                   179,232,121
</TABLE>
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                       PATRIOT AMERICAN HOSPITALITY, INC.
                          WYNDHAM INTERNATIONAL, INC.
 
                                     INDEX
 
                         PART I--FINANCIAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
ITEM 1. FINANCIAL STATEMENTS:
 
COMBINED PATRIOT AMERICAN HOSPITALITY, INC. AND WYNDHAM INTERNATIONAL, INC.:
  Condensed Combined Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997.............           3
  Condensed Combined Statements of Operations for the three months ended September 30, 1998 and 1997 and
    the nine months ended September 30, 1998 and 1997 (unaudited)..........................................           4
  Condensed Combined Statements of Cash Flows for the nine months ended September 30, 1998 and 1997
    (unaudited)............................................................................................           5
 
PATRIOT AMERICAN HOSPITALITY, INC.:
  Condensed Consolidated Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997.........           6
  Condensed Consolidated Statements of Operations for the three months ended September 30, 1998 and 1997
    and the nine months ended September 30, 1998 and 1997 (unaudited)......................................           7
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1998 and 1997
    (unaudited)............................................................................................           8
 
WYNDHAM INTERNATIONAL, INC.:
  Condensed Consolidated Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997.........           9
  Condensed Consolidated Statements of Operations for the three months ended September 30, 1998 and 1997
    and the nine months ended September 30, 1998 and the period from July 1, 1997 (inception of operations)
    through September 30, 1997 (unaudited).................................................................          10
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1998 and the
    period from July 1, 1997 (inception of operations) through September 30, 1997 (unaudited)..............          11
 
NOTES TO CONDENSED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998 (UNAUDITED)...............................          12
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............          40
 
                                               PART II--OTHER INFORMATION
 
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..........................................................          66
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
  Exhibits.................................................................................................          66
  Reports on Form 8-K......................................................................................          66
 
SIGNATURES.................................................................................................          67
</TABLE>
 
                                       2
<PAGE>
                         PART I:  FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
                       CONDENSED COMBINED BALANCE SHEETS
 
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,
                                                                                                         1997
                                                                                      SEPTEMBER 30,  ------------
                                                                                          1998
                                                                                      -------------
                                                                                       (UNAUDITED)
<S>                                                                                   <C>            <C>
                                                     ASSETS
 
Investment in real estate and related improvements and land held for development,
  net of accumulated depreciation of $198,810 in 1998 and $68,805 in 1997...........   $ 5,661,769    $2,044,649
Cash and cash equivalents...........................................................       118,285        42,431
Restricted cash.....................................................................        29,112         5,005
Accounts and lease revenue receivable...............................................       210,766        57,046
Investment in unconsolidated subsidiaries...........................................       122,075        11,802
Mortgage notes and other receivables from unconsolidated subsidiaries...............        75,906        76,419
Other mortgage notes and other receivables..........................................        39,383        12,983
Management contracts, net of accumulated amortization of $8,523 in 1998 and $1,574
  in 1997...........................................................................       191,129        20,879
Leaseholds, net of accumulated amortization of $3,649 in 1998.......................       146,913        --
Trade names and franchise costs, net of accumulated amortization of $4,699 in 1998
  and $122 in 1997..................................................................       137,069        11,166
Goodwill, net of accumulated amortization of $14,562 in 1998 and $1,851 in 1997.....       537,436       126,007
Deferred expenses, net of accumulated amortization of $21,598 in 1998 and $2,097 in
  1997..............................................................................        94,041        21,417
Deferred acquisition costs..........................................................        18,037        52,500
Inventories.........................................................................        24,553        10,450
Other assets........................................................................        93,515        15,099
                                                                                      -------------  ------------
    Total assets....................................................................   $ 7,499,989    $2,507,853
                                                                                      -------------  ------------
                                                                                      -------------  ------------
 
                                      LIABILITIES AND SHAREHOLDERS' EQUITY
 
Borrowings under line of credit facility, term loans, mortgage notes and capital
  leases............................................................................   $ 3,803,808    $1,112,709
Accounts payable and accrued expenses...............................................       383,430        78,468
Dividends and distributions payable.................................................       --             27,636
Deposits............................................................................        23,687        12,423
Due to unconsolidated subsidiaries..................................................         7,764         7,304
Deferred income taxes...............................................................        87,636         9,550
Minority interest in the Operating Partnerships.....................................       281,049       220,177
Minority interest in consolidated subsidiaries......................................       232,157        49,694
 
Commitment and contingencies
 
Shareholders' Equity:
  Preferred stock, $0.01 par value, authorized: 100,000,000 shares each; shares
    issued and outstanding: 8,423,230 shares in 1998................................            85        --
  Excess stock (paired shares), $0.01 par value, authorized: 750,000,000 shares
    each; no shares issued and outstanding..........................................       --             --
  Common stock (paired shares), $0.01 par value, authorized: 650,000,000 shares
    each; issued and outstanding: 155,500,032 shares in 1998 and 73,276,716 shares
    in 1997.........................................................................         3,110         1,466
  Additional paid in capital........................................................     2,927,752     1,070,973
  Receivable from shareholders and affiliates.......................................       (16,111)       --
  Unearned stock compensation, net of accumulated amortization of $10,756 in 1998
    and $5,825 in 1997..............................................................       (13,877)      (13,116)
  Unrealized loss on securities available for sale..................................        (1,388)       --
  Unrealized foreign exchange gain..................................................         4,323        --
  Distributions in excess of retained earnings......................................      (223,436)      (69,431)
                                                                                      -------------  ------------
    Total shareholders' equity......................................................     2,680,458       989,892
                                                                                      -------------  ------------
    Total liabilities and shareholders' equity......................................   $ 7,499,989    $2,507,853
                                                                                      -------------  ------------
                                                                                      -------------  ------------
</TABLE>
 
                  See notes to condensed financial statements.
 
                                       3
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
                  CONDENSED COMBINED STATEMENTS OF OPERATIONS
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED       NINE MONTHS ENDED
                                                                     SEPTEMBER 30,            SEPTEMBER 30,
                                                                 ----------------------  ------------------------
                                                                    1998        1997         1998         1997
                                                                 ----------  ----------  ------------  ----------
<S>                                                              <C>         <C>         <C>           <C>
Revenue:
  Hotel revenue................................................  $  554,331  $   30,271  $  1,266,985  $   30,271
  Lease revenue................................................       8,932      35,098        49,627     107,084
  Racecourse facility revenue..................................       9,955      10,861        34,945      10,861
  Management fee and service fee income........................      24,358       1,577        61,574       1,577
  Interest and other income....................................       6,274       3,831        12,949       4,963
                                                                 ----------  ----------  ------------  ----------
    Total revenue..............................................     603,850      81,638     1,426,080     154,756
                                                                 ----------  ----------  ------------  ----------
Expenses:
  Hotel expenses...............................................     417,814      22,360       924,471      30,009
  Racecourse facility operations...............................       8,810       9,213        29,667       9,213
  General and administrative...................................      26,571       6,582        64,558      11,663
  Interest expense.............................................      82,739      13,933       172,191      31,261
  Cost of acquiring leaseholds and license agreements..........       3,940      43,820        61,000      43,820
  Treasury lock settlement.....................................      49,225      --            49,225      --
  Depreciation and amortization................................      68,236      13,792       155,165      31,798
                                                                 ----------  ----------  ------------  ----------
    Total expenses.............................................     657,335     109,700     1,456,277     157,764
                                                                 ----------  ----------  ------------  ----------
Operating loss.................................................     (53,485)    (28,062)      (30,197)     (3,008)
  Equity in earnings of unconsolidated subsidiaries............       1,888       1,395         7,375       4,488
                                                                 ----------  ----------  ------------  ----------
Income (loss) before income tax provision, minority interests
  and extraordinary item.......................................     (51,597)    (26,667)      (22,822)      1,480
  Income tax provision.........................................      (6,783)        (94)      (11,273)        (94)
                                                                 ----------  ----------  ------------  ----------
Income (loss) before minority interests and extraordinary
  item.........................................................     (58,380)    (26,761)      (34,095)      1,386
  Minority interest in the Operating Partnerships..............       4,722       3,225         6,169      (1,309)
  Minority interest in consolidated subsidiaries...............      (4,500)       (934)       (7,514)     (1,381)
                                                                 ----------  ----------  ------------  ----------
Loss before extraordinary item.................................     (58,158)    (24,470)      (35,440)     (1,304)
  Extraordinary loss from early extinguishment of debt, net of
    minority interest and income taxes.........................      (1,257)     (2,534)      (31,817)     (2,534)
                                                                 ----------  ----------  ------------  ----------
Net loss.......................................................  $  (59,415) $  (27,004) $    (67,257) $   (3,838)
                                                                 ----------  ----------  ------------  ----------
                                                                 ----------  ----------  ------------  ----------
Basic and Diluted earnings per common Paired Share:
  Loss before extraordinary item...............................  $    (1.08) $    (0.40) $      (1.10) $    (0.03)
  Extraordinary loss...........................................  $    (0.01) $    (0.04) $      (0.26) $    (0.05)
                                                                 ----------  ----------  ------------  ----------
    Net loss per common Paired Share...........................  $    (1.09) $    (0.44) $      (1.36) $    (0.08)
                                                                 ----------  ----------  ------------  ----------
                                                                 ----------  ----------  ------------  ----------
</TABLE>
 
                  See notes to condensed financial statements.
 
                                       4
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
                  CONDENSED COMBINED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                             NINE MONTHS ENDED
                                                                                               SEPTEMBER 30,
                                                                                           ---------------------
                                                                                              1998       1997
                                                                                           ----------  ---------
<S>                                                                                        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss...............................................................................  $  (67,257) $  (3,838)
  Adjustments to reconcile net loss to net cash provided by operating activities:
    Depreciation.........................................................................     120,864     30,539
    Amortization of unearned stock compensation..........................................       4,818      3,312
    Amortization of deferred loan costs..................................................      18,075      1,342
    Amortization of management contracts and trade names.................................      15,523        469
    Amortization of goodwill and other assets............................................      18,778        911
    Treasury lock settlement.............................................................      49,225     --
    Cost of acquiring leaseholds and license agreements..................................      55,638     43,820
    Net payments collected from unconsolidated subsidiaries..............................       5,976      1,951
    Issuance of stock for bonuses and directors' fee.....................................         880     --
    Equity in earnings of unconsolidated subsidiaries....................................      (7,375)    (4,488)
    Minority interest in income of Operating Partnerships................................      (6,169)     1,309
    Minority interest in income of consolidated subsidiaries.............................       7,514      1,381
    Deferred income taxes................................................................      (5,352)    --
    Extraordinary loss from early extinguishment of debt.................................      32,235      2,534
    Changes in assets and liabilities:
      Accounts and lease revenue receivable and other assets.............................     (25,272)   (32,567)
      Inventories........................................................................      (1,137)    --
      Accounts payable and other accrued expenses........................................      20,282     29,211
                                                                                           ----------  ---------
        Net cash provided by operating activities........................................     237,246     75,886
                                                                                           ----------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of hotel properties and related working capital assets.....................  (1,349,705)  (546,876)
  Improvements and additions to hotel properties.........................................    (187,695)   (53,761)
  Net proceeds from real estate sales....................................................      17,734     77,226
  Cash received in acquisition of hotel leases...........................................      98,312     --
  Acquisition of management contracts....................................................     (32,299)    --
  Collections on other notes receivable..................................................       9,563        525
  Increase in restricted cash accounts...................................................      (8,283)   (38,196)
  Deferred acquisition costs.............................................................     (34,780)   (34,846)
  Investment in unconsolidated subsidiaries..............................................     (13,985)    (1,574)
  Investment in mortgage and other notes receivable......................................      (3,688)  (112,625)
  Other..................................................................................      (1,467)    --
                                                                                           ----------  ---------
        Net cash used in investing activities............................................  (1,506,293)  (710,127)
                                                                                           ----------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under line of credit facility, term loans, mortgage notes and capital lease
    obligations..........................................................................   2,749,394  1,300,820
  Repay borrowings under line of credit facility and other debt..........................  (1,524,481)  (822,226)
  Payment of deferred loan costs.........................................................     (32,729)   (18,723)
  Proceeds from issuance of common stock.................................................     277,474    255,587
  Payment of offering costs..............................................................      (3,805)   (12,602)
  Payment of merger costs................................................................      --        (11,414)
  Contributions received from minority interest in consolidated subsidiaries.............       3,440     16,204
  Collections on notes receivable from shareholders and affiliates.......................       2,999     --
  Payments to redeem OP Units............................................................      --        (14,596)
  Dividends and distributions paid.......................................................    (131,038)   (44,017)
  Other..................................................................................       3,647        119
                                                                                           ----------  ---------
        Net cash provided by financing activities........................................   1,344,901    649,152
                                                                                           ----------  ---------
Net increase in cash and cash equivalents................................................      75,854     14,911
Cash and cash equivalents at beginning of period.........................................      42,431      6,604
                                                                                           ----------  ---------
Cash and cash equivalents at end of period...............................................  $  118,285  $  21,515
                                                                                           ----------  ---------
                                                                                           ----------  ---------
</TABLE>
 
                  See notes to condensed financial statements.
 
                                       5
<PAGE>
                       PATRIOT AMERICAN HOSPITALITY, INC.
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
 
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,
                                                                                                         1997
                                                                                      SEPTEMBER 30,  ------------
                                                                                          1998
                                                                                      -------------
                                                                                       (UNAUDITED)
<S>                                                                                   <C>            <C>
                                                     ASSETS
Investment in real estate and related improvements and land held for development,
  net of accumulated depreciation of $173,105 in 1998 and $67,501 in 1997...........   $ 5,052,378    $2,016,267
Cash and cash equivalents...........................................................        14,429        15,355
Restricted cash.....................................................................        24,601         5,005
Accounts and lease revenue receivable...............................................        15,636        14,458
Investment in unconsolidated subsidiaries...........................................       942,874        11,802
Mortgage notes and other receivables from unconsolidated subsidiaries...............        75,906        76,419
Subscription Notes receivable from Wyndham..........................................       133,669        --
Notes and other amounts receivable from Wyndham.....................................       134,849        42,946
Other notes receivable..............................................................        18,917        --
Investment in leaseholds, net of accumulated amortization of $3,310.................       128,777        --
Trade names, net of accumulated amortization of $313................................         9,323        --
Goodwill, net of accumulated amortization of $3,348 in 1998 and $1,257 in 1997......        94,208        87,999
Deferred expenses, net of accumulated amortization of $19,291 in 1998 and $2,097 in
  1997..............................................................................        50,186        21,417
Deferred acquisition costs..........................................................         4,581        21,374
Other assets........................................................................        56,092         8,063
                                                                                      -------------  ------------
    Total assets....................................................................   $ 6,756,426    $2,321,105
                                                                                      -------------  ------------
                                                                                      -------------  ------------
 
                                      LIABILITIES AND SHAREHOLDERS' EQUITY
 
Borrowings under line of credit facility, term loans, mortgage notes and capital
  leases............................................................................   $ 3,543,014    $1,112,709
Subscription Notes payable to Wyndham...............................................        73,408        12,875
Notes and other amounts payable to Wyndham..........................................        42,576        --
Accounts payable and accrued expenses...............................................       116,079        28,151
Dividends and distributions payable.................................................       --             27,185
Deferred lease revenue..............................................................        17,890        --
Due to unconsolidated subsidiaries..................................................         7,764         7,304
Minority interest in Patriot Partnership............................................       227,213       174,640
Minority interest in consolidated subsidiaries......................................       232,157        49,214
 
Commitments and contingencies
 
Shareholders' equity:
  Preferred stock, $0.01 par value; authorized: 100,000,000 shares; shares issued
    and outstanding: 4,860,876 in 1998..............................................            49        --
  Excess stock, $0.01 par value; authorized: 750,000,000 shares; no shares issued
    and outstanding.................................................................       --             --
  Common stock, $0.01 par value; authorized: 650,000,000 shares; shares issued and
    outstanding: 155,500,032 shares in 1998 and 73,276,716 shares in 1997...........         1,555           733
  Additional paid in capital........................................................     2,680,648       990,821
  Receivable from shareholders......................................................       (15,034)       --
  Unearned stock compensation, net of accumulated amortization of $9,866 in 1998 and
    $5,825 in 1997..................................................................       (10,017)      (13,116)
  Unrealized foreign exchange gain..................................................         4,022        --
  Distributions in excess of retained earnings......................................      (164,898)      (69,411)
                                                                                      -------------  ------------
    Total shareholders' equity......................................................     2,496,325       909,027
                                                                                      -------------  ------------
    Total liabilities and shareholders' equity......................................   $ 6,756,426    $2,321,105
                                                                                      -------------  ------------
                                                                                      -------------  ------------
</TABLE>
 
                  See notes to condensed financial statements.
 
                                       6
<PAGE>
                       PATRIOT AMERICAN HOSPITALITY, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                       SEPTEMBER 30,           SEPTEMBER 30,
                                                                   ----------------------  ----------------------
                                                                      1998        1997        1998        1997
                                                                   ----------  ----------  ----------  ----------
<S>                                                                <C>         <C>         <C>         <C>
Revenue:
  Lease revenue..................................................  $  178,156  $   47,107  $  422,808  $  119,093
  Interest and other income......................................       6,540       3,083      15,311       4,215
                                                                   ----------  ----------  ----------  ----------
    Total revenue................................................     184,696      50,190     438,119     123,308
                                                                   ----------  ----------  ----------  ----------
Expenses:
  Real estate and personal property taxes and casualty
    insurance....................................................      16,799       4,253      42,023      11,219
  Ground lease expense...........................................      22,128       1,310      42,296       1,993
  General and administrative.....................................       5,090       2,501      15,091       7,582
  Interest expense...............................................      77,266      14,649     162,294      31,977
  Cost of acquiring leaseholds...................................       3,940      43,820       8,279      43,820
  Treasury lock settlement.......................................      49,225      --          49,225      --
  Depreciation and amortization..................................      50,561      12,650     112,253      30,656
                                                                   ----------  ----------  ----------  ----------
    Total expenses...............................................     225,009      79,183     431,461     127,247
                                                                   ----------  ----------  ----------  ----------
Operating income (loss)..........................................     (40,313)    (28,993)      6,658      (3,939)
  Equity in earnings of unconsolidated subsidiaries..............       4,764       1,395      24,011       4,488
                                                                   ----------  ----------  ----------  ----------
Income (loss) before income tax provision, minority interests and
  extraordinary item.............................................     (35,549)    (27,598)     30,669         549
  Income tax provision...........................................        (127)     --            (533)     --
                                                                   ----------  ----------  ----------  ----------
Income (loss) before minority interests and extraordinary item...     (35,676)    (27,598)     30,136         549
  Minority interest in Patriot Partnership.......................       2,015       3,340      (3,253)     (1,194)
  Minority interest in consolidated subsidiaries.................      (3,775)       (921)     (6,203)     (1,368)
                                                                   ----------  ----------  ----------  ----------
Income (loss) before extraordinary item..........................     (37,436)    (25,179)     20,680      (2,013)
  Extraordinary loss from early extinguishment of debt, net of
    minority interest............................................      --          (2,534)    (30,559)     (2,534)
                                                                   ----------  ----------  ----------  ----------
Net loss.........................................................  $  (37,436) $  (27,713) $   (9,879) $   (4,547)
                                                                   ----------  ----------  ----------  ----------
                                                                   ----------  ----------  ----------  ----------
Basic and Diluted earnings per common share:
  Income before extraordinary item...............................  $    (0.94) $    (0.41) $    (0.63) $    (0.04)
  Extraordinary loss.............................................      --           (0.04)      (0.25)      (0.05)
                                                                   ----------  ----------  ----------  ----------
  Net loss per common share......................................  $    (0.94) $    (0.45) $    (0.88) $    (0.09)
                                                                   ----------  ----------  ----------  ----------
                                                                   ----------  ----------  ----------  ----------
</TABLE>
 
                  See notes to condensed financial statements.
 
                                       7
<PAGE>
                       PATRIOT AMERICAN HOSPITALITY, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                              NINE MONTHS ENDED
                                                                                                SEPTEMBER 30,
                                                                                            ---------------------
                                                                                               1998       1997
                                                                                            ----------  ---------
<S>                                                                                         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss................................................................................  $   (9,879) $  (4,547)
  Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation..........................................................................     105,736     30,048
    Amortization of unearned stock compensation...........................................       4,041      3,312
    Amortization of deferred loan costs...................................................      16,884      1,342
    Amortization of trade names...........................................................         575     --
    Amortization of goodwill and other assets.............................................       5,942        730
    Treasury lock settlement..............................................................      49,225     --
    Cost of acquiring leaseholds..........................................................       3,000     43,820
    Net payments collected from unconsolidated subsidiaries...............................       5,962      2,353
    Issuance of stock for bonuses and directors' fee......................................         675     --
    Equity in earnings of unconsolidated subsidiaries.....................................     (24,011)    (4,488)
    Minority interest in income of Patriot Partnership....................................       3,253      1,194
    Minority interest in income of consolidated subsidiaries..............................       6,203      1,368
    Extraordinary loss from early extinguishment of debt..................................      30,559      2,534
  Changes in assets and liabilities:
    Accounts and lease revenue receivable and other assets................................     (57,887)   (14,072)
    Due from Wyndham......................................................................      21,572     --
    Inventory.............................................................................          64     --
    Accounts payable and other accrued expenses...........................................      16,632      7,642
                                                                                            ----------  ---------
        Net cash provided by operating activities.........................................     178,546     71,236
                                                                                            ----------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of hotel properties and related working capital assets......................  (1,943,779)  (541,555)
  Improvements and additions to hotel properties..........................................    (155,732)   (53,168)
  Net proceeds from land sale.............................................................      17,734     77,226
  Cash received upon acquisition of hotel assets..........................................       9,932        525
  Collections on other notes receivable...................................................       4,000     --
  Increase in restricted cash accounts....................................................      (6,201)   (38,196)
  Deferred acquisition costs..............................................................      (8,507)   (11,014)
  Investment in unconsolidated subsidiaries...............................................     (11,402)    (1,574)
  Investment in mortgage and other notes receivable.......................................      (1,305)  (112,625)
  Other...................................................................................          63     --
                                                                                            ----------  ---------
        Net cash used in investing activities.............................................  (2,095,197)  (680,381)
                                                                                            ----------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under line of credit facility, term loans, mortgage notes and capital lease
    obligations...........................................................................   2,562,394  1,300,820
  Repay borrowings under line of credit facility and other debt...........................    (747,051)  (822,226)
  Payment of deferred loan costs..........................................................     (31,273)   (18,723)
  Principal payments on subscription notes payable to Wyndham.............................     (12,875)   (35,486)
  Proceeds from issuance of common stock..................................................     265,117    243,521
  Payment of offering costs...............................................................      (3,649)   (12,602)
  Contributions received from minority interest in consolidated subsidiaries..............       3,440     16,204
  Collections on notes receivable from shareholders.......................................       2,999     --
  Payments to redeem OP Units.............................................................      --        (14,596)
  Dividends and distributions paid........................................................    (127,184)   (44,017)
  Other...................................................................................       3,807        (22)
                                                                                            ----------  ---------
        Net cash provided by financing activities.........................................   1,915,725    612,873
                                                                                            ----------  ---------
Net increase (decrease) in cash and cash equivalents......................................        (926)     3,728
Cash and cash equivalents at beginning of period..........................................      15,355      6,604
                                                                                            ----------  ---------
Cash and cash equivalents at end of period................................................  $   14,429  $  10,332
                                                                                            ----------  ---------
                                                                                            ----------  ---------
</TABLE>
 
                  See notes to condensed financial statements.
 
                                       8
<PAGE>
                          WYNDHAM INTERNATIONAL, INC.
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
 
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                      1997
                                                     SEPTEMBER    ------------
                                                      30, 1998
                                                    ------------
                                                    (UNAUDITED)
<S>                                                 <C>           <C>
                                    ASSETS
Current assets:
  Cash and cash equivalents.......................  $103,856      $ 27,076
  Restricted cash.................................     4,511         --
  Accounts receivable.............................   195,130        46,340
  Notes and other receivables from Patriot........    18,396        12,875
  Inventories.....................................    24,553         9,144
  Prepaid expenses and other current assets.......    32,945         5,227
                                                    ------------  ------------
    Total current assets..........................   379,391       100,662
Investment in real estate and related
  improvements, net of accumulated depreciation of
  $25,705 in 1998 and $1,304 in 1997..............   610,377        28,382
Investments in unconsolidated subsidiaries........    73,512         --
Subscription Notes receivable from Patriot........    73,408         --
Notes and other receivables from Patriot..........    24,180         --
Mortgage notes and other receivables..............    20,466        12,983
Management contract costs, net of accumulated
  amortization of $8,523 in 1998 and $1,574 in
  1997............................................   191,129        20,879
Leasehold costs, net of accumulated amortization
  of $339.........................................    18,136         --
Trade names and franchise costs, net of
  accumulated amortization of $4,386 in 1998 and
  $122 in 1997....................................   127,746        11,166
Deferred acquisition costs........................    13,456        31,126
Goodwill, net of accumulated amortization of
  $11,214 in 1998 and $594 in 1997................   443,228        38,008
Deferred expenses, net of accumulated amortization
  of $1,134.......................................    43,855         --
Other assets......................................     4,478         8,882
                                                    ------------  ------------
    Total assets..................................  $2,023,362    $252,088
                                                    ------------  ------------
                                                    ------------  ------------
 
                     LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses...........  $260,756      $ 50,317
  Dividends and distributions payable.............     --              451
  Participating lease payments payable to
    Patriot.......................................    61,018         9,519
  Deposits........................................    23,687        12,423
  Notes and other amounts payable to Patriot......    73,831        42,946
  Current portion of mortgage notes and capital
    lease obligations.............................    25,050         --
                                                    ------------  ------------
    Total current liabilities.....................   444,342       115,656
Subscription Notes payable to Patriot.............   133,669         --
Mortgage notes payable and capital lease
  obligations.....................................   235,744         --
Deferred income taxes.............................    87,636         9,550
Minority interest in Wyndham Partnership..........    53,836        45,537
Minority interest in consolidated subsidiaries....   894,311           480
Commitments and contingencies
Shareholders' equity:
  Preferred stock, $0.01 par value; authorized:
    100,000,000 shares; shares issued and
    outstanding: 3,562,354 in 1998................        36         --
  Excess stock, $0.01 par value; authorized:
    750,000,000 shares; no shares issued and
    outstanding...................................     --            --
  Common stock, $0.01 par value; authorized:
    650,000,000 shares; issued and outstanding:
    155,500,032 shares in 1998 and 73,276,716
    shares in 1997................................     1,555           733
  Additional paid in capital......................   247,104        80,152
  Receivable from shareholders and affiliates.....    (1,077    )    --
  Unearned executive compensation, net of
    accumulated amortization of $777..............    (3,860    )    --
  Unrealized loss on securities available for
    sale..........................................    (1,388    )    --
  Unrealized foreign exchange gain................       301         --
  Retained earnings/(deficit).....................   (68,847    )      (20    )
                                                    ------------  ------------
    Total shareholders' equity....................   173,824        80,865
                                                    ------------  ------------
    Total liabilities and shareholders' equity....  $2,023,362    $252,088
                                                    ------------  ------------
                                                    ------------  ------------
</TABLE>
 
                  See notes to condensed financial statements.
 
                                       9
<PAGE>
                          WYNDHAM INTERNATIONAL, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                    JULY 1, 1997
                                                                                                    (INCEPTION OF
                                                               THREE MONTHS ENDED     NINE MONTHS    OPERATIONS)
                                                                  SEPTEMBER 30,          ENDED         THROUGH
                                                              ---------------------  SEPTEMBER 30,  SEPTEMBER 30,
                                                                 1998       1997         1998           1997
                                                              ----------  ---------  -------------  -------------
<S>                                                           <C>         <C>        <C>            <C>
Revenue:
  Hotel revenue.............................................  $  554,331  $  30,271   $ 1,266,985     $  30,271
  Racecourse facility revenue...............................       9,955     10,861        34,945        10,861
  Management fee and service fee income.....................      24,917      1,577        62,560         1,577
  Interest and other income.................................       4,477      1,475        11,755         1,475
                                                              ----------  ---------  -------------  -------------
    Total revenue...........................................     593,680     44,184     1,376,245        44,184
                                                              ----------  ---------  -------------  -------------
Expenses:
  Hotel expenses............................................     378,886     16,797       840,153        16,797
  Racecourse facility operations............................       8,810     10,536        29,667        10,536
  General and administrative................................      21,482      4,081        49,467         4,081
  Interest expense..........................................      10,216         11        24,015            11
  Cost of acquiring leaseholds..............................      --         --            52,721        --
  Depreciation and amortization.............................      17,675      1,142        42,911         1,142
  Lease payments............................................     174,838     10,686       384,475        10,686
                                                              ----------  ---------  -------------  -------------
    Total expenses..........................................     611,907     43,253     1,423,409        43,253
                                                              ----------  ---------  -------------  -------------
Operating income (loss).....................................     (18,227)       931       (47,164)          931
  Equity in earnings of unconsolidated subsidiaries.........         447     --             2,461        --
                                                              ----------  ---------  -------------  -------------
Income (loss) before income tax provision and minority
  interests.................................................     (17,780)       931       (44,703)          931
  Income tax provision......................................      (6,656)       (94)      (10,740)          (94)
                                                              ----------  ---------  -------------  -------------
Income (loss) before minority interests.....................     (24,436)       837       (55,443)          837
  Minority interest in Wyndham Partnership..................       2,707       (115)        9,422          (115)
  Minority interest in consolidated subsidiaries............      (4,048)       (13)      (20,408)          (13)
                                                              ----------  ---------  -------------  -------------
Income (loss) before extraordinary item.....................     (25,777)       709       (66,429)          709
  Extraordinary loss from early debt, extinguishment of
    debt, net of income taxes...............................      (1,257)    --            (1,257)       --
                                                              ----------  ---------  -------------  -------------
Net income (loss)...........................................  $  (27,034) $     709   $   (67,686)    $     709
                                                              ----------  ---------  -------------  -------------
                                                              ----------  ---------  -------------  -------------
Basic and Diluted earnings per common share:
  Income (loss) before extraordinary item...................  $    (0.19) $    0.01   $     (0.55)    $    0.01
  Extraordinary loss........................................       (0.01)    --             (0.01)       --
                                                              ----------  ---------  -------------  -------------
  Net income (loss) per common share........................  $    (0.20) $    0.01   $     (0.56)    $    0.01
                                                              ----------  ---------  -------------  -------------
                                                              ----------  ---------  -------------  -------------
</TABLE>
 
                  See notes to condensed financial statements
 
                                       10
<PAGE>
                          WYNDHAM INTERNATIONAL, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                     JULY 1, 1997
                                                                                                     (INCEPTION OF
                                                                                       NINE MONTHS    OPERATIONS)
                                                                                          ENDED         THROUGH
                                                                                      SEPTEMBER 30,  SEPTEMBER 30,
                                                                                          1998           1997
                                                                                      -------------  -------------
<S>                                                                                   <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss).................................................................    $ (67,686)     $     709
  Adjustments to reconcile net loss to net cash provided by operating activities:
    Depreciation....................................................................       15,128            491
    Amortization of unearned stock compensation.....................................          777         --
    Amortization of management contracts and trade names............................       14,948            469
    Amortization of goodwill and other..............................................       14,026            181
    Issuance of stock for bonuses and directors' fees...............................          205         --
    Net payment from unconsolidated subsidiaries....................................           14         --
    Cost of acquiring leaseholds....................................................       52,638         --
    Deferred income taxes...........................................................       (5,352)        --
    Equity in earnings of unconsolidated subsidiaries...............................       (2,461)        --
    Minority interest in income of Wyndham Partnership..............................       (9,422)           115
    Minority interest in income of consolidated subsidiaries........................       20,408             13
    Extraordinary loss from early extinguishment of debt............................        1,676         --
  Changes in assets and liabilities:
    Accounts receivable and prepaid expenses and other assets.......................      (13,082)       (13,857)
    Other receivables from Patriot..................................................      (21,572)        --
    Inventories.....................................................................       (1,201)        --
    Accounts payable and other accrued expenses.....................................       14,945         14,458
    Participating lease payments payable to Patriot.................................       45,697          2,071
                                                                                      -------------  -------------
        Net cash provided by operating activities...................................       59,686          4,650
                                                                                      -------------  -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of hotel properties and related working capital assets................      (22,194)        (5,321)
  Improvements and additions to hotel properties....................................      (32,950)          (593)
  Increase in restricted cash account...............................................       (2,082)        --
  Acquisition of management contracts...............................................      (32,299)        --
  Deferred acquisition costs........................................................      (26,273)       (23,832)
  Cash received upon acquisition of hotel leases....................................       88,380         --
  Investment in other notes receivable..............................................       (2,383)        --
  Collections on other notes receivable.............................................        5,563         --
  Investment in unconsolidated subsidiaries.........................................       (2,583)        --
  Other.............................................................................       (1,688)        --
                                                                                      -------------  -------------
        Net cash used in investing activities.......................................      (28,509)       (29,746)
                                                                                      -------------  -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under credit facility and term loans...................................      187,000         --
  Repayment of assumed debt.........................................................     (775,578)        --
  Payment of capital lease obligations..............................................       (1,852)           141
  Proceeds from issuance of common stock............................................       12,357         12,066
  Payment of offering costs.........................................................         (156)        --
  Payment of merger costs...........................................................       --            (11,414)
  Payment of deferred loan costs....................................................       (1,456)        --
  Collections on Subscription Notes.................................................       12,875         35,486
  Contributions received from minority interest in consolidated subsidiaries........      616,268         --
  Distributions paid................................................................       (3,855)        --
                                                                                      -------------  -------------
        Net cash provided by financing activities...................................       45,603         36,279
                                                                                      -------------  -------------
Net increase in cash and cash equivalents...........................................       76,780         11,183
Cash and cash equivalents at beginning of period....................................       27,076         --
                                                                                      -------------  -------------
Cash and cash equivalents at end of period..........................................    $ 103,856      $  11,183
                                                                                      -------------  -------------
                                                                                      -------------  -------------
</TABLE>
 
                  See notes to condensed financial statements.
 
                                       11
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
1.  ORGANIZATION AND BASIS OF PRESENTATION:
 
    The entity formerly known as Patriot American Hospitality, Inc.
(collectively with its subsidiaries, "Old Patriot"), a Virginia corporation, was
formed April 17, 1995 as a self-administered real estate investment trust
("REIT") for the purpose of acquiring equity interests in hotel properties. On
October 2, 1995, Old Patriot completed an initial public offering of shares of
its common stock and commenced operations.
 
    On July 1, 1997, Old Patriot merged with and into California Jockey Club
("Cal Jockey"), with Cal Jockey being the surviving legal entity (the "Cal
Jockey Merger"). Cal Jockey's shares of common stock are paired and trade
together with the shares of common stock of Bay Meadows Operating Company ("Bay
Meadows") as a single unit pursuant to a stock pairing arrangement. In
connection with the Cal Jockey Merger, Cal Jockey changed its name to "Patriot
American Hospitality, Inc." ("Patriot") and Bay Meadows changed its name to
"Patriot American Hospitality Operating Company." In January 1998, as a result
of the merger of Wyndham Hotel Corporation with and into Patriot as discussed
below, Patriot American Hospitality Operating Company changed its name to
"Wyndham International, Inc." and is referred to herein, collectively with its
subsidiaries, as "Wyndham." The term "Companies" as used herein includes
Patriot, Wyndham and their respective subsidiaries. Patriot and Wyndham are both
Delaware corporations.
 
    The Cal Jockey Merger was accounted for as a reverse acquisition whereby Cal
Jockey was considered to be the acquired company for accounting purposes.
Consequently, the historical financial information of Old Patriot became the
historical financial information for Patriot. For accounting purposes, Wyndham
commenced its operations concurrent with the closing of the Cal Jockey Merger on
July 1, 1997.
 
    The shares of common stock of Patriot are paired and trade together with the
shares of common stock of Wyndham as a single unit pursuant to a stock pairing
arrangement. These units, consisting of one share of common stock of Patriot
paired with one share of common stock of Wyndham, are referred to herein as
"Paired Shares."
 
    A substantial portion of the assets of Patriot are held by Patriot American
Hospitality Partnership, L.P. (the "Patriot Partnership"). Patriot contributed
such assets to the Patriot Partnership in exchange for units of limited
partnership interest ("OP Units") of the Patriot Partnership. In addition, a
substantial portion of the assets of Wyndham are held by Wyndham International
Operating Partnership, L.P. (the "Wyndham Partnership," formerly known as
Patriot American Hospitality Operating Partnership, L.P.). Wyndham contributed
such assets to the Wyndham Partnership in exchange for OP Units of the Wyndham
Partnership. Collectively, the Wyndham Partnership and the Patriot Partnership
are referred to herein as the "Operating Partnerships."
 
    Patriot, through its wholly owned subsidiary, PAH GP, Inc., is the sole
general partner and the holder of a 1.0% general partnership interest in the
Patriot Partnership. In addition, Patriot, through its wholly owned subsidiary,
PAH LP, Inc., owns an approximate 88.5% limited partnership interest in the
Patriot Partnership as of September 30, 1998. Wyndham owns a 1.0% general
partnership interest and an approximate 87.3% limited partnership interest in
the Wyndham Partnership.
 
    At September 30, 1998, Patriot and Wyndham, through the Operating
Partnerships and other subsidiaries, owned interests in 184 hotels with an
aggregate of over 44,700 guest rooms and leased 122 hotels from third parties
with over 15,700 rooms. In addition, Wyndham manages 171 hotels with over
 
                                       12
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
1.  ORGANIZATION AND BASIS OF PRESENTATION: (CONTINUED)
42,000 guest rooms and franchises 9 hotels with over 2,500 rooms. Patriot leases
216 of its hotels to Wyndham and 14 of Patriot's hotels are leased to third
party lessees (the "Lessees") who are responsible for operating the hotels.
Generally, these leases provide for the payment of the greater of base or
participating rent, plus certain additional charges, as applicable (the
"Participating Leases"). The Lessees, in turn, have entered into separate
agreements with hotel management entities (the "Operators") to manage the
hotels.
 
    Seventy-six of the Companies' hotels are owned by special purpose entities
(the "Non-Controlled Subsidiaries"). Patriot owns approximately a 99% non-voting
interest and Wyndham owns approximately a 1% controlling voting interest in each
of the Non-Controlled Subsidiaries. Therefore, the operating results of the
Non-Controlled Subsidiaries are combined with those of Wyndham for financial
reporting purposes. Patriot accounts for its investment in the Non-Controlled
Subsidiaries using the equity method of accounting.
 
    PRINCIPLES OF CONSOLIDATION
 
    The unaudited separate consolidated financial statements include the
accounts of Patriot and Wyndham, their respective wholly owned subsidiaries and
the partnerships, corporations and limited liability companies in which Patriot
or Wyndham owns a controlling interest. The unaudited separate consolidated
financial statements of Patriot and Wyndham have also been combined for purposes
of financial statement presentation. All significant intercompany accounts and
transactions have been eliminated.
 
    These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine month period ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. For further information, refer to the consolidated financial statements
and footnotes thereto included in Patriot's and Wyndham's Joint Annual Report on
Form 10-K for the year ended December 31, 1997. Certain prior year amounts have
been reclassified to conform to current period presentation.
 
    BUSINESS SEGMENTS
 
    In June 1997, FASB issued Statement of Financial Accounting Standards No.
131 ("Statement 131"), "Disclosures About Segments of an Enterprise and Related
Information" which specifies revised guidelines for determining an entity's
operating segments and the type and level of financial information to be
disclosed. Statement 131 is effective for fiscal years beginning after December
15, 1997, but need not be applied to interim financial statements in the initial
year of its application. Management believes this statement will result in
expanded disclosure for the financial statements.
 
    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 
    In June 1998, FASB issued Statement of Financial Accounting Standards No.
133 ("Statement 133"), "Accounting for Derivative Instruments and Hedging
Activities," which is required to be adopted in years
 
                                       13
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
1.  ORGANIZATION AND BASIS OF PRESENTATION: (CONTINUED)
beginning after June 15, 1999. The Companies expect to adopt Statement 133
effective January 1, 2000. Statement 133 will require the Companies to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings, or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Management has not yet determined what the effect of
Statement 133 will be on the earnings and financial position of the Companies.
 
    PARTICIPATING LEASE REVENUE RECOGNITION
 
    In May 1998, the Financial Accounting Standards Board's Emerging Issues Task
Force issued EITF number 98-9, "Accounting for Contingent Rent in Interim
Financial Periods ("EITF 98-9"). EITF 98-9 provides that a lessor shall defer
recognition of contingent rental income in interim periods until specified
targets that trigger the contingent income are met. Management has reviewed the
terms of its Participating Leases and has determined that the provisions of EITF
98-9 will impact Patriot's current revenue recognition on an interim basis, but
will have no impact on Patriot's annual participating rent revenue or interim
cash flow from its Participating Leases. Patriot has adopted the provisions of
EITF 98-9 and elected to apply the provisions of the new pronouncement on a
prospective basis.
 
    Generally, Patriot's Participating Leases provide for the payment of the
greater of (i) a fixed base rent or (ii) participating rent, based on the
revenue of the hotels, plus certain additional charges, as applicable. The
Participating Leases contain annual revenue thresholds used to calculate the
various tiers of participating rent which are prorated on a monthly basis to
determine monthly participating rent payments. The provisions of EITF 98-9 call
for straight-line recognition of the annual base rent throughout the year and
for the deferral of any additional lease amounts collected or due from the
Lessees until such amounts exceed the annual revenue thresholds. This will
generally result in base rent being recognized in the first and second quarters
and participating rents already collected or due from the Lessees being deferred
and then recognized in the third and fourth quarters due to the structure of
Patriot's Participating Leases and the seasonality of the hotel operations. The
effect of the change was to defer recognition of $1,789 of lease revenue during
the nine months ended September 30, 1998.
 
2.  HOTELS AND OTHER BUSINESSES ACQUIRED:
 
    HOTEL INVESTMENTS PURCHASED
 
    Through September 30, 1998, Patriot, through the Patriot Partnership and its
subsidiaries, invested approximately $234,116 in the acquisition of four hotels
with a total of over 1,700 guest rooms and the Golden Door Spa. These
acquisitions were financed primarily with funds drawn on Patriot's revolving
credit facility, the issuance of 53,989 OP Units of the Operating Partnerships
valued at approximately $1,496, the issuance of 390,335 Paired Shares valued at
approximately $10,000 and the assumption of mortgage debt in the amount of
approximately $80,074. In addition, Patriot acquired an office building that
will be converted into a hotel for approximately $33,900.
 
                                       14
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
2.  HOTELS AND OTHER BUSINESSES ACQUIRED: (CONTINUED)
    BUSINESS COMBINATIONS
 
    WYNDHAM HOTEL CORPORATION--On January 5, 1998, Wyndham Hotel Corporation
("Old Wyndham") merged with and into Patriot, with Patriot being the surviving
corporation (the "Wyndham Merger").
 
    Patriot, as a result of the Wyndham Merger, acquired ownership of ten
Wyndham hotels and 14 ClubHouse hotels and leased such hotels to Wyndham.
Thirteen of the 14 hotel leases assumed by Patriot were sub-leased to Wyndham.
Old Wyndham's remaining 52 management and franchise contracts (excluding 16
hotels that Old Wyndham managed that are owned by Patriot), the Wyndham and
ClubHouse proprietary brand names, and the Wyndham hotel management company were
transferred to certain of the Non-Controlled Subsidiaries. The total purchase
consideration for the Wyndham Merger of approximately $982,000 consisted of
21,594,137 Paired Shares and 4,860,876 shares of Series A Convertible Preferred
Stock of Patriot (which are convertible on a one-for-one basis into Paired
Shares), cash of approximately $339,000 to repay debt and pay Old Wyndham
shareholders who elected to receive cash (which was financed with funds drawn on
Patriot's revolving credit facility), and the assumption of approximately
$59,063 in debt.
 
    In April 1998, the Companies issued an aggregate 240,437 Paired Shares
valued at approximately $5,347 in settlement of certain purchase price
adjustment arrangements related to Old Wyndham's acquisition of ClubHouse
Hotels, Inc.
 
    WHG CASINOS & RESORTS, INC. AND RELATED TRANSACTIONS--On January 16, 1998, a
subsidiary of Wyndham merged with and into WHG Casinos & Resorts Inc. ("WHG"),
with WHG being the surviving corporation (the "WHG Merger"). As a result of the
WHG Merger, Wyndham acquired the 570-room Condado Plaza Hotel & Casino, a 50%
interest in the partnership that owns the 389-room El San Juan Hotel & Casino
and a 23.3% interest in the partnership that owns the 751-room El Conquistador
Resort & Country Club (the "El Conquistador"), all of which are located in
Puerto Rico. In addition, Wyndham acquired a 62% interest in Williams
Hospitality Group, Inc., the management company for the three hotels and the Las
Casitas Village at the El Conquistador. A total of 5,004,690 Paired Shares were
issued in connection with the WHG Merger and approximately $21,300 of debt was
assumed, resulting in total purchase consideration of approximately $159,400.
 
    Effective March 1, 1998, Patriot acquired from unaffiliated third parties a
40% interest in the El San Juan Hotel & Casino, an aggregate 68.62% equity
interest in the El Conquistador and a 38% interest in Williams Hospitality
Group, Inc. for approximately $31,000 in cash and issuance of 1,818,182 Paired
Shares valued at approximately $49,227 (collectively, these transactions and the
WHG Merger are referred to herein as the "WHG Transactions").
 
    On July 13, 1998, Patriot acquired the remaining minority interests held by
a third party in entities that own the El Conquistador and the El San Juan Hotel
& Casino for a total purchase price of approximately $3,890. Wyndham owns the
controlling general partner interest in the partnerships that own the El San
Juan Hotel & Casino and the El Conquistador. Wyndham also holds voting control
of Williams Hospitality Group, Inc. Therefore, the operating results of these
entities have been consolidated with those of Wyndham for financial reporting
purposes.
 
                                       15
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
2.  HOTELS AND OTHER BUSINESSES ACQUIRED: (CONTINUED)
    On August 3, 1998, the Companies refinanced certain debt related to the El
Conquistador and the Condado Plaza Hotel & Casino (the "Interim Financing").
Proceeds of $145,000 from the refinancing were used to repay outstanding
indebtedness of approximately $139,350, to pay legal and closing costs and to
establish certain reserves, including interest reserves, required by the loan
agreements. The loans are secured by mortgages on the properties, bear interest
at a rate of LIBOR plus 2.25% and, prior to the extension described below,
matured on November 3, 1998.
 
    Hurricane Georges passed through Puerto Rico on September 21 and 22, 1998.
The hurricane caused approximately $60,000 of property related damage, excluding
the impact of business interruption, to El Conquistador, Condado Plaza Hotel &
Casino and the El San Juan Hotel & Casino properties. As a result of the damage,
the three properties experienced varying periods of business interruption. All
of the Companies' properties on Puerto Rico are insured with both comprehensive
property damage and business interruption insurance, subject to certain
deductibles. See "Note 13--Subsequent Events" for a discussion of the impact of
Hurricane Georges on the Companies' properties in Puerto Rico.
 
    On October 20, 1998, the El Conquistador Partnership, L.P., which is
beneficially owned 100% by the Companies (the "El Conquistador Partnership"),
filed a Form S-11 with the SEC with respect to the offering (the "Bond
Offering") of the undivided interests in the loan agreement between Puerto Rico
Industrial, Tourist, Educational, Medical and Environmental Control Facilities
Financing Authority ("AFICA") and the El Conquistador Partnership relating to
certain AFICA tourism revenue bonds (the "AFICA Bonds"). It is contemplated that
the AFICA Bonds will be issued in the total principal amount of $100,000, will
consist of serial bonds and term bonds and will be issued in register form,
without coupons, in denominations which are multiples of $5. AFICA will issue
the AFICA Bonds and lend the proceeds to the El Conquistador Partnership
pursuant to the loan agreement (the "AFICA Loan Agreement"). The El Conquistador
Partnership will use the loan proceeds to repay the Interim Financing entered
into on August 3, 1998, to fund certain reserves and to pay certain costs and
expenses of issuing the AFICA Bonds. The AFICA Bonds will be secured by a lien
on substantially all of the assets of the El Conquistador Partnership.
 
    On November 3, 1998, the Companies entered into agreements to extend the
maturity of certain debt related to the El Conquistador and the Condado Plaza
Hotel & Casino from November 3, 1998 to January 29, 1999. The extension
agreements required that $10,000 be deposited into an escrow account in
installments beginning on the date of the extension through January 12, 1999.
Upon the satisfactory completion of certain conditions, the $10,000 will be
released from escrow.
 
    ARCADIAN INTERNATIONAL LIMITED--On April 6, 1998, Patriot announced the
completion of its acquisition of all of the issued and to-be-issued shares of
Arcadian International Limited ("Arcadian," formerly known as Arcadian
International Plc) for 60 pence per share. Including the exercise of all
outstanding options to purchase shares, the assumption of debt and the
acquisition of the remaining shares in the Malmaison Group, the total
transaction cost was approximately L185,900 (approximately $308,700 U.S. based
on exchange rates at the time of closing). As a result of the transaction,
Patriot acquired ten owned hotels located throughout England; one owned hotel in
Jersey; five owned and managed Malmaison Hotels; two resorts under development
in Tuscany, Italy and Paris, France; and the proprietary Malmaison brand name.
Patriot also acquired Arcadian's 50% partnership interest in the redevelopment
of the luxury Great
 
                                       16
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
2.  HOTELS AND OTHER BUSINESSES ACQUIRED: (CONTINUED)
Eastern Hotel in London, to be branded as a flagship Wyndham Hotel and operated
by Wyndham once the development has been completed. Collectively, the
transactions described above are referred to herein as the "Arcadian
Acquisition."
 
    In connection with the Arcadian Acquisition, Patriot entered into a
short-term financing agreement on April 15, 1998 with Paine Webber Real Estate
Securities Inc. ("Paine Webber Real Estate") whereby Paine Webber Real Estate
loaned Patriot $160,000 through April 15, 1999, at a rate equal to the borrowing
rate on Patriot's Revolving Credit Facility. As described below in Note 13, the
Companies currently anticipate that this $160,000 loan will be satisfied in
connection with the Companies' transfer of certain assets to Paine Webber Real
Estate. In addition, Patriot assumed approximately $112,600 of debt in
connection with the Arcadian Acquisition.
 
    INTERSTATE HOTELS COMPANY--On June 2, 1998, pursuant to an Agreement and
Plan of Merger dated as of December 2, 1997, as thereafter amended, (the
"Interstate Merger Agreement") between Patriot, Wyndham and Interstate Hotels
Company ("Interstate"), Interstate merged with and into Patriot with Patriot
being the surviving company (the "Interstate Merger"). Pursuant to the
Interstate Merger Agreement, stockholders of Interstate could elect to convert
each of their shares of Interstate common stock into the right to receive either
(i) $37.50 in cash (the "Cash Consideration"), subject to proration in certain
circumstances, or (ii) a number of Paired Shares of Patriot and Wyndham common
stock based on an exchange ratio of 1.341 Paired Shares for each share of
Interstate common stock not exchanged for cash (the "Interstate Exchange
Ratio").
 
    As a result of the Interstate Merger, Patriot acquired controlling interest
in, or ownership of, 42 hotels representing over 12,000 rooms; leases for 84
hotels representing over 10,100 rooms and management or service agreements for
82 hotels representing over 20,400 rooms located throughout the United States
and in Canada, the Caribbean and Russia.
 
    The total purchase consideration for the Interstate Merger of approximately
$2,086,812 consisted of 28,825,875 Paired Shares, cash of approximately $525,385
to pay Interstate shareholders who elected to receive cash, approximately
$787,117 in debt assumed or refinanced by Patriot and approximately $73,351 to
pay other transaction-related costs. In addition, Interstate shareholders
received rights to receive a cash distribution of $0.429 on each share of
Interstate common stock that was converted into Paired Shares, aggregating
approximately $9,138.
 
    On May 27, 1998, the Companies and Interstate entered into a settlement
agreement (the "Settlement Agreement") with Marriott International, Inc.
("Marriott") which addressed certain claims asserted by Marriott in connection
with Patriot's then-proposed merger with Interstate. The Settlement Agreement
provided for the dismissal of litigation brought by Marriott and allowed
Patriot's merger with Interstate to close on June 2, 1998.
 
    In addition to dismissal of the Marriott litigation, the Settlement
Agreement provides for three principal transactions: (i) the re-branding of ten
Marriott hotels under the Wyndham name, (ii) 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 (iii) the divestiture by
the Companies by January 29, 1999 (subject to extension for 60 days upon payment
of certain fees by the Companies) of the
 
                                       17
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
2.  HOTELS AND OTHER BUSINESSES ACQUIRED: (CONTINUED)
third-party management business that was operated by Interstate (the
"Spin-off"). See "Note 13-- Subsequent Events" for a discussion of recent
activity regarding the Spin-off.
 
    SF HOTEL COMPANY, L.P.--On June 5, 1998, Patriot, through the Patriot
Partnership, acquired all of the partnership interests in SF Hotel Company, L.P.
("Summerfield") for approximately $298,915 (the "Summerfield Acquisition"). The
total purchase consideration for the Summerfield Acquisition consisted of
approximately 3,223,795 OP Units of the Operating Partnerships, 1,397,281 Paired
Shares, cash of approximately $165,514 and assumption of debt in the amount of
approximately $17,083. In addition, the purchase price is subject to future
adjustment based on (i) the market price of the Paired Shares through the end of
1998 and (ii) achievement of certain performance criteria through 2001 for seven
hotels that are currently under development. See "Note 13--Subsequent Events"
for a discussion of recent activity regarding these price adjustment mechanisms.
As a result of the Summerfield Acquisition, Patriot acquired four Summerfield
Suites-Registered Trademark- hotels, leasehold and management interests in 24
Summerfield Suites-Registered Trademark-, Sierra Suites-Trademark- and Sunrise
Suites hotels and management contracts and franchise interests for 12 additional
Summerfield Suites-Registered Trademark- and Sierra Suites-Registered Trademark-
hotels. Patriot has leased or sub-leased such hotels to Wyndham. In addition,
Patriot acquired the development contracts for several additional hotels.
 
    CHC INTERNATIONAL--On June 30, 1998, pursuant to an Agreement and Plan of
Merger dated as of September 30, 1997 (the "CHCI Merger Agreement") between
Patriot, Wyndham and CHC International ("CHCI"), the hospitality-related
businesses of CHCI merged with and into Wyndham with Wyndham being the surviving
company (the "CHCI Merger"). CHCI's gaming operations were transferred to a new
legal entity prior to the CHCI Merger and such operations were not a part of the
transaction. As a result of the CHCI Merger, Wyndham, through its subsidiaries,
acquired the remaining 50% investment interest in GAH-II, L.P. ("GAH"), the
remaining 17 leases and 16 of the associated management contracts related to the
Patriot hotels leased by CHC Lease Partners, 8 third-party management contracts,
two third-party asset management contracts, the Grand Bay proprietary brand name
and certain other hospitality management assets. The aggregate purchase price of
the 17 leasehold interests was approximately $52,723, which is reflected as a
cost of acquiring leaseholds in the accompanying statements of operations of
Wyndham.
 
    By operation of the CHCI Merger, all the issued and outstanding shares of
common stock, par value $0.005 per share, of CHCI ("CHCI Shares") and certain
stock option rights were exchanged for an aggregate of 1,781,173 shares of
Series A Redeemable Convertible Preferred Stock, par value $0.01 per share of
Wyndham (the "Wyndham Series A Preferred Stock") and 1,781,181 shares of Series
B Redeemable Convertible Preferred Stock, par value $0.01 per share, of Wyndham
(the "Wyndham Series B Preferred Stock"). In addition, Wyndham assumed CHCI's
outstanding debt in the amount of approximately $16,600.
 
    In addition, on September 30, 2000 and September 30, 2002, Wyndham may be
obligated to pay the CHCI stockholders and a subsidiary of Wyndham may be
obligated to pay a Gencom-related entity additional consideration, in each case
based upon the performance of certain specified assets.
 
    OTHER
 
    During the second quarter of 1998, Patriot re-acquired the leasehold
interests for three of its hotels from two of the Lessees for an aggregate
purchase price of approximately $4,339, which is reflected as a
 
                                       18
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
2.  HOTELS AND OTHER BUSINESSES ACQUIRED: (CONTINUED)
cost of acquiring leaseholds in the accompanying statements of operations of
Patriot. The Companies issued 118,112 Paired Shares valued at $3,000 and paid
cash of $637 to Metro Hotels Leasing Corporation and paid cash of $702 to
NorthCoast Hotels, L.L.C. in connection with the transaction. Patriot has leased
the hotels to Wyndham.
 
    In connection with Patriot's acquisition of certain license agreements,
Patriot recognized an expense of $3,940 related to the cost of acquiring these
agreements for the third quarter of 1998.
 
    In July 1998, Wyndham acquired an approximate 50% limited partnership
interest in a partnership with affiliates of Don Shula's Steakhouses, Inc. for
$1,500 in cash and 156,272 preferred units of limited partnership interest of
Wyndham Partnership valued at approximately $3,500. Wyndham entered into this
joint venture arrangement to expand the Shula's Steak House brand as a food and
beverage amenity in certain of Patriot's hotels.
 
3.  SUBSCRIPTION NOTES:
 
    In order to effect the issuance of the paired shares of common stock and OP
Units which were issued in connection with certain of the Companies' mergers,
other acquisition transactions and forward equity transactions, Patriot and
Wyndham have issued promissory notes to fund issuance of Paired Shares and OP
Units (the "Subscription Notes").
 
    In connection with the issuance of Paired Shares in the Wyndham Merger,
Patriot issued Subscription Notes payable to Wyndham in the aggregate amount of
$30,535. These Subscription Notes bear interest at a rate of LIBOR plus 1% per
annum and mature January 31, 2001.
 
    In connection with the issuance of Paired Shares in the WHG Merger, Wyndham
issued Subscription Notes payable to Patriot in the aggregate amount of
$133,669. These Subscription Notes bear interest at a rate of 8.7% per annum and
mature in January 2001.
 
    In connection with the issuance of Paired Shares and OP Units of the
Operating Partnerships in the Summerfield Acquisition, Patriot issued
Subscription Notes payable to Wyndham in the aggregate amount of $5,816. These
Subscription Notes bear interest at a rate of 8.7% per annum and mature in
January 2001.
 
    In connection with the issuance of Paired Shares in the Interstate Merger,
Patriot issued Subscription Notes payable to Wyndham in the aggregate amount of
$34,591. These Subscription Notes bear interest at a rate of 8.7% per annum and
mature in January 2001.
 
    In connection with the issuance of Paired Shares in the UBS forward equity
transaction, Patriot issued a promissory note payable to Wyndham in the
principal amount of $4,565. The promissory note bears interest at a rate of 8%
and matures on December 31, 2000.
 
    In connection with the issuance of Paired Shares in the Nations forward
equity transaction, Patriot issued a promissory note payable to Wyndham in the
principal amount of $6,091. The promissory note bears interest at a rate of 8%
and matures on February 28, 2001.
 
    In connection with the issuance of Paired Shares in the PaineWebber forward
equity transaction, Patriot issued a promissory note payable to Wyndham in the
principal amount of $6,955. The promissory note bears interest at a rate of 8%
and matures on April 30, 2001.
 
                                       19
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
4.  REVOLVING CREDIT FACILITY, TERM LOANS AND OTHER MORTGAGE DEBT:
 
    In connection with the Interstate Merger, the Companies closed on the
commitment from The Chase Manhattan Bank and Chase Securities, Inc. and Paine
Webber Real Estate to increase Patriot's existing credit facilities to an
aggregate of $2,700,000 (an increase of $1,450,000 from the prior $1,250,000
credit package). The increased credit facilities include the $900,000 Revolving
Credit Facility and a series of term loans in the aggregate amount of up to
$1,800,000 (the "Term Loans"). Proceeds from the increased credit facilities
were used to fund the cash portion of the Interstate Merger consideration, as
well as to refinance certain outstanding indebtedness of the Patriot Companies.
Interest rates on the credit facilities are based on the Companies' leverage
ratio and vary from 1.5% to 2.5% over LIBOR. Patriot incurred approximately
$27,405 in loan fees and other expenses associated with this financing
arrangement.
 
    As of November 12, 1998, the Companies had approximately $12,200 of
available funds under the Revolving Credit Facility. Additionally, certain Term
Loans have maturities of January 31, 1999 ($350,000); March 31, 1999 ($400,000);
and March 31, 2000 ($450,000). The Companies also have approximately $205,000 of
other debt which is currently due on or before December 31, 1998. The Companies
are in current negotiations to refinance or extend the maturity of the existing
indebtedness. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Combined Liquidity and Capital Resources."
 
    The Companies previously entered into three treasury interest rate lock
agreements to protect the Companies against the possibility of rising interest
rates. Under the rate lock agreements, the Companies receive or make payments
based on the difference between specified interest rates, 6.06%, 6.07%, and
5.625%, and the actual 10-year U.S. Treasury interest rate on a principal amount
of $525,000. The Companies settled the entire $525,000 in treasury interest rate
locks resulting in a $49,225 one-time charge to earnings in the third quarter of
1998.
 
    The Companies entered into a fourth interest rate swap arrangement during
the first quarter of 1998 to swap floating rate LIBOR-based interest rates for a
fixed rate interest amount as a hedge against $125,000 of the outstanding
balance on the Companies' revolving credit facility. The interest rate swap
fixes the LIBOR portion of the revolving credit facility interest rate at
5.5575% per annum through November 2002. If the actual LIBOR rate is less than
the specified fixed interest rate, Patriot is obligated to pay the differential
interest amount, such amount being recorded as incremental interest expense. If
the LIBOR is greater than the specified fixed interest rate, the differential
interest amount is refunded to Patriot.
 
    In June 1998, the Companies entered into a fifth interest rate swap
arrangement as a hedge against $250,000 of the outstanding balance on the
Companies' variable rate debt. The interest rate swap provides for a fixed LIBOR
rate of 5.8425% per annum through June 2003. If the actual LIBOR rate is less
than the specified fixed interest rate, Patriot is obligated to pay the
differential interest amount, such amount being recorded as incremental interest
expense. If the LIBOR is greater than the specified fixed interest rate, the
differential interest amount is refunded to Patriot.
 
    Additionally, in connection with the Interstate Merger, Patriot assumed four
interest rate hedge contracts: an interest rate cap that limits LIBOR to 6% on
up to $105,000 of indebtedness through June 1999; an interest rate cap that
limits LIBOR to 6% on up to $234,750 of indebtedness through October 1998; an
interest rate cap that limits LIBOR to 7% on up to $208,750 of indebtedness from
 
                                       20
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
4.  REVOLVING CREDIT FACILITY, TERM LOANS AND OTHER MORTGAGE DEBT: (CONTINUED)
October 1996 through October 1999; and an interest rate swap that provides for a
fixed LIBOR rate of 5.8% on $72,000 of indebtedness through December 2000.
 
    During the third quarter of 1998, the Companies incurred a charge for a
write-off of loan costs of $1,676, net of tax benefits of $419, in connection
with the Interim Financing on the El Conquistador and the Condado Plaza Hotel &
Casino.
 
5.  COMPREHENSIVE INCOME (LOSS):
 
    In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("Statement 130"),
"Reporting Comprehensive Income" which establishes standards for reporting and
display of comprehensive income (loss) and its components. The Companies have
adopted Statement 130 beginning with their interim financial statements for the
first quarter of 1998. Total comprehensive income (loss) for the periods is as
follows:
 
COMBINED
 
<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED    NINE MONTHS ENDED
                                                           SEPTEMBER 30,         SEPTEMBER 30,
                                                        --------------------  --------------------
                                                          1998       1997       1998       1997
                                                        ---------  ---------  ---------  ---------
<S>                                                     <C>        <C>        <C>        <C>
Net loss..............................................  $ (59,415) $ (27,004) $ (67,257) $  (3,838)
Unrealized loss on securities available for sale......       (767)    --         (1,388)    --
Unrealized foreign exchange gain......................      4,313     --          4,323     --
                                                        ---------  ---------  ---------  ---------
Total comprehensive loss..............................  $ (55,869) $ (27,004) $ (64,322) $  (3,838)
                                                        ---------  ---------  ---------  ---------
                                                        ---------  ---------  ---------  ---------
</TABLE>
 
PATRIOT
 
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED    NINE MONTHS ENDED
                                                            SEPTEMBER 30,         SEPTEMBER 30,
                                                         --------------------  --------------------
                                                           1998       1997       1998       1997
                                                         ---------  ---------  ---------  ---------
<S>                                                      <C>        <C>        <C>        <C>
Net loss...............................................  $ (37,436) $ (27,713) $  (9,879) $  (4,547)
Unrealized foreign exchange gain.......................      4,002     --          4,022     --
                                                         ---------  ---------  ---------  ---------
Total comprehensive loss...............................  $ (33,434) $ (27,713) $  (5,857) $  (4,547)
                                                         ---------  ---------  ---------  ---------
                                                         ---------  ---------  ---------  ---------
</TABLE>
 
                                       21
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
5.  COMPREHENSIVE INCOME (LOSS): (CONTINUED)
WYNDHAM
 
<TABLE>
<CAPTION>
                                                                                        JULY 1, 1997
                                                      THREE MONTHS ENDED   NINE MONTHS  (INCEPTION OF
                                                                              ENDED      OPERATIONS)
                                                        SEPTEMBER 30,       SEPTEMBER      THROUGH
                                                     --------------------      30,      SEPTEMBER 30,
                                                       1998       1997        1998          1997
                                                     ---------  ---------  -----------  -------------
<S>                                                  <C>        <C>        <C>          <C>
Net income (loss)..................................  $ (27,034) $     709   $ (67,686)    $     709
Unrealized loss on securities available for sale...       (767)    --          (1,388)       --
Unrealized foreign exchange gain...................        311     --             301        --
                                                     ---------  ---------  -----------        -----
Total comprehensive income (loss)..................  $ (27,490) $     709   $ (68,773)    $     709
                                                     ---------  ---------  -----------        -----
                                                     ---------  ---------  -----------        -----
</TABLE>
 
                                       22
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
6.  COMPUTATION OF EARNINGS PER SHARE:
 
    Earnings per share have been computed as follows:
 
    COMBINED BASIC AND DILUTED EARNINGS PER SHARE(1)
 
<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED    NINE MONTHS ENDED
                                                         SEPTEMBER 30,         SEPTEMBER 30,
                                                      --------------------  --------------------
                                                        1998       1997       1998       1997
                                                      ---------  ---------  ---------  ---------
                                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>        <C>        <C>        <C>
Loss before extraordinary item......................  $ (58,158) $ (24,470) $ (35,440) $  (1,304)
Adjustment for equity forwards(2)...................    (95,063)    --        (95,063)    --
Preferred stock dividends...........................     (2,695)    --         (4,250)    --
                                                      ---------  ---------  ---------  ---------
Loss to common stockholders before extraordinary
  items.............................................   (155,916)   (24,470)  (134,753)    (1,304)
Extraordinary loss..................................     (1,257)    (2,534)   (31,817)    (2,534)
                                                      ---------  ---------  ---------  ---------
Net loss to common stockholders.....................  $(157,173) $ (27,004) $(166,570) $  (3,838)
                                                      ---------  ---------  ---------  ---------
                                                      ---------  ---------  ---------  ---------
Weighted average number of Paired Shares
  outstanding.......................................    144,451     61,647    122,391     49,454
 
Dilutive securities:
  Effect of unvested stock grants...................     --         --         --         --
  Dilutive options to purchase Paired Shares........     --         --         --         --
  Dilutive effect of price adjustment
    arrangements....................................     --         --         --         --
  Dilutive convertible preferred shares.............     --         --         --         --
                                                      ---------  ---------  ---------  ---------
                                                        144,451     61,647    122,391     49,454
                                                      ---------  ---------  ---------  ---------
                                                      ---------  ---------  ---------  ---------
Earnings per Paired Share:
  Loss to common stockholders before extraordinary
    items...........................................  $   (1.08) $   (0.40) $   (1.10) $   (0.03)
  Extraordinary loss................................      (0.01)     (0.04)     (0.26)     (0.05)
                                                      ---------  ---------  ---------  ---------
  Net loss..........................................  $   (1.09) $   (0.44) $   (1.36) $   (0.08)
                                                      ---------  ---------  ---------  ---------
                                                      ---------  ---------  ---------  ---------
</TABLE>
 
------------------------
 
(1) The combined Companies are in a loss position for both the three months
    ended September 30, 1998 and 1997 and the nine months ended September 30,
    1998 and 1997. Therefore, the presentation of basic and diluted earnings per
    share are identical since the securities which could have a dilutive impact
    on earnings per share are anti-dilutive.
 
(2) The adjustment relates to the mark-to-market adjustment for the UBS
    Transaction and the Nations Transaction (described in Note 7), which can be
    settled in cash or stock, at the Companies' option. There is no adjustment
    to earnings per share for the PaineWebber Transaction since it can be
    settled in stock only and is accounted for by the Reverse Treasury Stock
    Method.
 
                                       23
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
6.  COMPUTATION OF EARNINGS PER SHARE: (CONTINUED)
 
    PATRIOT BASIC AND DILUTED EARNINGS PER SHARE(1)
 
<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED    NINE MONTHS ENDED
                                                         SEPTEMBER 30,         SEPTEMBER 30,
                                                      --------------------  --------------------
                                                        1998       1997       1998       1997
                                                      ---------  ---------  ---------  ---------
                                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>        <C>        <C>        <C>
Income (loss) before extraordinary item.............  $ (37,436) $ (25,179) $  20,680  $  (2,013)
Adjustment for equity forwards(2)...................    (95,063)    --        (95,063)    --
Preferred stock dividends...........................     (3,110)    --         (3,110)    --
                                                      ---------  ---------  ---------  ---------
Loss to common stockholders before extraordinary
  items.............................................   (135,609)   (25,179)   (77,493)    (2,013)
Extraordinary loss..................................     --         (2,534)   (30,559)    (2,534)
                                                      ---------  ---------  ---------  ---------
Net loss to common stockholders.....................  $(135,609) $ (27,713) $(108,052) $  (4,547)
                                                      ---------  ---------  ---------  ---------
                                                      ---------  ---------  ---------  ---------
Weighted average number of common shares
  outstanding.......................................    144,451     61,647    122,391     49,454
 
Dilutive securities:
  Effect of unvested stock grants...................     --         --         --         --
  Dilutive options to purchase common shares........     --         --         --         --
  Dilutive effect of price adjustment
    arrangements....................................     --         --         --         --
  Dilutive convertible preferred shares.............     --         --         --         --
                                                      ---------  ---------  ---------  ---------
                                                        144,451     61,647    122,391     49,454
                                                      ---------  ---------  ---------  ---------
                                                      ---------  ---------  ---------  ---------
Earnings per share:
  Loss to common stockholders before extraordinary
    items...........................................  $   (0.94) $   (0.41) $   (0.63) $   (0.04)
  Extraordinary loss................................     --          (0.04      (0.25)     (0.05)
                                                      ---------  ---------  ---------  ---------
  Net loss..........................................  $   (0.94) $   (0.45) $   (0.88) $   (0.09)
                                                      ---------  ---------  ---------  ---------
                                                      ---------  ---------  ---------  ---------
</TABLE>
 
------------------------
 
(1) Patriot is in a loss position for both the three months ended September 30,
    1998 and 1997 and the nine months ended September 30, 1998 and 1997.
    Therefore, the presentation of basic and diluted earnings per share are
    identical since the securities which could have a dilutive impact on
    earnings per share are anti-dilutive.
 
(2) The adjustment relates to the mark-to-market adjustment for the UBS
    Transaction and the Nations Transaction (described in Note 7), which can be
    settled in cash or stock, at the Companies' option. There is no adjustment
    to earnings per share for the PaineWebber Transaction since it can be
    settled in stock only and is accounted for by the Reverse Treasury Stock
    Method.
 
                                       24
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
6.  COMPUTATION OF EARNINGS PER SHARE: (CONTINUED)
    WYNDHAM BASIC AND DILUTED EARNINGS PER SHARE
 
<TABLE>
<CAPTION>
                                                                                       JULY 1,
                                                                                        1997
                                                                                     (INCEPTION
                                                                                         OF
                                                   THREE MONTHS ENDED   NINE MONTHS  OPERATIONS)
                                                     SEPTEMBER 30,         ENDED       THROUGH
                                                  --------------------   SEPTEMBER    SEPTEMBER
                                                   1998(1)     1997     30, 1998(1)   30, 1997
                                                  ---------  ---------  -----------  -----------
                                                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                               <C>        <C>        <C>          <C>
Income (loss) before extraordinary item.........  $ (25,777) $     709   $ (66,429)   $     709
Preferred stock dividends.......................     (1,140)    --          (1,140)      --
                                                  ---------  ---------  -----------  -----------
Income (loss) to common stockholders before
  extraordinary items...........................    (26,917)       709     (67,569)         709
Extraordinary loss..............................     (1,257)    --          (1,257)      --
                                                  ---------  ---------  -----------  -----------
Net income (loss) to common stockholders........  $ (28,174) $     709   $ (68,826)   $     709
                                                  ---------  ---------  -----------  -----------
                                                  ---------  ---------  -----------  -----------
Weighted average number of common shares
  outstanding...................................    144,451     61,647     122,391       61,647
 
Dilutive securities:
  Effect of unvested stock grants...............     --            891      --              891
  Dilutive options to purchase common shares....     --          1,100      --            1,100
  Dilutive effect of price adjustment
    arrangements................................     --         --          --           --
  Dilutive convertible preferred shares.........     --         --          --           --
                                                  ---------  ---------  -----------  -----------
                                                    144,451     63,638     122,391       63,638
                                                  ---------  ---------  -----------  -----------
                                                  ---------  ---------  -----------  -----------
Earnings per share:
  Income (loss) to common stockholders before
    extraordinary items.........................  $   (0.19) $    0.01   $   (0.55)   $    0.01
  Extraordinary loss............................      (0.01)    --           (0.01)      --
                                                  ---------  ---------  -----------  -----------
  Net income (loss).............................  $   (0.20) $    0.01   $   (0.56)   $    0.01
                                                  ---------  ---------  -----------  -----------
                                                  ---------  ---------  -----------  -----------
</TABLE>
 
------------------------
 
(1) Wyndham is in a loss position for both the three months and nine months
    ended September 30, 1998. Therefore, the presentation of basic and diluted
    earnings per share are identical since the securities which could have a
    dilutive impact on earnings per share are anti-dilutive.
 
7.  COMMITMENTS AND CONTINGENCIES:
 
    The Companies are parties to transactions with three counterparties
involving the sale of an aggregate of 13.3 million shares of Paired Common
Stock, with related Price Adjustment Mechanisms, as described below.
 
    UBS TRANSACTION.  On December 31, 1997, the Companies entered into
transactions with UBS Limited and Union Bank of Switzerland, London Branch
(together with its successor, UBS AG, London
 
                                       25
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
7.  COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Branch, "UBS" and, together with Warburg Dillon Read, LLC, the "UBS Parties").
Pursuant to the terms of a Purchase Agreement dated as of December 31, 1997 (the
"UBS Purchase Agreement"), UBS Limited purchased 3,250,000 Paired Shares (the
"Initial UBS Shares") from the Companies at a purchase price of $28.8125 per
share (the last reported sale price of the Paired Shares on December 30, 1997)
for approximately $91,800 in net proceeds. The net proceeds were used by the
Companies to repay existing indebtedness. The Initial UBS Shares represent
approximately 1.8% of the outstanding Paired Shares as of the date of this
filing. UBS received from the Companies a placement fee of 2%, or approximately
$1,900.
 
    In connection with the issuance of the Initial UBS Shares, the Companies
entered into a Forward Stock Contract, dated as of December 31, 1997, with UBS
(as amended on August 14, 1998 and September 11, 1998, the "Forward Stock
Contract"). Pursuant to the Forward Stock Contract, the Companies have agreed to
effect a settlement, in one or more transactions (each a "UBS Settlement"), with
respect to a number of Paired Shares equal to the number of Initial UBS Shares,
at a per Paired Share price equal to $28.8125 plus a forward accretion
reflecting an imputed return at LIBOR plus 140 basis points, minus an adjustment
to reflect distributions on the Paired Shares (the "UBS Forward Price"). The
forward accretion component represents a guaranteed rate of return to UBS. The
Paired Shares to be delivered to or by UBS may consist of Paired Shares acquired
under the UBS Purchase Agreement or otherwise.
 
    The Companies may effect a UBS Settlement by (i) delivering to UBS Paired
Shares (the "UBS Settlement Shares") equal in value (valued at the daily average
closing price for the Paired Shares over a specific period of time (the "UBS
Unwind Price")) to the UBS Forward Price at the time of such UBS Settlement
times the number of Paired Shares subject to such UBS Settlement (the "UBS
Settlement Amount") in exchange for the number of shares subject to such UBS
Settlement, (ii) delivering to (or, in the event the UBS Unwind Price is greater
than the UBS Forward Price, receiving from) UBS a number of Paired Shares equal
to the difference between the number of the UBS Settlement Shares and the number
of shares subject to such UBS Settlement, or (iii) delivering to UBS cash equal
to the UBS Settlement Amount in exchange for the shares subject to such UBS
Settlement. If the Companies make a UBS Settlement in Paired Shares, they must
also pay to UBS (i) an unwind accretion fee (payable in cash or shares) equal to
50% of the UBS Settlement Amount times the imputed return of LIBOR plus 140
basis points over the period designated for such UBS Settlement and (ii) a
placement fee equal to 0.50% of the UBS Settlement Amount. The Forward Stock
Contract provides that shares may be delivered in settlement only if the
Companies have on file with the SEC an effective registration statement covering
the resale by UBS of the shares to be delivered. A registration statement
covering up to 4,000,000 shares to be sold by UBS was declared effective (as
amended) on October 15, 1998. A registration statement covering up to an
additional 40,000,000 shares to be sold by PWFS, Nations and UBS was declared
effective on October 15, 1998.
 
    In connection with the September 11, 1998 amendment to the Forward Stock
Contract, the Companies paid down $45,628 under the Forward Stock Contract
through the application of cash collateral that had previously been delivered to
UBS pursuant to the Forward Stock Contract. In addition, the Companies have
delivered an additional 2,474,359 Paired Shares and $8,252 to UBS as collateral
pursuant to the
 
                                       26
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
7.  COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Forward Stock Contract. The cash collateral held by UBS is subject to adjustment
every two weeks such that the amount of cash collateral is equal to the number
of shares subject to the Forward Stock Contract times the amount by which the
UBS Forward Price exceeds the closing price for the Paired Shares on the trading
day immediately preceding the adjustment date (such closing price the "UBS Reset
Price" and such product the "UBS Interim Settlement Amount"). With the prior
written consent of UBS, the Companies may elect to deliver to UBS a number of
Paired Shares (the "UBS Interim Settlement Shares") equal in value (valued at
the UBS Reset Price) to 125% of the UBS Interim Settlement Amount.
 
    The Forward Stock Contract provides that if the average closing price of the
Paired Shares for any two consecutive trading days does not equal or exceed
$11.00 (the "UBS Unwind Threshold"), UBS has the right to force a complete
settlement under the Forward Stock Contract. As a result of the failure of the
average closing price of the Paired Shares for October 2 and October 5, 1998 to
equal or exceed $11.00, UBS became entitled to force a complete settlement
pursuant to the terms of the Forward Stock Contract and continues to be so
entitled. In addition, the Forward Stock Contract reached maturity on October
15, 1998. UBS has asserted that the Companies are in default under the terms of
the Forward Stock Contract as the result of the Companies not delivering certain
cash collateral and not making final settlement of the Forward Stock Contract in
cash, although the Companies have disputed this assertion. See "Potential
Dilution and Liquidity Effects of the Price Adjustment Mechanisms" below.
 
    UBS also has the right to force a complete settlement under the Forward
Stock Contract if the Companies (i) are in default with respect to certain
financial and notice covenants under the Forward Stock Contract, (ii) are in
default under the Corporation's credit facility with Chase Manhattan Bank, (iii)
are in default with respect to certain specified indebtedness of the Companies,
(iv) declare bankruptcy or become insolvent or fail to post sufficient cash
collateral, (v) effect an early settlement, unwind or liquidation of any
transaction similar to the transaction with UBS or (vi) fail to settle the
transaction in cash simultaneously with the sale by the Companies of certain
property. A registration statement covering the sale of up to 4,000,000 shares
by UBS was declared effective (as amended) on October 15, 1998. Also, a
registration statement covering the sale of up to an additional 40,000,000
shares by PWFS, Nations and UBS was declared effective on October 15, 1998.
However, there can be no assurance that such registration statements will remain
effective or that the Companies will not be required to register more Paired
Shares in connection with the Forward Stock Contract.
 
    NATIONS TRANSACTION.  On February 26, 1998, the Companies entered into
transactions with a subsidiary of NationsBank Corporation (together with
NationsBanc Mortgage Capital Corporation, "Nations"). Pursuant to the terms of a
Purchase Agreement dated as of February 26, 1998 (the "Nations Purchase
Agreement"), Nations purchased 4,900,000 Paired Shares (the "Initial Nations
Shares") from the Companies 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.
The net proceeds were used by the Companies to repay existing indebtedness. The
Initial Nations Shares represent approximately 2.7% of the outstanding Paired
Shares as of the date of this filing.
 
    In connection with the issuance of the Initial Nations Shares, the Companies
entered into a Purchase Price Adjustment Mechanism, dated as of February 26,
1998, with Nations (as amended on August 14,
 
                                       27
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
7.  COMMITMENTS AND CONTINGENCIES: (CONTINUED)
1998, the "Nations Price Adjustment Mechanism"). Pursuant to the Nations Price
Adjustment Mechanism, the Companies have agreed to effect certain purchase price
adjustments on or before February 26, 1999, in one or more transactions (each a
"Nations Settlement"), with respect to a number of Paired Shares equal to the
number of Initial Nations Shares, by reference to a per Paired Share price equal
to $25.50 plus a forward accretion representing an imputed return at LIBOR plus
150 basis points, minus an adjustment to reflect distributions on the Paired
Shares (the "Nations Forward Price"). The Paired Shares to be delivered to or by
Nations may consist of Paired Shares acquired under the Nations Purchase
Agreement or otherwise.
 
    The Companies may effect a Nations Settlement by (i) delivering to Nations
Paired Shares (the "Nations Settlement Shares") equal in value (valued at the
dollar volume weighted average price for the Paired Shares (as calculated
pursuant to the Nations Price Adjustment Mechanism) over a specific period of
time (the "Nations Unwind Price")) to the Nations Forward Price at the time of
such Nations Settlement times the number of shares subject to such Nations
Settlement (the "Nations Settlement Amount") in exchange for the number of
shares subject to such Nations Settlement, (ii) delivering to (or, in the event
the Nations Unwind Price is greater than the Nations Forward Price, receiving
from) Nations a number of Paired Shares equal to the difference between the
number of Nations Settlement Shares and the number of shares subject to such
Nations Settlement, or (iii) delivering to Nations cash equal to the Nations
Settlement Amount in exchange for a number of Paired Shares equal to the number
of shares subject to such Nations Settlement. If the Companies effect a
settlement pursuant to clause (i) or (ii) above, they must also pay a placement
fee equal to 2% of the Nations Settlement Amount. The Nations Price Adjustment
Mechanism provides that shares may be delivered in settlement only if (i) the
Companies have on file with the SEC an effective registration statement covering
the sale by Nations of the shares to be delivered, (ii) for settlement at
maturity, the dollar volume weighted average price of the Paired Shares (as
calculated pursuant to the Nations Price Adjustment Mechanism) on the date of
such settlement is greater than or equal to $20.00 and (iii) for settlement at
maturity, no Mandatory Nations Unwind Event (as defined below) has occurred and
is continuing. If the above conditions are not met when they apply, the
Companies generally must deliver cash equal to the Nations Settlement Amount.
 
    The Nations Price Adjustment Mechanism provides that on or after October 15,
1998, if the dollar volume weighted average price of the Paired Shares for any
two consecutive trading days does not equal or exceed certain amounts (the
"Nations Unwind Thresholds"), Nations has the right to force a partial or
complete settlement under the Nations Price Adjustment Mechanism. The Nations
Unwind Thresholds are $20.00 (33% settlement), $18.75 (67%) and $17.25 (100%).
As a result of failure of the price of the Paired Shares to exceed the Nations
Unwind Thresholds, pursuant to the terms of the Nations Price Adjustment
Mechanism, Nations became entitled to force a complete settlement under the
Nations Price Adjustment Mechanism on October 16, 1998, and continues to be so
entitled. Nations has not required any settlement under the Nations Price
Adjustment Mechanism to date. See "Potential Dilution and Liquidity Effects of
the Price Adjustment Mechanism" below.
 
    Nations also has the right to force a complete settlement under the Nations
Price Adjustment Mechanism at any time upon the occurrence of any of the
following (each a "Mandatory Nations Unwind
 
                                       28
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
7.  COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Event"): (i) default of the Companies with respect to certain indebtedness, (ii)
declaration by the Companies of bankruptcy or insolvency or failure to post
sufficient cash collateral or (iii) the sale or refinancing by the Companies of
certain properties in which the net proceeds of such sale or refinancing (up to
the amount necessary to effect a complete cash settlement) are not applied to a
cash settlement under the Nations Price Adjustment Mechanism. The Nations Price
Adjustment Mechanism also provides that, upon the consummation of the sale or
refinancing of certain properties by the Companies with a third party, the
Companies must apply the net proceeds to the extent necessary to effect a
complete cash settlement under the Nations Price Adjustment Mechanism. The
Companies have agreed to use all commercially reasonable efforts to effect such
a sale or refinancing. The Companies' planned sale of assets to Paine Webber
Real Estate (as described in Note 13 below) would give rise to a Mandatory
Nations Unwind Event absent a waiver by Nations. The Companies are seeking such
a waiver, but no assurance can be given as to whether or on what terms it will
be obtained. In addition, the Companies' bank group has indicated its belief
that consent under the credit facility would be required in connection with such
sale. No assurance can be given as to whether or on what terms such consent, if
required, will be obtained. Under the terms of the Nations Price Adjustment
Mechanism, upon the occurrence of a Mandatory Nations Unwind Event, if the Daily
Average Price (as defined) of the Paired Shares does not exceed $20.00, the
Companies would be deemed to have elected to settle the Nations Price Adjustment
Mechanism in cash (and the Companies would not be entitled to elect to settle in
stock). The Daily Average Price of the Paired Shares on November 19, 1998 was
$7.46.
 
    As of the date of this filing, the Companies have delivered an aggregate of
13,886,547 Paired Shares and $179.2 to Nations as collateral to secure the
Companies' obligations under the Nations Price Adjustment Mechanism. A
registration statement covering the sale by PWFS, Nations and UBS of up to
40,000,000 Paired Shares in connection with the Price Adjustment Mechanisms has
been declared effective; however there can be no assurance that such
registration statement will remain effective or that the Companies will not be
required to register more Paired Shares in connection with the Price Adjustment
Mechanisms.
 
    PWFS TRANSACTION.  On April 6, 1998, the Companies entered into transactions
with PaineWebber Incorporated ("PaineWebber") and PaineWebber Financial
Products, Inc. ("PWFS" and, together with PaineWebber, the "PaineWebber
Parties"). Pursuant to the terms of a Purchase Agreement dated as of April 6,
1998 (the "PaineWebber Purchase Agreement"), PaineWebber purchased 5,150,000
Paired Shares (the "Initial PaineWebber Shares") from the Companies 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. The net proceeds were used by the Companies to repay
existing indebtedness. The Initial PaineWebber Shares represent approximately
2.9% of the outstanding Paired Shares as of the date of this filing.
 
    In connection with the issuance of the Initial PaineWebber Shares, the
Companies entered into a Purchase Price Adjustment Mechanism Agreement, dated as
of April 6, 1998, with PWFS (as amended on August 14, 1998, September 30, 1998
and October 22, 1998, the "PaineWebber Price Adjustment Agreement"). Upon any
settlement under the PaineWebber Price Adjustment Agreement (a "PW Settlement"),
 
                                       29
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
7.  COMMITMENTS AND CONTINGENCIES: (CONTINUED)
the purchase price of the Initial PaineWebber Shares subject to the PW
Settlement is adjusted based upon the difference between (i) the proceeds (net
of a negotiated resale spread or underwriting discount) received by PWFS from
the sale of the Paired Shares and (ii) a reference price (the "Reference Price")
equal to the closing price for a Paired Shares on April 3, 1998 plus a forward
accretion reflecting an imputed return at LIBOR plus 140 basis points, minus an
adjustment to reflect distributions on the Initial PaineWebber Shares prior to
the date of such PW Settlement (such difference, the "PW Price Difference"). If
the PW Price Difference is positive, PWFS must deliver Paired Shares or cash to
the Companies equal in value to the aggregate PW Price Difference. If the PW
Price Difference is negative, the Companies must deliver to PWFS additional
Paired Shares equal in value (net of a negotiated resale spread or underwriting
discount, as the case may be) to the aggregate PW Price Difference. The
PaineWebber Price Adjustment Agreement provides that shares may be delivered in
settlement only if the Companies have on file with the SEC an effective
registration statement covering the resale by PWFS of the shares to be
delivered. Although a registration statement covering the sale of up to
40,000,000 Paired Shares by PWFS, Nations and UBS in connection with the Price
Adjustment Mechanisms has been declared effective, there can be no assurance
that such registration statement will remain effective or that the Companies
will not be required to register more Paired Shares in connection with the Price
Adjustment Mechanisms.
 
    Pursuant to the PaineWebber Price Adjustment Agreement, the Companies have
to date delivered 17,816,281 Paired Shares to PWFS as collateral ("Collateral
Shares") and have paid cash dividends totaling $192.3 on the Collateral Shares,
which amount is held by PWFS as collateral. Such number of shares is subject to
adjustment every two weeks such that the value of the Collateral Shares plus the
Initial PaineWebber Shares that have not been settled (valued at the closing
price of the Paired Shares on the adjustment date) is equal to the amount by
which the Reference Price times the number of shares subject to the PaineWebber
Price Adjustment Agreement (i.e., the number of Initial PaineWebber Shares that
have not been settled) exceeds $5,000 (such excess amount, the "Collateral
Amount"). The PaineWebber Price Adjustment Agreement provides, that if the
resale by PWFS of the shares to be so delivered is not covered by an effective
registration statement, then the Companies, at their option, must deliver to
PWFS either (i) a number of Collateral Shares equal in value to 125% of the
Collateral Amount or (ii) cash collateral equal to the Collateral Amount.
Although a registration statement covering the sale of up to 40,000,000 Paired
Shares by PWFS, Nations and UBS in connection with the Price Adjustment
Agreements has been declared effective, there can be no assurance that such
registration statement will remain effective or that the Companies will not be
required to register more Paired Shares in connection with the Price Adjustment
Mechanisms.
 
    The PaineWebber Price Adjustment Agreement provides that if the closing
price of the Paired Shares on any trading day does not equal or exceed $16.00,
PWFS has the right to force a complete settlement under the PaineWebber Price
Adjustment Agreement through any commercially reasonable manner of sale
specified by PWFS. As a result of the failure of the closing price of the Paired
Shares to equal or exceed $16.00 on August 25, 1998, pursuant to the terms of
the PaineWebber Price Adjustment Agreement, PWFS became entitled to force a
complete settlement under the PaineWebber Price Adjustment Agreement and
continues to be so entitled. In addition, the PaineWebber Price Adjustment
Agreement
 
                                       30
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
7.  COMMITMENTS AND CONTINGENCIES: (CONTINUED)
reached maturity on October 15, 1998. PWFS has not required any settlement under
the PaineWebber Price Adjustment Agreement to date although it has reserved its
right to do so. See "Potential Dilution and Liquidity Effects of the Price
Adjustment Mechanisms" below.
 
    PWFS also has the right to force a complete settlement under the PaineWebber
Price Adjustment Agreement if the Companies (i) are in default with respect to
certain specified indebtedness of the Companies or (ii) effect an early
settlement, unwind or liquidation of any transaction similar to the transaction
with PWFS.
 
    POTENTIAL DILUTION AND LIQUIDITY EFFECTS OF THE PRICE ADJUSTMENT
MECHANISMS.  Settlement under one or more of the Price Adjustment Mechanisms
described above could have adverse effects on the Companies' liquidity or
dilutive effects on the Companies' capital stock. As of the date of this filing,
all three counterparties to the Price Adjustment Mechanisms were, pursuant to
the terms of the Price Adjustment Mechanisms, entitled to require settlement of
their transactions. If upon settlement the reset price or unwind price (in the
case of the UBS and Nations transactions) or the market price (in the case of
the PWFS transaction) of the Paired Shares is less than the applicable forward
price or reference price, the Companies must deliver cash or additional Paired
Shares to effect such settlement. Delivery of cash would adversely affect the
Companies' liquidity, and delivery of shares would have dilutive effects on the
Companies' capital stock. Moreover, to settle in stock under any of the Price
Adjustment Mechanisms, the Companies may be required to issue Paired Shares at a
depressed price, which would heighten the dilutive effects on the Companies'
capital stock. The dilutive effects of a stock settlement increase significantly
as the market price of the Paired Shares declines below the applicable forward
price or reference price. Furthermore, under certain circumstances, the
Companies may settle in Paired Shares only if a registration statement covering
such shares is effective. Although to date registration statements covering the
sale of up to 44,000,000 Paired Shares in connection with the Price Adjustment
Mechanisms have been declared effective, there can be no assurance that such
registration statements will remain effective or that the Companies will not be
required to register more Paired Shares in connection with the Price Adjustment
Mechanisms.
 
    The market price of the Paired Shares has dropped significantly below the
applicable forward price or reference price under each of the Price Adjustment
Mechanisms. As a result, the Companies have to date made cash payments
(including cash dividends on collateral shares) totaling $54,252 (including a
partial settlement of $45,628 in cash under the UBS Forward Stock Contract) and
delivered an aggregate of 34,177,187 additional Paired Shares as collateral
pursuant to the Price Adjustment Mechanisms. If the Companies settled all three
transactions in cash on November 12, 1998, they would be obligated to deliver to
the counterparties a total of approximately $314,369 (assuming application of
the cash currently held as collateral by the counterparties) and would receive
from the counterparties a total of 13.3 million Paired Shares plus all Paired
Shares then held as collateral by them.
 
    The terms of the Price Adjustment Mechanisms provide that all three
counterparties currently have the right to require the Companies to settle their
transactions. Moreover, UBS has asserted that the Companies are in default under
the terms of the Forward Stock Contract as the result of the Companies
 
                                       31
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
7.  COMMITMENTS AND CONTINGENCIES: (CONTINUED)
not delivering certain cash collateral and not making final settlement of the
Forward Stock Contract in cash, although the Companies have disputed this
assertion.
 
    The Companies are currently in discussions regarding possible resolutions of
the Price Adjustment Mechanisms to provide the Companies with the opportunity to
resolve the Price Adjustment Mechanisms through payments of cash or other forms
of consideration, and thus to avoid the need to settle in shares. There can be
no assurance that such discussions will be successful. Moreover, any such
resolutions may require the consent of the lenders under the Companies' credit
facility. No assurances can be given that any such consent, if required and
sought, would be obtained, or that the Companies would be able to meet their
obligations under any such settlement arrangement.
 
8.  RELATED PARTY TRANSACTIONS:
 
    In connection with the CHCI Merger, Mr. Karim Alibhai, President and Chief
Operating Officer of Wyndham, received 156,863 OP Units of the Operating
Partnerships valued at approximately $5,000 and entities affiliated with Mr.
Alibhai received 85,600 shares of Wyndham Series A Preferred Stock and 85,600
shares of Wyndham Series B Preferred Stock with an aggregate value of
approximately $3,980. These units and shares were issued in consideration of Mr.
Alibhai's ownership interests in CHCI and its affiliates. In addition, Mr.
Sherwood M. Weiser, a director of Wyndham, received 394,397 shares of Wyndham
Series A Preferred Stock and 394,398 shares of Wyndham Series B Preferred Stock
valued at $18,182 in connection with the CHCI Merger as consideration for his
ownership interest in CHCI and its affiliates.
 
9.  INCOME TAXES:
 
    As a result of the Wyndham Merger, the WHG Merger and the Interstate Merger,
Wyndham recorded a deferred tax liability totaling $108,221. The deferred tax
liability represents the tax effects of differences between the fair values and
the tax bases of identifiable assets acquired and liabilities assumed in
connection with the transactions.
 
    The income tax provision for Wyndham is affected by certain expenses which
are deductible in determining net income for GAAP purposes, but are
non-deductible for federal income tax purposes. The income tax provision is also
affected by Wyndham's ownership of certain subsidiaries which are not
consolidated for federal income tax purposes.
 
                                       32
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
10.  CASH DIVIDENDS DECLARED; 1998 DIVIDENDS
 
<TABLE>
<CAPTION>
                                                                                                        DIVIDEND
                                                                                                           PER
                                                                                                        SHARE(1)
                                                                                                       -----------
<S>                                                                                                    <C>
1997:
  First quarter......................................................................................   $  0.2625
  Second quarter.....................................................................................   $  0.3225(2)
  Third quarter......................................................................................   $  0.2625
 
1998:
  First quarter......................................................................................   $  0.3200(3)
  Second quarter.....................................................................................   $  0.3200(4)
</TABLE>
 
------------------------
 
(1) Represents shares of Old Patriot Common Stock for periods through July 1,
    1997, and Paired Shares for periods after July 1, 1997, except that
    dividends have been paid only on shares of Patriot Common Stock for periods
    after July 1, 1997. No dividends have been paid on shares of Wyndham
    International Common Stock.
 
(2) Dividends paid for second quarter of 1997 include a special dividend of
    $0.06 per share paid by Old Patriot on June 30, 1997. To maintain its
    qualification as a REIT prior to consummation of the Cal Jockey merger, Old
    Patriot was required to distribute to its stockholders any undistributed
    "real estate investment trust taxable income" of Old Patriot for Old
    Patriot's short taxable year ending with the consummation of the Cal Jockey
    Merger.
 
(3) On May 4, 1998, Patriot declared a dividend of $0.32 per share for the first
    quarter of 1998. The dividend was paid on May 29, 1998 to shareholders of
    record on May 20, 1998.
 
(4) On July 28, 1998, Patriot declared a dividend of $0.32 per share for the
    second quarter of 1998. The dividend was paid on August 20, 1998 to
    shareholders of record on August 10, 1998.
 
    Patriot is currently reviewing its liquidity and financial condition.
Accordingly, Patriot has decided not to declare a dividend with respect to the
third quarter at this time. Instead, prior to December 31, 1998, Patriot intends
to declare a dividend, payable in cash or securities in January, 1999, which
will be at least sufficient to satisfy the federal income tax requirements with
respect to dividends in order for Patriot to continue to qualify as a REIT.
 
11.  PRO FORMA FINANCIAL INFORMATION:
 
    The following unaudited separate and combined pro forma results of
operations of Patriot and Wyndham are presented as if the 487 hotels owned,
leased, managed or franchised by the Companies as of September 30, 1998, had
been acquired on January 1, 1997. Such acquisition transactions include: (i) the
Cal Jockey Merger, the Wyndham Merger, the Interstate Merger and the CHCI Merger
and the related transactions; (ii) the closing on the commitment for the
Revolving Credit Facility and Term Loans; (iii) the acquisition of Grand
Heritage Hotels, Inc. and other Grand Heritage subisidiaries; (iv) the Arcadian
Acquisition and the Summerfield Acquisition; (v) the WHG Transactions; and (vi)
the private placements of equity securities and public offering of the
Companies' common stock which occurred during the first nine months of 1998 and
during 1997. The following unaudited pro forma financial information is not
 
                                       33
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
11.  PRO FORMA FINANCIAL INFORMATION: (CONTINUED)
necessarily indicative of what actual results of operations of Patriot and
Wyndham would have been assuming such transactions had been completed as of
January 1, 1997, nor do they purport to represent the results of operations for
future periods.
 
                              PATRIOT AND WYNDHAM
                    COMBINED PRO FORMA RESULTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                        NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                    --------------------------
                                                                        1998          1997
                                                                    ------------  ------------
                                                                    (IN THOUSANDS, EXCEPT PER
                                                                           SHARE DATA)
<S>                                                                 <C>           <C>
Total revenue.....................................................  $  1,929,924  $  1,794,741
                                                                    ------------  ------------
                                                                    ------------  ------------
Net loss(1).......................................................  $    (86,513) $    (45,931)
Adjustment for equity forwards(2).................................       (95,063)      --
Preferred stock dividends.........................................        (4,250)      --
                                                                    ------------  ------------
  Net loss to common stockholders.................................  $   (185,826) $    (45,931)
                                                                    ------------  ------------
                                                                    ------------  ------------
Earnings per share--
 
Basic loss per Paired Share.......................................  $      (1.33) $      (0.33)
                                                                    ------------  ------------
                                                                    ------------  ------------
Diluted loss per Paired Share.....................................  $      (1.33) $      (0.33)
                                                                    ------------  ------------
                                                                    ------------  ------------
Weighted average number of Paired Shares and Paired Share
  equivalents outstanding:
  Basic...........................................................       139,820       139,820
                                                                    ------------  ------------
                                                                    ------------  ------------
  Diluted.........................................................       139,820       139,820
                                                                    ------------  ------------
                                                                    ------------  ------------
</TABLE>
 
------------------------
 
(1) Combined pro forma net loss for the nine months ended September 30, 1998
    includes costs to acquire leaseholds and treasury lock settlement costs,
    non-recurring expenses, in the amount of $61,000 and $49,225, respectively.
    Combined pro forma net loss for the nine months ended September 30, 1997
    includes costs to acquired leaseholds, a non-recurring expense, in the
    amount of $43,820 that was reported by the Companies.
 
(2) The adjustment relates to the mark-to-market adjustment for the UBS
    Transaction and the Nations Transaction (described in Note 7), which can be
    settled in cash or stock, at the Companies' option. There is no adjustment
    to earnings per share for the PaineWebber Transaction since it can be
    settled in stock only and is accounted for by the Reverse Treasury Stock
    Method.
 
                                       34
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
11.  PRO FORMA FINANCIAL INFORMATION: (CONTINUED)
                                    PATRIOT
                  CONSOLIDATED PRO FORMA RESULTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                        NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                    --------------------------
                                                                        1998          1997
                                                                    ------------  ------------
                                                                    (IN THOUSANDS, EXCEPT PER
                                                                           SHARE DATA)
<S>                                                                 <C>           <C>
Total revenue.....................................................  $    565,944  $    545,601
                                                                    ------------  ------------
                                                                    ------------  ------------
Net income (loss)(1)..............................................  $     17,263  $    (42,754)
Adjustment for equity forwards(2).................................       (95,063)      --
Preferred stock dividends.........................................        (3,110)      --
                                                                    ------------  ------------
  Net loss to common stockholders.................................  $    (80,910) $    (42,754)
                                                                    ------------  ------------
                                                                    ------------  ------------
Earnings per share--
 
Basic earnings (loss) per share...................................  $      (0.58) $      (0.31)
                                                                    ------------  ------------
                                                                    ------------  ------------
Diluted earnings (loss) per share.................................  $      (0.58) $      (0.31)
                                                                    ------------  ------------
                                                                    ------------  ------------
Weighted average number of common shares and common share
  equivalents outstanding:
  Basic...........................................................       139,820       139,820
                                                                    ------------  ------------
                                                                    ------------  ------------
  Diluted.........................................................       139,820       139,820
                                                                    ------------  ------------
                                                                    ------------  ------------
</TABLE>
 
------------------------
 
(1) Consolidated pro forma net loss for the nine months ended September 30, 1998
    includes costs to acquire leaseholds and treasury lock settlement costs,
    non-recurring expenses, in the amount of $8,279 and $49,225, respectively,
    that were reported by Patriot. Consolidated pro forma net loss for the nine
    months ended September 30, 1997 includes costs to acquired leaseholds, a
    non-recurring expense, in the amount of $43,820 that was reported by
    Patriot.
 
(2) The adjustment relates to the mark-to-market adjustment for the UBS
    Transaction and the Nations Transaction (described in Note 7), which can be
    settled in cash or stock, at the Companies' option. There is no adjustment
    to earnings per share for the PaineWebber Transaction since it can be
    settled in stock only and is accounted for by the Reverse Treasury Stock
    Method.
 
                                       35
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
11.  PRO FORMA FINANCIAL INFORMATION: (CONTINUED)
                                    WYNDHAM
                  CONSOLIDATED PRO FORMA RESULTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                        NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                    --------------------------
                                                                        1998          1997
                                                                    ------------  ------------
                                                                    (IN THOUSANDS, EXCEPT PER
                                                                           SHARE DATA)
<S>                                                                 <C>           <C>
Total revenue.....................................................  $  1,901,245  $  1,760,812
                                                                    ------------  ------------
                                                                    ------------  ------------
Net loss(1).......................................................  $   (114,085) $     (3,177)
Preferred stock dividends.........................................        (1,140)      --
                                                                    ------------  ------------
 
  Net loss to common stockholders.................................  $   (115,225) $     (3,177)
                                                                    ------------  ------------
                                                                    ------------  ------------
Earnings per share
 
Basic loss per share..............................................  $      (0.82) $      (0.02)
                                                                    ------------  ------------
                                                                    ------------  ------------
Diluted loss per share............................................  $      (0.82) $      (0.02)
                                                                    ------------  ------------
                                                                    ------------  ------------
Weighted average number of common shares and common share
  equivalents outstanding:
  Basic...........................................................       139,820       139,820
                                                                    ------------  ------------
                                                                    ------------  ------------
  Diluted.........................................................       139,820       139,820
                                                                    ------------  ------------
                                                                    ------------  ------------
</TABLE>
 
------------------------
 
(1) Consolidated pro forma net loss for the nine months ended September 30, 1998
    includes costs to acquire leaseholds, a non-recurring expense, in the amount
    of $52,721 that was reported by Wyndham.
 
12.  LIQUIDITY:
 
    The Companies are evaluating possible means of meeting near-term debt
service requirements and improving liquidity through refinancing or extending
the maturity of existing indebtedness, issuing additional equity securities, and
divesting certain non-core, non-proprietarily branded hotel assets. The
Companies have also re-strategized capital expenditures (currently estimated at
$100,000 for 1999) and development programs, are improving operating
efficiencies, and are in discussions to seek possible amendments to the
Revolving Credit Facility.
 
    No assurances can be made regarding the availability or terms of additional
sources of capital for the Companies in the future and no assurances can be
given regarding the Companies' ability to successfully refinance or extend the
maturity of existing indebtedness. A default by the Companies under current
existing indebtedness may cause a cross-default under other existing
indebtedness, including, without limitation, the Revolving Credit Facility. No
assurances can be given regarding the Companies' success in securing any
amendments to the Revolving Credit Facility. Additionally, in the absence of
such amendments, no assurances can be given that the Companies will meet the
reduced EBITDA coverage ratio
 
                                       36
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
12.  LIQUIDITY: (CONTINUED)
requirements which go into effect in December under the Revolving Credit
Facility. If the Companies are unable to secure additional sources of financing
in the future, are unable to successfully refinance existing indebtedness, or
are unable to obtain amendments to existing convenants under the Revolving
Credit Facility, no assurance can be made that the Companies will be able to
meet their financial obligations as they come due without substantial dilution
of assets outside the ordinary course of business, restructuring of debt,
externally forced revisions of its operations or similar actions. Additionally,
no assurances can be given that the lack of future financing sources would not
have a material adverse effect on the Companies' financial condition and results
of operations.
 
13.  SUBSEQUENT EVENTS:
 
    In September 1998, Hurricane Georges hit the island of Puerto Rico and the
Gulf coast of the United States, including Florida and Louisiana. Patriot owns
three properties on Puerto Rico, the El Conquistador Resort and Country Club,
the El San Juan Hotel and Casino and the Condado Plaza Hotel. The hurricane
caused approximately $60,000 of property related damage, excluding the impact of
business interruption, to the El Conquistador, Condado Plaza Hotel & Casino and
the El San Juan Hotel & Casino properties. As a result of the damage, the three
properties experienced varying periods of business interruption. In addition to
these properties, Wyndham manages two properties on the island, the Old San Juan
Hotel and Casino and the Wyndham Palmas del Mar.
 
    The Companies' damage assessment teams, working with the underwriters for
the Companies' insurance providers, have inspected each of the Companies' owned
or managed properties on Puerto Rico and while none of the properties were
destroyed, each sustained damages requiring repair and construction.
Furthermore, each of the Companies' owned or managed properties sustained
damages to the surrounding grounds and landscaping which are in the process of
being repaired. To date, the El San Juan, the Old San Juan, the El Conquistador
and the Palmas del Mar have re-opened for business. It is currently anticipated
that the remainder of the closed rooms at the Condado Plaza, the stand alone
ballroom at the Palmas del Mar and the suites at Las Casitas and certain other
ancillary facilities at the El Conquistador will re-open in late November. In
addition, the grand opening of the Golden Door Spa at the El Conquistador which
was scheduled for mid-October will be delayed until mid-December. The Companies'
estimated re-opening dates are subject to the availability of construction
materials and labor. No assurance can be given that the Companies' owned or
manage properties in Puerto Rico will be operating at full capacity by these
estimated dates.
 
    All of the Companies' owned or managed properties on Puerto Rico are insured
with both comprehensive property damage and business interruption insurance,
subject to certain deductibles. The Companies have hired a consultant to assess
their business interruption claims and are currently negotiating with their
insurance carriers regarding coverage for the losses sustained at the Puerto
Rico properties. While the Companies currently believe that substantially all of
the damages sustained at their Puerto Rico properties will be covered by
insurance, no assurances can be made regarding the timing or amount of the
actual payments that will ultimately be received by the Companies under these
policies.
 
                                       37
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
13.  SUBSEQUENT EVENTS: (CONTINUED)
    On October 20, 1998, the El Conquistador Partnership, L.P. (the "El
Conquistador Partnership"), which is beneficially owned 100% by the Companies,
filed a Form S-11 with the SEC with respect to the offering (the "Bond
Offering") of the undivided interests in the loan agreement between Puerto Rico
Industrial, Tourist, Educational, Medical and Environmental Control Facilities
Financing Authority ("AFICA") and the El Conquistador Partnership relating to
certain AFICA tourism revenue bonds (the "AFICA Bonds"). It is contemplated that
the AFICA Bonds will be issued in the total principal amount of $100,000, will
consist of serial bonds and term bonds and will be issued in register form,
without coupons, in denominations which are multiples of $5. AFICA will issue
the AFICA Bonds and lend the proceeds to the El Conquistador Partnership
pursuant to the loan agreement (the "AFICA Loan Agreement"). The El Conquistador
Partnership will use the loan proceeds to repay the Interim Financing entered
into on August 3, 1998, to fund certain reserves and to pay certain costs and
expenses of issuing the AFICA Bonds. The AFICA Bonds will be secured by a lien
on substantially all the assets of the El Conquistador Partnership.
 
    On October 23, 1998, Patriot notified the Summerfield Partners'
Representative of Patriot's intention to deliver the additional consideration
due under the Summerfield Acquisition agreement based on the market price of the
Paired Shares through the end of 1998 in the form of OP Units. Patriot currently
estimates the additional consideration due under the Summerfield Acquisition
agreement at approximately $10,500.
 
    On November 3, 1998, the Companies entered into agreements to extend the
maturity of certain debt related to the El Conquistador and the Condado Plaza
Hotel & Casino from November 3, 1998 to January 29, 1999. The extension
agreements required that $10,000 be deposited into an escrow account in
installments beginning on the date of the extension through January 12, 1999.
Upon the satisfactory completion of certain conditions, the $10,000 will be
released from escrow.
 
    On November 8, 1998, the Companies announced two asset disposition
transactions which, in aggregate, are expected to total approximately $206,500.
The first transaction, currently under a letter of intent, is to transfer seven
hotels representing approximately 1,982 guest rooms, as well as a controlling
interest in Interstate Hotel Management, Inc., to affiliates of Paine Webber
Real Estate for aggregate consideration of approximately $165,000, including the
satisfaction of $160,000 in debt owed by the Companies to Paine Webber Real
Estate in connection with the Arcadian Acquisition. This consideration may be
subject to an additional earn-out if the hotels meet certain return targets.
This transaction is expected to close on or before December 23, 1998 subject to
the satisfactory completion of PaineWebber's due diligence and customary closing
conditions. This acquisition, if consummated, would be in lieu of the Spin-off
contemplated under the Marriott Settlement Agreement. This transaction is
subject to third-party consents and conditions. There can be no assurance that a
definitive contract will be entered into, that the consents and conditions will
be satisfied, or that the transaction will ultimately be consummated.
 
    The second transaction, which is expected to close by November 20, 1998,
includes the sale of a 100% interest in two hotel properties and a 50% equity
interest in two other hotel properties to Mr. Milton Fine, a director of
Patriot, for an aggregate purchase price of $41,500.
 
                                       38
<PAGE>
                     PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.
 
              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
                               SEPTEMBER 30, 1998
                (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
                                  (UNAUDITED)
 
13.  SUBSEQUENT EVENTS: (CONTINUED)
    On November 12, 1998, the Companies announced they had retained Morgan
Stanley Dean Witter & Co. and Chase Securities Inc. as co-advisors to explore
alternatives responding to issues relating to debt maturities and the forward
equity contracts. The Companies are exploring a broad range of alternatives to
address these matters, including, without limitation, a sale of equity and/or
debt securities, a business combination or a sale of certain assets. No
assurances can be given as to whether or when (or on what terms) any transaction
would be consummated.
 
    On November 16, 1998, the Companies announced they will offer a stock option
exchange program for its employees who were awarded options since the Companies
acquired the paired-share structure. Certain senior executives and directors
will not participate in the exchange. The Companies will utilize the Black
Schole's Option Pricing Model, one of two valuation models recognized by the
SEC, to compute the appropriate exchange of the formerly issued options. The
share price on the to-be-exchanged options will be determined by the higher of
the average price of the Companies paired shares over a five-day trading period
that commenced on Tuesday, November 10, 1998, or the closing price of the
Companies paired shares on the fifth trading day. The result of the exchange
will be the award of fewer options in aggregate, but at a calculated amount of
$8.10 per share, to ensure that the option program continues as a valuable
vehicle through which to incent and retain valuable employees.
 
    Certain lenders on the debt assumed in the Arcadian Acquisition have rights
to consent to the roll-over of certain short-term leases which are subject to
renewal in December 1998. Certain lenders have asserted that they intend not to
consent to the roll-over of these leases. As a result, the Companies would be
required to refinance such debt if such consents could not be obtained.
 
    The Companies are in discussions regarding the sale of certain hotels
currently leased to NorthCoast Hotels. No definitive agreement has been reached
regarding this sale and no assurances can be given that the transaction will be
consummated.
 
    As previously disclosed, the Companies are currently reviewing the
characterization and recognition in the fourth quarter of 1998 of approximately
$16,000 of income relating to the cancellation of certain rights.
 
                                       39
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
    The following discussion and analysis should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Companies' Joint Annual Report on Form 10-K for the
year ended December 31, 1997.
 
    Certain statements with respect to future events, including, without
limitation, statements regarding availability of equity or debt financing, the
Companies' ability to successfully refinance or extend the maturity of existing
indebtedness, and the Companies' ability to successfully negotiate a settlement
to the forward equity contracts in this Form 10-Q constitute "forward-looking
statements" as that term is defined under Section21E of the Securities Exchange
Act of 1934, as amended and the Private Securities Litigation Reform Act of
1995. The words "believe", "expect", "anticipate", "intend", "estimate" and
other expressions which are predictions of or indicate future events and trends
and which do not relate to historical matters identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements and to note that they speak only as of the date
hereof. Although forward-looking statements reflect management's good faith
beliefs, reliance should not be placed on forward-looking statements because
they involve known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievement of the Companies to differ
materially from anticipated future results, performance or achievements
expressed or implied by such forward-looking statements. The Companies undertake
no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise. Certain
factors that might cause a difference include, but are not limited to, risks
associated with the availability of equity or debt financing at terms and
conditions favorable to the Companies, the willingness of the Companies'
existing lenders to refinance, extend or amend the terms of existing
indebtedness, the willingness of the counterparties to the Companies' forward
equity contracts to enter into settlements regarding those agreements; the
Companies' ability to effect sales of assets on favorable terms and conditions;
risks associated with the hotel industry and real estate markets in general; and
risks associated with debt financing.
 
THE COMPANIES
 
    At September 30, 1998, Patriot and Wyndham, directly or through the
Operating Partnerships and other subsidiaries, owned interests in 184 hotels
totaling over 44,700 rooms and leased 122 hotels from third parties totaling
over 15,700 rooms. In addition, Wyndham managed 171 hotels with over 42,000
rooms for third party owners and franchised nine hotels under the Wyndham,
Summerfield or ClubHouse brands. The hotels are diversified by franchise or
brand affiliation and serve primarily major U.S. business centers. In addition
to hotels catering primarily to business travelers, the Companies' portfolio
includes world-class resort hotels and prominent hotels in major tourist
destinations.
 
    Patriot leases 216 of its owned or leased hotels to Wyndham and 14 of
Patriot's hotels are leased to third party lessees (the "Lessees") who are
responsible for operating the hotels. Generally, these leases provide for the
payment of the greater of base or participating rent, plus certain additional
charges, as applicable (the "Participating Leases"). The Lessees, in turn, have
entered into separate agreements with hotel management entities (the
"Operators") to manage the hotels.
 
    Seventy-six of the Companies' hotels are owned or leased by special purpose
entities (the "Non-Controlled Subsidiaries"). Patriot owns an approximate 99%
non-voting interest and Wyndham owns an approximate 1% controlling voting
interest in each of the Non-Controlled Subsidiaries. Therefore, the operating
results of the Non-Controlled Subsidiaries are combined with those of Wyndham
for financial reporting purposes. Patriot accounts for its investment in the
Non-Controlled Subsidiaries using the equity method of accounting.
 
                                       40
<PAGE>
    In addition to leasing and managing hotels, Wyndham is also engaged in the
business of conducting and offering pari-mutuel wagering on thoroughbred horse
racing at the Bay Meadows Racecourse (the "Racecourse").
 
    On November 12, 1998, the Companies announced that they had retained Morgan
Stanley Dean Witter & Co. and Chase Securities Inc. as co-advisors to explore
alternatives responding to issues relating to debt maturities and the forward
equity contracts. The Companies are exploring a broad range of alternatives to
address these matters, including, without limitation, a sale of equity and/or
debt securities, a business combination or a sale of certain assets. No
assurances can be given as to whether or when (or on what terms) any transaction
would be consummated.
 
HOTELS AND OTHER BUSINESSES ACQUIRED
 
    WYNDHAM HOTEL CORPORATION
 
    On January 5, 1998, pursuant to the Agreement and Plan of Merger dated as of
April 14, 1997, as thereafter amended, (the "Wyndham Merger Agreement") between
Patriot, Wyndham and Wyndham Hotel Corporation ("Old Wyndham"), Old Wyndham
merged with and into Patriot, with Patriot being the surviving corporation (the
"Wyndham Merger").
 
    Patriot, as a result of the Wyndham Merger, acquired ownership of ten
Wyndham hotels and 14 Clubhouse hotels and leased such hotels to Wyndham. In
addition, Patriot assumed 14 hotel leases, 13 of which were sub-leased to
Wyndham. Old Wyndham's remaining 52 management and franchise contracts
(excluding 16 hotels that Old Wyndham managed that are owned by Patriot), the
Wyndham and ClubHouse proprietary brand names, and the Wyndham hotel management
company were transferred to corporate subsidiaries of Patriot (collectively, the
"Non-Controlled Subsidiaries"). Patriot owns a 99% non-voting interest and
Wyndham owns the 1% controlling voting interest in each of the Non-Controlled
Subsidiaries. Therefore, the operating results of the Non-Controlled
Subsidiaries have been combined with those of Wyndham for financial reporting
purposes. Patriot accounts for its investment in the Non-Controlled Subsidiaries
using the equity method of accounting. The total purchase consideration for the
Wyndham Merger of approximately $982 million consisted of 21,594,137 Paired
Shares and 4,860,876 shares of Series A Convertible Preferred Stock of Patriot
(which are convertible on a one-for-one basis into Paired Shares), cash of
approximately $339 million to repay debt and pay Old Wyndham shareholders who
elected to receive cash (which was financed with funds drawn on the Companies'
revolving credit facility (the "Revolving Credit Facility")), and the assumption
of approximately $59 million in debt.
 
    WHG CASINOS & RESORTS, INC. AND RELATED TRANSACTIONS
 
    On January 16, 1998, pursuant to the Agreement and Plan of Merger dated as
of September 30, 1997 (the "WHG Merger Agreement") between Patriot, Wyndham and
WHG Casinos & Resorts Inc. ("WHG"), a subsidiary of Wyndham merged with and into
WHG, with WHG being the surviving corporation (the "WHG Merger"). As a result of
the WHG Merger, Wyndham acquired the 570-room Condado Plaza Hotel & Casino, a
50% interest in the partnership that owns the 389-room El San Juan Hotel &
Casino and a 23.3% interest in the partnership that owns the 751-room El
Conquistador Resort & Country Club (the "El Conquistador"), all of which are
located in Puerto Rico. In addition, Wyndham acquired a 62% interest in Williams
Hospitality Group, Inc., the management company for the three hotels and the Las
Casitas Village at the El Conquistador. A total of 5,004,690 Paired Shares were
issued in connection with the WHG Merger and approximately $21.3 million of debt
was assumed, resulting in total purchase consideration of approximately $159.4
million.
 
    Effective March 1, 1998, Patriot acquired from unaffiliated third parties a
40% interest in the El San Juan Hotel & Casino, an aggregate 68.62% equity
interest in the El Conquistador and a 38% interest in Williams Hospitality
Group, Inc. for approximately $31 million in cash and issuance of 1,818,182
Paired
 
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Shares valued at approximately $49.2 million (collectively, these transactions
and the WHG Merger are referred to herein as the "WHG Transactions").
 
    On July 13, 1998, Patriot acquired the remaining minority interests held by
a third party in entities that own the El Conquistador and the El San Juan Hotel
& Casino for a total purchase price of approximately $3.9 million. Wyndham owns
the controlling general partner interest in the partnerships that own the El San
Juan Hotel & Casino and the El Conquistador. Wyndham also holds voting control
of Williams Hospitality Group, Inc. Therefore, the operating results of these
entities have been consolidated with those of Wyndham for financial reporting
purposes.
 
    On August 3, 1998, the Companies refinanced certain debt related to the El
Conquistador and the Condado Plaza Hotel & Casino. Proceeds of $145.0 million
from the refinancing were used to repay outstanding indebtedness of
approximately $139.3 million, to pay legal and closing costs and to establish
certain reserves, including interest reserves, required by the loan agreements.
The loans are secured by mortgages on the properties, bear interest at a rate of
LIBOR plus 2.25% and, prior to the extension described below, matured on
November 3, 1998.
 
    In September 1998, Hurricane Georges hit the island of Puerto Rico and the
Gulf coast of the United States, including Florida and Louisiana. Patriot owns
three properties on Puerto Rico, the El Conquistador Resort and Country Club,
the El San Juan Hotel and Casino and the Condado Plaza Hotel. The hurricane
caused approximately $60 million of property related damage, excluding the
impact of business interruption, to the El Conquistador, Condado Plaza Hotel &
Casino and the El San Juan Hotel & Casino properties. As a result of the damage,
the three properties experienced varying periods of business interruption. In
addition to these properties, Wyndham manages two properties on the island, the
Old San Juan Hotel and Casino and the Wyndham Palmas del Mar.
 
    The Companies' damage assessment teams, working with the underwriters for
the Companies' insurance providers, have inspected each of the Companies' owned
or managed properties on Puerto Rico and while none of the properties were
destroyed, each sustained damages requiring repair and construction.
Furthermore, each of the Companies' owned or managed properties sustained
damages to the surrounding grounds and landscaping which are in the process of
being repaired. To date, the El San Juan, the Old San Juan, the El Conquistador
and the Palmas del Mar have re-opened for business. It is currently anticipated
that the remainder of the closed rooms at the Condado Plaza, the stand alone
ballroom at the Palmas del Mar and the suites at Las Casitas and certain other
ancillary facilities at the El Conquistador will re-open in late November. In
addition, the grand opening of the Golden Door Spa at the El Conquistador which
was scheduled for mid-October will be delayed until mid-December. The Companies'
estimated re-opening dates are subject to the availability of construction
materials and labor. No assurance can be given that the Companies' owned or
manage properties in Puerto Rico will be operating at full capacity by these
estimated dates.
 
    All of the Companies' owned or managed properties on Puerto Rico are insured
with both comprehensive property damage and business interruption insurance,
subject to certain deductibles. The Companies have hired a consultant to assess
their business interruption claims and are currently negotiating with their
insurance carriers regarding coverage for the losses sustained at the Puerto
Rico properties. While the Companies currently believe that substantially all of
the damages sustained at their Puerto Rico properties will be covered by
insurance, no assurances can be made regarding the timing or amount of the
actual payments that will ultimately be received by the Companies under these
policies.
 
    On November 3, 1998, the Companies entered into agreements to extend the
maturity of certain debt related to the El Conquistador and the Condado Plaza
Hotel & Casino from November 3, 1998 to January 29, 1999. The extension
agreements required that $10 million be deposited into an escrow account in
installments beginning on the date of the extension through January 12, 1999.
Upon the satisfactory completion of certain conditions, the $10 million will be
released from escrow.
 
                                       42
<PAGE>
    ARCADIAN INTERNATIONAL LIMITED
 
    On April 6, 1998, Patriot announced the completion of its acquisition of all
of the issued and to-be-issued shares of Arcadian International Limited
("Arcadian," formerly known as Arcadian International Plc) for 60 pence per
share. Including the exercise of all outstanding options to purchase shares, the
assumption of debt and the acquisition of the remaining shares in the Malmaison
Group, the total transaction cost was approximately L185.9 million
(approximately $308.7 million U.S. based on exchange rates at the time of
closing). As a result of the transaction, Patriot acquired ten owned hotels
located throughout England; one owned hotel in Jersey; five owned and managed
Malmaison Hotels; two resorts under development in Tuscany, Italy and Paris,
France; and the proprietary Malmaison brand name. Patriot also acquired
Arcadian's 50% partnership interest in the redevelopment of the luxury Great
Eastern Hotel in London, to be branded as a flagship Wyndham Hotel and operated
by Wyndham once the development has been completed. Collectively, the
transactions described above are referred to herein as the "Arcadian
Acquisition."
 
    In connection with the Arcadian Acquisition, Patriot entered into a
short-term financing agreement on April 15, 1998 with Paine Webber Real Estate
Securities Inc. ("Paine Webber Real Estate") whereby Paine Webber Real Estate
loaned Patriot $160 million through April 15, 1999, at a rate equal to the
borrowing rate on Patriot's Revolving Credit Facility. The Companies currently
anticipate that this $160 million debt will be satisfied in connection with the
sale of certain hotel and other assets to Paine Webber Real Estate described in
Note 13 to the financial statements. In addition, Patriot assumed approximately
$112.6 million of debt in connection with the Arcadian Acquisition.
 
    INTERSTATE HOTELS COMPANY
 
    On June 2, 1998, pursuant to an Agreement and Plan of Merger dated as of
December 2, 1997, as thereafter amended, (the "Interstate Merger Agreement")
between Patriot, Wyndham and Interstate Hotels Company ("Interstate"),
Interstate merged with and into Patriot with Patriot being the surviving company
(the "Interstate Merger"). Pursuant to the Interstate Merger Agreement,
stockholders of Interstate could elect to convert each of their shares of
Interstate common stock into the right to receive either (i) $37.50 in cash (the
"Cash Consideration"), subject to proration in certain circumstances, or (ii) a
number of Paired Shares of Patriot and Wyndham common stock based on an exchange
ratio of 1.341 Paired Shares for each share of Interstate common stock not
exchanged for cash (the "Interstate Exchange Ratio").
 
    As a result of the Interstate Merger, Patriot acquired controlling interest
in, or ownership of, 42 hotels representing over 12,000 rooms; leases for 84
hotels representing over 10,100 rooms and management or service agreements for
82 hotels representing over 20,400 rooms located throughout the United States
and in Canada, the Caribbean and Russia.
 
    The total purchase consideration for the Interstate Merger of approximately
$2.1 billion consisted of 28,825,875 Paired Shares, cash of approximately $525.4
million to pay Interstate shareholders who elected to receive cash,
approximately $787.1 million in debt assumed or refinanced by Patriot and
approximately $73.4 million to pay other transaction-related costs. In addition,
Interstate shareholders received rights to receive a cash distribution of $0.429
on each share of Interstate common stock that was converted into Paired Shares,
aggregating approximately $9.1 million.
 
    In connection with the Interstate Merger, the Patriot Companies closed on
the commitment from The Chase Manhattan Bank and Chase Securities, Inc. and
Paine Webber Real Estate to increase Patriot's existing credit facilities to an
aggregate of $2.7 billion (an increase of $1.45 billion from the prior $1.25
billion credit package). The increased credit facilities include the $900
million Revolving Credit Facility and a series of term loans in the aggregate
amount of up to $1.8 billion (the "Term Loans"). Proceeds from the increased
credit facilities were used to fund the cash portion of the Interstate Merger
consideration, as well as to refinance certain outstanding indebtedness of the
Patriot Companies. In addition, the increased credit facilities will be used to
fund future acquisitions and for general working capital purposes. Interest
rates will be based on the Patriot Companies' leverage ratio and may vary from
1.5% to 2.5% over LIBOR.
 
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<PAGE>
Patriot incurred approximately $27.4 million in loan fees and other expenses
associated with this financing arrangement.
 
    On May 27, 1998, the Companies and Interstate entered into a settlement
agreement (the "Settlement Agreement") with Marriott International, Inc.
("Marriott") which addressed certain claims asserted by Marriott in connection
with Patriot's then proposed merger with Interstate. The Settlement Agreement
provided for the dismissal of litigation brought by Marriott and allowed
Patriot's merger with Interstate to close on June 2, 1998.
 
    In addition to dismissal of the Marriott litigation, the Settlement
Agreement provides for three principal transactions: (i) rebranding of ten
Marriott hotels under the Wyndham name, (ii) 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 (iii) the Spin-off. On
November 8, 1998, the Companies entered into a letter of intent pursuant to
which the Companies will sell seven hotels, representing approximately 1,982
guest rooms, as well as a controlling interest in Interstate Hotel Management,
Inc., to affiliates of Paine Webber Real Estate Securities Inc. This
transaction, if consummated, would be in lieu of the Spin-off.
 
    SF HOTEL COMPANY, L.P.
 
    On June 5, 1998, Patriot, through the Patriot Partnership, acquired all of
the partnership interests in SF Hotel Company, L.P. ("Summerfield") for
approximately $298.9 million (the "Summerfield Acquisition"). The total purchase
consideration for the Summerfield Acquisition consisted of approximately
3,223,795 OP Units of the Operating Partnerships, 1,397,281 Paired Shares, cash
of approximately $165.5 million and assumption of debt in the amount of
approximately $17.1 million. In addition, the purchase price is subject to
future adjustment based on (i) the market price of the Paired Shares through the
end of 1998 and (ii) achievement of certain performance criteria through 2001
for seven hotels that are currently under development. As a result of the
Summerfield Acquisition, Patriot acquired four Summerfield
Suites-Registered Trademark- hotels, leasehold and management interests in 24
Summerfield Suites-Registered Trademark-, Sierra Suites-Registered Trademark-
and Sunrise Suites hotels and management contracts and franchise interests for
12 additional Summerfield Suites-Registered Trademark- and Sierra
Suites-Registered Trademark-hotels. Patriot has leased or sub-leased such hotels
to Wyndham. In addition, Patriot acquired the development contracts for several
additional hotels.
 
    On October 23, 1998, Patriot notified the Summerfield Partners'
Representative of Patriot's intention to deliver the additional consideration
due under the Summerfield Acquisition agreement based on the market price of the
Paired Shares through the end of 1998 in the form of OP Units. Patriot currently
estimates the additional consideration due under the Summerfield Acquisition
agreement at approximately $10,500,000.
 
    CHC INTERNATIONAL
 
    On June 30, 1998, pursuant to an Agreement and Plan of Merger dated as of
September 30, 1997 (the "CHCI Merger Agreement") between Patriot, Wyndham and
CHC International ("CHCI"), the hospitality-related businesses of CHCI merged
with and into Wyndham with Wyndham being the surviving company (the "CHCI
Merger"). CHCI's gaming operations were transferred to a new legal entity prior
to the CHCI Merger and such operations were not a part of the transaction. As a
result of the CHCI Merger, Wyndham, through its subsidiaries, acquired the
remaining 50% investment interest in GAH-II, L.P. ("GAH"), the remaining 17
leases and 16 of the associated management contracts related to the Patriot
hotels leased by CHC Lease Partners, 8 third-party management contracts, two
third-party asset management contracts, the Grand Bay proprietary brand name and
certain other hospitality management assets.
 
    By operation of the CHCI Merger, all the issued and outstanding shares of
common stock, par value $0.005 per share, of CHCI ("CHCI Shares") and certain
stock option rights were exchanged for an aggregate of 1,781,173 shares of
Series A Redeemable Convertible Preferred Stock, par value $0.01 per
 
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<PAGE>
share of Wyndham (the "Wyndham Series A Preferred Stock") and 1,781,181 shares
of Series B Redeemable Convertible Preferred Stock, par value $0.01 per share,
of Wyndham (the "Wyndham Series B Preferred Stock"). In addition, Wyndham
assumed CHCI's outstanding debt in the amount of approximately $16.6 million.
 
    In addition, on September 30, 2000 and September 30, 2002, Wyndham may be
obligated to pay the CHCI stockholders and a subsidiary of Wyndham may be
obligated to pay a Gencom-related entity additional consideration, in each case
based upon the performance of certain specified assets.
 
    OTHER ACQUISITIONS
 
    In addition, during the nine months ended September 30, 1998, Patriot
acquired investments in four hotels and the Golden Door Spa for approximately
$234.1 million. These acquisitions were financed primarily with funds drawn on
the Companies' revolving credit facility, the issuance of 53,989 OP Units of the
Operating Partnerships valued at approximately $1.5 million, the issuance of
390,335 Paired Shares valued at approximately $10 million, and the assumption of
other mortgage debt in the amount of approximately $80.1 million. In addition,
Patriot acquired an office building that will be converted into a hotel for
approximately $33.9 million.
 
    In July 1998, Wyndham acquired an approximate 50% limited partnership
interest in a partnership with affiliates of Don Shula's Steakhouses, Inc. for
$1.5 million in cash and 156,272 preferred units of limited partnership interest
of Wyndham Partnership. Wyndham entered into this joint venture arrangement to
expand the Shula's Steakhouse Brand as a food and beverage amenity in certain of
Patriot's hotels.
 
1998 DIVIDENDS
 
    Patriot is currently reviewing its liquidity and financial condition.
Accordingly, Patriot has decided not to declare a dividend with respect to the
third quarter at this time. Instead, prior to December 31, 1998, Patriot intends
to declare a dividend, payable in cash or securities in January, 1999, which
will be at least sufficient to satisfy the federal income tax requirements with
respect to dividends in order for Patriot to continue to qualify as a REIT.
 
SALES OF PAIRED COMMON STOCK WITH PRICE ADJUSTMENT MECHANISMS
 
    The Companies are parties to transactions with three counterparties
involving the sale of an aggregate of 13.3 million shares of Paired Common
Stock, with related Price Adjustment Mechanisms, as described below.
 
    UBS TRANSACTION.  On December 31, 1997, the Companies entered into
transactions with UBS Limited and Union Bank of Switzerland, London Branch
(together with its successor, UBS AG, London Branch, "UBS" and, together with
Warburg Dillon Read, LLC, the "UBS Parties"). Pursuant to the terms of a
Purchase Agreement dated as of December 31, 1997 (the "UBS Purchase Agreement"),
UBS Limited purchased 3,250,000 Paired Shares (the "Initial UBS Shares") from
the Companies at a purchase price of $28.8125 per share (the last reported sale
price of the Paired Shares on December 30, 1997) for approximately $91.8 million
in net proceeds. The net proceeds were used by the Companies to repay existing
indebtedness. The Initial UBS Shares represent approximately 1.8% of the
outstanding Paired Shares as of the date of this filing. UBS received from the
Companies a placement fee of 2%, or approximately $1.9 million.
 
    In connection with the issuance of the Initial UBS Shares, the Companies
entered into a Forward Stock Contract, dated as of December 31, 1997, with UBS
(as amended on August 14, 1998 and September 11, 1998, the "Forward Stock
Contract"). Pursuant to the Forward Stock Contract, the Companies have agreed to
effect a settlement, in one or more transactions (each a "UBS Settlement"), with
respect to a number of Paired Shares equal to the number of Initial UBS Shares,
at a per Paired Share
 
                                       45
<PAGE>
price equal to $28.8125 plus a forward accretion reflecting an imputed return at
LIBOR plus 140 basis points, minus an adjustment to reflect distributions on the
Paired Shares (the "UBS Forward Price"). The forward accretion component
represents a guaranteed rate of return to UBS. The Paired Shares to be delivered
to or by UBS may consist of Paired Shares acquired under the UBS Purchase
Agreement or otherwise.
 
    The Companies may effect a UBS Settlement by (i) delivering to UBS Paired
Shares (the "UBS Settlement Shares") equal in value (valued at the daily average
closing price for the Paired Shares over a specific period of time (the "UBS
Unwind Price")) to the UBS Forward Price at the time of such UBS Settlement
times the number of Paired Shares subject to such UBS Settlement (the "UBS
Settlement Amount") in exchange for the number of shares subject to such UBS
Settlement, (ii) delivering to (or, in the event the UBS Unwind Price is greater
than the UBS Forward Price, receiving from) UBS a number of Paired Shares equal
to the difference between the number of the UBS Settlement Shares and the number
of shares subject to such UBS Settlement, or (iii) delivering to UBS cash equal
to the UBS Settlement Amount in exchange for the shares subject to such UBS
Settlement. If the Companies make a UBS Settlement in Paired Shares, they must
also pay to UBS (i) an unwind accretion fee (payable in cash or shares) equal to
50% of the UBS Settlement Amount times the imputed return of LIBOR plus 140
basis points over the period designated for such UBS Settlement and (ii) a
placement fee equal to 0.50% of the UBS Settlement Amount. The Forward Stock
Contract provides that shares may be delivered in settlement only if the
Companies have on file with the SEC an effective registration statement covering
the resale by UBS of the shares to be delivered. A registration statement
covering up to 4,000,000 shares to be sold by UBS was declared effective (as
amended) on October 15, 1998. A registration statement covering up to an
additional 40,000,000 shares to be sold by PWFS, Nations and UBS was declared
effective on October 15, 1998.
 
    In connection with the September 11 amendment to the Forward Stock Contract,
the Companies paid down $45,627,725 under the Forward Stock Contract through the
application of cash collateral that had previously been delivered to UBS
pursuant to the Forward Stock Contract. In addition, the Companies have
delivered an additional 2,474,359 Paired Shares and $8,252,274 to UBS as
collateral pursuant to the Forward Stock Contract. The cash collateral held by
UBS is subject to adjustment every two weeks such that the amount of cash
collateral is equal to the number of shares subject to the Forward Stock
Contract times the amount by which the UBS Forward Price exceeds the closing
price of the Paired Shares on the trading day immediately preceding the
adjustment date (such closing price the "UBS Reset Price" and such product the
"UBS Interim Settlement Amount"). With the prior written consent of UBS, the
Companies may elect to deliver to UBS a number of Paired Shares (the "UBS
Interim Settlement Shares") equal in value (valued at the UBS Reset Price) to
125% of the UBS Interim Settlement Amount.
 
    The Forward Stock Contract provides that if the average closing price of the
Paired Common Stock for any two consecutive trading days does not equal or
exceed $11.00 (the "UBS Unwind Threshold"), UBS has the right to force a
complete settlement under the Forward Stock Contract. As a result of the failure
of the average closing price of the Paired Common Stock for October 2 and
October 5, 1998 to equal or exceed $11.00, UBS became entitled to force a
complete settlement pursuant to the terms of the Forward Stock Contract and
continues to be so entitled. In addition, the Forward Stock Contract reached
maturity on October 15, 1998. UBS has asserted that the Companies are in default
under the terms of the Forward Stock Contract as the result of the Companies not
delivering certain cash collateral and not making final settlement of the
Forward Stock Contract in cash, although the Companies have disputed this
assertion. See "Potential Dilution and Liquidity Effects of the Price Adjustment
Mechanisms" below.
 
    UBS also has the right to force a complete settlement under the Forward
Stock Contract if the Companies (i) are in default with respect to certain
financial and notice covenants under the Forward Stock Contract, (ii) are in
default under the Corporation's credit facility with Chase Manhattan Bank, (iii)
are in default with respect to certain specified indebtedness of the Companies,
(iv) declare bankruptcy or become insolvent or fail to post sufficient cash
collateral, (v) effect an early settlement, unwind or
 
                                       46
<PAGE>
liquidation of any transaction similar to the transaction with UBS or (vi) fail
to settle the transaction in cash simultaneously with the sale by the Companies
of certain property. A registration statement covering the sale of up to
4,000,000 shares by UBS was declared effective (as amended) on October 15, 1998.
Also, a registration statement covering the sale of up to an additional
40,000,000 shares by PWFS, Nations and UBS was declared effective on October 15,
1998. However, there can be no assurance that such registration statements will
remain effective or that the Companies will not be required to register more
Paired Shares in connection with the Forward Stock Contract.
 
    NATIONS TRANSACTION.  On February 26, 1998, the Companies entered into
transactions with a subsidiary of NationsBank Corporation (together with
NationsBanc Mortgage Capital Corporation, "Nations"). Pursuant to the terms of a
Purchase Agreement dated as of February 26, 1998 (the "Nations Purchase
Agreement"), Nations purchased 4,900,000 Paired Shares (the "Initial Nations
Shares") from the Companies 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 $121.8
million. The net proceeds were used by the Companies to repay existing
indebtedness. The Initial Nations Shares represent approximately 2.7% of the
outstanding Paired Shares as of the date of this filing.
 
    In connection with the issuance of the Initial Nations Shares, the Companies
entered into a Purchase Price Adjustment Mechanism, dated as of February 26,
1998, with Nations (as amended on August 14, 1998, the "Nations Price Adjustment
Mechanism"). Pursuant to the Nations Price Adjustment Mechanism, the Companies
have agreed to effect certain purchase price adjustments on or before February
26, 1999, in one or more transactions (each a "Nations Settlement"), with
respect to a number of Paired Shares equal to the number of Initial Nations
Shares, by reference to a per Paired Share price equal to $25.50 plus a forward
accretion representing an imputed return at LIBOR plus 150 basis points, minus
an adjustment to reflect distributions on the Paired Shares (the "Nations
Forward Price"). The Paired Shares to be delivered to or by Nations may consist
of Paired Shares acquired under the Nations Purchase Agreement or otherwise.
 
    The Companies may effect a Nations Settlement by (i) delivering to Nations
Paired Shares (the "Nations Settlement Shares") equal in value (valued at the
dollar volume weighted average price for the Paired Shares (as calculated
pursuant to the Nations Price Adjustment Mechanism) over a specific period of
time (the "Nations Unwind Price")) to the Nations Forward Price at the time of
such Nations Settlement times the number of shares subject to such Nations
Settlement (the "Nations Settlement Amount") in exchange for the number of
shares subject to such Nations Settlement, (ii) delivering to (or, in the event
the Nations Unwind Price is greater than the Nations Forward Price, receiving
from) Nations a number of Paired Shares equal to the difference between the
number of Nations Settlement Shares and the number of shares subject to such
Nations Settlement, or (iii) delivering to Nations cash equal to the Nations
Settlement Amount in exchange for a number of Paired Shares equal to the number
of shares subject to such Nations Settlement. If the Companies effect a
settlement pursuant to clause (i) or (ii) above, they must also pay a placement
fee equal to 2% of the Nations Settlement Amount. The Nations Price Adjustment
Mechanism provides that shares may be delivered in settlement only if (i) the
Companies have on file with the SEC an effective registration statement covering
the sale by Nations of the shares to be delivered, (ii) for settlement at
maturity, the dollar volume weighted average price of the Paired Shares (as
calculated pursuant to the Nations Price Adjustment Mechanism) on the date of
such settlement is greater than or equal to $20.00 and (iii) for settlement at
maturity, no Mandatory Nations Unwind Event (as defined below) has occurred and
is continuing. If the above conditions are not met when they apply, the
Companies generally must deliver cash equal to the Nations Settlement Amount.
 
    The Nations Price Adjustment Mechanism provides that on or after October 15,
1998, if the dollar volume weighted average price of the Paired Shares for any
two consecutive trading days does not equal or exceed certain amounts (the
"Nations Unwind Thresholds"), Nations has the right to force a partial or
complete settlement under the Nations Price Adjustment Mechanism. The Nations
Unwind Thresholds are $20.00 (33% settlement), $18.75 (67%) and $17.25 (100%).
As a result of failure of the price of the
 
                                       47
<PAGE>
Paired Shares to exceed the Nations Unwind Thresholds, pursuant to the terms of
the Nations Price Adjustment Mechanisms, Nations became entitled to force a
complete settlement under the Nations Price Adjustment Mechanism on October 16,
1998, and continues to be so entitled. Nations has not required any settlement
under the Nations Price Adjustment Mechanism to date. See "Potential Dilution
and Liquidity Effects of the Price Adjustment Mechanisms" below.
 
    Nations also has the right to force a complete settlement under the Nations
Price Adjustment Mechanism at any time upon the occurrence of any of the
following (each a "Mandatory Nations Unwind Event"): (i) default of the
Companies with respect to certain indebtedness, (ii) declaration by the
Companies of bankruptcy or insolvency or failure to post sufficient cash
collateral or (iii) the sale or refinancing by the Companies of certain
properties in which the net proceeds of such sale or refinancing (up to the
amount necessary to effect a complete cash settlement) are not applied to a cash
settlement under the Nations Price Adjustment Mechanism. The Nations Price
Adjustment Mechanism also provides that, upon the consummation of the sale or
refinancing of certain properties by the Companies with a third party, the
Companies must apply the net proceeds to the extent necessary to effect a
complete cash settlement under the Nations Price Adjustment Mechanism. The
Companies have agreed to use all commercially reasonable efforts to effect such
a sale or refinancing. The Companies' planned sale of assets to Paine Webber
Real Estate (as described in Note 13 to the financial statements) would give
rise to a Mandatory Nations Unwind Event absent a waiver by Nations. The
Companies are seeking such a waiver, but no assurance can be given as to whether
or on what terms it will be obtained. In addition, the Companies' bank group has
indicated its belief that consent under the credit facility would be required in
connection with such sale. No assurance can be given as to whether or on what
terms such consent, if required, will be obtained. Under the terms of the
Nations Price Adjustment Mechanism, upon the occurrence of a Mandatory Nations
Unwind Event, if the Daily Average Price (as defined) of the Paired Shares does
not exceed $20.00, the Companies would be deemed to have elected to settle the
Nations Price Adjustment Mechanism in cash (and the Companies are not entitled
to elect to settle in stock). The Daily Average Price of the Paired Shares on
November 19, 1998 was $7.46.
 
    As of the date of this filing, the Companies have delivered an aggregate of
13,886,547 Paired Shares and $179,208 to Nations as collateral to secure the
Companies' obligations under the Nations Price Adjustment Mechanism. A
registration statement covering the sale by PWFS, Nations and UBS of up to
40,000,000 Paired Shares in connection with the Price Adjustment Mechanisms has
been declared effective; however, there can be no assurance that such
registration statement will remain effective or that the Companies will not be
required to register more Paired Shares in connection with the Price Adjustment
Mechanisms.
 
    PWFS TRANSACTION.  On April 6, 1998, the Companies entered into transactions
with PaineWebber Incorporated ("PaineWebber") and PaineWebber Financial
Products, Inc. ("PWFS" and, together with PaineWebber, the "PaineWebber
Parties"). Pursuant to the terms of a Purchase Agreement dated as of April 6,
1998 (the "PaineWebber Purchase Agreement"), PaineWebber purchased 5,150,000
Paired Shares (the "Initial PaineWebber Shares") from the Companies 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 $139.1 million. The net proceeds were used by the Companies to
repay existing indebtedness. The Initial PaineWebber Shares represent
approximately 2.9% of the outstanding Paired Shares as of the date of this
filing.
 
    In connection with the issuance of the Initial PaineWebber Shares, the
Companies entered into a Purchase Price Adjustment Mechanism Agreement, dated as
of April 6, 1998, with PWFS (as amended on August 14, 1998, September 30, 1998
and October 22, 1998, the "PaineWebber Price Adjustment Agreement"). Upon any
settlement under the PaineWebber Price Adjustment Agreement (a "PW Settlement"),
the purchase price of the Initial PaineWebber Shares subject to the PW
Settlement is adjusted based upon the difference between (i) the proceeds (net
of a negotiated resale spread or underwriting discount) received by PWFS from
the sale of Paired Shares and (ii) a reference price (the "Reference Price")
equal
 
                                       48
<PAGE>
to the closing price for a Paired Share on April 3, 1998 plus a forward
accretion reflecting an imputed return at LIBOR plus 140 basis points, minus an
adjustment to reflect distributions on the Initial PaineWebber Shares prior to
the date of such PW Settlement (such difference, the "PW Price Difference"). If
the PW Price Difference is positive, PWFS must deliver Paired Shares or cash to
the Companies equal in value to the aggregate PW Price Difference. If the PW
Price Difference is negative, the Companies must deliver to PWFS additional
Paired Shares equal in value (net of a negotiated resale spread or underwriting
discount, as the case may be) to the aggregate PW Price Difference. The
PaineWebber Price Adjustment Agreement provides that shares may be delivered in
settlement only if the Companies have on file with the SEC an effective
registration statement covering the resale by PWFS of the shares to be
delivered. Although a registration statement covering the sale of up to
40,000,000 Paired Shares by PWFS, Nations and UBS in connection with the Price
Adjustment Mechanisms has been declared effective, there can be no assurance
that such registration statement will remain effective or that the Companies
will not be required to register more Paired Shares in connection with the Price
Adjustment Mechanisms.
 
    Pursuant to the PaineWebber Price Adjustment Agreement, the Companies have
to date delivered 17,816,281 Paired Shares to PWFS as collateral ("Collateral
Shares") and have paid cash dividends totaling $192,305 on the Collateral
Shares, which amount is held by PWFS as collateral. Such number of shares is
subject to adjustment every two weeks such that the value of the Collateral
Shares plus the Initial PaineWebber Shares that have not been settled (valued at
the closing price of the Paired Shares on the adjustment date) is equal to the
amount by which the Reference Price times the number of shares subject to the
PaineWebber Price Adjustment Agreement exceeds (i.e., the number of Initial
PaineWebber Shares that have not been settled) $5,000,000 (such excess amount,
the "Collateral Amount"). The PaineWebber Price Adjustment Agreement provides,
that if the resale by PWFS of the shares to be so delivered is not covered by an
effective registration statement, then the Companies, at their option, must
deliver to PWFS either (i) a number of Collateral Shares equal in value to 125%
of the Collateral Amount or (ii) cash collateral equal to the Collateral Amount.
Although a registration statement covering the sale of up to 40,000,000 Paired
Shares by PWFS, Nations and UBS in connection with the Price Adjustment
Agreements has been declared effective, there can be no assurance that such
registration statement will remain effective or that the Companies will not be
required to register more Paired Shares in connection with the Price Adjustment
Mechanisms.
 
    The PaineWebber Price Adjustment Agreement provides that if the closing
price of the Paired Shares on any trading day does not equal or exceed $16.00,
PWFS has the right to force a complete settlement under the PaineWebber Price
Adjustment Agreement through any commercially reasonable manner of sale
specified by PWFS. As a result of the failure of the closing price of the Paired
Shares to equal or exceed $16.00 on August 25, 1998, pursuant to the terms of
the PaineWebber Price Adjustment Agreement, PWFS became entitled to force a
complete settlement under the PaineWebber Price Adjustment Agreement and
continues to be so entitled. In addition, the PaineWebber Price Adjustment
Agreement reached maturity on October 15, 1998. PWFS has not required any
settlement under the PaineWebber Price Adjustment Agreement to date although it
has reserved the right to do so. See "Potential Dilution and Liquidity Effects
of the Price Adjustment Mechanisms" below.
 
    PWFS also has the right to force a complete settlement under the PaineWebber
Price Adjustment Agreement if the Companies (i) are in default with respect to
certain specified indebtedness of the Companies or (ii) effect an early
settlement, unwind or liquidation of any transaction similar to the transaction
with PWFS.
 
    POTENTIAL DILUTION AND LIQUIDITY EFFECTS OF THE PRICE ADJUSTMENT
MECHANISMS.  Settlement under one or more of the Price Adjustment Mechanisms
described above could have adverse effects on the Companies' liquidity or
dilutive effects on the Companies' capital stock. As of the date of this filing,
all three counterparties to the Price Adjustment Mechanisms were, pursuant to
the terms of the Price Adjustment Mechanisms, entitled to require settlement of
their transactions. If upon settlement the reset price or
 
                                       49
<PAGE>
unwind price (in the case of the UBS and Nations transactions) or the market
price (in the case of the PWFS transaction) of the Paired Shares is less than
the applicable forward price or reference price, the Companies must deliver cash
or additional Paired Shares to effect such settlement. Delivery of cash would
adversely affect the Companies' liquidity, and delivery of shares would have
dilutive effects on the Companies' capital stock. Moreover, to settle in stock
under any of the Price Adjustment Mechanisms, the Companies may be required to
issue Paired Shares at a depressed price, which would heighten the dilutive
effects on the Companies' capital stock. The dilutive effects of a stock
settlement increase significantly as the market price of the Paired Shares
declines below the applicable forward price or reference price. Furthermore,
under certain circumstances, the Companies may settle in Paired Shares only if a
registration statement covering such shares is effective. Although to date
registration statements covering the sale of up to 44,000,000 Paired Shares in
connection with the Price Adjustment Mechanisms have been declared effective,
there can be no assurance that such registration statements will remain
effective or that the Companies will not be required to register more Paired
Shares in connection with the Price Adjustment Mechanisms.
 
    The market price of the Paired Shares has dropped significantly below the
applicable forward price or reference price under each of the Price Adjustment
Mechanisms. As a result, the Companies have to date made cash payments
(including cash dividends on collateral shares) totaling $54,251,513 (including
a partial settlement of $45,627,725 in cash under the UBS Forward Stock
Contract) and delivered an aggregate of 34,177,187 additional Paired Shares as
collateral pursuant to the Price Adjustment Mechanisms. All such collateral
shares are deemed to be outstanding for purposes of the Companies' per share
calculations. If the Companies settled all three transactions in cash on
November 12, 1998, they would be obligated to deliver to the counterparties a
total of approximately $314.4 million (assuming application of the cash
currently held as collateral by the counterparties) and would receive from the
counterparties a total of 13.3 million Paired Shares plus all Paired Shares then
held as collateral by them.
 
    The terms of the Price Adjustment Mechanisms provide that all three
counterparties currently have the right to require the Companies to settle their
transactions. Moreover, UBS has asserted that the Companies are in default under
the terms of the Forward Stock Contract as the result of the Companies not
delivering certain cash collateral and not making final settlement of the
Forward Stock Contract in cash, although the Companies have disputed this
assertion.
 
    The Companies are currently in discussions regarding possible resolutions of
the Price Adjustment Mechanisms to provide the Companies with the opportunity to
resolve the Price Adjustment Mechanisms through payments of cash or other forms
of consideration, and thus to avoid the need to settle in shares. There can be
no assurance that such discussions will be successful. Moreover, any such
resolutions may require the consent of the lenders under the Companies' credit
facility. No assurances can be given that any such consent, if required and
sought, would be obtained, or that the Companies would be able to meet their
obligations under any such settlement arrangement.
 
PARTICIPATING LEASE REVENUE RECOGNITION
 
    In May 1998, the Financial Accounting Standards Board's Emerging Issues Task
Force issued EITF number 98-9, "Accounting for Contingent Rent in Interim
Financial Periods ("EITF 98-9"). EITF 98-9 provides that a lessor shall defer
recognition of contingent rental income in interim periods until specified
targets that trigger the contingent income are met. Management has reviewed the
terms of its Participating Leases and has determined that the provisions of EITF
98-9 will impact Patriot's current revenue recognition on an interim basis, but
will have no impact on Patriot's annual participating rent revenue or interim
cash flow from its Participating Leases. Patriot has adopted the provisions of
EITF 98-9 and elected to apply the provisions of the new pronouncement on a
prospective basis.
 
                                       50
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
 
RESULTS OF OPERATIONS: QUARTER ENDED SEPTEMBER 30, 1998 COMPARED WITH QUARTER
  ENDED SEPTEMBER 30, 1997
 
    Patriot's lease revenue from the Lessees (including Wyndham) for the quarter
ended September 30, 1998, increased 278% from $47,107,000 in 1997 to
$178,156,000 in 1998. This increase is primarily due to the acquisition of 174
hotel properties during the past twelve months. Patriot owned or leased 306
hotel properties as of September 30, 1998. Interest and other income increased
from $3,083,000 in 1997 to $6,540,000 in 1998 which is primarily attributable to
additional investments in Subscription Notes and other notes receivable from
Wyndham and interest and dividend income earned on cash investments. Interest
and other income for the three months ended September 30, 1998 includes
$3,667,000 of interest income related to notes receivable from Wyndham.
 
    Generally, Patriot's Participating Leases provide for the payment of the
greater of (i) a fixed base rent or (ii) participating rent, based on the
revenue of the hotels, plus certain additional charges, as applicable. The
Participating Leases contain annual revenue thresholds used to calculate the
various tiers of participating rent which are prorated on a monthly basis to
determine monthly participating rent payments. The provisions of EITF 98-9 call
for straight-line recognition of the annual base rent throughout the year and
for the deferral of any additional lease amounts collected or due from the
Lessees until such amounts exceed the annual revenue thresholds. This will
generally result in base rent being recognized in the first and second quarters
and participating rents already collected or due from the Lessees being deferred
and then recognized in the third and fourth quarters due to the structure of
Patriot's Participating Leases and the seasonality of the hotel operations. The
effect of the change was to defer recognition of $1,789,000 of lease revenue
during the quarter ended September 30, 1998.
 
    For the three months ended September 30, 1998 as compared to the same period
for 1997, Patriot experienced significant increases in expenses as a result of
the acquisition of hotels discussed above.
 
    Real estate and personal property taxes and casualty insurance were
$16,799,000 for the three months ended September 30, 1998, compared to
$4,253,000 for the three months ended September 30, 1997.
 
    Ground lease expense increased from $1,310,000 to $22,128,000 for the three
months ended September 30, 1997 compared to the same period in 1998 as a result
of acquisition of properties subject to existing ground leases, including
$1,318,000 related to the Racecourse land lease with an affiliate of
PaineWebber, Inc.
 
    General and administrative expenses were $5,090,000 for the three months
ended September 30, 1998, compared to $2,501,000 for 1997. This increase is
primarily attributable to Patriot's tremendous growth over the past year through
mergers and acquisitions. General and administrative expenses include the
amortization of unearned stock compensation of $1,381,000 for 1998 and
$1,385,000 for 1997.
 
    Interest expense for the three months ended September 30, 1998 was
$77,266,000 compared to $14,649,000 in 1997. Patriot's outstanding debt
obligations as of September 30, 1998 and 1997 were approximately $3.6 billion
and $727.2 million, respectively. The primary components of interest expense for
the three months ended September 30, 1998 are $54,303,000 of interest related to
the revolving credit facility and term loans, $11,311,000 of interest on
mortgage notes, $8,007,000 of amortization of deferred financing costs and
$7,264,000 of other interest related to other miscellaneous notes, capital lease
obligations and commitments payable. Interest expense for the three months ended
September 30, 1997 consists primarily of $12,372,000 of interest on Patriot's
Revolving Credit Facility, the Old Line of Credit and mortgage note balances
outstanding, $2,461,000, of other interest related to Subscription Notes, other
miscellaneous notes, capital leases and commitments payable and $567,000 of
amortization of deferred financing costs. Additionally, Patriot capitalized
interest totaling $3,619,000 and $751,000 for the three months ended September
30, 1998 and 1997, respectively, associated with major renovations of certain
hotel properties.
 
                                       51
<PAGE>
    In connection with Patriot's acquisition of certain license agreements
Patriot recognized an expense of $3,940,000 related to the cost of acquiring
these agreements for the third quarter of 1998.
 
    The Companies previously entered into three treasury interest rate lock
agreements to protect the Companies against the possibility of rising interest
rates in connection with an anticipated $850 million corporate bond offering
originally scheduled for the fourth quarter of 1998. However, given current
conditions in the debt capital markets, the Companies have decided to delay this
debt issuance indefinitely. Under the treasury interest rate lock agreements,
the Companies receive or make payment based on the difference between specified
interest rates, 6.06%, 6.07% and 5.62%, and the actual 10-year U.S. Treasury
interest rate on a notional principal amount of $525 million. The Companies have
settled the entire $525 million in treasury interest rate locks at rates between
4.58% and 4.67% resulting in a $49,225,000 one-time charge to earnings in the
third quarter of 1998.
 
    Depreciation and amortization expense was $50,561,000 for the three months
ended September 30, 1998 compared to $12,650,000 for the same period in 1997.
 
    Patriot's share of income from unconsolidated subsidiaries was $4,764,000
for the third quarter of 1998 compared to $1,395,000 for the third quarter of
1997. The increase is primarily attributable to Patriot's investment in the
Non-Controlled Subsidiaries.
 
    Minority interest share of income in the Patriot Partnership was $2,015,000
and $3,340,000 for the three months ended September 30, 1998 and 1997,
respectively. Minority interest share of income in Patriot's other consolidated
subsidiaries was $3,775,000 for the third quarter of 1998 and $921,000 for the
third quarter of 1997.
 
    As a result, the net loss was $37,436,000 for the three months ended
September 30, 1998 and $27,713,000 for the three months ended September 30,
1997.
 
RESULTS OF OPERATIONS: NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE
  MONTHS ENDED SEPTEMBER 30, 1997
 
    Patriot's lease revenue from the Lessees (including Wyndham) for the nine
months ended September 30, 1998, increased 255% from $119,093,000 in 1997 to
$422,808,000 in 1998. This increase is primarily due to the acquisition of 174
hotel properties during the past twelve months. Interest and other income
increased from $4,215,000 in 1997 to $15,311,000 in 1998 which is primarily
attributable to investments in Subscription Notes and other notes receivable
from Wyndham and interest and dividend income earned on cash investments.
Interest and other income for the nine months ended September 30, 1998 includes
$9,695,000 of interest income related to notes receivable from Wyndham.
 
    As discussed above, Patriot elected to adopt the provisions of EITF 98-9
(which provides new guidance for accounting procedures to be applied when
accounting for participating lease income) beginning in May 1998. The effect of
the change was to defer recognition of $7,470,000 of lease revenue during the
nine months ended September 30, 1998. The provisions of EITF 98-9 call for
straight-line recognition of the annual base rent throughout the year and for
the deferral of any additional lease amounts collected or due from the Lessees
until such amounts exceed the annual revenue thresholds. This will generally
result in base rent being recognized in the first and second quarters and
participating rents already collected or due from the Lessees being deferred and
then recognized in the third and fourth quarters due to the structure of
Patriot's Participating Leases and the seasonality of the hotel operations.
 
    For the nine months ended September 30, 1998 as compared to the same period
for 1997, Patriot experienced significant increases in expenses as a result of
the acquisition of hotels discussed above.
 
    Real estate and personal property taxes and casualty insurance were
$42,023,000 for the nine months ended September 30, 1998, compared to
$11,219,000 for the nine months ended September 30, 1997.
 
    Ground lease expense increased from $1,993,000 to $42,296,000 for the nine
months ended September 30, 1997 compared to the same period in 1998 as a result
of acquisition of properties subject to existing ground leases, including
$3,915,000 related to the Racecourse land lease with an affiliate of
PaineWebber, Inc.
 
                                       52
<PAGE>
    General and administrative expenses were $15,091,000 for the nine months
ended September 30, 1998, compared to $7,582,000 for 1997. This increase is
primarily attributable to Patriot's tremendous growth over the past year through
mergers and acquisitions. General and administrative expenses include the
amortization of unearned stock compensation of $4,041,000 for 1998 and
$3,312,000 for 1997.
 
    Interest expense for the nine months ended September 30, 1998 was
$162,294,000 compared to $31,977,000 in 1997. Patriot's outstanding debt
obligations as of September 30, 1998 and 1997 were approximately $3.5 billion
and $727.2 million, respectively. The primary components of interest expense for
the nine months ended September 30, 1998 are $109,290,000 of interest related to
the revolving credit facility and term loans, $25,627,000 of interest on
mortgage notes, $16,884,000 of amortization of deferred financing costs and
$18,723,000 of other interest related to other miscellaneous notes, capital
lease obligations and commitments payable. Interest expense for the nine months
ended September 30, 1997 consists primarily of $29,867,000 of interest on the
Revolving Credit Facility, the Old Line of Credit and mortgage note balances
outstanding, $2,461,000 of other interest related to Subscription Notes, other
miscellaneous notes, capital leases and commitments payable, and $1,331,000 of
amortization of deferred financing costs. Additionally, Patriot capitalized
interest totaling $8,230,000 and $1,682,000 for the nine months ended September
30, 1998 and 1997, respectively, associated with major renovations of certain
hotel properties.
 
    In connection with Patriot's acquisition of three leasehold interests for
hotels that Patriot owns and leased to certain of the Lessees and the
acquisition of certain license agreements, Patriot recognized expense of
$8,279,000 related to the cost of acquiring these leaseholds and license
agreements.
 
    The Companies previously entered into three treasury interest rate lock
agreements to protect the Companies against the possibility of rising interest
rates in connection with an anticipated $850 million corporate bond offering
originally scheduled for the fourth quarter of 1998. However, given current
conditions in the debt capital markets, the Companies have decided to delay this
debt issuance indefinitely. Under the rate lock agreements, the Companies
receive or make payment based on the difference between specified interest
rates, 6.06%, 6.07% and 5.62%, and the actual 10-year U.S. Treasury interest
rate on a notional principal amount of $525 million. The Companies have settled
the entire $525 million in treasury interest rate locks at rates between 4.58%
and 4.67% resulting in a $49,225,000 one-time charge to earnings in the third
quarter of 1998.
 
    Depreciation and amortization expense was $112,253,000 for the nine months
ended September 30, 1998 compared to $30,656,000 for the same period in 1997.
 
    Patriot's share of income from unconsolidated subsidiaries was $24,011,000
for the nine months ended September 30, 1998 compared to $4,488,000 for 1997.
The increase is primarily attributable to Patriot's investments in the
Non-Controlled Subsidiaries.
 
    Minority interest share of loss in the Patriot Partnership was $3,253,000
and $1,194,000 for the nine months ended September 30, 1998 and 1997,
respectively. Minority interest share of income in Patriot's other consolidated
subsidiaries was $6,203,000 for the first half of 1998 and $1,368,000 for 1997.
 
    Patriot repaid certain debt obligations of Old Wyndham, Interstate and
Summerfield in connection with the Wyndham Merger, the Interstate Merger and the
Summerfield Acquisition. As a result, Patriot incurred certain prepayment
penalties and wrote off the remaining balance of unamortized deferred financing
costs associated with such debt in the aggregate amount of $30,559,000.
 
    As a result, the net loss was $9,879,000 for the nine months ended September
30, 1998 and $4,547,000 for the nine months ended September 30, 1997.
 
                                       53
<PAGE>
WYNDHAM INTERNATIONAL, INC.
 
    As of September 30, 1998, Wyndham leased 216 hotels from Patriot, managing
202 of those hotels, and managed 171 hotels for third parties. In addition,
Wyndham operated the Bay Meadows Racecourse. Subsequent to the Cal Jockey Merger
in July 1997, the major portion of the revenues of Wyndham and Patriot have been
derived from the leasing and operation of hotels.
 
RESULTS OF OPERATIONS: QUARTER ENDED SEPTEMBER 30, 1998 COMPARED WITH QUARTER
  ENDED SEPTEMBER 30, 1997
 
    For the three months ended September 30, 1998, Wyndham (including its
consolidated subsidiaries) had hotel revenues of $554,331,000 from the 290
hotels it operated during the period as compared to $30,271,000 in hotel
revenues from the 29 hotels operated during the three months ended September 30,
1997. In addition, Wyndham reported management fee and service fee income of
$24,917,000 and $1,577,000 for the three months ended September 30, 1998 and
1997, respectively. Interest and other income for the three month period ended
September 30, 1998 increased from $1,475,000 in 1997 to $4,477,000 mainly due to
the interest income related to the Subscription Notes and other notes receivable
from Patriot.
 
    Total revenues from the Racecourse facility operations were $9,955,000 for
the quarter ended September 30, 1998 compared to $10,861,000 for the same
quarter last year. Total costs and expenses associated with the Racecourse
operations were $8,810,000 for the quarter ended September 30, 1998 compared to
$10,536,000 for the same quarter last year. These decreases were primarily
attributable to fewer racing days in the third quarter of 1998 compared to 1997.
 
    Hotel expenses increased from $16,797,000 to $378,886,000 for the quarter
ended September 30, 1998 as a result of the increased number of hotels operated
by Wyndham quarter over quarter.
 
    Lease payments paid to Patriot pursuant to the Participating Leases, other
hotel sub-leases and the Racecourse facility lease increased from $10,686,000 to
$174,838,000 for the for the third quarter of 1998.
 
    General and administrative expenses were $21,482,000 for the period compared
to $4,081,000 for the same period last year. General and administrative expenses
consist primarily of salaries and wages of personnel.
 
    Interest expense for the three months ended September 30, 1998 was
$10,216,000 compared to $11,000 for the same period last year. The increase is
primarily attributable to debt obligations related to the three hotels acquired
in the WHG Merger. The amount also includes $3,667,000 of interest expense
related to the Subscription Notes and other notes payable to Patriot for the
three months ended September 30, 1998.
 
    Depreciation and amortization increased from $1,142,000 to $17,675,000 for
the three months ended September 30, 1998. The increase in depreciation is
attributable to the three hotels acquired in the WHG Merger and assets acquired
in the Interstate Merger.
 
    Wyndham's share of income from unconsolidated subsidiaries was $447,000 for
the three months ended September 30, 1998.
 
    Minority interest's share of income associated with the Wyndham Partnership
was a loss of $2,707,000 for the three months ended September 30, 1998 as
compared to income of $115,000 for the same quarter last year. Minority
interest's share of income in Wyndham's other consolidated subsidiaries was
$4,048,000 in 1998 and $13,000 in 1997.
 
    The extraordinary loss of $1,257,000 for the three months ended September
30, 1998 was a result of costs associated with a debt refinancing.
 
    As a result, the net loss was $27,034,000 for the three months ended
September 30, 1998 and the net income was $709,000 for the three months ended
September 30, 1997.
 
                                       54
<PAGE>
RESULTS OF OPERATIONS: NINE MONTHS ENDED SEPTEMBER 30, 1998
 
    The results for the nine months ended September 30, 1998 are not being
compared to the prior period since the prior period only represents July 1, 1997
(inception of operations) through September 30, 1997.
 
    For the nine months ended September 30, 1998, Wyndham (including its
consolidated subsidiaries) had hotel revenues of $1,266,985,000 from the 290
hotels it operated during the period. In addition, Wyndham reported management
fee and service fee income of $62,560,000 for the nine months ended September
30, 1998. Interest and other income for the period included $11,755,000 of
interest income related to the Subscription Notes and other notes receivable
from Patriot.
 
    Total revenues from the Racecourse facility operations were $34,945,000 for
the nine months ended September 30, 1998. Total costs and expenses associated
with the Racecourse operations were $29,667,000 for the nine months ended
September 30, 1998.
 
    Lease payments paid to Patriot pursuant to the Participating Leases, other
hotel sub-leases and the Racecourse facility lease were $384,475,000 for the
nine months ended September 30, 1998.
 
    General and administrative expenses were $49,467,000 for the period and
consist primarily of salaries and wages of personnel.
 
    Interest expense of $24,015,000 for the nine months ended September 30, 1998
is primarily attributable to debt obligations related to the three hotels
acquired in the WHG Merger. The amount also includes $9,695,000 of interest
expense related to the Subscription Notes and other notes payable to Patriot.
 
    In connection with the CHCI Merger, Wyndham acquired 17 leasehold interests
for hotels that Patriot owns. As a result, Wyndham recognized expense of
$52,721,000 related to the cost of acquiring these leaseholds.
 
    Wyndham's share of income from unconsolidated subsidiaries was $2,461,000
for the nine months ended September 30, 1998.
 
    Minority interest's share of losses associated with the Wyndham Partnership
was $9,422,000 for the nine months ended September 30, 1998. Minority interest's
share of income in Wyndham's other consolidated subsidiaries was $20,408,000 in
1998.
 
    The extraordinary loss of $1,257,000 for the three months ended September
30, 1998 was a result of a charge for the write-off of deferred loan costs
associated with a debt refinancing.
 
    As a result, the net loss was $67,686,000 for the nine months ended
September 30, 1998.
 
    STATISTICAL INFORMATION
 
    Third quarter 1998 operating performance across the Companies' owned
portfolio improved over the third quarter of 1997, as reflected in a 5.1%
increase in revenue per available room ("RevPAR"), a 6.6% increase in average
daily rate ("ADR"), and a slight decrease in occupancy of 1.5%.
 
    Similarly, third quarter 1998 operating performance across Wyndham's
comparable branded portfolio of owned and managed hotels (hotels in the
portfolio for one full common fiscal quarter in both periods presented) improved
over the 1997 third quarter, as reflected in a 4.8% increase in RevPAR, a 7.2%
increase in ADR, and a decrease in occupancy of 2.2%.
 
    The Wyndham-branded comparable portfolio was led by strong growth in the
Resort division, which posted a 22.9% increase in RevPAR, as several recently
renovated properties contributed to the improved performance against weak 1997
results. The Garden division also experienced strong performance, with a 6.7%
RevPAR increase driven by improved results at hotels added in the past 18
months. During the third
 
                                       55
<PAGE>
quarter of 1998, Patriot converted four hotels, representing approximately 1,600
rooms, to the Wyndham brand; two of these properties were former Sheratons and
two properties were former Westins.
 
<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED SEPTEMBER 30
                                                 ----------------------------------------------------------------
                                                      OCCUPANCY                ADR                  REVPAR
                                                 --------------------  --------------------  --------------------
                                                   1998       1997       1998       1997       1998       1997
                                                 ---------  ---------  ---------  ---------  ---------  ---------
<S>                                              <C>        <C>        <C>        <C>        <C>        <C>
The Companies' owned hotels....................       73.8%      74.9% $  103.92  $   97.49  $   76.71  $   72.98
 
Wyndham-brand comparable portfolio.............       72.0%      73.6% $  100.83  $   94.08  $   72.58  $   69.26
</TABLE>
 
    For the nine months ended September 30, 1998, the Companies' owned portfolio
also improved over the comparable period in 1997, as reflected in an 6.9%
increase in RevPAR, a 6.3% increase in ADR, and an improvement of 0.6% in
occupancy.
 
    Similarly, operating performance across Wyndham's comparable branded
portfolio of owned and managed hotels for the nine-month period improved over
last year, as reflected in a 9.1% increase in RevPAR, a 7.8% increase in ADR,
and an improvement of 1.2% in occupancy.
 
<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED SEPTEMBER 30
                                                ----------------------------------------------------------------
                                                     OCCUPANCY                ADR                  REVPAR
                                                --------------------  --------------------  --------------------
                                                  1998       1997       1998       1997       1998       1997
                                                ---------  ---------  ---------  ---------  ---------  ---------
<S>                                             <C>        <C>        <C>        <C>        <C>        <C>
The Companies' owned hotels...................       73.7%      73.3% $  108.36  $  101.98  $   79.84  $   74.71
 
Wyndham-brand comparable portfolio............       71.8%      71.0% $  106.49  $   98.76  $   76.48  $   70.08
</TABLE>
 
COMBINED LIQUIDITY AND CAPITAL RESOURCES
 
    CASH FLOW PROVIDED BY OPERATING ACTIVITIES
 
    The Companies' principal source of cash to fund operating expenses and
distributions to stockholders is cash flow provided by operating activities.
Patriot's principal source of revenue is rent payments from the Lessees and
Wyndham under the Participating Leases. Wyndham's principal source of cash flow
is from the operation of the hotels that it leases and/or manages. The Lessees'
and Wyndham's ability to make the rent payments to Patriot is dependent upon
their ability to efficiently manage the hotels and generate sufficient cash flow
from operation of the hotels.
 
    Combined cash and cash equivalents as of September 30, 1998 were $147.4
million, including capital improvement reserves of $29.1 million. Combined cash
flows from operating activities of the Companies were $237.2 million for the
first nine months of 1998, which represent a combination of the collection of
rents under Participating Leases with third party Lessees and cash flows
generated by the hotels operated by Wyndham.
 
    Combined cash and cash equivalents as of September 30, 1997 were $59.7
million, including capital improvement reserves of $38.2 million. Combined cash
flows from operating activities of Patriot were $75.9 million for the first nine
months of 1997, which primarily represent the collection of rents under
Participating Leases.
 
    CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
 
    Through September 30, 1998, the Companies experienced a period of rapid
growth, acquiring an aggregate of $4.5 billion of hotel properties and
management companies. These transactions included the Wyndham Merger, the WHG
Merger, the Arcadian Acquisition, the Interstate Merger, the Summerfield
Acquisition, the CHCI Merger, and the acquisition of four additional hotel
properties and the Golden Door Spa. These transactions were funded with a
combination of an aggregate of approximately $1.4 billion in cash (primarily
drawn from the Companies' Revolving Credit Facility and Term Loans), issuance
 
                                       56
<PAGE>
of and assumption of other debt aggregating approximately $1.4 billion in debt
and the issuance of an aggregate of approximately $1.7 billion of equity
securities.
 
    Combined cash flows used in investing activities of the Companies were $1.5
billion for the nine months ended September 30, 1998, resulting primarily from
the acquisition of hotel properties and management companies, renovation
expenditures at certain hotels, as well as cash deposited on collateral under
one of the Price Adjustment Mechanisms. Combined cash flows from financing
activities of $1.3 billion for the nine months ended September 30, 1998 were
primarily related to borrowings on the Revolving Credit Facility and mortgage
notes, and net proceeds from private placements of equity securities, net of
payments of dividends and distributions.
 
    Combined cash flows used in investing activities were $710.1 million for the
nine months ended September 30, 1997, resulting primarily from the acquisition
of hotel properties. Combined cash flows from financing activities of $649.2
million for the nine months ended September 30, 1997 were primarily related to
borrowings on Patriot's previous line of credit facility, net of payments of
dividends and distributions.
 
    As of September 30, 1998, Patriot had approximately $887.8 million
outstanding under its Revolving Credit Facility and $1.8 billion outstanding on
its Term Loans. The Term Loans have maturities of January 31, 1999 ($350
million); March 31, 1999 ($400 million); and March 31, 2000 ($450 million). As
of September 30, 1998, the Companies also had over $1.2 billion of mortgage and
other debt outstanding (approximately $205 million of which is due on or before
December 31, 1998), resulting in total indebtedness of approximately $3.8
billion. Additionally, under the terms of certain put arrangements, the
Companies could be obligated to purchase a partial interest in a hotel property
for approximately $11 million in January 1999. As of September 30, 1998, the
Companies had approximately $12.2 million of availability under the Revolving
Credit Facility in addition to cash on hand.
 
    The Companies are evaluating possible means of meeting near-term debt
service requirements and improving liquidity through refinancing or extending
the maturity of existing indebtedness, issuing additional equity securities, and
divesting certain non-core, non-proprietarily branded hotel assets. The
Companies have also re-strategized capital expenditures (currently estimated at
approximately $100 million for 1999) and development programs, are improving
operating efficiencies, and are in discussions to seek possible amendments to
the Revolving Credit Facility. In addition, Patriot has decided not to declare a
dividend with respect to the third quarter at this time. Instead, prior to
December 31, 1998, Patriot intends to declare a dividend, payable in cash or
securities in January, 1999, which will be at least sufficient to satisfy the
federal income tax requirements with respect to dividends in order for Patriot
to continue to qualify as a REIT. See "The Companies--1998 Dividends."
 
    No assurances can be made regarding the availability or terms of additional
sources of capital for the Companies in the future and no assurances can be
given regarding the Companies' ability to successfully refinance or extend the
maturity of existing indebtedness. A default by the Companies under current
existing indebtedness may cause a cross-default under other existing
indebtedness, including, without limitation, the Revolving Credit Facility. No
assurances can be given regarding the Companies' success in securing any
amendments to the Revolving Credit Facility. Additionally, in the absence of
such amendments, no assurances can be given that the Companies will meet the
reduced EBITDA coverage ratio requirements which go into effect in December
under the Revolving Credit Facility. If the Companies are unable to secure
additional sources of financing in the future, are unable to successfully
refinance existing indebtedness, or are unable to obtain amendments to existing
covenants under the Revolving Credit Facility, no assurance can be made that the
Companies will be able to meet their financial obligations as they come due
without substantial disposition of assets outside the ordinary course of
business, restructuring of debt, externally forced revisions of its operations
or similar actions. Additionally, no assurances can be given that the lack of
future financing sources would not have a material adverse effect on the
Companies' financial condition and results of operations.
 
                                       57
<PAGE>
    As noted above, the Companies are parties to forward equity transactions
with three counterparties involving the sale of an aggregate of 13.3 million
Paired Shares (the "Initial Shares") of the Companies with related Price
Adjustment Mechanisms. The Price Adjustment Mechanisms require the Companies
from time to time to issue additional Paired Shares or pay cash based upon the
difference between the respective forward prices and the market price of the
Companies' Paired Shares. The Companies' aggregate exposure under the Purchase
Price Mechanisms as of November 12, 1998 was approximately $323 million
(assuming the forward equity transactions are settled in cash and without giving
effect to the cash collateral currently held by the counterparties). The
Companies have registered the sale of up to 44 million Paired Shares in
connection with the forward equity transactions; however, to date no sales have
been made under such registration statements. There can be no assurance that
such registration statements will remain effective or that the Companies will
not be required to register additional Paired Shares for delivery under the
forward equity transactions. See "--Sales of Paired Common Stock with Price
Adjustment Mechanisms."
 
    Settlement under one or more of the forward equity transactions could have
adverse effects on the Companies' liquidity or dilutive effects on the
Companies' capital stock. Moreover, settlement (whether by reason of a drop in
the market price of the paired shares or otherwise) may force the Companies to
issue paired shares at a depressed price, which would heighten the dilutive
effects on the Companies' capital stock. The dilutive effects of a stock
settlement increase significantly as the market price of the paired shares
declines below the applicable forward price or reference price.
 
    The market price of the Paired Shares has dropped significantly below the
respective forward prices under the forward equity contracts. As a result, the
Companies to date have made cash payments totaling approximately $54.3 million
and have delivered an aggregate of 34.1 million additional Paired Shares as
collateral to the counterparties.
 
    The Companies' forward equity transactions with PaineWebber and UBS,
representing a total obligation of approximately $195 million (without applying
approximately $8.2 million previously delivered to UBS as collateral), reached
maturity on October 15, 1998 without final settlement by the Companies. UBS has
asserted that the Companies are in default under the terms of its forward
contract as the result of the Companies not delivering certain cash collateral
and not making a final settlement of the contract in cash, although the
Companies dispute this assertion. In addition, because the market price of the
paired common stock is below applicable unwind thresholds under the forward
equity transaction with Nations (which represents an obligation of approximately
$128 million), Nations has the right to require a complete settlement of its
transaction.
 
    The Companies are currently in discussions regarding possible resolutions of
the forward equity transactions to provide the Companies with the opportunity to
resolve the transactions through payments of cash or other forms of
consideration, and thus to avoid the need to settle in shares. There can be no
assurance that such discussions will be successful. Moreover, and such
resolutions may require the consent of the lenders under the Companies'
Revolving Credit Facility. No assurances can be given that any such consent, if
required and sought, would be obtained, or that the Companies would be able to
meet their obligations under any such settlement arrangement.
 
    TREASURY RATE LOCK AGREEMENTS.  The Companies previously entered into three
treasury interest rate lock agreements to protect the Companies against the
possibility of rising interest rates in connection with an anticipated $850
million corporate bond offering originally scheduled for the fourth quarter of
1998. However, given current conditions in the debt capital markets, the
Companies have decided to delay this debt issuance indefinitely. Under the rate
lock agreements, the Companies receive or make payments based on the
differential between specified interest rates, 6.06%, 6.07% and 5.62%,
respectively, and the actual 10-year U.S. Treasury interest rate on a notional
principal amount of $525 million. The Companies have settled the entire $525
million in treasury interest rate locks at rates between 4.59% and 4.67%
resulting in a $49.2 million one-time charge to earnings recorded in the third
quarter of 1998.
 
                                       58
<PAGE>
    The $49.2 million charge for the treasury locks was paid by a unsecured
promissory note with Chase Manhattan Bank; bears interest at LIBOR plus 225
basis points and matures in November, 1999.
 
    OTHER DEBT REFINANCINGS AND EXTENSIONS.  On October 16, 1998, the Companies
refinanced two mortgage loans with Credit Suisse First Boston which encumber the
Embassy Suites Chicago and the Wyndham Greenspoint. The refinanced debt of
approximately $82.1 million bears a fixed interest rate of 8.25% and matures in
10 years with a 25-year principal amortization schedule.
 
    On October 23, 1998, the Companies refinanced a mortgage loan with Credit
Suisse First Boston which encumbers the Wyndham Peachtree Conference Center. The
refinanced debt of approximately $38 million bears an variable interest rate at
LIBOR plus 350 basis points and matures in three years with a 25-year
amortization.
 
    On November 3, 1998, the Companies entered into agreements to extend the
maturity of certain debt related to the El Conquistador and the Condado Plaza
Hotel & Casino from November 3, 1998 to January 29, 1999. The extension
agreements required that $10 million be deposited into an escrow account in
installments beginning on the date of the extension through January 12, 1999.
Upon the satisfactory completion of certain conditions, the $10 million will be
released from escrow.
 
    RENOVATIONS AND CAPITAL IMPROVEMENTS
 
    During the first nine months of 1998, the Companies invested approximately
$187.7 million to renovate or re-brand hotels. Pursuant to certain of the
Participating Leases, Patriot is obligated to establish a reserve for each such
hotel for capital improvements, including the periodic replacement or
refurbishment of furniture, fixtures and equipment ("FF&E"). The aggregate
amount of such reserves averages 4.0% of total revenue, with the amount of such
reserve with respect to each hotel based upon projected capital requirements of
such hotel. Management believes such amounts are sufficient to fund recurring
capital expenditures for the hotels. Capital expenditures, exclusive of
renovations, may exceed these reserves in a single year.
 
    The Companies attempt to schedule renovations and improvements during
traditionally lower occupancy periods in an effort to minimize disruption to the
hotel's operations. Therefore, management does not believe such renovations and
capital improvements will have a material effect on the results of operations of
the hotels. Capital expenditures will be financed through capital expenditure
reserves. See "Combined Liquidity and Capital Resources."
 
    LEGISLATION AFFECTING THE PAIRED SHARE STRUCTURE
 
    Patriot's ability to qualify as a REIT is dependent upon its continued
exemption from the anti-pairing rules of Section 269B(a)(3) of the Internal
Revenue Code of 1986, as amended (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 Wyndham. The "grandfathering" rules governing Section 296B
generally provide, however, that Section 296B(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 this
"grandfathering" rule in the context of a merger into a grandfathered REIT or
otherwise. Moreover, although Patriot's and Wyndham's respective predecessors,
Cal Jockey and Bay Meadows, were paired on June 30, 1983, if for any reason Cal
Jockey failed to qualify as a REIT in 1983 the benefit of the grandfathering
rule would not be available to Patriot and Patriot would not qualify as a REIT
for any taxable year.
 
    Patriot's ability to utilize the paired structure was limited as a result of
the Internal Revenue Service Restructuring and Reform Act of 1998 (the "IRS
Reform Act of 1998"), which was signed into law by the President on July 22,
1998. Included in the IRS Reform Act of 1998 is a freeze on the grandfathered
status of paired share REITs such as Patriot. Under this legislation, the
anti-pairing rules generally apply to real
 
                                       59
<PAGE>
property interests acquired after March 26, 1998 by Patriot and Wyndham, or a
subsidiary or partnership in which a 10% or greater interest is owned by Patriot
or Wyndham (collectively, the "REIT Group"), unless (i) the real property
interests are acquired pursuant to a written agreement which is binding on March
26, 1998 and all times thereafter or (ii) the acquisition of such real property
interests were described in a public announcement or in a filing with the
Securities and Exchange Commission on or before March 26, 1998. In addition, the
grandfathered status of any property under the foregoing rules will be lost if
the rent on a lease entered into or renewed after March 26, 1998, with respect
to such property exceeds an arm's-length rate. The IRS Reform Act of 1998 also
provides that a property held by Patriot or Wyndham that is not subject to the
anti-pairing rules would become subject to such rules in the event of an
improvement placed in service after December 31, 1999 that changes the use of
the property and the cost of which is greater than 200 percent of (x) the
undepreciated cost of the property (prior to the improvement) or (y) in the case
of property acquired where there is a substituted basis, the fair market value
of the property on the day it was acquired by Patriot and Wyndham. There is an
exception for improvements placed in service before January 1, 2004 pursuant to
a binding contract in effect as of December 31, 1999 and at all times
thereafter. The IRS Reform Act of 1998 also provides an exception that permits
Patriot to acquire new assets through taxable subsidiaries of Patriot, although
in order to comply with the general REIT rules, Wyndham or persons unrelated to
Patriot must own the voting securities of any such taxable subsidiaries. To the
extent of Wyndham's proportionate interest in such subsidiaries the Act requires
Patriot to treat gross revenues from the assets as nonqualifying REIT income for
purposes of the REIT income tests (which generally limit the total amount of
such revenues to 5% of Patriot's gross income determined for tax purposes). In
addition, Patriot must account for its stock in such subsidiaries and any
unsecured loans it makes to them as nonqualifying assets under the REIT asset
tests (which generally limit the total value of Patriot's non-real estate assets
of 25% of its total assets).
 
    On September 16, 1998, the Companies announced that after a thorough review
of numerous restructuring alternatives and current market conditions, they
elected to maintain the paired-share structure. Because Patriot and Wyndham have
retained the paired structure, Patriot will remain subject to the IRS Reform Act
for 1998. The IRS Reform Act of 1998 generally permits Patriot to continue its
current method of operations with respect to its existing assets, including the
assets acquired in the Interstate Merger, the Arcadian Acquisition, the
Summerfield Acquisition and the CHI Merger; provided that none of Patriot's
leases to Wyndham entered into or renewed after March 26, 1998 (which includes a
substantial portion of the Companies' leases) provides for rent in excess of an
arm's-length rate. In that regard, Patriot believes that none of its leases
provides for above-market rent, but Patriot has not obtained independent
appraisals, and the IRS could disagree with its analysis. The legislation also
limits Patriot's ability to make improvements to existing properties that do not
fall within the grandfathering rules described above. In addition, with respect
to the new acquisitions, the legislation requires Patriot to modify its method
of operations, and Patriot generally intends to acquire new assets through
taxable subsidiaries pursuant to the exception noted above, subject to the
limitations of the REIT asset and income tests.
 
    ISSUES REGARDING REIT STATUS
 
    In general, if Patriot ceases or fails to quality as a REIT in any year,
Patriot will be subject to federal income tax on its taxable income for the
entire year of disqualification, and for future taxable years, at regular
corporate rates. In such case, Patriot would no longer be required to make
distributions to stockholders, and the amount of its distributions might be
reduced. The failure to qualify as a REIT would also constitute a default under
certain debt obligations of Patriot. Notwithstanding the Companies' decision to
retain their paired structure, Patriot will not qualify as a REIT for 1998 or
subsequent years unless it operates in accordance with the various REIT
qualification requirements imposed by the Internal Revenue Code. These
requirements impose numerous restrictions on the Companies' activities and could
preclude the Companies from engaging in activities that might otherwise be
beneficial. Moreover, compliance with those requirements is more difficult in
the case of a paired REIT such as Patriot, is
 
                                       60
<PAGE>
further complicated by the additional requirements of the IRS Reform Act of
1998, and could be impacted by future legislation.
 
    Patriot faces a greater risk than most REITs of failing one or more of the
requirements for REIT qualification. First, the Companies could, in the future,
pursue, or be forced to adopt, business strategies that are inconsistent with
one or more of the REIT requirements. For example, management's most recent
valuation of Patriot's assets concluded that slightly more than 75% of the value
of its assets is represented by "real estate assets" within the meaning of the
Code. Sufficient variations in the value of its assets or sufficient sales of
hotels could cause Patriot to fail the REIT asset tests. Second, as discussed
above under "Legislation Affecting the Paired Share Structure," a determination
that Patriot's leases to Wyndham entered into or renewed after March 26, 1998
(which includes a substantial portion of the Companies' leases) provide for rent
in excess of an arm's length rate could cause Patriot to fail the requirements
for REIT qualification. Finally, Patriot is currently negotiating the renewal of
a number of recently expired leases with Wyndham. The ability of payments under
any such renewed lease to qualify as "rents from real property" under the Code
will depend on the terms of each such renewal. In view of the foregoing
uncertainties, no assurance can be given that Patriot will quality as a REIT for
the current year or subsequent years.
 
    Goodwin, Procter & Hoar LLP, special tax counsel to Patriot, has previously
rendered an opinion to Patriot dated April 30, 1998 to the effect that
commencing with the taxable year ending December 31, 1983 to the date of such
opinion, Patriot had 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 Patriot's proposed method of operation would
enable it to continue to meet the requirements for qualification and taxation as
a REIT under the Code. Patriot has not received any similar REIT qualification
opinion subsequent to April 30, 1998. Stockholders should be aware, however,
that opinions of counsel are not binding upon the IRS or any court. Goodwin,
Procter & Hoar LLP's opinion was based on various assumptions and was
conditioned upon certain representations made by Patriot on or about the date of
such opinion as to factual matters, including representations regarding the
nature of Patriot's properties and the future conduct of Patriot's business. Any
inaccuracy in such assumptions and representations (including as a result of
Patriot's activities subsequent to the date of the opinion) could adversely
affect the opinion.
 
    INFLATION
 
    Operators of hotels in general possess the ability to adjust room rates
quickly. However, competitive pressures may limit Wyndham's and the Lessees'
ability to raise room rates in the face of inflation.
 
    SEASONALITY
 
    The hotel industry is seasonal in nature. Revenues for certain of Patriot's
hotels are greater in the first and second quarters of a calendar year and at
other hotels in the second and third quarters of a calendar year. Seasonal
variations in revenue at the hotels may cause quarterly fluctuations in the
Companies' revenues.
 
    YEAR 2000 COMPLIANCE
 
    Many computer systems were not designed to interpret any dates beyond 1999,
which could lead to business disruptions in the United States and
internationally (the "Year 2000 issue"). The Companies recognize the importance
of minimizing the number and seriousness of any disruptions that may occur as a
result of Year 2000 and have adopted an extensive compliance program. The
Companies' compliance program involves three major program areas:
 
    - corporate information technology infrastructure and reservation systems
 
                                       61
<PAGE>
    - other electronic assets (such as, but not limited to, automated time
      clocks, point-of-sale, non-information technology systems, including
      embedded technologies that operate fire-life safety systems, phone
      systems, energy management systems and other similar systems)
 
    - third parties with whom the Companies conduct business
 
The Companies are applying a three phase approach to each program area:
 
    - Inventory Phase (identify systems and third parties that may be affected
      by Year 2000 issues)
 
    - Assessment Phase (prioritize the inventoried systems and third parties,
      assess their Year 2000 readiness, plan corrective actions)
 
    - Remediation Phase (implement corrective actions, verify implementation,
      formulate contingency plans)
 
    The Companies engaged a consulting firm to conduct the inventory and
assessment phases of the compliance program. The inventory and assessment phases
have been completed with respect to the Companies' corporate information
technology infrastructure and reservation systems. The inventory and assessment
phases have also been completed with respect to the Companies' information
technology and other electronic assets that are located in the Companies'
Hotels, other than the Hotels acquired in the Arcadian Acquisition (the
"Arcadian Hotels") and the Interstate Merger (the "Interstate Hotels"), and 81
Hotels which are either managed by Wyndham but not owned by Patriot or owned by
Patriot but not leased or operated by Wyndham (the "Third Party Compliance
Hotels"). During the fourth quarter of 1998, the Companies expect that the
inventory and assessment phases will be completed with respect to the systems
used in the operation of the Arcadian Hotels and the Interstate Hotels, other
than the Interstate Hotels whose owners have undertaken their own compliance
programs. Based on those completed assessments, the Companies, working with
their consultants, have determined which systems are not Year 2000 compliant and
the scope of the non-compliance.
 
    As previously disclosed, the Companies have been informed by the appropriate
owners or managers/ operators of the Third Party Compliance Hotels that they
intend to effect their own compliance programs. The Companies continuing to
monitor the status of the compliance programs being implemented by those
parties. The Companies are also surveying the Year 2000 compliance of the owners
of the hotels that are franchised under the Wyndham brand but not managed by
Wyndham. However, as those systems are not under the Companies' control, the
Companies will be required to rely on the information provided by those owners
or managers/operators and will not be able to test the assessment or remediation
phases of those parties' compliance programs at the Third Party Compliance
Hotels or those franchised hotels.
 
    The Companies are now preparing the necessary work plans to remediate the
systems for which the assessment phase has been completed, including the
Companies' corporate information technology infrastructure and reservations
systems. The Companies have engaged a consulting firm to provide the support and
additional skills to effect the necessary remediation in sufficient time for
testing and any necessary modifications. The Companies are also negotiating with
hardware vendors to obtain the necessary hardware components and other
equipment, and software vendors to obtain the requisite modifications, upgrades
or new software to implement the Companies' remediation plan.
 
    The Companies presently expect to expend approximately $40 million in
connection with Year 2000 issues. To date, the Companies have expended $1.25
million in connection with the inventory and assessment phases of their
compliance program and $500,000 to remediate their systems. However, the
Companies' anticipated expenditures may increase as the Companies complete the
inventory and assessment phases in respect of the Arcadian and Interstate Hotels
and the remediation plans are effected. In addition, these amounts may increase
if the Companies' remediation efforts do not remain on schedule.
 
    As part of the settlement of litigation arising out of the Interstate
Merger, the Companies agreed to contribute to a new company management of many
of the Interstate Hotels, and then dispose of
 
                                       62
<PAGE>
substantially all of that new company's stock by means of a spin-off to the
Companies' stockholders or otherwise. While the disposition is expected to occur
after the Companies complete the inventory and assessment of the Interstate
Hotels, the disposition is expected to occur before any remediation is effected.
As the majority of the Interstate Hotels whose management will be contributed to
the new company are owned by third parties, the Companies expect those owners to
bear all costs related to the inventory, assessment and remediation of those
Interstate Hotels.
 
    The Companies are also surveying their vendors and service providers that
are critical to the Companies' businesses to determine whether they are Year
2000 compliant. The Companies now expect to complete their vendor surveys in the
first quarter of 1999, but cannot guarantee that all vendors or service
providers will comply with the Companies' surveys. More importantly, the
Companies must rely on the information provided by the third parties and will
not be able to test the third parties' compliance. As a result, the Companies
will not be able to ensure the Year 2000 compliance of those vendors or service
providers. During the first quarter of 1999, the Companies intend to determine
the extent to which they will be able to replace vendors and service providers
that are expected to be non-compliant. Due to the lack of an alternative source,
there may be instances in which the Companies will have no alternative but to
remain with non-compliant vendors or service providers. As the Companies
identify the non-compliant vendors and service providers, they will then
determine appropriate contingency plans.
 
    The Companies believe that their current compliance program will allow them
sufficient time to identify which of their systems and other electronic assets
are not Year 2000 compliant and to effect the necessary remediation to avoid
substantial problems arising from Year 2000 induced failures. The Companies
believe that their reprogramming, upgrading and systems replacements will be
implemented by June 30, 1999. The Companies believe that this should provide
adequate time to further correct any problems that did not surface during the
implementation and testing for those systems. Notwithstanding that, the
Companies do recognize that some vendors and the owners and managers/operators
of the Third Party Compliance Hotels may not comply with their present schedules
and could affect the Companies' timing and remediation efforts generally.
 
    In addition to those systems within the Companies' control and the control
of its vendors and suppliers, there are other systems that could have an impact
on the Companies' businesses and which may not be Year 2000 compliant by January
1, 2000. These systems could affect the operations of the air traffic control
system and airlines or other segments of the lodging and travel industries, or
the economy and travel generally. In addition, these systems could affect the
Third Party Compliance Hotels or the Hotels franchised under the Companies'
brands whose owners and managers/operators are implementing their own compliance
programs. These systems are outside of the Companies' control or influence and
their compliance may not be verified by the Companies. However, these systems
could adversely affect the Companies' financial condition or results of
operation.
 
    If the Companies are not successful in implementing their Year 2000
compliance plan, the Companies may suffer a material adverse impact on their
consolidated results of operations and financial condition. Because of the
importance of addressing the Year 2000 problem, the Companies expect to develop
contingency plans if they determine that the remediation phase of their
compliance plan will not be fully implemented by June 30, 1999.
 
FUNDS FROM OPERATIONS
 
    Combined Funds from Operations of the Companies (as defined and computed
below) was $58.1 million for the three months ended September 30, 1998 and $30.1
million for the three months ended September 30, 1997. Combined Funds from
Operations was $221.9 million for the nine months ended September 30, 1998 and
$78.1 million for the nine months ended September 30, 1997.
 
    Management considers Funds from Operations to be a key measure of REIT
performance. Funds from Operations represents net income (loss) (computed in
accordance with generally accepted accounting
 
                                       63
<PAGE>
principles), excluding gains (or losses) from debt restructuring or sales of
property, plus depreciation of real property, amortization of goodwill and
amortization of management contracts and trade names, and after adjustments for
unconsolidated partnerships, joint ventures and corporations. Adjustments for
Patriot's unconsolidated subsidiaries are calculated to reflect Funds from
Operations on the same basis. The Companies have also made certain adjustments
to Funds from Operations for real estate related amortization. Funds from
Operations should not be considered as an alternative to net income or other
measurements under generally accepted accounting principles as an indicator of
operating performance or to cash flows from operating, investing or financing
activities as a measure of liquidity. Funds from Operations does not reflect
working capital changes, cash expenditures for capital improvements or principal
payments on indebtedness.
 
    The following reconciliation of net loss to Funds from Operations
illustrates the difference between the two measures of operating performance for
the three months ended September 30, 1998 and 1997:
 
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                            SEPTEMBER 30,
                                                                        ----------------------
                                                                           1998        1997
                                                                        ----------  ----------
                                                                            (IN THOUSANDS)
<S>                                                                     <C>         <C>
Net loss..............................................................  $  (59,415) $  (27,004)
Add:
  Extraordinary loss from extinguishment of debt......................       1,257       2,534
  Minority interest in the Operating Partnerships.....................      (4,722)     (3,225)
  Depreciation of buildings and improvements and furniture, fixtures
    and equipment.....................................................      48,762      12,592
  Amortization of goodwill and other assets...........................       9,573         716
  Amortization of management contracts and trade names................       7,295         491
  Amortization of capitalized lease costs.............................       2,144          30
  Cost of acquiring leaseholds........................................       3,938      43,820
  Treasury lock settlement............................................      49,225      --
  Other...............................................................       2,382      --
Adjustment for Funds from Operations of unconsolidated subsidiaries:
  Equity in earnings of unconsolidated subsidiaries...................      (1,888)     (1,395)
  Funds from Operations of unconsolidated subsidiaries................       2,875       2,121
Adjustment for minority interest share of Funds from Operations of
  other consolidated subsidiaries:
  Minority interest in earnings of consolidated subsidiaries..........       4,500         934
  Minority interest in Funds from Operations of consolidated
    subsidiaries......................................................      (7,863)       (934)
                                                                        ----------  ----------
Funds from Operations.................................................  $   58,063  $   30,680
                                                                        ----------  ----------
                                                                        ----------  ----------
Weighted average shares and OP Units outstanding:
  Basic...............................................................     160,005      72,091
                                                                        ----------  ----------
                                                                        ----------  ----------
  Diluted.............................................................     172,700      72,082
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>
 
                                       64
<PAGE>
    The following reconciliation of net loss to Funds from Operations
illustrates the difference between the two measures of operating performance for
the nine months ended September 30, 1998 and 1997:
 
<TABLE>
<CAPTION>
                                                                           NINE MONTHS ENDED
                                                                             SEPTEMBER 30,
                                                                         ---------------------
                                                                            1998       1997
                                                                         ----------  ---------
                                                                            (IN THOUSANDS)
<S>                                                                      <C>         <C>
Net loss...............................................................  $  (67,257) $  (3,838)
Add:
  Extraordinary loss from extinguishment of debt.......................      31,817      2,534
  Minority interest in the Operating Partnerships......................      (6,169)     1,309
  Depreciation of buildings and improvements and furniture, fixtures
    and equipment......................................................     115,723     30,539
  Amortization of goodwill and other assets............................      18,754        716
  Amortization of management contracts and trade names.................      15,523        535
  Amortization of capitalized lease costs..............................       3,649        102
  Cost of acquiring leaseholds.........................................      61,000     43,820
  Treasury lock settlement.............................................      49,225     --
  Other................................................................       2,382     --
Adjustment for Funds from Operations of unconsolidated subsidiaries:
  Equity in earnings of unconsolidated subsidiaries....................      (7,375)    (4,488)
  Funds from Operations of unconsolidated subsidiaries.................      10,537      6,883
Adjustment for minority interest share of Funds from Operations of
  other consolidated subsidiaries:
  Minority interest in earnings of consolidated subsidiaries...........       7,514      1,381
  Minority interest in Funds from Operations of consolidated
    subsidiaries.......................................................     (13,396)    (1,381)
                                                                         ----------  ---------
Funds from Operations..................................................  $  221,927  $  78,112
                                                                         ----------  ---------
                                                                         ----------  ---------
Weighted average shares and OP Units outstanding:
  Basic................................................................     136,199     57,980
                                                                         ----------  ---------
                                                                         ----------  ---------
  Diluted..............................................................     145,766     59,616
                                                                         ----------  ---------
                                                                         ----------  ---------
</TABLE>
 
                                       65
<PAGE>
                          PART II:  OTHER INFORMATION
 
ITEM 2.  CHANGES IN SECURITIES
 
Recent Sales of Unregistered Securities
 
    Since June 30, 1998, the Companies have issued equity securities in private
placements in reliance on an exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended, in the amounts and for the consideration
set forth below.
 
    In July 1998, in connection with the acquisition of an approximate 50%
limited partnership interest in a partnership with affiliates of Don Shula's
Steakhouses, Inc., the Companies issued 156,272 preferred units of limited
partnership interest in the Wyndham Partnership.
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
    (a) Exhibits:
 
<TABLE>
<CAPTION>
  ITEM NO.   DESCRIPTION
-----------  ----------------------------------------------------------------------------------------------
<S>          <C>
      10.1   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.
 
      10.2   Letter Agreement, dated July 30, 1998, by and among Patriot American Hospitality, Inc.,
             Wyndham International, Inc. and PaineWebber Financial Products, Inc.
 
      10.3   Letter Agreement, dated September 11, 1998, by and among Patriot American Hospitality, Inc.,
             Wyndham International, Inc. and UBS AG, London Branch.
 
      10.4   Letter, dated September 15, 1998, from PaineWebber Financial Products, Inc. to Patriot
             American Hospitality, Inc. and Wyndham International, Inc.
 
      10.5   Letter Agreement, dated September 30, 1998, by and among Patriot American Hospitality, Inc.,
             Wyndham International, Inc. and PaineWebber Financial Products, Inc.
 
      10.6   Letter Agreement, dated October 22, 1998, by and among Patriot American Hospitality, Inc.,
             Wyndham International, Inc. and PaineWebber Financial Products, Inc.
 
      99.1   Debt Maturity Schedule of the Companies as of November 5, 1998.
 
  ITEM NO.   DESCRIPTION
-----------  ----------------------------------------------------------------------------------------------
      27.1   Financial Data Schedule--Patriot (filed herewith).
 
      27.2   Financial Data Schedule--Wyndham (filed herewith).
</TABLE>
 
    (b) Reports on Form 8-K:
 
        (i) Joint Current Report on Form 8-K of Patriot American Hospitality,
            Inc. and Wyndham International, Inc. dated June 2, 1998 (Nos.
            001-09319 and 001-09320 filed June 17, 1998), as amended August 6,
            1998, reporting under Item 2 the Interstate Merger and the
            Summerfield Acquisition.
 
       (ii) Joint Current Report on Form 8-K of Patriot American Hospitality,
            Inc. and Wyndham International, Inc. dated November 9, 1998 (Nos.
            001-09319 and 001-09320 filed November 9, 1998), as amended November
            10, 1998, reporting under Item 5 current developments regarding
            combined liquidity and capital resources, the forward contracts, the
            treasury rate lock agreements, Hurricane Georges and third quarter
            1998 earnings.
 
                                       66
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.
 
DATED: November 20, 1998
 
<TABLE>
<S>                             <C>
                                PATRIOT AMERICAN HOSPITALITY, INC.
 
                                             /s/ LAWRENCE S. JONES
                                -----------------------------------------------
                                               Lawrence S. Jones
                                    EXECUTIVE VICE PRESIDENT AND TREASURER
                                 (AUTHORIZED OFFICER AND PRINCIPAL ACCOUNTING
                                            AND FINANCIAL OFFICER)
 
                                WYNDHAM INTERNATIONAL, INC.
 
                                             /s/ LAWRENCE S. JONES
                                -----------------------------------------------
                                               Lawrence S. Jones
                                    EXECUTIVE VICE PRESIDENT AND TREASURER
                                 (AUTHORIZED OFFICER AND PRINCIPAL ACCOUNTING
                                            AND FINANCIAL OFFICER)
</TABLE>
 
                                       67