<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
SCHEDULE 13D/A
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 1)
CNL Hospitality Properties, Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
N/A
(CUSIP Number)
Mr. Matthew W. Kaplan
Rothschild Realty Inc.
1251 Avenue of the Americas
New York, New York 10020
(212) 403-3500
(Name, address and telephone number of person
authorized to receive notices and communications)
June 17, 1999
(Date of event which requires filing of this statement)
______________________
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition that is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(e), 13d-1(f) or 13D-1(g), check the following box [ ].
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Page 2 of 9 pages
13D
CUSIP No. N/A
----------
- ------------------------------------------------------------------------
(1) NAME OF REPORTING PERSON Five Arrows Realty Securities II
L.L.C.
I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON (ENTITIES ONLY)
- ------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [/X/]
(b) [/ /]
- ------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- ------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER -0-
SHARES ---------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER 1,499,960.18 (fn1)
OWNED BY ---------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING ---------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 1,499,960.18 (fn1)
- ------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 1,499,960.18 (fn1)
- ------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
- ------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 12.2% (fn1)
- ------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
OO
- ------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
(fn1) Not included is the number of shares of Common Stock of the
Company issuable upon the optional exchange at any time or from time to
time of 48,337 shares of Class A Cumulative Preferred Stock and common
stock of CNL Hotel Investors, Inc. as described in Item 5, subject to
adjustment, held by the reporting person.
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Page 3 of 9 pages
13D
CUSIP No. N/A
-------
(1) NAME OF REPORTING PERSON Rothschild Realty Investors IIA L.L.C
I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON (ENTITIES ONLY)
- ------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) /x/
(b) / /
- ------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- ------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER -0-
SHARES ---------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER 1,499,960.18 (fn1)
OWNED BY ---------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING ---------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 1,499,960.18 (fn1)
- ------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 1,499,960.18 (fn1)
- ------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES** [ ]
- ------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 12.2% (fn1)
- ------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
OO
- ------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
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Page 4 of 9 pages
Item 1. Security and Issuer
This Amendment No. 1 amends in its entirety the statement on
Schedule 13D ("Schedule 13D") filed on March 5, 1999 with respect to the
shares of beneficial interest, par value $.01 per share (the "CHP Common
Stock"), of CNL Hospitality Properties, Inc., a Maryland corporation
(the "Company"), whose principal executive offices are located at 400
East South Street, Orlando, Florida 32801.
Item 2. Identity and Background
(a) This Schedule 13D, as amended, is being filed on behalf
of (i) Five Arrows Realty Securities II L.L.C., a Delaware limited
liability company ("Five Arrows") and (ii) Rothschild Realty Investors
IIA L.L.C., a Delaware limited liability company and sole Managing
Member of Five Arrows ("Rothschild").
The reporting entities are making a joint filing pursuant to
Rule 13d-1(k) because, by reason of the relationship as described
herein, they may be deemed to be a "group" within the meaning of Section
13(d)(3) with respect to acquiring, holding and disposing of shares of
Common Stock.
(b) The business address of each of the Five Arrows and
Rothschild is 1251 Avenue of the Americas, New York, New York 10020.
(c) Five Arrows is a private investment limited liability
company. The principal occupation of Rothschild is acting as managing
member of Five Arrows. The current Managers of Rothschild are John D.
McGurk, Matthew W. Kaplan, James E. Quigley, 3rd, and D. Pike Aloian.
(d) Neither of Five Arrows or Rothschild has, during the last
five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) Neither Five Arrows or Rothschild has, during the last
five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as result of such
proceeding was or is subject to a judgment decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or a finding of any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
The source of funds for the purchases reported by Five Arrows
herein was Five Arrow's capital. The total amount of funds used by Five
Arrows to purchase the shares reported herein was $62,586,194.80
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Page 5 of 9 pages
allocated as follows: (i) $10,564,876.50 to purchase 1,112,092.26 shares
of CHP Common Stock, at a price per share of $9.50, (ii) $3,684,745.24
as a loan (the "Loan") to the Company in exchange for a promissory note
(the "Promissory Note") issued by the Company and CNL Hotel Investors,
Inc. ("CHI"), a subsidiary of the Company, that was converted into
387,867.92 shares of CHP Common Stock, at a conversion price per share
of $9.50, on April 30, 1999 after certain conditions set forth in the
CHP Purchase Agreement attached Exhibit 99.2 and incorporated by
reference into this Item 3 in its entirety were satisfied, (iii)
$48,336,089.69 to purchase 48,337 shares of Class A Cumulative Preferred
Stock of CNL Hotel (the "CHI Preferred Stock"), at a price per share of
$1,000, and (iv) $483.37 to purchase 483.37 shares of common stock (the
"CHI Common Stock" and together with the CHI Preferred Stock, the "CHI
Stock") CHI, at a price per share of $.01.
Item 4. Purpose of Transaction
The purpose of the acquisition of the shares of CHP Common
Stock, the CHI Stock and the advancement and subsequent conversion of
the Loan by Five Arrows reported herein is for investment.
Five Arrows intends to review its holdings with respect to the
Company on a continuing basis. Depending on Five Arrows' evaluation of
the Company's business and prospects, and upon future developments
(including, but not limited to, market prices of the shares of CHP
Common Stock and availability and alternative uses of funds; as well as
conditions in the securities markets and general economic and industry
conditions), Five Arrows may acquire other securities of the Company;
sell all or a portion of its shares of CHP Common Stock or other
securities of the Company, including the Loan, and the CHI Stock which
is exchangeable into shares of CHP Common Stock, now owned or hereafter
acquired; provided, however, that pursuant to the CHI Subscription
Agreement attached hereto as Exhibit 99.4 and incorporated by reference
in its entirety in this Item 4, Five Arrows has agreed that prior to any
sale, transfer, assignment or other disposition of any shares of the CHI
Stock, it will first offer such shares of CHI Stock to CNL Hospitality
Partners, LP ("CNL Hospitality Partners"), a subsidiary of the Company.
Pursuant to the CHP Purchase Agreement attached as Exhibit
99.2 and incorporated by reference in its entirety in this Item 4, Five
Arrows has the right to designate one member of the Board of Directors
of the Company. Matthew W. Kaplan has been designated as a member of
the Board of Directors of the Company and has been appointed to the
Board of Directors of the Company by the existing Board of Directors of
the Company.
Other than as set forth above, Five Arrows has no present
plans or proposals which relate to, or would result in, any of the
matters enumerated in paragraphs (b) through (j), inclusive, of Item 4
of Schedule 13D. Five Arrows may, at any time and from time to time,
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Page 6 of 9 pages
review or reconsider its position with respect to the Company, and
formulate plans or proposals with respect to any such matters.
Item 5. Interest in Securities of the Issuer
(a) As of the close of business on June 17, 1999, Five Arrows
owned, within the meaning of Rule 13d-3 under the Exchange Act,
1,499,960.18 shares of CHP Common Stock, or 12.2% of the issued and
outstanding shares of CHP Common Stock, (based on the Company reporting
11,800,952 shares of CHP Common Stock outstanding as of May 7, 1999 plus
the 521,322.73 reported herein).
In addition, Five Arrows owned, within the meaning of Rule
13d-3 under the Exchange Act 48,337 shares of CHI Preferred Stock and
48,337 shares of CHI Common Stock, of which one share of CHI Preferred
Stock together with one share of CHI Common Stock are exchangeable at
any time into shares of CHP Common Stock, subject to adjustment.
Because the exchange ratio of the CHI Stock, fluctuates from time to
time, the percentage ownership reported herein does not include any
shares of CHP Common Stock issuable to Five Arrows upon the exchange of
shares of CHI Preferred Stock and CHI Common Stock. But for the quarter
ended March 31, 1999, the exchange ratio was 144.637 shares of CHP
Common Stock for each share of CHI Preferred Stock and CHI Common Stock
exchanged. Rothschild, as sole managing member of Five Arrows, may be
deemed the beneficial owner of the 1,499,960.18 shares of CHP Common
Stock and the 48,337 shares of CHI Preferred Stock and the 48,337 shares
of CHI Common Stock which are exchangeable into shares of CHP Common
Stock, held by Five Arrows.
The acquisition of shares of CHP Common Stock and the
Promissory Note was made pursuant to the Securities Purchase Agreement,
dated as of February 24, 1999, between the Company and Five Arrows (the
"CHP Purchase Agreement") attached hereto as Exhibit 99.2 and 99.3,
respectively, and incorporated by reference in their entirety herein.
The CHP Purchase Agreement provides for the sale by CHP and the
purchase, by Five Arrows of up to an additional 78,986.82 shares of CHP
Common Stock for an aggregate purchase of 1,578,947 shares of CHP Common
Stock.
In accordance with the CHP Purchase Agreement attached as
Exhibit 99.2 and incorporated by reference in its entirety in this Item
5, the outstanding principal amount of the Promissory Note was converted
by the Company on April 30, 1999 into shares of CHP Common Stock upon
the satisfaction of certain conditions including (i) (a) the approval of
the stockholders of the Company to amend the Company's Amended and
Restated Articles of Incorporation to expand the class of investors for
whom the Board of Directors of the Company may waive the ownership
limitations on common and preferred stock as set forth in the Amended
and Restated Articles of Incorporation and (b) the Board of Directors of
the Company waiving such ownership limitations or (ii) as a result of
such conversion Five Arrows would not violate the ownership limitations
as set forth in the Articles of Incorporation of the Company.
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Page 7 of 9 pages
The stockholders of the Company approved the proposed amendment to the
Amended and Restated Articles of Incorporation at the Company's annual
meeting on May 12, 1999, and the Board of Directors waived such
ownership limitation as it applies to the reporting person.
The acquisition of the CHI Stock was made pursuant to a
Subscription and Stockholders' Agreement, dated as of February 24, 1999,
between CHI, the Company and Five Arrows (the "CHI Subscription
Agreement")attached hereto as Exhibit 99.4 and incorporated by reference
in its entirety herein. The CHI Subscription Agreement provides for the
sale by CHI and the purchase by Five Arrows of up to an additional 2,549
shares of CHI Preferred Stock and 2,549 shares of CHI Common Stock, for
an aggregate purchase of 50,886 shares of CHI Preferred Stock and 50,886
shares of CHI Common Stock. One share of CHI Preferred Stock together
with one share of CHI Common Stock are exchangeable at any time into
shares of CHP Common Stock. The exchange ratio per share of CHI
Preferred Stock and CHI Common Stock is determined by calculating the
funds from operations per share of CHI Stock with the respect to the
Five Arrows investment and dividing it by the funds from operations per
share of CHP Common Stock. For the quarter ended March 31, 1999, the
exchange ratio was 144.637 shares of CHP Common Stock for each share of
CHI Preferred Stock and CHI Common Stock exchanged, but the exchange
raio will fluctuate from time to time.
(b) Five Arrows has the sole power to vote and dispose of the
shares of CHP Common Stock and CHI Stock owned by it reported herein,
which power may be exercised by Rothschild.
(c) Five Arrows purchased 590,769.53 shares of CHP Common
Stock from the Company on February 24, 1999 pursuant to the CHP Purchase
Agreement. In consideration therefor, Five Arrows paid $9.50 per share
for a total of $5,612,310.53, in cash, and loaned to the Company
$3,684,745.24 in exchange for the Promissory Note, which was converted
on April 30, 1999 into 387,867.92 shares of CHP Common Stock at a
conversion price of $9.50. On June 17, 1999, Five Arrows purchased
521,322.73 shares of CHP Common Stock from the Company pursuant to the
CHP Purchase Agreement. In consideration therefor, Five Arrows paid
$9.50 per share for a total of $4,952,565.97, in cash.
Five Arrows purchased 31,537 shares of CHI Preferred Stock and
the 31,537 shares of CHI Common Stock from CHI on February 24, 1999
pursuant to the CHI Subscription Agreement. In consideration therefor,
Five Arrows paid $1,000 and $.01 per share of CHI Preferred Stock and
CHI Common Stock, respectively, for a total of $31,536,824.20. On June
16, 1999, Five Arrows purchased 16,800 shares of CHI Preferred Stock and
16,800 shares of CHI Common Stock from CHI pursuant to the CHI
Subscription Agreement. In consideration therefor, Five Arrows paid
$1,000 and $.01 per share of CHI Preferred Stock and CHI Common Stock,
respectively, for a total of $16,799,748.86.
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Page 8 of 9 pages
(d) Not applicable.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer
Other than as described in the agreements in the Exhibits
attached hereto and incorporated by reference this Item 6 in their
entirety, there are no contracts, understandings or relationships (legal
or otherwise) among the persons named in Item 2 hereof and between such
persons or any person with respect to any securities of the Company,
including but not limited to transfer or voting of any of the Common
Stock, finder's fees, joint ventures, loan or option arrangements, puts
or calls, guarantees of profits, division of profits or loss, or the
giving or withholding of proxies.
ITEM 7. Material To Be Filed As Exhibits
Exhibit Number Description
99.1 Joint Acquisition Statement, as
required by Rule 13d-1(k) of the
Securities Exchange Act of 1934.
99.2 Securities Purchase Agreement, dated
as of February 24, 1999, between the
Company and Five Arrows.
99.3 Promissory Note of the Company and CHI
in the aggregate principal amount of
$14,999,996.50, dated as of February
24, 1999, payable to the order of Five
Arrows.
99.4 Subscription and Stockholders'
Agreement, dated as of February 24,
1999, between the Company and Five
Arrows.
99.5 Investment Option Agreement, dated as
of February 24, 1999, by among CNL
Hospitality, LP, CNL Group, Inc. and
Five Arrows.
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Page 9 of 9 pages
SIGNATURE
After reasonable inquiry and to the best of their knowledge
and belief, the undersigned certify that the information set forth in
this statement is true, complete and correct.
Dated: June 18, 1999
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Matthew W. Kaplan
________________________
Matthew W. Kaplan
Manager
ROTHSCHILD REALTY INVESTORS IIA L.L.C.
By: /s/ Matthew W. Kaplan
________________________
Matthew W. Kaplan
Member
<PAGE>
EXHIBIT 99.1
EXHIBIT 99.1
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(k)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D, as amended, is filed on behalf of each of the
undersigned and that all subsequent amendments to this statement on
Schedule 13D, as amended, shall be filed on behalf of each of the
undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall
be responsible for the timely filing of such amendments, and for the
completeness and accuracy of the information concerning him or it
contained therein, but shall not be responsible for the completeness
and accuracy of the information concerning the other, except to the
extent that he or it knows or has reason to believe that such
information is inaccurate.
Dated: June 18, 1999
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Matthew W. Kaplan
______________________
Matthew W. Kaplan
Manager
ROTHSCHILD REALTY INVESTORS IIA L.L.C.
By: /s/ Matthew W. Kaplan
________________________
Matthew W. Kaplan
Member
<PAGE>
EXHIBIT 99.2
=======================================
SECURITIES PURCHASE AGREEMENT
Dated as of February 24, 1999
among
CNL HOSPITALITY PROPERTIES, INC.,
CNL HOTEL INVESTORS, INC.
and
FIVE ARROWS REALTY SECURITIES II L.L.C.
=======================================
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TABLE OF CONTENTS
Page
----
ARTICLE I............................................................2
1. PURCHASE OF CHP COMMON STOCK.............................2
1.1. Purchase of CHP Common Stock.......................2
1.2. Timing of Purchases................................2
1.3. Use of Proceeds....................................2
1.4. Purchase Price.....................................2
1.5. Issuance of Note in lieu of CHP Common Stock.......3
1.6. Conversion of Note........... .....................3
ARTICLE II...........................................................3
2. REPRESENTATIONS AND WARRANTIES OF CHP 3
2.1. Corporate Power and Authority 3
2.2. Consents and Approvals; Authorization and
Noncontravention 3
2.3. Existence and Good Standing 4
2.4. Capital Stock 5
2.5. Valid Issuance of Shares; No Personal Liability 5
2.6. Subsidiaries and Investments 5
2.7. Financial Statements and No Material Changes 6
2.8. Title to Properties; Encumbrances 7
2.9. Leases 7
2.10. Contracts 7
2.11. Restrictive Documents 8
2.12. Litigation 8
2.13. ERISA 9
2.14. Environmental Matters 10
2.15. Taxes 12
2.16. Compliance with Laws 13
2.17. No Changes Since Balance Sheet Date 13
2.18. Disclosure 13
2.19. Broker's or Finder's Fees 14
2.20. Insurance 15
ARTICLE III 15
3. REPRESENTATIONS AND WARRANTIES OF FIVE ARROWS 15
3.1. Power and Authority 15
3.2. Existence and Good Standing 15
3.3. Consents; Authorization 15
3.4. Accredited Investor 15
3.5. Investment 15
3.6. Rule 144 15
3.7. Brokers or Finders 16
3.8. Ownership Limits 16
-i-
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ARTICLE IV 16
4. COVENANTS 16
4.1. Use of Proceeds 16
4.2. Notice of Default 16
4.3. Stockholder Approval 16
4.4. Appointment of Five Arrows Director 17
4.5. Further Assurances 18
4.6 Supplemental Disclosure 18
4.7 Prohibition on Issuance of Securities 18
ARTICLE V 18
5. CONDITIONS TO CHP'S OBLIGATIONS 18
5.1. Representations and Warranties 18
5.2. Approvals 18
5.3. Proceedings 18
ARTICLE VI 19
6. CONDITIONS TO THE INITIAL PURCHASE 19
6.1. Representations and Warranties 19
6.2. Performance of Agreements 19
6.3. Approvals 19
6.4. Opinion of CHP's Counsel 19
6.5. Good Standing and Other Certificates 19
6.6. No Material Adverse Change 19
6.7. Registration Rights Agreement 20
6.8. Hotel Investors Subscription Agreement 20
6.9. Valid Issuance 20
6.10. Appointment of Five Arrows Director 20
6.11. D&O Insurance 20
6.12. Investment in Advisor 20
6.13. Proceedings 20
6.14 Opinion of CHP's Tax Counsel 20
6.15 Approval of Financing and Other Material
Documents 20
ARTICLE VII 21
7. CONDITIONS TO SUBSEQUENT PURCHASES 21
7.1. Representations and Warranties 21
7.2. Performance of Agreements 21
7.3. Assurance of Performance 21
7.4. Performance of Hotel Investors Subscription
Agreement 21
7.5. No Material Adverse Change 21
7.6. Valid Issuance 21
7.7. Five Arrows Director 21
7.8. D&O Insurance 21
-ii-
<PAGE>
ARTICLE VIII 22
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY 22
8.1. Survival 22
8.2. Indemnification 22
ARTICLE IX 24
9. MISCELLANEOUS 24
9.1. Preservation of Confidential Information 24
9.2. Governing Law 24
9.3. Prevailing Party 24
9.4. Captions 24
9.5. Publicity 24
9.6. Notices 24
9.7. Successors and Assigns 25
9.8. Counterparts 25
9.9. Entire Agreement 25
9.10. Amendments 25
9.11. Severability 25
9.12. Termination of Agreement 26
Exhibits and Schedules
Schedule 2.1 - Liens, Encumbrances, Restrictions and Claims
Schedule 2.2 - Contravention
Schedule 2.3 - Jurisdictions Where CHP is Qualified to Do Business
Schedule 2.4 - Capitalization
Schedule 2.6 - Subsidiaries and Investments
Schedule 2.7(b) - Material Adverse Changes
Schedule 2.8 - Title to Properties Encumbrances
Schedule 2.9 - Leases
Schedule 2.10 - Material Contracts
Schedule 2.11 - Restrictive Documents
Schedule 2.12 - Litigation
Schedule 2.13 - ERISA Plans
Schedule 2.14 - Environmental Matters
Schedule 2.15 - Taxes
Schedule 2.16 - Non-Compliance
Exhibit 1 - Hotels
Exhibit 1.2 - Promissory Note
Exhibit 6.4 - Opinion of CHP's Counsel
Exhibit 6.7 - Registration Rights Agreement
-iii-
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as
of February 24, 1999, among CNL Hospitality Properties, Inc., a Maryland
corporation ("CHP"), CNL Hotel Investors, Inc., a Maryland corporation
("Hotel Investors"), and Five Arrows Realty Securities II L.L.C., a
Delaware limited liability company ("Five Arrows").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Five Arrows, CHP and CNL Hospitality Partners, LP,
a Delaware limited partnership ("Hospitality Partners") 100% of the
partnership interests of which are owned by CHP through its wholly owned
subsidiaries have formed Hotel Investors to be operated as a real estate
investment trust ("REIT") within the meaning of Section 856 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, a purpose of Hotel Investors is to acquire from
various sellers affiliated with Western International ("WI") 100% of the
partnership interests in partnerships that own certain hotels identified
on Exhibit 1 hereto or, with the consent of Five Arrows, such other
hotels as may be substituted in lieu thereof of similar quality,
characteristics and subject to the same cross-default obligations as the
hotels on Exhibit 1 (the "Hotels") and to manage the Hotels
(collectively, the "Business"); and
WHEREAS, the Hotels are expected to be subject to leases
with a new entity affiliated with WI; and
WHEREAS, in accordance with the Subscription and
Stockholders' Agreement, (the "Hotel Investors Subscription Agreement")
dated as of February 24, 1999, among Five Arrows, CHP and Hospitality
Partners, Five Arrows has agreed to contribute to Hotel Investors up to
a maximum amount of $50,886,508.86 (the "Five Arrows Commitment"), and
Hospitality Partners has agreed to contribute to Hotel Investors up to a
maximum of $39,982,488.90 (the "Hospitality Commitment"), for the
acquisition of the Hotels; and
WHEREAS, pursuant to the Hotel Investors Subscription
Agreement upon making advances on the Five Arrows Commitment and in
consideration therefor, Five Arrows will purchase from Hotel Investors
shares of 8% Class A Cumulative Preferred Stock of Hotel Investors (the
"Class A Preferred Stock") having an aggregate liquidation preference
equal to the aggregate amount of such advances; and
WHEREAS, the Class A Preferred Stock shall be exchangeable
for newly issued shares of CHP common stock, par value $.01 per share
("CHP Common Stock"), upon the terms set forth in the Hotel Investors
Subscription Agreement; and
<PAGE>
WHEREAS, to provide a portion of the funds necessary in
order for Hospitality Partners to satisfy the Hospitality Commitment
therefor, CHP desires to issue the CHP Common Stock required to be
delivered to the holders of the Class A Preferred Stock upon any such
exchange; and
WHEREAS, Five Arrows desires to purchase and CHP desires to
sell up to an additional 1,578,947 shares of CHP Common Stock, at
purchase price of $9.50 per share, for a maximum aggregate investment of
$14,999,996.50, each upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and of the
respective representations and warranties hereinafter set forth and the
respective covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
1. PURCHASE OF CHP COMMON STOCK
----------------------------
1.1. Purchase of CHP Common Stock. Upon the terms and
subject to the conditions herein stated, CHP agrees to issue and sell to
Five Arrows, and Five Arrows agrees to purchase from CHP, up to
1,578,947 shares of CHP Common Stock (the "Shares") at a purchase price
(the "Purchase Price") of $9.50 per share, for a maximum aggregate
investment of $14,999,996.50 (the "Five Arrows Investment"). On any
Closing Date (as defined in Section 1.2 hereof) on which Five Arrows
purchases Shares, CHP shall deliver to Five Arrows a certificate
registered in Five Arrows' name (or satisfactory evidence of such
issuance), representing the Shares to be issued to Five Arrows at the
closing on the applicable Closing Date (each a "Closing"). Five Arrows
may elect to pay that portion of the Purchase Price required to be paid
by Five Arrows at each Closing by wire transfer to either (i) an account
designated by CHP within two days before the applicable Closing Date or
(ii) an account designated by Hospitality Partners, for the benefit of
Hotel Investors and on behalf of CHP, within two days before the
applicable Closing Date.
1.2. Timing of Purchases. At any time or from time to
time between the date hereof and December 31, 1999, Five Arrows shall be
required, subject to the conditions set forth below, to purchase Shares
within 10 days of receipt of a notice from CHP (a "Notice of Purchase")
which notice shall (a) state that CHP has received notice from
Hospitality Partners requesting that Hospitality Partners fund all or
any portion of the Hospitality Commitment (each such amount to be funded
to be referred to as an "Incremental Funding") and (b) specify the
portion of the Five Arrows Investment to be made which shall not exceed
the lesser of the balance of the Five Arrows Commitment or 37.52% of the
<PAGE>
applicable Incremental Funding; provided, however, that such portion
shall be rounded down to the nearest whole share so as to avoid the
issuance of fractional shares of CHP Common Stock, and the date (each a
"Closing Date") such Shares are to be purchased (a "Purchase," and the
first Purchase, the "Initial Purchase").
1.3. Use of Proceeds In no event shall Five Arrows be
required to purchase any Shares other than by reason of the funding of
any Hospitality Commitment.
1.4. Purchase Price. Five Arrows shall, on each
Closing Date, pay to CHP (or, in accordance with Section 1.1 hereof, to
Hospitality Partners) the Purchase Price for the number of Shares
specified in the applicable Notice of Purchase. Upon receipt of such
Purchase Price, CHP shall deliver to Five Arrows that number of Shares
equal to the Purchase Price divided by 9.5. For example, if the portion
of the Hospitality Commitment required by Hotel Investors on a
particular Closing Date (i.e., the Incremental Funding) is $22,000,000,
then the Purchase Price shall be $8,254,400 for 868,884 Shares and the
remaining Five Arrows Commitment shall be $6,745,596.
1.5. Issuance of Note in lieu of CHP Common Stock.
Notwithstanding the foregoing, in the event that Five Arrows would own
more than 9.8% of the outstanding CHP Common Stock as a result any
purchase of Shares hereunder and the ownership limitations set forth in
the Articles of Incorporation of CHP (the "Ownership Limits") have not
theretofore been amended or waived to permit Five Arrows to hold in
excess of such limitations, Five Arrows shall (i) purchase in the
aggregate that number of whole Shares that would cause Five Arrows to
own up to but not in excess of 9.8% of the outstanding CHP Common Stock
and (ii) loan to CHP the balance of any Incremental Funding in exchange
for the promissory note of CHP and Hotel Investors substantially in the
form of Exhibit 1.5 attached hereto (the "Note").
1.6. Conversion of Note. The principal amount of the
Note shall be converted automatically into shares of CHP Common Stock,
at one time or from time to time as the holder of the Note is permitted
under the amended or waived Ownership Limits to own additional shares of
CHP Common Stock. The per share conversion price shall be equal to the
principal amount converted divided by 9.5 and upon any such conversion,
the accrued and unpaid interest on the converted portion of the Note
shall be paid immediately by CHP. All shares of CHP Common Stock issued
upon such conversion shall be fully paid and nonassessable, and the
Holder (as defined below) thereof shall be entitled to the same rights
with respect to such shares (including, without limitation, registration
rights) as if such shares were purchased pursuant to Section 1.4 hereof.
<PAGE>
ARTICLE II
2. REPRESENTATIONS AND WARRANTIES OF CHP. CHP, with
respect to itself and each of its Subsidiaries (as such term is defined
in Section 2.6 hereof), represents and warrants, as of the date
hereof(except as otherwise specified herein), and as may be updated
pursuant to Section 4.6 hereof as of each Closing Date as if made on
such Closing Date, as follows:
2.1. Corporate Power and Authority CHP has the full
legal right, power and authority to enter into this Agreement, the Note,
the Registration Rights Agreement, dated February 24, 1999 by and
between CHP and Five Arrows (the "CHP Registration Rights Agreement"),
the Hotel Investors Subscription Agreement and any other agreements
executed in connection herewith or therewith (collectively with this
Agreement, the "Transaction Documents"), and to issue and sell the
Shares to be issued pursuant to this Agreement and to consummate the
other transactions contemplated hereby and thereby.
2.2. Consents and Approvals; Authorization and
Noncontravention. Except as set forth in Schedule 2.2 attached hereto,
there is no requirement applicable to CHP or any of its Subsidiaries to
make any filing with, or obtain any permit, authorization, consent or
approval of, any governmental authority or any other person as a
condition to the lawful consummation by CHP and any of its Subsidiaries
of the transactions contemplated by this Agreement and the Transaction
Documents. This Agreement and each other Transaction Document has been
duly and validly authorized, executed and delivered by CHP and any of
its Subsidiaries party thereto and constitute the valid and legally
binding agreements of CHP and each Subsidiary who is a party thereto,
enforceable against them in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles. The execution and delivery by CHP and such
subsidiaries of this Agreement, and the other agreements and instruments
to be executed and delivered by CHP in connection herewith and
therewith, do not and the consummation of the transactions contemplated
hereby and thereby will not, in any manner which would have a material
adverse effect on CHP: (i) violate any provision of the Articles of
Incorporation or By-Laws of CHP or of any of CHP's Subsidiaries; (ii)
except as set forth on Schedule 2.2, violate any provision of, or result
in the termination or acceleration of, or default under, or entitle any
party to accelerate (whether after the filing of notice or lapse of time
or both) any obligation under, or result in the creation or imposition
of any lien, charge, pledge, security interest or other encumbrance upon
any of the assets of CHP or of any of CHP's Subsidiaries pursuant to any
provision of any mortgage, lien, lease, agreement, license, or
instrument, or violate any law, regulation, order, arbitration award,
judgment or decree to which CHP or any of CHP's Subsidiaries is a party
or by which CHP or any of CHP's Subsidiaries or any of their respective
<PAGE>
properties is bound, or (iii) violate or conflict with, or create a
default under, any other material contract, including, without
limitation, those contracts listed on Schedule 2.10 attached hereto, or
restriction of any kind or character to which CHP or any of its
Subsidiaries is bound or subject.
2.3. Existence and Good Standing
(a) CHP and each of CHP's Subsidiaries is a
corporation or partnership, duly formed or organized, validly existing
and in good standing under the laws of its organization, as the case may
be. CHP and each of CHP's Subsidiaries has the requisite power,
corporate or otherwise, to own its property and to carry on its business
as it is now being conducted. CHP is duly qualified to do business and
is in good standing in the jurisdictions listed on Schedule 2.3 attached
hereto, which are the only jurisdictions in which the character or
location of the properties owned or leased by CHP or the nature of the
business conducted by CHP makes such qualification necessary, except
where the failure to so qualify would not have a material adverse effect
on CHP.
(b) CHP has qualified as a REIT under the Code
and has taken no action or omitted to take any action, the effect of
which reasonably could be expected to disqualify CHP as a REIT under the
Code.
2.4. Capital Stock
(a) The authorized capital stock of CHP consists
of: (i) 60,000,000 shares of Common Stock; (ii) 3,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"); and
(iii) 63,000,000 shares of excess stock, par value $.01 per share (the
"Excess Stock"). As of November 20, 1998, (i) 3,290,417.022 shares of
Common Stock were validly issued and outstanding, fully paid and
nonassessable, and no shares of Preferred Stock or Excess Stock have
been issued or are outstanding; and (ii) no shares of Common Stock and
no shares of Preferred Stock were reserved for issuance. All of such
shares of capital stock of CHP have been duly authorized, validly
issued, are fully paid and nonassessable and were issued in compliance
with all applicable federal and state securities laws. Except as set
forth on Schedule 2.4, (i) no shares of capital stock of CHP or any of
CHP's Subsidiaries are subject to preemptive rights or any other similar
rights; (ii) no securities, directly or indirectly, are convertible into
or exchangeable for any of the capital stock of CHP or any of CHP's
Subsidiaries; and (iii) no options, warrants, rights, calls or
commitments relating to such shares or other such securities, are
outstanding.
<PAGE>
(b) Except as set forth on Schedule 2.4, neither
CHP nor any of its Subsidiaries are subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of its capital stock nor are there any outstanding rights to
repurchase capital stock of CHP or any of its Subsidiaries, except as
set forth in or contemplated by this Agreement. Except as set forth on
Schedule 2.4, there are no agreements between CHP's shareholders with
respect to the voting, transfer or registration of CHP's capital stock.
2.5. Valid Issuance of Shares; No Personal Liability.
(a) When issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein, the Shares
will be duly and validly issued, fully paid and non-assessable. The
Shares are not subject to preemptive rights or any other similar rights
and will be issued in compliance with all applicable federal and state
securities laws. Five Arrows, upon purchase of the Shares, will not be
subject to personal liability by reason of being a holder of Shares.
(b) The shares of CHP Common Stock when issued
and delivered upon exchange for shares of Class A Preferred Stock in
accordance with the terms hereof will be duly and validly issued, fully
paid and non-assessable and will not be subject to preemptive rights or
any other similar rights. Such shares of CHP Common Stock will be
issued in compliance with all applicable federal and state securities
laws. Five Arrows, upon issuance of such shares of CHP Common Stock,
will not be subject to personal liability by reason of being a holder of
such shares.
2.6. Subsidiaries and Investments. CHP's only direct
or indirect Subsidiaries are listed in Schedule 2.6 attached hereto.
The outstanding shares of capital stock, partnership or other equity
interests of each Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable, as applicable, and are
owned by CHP, directly or through one or more Subsidiaries, free and
clear of any lien, charge, encumbrance or other security interests
except as set forth in Schedule 2.6. For purposes of this Agreement,
"Subsidiary" shall mean a Person (as defined in Section 2.10) in which
CHP has the ability, whether by the direct or indirect ownership of
shares or other equity interests, by contract or otherwise, to elect a
majority of the directors of a corporation or the trustees of a real
estate investment trust, to select the managing partner of a
partnership, or otherwise to select, or have the power to remove and
then select, a majority of those persons exercising governing authority
over such Person. In the case of a limited partnership, the sole
general partner, all of the general partners to the extent each has
equal management control and authority, or the managing general partner
or managing general partners thereof shall be deemed to have control of
<PAGE>
such partnership and, in the case of a trust other than a real estate
investment trust, any trustee thereof or any Person having the right to
select any such trustee shall be deemed to have control of such trust.
2.7. Financial Statements and No Material Changes
(a) CHP has heretofore furnished Five Arrows with
true and correct copies of (i) the audited consolidated balance sheet
and the related statements of income and cash flows, including the
footnotes thereto, of CHP and CHP's Subsidiaries as of the end of their
latest fiscal year ended December 31, 1997 ("Fiscal 1997"), all of which
were audited by Coopers & Lybrand L.L.P., and (ii) the unaudited
consolidated balance sheet of CHP and CHP's Subsidiaries and the related
statements of income and cash flows as of September 30, 1998 prepared by
CHP. (The balance sheet of CHP and CHP's Subsidiaries at December 31,
1997 is hereinafter referred to as the "Balance Sheet" and such date is
hereinafter referred to as the "Balance Sheet Date"). Such financial
statements including the footnotes thereto, except as indicated therein,
have been prepared in accordance with generally accepted accounting
principles ("GAAP"), consistently applied throughout the periods
presented. The Balance Sheet fairly presents the financial condition of
CHP and CHP's Subsidiaries at the date thereof and, except as indicated
therein, reflects all known or asserted material claims against and all
material debts and liabilities of CHP and CHP's Subsidiaries, fixed or
contingent, as at the date thereof, and the related statements of income
and retained earnings fairly present the results of the operations of
CHP and CHP's Subsidiaries and the changes in its financial position for
the period indicated each in accordance with GAAP, except as specified
therein.
(b) CHP has filed all forms, reports and
documents (the "SEC Reports") required to be filed by it pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
the Securities and Exchange Commission (the "SEC") since September 30,
1998. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act and the
Securities Act and the applicable rules and regulations promulgated by
the SEC thereunder. None of the SEC Reports, as of their respective
dates, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements made, in light of the circumstances under
which they were made, not misleading. CHP has heretofore furnished or
offered to furnish Five Arrows with true and correct copies of all SEC
Reports and Exhibits and Schedules thereto required to be filed by CHP
with SEC.
(c) Since the respective dates of the material
SEC Reports, except as otherwise listed on Schedule 2.7(c) attached
hereto, there has been no material adverse change in the assets or
<PAGE>
liabilities, or in the business affairs or business prospects of CHP or
any of its Subsidiaries (present or anticipated) or condition, financial
or otherwise, or in the results of operations of CHP or any of CHP's
Subsidiaries; and to the best knowledge, information and belief of CHP,
no fact or condition (not of general knowledge) exists or is
contemplated or threatened which might reasonably be expected to cause
such a change in the future.
2.8. Title to Properties; Encumbrances. Except as set
forth on Schedule 2.8 attached hereto and except for properties and
assets reflected in the Balance Sheet or acquired since the Balance
Sheet Date which have been sold or otherwise disposed of in the ordinary
course of business, CHP and each of CHP's Subsidiaries has, and on each
Closing Date, will have, good, valid and marketable title to (a) all of
its material properties and assets (real and personal, tangible and
intangible), including, without limitation, all of the properties and
assets reflected in the Balance Sheet, except as indicated in the notes
thereto or in a Schedule to this Agreement, and (b) all of the material
properties and assets purchased by CHP or any of CHP's Subsidiaries
since the Balance Sheet Date, in each case subject to no material
encumbrance, lien, charge or other restriction of any kind or character,
except for (i) liens reflected in the Balance Sheet or in a Schedule to
this Agreement, (ii) liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations
on the use of real property or irregularities in title thereto which do
not detract from the value of, or impair the use of, such property by
CHP or any of CHP's Subsidiaries in the operation of their respective
businesses, and (iii) liens for current taxes, assessments or
governmental charges or levies on property not yet due and delinquent
and liens of carriers, warehousemen, vendors and material men incurred
in the ordinary course of business securing sums not yet due and payable
(liens of the type described in clauses (i), (ii) and (iii) above are
hereinafter sometimes referred to as "Permitted Liens").
2.9. Leases. Except as set forth on Schedule 2.9, each
lease of material real or personal property to which CHP and each of its
Subsidiaries is a party is in full force and effect, and there exists no
event of default or event, occurrence, condition or act (including the
purchase of the Shares or any of the conditions precedent hereunder)
which, with the giving of notice, the lapse of time or the happening of
any further event or condition, would become a default under such lease
to real or personal property. CHP and each of its Subsidiaries is not
currently in default of any of the terms or conditions under any such
lease to real or personal property and, to the best knowledge,
information and belief of CHP, all of the material covenants to be
performed by any other party under any such lease to real or personal
property have been fully performed. The real or personal property
leased by CHP and each of its Subsidiaries is in a state of good
maintenance and repair in all material respects.
<PAGE>
2.10. Contracts. Except as set forth on Schedule 2.10
attached hereto, neither CHP nor any of CHP's Subsidiaries is bound by
(a) any material contract or other agreements relating to the
acquisition or disposition by CHP or any of CHP's Subsidiaries of any
operating business or the capital stock or assets of any person, (b) any
material agreement, contract or commitment relating to the employment of
any person by CHP or any of CHP's Subsidiaries, or any bonus, deferred
compensation, pension, profit sharing, stock option, employee stock
purchase, retirement or other employee benefit plan, (c) any material
agreement, indenture or other instrument which contains restrictions
with respect to payment of dividends or any other distribution in
respect of its capital stock, (d) any material agreement, contract or
commitment relating to capital expenditures not yet made, (e) any
material loan or advance to, or material investment in, any individual,
partnership, limited liability company, joint venture, corporation,
trust, unincorporated organization, government or other entity (each a
"Person") or any material agreement, contract or commitment relating to
the making of any such loan, advance or investment, (f) any material
guarantee or other contingent liability in respect of any indebtedness
or obligation of any Person (other than the endorsement of negotiable
instruments for collection in the ordinary course of business), (g) any
material management service, consulting or any other similar type of
contract, unless entered into or incurred in the ordinary course of
business, (h) any material agreement, contract or commitment limiting
the freedom of CHP or any of CHP's Subsidiaries to engage in any line of
business or to compete with any Person, (i) any material bank debt,
loan, credit or other financing arrangement, and (j) except as otherwise
disclosed in this Agreement or a Schedule or Exhibit annexed hereto, any
material agreement, contract or commitment not entered into in the
ordinary course of business. Each contract or agreement set forth on
Schedule 2.10 (or required to be set forth on Schedule 2.10) is in full
force and effect and except as set forth on Schedule 2.10, there exists
no default or event of default or event, occurrence, condition or act
(including the purchase of the Shares, or any of the conditions
precedent hereunder) which, with the giving of notice, the lapse of time
or the happening of any further event or condition, would become a
default or event of default thereunder.
2.11. Restrictive Documents. Except as set forth on
Schedule 2.11 attached hereto, neither CHP nor any of CHP's Subsidiaries
is subject to, or a party to, any charter, by-law, mortgage, lien,
lease, license, permit, agreement, contract, instrument, law, rule,
ordinance, regulation, order, judgment or decree, or any other
restriction of any kind or character, in any such case which is material
to CHP, which would prevent consummation of the transactions
contemplated by this Agreement, compliance by CHP with the terms,
conditions and provisions hereof or the continued operation of CHP's or
any of CHP's Subsidiaries' business after the date hereof or each
<PAGE>
Closing Date on substantially the same basis as heretofore operated or
which would restrict the ability of CHP or any of CHP's Subsidiaries to
acquire any property or conduct business in any area.
2.12. Litigation. Except as set forth on Schedule 2.12
attached hereto, there is no material action, suit, proceeding at law or
in equity, arbitration or administrative or other proceeding by or
before or any investigation by any governmental or other instrumentality
or agency, pending, or, to the best knowledge, information and belief of
CHP threatened, against or affecting CHP or any of CHP's Subsidiaries,
or any of their respective properties or rights, and CHP does not know
of any valid basis for any action, proceeding or investigation. Except
as set forth on Schedule 2.12, neither CHP nor any of CHP's Subsidiaries
is subject to any judgment, order or decree entered in any lawsuit or
proceeding which is reasonably likely to have a material adverse effect
on its operations, business practices, present or anticipated, or
ability to acquire any property or conduct business.
2.13. ERISA. (i) Each employee benefit plan defined in
Section 3(3) of ERISA in respect of which CHP or any ERISA Affiliate is,
or within the immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA of CHP (each a "Plan") is in
substantial compliance with the applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA") and the
Code, (ii) no Termination Event has occurred nor is reasonably expected
to occur with respect to any Benefit Plan, (iii) the most recent annual
report (Form 5500 Series) with respect to each Plan, including Schedule B
(Actuarial Information) thereto, copies of which have been filed with the
Internal Revenue Service, is complete and correct in all material
respects and fairly presents the funding status of such Benefit Plan,
and since the date of such report there has been no material adverse
change in such funding status, (iv) no Benefit Plan had an accumulated
(whether or not waived) funding deficiency or permitted decreases which
would create a deficiency in its funding standard account within the
meaning of Section 412 of the Code at any time during the previous 60
months, and (v) no lien imposed under the Code or ERISA exists or is
likely to arise on account of any Benefit Plan within the meaning of
Section 412 of the Code. Neither CHP nor any of its ERISA Affiliates has
incurred any withdrawal liability under ERISA with respect to any
Multiemployer Plan, and CHP is not aware of any facts indicating that CHP
or any of its ERISA Affiliates may in the future incur any such
withdrawal liability. Except as required by Section 4980B of the Code,
CHP does not maintain a welfare plan (as defined in Section 3(1) of
ERISA) which provides benefits or coverage after a participant's
termination of employment. Neither CHP nor any of its ERISA Affiliates
have incurred any liability under the Worker Adjustment and Retraining
Notification Act. All Plans in existence on the initial Closing Date are
set forth on Schedule 2.13 attached hereto. For purposes of this
Agreement, (i) "Termination Event" means (a) a Reportable Event with
respect to any Benefit Plan (with respect to which the 30 day notice
<PAGE>
requirement has not been waived); (b) the withdrawal of CHP or any ERISA
Affiliate from a Benefit Plan during a plan year in which CHP or any
ERISA Affiliate was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (c) providing a written notice of intent to
terminate a Benefit Plan to affected parties of a distress termination
described in Section 4041(c) of ERISA; or (d) the institution by the
Pension Benefit Guarantee Corporation of proceedings to terminate a
Benefit Plan, (ii) "Benefit Plan" means a defined benefit plan as
defined in Section 3(35) of ERISA that is subject to Title IV of ERISA
(other than a Multiemployer Plan) and in respect of which CHP or any
ERISA Affiliate is or within the immediately preceding six (6) years was
an "employer" as defined in Section 3(5) of ERISA, (iii) "Multiemployer
Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA and subject to Title IV of ERISA which is, or within the
immediately preceding six (6) years was, contributed to by CHP or any
ERISA Affiliate, (iv) "ERISA Affiliate" means any (a) corporation which
is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as CHP, (b) partnership or other
trade or business (whether or not incorporated) under common control
(within the meaning of Section 414(c) of the Code) with CHP, or (c)
member of the same affiliated service group (within the meaning of
Section 414(m) of the Code) as CHP, any corporation described in clause
(a) above or any partnership or trade or business described in clause
(b) above and (v) "Reportable Event" means any of the events described in
Section 4043(b) of ERISA (other than events for which the notice
requirements have been waived).
2.14. Environmental Matters. Except as set forth in
Schedule 2.14 attached hereto, to the best knowledge of the Company and
its Subsidiaries:
(a) The operations and properties of CHP and its
Subsidiaries are in material compliance with Environmental Laws;
(b) CHP and its Subsidiaries have obtained and
is in compliance with all necessary permits or authorizations that are
required under Environmental Laws to operate the facilities, assets and
business of CHP and its Subsidiaries;
(c) There has been no Release (i) at any assets,
properties or businesses owned or operated by CHP, any of its
Subsidiaries or any predecessor in interest; (ii) from adjoining
properties or businesses; or (iii) from or onto any facilities which
received Hazardous Materials generated by CHP, any of its Subsidiaries
or any predecessor in interest that would result in any Environmental
Liabilities except to the extent that any such Release is not reasonably
likely to have a material adverse effect on the business (present or
anticipated) or condition (financial or otherwise), properties, results
of operations or prospects of CHP or its Subsidiaries;
<PAGE>
(d) No Environmental Claims have been asserted
against CHP, any of its Subsidiaries or any predecessor in interest nor
does CHP or any of its Subsidiaries have knowledge or notice of any
threatened or pending Environmental Claims against CHP or any of its
Subsidiaries which is reasonably likely to result in Environmental
Liabilities except to the extent that any such Environmental Claims are
not reasonably likely to have a material adverse effect on the business
(present or anticipated) or condition (financial or otherwise),
properties, results of operations or prospects of CHP or its
Subsidiaries;
(e) No Environmental Claims have been asserted
against any facilities that may have received Hazardous Materials
generated by CHP, any of its Subsidiaries or any predecessor in interest
which is reasonably likely to result in Environmental Liabilities except
to the extent that any such Environmental Claims are not reasonably
likely to have a material adverse effect on the business (present or
anticipated) or condition (financial or otherwise), properties, results
of operations or prospects of CHP or its Subsidiaries;
(f) CHP has delivered to Five Arrows true and
complete copies of all Phase I environmental assessments, environmental
reports, studies, material correspondence or investigations in their
possession regarding any Environmental Liabilities, or any environmental
conditions, at the assets, properties or businesses of CHP or any of its
Subsidiaries; and
(g) To the extent that any of the assets,
properties or businesses owned or operated by CHP or any of its
Subsidiaries are located in "wetlands" regulated under Environmental
Laws, CHP and its Subsidiaries are in compliance with Environmental Laws
regulating those "wetlands" except to the extent that any such failure
to comply is not reasonably expected to have a material adverse effect
on the business (present or anticipated) or condition of CHP or its
Subsidiaries or any predecessor in interest.
(h) Schedule 2.14(h) is a true, complete and
accurate list of each instance where the operations of CHP and its
Subsidiaries or the environmental conditions of the real estate
presently or formerly owned or operated by CHP or its Subsidiaries or
its predecessors in interest are not in material compliance with an
Environmental Law or give rise to Environmental Liabilities. None of
the items listed on Schedule 2.14 individually or in the aggregate would
have a material adverse effect on CHP and its Subsidiaries.
For purposes of this Agreement, (i) "Environmental Laws"
means the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as amended; the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901 et seq.,
as amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as
<PAGE>
amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as
amended; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 655
et seq.; and any other federal, state, local or municipal laws,
statutes, regulations, rules or ordinances imposing liability or
establishing standards of conduct for protection of the environment,
(ii) "Environmental Liabilities" means any monetary obligations, losses,
liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result
of any Environmental Claim filed by any governmental authority or any
third party against CHP or its Subsidiaries or any predecessors in
interest which relate to any violations of Environmental Laws, Remedial
Actions, Releases or threatened Releases of Hazardous Materials from or
onto (a) any assets, properties or businesses presently or formerly
owned by CHP, its Subsidiaries or a predecessor in interest, or (b) any
facility which received Hazardous Materials generated by the Company,
its Subsidiaries or a predecessor in interest, (iii) "Environmental
Claim" means any complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter or other communication from any governmental agency,
department, bureau, office or other authority, or any third party
alleging violations of Environmental Laws or Releases of Hazardous
Materials (a) from any assets, properties or businesses of CHP and its
Subsidiaries or any predecessor in interest, (b) from adjoining
properties or businesses, or (c) from or onto any facility, which
received hazardous materials generated by CHP and its Subsidiaries or
any predecessor in interest, (iv) "Hazardous Materials" include (a) any
element, compound, or chemical that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or
hazardous substances, extremely hazardous substance or chemical,
hazardous waste, medical waste, biohazardous or infectious waste,
special waste, or solid waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste characteristic
including but not limited to corrosivity, ignitibility toxicity or
reactivity as well as any radioactive or explosive materials; and (e)
any raw materials, building components exhibiting a Hazardous Material
characteristic, including but not limited to asbestos-containing
materials, (v) "Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating,
dumping, or disposing of Hazardous Materials (including the abandonment
or discarding of barrels, containers or other closed receptacles
containing Hazardous Materials) into the environment, (vi) "Remedial
Action" means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; (b) prevent or
minimize a Release or threatened Release of Hazardous Materials so they
<PAGE>
do not migrate to cause substantial danger to public health or welfare
or the indoor or outdoor environment; (c) perform pre-remedial studies
and investigations and post-remedial operation and maintenance
activities; or (d) any other actions authorized by 42 U.S.C. 9601.
2.15. Taxes. Except as set forth on Schedule 2.15
attached hereto:
(a) All taxes and assessments, including,
without limitation, income, property, sales, use, franchise, value
added, employees' income withholding and social security taxes and
import duties, including interest and penalties thereon, imposed by the
United States or by any foreign country or by any state, municipality,
subdivision or instrumentality of the United States or of any foreign
country, or by any other taxing authority, for which CHP or any of CHP's
Subsidiaries may be liable in respect of all periods prior to each
Closing Date (including taxes in respect of tax periods ending on each
Closing Date and taxes in respect of tax periods ending after each
Closing Date to the extent attributable to the portion of that period
which ends on each Closing Date), either have been paid when due or will
be paid when due. All tax returns required to be filed through the date
hereof taking into account all lawful extensions of due dates (and each
Closing Date), including, without limitation, information returns, have
been (or will be) duly and timely filed taking into account all lawful
extensions of due dates and are (or will be) true, complete and correct
in all material respects and all deposits and payments required by law
to be made by CHP or any of CHP's Subsidiaries, including with respect
to employees' withholding taxes, have been duly made in accordance with
all applicable laws, except to the extent that such failure to make such
payment would not reasonably be expected to have a material adverse
effect on CHP or any of its Subsidiaries. As of the date hereof, no
such returns have been the subject of an audit or examination by any
taxing authority. There is not now in force any waiver or agreement by
CHP or any of CHP's Subsidiaries for the extension of time for the
assessment of any tax.
(b) There are no tax sharing agreements or
arrangements or tax indemnity agreements between CHP or any of CHP's
Subsidiaries and any other person, including any agreements or
undertakings provided by CHP or any of CHP's Subsidiaries to any Person
requiring CHP or such Subsidiary to take any action, or refrain from
taking any action, to reduce or defer the tax liability of such other
Person.
(c) Neither CHP nor any of CHP's Subsidiaries
has ever been an includable corporation in any affiliated group of
corporations within the meaning of Section 1504 of the Code of 1986 (or
any similar provision of state or other tax law).
<PAGE>
(d) Neither CHP nor any of CHP's Subsidiaries
has filed a consent pursuant to the collapsible corporation provisions
of section 341(f) of the Code (or any similar provision of state or
other tax law) or agreed to have section 341(f)(2) of the Code or any
similar provision of state or other tax law) apply to any disposition of
any asset owned by CHP or any of CHP's Subsidiaries.
2.16. Compliance with Laws. Except as set forth on
Schedule 2.16 attached hereto, CHP and each of CHP's Subsidiaries is in
compliance in all material respects with all applicable laws,
regulations, orders, judgments and decrees. Neither CHP nor any of
CHP's Subsidiaries, any employee of CHP nor any of CHP's Subsidiaries
nor any of CHP's affiliates acting upon CHP's request has at any time
made any payments for unlawful political contributions or made any
bribes, kickback payments or other illegal payments.
2.17. No Changes Since Balance Sheet Date. Since the
Balance Sheet Date, except as expressly contemplated hereby or as
disclosed in a Schedule or Exhibit hereto (including, without
limitation, Schedule 2.17) or any SEC Report, neither CHP nor any of
CHP's Subsidiaries has (a) incurred any material liability or obligation
of any nature (whether accrued, absolute, contingent or otherwise),
except in the ordinary course of business (and neither CHP nor any of
CHP's Subsidiaries is in default in respect of the terms or conditions
of any indebtedness), (b) permitted any of its assets to be subjected to
any material mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind (other than Permitted Liens), (c)
sold, transferred or otherwise disposed of any material assets except in
the ordinary course of business, (d) made any material capital
expenditure or commitment therefor, except in the ordinary course of
business, (e) declared or paid any dividend or made any distribution on
any shares of its capital stock, or redeemed, purchased or otherwise
acquired any shares of its capital stock or any option, warrant or other
right to purchase or acquire any such shares, other than regularly
scheduled cash dividends, (f) made any material bonus or profit sharing
distribution or payment of any kind, (g) materially increased its
indebtedness for borrowed money or made any material loan to any Person,
(h) written off as uncollectible any notes or accounts receivable,
except write-offs in the ordinary course of business charged to
applicable reserves, (i) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or
other employees, except in the ordinary course of business, (j) canceled
or waived any claims or rights of substantial value, (k) made any
material change in any method of accounting or audit practice, (l)
otherwise conducted its business or entered into any transaction, except
in the ordinary course of business, or (m) agreed, whether or not in
writing, to do any of the foregoing.
<PAGE>
2.18. Disclosure. None of this Agreement, the
financial statements referred to in Section 2.7 hereof (including the
footnotes thereto), any Schedule, Exhibit or certificate attached hereto
or delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by CHP or by any of its
directors or officers in connection with the transactions contemplated
by this Agreement contains any untrue statement of material fact, or
omits any statement of material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which made.
2.19. Broker's or Finder's Fees. Except for a fee
payable by CHP to CNL Hospitality Advisors, Inc. in the amount of
$600,000, CHP has not incurred, and will not incur, directly or
indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or
any other Transaction Document or any of the transactions contemplated
hereby.
2.20. Insurance. CHP and each of its Subsidiaries
maintains insurance policies, including but not limited to fire and
casualty and worker's compensation policies, which provide with
reputable third party insurers coverage customary for companies
similarly situated and otherwise adequate for its businesses.
ARTICLE III
3. REPRESENTATIONS AND WARRANTIES OF FIVE ARROWS. Five
Arrows hereby represents, warrants and agrees, as of the date hereof and
as of each Closing Date, as if made on such Closing Date, as follows:
3.1. Power and Authority. Five Arrows has the full
legal right, power and authority to enter into this Agreement and the
Transaction Documents, and to consummate the other transactions
contemplated hereby and thereby.
3.2. Existence and Good Standing. Five Arrows is a
limited liability company, duly formed or organized, validly existing
and in good standing under the laws of its organization.
3.3. Consents; Authorization. There is no requirement
applicable to Five Arrows to make any filing with, or obtain any permit,
authorization, consent or approval of, any governmental authority or any
other person as a condition to the lawful consummation by Five Arrows of
the transactions contemplated by this Agreement and the Transaction
Documents. This Agreement, when executed and delivered by Five Arrows,
will constitute a valid and legally binding obligation of Five Arrows,
<PAGE>
enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditor's rights generally and of
general principles of equity (regardless of whether considered in a
proceeding at law or in equity).
3.4. Accredited Investor. Five Arrows is an accredited
investor as defined in Rule 501 under the Securities Act.
3.5. Investment. Five Arrows is acquiring the Shares
for investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution
thereof. Five Arrows understands that the Shares have not been, and
will not be, registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, and
cannot be transferred by it unless subsequently registered under the
Securities Act or if an exemption from the registration requirements
exists.
3.6. Rule 144. Five Arrows acknowledges that the
Shares must be held indefinitely unless subsequently registered under
the Securities Act, or unless an exemption from such registration is
available. Five Arrows is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of
securities purchased in a private placement subject to the satisfaction
of certain conditions, which presently include, among other things, in
most circumstances (i) the existence of a public market for the Shares,
(ii) the availability of certain current public information about CHP,
(iii) the resale occurring not less than one year after a party has
purchased and fully paid for the securities to be sold from CHP or
affiliate of CHP, (iv) the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)), and (v) the number of shares being sold during
any three-month period not exceeding specified limitations.
3.7. Brokers or Finders. Five Arrows has not incurred,
and will not incur, directly or indirectly, as a result of any action
taken by Five Arrows, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.8. Ownership Limits. The issuance of shares of CHP
Common Stock to Five Arrows pursuant to this Agreement will not cause
Five Arrows or any member of Five Arrows to Beneficially or
Constructively Own (as such terms are defined in the Articles of
Incorporation of CHP) shares in excess of the Ownership Limits that are
applicable to Five Arrows and its members pursuant to Section 7.6 and
7.7 of the Articles of Incorporation of CHP as such Articles are in
effect at the time of any issuance, taking into account the waiver of
certain Ownership Limits referred to in Section 4.3(a) hereof.
<PAGE>
ARTICLE IV
4. COVENANTS
4.1. Use of Proceeds. Any portion of the Five Arrows
Investment received by CHP on account of Five Arrows' purchase of Shares
pursuant to this Agreement shall immediately be contributed by CHP to
Hospitality Partners to immediately fund its corresponding capital
commitment to Hotel Investors.
4.2. Notice of Default. As soon as practicable and in
any event within 5 business days of the occurrence of a default or
failure by CHP or Hospitality Partners to perform or observe any
covenant, agreement, or obligation contained in this Agreement, the
Registration Rights Agreement, the Hotel Investors Subscription
Agreement or any Transaction Document contemplated hereby or thereby,
CHP shall notify Five Arrows of such default or failure.
4.3. Stockholder Approval.
(a) CHP covenants that it will call a meeting of
stockholders of CHP to be held no later than June 30, 1999 (the
"Stockholder Meeting Deadline"), for purposes of securing stockholder
approval for the waiver of the Ownership Limits set forth in Section
7.6(ii)(a) and (b) of the Articles of Incorporation of CHP.
Notwithstanding anything to the contrary contained herein, any waiver of
the Ownership Limits shall neither waive nor purport to waive the
limitations contained in Sections 7.6(ii)(c), (d) or (e) of CHP's
Articles of Incorporation. CHP will promptly prepare and file and will
provide to each of its stockholders entitled to vote at such meeting in
advance of such meeting, a proxy statement complying with Section 14 of
the Exchange Act soliciting each such stockholder's affirmative vote at
such stockholder meeting in favor of the amendment of CHP's Articles of
Incorporation to permit the Board of Directors of CHP to waive the
Ownership Limits with respect to issuance of the shares of CHP Common
Stock and upon the exchange of Class A Preferred Stock pursuant to the
Hotel Investors Subscription Agreement. Such proxy statement shall
reflect that the Board of Directors has approved the waiver of such
ownership limitation with respect to Five Arrows, subject to stockholder
approval. CHP and its Board of Directors shall recommend to the
stockholders that they approve such proposal and shall use its best
efforts to solicit its stockholders' approval of such amendment. Such
proxy statement shall not seek approval of any matters other than the
approval described in the preceding sentence and the election of
directors, which shall include a nominee designated by Five Arrows,
which may be the director designated pursuant to Section 4.4 hereof.
CHP shall file such proxy statement with the SEC on a timely basis so as
to permit the stockholders' meeting to be held by the Stockholder
Meeting Deadline. Five Arrows shall have the opportunity to review and
comment on each version of the Proxy Statement submitted to or filed
with the SEC.
<PAGE>
(b) Upon approval by CHP's stockholders of the
amendment of CHP's Articles of Incorporation to permit the Board of
Directors of CHP to waive the Ownership Limits with respect to the
issuance of shares and the exchange of shares of Class A Preferred Stock
for shares of CHP Common Stock pursuant to the Hotel Investors
Subscription Agreement, (i) CHP shall deliver to Five Arrows (A) a
certificate of the Secretary of CHP certifying that the stockholders of
the Company have approved such amendment and (B) a certified copy of the
amended Articles of Incorporation of CHP as filed with the State of
Maryland and (ii) the balance of the outstanding principal amount of the
Note shall be converted into shares of CHP Common Stock as provided in
Section 1.6 hereof and any accrued and unpaid interest thereon shall be
paid to the holder of the Note as set forth in Section 1.6 hereof.
(c) Notwithstanding anything to the contrary
contained herein, any waiver of the Ownership Limits shall (i) neither
waive nor purport to waive the limitations contained in Sections
7.6(ii)(c), (d) or (e) of CHP's Articles of Incorporation and (ii) be
subject to the condition that Five Arrows make representations at the
time of such waiver that the issuance of shares of CHP Common Stock in
excess of the Ownership Limits to Five Arrows pursuant to this Agreement
or the exchange of shares of Class A Preferred Stock for shares of CHP
Common Stock in excess of the Ownership Limits pursuant to the Hotel
Investors Subscription Agreement will neither (a) cause any individual
within the meaning of Section 542(a)(2) of the Code, as modified by
Section 856(h) of the Code, to own more than 9.9% of the stock of CHP,
directly or indirectly through the application of Section 544 of the
Code, as modified by Section 856(h) of the Code nor (b) cause the
Company to own (directly or Constructively (as defined in Section 7.6(i)
of CHP's Articles of Incorporation)) an interest in an tenant that is
described in Section 856(d)(2)(B) of the Code.
4.4. Appointment of Five Arrows Director. CHP shall
use it best efforts to qualify, nominate and recommend to the
stockholders that they elect to the Board of Directors the nominee
designated by Five Arrows from time to time (the "Five Arrows Director")
at each meeting of stockholders at which directors are generally
elected.
4.5. Further Assurances. CHP and Five Arrows shall
take any and all actions, in a manner satisfactory to the other, to meet
each condition to closing set forth herein, keep all its respective
representations and warranties hereunder true, complete and correct and
effect all applicable actions contemplated by this Agreement required to
be effected on or prior to each Closing Date.
4.6. Supplemental Disclosure. CHP shall have the
continuing obligation up to and until the entire amount of the Five
Arrows Investment has been invested in CHP to supplement promptly or
<PAGE>
amend the Schedules with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or listed in the Schedules;
provided, however, that for the purpose of the rights and obligations of
Five Arrows hereunder, (a) any such supplemental disclosure that may be
reasonably considered by Five Arrows to be material and adverse to Five
Arrows, CHP or any of its Subsidiaries shall not be deemed to have been
disclosed as of the date of this Agreement unless so agreed to in
writing by Five Arrows and (b) such supplemental disclosure other than
as described in clause (a) shall be deemed to have been disclosed as of
the date of this Agreement.
4.7. Prohibition on Issuance of Securities. For so
long as any shares of Class A Preferred Stock are outstanding, other
than in accordance with and pursuant to employee benefit plans approved
by the Board of Directors of CHP, CHP shall not issue any shares of CHP
Common Stock (or rights, warrants or other securities convertible into
or exchangeable for CHP Common Stock) after the date hereof at a
purchase price per share (or having a conversion, exchange or exercise
price per share of CHP Common Stock) (excluding the value of services
and other intangible assets) of less than $9.50.
ARTICLE V
5. CONDITIONS TO CHP'S OBLIGATIONS. The obligation of CHP
to consummate the transactions contemplated by this Agreement on each
Closing Date is conditioned upon satisfaction, on or prior to such date,
of the following conditions:
5.1. Representations and Warranties. The
representations and warranties of Five Arrows contained in this
Agreement shall be true, complete and correct in all material respects
(except that representations and warranties qualified by materiality,
material adverse effect or knowledge shall, as so qualified, be true and
correct in all respects) on and as of the applicable Closing Date with
the same effect as though such representations and warranties had been
made on and as of such date.
5.2. Approvals. All governmental and other consents
and approvals, if any, necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been received
(including but not limited to the waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, having expired,
if applicable).
5.3. Proceedings. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
<PAGE>
substance to CHP and its counsel, and CHP shall have received copies of
all such documents and other evidences as it or its counsel may
reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
ARTICLE VI
6. CONDITIONS TO THE INITIAL PURCHASE. The obligation of
Five Arrows to purchase Shares pursuant to the Notice of Purchase for
the Initial Purchase on such Closing Date is conditioned upon
satisfaction, on or prior to such date, of the following conditions:
6.1. Representations and Warranties. The
representations and warranties of CHP contained in this Agreement or in
any Exhibit or Schedule attached hereto shall be true, complete and
correct in all material respects (except that representations and
warranties qualified by materiality, material adverse effect or
knowledge shall, as so qualified, be true and correct in all respects)
on and as of such Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and
CHP shall have delivered to Five Arrows a certificate, dated such
Closing Date, to such effect.
6.2. Performance of Agreements. All of the covenants
and agreements of CHP to be performed on or before such Closing Date
pursuant to the terms hereof or the terms of any Exhibit hereto, shall
have been duly performed in all material respects, and CHP shall have
delivered to Five Arrows a certificate, dated such Closing Date, to such
effect.
6.3. Approvals. All material governmental and other
material consents, filings and approvals necessary to permit the
consummation of the transactions contemplated by this Agreement shall
have been received and be in full force and effect (including but not
limited to the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, having expired, if applicable).
6.4. Opinion of CHP's Counsel. CHP shall have
furnished Five Arrows with a favorable opinions, dated such Closing
Date, of both of Shaw Pittman Potts & Trowbridge, special counsel to
CHP, and Lowndes Drosdick Kantor & Reed, P.A., Florida counsel to CHP,
each in form and substance satisfactory to Five Arrows and its counsel,
to the effect set forth on Exhibit 6.4 attached hereto.
6.5. Good Standing and Other Certificates. CHP shall
have delivered to Five Arrows a certificate from the Secretary of State
or other appropriate official of the State of Maryland, and such other
states as applicable to the effect that CHP and each of CHP's
<PAGE>
Subsidiaries are in good standing or subsisting in each such State and
listing all charter documents of CHP and each of CHP's Subsidiaries on
file with each such State.
6.6. No Material Adverse Change. Since the Balance
Sheet Date and prior to such Closing Date, there shall be no material
adverse change in the assets or liabilities, the business (present or
anticipated), or condition, financial or otherwise, the results of
operations, of CHP and each of CHP's Subsidiaries and CHP shall have
delivered to Five Arrows a certificate, dated such Closing Date, to such
effect.
6.7. Registration Rights Agreement. On such Closing
Date, CHP shall have properly and validly executed the Registration
Rights Agreement in the form of Exhibit 6.7 annexed hereto.
6.8. Hotel Investors Subscription Agreement. On such
Closing Date, Hotel Investors, CHP and Hospitality Partners shall have
properly and validly executed the Hotel Investors Subscription Agreement
and taken all actions required to be taken by it hereunder.
6.9. Valid Issuance. The Shares to be issued and sold
by CHP and to be acquired by Five Arrows shall be duly authorized and
validly issued to Five Arrows, free and clear of all liens,
encumbrances, restrictions and claims of every kind. Five Arrows shall
have received properly completed stock certificates representing the
number of Shares being purchased by Five Arrows on such Closing Date.
6.10. Appointment of Five Arrows Director. Prior to or
concurrent with the Initial Purchase, the Five Arrows Director shall
have been elected and qualified to become a member of the Board of
Directors of CHP.
6.11. D&O Insurance. CHP shall have purchased
officers' and directors' liability insurance with respect to the Five
Arrows Director and on such terms and with such carrier as are
reasonably acceptable to Five Arrows.
6.12. Investment in Advisor. Prior to or concurrent
with the Initial Closing, the investment by Five Arrows in CNL
Hospitality Advisors, Inc. shall be occurring substantially with the
Initial Purchase.
6.13. Proceedings. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be satisfactory in form and substance
to Five Arrows and its counsel, and Five Arrows shall have received
copies of all such documents and other evidences as it or its counsel
<PAGE>
may request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
6.14. Opinion of CHP's Tax Counsel. CHP shall have
furnished Five Arrows with a reasoned opinion satisfactory to Five
Arrows and its counsel, dated the Closing Date, of
PriceWaterhouseCoopers LLP, or other tax counsel satisfactory to Five
Arrows and its counsel, that Five Arrows should not recognize "unrelated
business taxable income" within the meaning of Section 512 of the Code
as a result of Five Arrows' investment in CNL Hotel Investors, Inc.
6.15. Approval of Financing and Other Material
Documents. CHP shall have furnished Five Arrows with all documents
related to the financing of the Hotels by Hotel Investors and all other
material documents required to be delivered by Hotel Investors
thereunder or in connection with the transactions contemplated hereunder
and thereunder, and all such documents including any material changes,
amendments, modifications or waivers thereto shall have been approved by
Five Arrows and its counsel, in their sole discretion.
ARTICLE VII
7. CONDITIONS TO SUBSEQUENT PURCHASES. The obligation of
Five Arrows to purchase Shares pursuant to any Notice of Purchase after
the Initial Purchase on such Closing Date is conditioned upon
satisfaction, on or prior to such date, of the following conditions:
7.1. Representations and Warranties. Subject to
Section 4.6 hereof, the representations and warranties of CHP contained
in this Agreement or in any Exhibit or Schedule attached hereto shall be
true, complete and correct in all material respects (except that
representations and warranties qualified by materiality, material
adverse effect or knowledge shall, as so qualified, be true and correct
in all respects) on and as of such Closing Date with the same effect as
though such representations and warranties had been made on and as of
such date.
7.2. Performance of Agreements. All of the covenants
and agreements of Hotel Investors, CHP and Hospitality Partners to be
performed on or before such Closing Date pursuant to the terms hereof,
the Note or the terms of any other agreement contemplated hereby and
thereby, shall have been duly performed in all material respects.
7.3. Assurance of Performance. CHP shall have
delivered to Five Arrows evidence that the Purchase Price to be paid at
any Closing hereunder shall immediately be contributed by CHP to
Hospitality Partners who in turn will use such proceeds to fund its
capital commitment to Hotel Investors.
<PAGE>
7.4. Performance of Hotel Investors Subscription
Agreement. All of the agreements to be performed or observed by Hotel
Investors, CHP and Hospitality Partners pursuant to the terms of the
Hotel Investors Subscription Agreement or the terms of the Articles
Supplementary shall have been duly performed or observed.
7.5. No Material Adverse Change. Prior to such Closing
Date, there shall be no material adverse change in the assets or
liabilities, the business (present or anticipated), or condition,
financial or otherwise, the results of operations, of CHP and each of
CHP's Subsidiaries.
7.6. Valid Issuance. The Shares to be issued and sold
by CHP and to be acquired by Five Arrows on such Closing Date shall be
duly authorized and validly issued to Five Arrows, free and clear of all
liens, encumbrances, restrictions and claims of every kind. Five Arrows
shall have received properly completed stock certificates representing
the number of Shares being purchased by Five Arrows on such Closing
Date.
7.7. Five Arrows Director. The Five Arrows Director
shall be serving as a member of the Board of Directors of CHP.
7.8. D&O Insurance. CHP shall have maintained
officers' and directors' liability insurance with respect to the Five
Arrows Director and on such terms and with such carrier as are
reasonably acceptable to Five Arrows.
ARTICLE VIII
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY.
8.1. Survival. The respective representations and
warranties and covenants and agreements of CHP and Five Arrows contained
in this Agreement or in any Schedule or Exhibit attached hereto shall
survive the Closing and shall terminate on January 1, 2002, except that
the representations and warranties and covenants and agreements
contained in Sections 2.13, 2.14 and 2.15 (and any applicable Schedule)
shall terminate upon the expiration of the applicable statute of
limitations giving effect to any extensions thereof.
8.2. Indemnification.
(a) Each of CHP and Five Arrows, as the case may
be (each, an "Indemnifying Party"), agrees to indemnify and hold the
other and such other's respective stockholders, partners, officers,
directors, members, employees, counsel, accountants and agents (each, an
"Indemnified Party") harmless from any damages, liabilities, losses,
<PAGE>
costs or expenses (including, without limitation, reasonable counsel
fees and expenses) suffered or paid, directly or indirectly, as a result
of or arising out of (without regard to any materiality, material
adverse effect or knowledge qualifier) (i) the breach or non-compliance
with any covenant, agreement or obligation contained herein by an
Indemnifying Party, (ii) the breach of or the failure of any respective
representation or warranty contained herein made by an Indemnifying
Party, (iii) any breach of any covenant, agreement or obligation
contained in the Registration Rights Agreement, or any other Transaction
Document by an Indemnifying Party, (iv) all Taxes resulting from CHP
being severally liable for any Taxes pursuant to Section 1.1502-6 of the
Treasury Regulations or any analogous state or local provision or (v)
any Environmental Liabilities arising out of any (A) any Releases or
threatened Releases of Hazardous Materials at or from the properties of
CHP or its Subsidiaries; (B) any violations of Environmental Laws; (C)
any Environmental Claim related to the conditions existing prior to each
applicable Closing Date; and (D) any personal injury (including wrongful
death) or property damage (real or personal) arising out of exposure to
Hazardous Material used, handled, generated, transported or disposed by
CHP, any of its Subsidiaries or any predecessor in interest at the
properties of CHP or its Subsidiaries. However, the Indemnifying Party
shall be obligated to indemnify the Indemnified Party only when the
aggregate of all damages, liabilities, losses, costs or expenses
suffered or paid by the Indemnified Party as to which a right of
indemnification is provided under this Article VIII exceeds $200,000
(the "Threshold Amount"). After the aggregate amount of all damages,
liabilities, losses, costs or expenses suffered or paid by the
Indemnified Party exceeds the Threshold Amount, the Indemnifying Party
shall be obligated to indemnify the Indemnified Party for all such
damages, liabilities, losses, costs or expenses suffered or paid.
Notwithstanding anything in this Agreement to the contrary, the
liability of CHP hereunder shall in no event exceed the Five Arrows
Investment received by CHP pursuant to this Agreement (except for CHP's
liability under clause (iv) of this paragraph (a)).
(b) If any action, suit, proceeding or
investigation is commenced, as to which an Indemnified Party proposes to
demand indemnification, it shall notify the Indemnifying Party with
reasonable promptness and the Indemnifying Party shall have the right to
assume the defense thereof; provided, however, that any failure by an
Indemnified Party to notify the Indemnifying Party shall not relieve the
Indemnifying Party from its obligations hereunder, except to the extent
that the Indemnifying Party shall have been materially prejudiced in its
ability to defend the action, suit, proceedings or investigation for
which such indemnification is sought by reason of such failure. An
Indemnified Party shall have the right to retain counsel of its own
choice in its sole discretion, and the Indemnifying Party shall pay the
<PAGE>
reasonable fees, reasonable expenses and reasonable disbursements of
such counsel only if the Indemnifying Party has declined or failed to
assume the defense thereof or if the Indemnifying Party's counsel would
be unable to defend such claim on behalf of the Indemnified Party by
virtue of a conflict of interest; and such counsel shall to the extent
consistent with its professional responsibilities cooperate with the
Indemnifying Party and any counsel designated by the Indemnifying Party.
The Indemnifying Party shall be liable for any settlement of any claim
against an Indemnified Party made with the Indemnifying Party's written
consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall not, without prior written consent of an
Indemnified Party, settle or compromise any claim, or permit a default
or consent to the entry of any judgment in respect thereof, unless such
settlement, compromise or consent includes, as an unconditional term
thereof, the giving by the claimant to an Indemnified Party of an
unconditional release from all liability in respect to such claim.
(c) In order to provide for just and equitable
contribution, if a claim for indemnification pursuant to these
indemnification provisions is made but it is found in a final judgment
by a court of competent jurisdiction (not subject to further appeal)
that such indemnification may not be enforced in such case, even though
the express provisions hereof provide for indemnification in such case,
then the Indemnifying Party, on the one hand, and an Indemnified Party,
on the other, shall contribute to the losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs and
expenses to which the indemnified persons may be subject in accordance
with the relative benefits received by the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, in connection
with the statements, acts or omissions which resulted in expenses and
the relevant equitable considerations shall also be considered. No
person found liable for a fraudulent misrepresentation shall be entitled
to contribution on account thereof from any person who is not also found
liable for such fraudulent misrepresentation.
(d) The obligations to indemnify and hold
harmless pursuant to this Section 8.2 shall survive each Closing Date
and shall terminate with respect to any unasserted claim based on a
breach of or the non-compliance with any covenant, agreement or
obligation or a breach of or a failure of any representation or warranty
contained in (i) this Agreement (other than Sections 2.13, 2.14 and
2.15) on January 1, 2002 and (ii) Sections 2.13, 2.14 and 2.15 and the
obligation set forth in Section 8.2(a)(iv) hereof upon expiration of the
applicable statute of limitations giving effect to any extensions
thereof.
<PAGE>
ARTICLE IX
9. MISCELLANEOUS.
9.1. Preservation of Confidential Information. Five
Arrows shall keep confidential any and all non-public information
obtained from CHP concerning CHP's properties, operations and business
(unless readily ascertainable from public or published information or
trade sources) until the same ceases to be non-public (or becomes so
ascertainable).
9.2. Governing Law. The interpretation and
construction of this Agreement, and all matters relating hereto, shall
be governed by the laws of the State of New York applicable to
agreements executed and to be performed solely within such State.
9.3. Prevailing Party. The prevailing party or parties
in any litigation shall be entitled to receive from the losing party or
parties all costs and expenses, including reasonable counsel fees,
incurred by the prevailing party or parties.
9.4. Captions. The Article and Section captions used
herein are for reference purposes only, and shall not in any way affect
the meaning or interpretation of this Agreement.
9.5. Publicity. Except as otherwise required by law,
none of the parties hereto shall issue any press release or take any
other public statement, in each case relating to, connected with or
arising out of this Agreement or the matters contained herein. Any
statement so issued or made shall require the reasonable prior approval
of the other parties hereto as to the contents and the manner of
presentation and publication thereof.
9.6. Notices. All notices, statements, instructions or
other documents required to be given hereunder, shall be in writing and
shall be given either by hand delivery, by overnight delivery service,
by facsimile transmission or by mailing the same in a sealed envelope,
first-class mail, postage prepaid and either certified or registered,
return receipt requested, addressed as follows:
if to Five Arrows, to:
Five Arrows Realty Securities II L.L.C.
c/o Rothschild Realty, Inc.
1251 Avenue of the Americas
51st Floor
New York, New York 10020
Facsimile No. (212) 403-3520
Attention: Matthew W. Kaplan
<PAGE>
with a copy to its counsel:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022-4728
Facsimile No. (212) 593-5955
Attention: Andre Weiss
if to CHP or Hotel Investors, to:
CNL Hospitality Properties, Inc.
or CNL Hotel Investors, Inc. (as the case may be)
c/o CNL Hospitality Group
400 E. South Street
Orlando, FL 32801
Facsimile No. (407) 428-9370
Attention: C. Brian Strickland
with a copy to its counsel:
Shaw Pittman Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Facsimile No. (202) 663-8007
Attention: Thomas H. McCormick
and to any other parties at their addresses reflected in the stock
records of CHP. Five Arrows, by written notice given to CHP in
accordance with this Section 9.6, and CHP by written notice to Five
Arrows, may change the address to which notices, statements, instruction
or other documents are to be sent to such party. All notices,
statements, instructions and other documents delivered hereunder shall
be deemed effective upon receipt.
9.7. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.
9.8. Counterparts. This Agreement may be executed in
two or more counterparts, all of which taken together shall constitute
one instrument.
9.9. Entire Agreement. This Agreement, including the
other documents referred to herein or annexed as Exhibits or Schedules
hereto which form a part hereof, contains the entire understanding of
the parties hereto with respect to the subject matter contained herein
and therein and supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
<PAGE>
9.10. Amendments. This Agreement may not be changed
orally, but only by an agreement in writing signed by the parties
hereto.
9.11. Severability. In case any provision in this
Agreement shall be held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof will not
in any way be affected or impaired thereby.
9.12. Termination of Agreement. The Agreement may be
terminated upon mutual written agreement of the parties.
[The remainder of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
CNL HOSPITALITY PROPERTIES, INC.
By: /s/ James M. Seneff
-----------------------------
Name: James M. Seneff
Title: Chairman and Chief Executive
Officer
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Matthew W. Kaplan
-----------------------------
Name: Matthew W. Kaplan
Title: Manager
CNL HOTEL INVESTORS, INC.
By: /s/ James M. Seneff
-----------------------------
Name: James M. Seneff
Title: Chairman and Chief Executive
Officer
<PAGE>
EXHIBIT 1
Hotels
Project Owner
Courtyard:
Addison, TX Acourt Property, Ltd.
Plano, TX PLC Hotel Property, Ltd.
Scottsdale, AZ SAHD Property, L.P.
Seattle, WA Westlake Hotel Property, L.P.
Residence Inn:
Las Vegas, NV LVHC Hotel Property,
Limited Partnership
Phoenix, AZ PARI Hotel Property, L.P.
Plano, TX PLRI Hotel Property, Ltd.
Marriott Suites:
Dallas, TX Marcen Property, Ltd.
<PAGE>
EXHIBIT 1.5
Form of Promissory Note
<PAGE>
EXHIBIT 99.3
CONVERTIBLE PROMISSORY NOTE
$14,999,996.50 Dated: February 24, 1999
FOR VALUE RECEIVED, the undersigned, CNL Hospitality
Properties, Inc., a Maryland corporation ("CHP"), and CNL Hotel
Investors, Inc., a Maryland corporation ("Hotel Investors"), HEREBY
PROMISE TO PAY to the order of Five Arrows Realty Securities II L.L.C.,
a Delaware limited liability company ("Five Arrows") on July 1, 2000
(the "Maturity Date") (i) the principal sum of FOURTEEN MILLION NINE
HUNDRED NINETY-NINE THOUSAND NINE HUNDRED NINETY-SIX AND 50/100 Dollars
($14,999,996.50), or, if less, the aggregate unpaid principal amount of
all advances made by Five Arrows to CHP pursuant to Section 1.5 of the
CHP Securities Purchase Agreement (as defined below); and (ii) interest
(computed on the basis of a year of 360 days for the actual number of
days, including the first day but excluding the last day, elapsed) on
any and all principal amounts remaining unpaid hereunder from time to
time outstanding from the date hereof until such principal amounts
become due, at an interest rate per annum equal at all times to eight
percent (8%) except that from and after an Event of Default, as defined
below, such interest rate shall be ten percent (10%). Both principal
and interest are payable in lawful money of the United States of America
by wire transfer of immediately available funds to an account designated
by Five Arrows.
This Note is the Note referred to, and is entitled to the
benefits provided for the Note in, the CHP Securities Purchase
Agreement, dated as of February 24, 1999 (the "CHP Securities Purchase
Agreement"), by and between CHP, Hotel Investors and Five Arrows.
Capitalized terms defined otherwise defined herein shall have the
meanings ascribed to them in the CHP Securities Purchase Agreement.
This Note is subject to the following additional provisions:
1. In the event that the entire principal amount of this
Note is not converted before the Maturity Date as provided in Section
1.6 of the CHP Securities Purchase Agreement, this Note shall, without
requirement of notice, become immediately due and payable on the
Maturity Date in an amount equal to the greater of (i) such outstanding
principal amount and (ii) the Fair Market Value of the aggregate number
of shares of CHP Common Stock that Five Arrows would have received if
such outstanding principal amount had been converted. All shares of CHP
Common Stock issued upon conversion of this Note shall be fully paid and
nonassessable, and the Holder (as defined below) thereof shall be
<PAGE>
entitled to the same rights with respect to such shares (including,
without limitation, registration rights) as if such shares were
purchased pursuant to the CHP Securities Purchase Agreement.
The term "Fair Market Value" on any date of determination
with respect to the CHP Common Stock, shall mean the average of the
daily Market Prices for the 10 consecutive Trading Days immediately
preceding such date. The term "Market Price" on any date shall mean the
Closing Price for CHP Common Stock on such date. The term "Closing
Price" on any date shall mean the last sale price for CHP Common Stock,
regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, for CHP Common
Stock, as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if CHP Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported on the
principal national securities exchange on which CHP Common Stock is are
listed or admitted to trading or, if CHP Common Stock is not listed or
admitted to trading on any national securities exchange, the last sale
price in the over-the counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System.
2. The holder of this Note ("Holder") is authorized to
endorse on the schedule attached hereto and made a part hereof the date
and amount of each advance made by Five Arrows pursuant to the CHP
Securities Purchase Agreement, which endorsement shall constitute prima
facie evidence of the accuracy of the information enclosed in the
absence of manifest or provable error; provided that the failure of the
Holder to make any such endorsement shall not affect the obligations of
CHP or Hotel Investors hereunder or under the CHP Securities Purchase
Agreement.
3. If one or more of the following described "Events of
Default" shall occur and continue for seven (7) days or such other
period indicated below:
(a) CHP and Hotel Investors shall default in the
conversion or payment of principal or interest on this Note; or
(b) Any of the representations or warranties made
by CHP herein, in the CHP Securities Purchase Agreement, or in any
certificate or financial or other written statements heretofore or
hereafter furnished by or on behalf of CHP in connection with the
execution and delivery of this Note or the CHP Securities Purchase
Agreement shall be false or misleading in any material respect at the
time made; or
<PAGE>
(c) CHP or Hotel Investors shall fail to perform or
observe, in any material respect, any other covenant, term, provision,
condition, agreement or obligation of CHP or Hotel Investors under this
Note or the CHP Securities Purchase Agreement (and such failure shall
continue uncured for a period of seven (7) days after notice from the
Holder of such failure); or
(d) CHP or Hotel Investors shall (1) become
insolvent; (2) admit in writing its liability to pay its debts generally
as they mature; (3) make an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (4) apply for or consent to
the appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be
appointed for CHP or Hotel Investors or for a substantial part of their
property or business without its consent and shall not be discharged
within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of
competent jurisdiction at the instance of any governmental agency shall
assume custody or control of the whole or any substantial portion of the
properties or assets of CHP or Hotel Investors and shall not be
dismissed within sixty (60) days thereafter; or
(g) Any money judgment, writ or warrant of
attachment, or similar process, in excess of One Hundred Thousand
($100,000) Dollars in the aggregate shall be entered or filed against
CHP or Hotel Investors or any of their properties or other assets and
shall remain unpaid, unvacated, unbonded or unstayed for a period of
sixty (60) days after it becomes final and non-appealable; or
(h) Bankruptcy, reorganization, insolvency or
liquidation proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be instituted
by or against CHP or Hotel Investors and, if instituted against CHP or
Hotel Investors, shall not be dismissed within sixty (60) days after
such institution, or CHP or Hotel Investors shall by any action or
answer approve of, consent to, or acquiesce in any such proceedings or
admit the material allegations of, or default in answering a petition
filed in any such proceeding; or
(i) This Note or any of its covenants, described
below, shall, pursuant to its terms, at any time for any reason (i)
cease to be in full force and effect, (ii) be declared to be null and
void by CHP or Hotel Investors or a court of competent jurisdiction
while the indebtedness is outstanding hereunder, (iii) have the validity
or enforceability hereof contested by CHP or Hotel Investors, or (iv)
<PAGE>
have CHP or Hotel Investors in a writing signed by CHP or Hotel
Investors deny that it has any or further liability or obligation
hereunder; then, or at any time thereafter, and in each and every such
case, unless such Event of Default shall have been waived in writing by
the Holder (which waiver shall not be deemed to be waiver of any
subsequent default) at the option of the Holder and in the Holder's sole
discretion, the Holder may consider this Note immediately due and
payable, without presentment, demand, protest or (further) notice of any
kind (other than notice of acceleration), all of which are hereby
expressly waived, anything herein or in any notice or other instruments
contained to the contrary notwithstanding, and the Holder may
immediately, and without expiration of any period of grace, enforce any
and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law, and no delay or omission of the
Holder to exercise any right or power accruing upon any default
occurring and continuing shall impair any such right or power, or shall
be construed to be a waiver of any such default or an acquiescence
therein.
4. CHP covenants and agrees that, from the date hereof
until the payment in full of this Note, CHP:
(i) will maintain its corporate existence and right
to carry on its business;
(ii) will not merge or consolidate with or into any
other corporation (where CHP does not survive the transaction) or sell
or otherwise convey all or a substantial portion of its assets;
(iii) shall maintain with financially sound and
reputable insurance companies, insurance of the kinds, covering the
risks, and in the relative proportionate amounts, usually carried by
reasonable and prudent companies conducting businesses similar to that
of CHP and its Subsidiaries taking into consideration CHP's size and
leverage;
(iv) will comply in all material respects with all
applicable laws, rules, regulations, permits and orders;
(v) will maintain and preserve its existence,
rights and privileges and use its best efforts to obtain, maintain and
preserve all material permits, licenses, authorizations and approvals
that are necessary in the proper conduct of its business;
(vi) shall not take or fail to take any action
within CHP's control which has impaired or is likely to impair the value
of any substantial part of the assets of CHP or any of its Subsidiaries;
<PAGE>
(vii) shall pay and discharge, or cause to be paid
and discharged, before (A) the same shall become overdue and (B) any
penalty, interest, fine or surcharge is imposed, all material taxes,
assessments and other governmental charges imposed upon CHP and its
Subsidiaries, if any, and their properties (real and personal), sales
and activities, or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies, which if unpaid might by law
become a lien or charge upon any of their properties; provided, however,
that any such tax, assessment, charge, levy or claim need not be paid if
the validity or amount thereof shall then currently be contested in good
faith by appropriate proceedings and if CHP or the appropriate
Subsidiary, if any, shall have set aside on its books adequate reserves
with respect thereto; and
(viii) shall give notice to the Holder of any
default under any provisions of this Note within five (5) business days
after the discovery by CHP or any of its Subsidiaries of such default.
5. No provision of this Note shall alter or impair the
obligation of CHP and Hotel Investors, which is absolute and
unconditional, to pay the principal of and interest on, this Note at the
time, place, and rate, and in the coin currently, herein prescribed.
6. CHP and Hotel Investors hereby expressly waive demand
and presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to
accelerate, bringing of suit and diligence in taking any action to
collect amounts called for hereunder and shall be jointly and severally
liable for the payment of all sums owing and to be owing hereof
regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder;
provided, however, that with respect to Hotel Investors, the payment of
any such sums shall be subordinate in right of payment, to the extent
and in the manner provided in the Senior Loan Agreement (as defined in
the Articles Supplementary of Hotel Investors designating the 8% Class A
Cumulative Preferred Stock of Hotel Investors) to the prior payment in
full of all indebtedness incurred thereunder, whether outstanding on the
date hereof or thereafter incurred.
7. CHP and Hotel Investors agree to pay all costs and
expenses, including reasonable attorneys' fees, which may be incurred by
the Holder in collecting any amount due under this Note.
<PAGE>
8. This Note shall be governed by, and construed in
accordance with, the law of the State of New York. CHP and Hotel
Investors hereby agree to service of process by mail, submits to the
jurisdiction of the Federal or State courts of New York, waives any
claims that the forum is inconvenient and waives trial by jury.
CNL HOSPITALITY PROPERTIES, INC.
By: /s/ James M. Seneff
-----------------------------
Title: Chairman and Chief Executive
Officer
CNL HOTEL INVESTORS, INC.
By: /s/ James M. Seneff
-----------------------------
Title: Chairman and Chief Executive
Officer
<PAGE>
Amount of Notation
Date Advance Made by
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<PAGE>
EXHIBIT 99.4
SUBSCRIPTION
AND
STOCKHOLDERS' AGREEMENT
dated as of February 24, 1999
among
CNL HOTEL INVESTORS, INC.
and
THE STOCKHOLDERS
NAMED HEREIN
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CAPITAL STRUCTURE........................................2
1.1 Authorized Capital............................................2
1.2 Capital Commitments...........................................2
1.3 Drawdowns of Capital Commitment of the Capital Stockholders...2
1.4 Default and Consequences of Default...........................3
1.5 Conditions to each Drawdown...................................5
1.6 Purchase of Class D Junior Preferred Stock....................6
ARTICLE II CORPORATE GOVERNANCE.....................................7
2.1 Articles of Incorporation and By-laws.........................7
2.2 Number of Directors...........................................7
2.3 Initial Board of Directors....................................7
2.4 Director Approval Required For Certain Action.................8
2.5 Covenant to Vote.............................................10
2.6 No Voting or Conflicting Agreements..........................10
2.7 Actions Consistent with Agreement............................11
2.8 Conflict with Articles or Bylaws.............................11
ARTICLE III RESTRICTIONS ON TRANSFER OR ISSUANCE OF COMMON STOCK....12
3.1 General Prohibition on Transfers.............................12
3.2 Compliance with Securities Laws..............................12
3.3 Permitted Transfers..........................................13
3.4 Sales of Stock by Five Arrows; Company Sale Transactions.....13
3.5 Hospitality Partners' Right of First Offer...................15
3.6 Mandatory Exchange at the Option of Hospitality Partners.....16
ARTICLE IV EXCHANGE OF CLASS A PREFERRED STOCK.....................16
4.1 Definitions..................................................16
4.2 Exchange of Class A Preferred Stock..........................18
ARTICLE V LEGENDS ON STOCK CERTIFICATES...........................24
5.1 Legends on Stock Certificates................................24
ARTICLE VI CLOSING.................................................24
6.1 Closing......................................................24
ARTICLE VII REPRESENTATIONS AND COVENANTS...........................24
7.1 Representations of CHP.......................................24
7.2 Covenants of CHP.............................................25
7.3 Representations of Five Arrows...............................26
7.4 Covenants of Five Arrows.....................................26
7.5 Representations of Hospitality Partners......................26
<PAGE>
ARTICLE VIII MISCELLANEOUS...........................................28
8.1 Expenses.....................................................28
8.2 Injunctive Relief............................................28
8.3 Notice.......................................................28
8.4 Successors and Assigns.......................................28
8.5 Governing Law................................................29
8.6 Headings.....................................................29
8.7 Entire Agreement; Amendment..................................29
8.8 Inspection...................................................29
8.9 Counterparts.................................................29
<PAGE>
SUBSCRIPTION AND STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of February 24, 1999, by and among CNL
Hotel Investors, Inc., a Maryland corporation (the "Company"), Five
Arrows Realty Securities II L.L.C., a Delaware limited liability company
("Five Arrows"), CNL Hospitality Partners, LP, a Delaware limited
partnership ("Hospitality Partners", and together with Five Arrows,
individually and collectively, the "Capital Stockholders") and CNL
Hospitality Properties, Inc., a Maryland corporation ("CHP"), which
owns, through its wholly-owned subsidiaries, all of the outstanding
equity interests of Hospitality Partners. Five Arrows, Hospitality
Partners, CHP and any other person who shall hereafter acquire shares of
Common Stock, $.01 par value, of the Company (the "Common Stock") or
shares of Class A Preferred Stock, Class B Preferred Stock, Class C
Preferred Stock or Class D Junior Preferred Stock of the Company (the
"Preferred Stock" together with the Common Stock, the "Stock"), pursuant
to the provisions of, and subject to the restrictions and rights set
forth in, this Agreement are sometimes hereinafter referred to
individually as a "Stockholder" or, collectively, as the "Stockholders."
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Articles and the Articles Supplementary
(each as defined herein) of the Company.
RECITALS
Five Arrows, CHP, and Hospitality Partners have formed the
Company to acquire, hold, own, develop, maintain, operate, sell,
transfer, exchange and otherwise dispose of real property as a real
estate investment trust within the meaning of Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code").
A purpose of the Company is to acquire from various sellers
affiliated with Western International ("WI") 100% of the partnership
interests in partnerships that own certain hotels identified on Exhibit
1.3 hereto or, with the consent of Five Arrows, such other hotels as may
be substituted in lieu thereof of similar quality, characteristics and
subject to the same cross-default obligations as the hotels identified
on Exhibit 1.3 (the "Hotels") and to manage the Hotels (the "Business").
The Hotels are expected to be subject to leases with a new
entity affiliated with WI.
Concurrently herewith, Five Arrows and CHP are entering into
that certain Securities Purchase Agreement (the "CHP Securities Purchase
Agreement"), dated the date hereof, pursuant to which Five Arrows has
committed to purchase from time to time up to 1,578,947 shares of CHP
common stock, par value $.01 per share ("CHP Common Stock") for a
maximum aggregate purchase price of up to $14,999,996.50 (the "CHP
Investment Amount").
<PAGE>
Concurrently herewith, Five Arrows and CNL Hospitality
Advisors, Inc. ("Advisor"), an affiliate of CHP and Hospitality
Partners, are entering into that certain Securities Purchase Agreement,
dated the date hereof (together with the agreements contemplated
thereby, the "Advisor Investment Documents"), pursuant to which Advisor
will sell to Five Arrows 200 shares of Advisor Class A common stock.
Concurrently herewith, the Company and Advisor are entering
into the Management Agreement, dated the date hereof, pursuant to which
Advisor will provide to the Company the services provided therein with
respect to the Hotels.
In connection with the acquisition of the Hotels and to
provide a portion of the funds required therefor, the Stockholders have
agreed, among other things, to contribute to the Company up to a maximum
amount of $90,868,997.76, upon the terms and conditions set forth
herein.
The Company and the Stockholders also deem it in their
respective best interests to provide for the corporate governance of the
Company and desire to enter into this Agreement in order to effectuate
that purpose. The Stockholders also desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the Stock
(including Stock issued and outstanding as of the date hereof, as well
as Stock which may be issued hereafter), and to provide for certain
rights and obligations in respect thereto as hereinafter provided.
In consideration of the promises and of the terms and
conditions herein contained, the parties hereto mutually further agree
as follows:
ARTICLE I
CAPITAL STRUCTURE
1.1 Authorized Capital. As of the date hereof, the
------------------
Company represents and warrants that it has the following authorized
capital stock, none of which has been issued: (i) 99,776 shares of
Common Stock; and (ii) 151,854 shares of Preferred Stock of which 50,886
shares have been designated as 8% Class A Cumulative Preferred Stock,
liquidation preference $1,000 per share (the "Class A Preferred Stock"),
39,982 shares of 9.76% Class B Cumulative Preferred Stock, liquidation
preference $1,000 per share (the "Class B Preferred Stock"), 50,986
shares of 8% Class C Cumulative Preferred Stock, liquidation preference
$1,000 per share (the "Class C Preferred Stock"), and 10,000 shares of
Class D Junior Preferred Stock, liquidation preference $1,000 per share
(the "Class D Junior Preferred Stock"). The foregoing Stock has the
rights, privileges and limitations provided in the Articles of
Incorporation and the respective Articles Supplementary designating each
a class of preferred stock.
<PAGE>
1.2 Capital Commitments. By its execution hereof, (a)
-------------------
Five Arrows hereby commits to purchase, upon the terms and subject to
the conditions set forth herein, from the Company up to 50,886 shares of
Common Stock at a purchase price of $.01 per share, and up to 50,886
shares of Class A Preferred Stock at a purchase price of $1,000 per
share for a maximum aggregate purchase price of up to $50,886,508.86
(the "Five Arrows Capital Commitment"), and (b) Hospitality Partners
hereby commits to purchase, upon the terms and subject to the conditions
set forth herein, from the Company up to 48,890 shares of Common Stock
at a purchase price of $.01 per share and up to 39,982 shares of Class B
Preferred Stock at a purchase price of $1,000 per share for a maximum
aggregate purchase price of up to $39,982,488.90 (the "Hospitality
Partners Capital Commitment", and together with the Five Arrows Capital
Commitment, the "Capital Commitments").
1.3 Drawdowns of Capital Commitments of the Capital
-----------------------------------------------
Stockholders. Subject to Section 1.4 hereof, the Capital Stockholders
- ------------
shall be required to fund a portion of their Capital Commitments from
time to time, subject to the following terms and conditions:
(a) Each Capital Stockholder shall be required to
fund its Capital Commitment only in connection with and for the purposes
of facilitating (by the use of the proceeds for the acquisition price
and related unaffiliated third party expenses including, without
limitation, costs related to the incorporation of the Company, purchase
price deposits and fees and expenses incurred by the Company in
connection with the Senior Loan Facility) the acquisition of a Hotel
identified on Exhibit 1.3 attached hereto (each Hotel acquisition and
the related
- -----------
acquisition expenses thereof, a "Portfolio Investment") by the Company
pursuant to the related Hotel purchase agreement.
(b) The Company shall provide to each Capital
Stockholder notice (a "Notice of Drawdown") at least 10 business days
prior to the ------------------
date any portion of the Capital Commitment is required (a "Drawdown").
Each Notice of Drawdown shall give in reasonable detail a description of
the Portfolio Investment, the material terms and conditions of the
acquisition, any purchase price deposit or other expenditure, and the
proposed closing date of such Portfolio Investment. The Notice of
Drawdown shall specify the aggregate purchase price of the Portfolio
Investment and the portion of such Capital Stockholder's Capital
Commitment required in connection with such Drawdown (determined in
accordance with subparagraph (d) below) and number of shares of Class A
<PAGE>
or Class B Preferred Stock, as applicable, and Common Stock to be
purchased by such Capital Stockholder in proportion to such Capital
Stockholder's Capital Commitment.
(c) Each Capital Stockholder shall deliver to the
Company the portion of such Capital Stockholder's Capital Commitment
specified in the Notice of Drawdown, in cash or other immediately
available funds, on the date of Drawdown specified in the Notice of
Drawdown. Upon receipt of such portion of such Capital Stockholder's
Capital Commitment, the Company shall deliver to each Capital
Stockholder that number of shares of Class A or Class B Preferred Stock,
as applicable, and Common Stock equal to the amount specified in the
Notice of Drawdown.
(d) Subject to Section 1.4, the required portion
of each Capital Stockholder's Capital Commitment shall be equal to the
lesser of (A) such Capital Stockholder's pro rata share (based on
remaining
--- ----
Capital Commitments of the Capital Stockholders) of the aggregate amount
required for the Company to acquire such Portfolio Investment (or to
make the purchase price deposit or other expenditure which is the
subject of the applicable Notice of Drawdown) and (B) such Capital
Stockholder's remaining Capital Commitment.
(e) No Capital stockholder shall be required to
contribute to the Company any portion of such Capital Stockholder's
Capital Commitment after December 31, 1999.
1.4 Default and Consequences of Default. (a) In the
-----------------------------------
event that a Stockholder fails to contribute to the Company its required
Capital Commitment by the date specified in the Notice of Drawdown (a
"Default") any portion of the Capital Commitment required to be
contributed (a "Defaulted Capital Commitment") by such Stockholder (a
"Defaulting Stockholder"), the non-Defaulting Stockholder, in its sole
discretion, may take or cause to be taken any and all of the following
actions individually but not in combination:
(i) loan to the Company an amount equal to
the Defaulted Capital Commitment, bearing an interest rate equal to the
prime rate as announced by Citibank, N.A. on the date of such loan plus
400 basis points per annum and on such other terms and conditions as are
satisfactory to the non-Defaulting Stockholder;
<PAGE>
(ii) contribute to the Company an amount equal
to the Defaulted Capital Commitment in exchange for additional shares of
either Class A or Class B Preferred Stock as determined by the non-
Defaulting Stockholder (in either case at a purchase price of $1,000 per
share) and Common Stock (calculated as provided in Section 1.4(b)); or
(iii) notwithstanding any provision to the
contrary contained in this Agreement, arrange for and cause the Company
to borrow from a third party an amount not to exceed the Defaulted
Capital Commitment.
(b) (i) If the non-Defaulting Stockholder funds
such Defaulted Capital Commitment (or causes it to be funded) pursuant
to this Section 1.4, then the percentage ownership of the Common Stock
owned by the non-Defaulting Stockholder (the "Default Adjusted
Percentage") shall be equal to the sum of (A) the product of (1) 200%
times (2) a fraction the numerator of which is the Defaulted Capital
Commitment and the denominator of which is $90,868,000 plus (B) 51%, if
Five Arrows is the non-Defaulting Stockholder, or 49%, if Hospitality
Partners is the non-Defaulting Stockholder, as the case may be. The
percentage ownership of Common Stock owned by the Defaulting
Stockholder, if any, shall be, after giving effect to the Default
Adjusted Percentage, to the extent a positive number, 100% minus the
Default Adjusted Percentage. The Company shall promptly issue to the
non-Defaulting Stockholder, for no additional consideration, such shares
of Common Stock as are necessary to implement this Section 1.4(b)(i).
(ii) Notwithstanding the foregoing, if the
Defaulting Stockholder shall contribute within 60 days of the date
originally specified in the Notice of Drawdown an amount equal to all of
the Defaulted Capital Commitment, plus an amount equal to 10% of such
Defaulted Capital Commitment, plus, if any, the amount of premiums,
prepayments penalties, charges and reasonable out-of-pocket expenses
incurred by the Company and the non-Defaulting Stockholder, as the case
may be, in connection with the alternative financing arranged pursuant
to Section 1.4(a) above (the "Increased Capital Commitment"), then the
percentage ownership of Common Stock by the Defaulting Stockholder and
the non-Defaulting Stockholder shall revert back to the amount it would
have been without giving effect to the adjustment provided in Section
1.4(b)(i), and any shares of Preferred Stock and Common Stock purchased
by the non-Defaulting Stockholder by contributing the Defaulted Capital
Commitment shall be canceled (and in connection therewith the Company
shall refund to the non-Defaulting Stockholder the Defaulted Capital
Commitment) and the Defaulting Stockholder shall receive the class and
number of shares of Preferred Stock and Common Stock that such
Stockholder would have received had no such default occurred. Within 5
days of the receipt of the Increased Capital Commitment by the Company,
<PAGE>
the Company shall pay to the non-Defaulting Stockholder the excess, if
any, of the Increased Capital Commitment over (A) any premiums,
prepayment penalties, charges and out-of-pocket expenses reasonably
incurred and paid by the Company in connection with the alternative
Financing arranged pursuant to clause (iii) above and (B) the Defaulted
Capital Commitment.
(c) In no event shall Hospitality Partners be
deemed a Defaulting Stockholder to the extent the amount of any
Defaulted Capital Commitment is less than or equal to the amount that
Five Arrows has defaulted on its obligation to contribute capital to CHP
in accordance with and to the extent required by the CHP Securities
Purchase Agreement.
1.5 Conditions to each Drawdown.
---------------------------
(a) The obligation of Five Arrows to make
contributions pursuant to any Notice of Drawdown shall be subject to the
following conditions precedent (and, if any such condition is not
satisfied, other than solely due to actions or omissions of Five Arrows,
then Five Arrows shall not be deemed to be a Defaulting Stockholder with
respect to such Notice of Drawdown):
(i) no default by Hospitality Partners in the
observance or performance of any material agreement contained in this
Agreement shall have occurred and be continuing;
(ii) no Event of Default under Section 11(a)
of the Articles Supplementary designating the Class A Preferred Stock
shall have occurred and be continuing;
(iii) no default by the Company in the
observance or performance of any material agreement contained in this
Agreement or the Articles Supplementary designating the Class A
Preferred Stock shall have occurred and be continuing;
(iv) no default by CHP in the observance or
performance of any material agreement contained in the CHP Securities
Purchase Agreement or the agreements contemplated thereby shall have
occurred and be continuing;
(v) all documents related to the financing of
the Hotels by the Company and all other material documents required to
be delivered by the Company thereunder or in connection with the
transactions contemplated hereunder and thereunder and any material
changes, amendments, modifications or waivers thereto shall have been
approved by Five Arrows, in its sole discretion;
<PAGE>
(vi) all documents related to the leases of
the Hotels and all the governing documents relating to each of the
tenants thereunder shall have been approved by Five Arrows, in its sole
discretion;
(vii) the acquisition of the Portfolio
Investment to which such Notice of Drawdown relates shall be made by the
Company in all material respects in accordance with the purchase
agreement related to such acquisition and any material amendment,
modification, changes or waiver thereto shall have been approved by each
Stockholder;
(viii) no material default or breach under any
Advisor Investment Document shall have occurred and be continuing and
such agreements shall be in full force and effect; and
(ix) the Company shall have purchased
officers' and directors' liability insurance in such amounts and on such
terms as are customary for entities engaged in the same or similar
business as the Company and as are reasonably acceptable to Five Arrows.
(b) The obligation of Hospitality Partners to make
contributions pursuant to any Notice of Drawdown shall be subject to the
following conditions precedent (and, if any such condition is not
satisfied, other than solely due to actions or omissions of Hospitality
Partners, then Hospitality Partners shall not be deemed to be a
Defaulting Stockholder with respect to such Notice of Drawdown):
(i) no default by Five Arrows in the
observance or performance of any material agreement contained in this
Agreement shall have occurred and be continuing;
(ii) in the event that the directors
designated by Five Arrows constitute a majority of the Board (as defined
herein), no default by the Company in the observance or performance of
any material agreement contained in the Articles Supplementary
designating the Class B Preferred Stock shall have occurred and be
continuing;
(iii) no default by Five Arrows in the
observance or performance of any material agreement contained in the CHP
Securities Purchase Agreement or the agreements contemplated thereby
shall have occurred and be continuing;
(iv) in the event that the directors
designated by Five Arrows constitute a majority of the Board, the
acquisition of the Portfolio Investment to which such Notice of Drawdown
<PAGE>
relates shall be made by the Company in all material respects in
accordance with the purchase agreement related to such acquisition and
any material amendment, modification, changes or waiver thereto shall
have been approved by each Stockholder;
(v) no material default or breach under any
Advisor Investment Document shall have occurred and be continuing and
such agreements shall be in full force and effect; and
(vi) the Company shall have purchased
officers' and directors' liability insurance in such amounts and against
such risks as is customary for an entity engaged in the same or similar
business as the Company.
1.6 Purchase of Class D Junior Preferred Stock. If a
------------------------------------------
Distribution Nonpayment Event under the Articles Supplementary
designating the Class A Preferred Stock occurs and the election has been
made to increase the Distribution Rate by 2.5% per annum as provided in
Section 11(A) of such Articles Supplementary, then Hospitality Partners
may, if it desires, within 15 days of such election purchase from the
Company a sufficient number of shares of Class D Junior Preferred Stock
(and no more than such number rounded to the nearest whole share) as is
necessary to permit the Company to pay to the holders of Class A
Preferred Stock the defaulted amount of any such distribution and shall
be entitled, if it desires, to purchase on or before any subsequent
Distribution Payment Date on the Class A Preferred Stock a sufficient
number of shares of Class D Junior Preferred Stock (and no more than
such number rounded to the nearest whole share) to permit the Company to
pay the full distribution due on such Distribution Payment Date in
respect of the outstanding Class A Preferred Stock. The Company shall
promptly distribute, in cash, the proceeds of any sale of Class D Junior
Preferred Stock to the holders of shares of Class A Preferred Stock.
ARTICLE II
CORPORATE GOVERNANCE
2.1 Articles of Incorporation and By-laws. The Articles
-------------------------------------
of Incorporation (the "Articles"), the Articles Supplementary to the
Articles (the "Articles Supplementary") and the By-laws of the Company
(the "By-laws") are annexed hereto as Schedule 2.1A, Schedule 2.1B and
------------- -------------
Schedule 2.1C, respectively.
- -------------
<PAGE>
2.2 Number of Directors. The Company shall be governed by
-------------------
a Board of Directors (the "Board") initially consisting of three (3)
members. The number of directors may thereafter be increased or
decreased in accordance with the Certificate and the By-laws and the
provisions of this Agreement.
2.3 Initial Board of Directors.
--------------------------
(a) Initially, and until the next meeting of
stockholders, the Board shall consist of the following directors:
James M. Seneff, Jr.
Robert A. Bourne
Matthew W. Kaplan
Each initial director shall hold his office until the 1999
annual meeting of stockholders of the Company (or a special meeting of
stockholders in lieu thereof) and until his successor is duly elected
and qualified or until his earlier resignation or removal. Each Capital
Stockholder agrees to vote all of its shares of Common Stock and use its
best efforts to elect to the Board at the 1999 annual meeting of
stockholders of the Company and subsequent annual meetings or at any
special stockholders' meeting at which directors are to be elected
(except as otherwise provided in this Section 2.3) two directors to be
designated by Hospitality Partners, and one director to be designated by
Five Arrows; provided that each such director designated pursuant to
this Section 2.3(a) is reasonably acceptable to the Capital Stockholder
not designating such director. Each Capital Stockholder agrees to take
all actions necessary to vote all of its shares of Common Stock and use
its best efforts to elect a successor to such director designated by the
Capital Stockholder or Capital Stockholders that designated such former
director; provided that such successor is reasonably acceptable to the
non-designating Capital Stockholder. Except as otherwise provided
herein and subject to the rights of holders of one or more classes or
series of Preferred Stock to elect or remove one or more directors, any
director or the entire Board may be removed from office at any time with
cause by the affirmative vote of a majority of the votes of all shares
of capital stock of the Company then outstanding entitled to vote in the
election of directors, voting as a single class. Any director shall be
removed upon a showing of cause by a Capital Stockholder that did not
designate such director reasonably satisfactory to the Capital
Stockholder that designated such director, and the designating Capital
Stockholder agrees to take all actions necessary to vote all of its
shares of Common Stock and use its best efforts to remove such director.
<PAGE>
(b) Notwithstanding the preceding paragraphs of
this Section 2.3, (i) if an Event of Default (as defined in the Articles
Supplementary designating the Class A Preferred Stock ) shall have
occurred and the holders of Class A Preferred Stock elect, under the
Articles Supplementary classifying such class, the remedy of designating
two (2) additional directors, the number of directors constituting the
Board shall be increased by two (2) directors, and the holders of shares
of Class A Preferred Stock voting as a single class shall be entitled to
elect the two additional directors to serve on the Board until no Event
of Default is continuing (at which time the holders of Class A Preferred
Stock shall vote to remove such additional directors) or (ii) if
Hospitality Partners is the Defaulting Stockholder in connection with a
Defaulted Capital Commitment, the number of directors constituting the
Board shall be increased by two (2) directors, and the holders of shares
of Class A Preferred Stock voting as a single class shall be entitled to
elect the two additional directors to serve on the Board as a permanent
and fixed right of the Class A Preferred Stock; provided that such right
shall terminate (at which time the holders of Class A Preferred Stock
shall vote to remove such additional directors) if Hospitality Partners
pays the Increased Capital Commitment in accordance with Section 1.4.
Any director elected to the Board by the holders of Class A
Preferred Stock shall be removed, with or without cause, only by the
affirmative vote of a majority of votes of all shares of Class A
Preferred Stock then outstanding entitled to vote thereon or in
accordance with the provisions of the Articles Supplementary of such
preferred stock.
2.4 Director Approval Required For Certain Action.
---------------------------------------------
(a) Subject to paragraph (b) of this Section 2.4,
so long as at least 5% of the shares of Class A Preferred Stock issued
pursuant to the terms hereof remain outstanding, the Company hereby
agrees that none of the following actions may be taken by the Company
without the consent of Five Arrows or the director(s) of the Company
designated by Five Arrows:
(i) the sale, lease, assignment, transfer or
other disposition of any of the Company's property, business or assets
(including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired and whether by distribution or
otherwise, or, in the case of any Subsidiary, the issuance or sale any
shares of such Subsidiary's Capital Interest to any Person other than
the Company or any wholly owned Subsidiary of the Company or the
entering into a merger or consolidation with another Person, other than
sales of furniture, fixtures and equipment (i) in the ordinary course of
<PAGE>
business and not exceeding in the aggregate $300,000 in any twelve month
period, or (ii) that the Board deems necessary to insure that the rents
received by the Company from personal property leased by the Company
with real property do not exceed 10%, as provided in the regulations
promulgated under Section 512 of the Code;
(ii) the acquisition or leasing of assets
(other than pursuant to the leases or management agreements related to
the management of the Hotels) or Investments by the Company other than
(A) the Portfolio Investments and (B) Investments in U.S. government
backed securities or "no-load" mutual funds that are restricted to
investing solely in U.S. government backed securities of reserves taken
for working capital accounts;
(iii) the material amendment or modification of
the Management Agreement (the "Management Agreement"), dated the date
hereof, between the Company and CNL Hospitality Advisors, Inc.;
(iv) the discontinuance or disqualification of
the Company's status as a Real Estate Investment Trust within the
meaning of the Code; provided, however, that the consent of the
director(s) of the
-------- -------
Company designated by Hospitality Partners would be required if CHP
would (with or without the passage of time) be disqualified as a Real
Estate Investment Trust thereby and;
(v) the incurrence of Indebtedness, other
than (A) Indebtedness outstanding pursuant to the Senior Loan Facility
as in existence on the Effective Date and (B) other Indebtedness in
connection with (1) capital expenditures so long as such Indebtedness
incurred for such capital expenditures is, in the aggregate, in an
amount not exceeding $1,500,000 at any one time outstanding or (2) the
payment of distributions required for the Company to maintain its REIT
status and (C) Permitted Refinancing.
(b) The Company hereby agrees that none of the
following actions may be taken by the Company without the consent of
both (1) Five Arrows or the directors of the Company designated by Five
Arrows, and (2) Hospitality Partners or the directors of the Company
designated by Hospitality Partners:
(i) the entering into or conducting any
business other than the Business and matters reasonably related to the
Business;
<PAGE>
(ii) even if the Articles of Incorporation
were amended to provide otherwise, for so long as the Company is or may
be a "pension-held REIT" as defined in Section 856(h)(3)(D) of the Code
as determined by the counsel to the holders of a majority of shares of
Class A Preferred Stock, engaging in any business or taking any action
that would result in the Company realizing "unrelated business taxable
income" within the meaning of Section 512 of the Code, if the Company
were a "qualified trust' as defined in Section 856(h)(3)(E) of the Code;
and
(iii) the entering into any transaction or
series of related transactions (including, without limitation, any
purchase, sale, lease or exchange of property or the rendering of any
service or the making of any Investment) with or in any affiliate other
than (A) as provided by the Management Agreement and (B) leases to
tenants affiliated with Rothschild Realty, Inc.
2.5 Covenant to Vote.
----------------
(a) Each Stockholder shall appear in person or by
proxy at any annual or special meeting of stockholders for the purpose
of establishing a quorum and shall vote all of the shares of Common
Stock owned by such Stockholder upon any matter in a manner so as to be
consistent and not in conflict with, and to implement, the terms of this
Agreement. Each Stockholder also agrees to execute and deliver
unanimous written consents in lieu of special meetings of stockholders
to implement the terms of this Agreement if requested to do so by any
Stockholder.
(b) In accordance with the provisions of Section
2.5(a) above and subject to Section 3.5 below, (i) if (A) an Event of
Default under the Articles Supplementary designating the Class A
Preferred Stock has occurred, (B) CHP shall breach or default under any
provision of the CHP Securities Purchase Agreement, or (C) by the sixth
anniversary of this Agreement, (1) shares of CHP Common Stock have not
been listed on a recognized U.S. national securities exchange or
included in the National Association of Securities Dealers Inc.-National
Market System, or (2) shares of CHP Common Stock shall have been so
listed or included but shall have failed to achieve a 30 trading day
average trading price per share (during any 30-day period) of $12.50 or
greater, or (3) upon exchange of all shares of Class A Preferred Stock
held by Five Arrows into shares of CHP Common Stock, Five Arrows would
own more than 10% of the outstanding shares of CHP Common Stock (each of
the events described in clause (1), (2) and (3) individually and
collectively, a "Trigger Date Event"), then each Stockholder shall, at
the request of holders of a majority of the shares of Class A Preferred
<PAGE>
Stock, promptly vote all shares of Common Stock or Preferred Stock owned
by such Stockholder to liquidate, dissolve or wind-up the Company or
(ii) if the holders of a majority of Class A Preferred Stock desire to
sell, transfer or otherwise dispose of any or all of the Hotels (a
"Hotel Sale"), then each Stockholder shall, at the request of such
holders of Class A Preferred Stock, promptly vote all shares of Common
Stock and Preferred Stock owned by such Stockholder in favor of the
resolution proposed by the holders of a majority of the Class A
Preferred Stock to sell, transfer or otherwise dispose of any or all
such Hotels. Each of the Stockholders hereby agrees that in the event
of a liquidation, dissolution or winding-up of the Company, such
liquidation, dissolution or winding-up shall be completed and the
proceeds therefrom shall be distributed within two years from the date
thereof.
(c) If Five Arrows is a Defaulting Stockholder and
has not cured its default within 60 days, then at the request of the
holders of shares of Class B Preferred Stock, Five Arrows shall promptly
vote all shares of Common Stock and Class A Preferred Stock then owned
by Five Arrows in favor of the liquidation, dissolution or winding-up of
the Company.
2.6 No Voting or Conflicting Agreements. No Stockholder
-----------------------------------
shall grant any proxy or enter into or agree to be bound by any voting
trust with respect to its Common Stock, nor shall any Stockholder enter
into any stockholder agreements or arrangements of any kind with any
person with respect to Preferred Stock or Common Stock, inconsistent
with the provisions of this Agreement (whether or not such agreements
and arrangements are with other Stockholders or holders of Preferred
Stock or Common Stock that are not parties to this Agreement). The
foregoing prohibition includes, but is not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of
shares of Preferred Stock or Common Stock. No Stockholder shall act,
for any reason, as a member of a group or in concert with any other
persons in connection with the acquisition, disposition or voting of
Preferred Stock or Common Stock in any manner which is inconsistent with
the provisions of this Agreement. Actions taken by the Board or the
Stockholders to find purchasers to acquire shares of capital stock or to
find purchasers to acquire the Company as contemplated by this Agreement
shall not be deemed prohibited hereunder.
2.7 Actions Consistent with Agreement. Neither the
---------------------------------
Company nor the Stockholders shall circumvent this Agreement by taking
any action indirectly through a subsidiary, affiliate or otherwise that
would be prohibited under this Agreement.
<PAGE>
2.8 Conflict with Articles or By-laws. In the event of
---------------------------------
any conflict or inconsistency between or among the provisions of this
Agreement and the Articles, Articles Supplementary or By-laws in effect
at any time during the term of this Agreement, the provisions of this
Agreement shall govern and be deemed controlling and each Stockholder
agrees to vote all of its or his shares of capital stock and to cause
the Board to authorize and approve such amendments to the Articles
and/or the By-laws as shall resolve and remove any such conflicts or
inconsistencies.
ARTICLE III
RESTRICTIONS ON TRANSFER OR ISSUANCE OF COMMON STOCK
3.1 General Prohibition on Transfers.
--------------------------------
(a) Notwithstanding anything to the contrary set
forth herein, (i) no Stockholder shall directly or indirectly Transfer
(as defined in the Articles) any shares of Preferred Stock without at
the same time transferring a proportionate number of shares of Common
Stock then held by it, and vice versa, and (ii) except as provided in
Section 3.3 (Permitted Transfers), 3.4 (Sales of Preferred and Common
Stock by Five Arrows and Company Sale Transactions), and 3.5
(Hospitality Partners' Right of First Refusal), and except for sales
pursuant to any registration statement which becomes effective under the
Securities Act of 1933, as amended (the "Securities Act"), no
Stockholder shall directly or indirectly Transfer any Stock during the
term hereof, unless such Transfer shall have been effected in accordance
with the terms of this Agreement or with the prior written consent of
all of the Stockholders.
(b) Except in the event of (i) the Transfer of all
of the then outstanding Preferred Stock and Common Stock of the Company
to one or more purchasers in a contemporaneous transaction, (ii) the
merger or consolidation of the Company, (iii) the sale or other transfer
of all or substantially all of the assets and business of the Company or
(iv) any similar transaction resulting in a change in control of the
Company, in each case consummated with another person or entity which is
not an affiliate of the Company prior to the consummation of such
transaction (each such transaction being a "Company Sale Transaction"),
no Transfer by any Stockholder of any Preferred Stock or Common Stock
permitted under this Agreement shall be effective at any time prior to
the termination of this Agreement unless the transferee shall have
executed an appropriate document confirming that (i) the transferee
takes such Stock subject to all of the terms and conditions of this
Agreement and (ii) the certificates or other instruments representing
<PAGE>
such Stock shall bear a legend that such Stock is subject to the terms
of this Agreement, and such document shall have been delivered to the
Board prior to such transferee's acquisition of Stock. The Company
shall not transfer upon its books any Stock held or owned by any
Stockholder to any person except in accordance with this Agreement.
3.2 Compliance with Securities Laws. Unless otherwise
-------------------------------
explicitly provided herein, except in connection with a sale of Stock
included in a registered public offering in accordance with the
Securities Act, or sales of Stock pursuant to Rule 144 thereunder, no
Stockholder shall Transfer any Stock to any person (regardless of the
manner in which such Stockholder initially acquired such Stock) at any
time prior to the termination of this Agreement unless the certificates
or other instruments representing such securities bear legends as
provided in Article IV to the effect that such securities are not
registered under the Securities Act and are subject to the terms of this
Agreement. No Stockholder shall Transfer any Stock at any time if such
action would constitute a violation of any state securities or blue sky
laws or a breach of the conditions to any exemption from registration of
Stock under any such laws or a breach of any undertaking or agreement of
such Stockholder entered into pursuant to such laws or in connection
with obtaining an exemption thereunder.
3.3 Permitted Transfers. Except as otherwise provided in
-------------------
this Agreement, the restrictions contained in Section 3.1(a) of this
Agreement with respect to Transfers of Stock shall not apply to: (a)
any Transfer to a Stockholder or to a designee of a Stockholder
permitted by this Agreement; (b) any Transfer to any wholly-owned
subsidiary or parent entity of any Stockholder, or any other wholly-
owned subsidiary of such parent entity (it being understood with respect
to a wholly-owned subsidiary or parent entity or other wholly-owned
subsidiary of such parent entity that the later sale of such subsidiary
or any shares of capital stock of such subsidiary or parent entity or
any other wholly-owned subsidiary of such parent entity would constitute
an indirect sale of Stock by such corporate Stockholder which sale may
only be made within the terms of this Agreement); (c) any Transfer that
would not violate the Company's obligations under Section 2.1 of the
Consent and Amendment to Management Agreements, each dated as of
February 24, 1999, among the Company, the respective tenant and the
respective property of manager named therein by Five Arrows to a third
party (a "Section 3.3.(c) Transferee") which has a similar reputation
and financial stability to that of Five Arrows and which is not a direct
competitor of CHP; (d) any Transfer to the members, partners or
stockholders of any Stockholder; (e) any Transfer to a party to this
Agreement; and (f) any Transfer approved by the unanimous vote of the
<PAGE>
Board; provided, that (i) in each of clauses (a) through (f), such
-------- ----
Transfer otherwise complies with the provisions of this Agreement, with
each transferee, donee or distributee (a "Permitted Transferee")
agreeing in writing to take subject to and to comply with all of the
provisions of this Agreement in accordance with Section 3.1(b) and each
such Permitted Transferee shall be deemed to take such securities
subject to all of the other provisions of this Agreement, and shall be
deemed to take such securities subject to the restrictions endorsed
thereon, and any certificates issued by the Company to reflect such
transfer shall be appropriately legended, and (ii) in the case of a
Transfer by a corporate Stockholder to a wholly-owned subsidiary or
parent entity or any other wholly-owned subsidiary of such parent
entity, such subsidiary or parent entity or other wholly-owned
subsidiary of such parent entity shall agree to have its shares of
equity stock legended to note the restrictions on transfer contained in
this Agreement as if they were Stock, any Permitted Transferee so
acquiring Stock, as a successor or assignee hereunder, be deemed to take
such securities subject to all of the other provisions of this
Agreement, and shall be deemed to take such securities subject to the
restrictions endorsed thereon, and any certificates issued by the
Company to reflect such Transfer shall be appropriately legended.
3.4 Sales of Stock by Five Arrows; Company Sale
-------------------------------------------
Transactions.
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(a) Subject to the provisions of paragraph (b) of
this Section 3.4 relating to Company Sale Transactions (as defined in
Section 3.1(b) hereof) and Section 3.5, at any time from and after a
Trigger Date Event if Five Arrows seeks to Transfer any of its shares of
Common Stock and an equal number of shares of Class A Preferred Stock (a
"Share Sale Transaction") to one or more unaffiliated third parties
(other than a Permitted Transferee) (each an "Independent Third Party"),
Five Arrows shall give Hospitality Partners and the other Stockholders,
(the "Remaining Stockholders") a written notice which specifies the
identity of the proposed purchaser(s), the number of shares of Common
Stock and Class A Preferred Stock proposed to be purchased and the
consideration proposed to be paid by such purchaser(s) for each share of
Common Stock and Class A Preferred Stock (the "Share Sale Notice"). If
the Share Sale Notice so directs, the Remaining Stockholders shall
Transfer, on the same terms and conditions as Five Arrows proposes to
Transfer shares of Common Stock and Class A Preferred Stock, the number
of shares of Common Stock and Preferred Stock, owned by the Remaining
Stockholders (the "Included Shares") which is calculated in the manner
specified the second succeeding sentence. If the Share Sale Notice does
<PAGE>
not direct the Remaining Stockholders to include their shares in the
proposed Transfer, then the Remaining Stockholders shall have the
option, exercisable in writing no later than within fifteen (15) days
following the delivery to the Remaining Stockholders of the Share Sale
Notice, to require Five Arrows to include in such proposed Transfer, on
the same terms and conditions as Five Arrows proposes to Transfer its
shares of Common Stock and Class A Preferred Stock, the Included Shares
of such Remaining Stockholders, calculated in the manner specified in
the following sentence. The Included Shares of any Remaining
Stockholders shall equal the number which is determined by multiplying
the number of shares of Common Stock or Preferred Stock owned by the
Remaining Stockholders on the date that the Sale Notice is delivered by
a fraction, the numerator of which is the number of shares of Common
Stock or Preferred Stock which the proposed purchaser desires to
purchase and the denominator of which is the total number of shares of
Common Stock or Preferred Stock which are outstanding on the date that
the Sale Notice is mailed. In the event that the number so determined
includes a fraction which is greater than .50, the Included Shares shall
be the next larger whole integer and in the event that the number so
determined includes a fraction which is equal to or less than .50, the
Included Shares shall be the next smaller whole integer. Without
limiting the generality of the preceding sentence, if Five Arrows
proposes to Transfer all shares owned by Five Arrows then the Included
Shares would include all shares owned by the Remaining Stockholder. The
net consideration per share of Common Stock or Preferred Stock sold in
accordance with this paragraph (a) shall be computed based on (and, to
the extent available, equal to) the amount that would be payable to the
Stockholders upon a liquidation of the Company. All fees and expenses
associated with any Transfer of shares of Common Stock or Preferred
Stock pursuant to this Section 3.4(a) shall be shared by the
Stockholders in proportion to the respective number of their shares of
Common Stock or Preferred Stock which are included in such Transfer.
Subject to the provisions of Section 3.4(d), the Remaining Stockholders
shall cooperate and take all necessary action to facilitate consummation
of any Share Sale Transaction, including the Transfer of all Included
Shares owned by the Remaining Stockholders.
(b) Subject to the provisions of Section 3.5, at
any time from and after a Trigger Date Event, Five Arrows shall have the
right to effectuate a Company Sale Transaction to or with an Independent
Third Party. Five Arrows may propose a Company Sale Transaction by
giving the Company and the Board notice of its intention to commence an
initiative to seek a Company Sale Transaction to an Independent Third
Party. To the extent Five Arrows seeks to provide any potential
purchasers with confidential information regarding the Company or any of
its subsidiaries, the Company and all other Stockholders shall provide
<PAGE>
to such potential purchasers any information regarding the Company and
its subsidiaries, if any, requested by Five Arrows, provided that Five
Arrows shall, on behalf of the Company, obtain confidentiality
agreements in customary form signed by such potential purchasers. Five
Arrows shall deliver written notice to the Company setting forth the net
consideration per share of Common Stock and Preferred Stock to be paid
in connection with any such Company Sale Transaction and the terms of
payment thereof (the "Company Sale Notice") and the Company shall
promptly upon receipt thereof deliver a copy thereof to the Remaining
Stockholder. If the Company Sale Transaction is structured as a sale of
assets, the net consideration per share of Common Stock shall be
computed based upon the consideration that would be payable to the
Stockholders upon a liquidation of the Company immediately after such
sale of assets, taking into account any taxes payable by the Company and
any liabilities retained by the Company, in connection with such sale of
assets. The Remaining Stockholders shall cooperate and take all
necessary action including without limitation, voting their shares in
favor of such transaction and transfer of all shares owned by the
Remaining Stockholders to facilitate consummation of any Company Sale
Transaction.
(c) In the event of any proposed Share Sale
Transaction or Company Sale Transaction, the Company and all
Stockholders shall cooperate in all reasonable respects with the efforts
of Five Arrows in connection with any such proposed transaction,
including without limitation, by voting all Common Stock to approve such
transaction and agreeing to sell all Common Stock or Preferred Stock
owned by them in such transaction.
3.5 Hospitality Partners' Right of First Offer.
------------------------------------------
(a) In the event Five Arrows seeks to (i) effect a
Hotel Sale, or a Share Sale Transaction or a Company Sale Transaction,
(ii) at any time after a Trigger Date Event, liquidate, dissolve or
wind-up the Company or (iii) Transfer shares to a Section 3.3(c)
Transferee, Five Arrows shall deliver a notice notifying Hospitality
Partners of its intent to effect such a transaction.
(b) Hospitality Partners shall have the option
(the "Option"), exercisable in writing (the "Option Notice") no later
than 15 days following the delivery to Hospitality Partners of notice by
Five Arrows, to agree to:
<PAGE>
(i) in the case of a Share Sale Transaction
or a Transfer to a Section 3.3 Transferee, purchase all or a portion of
such shares of Preferred Stock and Common Stock proposed to be disposed
of by Five Arrows for an amount equal to that which Five Arrows would
have received had the Company sold all of its assets and liquidated and
distributed the net proceeds to the Stockholders;
(ii) in the case of a Company Sale Transaction
or a liquidation, dissolution or winding-up of the Company, purchase all
shares of Preferred Stock and Common Stock then held by Five Arrows for
an amount equal to that which Five Arrows would have received had the
Company sold all of its assets and liquidated and distributed the net
proceeds to the Stockholders; or
(iii) in the case of a Hotel Sale, purchase
such number of shares of Preferred Stock and Common stock then held by
Five Arrows that would have been redeemed pursuant to the Mandatory
Redemption provisions of the Articles Supplementary applicable to Asset
Sales (as defined therein) had such Hotel Sale been an Asset Sale.
The amount payable to Five Arrows pursuant to this Section 3.5
shall be determined by a nationally recognized investment bank engaged
by the Company and selected by Five Arrows from a list of three
investments banks selected by Hospitality Partners from the investment
banks listed on Exhibit 3.5 attached hereto, whose determination shall
be final and binding on the parties.
(c) If at any time during and up until the third
anniversary of this Agreement Hospitality Partners has elected to
exercise the Option, Hospitality Partners shall pay to Five Arrows upon
delivery of the Option Notice $500,000 in cash, which shall be credited
against the purchase price of such shares of Stock, and shall consummate
such purchase within 90 days after delivery of the Option Notice to Five
Arrows. If at any time after the third anniversary of this Agreement
Hospitality Partners has elected to exercise the Option, Hospitality
Partners shall pay to Five Arrows upon delivery of the Option Notice
$200,000 in cash, which shall be credited against the purchase price of
such shares of Stock, and shall consummate such purchase within 45 days
after delivery of the Option Notice to Five Arrows. In the event
Hospitality Partners fails to consummate such purchase within the
applicable period, the payment made to Five Arrows upon delivery of the
Option Notice shall be forfeited.
(d) In the event Hospitality Partners does not
elect to purchase the shares of Stock held by Five Arrows within such
15-day period, Five Arrows shall be entitled to dispose of such shares
of Stock, effect a Company Sale Transaction or Hotel Sale, or liquidate,
dissolve or wind-up the Company, as the case may be, in accordance with
the terms hereof.
<PAGE>
3.6 Mandatory Exchange at the Option of Hospitality
-----------------------------------------------
Partners. Hospitality Partners shall have the option, exercisable in
- --------
writing, to require Five Arrows to exchange all shares of Class A
Preferred Stock held by Five Arrows into shares of CHP Common Stock in
accordance with the terms of Article IV hereof, if (i) shares of CHP
Common Stock are listed on a recognized U.S. national securities
exchange or over-the-counter market, (ii) the 30 day average trading
price per share of the CHP Common Stock is $12.50 or greater (during any
30-day period) and (iii) after such exchange Five Arrows would not own
more than 10% of the outstanding shares of CHP Common Stock.
ARTICLE IV
EXCHANGE OF CLASS A PREFERRED STOCK
4.1 Definitions. For purposes of this Article IV, the
-----------
following terms shall have the following meanings:
"Adjusting Distribution" shall have the meaning set forth in
paragraph (d)(ii) of Section 4.2 hereof.
"CHP Common Stock" shall mean the Common Stock, par value $.01
per share, of CHP.
"Capital Interests" shall mean any shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation (other than the Class A Preferred Stock of the
Company), any and all units or interests, participations (however
designated) or other equivalents of a partnership, and any and all
equivalent ownership interests in a Person (other than a partnership or
a corporation) and any and all warrants or options to purchase any of
the foregoing.
"Company Operation Funds" of the Company for any Reported
Quarter, shall mean the sum of (a) $20, unless no cash dividends have
been paid to the holders of shares of Class B Preferred Stock with
respect to such Reported Quarter, in which event the lesser of $20 and
the amount of cash dividends per share of Class A Preferred Stock
actually paid to the holders of shares of Class A Preferred Stock during
such Reported Quarter, (b) the amount of cash dividends per share
actually paid to the holders of shares of Common Stock who also hold
shares of Class A Preferred Stock during such Reported Quarter, (c) the
quotient obtained by dividing (i) the amount of all loan principal
<PAGE>
amortization during such Reported Quarter by (ii) the number of shares
of Common Stock outstanding at the end of such Reported Quarter, and (d)
the quotient obtained by dividing (i) the amount of any increase in
reserves in working capital accounts during such Reported Quarter by
(ii) the number of shares of Common Stock outstanding at the end of such
Reported Quarter, less (e) the quotient obtained by dividing (i) the sum
of (a) the amount of amortization expense for capitalized financing
costs (excluding amortization of goodwill and other intangibles)
incurred during such Reported Quarter and (b) the amount of amortization
expense for organizational costs and expenses of the Company incurred
during such Reported Quarter by (ii) the number of shares of Common
Stock outstanding at the end of such Reported Quarter.
"Constituent Person" shall have the meaning set forth in
paragraph (e) of Section 4.2 hereof.
"Exchange Date" shall mean a date on which any of the shares
of Class A Preferred Stock are exchanged for shares of CHP Common Stock
pursuant to Section 4.2 hereof.
"Exchange Ratio" shall mean the ratio for which the Class A
Preferred Stock is exchangeable as of any date, which shall be equal to
the quotient obtained by dividing the Company Operation Funds per share
by the CHP Funds From Operations per share, as such Exchange Ratio may
be adjusted pursuant to Section 4.2 hereof.
"Exchange Shares" shall have the meaning set forth in
paragraph (a) of Section 4.2 hereof.
"Fair Market Value" on any date of determination with respect
to the CHP Common Stock or any other Capital Interest, shall mean (a)
$10 at such time as the CHP Common Stock is not listed on a national
securities exchange and does not have its quotations reported through
the National Association of Securities Dealers, Inc. Automated Quotation
System or (b) at such time as the CHP Common Stock is so listed or its
quotations so reported, the average of the daily Market Prices for the
10 consecutive Trading Days immediately preceding such date. The term
"Market Price" on any date shall mean the Closing Price for CHP Common
Stock on such date. The "Closing Price" on any date shall mean the last
sale price for CHP Common Stock, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, for CHP Common Stock, as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if CHP
Common Stock is not listed or admitted to trading on the New York Stock
Exchange, as reported on the principal national securities exchange on
which CHP Common Stock is are listed or admitted to trading or, if CHP
<PAGE>
Common Stock is not listed or admitted to trading on any national
securities exchange, the last sale price in the over-the counter market,
as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System.
"Funds From Operations" shall mean as to any Person the funds
from operations of such Person per quarter as computed using such
Person's most recent quarterly financial statements but calculated in
accordance with the guidelines of the National Association of Real
Estate Investment Trusts in effect on the date hereof.
"Market Price" shall have the meaning set forth in the
definition of "Fair Market Value".
"Non-Electing Share" shall have the meaning set forth in
paragraph (e) of Section 4.2 hereof.
"Regular Quarterly Distribution" shall mean any regular cash
distributions of CHP that do not in the aggregate exceed the CHP Funds
From Operations for the quarter relating to such distribution.
"Reported Quarter" shall mean as to any Person the most recent
quarter for which Funds From Operations have been publicly reported (or
would have been reported if such Person were required to publicly
report).
"Rights" shall have the meaning set forth in paragraph
(d)(iii) of Section 4.2 hereof.
"Rights Agreement" shall have the meaning set forth in
paragraph (d)(iii) of Section 4.2 hereof.
"Trading Day" shall mean any day on which the securities in
question are traded on the New York Stock Exchange, or if such
securities are not listed or admitted for trading on the New York Stock
Exchange, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for
trading on any national securities exchange, on the NASDAQ National
Market, or if such securities are not quoted on such NASDAQ National
Market, in the applicable securities market in which the securities are
traded.
"Transaction" shall have the meaning set forth in paragraph
(e) of Section 4.2 hereof.
<PAGE>
4.2 Exchange of Class A Preferred Stock. Subject to the
-----------------------------------
ownership limitations contained in Sections 7.6 and 7.7 of CHP's
Articles of Incorporation as such Articles are in effect at the time of
any such exchange, taking into account the waiver of certain ownership
limitations referred to in Section 4.3(a) of the CHP Securities Purchase
Agreement, Holders of shares of Class A Preferred Stock shall have the
right to exchange all or a portion of such shares for shares of CHP
Common Stock, as follows:
(a) Subject to and upon compliance with the
provisions of this Section 4.2, holders of shares of Class A Preferred
Stock shall have the right, at any time and from time to time, to
exchange all or a portion of such stock into the number of fully paid
and non-assessable shares of CHP Common Stock obtained by multiplying
the number of shares of Class A Preferred Stock to be exchanged (the
"Exchange Shares") by the then extant Exchange Ratio, by surrendering
the Exchange Shares together with an equal number of shares of Common
Stock, such surrender to be made in the manner provided in paragraph (b)
of this Section 4.2.
(b) (i) In order to exercise the exchange right,
the holder of Exchange Shares shall surrender the certificate
representing such Exchange Shares and the certificate representing an
equal number of shares Common Stock to CHP, accompanied by written
notice to the Company and CHP that the holder thereof elects to exchange
such Exchange Shares.
(ii) Holders of Exchange Shares at the close
of business on a Distribution Payment Record Date shall be entitled to
receive the distribution payable with respect to such Exchange Shares on
the corresponding Distribution Payment Date, notwithstanding the
exchange or transfer thereof following such Distribution Payment Record
Date and prior to such Distribution Payment Date. Except as provided
above, the Company shall make no payment or allowance for unpaid
distributions, whether or not in arrears, on exchanged Exchange Shares
at the time of such exchange.
(iii) Subject to Section 4.2(c), each exchange
shall be deemed to have been effected immediately prior to the close of
business on the date on which the certificates for Exchange Shares and
the applicable number of shares of Common Stock shall have been
surrendered and such notice shall have been received by the Company and
CHP, and the person or persons in whose name or names any certificate or
certificates for shares of CHP Common Stock shall be issuable upon such
exchange shall be deemed to have become the holder or holders of record
of the shares of CHP Common Stock represented thereby at such time on
<PAGE>
such date, and such exchange shall be at the Exchange Ratio in effect at
such time and on such date; provided, however, that if CHP fails to
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deliver the CHP Common Stock deliverable upon any such exchange, the
holder of the Exchange Shares and the applicable number of shares of
Common Stock surrendered for exchange shall continue to be deemed the
holder thereof until CHP complies with such exchange.
(iv) Upon the delivery of the Exchange Shares
and the applicable number of shares of Common Stock to CHP and the
consummation of the exchange, the Exchange Shares then held by CHP shall
automatically be converted on a one for one basis into shares of Class C
Preferred Stock.
(c) The consummation of the exchange of Exchange
Shares shall be subject to compliance with any required approvals of
CHP's Stockholders or required filings with the Securities and Exchange
Commission or any stock exchange on which the shares of CHP Common Stock
may at the time be listed and the expiration or termination of the
applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. CHP shall make, at its sole cost
and expense, all filings necessary to secure such approval or compliance
and achieve such expiration or termination, if applicable, promptly
after receiving notice of the holder's election to exchange. Each
holder of Exchange Shares shall cooperate with CHP in providing
information relating to such holder as may be reasonably required in
connection with such filings and approvals.
(d) (i) The CHP Funds From Operation per share of
CHP Common Stock as reported in the Reported Quarter shall be adjusted
from time to time as follows:
If CHP shall (A) make a distribution on its CHP
Common Stock (other than Regular Quarterly Distributions), (B) subdivide
its outstanding CHP Common Stock into a greater number of shares or (C)
combine its outstanding CHP Common Stock into a smaller number of shares
after the most recent Reported Quarter, then the CHP Funds From
Operations per share of CHP Common Stock as reported in the Reported
Quarter shall be recalculated to give effect to such distribution,
subdivision or combination.
(ii) If CHP shall, by dividend or otherwise,
distribute to any holders of shares of its CHP Common Stock evidence of
its indebtedness or assets (other than Regular Quarterly Distributions)
or rights or warrants to subscribe for or purchase any of its securities
or any shares of CHP Common Stock (excluding those which are referred to
in and treated under subparagraph (i) above) (any of the foregoing being
<PAGE>
hereinafter in this subparagraph (ii) called the "Securities" and any
dividend or distribution referred to in this subparagraph (ii) called an
"Adjusting Distribution"), then, and in each such case, the holders of
Class A Preferred Stock shall be entitled to receive concurrently with
the receipt by holders of the CHP Common Stock the kind and amount of
such Securities or Adjusting Distribution that they would have owned or
been entitled to receive had such Class A Preferred Stock been exchanged
immediately prior to such distribution or the related record date, as
the case may be. In the event of any dividend or distribution to
holders of Class A Preferred Stock pursuant to this Section 4.2(d)(ii)
in the form of assets, properties or evidence of indebtedness, the fair
market value of such dividend or distribution, as of the date of such
dividend or distribution, shall be deducted from any amounts payable to
holders of Class A Preferred Stock upon the liquidation, dissolution or
winding-up of the Company. The fair market value of any dividend or
distribution received by the holders of Class A Preferred Stock pursuant
to this Section 4.2(d)(ii) shall be determined by a nationally
recognized investment bank engaged by the Company and selected by the
holders of a majority of Class A Preferred Stock from a list of three
investments banks selected by the Company from the investment banks
listed on Exhibit 3.5 attached hereto, whose determination shall be
final and binding on the parties.
(iii) The occurrence of a distribution or the
occurrence of any other event as a result of which holders of shares of
CHP Common Stock shall be entitled to receive rights, including exchange
rights (the "Rights"), pursuant to any shareholders protective rights
agreement (the "Rights Agreement") that may be adopted by CHP shall not
be deemed a distribution of Securities for the purposes of any dividend
or distribution pursuant to this subparagraph (ii) or otherwise give
rise to any adjustment of the CHP Funds From Operation pursuant to this
Section 4.2; provided, however, that in lieu of any dividend,
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distribution or adjustment as a result of any such a distribution or
occurrence, CHP shall make provision so that Rights, to the extent
issuable at the time of exchange of any shares of Class A Preferred
Stock into shares of CHP Common Stock, shall issue and attach to such
shares of CHP Common Stock then issued upon exchange in the amount and
manner and to the extent and as provided in the Rights Agreement in
respect of issuances at the time of shares of CHP Common Stock other
than upon exchange.
(iv) All calculations under this Section 4.2
(including, without limitation, the calculation of Company Operation
Funds, Exchange Ratio and Funds From Operations) shall be made out to
the sixth decimal place (with $.000005 being rounded upward) or to the
nearest whole share, as the case may be.
<PAGE>
(e) If CHP shall be a party to any transaction
(including without limitation a merger, consolidation, statutory share
exchange, self tender offer for all or substantially all shares of CHP
Common Stock, sale of all or substantially all of its assets or
recapitalization of the CHP Common Stock (excluding any transaction as
to which subparagraph (d)(i) of this Section 4.2 applies) (each of the
foregoing being referred to herein as a "Transaction"), in each case as
a result of which shares of CHP Common Stock shall be converted into the
right to receive stock, partnership interests, securities or other
property (including cash or any combination thereof), each share of
Class A Preferred Stock shall thereafter be exchangeable for the kind
and amount of shares of stock, partnership interests, securities and
other property (including cash or any combination thereof) receivable
upon the consummation of such Transaction by a holder of that number of
shares of CHP Common Stock for which one share of Class A Preferred
Stock was exchangeable immediately prior to such Transaction, assuming
such holder of shares of CHP Common Stock (i) is not a Person with which
CHP consolidated or into which the CHP merged or which merged into the
CHP or to which such sale or transfer was made, as the case may be (a
"Constituent Person"), or an Affiliate of a Constituent Person, and (ii)
failed to exercise his or her rights of the election, if any, as to the
kind or amount of stock, partnership interests, securities and other
property (including cash) receivable upon such Transaction (provided
that if the kind or amount of stock, partnership interests, securities
and other property (including cash) receivable upon such Transaction is
not the same for each share of CHP Common Share held immediately prior
to such Transaction by other than a Constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have
been exercised ("Non-Electing Share"), then for the purpose of this
paragraph (e) the kind and amount of stock, partnership interests,
securities and other property (including cash) receivable upon such
Transaction by each Non-Electing Share shall be deemed to be the kind
and amount so receivable per share by a plurality of the Non-Electing
Shares). The provisions of this paragraph (e) shall similarly apply to
successive Transactions.
(f) (i) If:
(1) CHP shall declare an Adjusting
Distribution; or
(2) CHP shall authorize the granting to
the holders of shares of CHP Common Stock or rights or warrants to
subscribe for or purchase any shares of any class or any other rights or
warrants (other than Rights to which the subparagraph (d)(ii) of this
Section 4.2 applies); or
<PAGE>
(3) there shall be any reclassification of
the CHP Common Stock (other than an event to which subparagraph
(d)(i)(A) of this Section 4.2 applies) or any consolidation or merger to
which CHP is a party and for which approval of any shareholders of CHP
is required, or a statutory share exchange involving the conversion or
exchange of CHP Common Stock into securities or other property, or a
self tender offer by CHP for all or substantially all of its outstanding
CHP Common Stock, or the sale or transfer of all or substantially all of
the assets of CHP as an entirety and for which approval of any
shareholders of CHP is required; or
(4) there shall occur the voluntary or
involuntary liquidation, dissolution or winding-up of the Company or
CHP,
then the Company shall cause to be mailed to
the holders of the Class A Preferred Stock at their addresses as shown
on the records of the Company, as promptly as possible, but at least 15
days prior to the applicable date hereinafter specified, a notice
stating (A) the date on which a record is to be taken for the purpose of
such Adjusting Distribution, or granting of rights or warrants, or, if a
record is not to be taken, the date as of which the holders of record of
shares of CHP Common Stock to be entitled to such Adjusting
Distribution, or granting of rights or warrants are to be determined or
(B) the date on which such reclassification, consolidation, merger,
statutory share exchange, sale, transfer, liquidation, dissolution or
winding-up is expected to become effective, and the date as of which it
is expected that holders or record of shares of CHP Common Stock shall
be entitled to exchange their CHP Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation,
dissolution or winding-up or (C) the date on which shares are to be
redeemed and the number of shares to be redeemed. Failure to give or
receive such notice or any defect therein shall not affect the legality
or validity of the proceedings described in this Section 4.2.
(ii) If any holders of Class A Preferred Stock have
exercised their exchange rights after receiving a notice pursuant to
this paragraph (f) but are unable to exchange such Exchange Shares for
CHP Common Stock (including, without limitation, as a result of the
circumstances described in paragraph (c) of this Section 4.2 hereof ),
CHP shall make appropriate arrangements to enable such holders to
receive the intended protections afforded by this paragraph (f).
(g) Whenever the CHP Funds From Operations per share of
CHP Common Stock as reported in the Reported Quarter is adjusted as
herein provided, CHP shall (i) promptly prepare (A) an officer's
<PAGE>
certificate setting forth the CHP Funds From Operations per share of CHP
Common Stock after such adjustment and setting forth a brief statement
of the facts requiring such adjustment, and (B) a notice of such
adjustment of the CHP Funds From Operations per share of CHP Common
Stock setting forth the adjusted CHP Funds From Operations per share of
CHP Common Stock and the effective date that such adjustment becomes
effective, which certificate and notice shall be conclusive evidence of
the correctness of such adjustment absent manifest error, and (ii)
promptly mail such notice of such adjustment of the Exchange Ratio and a
copy of such certificate to the holders of shares of Class A Preferred
Stock at such holders' last address as shown on the records of the
Company.
(h) In any case in which paragraph (d) of this Section 4.2
provides that an adjustment shall become effective on the day next
following the record date for an event, CHP may defer until the
occurrence of such event issuing to the holder of any Exchange Shares
exchanged after such record date and before the occurrence of such event
the additional shares of CHP Common Stock issuable upon such exchange by
reason of the adjustment required by such event over and above the CHP
Common Stock issuable upon such exchange before giving effect to such
adjustment.
(i) If any action or transaction would require adjustment
of the Exchange Ratio pursuant to more than one paragraph of this
Section 4.2, only one adjustment shall be made, and such adjustment
shall be the amount of adjustment that results in the lowest Exchange
Ratio.
(j) If CHP shall take any action affecting the CHP Common
Stock, other than action described in this Section 4.2, that would
materially adversely affect the exchange rights of the holders of shares
of the Class A Preferred Stock, the Exchange Ratio for the Class A
Preferred Stock shall be adjusted, to the extent permitted by law, in
such manner, if any, and at such time, as the holders of a majority of
the then outstanding shares of Class A Preferred Stock and the
Independent Directors (as defined in the Articles of Incorporation of
CHP) of the Board of Directors of CHP shall mutually agree.
(k) CHP shall pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of
shares of CHP Common Stock or other securities or property on exchange
of the Exchange Shares pursuant hereto.
(l) The giving of a Redemption Notice by the Company shall
not affect the right of the holders of Class A Preferred Stock to
exercise the exchange right pursuant to this Section 4.2 prior to the
<PAGE>
Redemption Date; provided, however, that if a majority of such holders
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require the Company to sell, transfer or otherwise dispose of any or all
of the Hotels pursuant to Section 2.5(b)(ii) hereof, none of the holders
of Class A Preferred Stock shall be entitled to exercise such exchange
right after receiving a Notice of Redemption with respect to such sold,
transferred or otherwise disposed of Hotel or Hotels, as the case may
be.
ARTICLE V
LEGENDS ON STOCK CERTIFICATES
5.1 Legends on Stock Certificates. A copy of this
-----------------------------
Agreement shall be filed with the Secretary of the Company and kept with
the records of the Company. Each Stockholder hereby agrees that each
outstanding certificate or other instrument representing Common Stock or
Class A Preferred Stock or Class B Preferred Stock shall bear legends
reading substantially as follows:
"The securities represented by this certificate were acquired
for investment only and not for resale. They have not been registered
under the Securities Act of 1933, as amended, or any state securities
law. These securities may not be sold, transferred, pledged, or
hypothecated or otherwise disposed of unless first registered under such
laws, or unless the Company has received evidence satisfactory to it
that registration under such laws is not required."
"The securities represented by this certificate are subject to
significant restrictions on resale and transfer and certain other
restrictions as set forth in a Subscription and Stockholder's Agreement,
dated as of February 24, 1999, a copy of which may be obtained from the
Company or from the holder of this certificate. No transfer of such
securities will be made on the books of the Company unless accompanied
by evidence of compliance with the terms of such Agreement."
Each such certificate or other instrument shall bear any
additional legends which may be required for compliance with state
securities or blue sky laws.
ARTICLE VI
<PAGE>
CLOSING
6.1 Closing. Any Stockholder who is selling (a "Selling
-------
Stockholder") and any person who is purchasing any Common Stock or
Preferred Stock from a Stockholder pursuant to Section 3.3 or 3.4 shall
mutually determine a closing date (the "Closing Date") no later than 30
days after the notice triggering such sale has been delivered in a
manner consistent with any applicable provisions contained in this
Agreement. The closing shall be held at such time or place as the
parties may agree. On the Closing Date, any Selling Stockholder shall
deliver certificates with appropriate transfer tax stamps affixed and
with stock powers endorsed in blank, representing the shares of Common
Stock or Preferred Stock to be purchased by the person exercising an
option hereunder, who shall deliver to such Stockholder the purchase
price which is payable in cash, by wire transfer of immediately
available funds or by certified check payment in New York Clearing House
funds, and/or the other consideration, if any, permitted by the terms of
this Agreement to be given in exchange for such shares.
ARTICLE VII
REPRESENTATIONS AND COVENANTS
7.1 Representations of CHP. CHP hereby represents and
----------------------
warrants, as of the date hereof and as of each date Capital Stockholders
are required to contribute to the Company any portion of their
respective Capital Commitments, as follows:
(a) CHP has the full legal right, power and authority to
enter into this Agreement, the CHP Securities Purchase Agreement and the
other agreements contemplated hereby and thereby, and such instruments
do not conflict with any contract or agreement to which it is a party or
by which it is bound.
(b) The acquisition of the Portfolio Investments by the
Company does not conflict with any agreement or contract to which CHP is
bound or constitute a taking of a corporate opportunity by the Company
from CHP.
7.2 Covenants of CHP. CHP hereby covenants, for so long
----------------
as any shares of Class A Preferred Stock are outstanding, as follows:
<PAGE>
(a) CHP shall not be a party to any sale, merger or
consolidation transaction unless the terms of such transaction are
consistent with the provisions hereof, and it shall not consent or agree
to the occurrence of any such transaction until CHP has entered into an
agreement with the successor or purchasing entity, as the case may be,
for the benefit of the holders of the Class A Preferred Stock that will
contain provisions enabling the holders of the Class A Preferred Stock
that remain outstanding after such transaction to exchange their shares
of Class A Preferred Stock into the consideration received by holders of
shares of CHP Common Stock at the Exchange Ratio in effect, immediately
prior to such transaction.
(b) CHP shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued shares
of CHP Common Stock, for the purpose of effecting the exchange of shares
of Class A Preferred Stock, the full number of shares of CHP Common
Stock that at any time and from time to time would be deliverable upon
the exchange of all of the shares of Class A Preferred Stock not
theretofore exchanged.
(c) CHP further covenants that any shares of CHP Common
Stock issued upon exchange of shares of CHP Common Stock into which the
shares of Class A Preferred Stock are exchangeable shall be validly
issued, fully paid and non-assessable. Before taking any action that
would cause an adjustment reducing the Exchange Ratio below the then-par
value of shares of CHP Common Stock deliverable upon such exchange, CHP
shall take any corporate action that in the opinion of its counsel, may
be necessary in order that CHP may validly and legally issue fully paid
and non-assessable shares of CHP Common Stock at such adjusted Exchange
Ratio.
(d) CHP further covenants that as promptly as practicable
after the surrender of certificates of shares of Class A Preferred
Stock, CHP shall cause to be delivered to such holder, or on such
holders written order, a certificate or certificates for the number of
shares of CHP Common Stock issuable upon exchange of such Class A
Preferred Stock in accordance with the terms hereof.
(e) CHP further covenants that upon receipt of any
certificate representing shares of Class A Preferred Stock, which
pursuant to Section 4.2(b)(iv) hereof shall have been automatically
converted into shares of Class C Preferred Stock, CHP shall promptly
deliver such certificate to the Company so that the Company may issue to
CHP a certificate or certificates representing an identical number of
shares of Class C Preferred Stock.
<PAGE>
(f) Other than in accordance with and pursuant to employee
benefit plans approved by the Board of Directors of CHP, CHP shall not
issue any shares of CHP Common Stock (or rights, warrants or other
securities convertible into or exchangeable for CHP Common Stock) after
the date hereof at a purchase price per share (or having a conversion,
exchange or exercise price per share of CHP Common Stock) (excluding the
value of services and other intangible assets) of less than $9.50.
7.3 Representations of Five Arrows. Five Arrows hereby
------------------------------
represents and warrants, as of the date hereof and as of each date
Capital Stockholders are required to contribute to the Company any
portion of their respective Capital Commitments as follows:
(a) Five Arrows has the full legal right, power and
authority to enter into this Agreement, the CHP Securities Purchase
Agreement and the other agreements contemplated hereby and thereby.
(b) The acquisition of the Portfolio Investments by the
Company does not conflict with any agreement or contract to which Five
Arrows is bound or constitute a taking of a corporate opportunity by the
Company from Five Arrows.
(c) Five Arrows is an accredited investor as defined in
Rule 501 under the Securities Act of 1933, as amended.
7.4 Covenants of Five Arrows. If at any time Five Arrows
------------------------
takes control of a majority of the Board in accordance with the terms
hereof and the Articles Supplementary, and at such time terminates the
Management Agreement and elects to enter into another agreement pursuant
to which the Company would receive services similar to those provided
under the Management Agreement, Five Arrows covenants that it will cause
the Company to enter into such agreement, having a term of not more than
two (2) years and that may be terminated within six (6) months of such
termination date (or such other term or termination provisions as are
required by then applicable rules, guidelines or regulations), only with
unaffiliated third parties.
7.5 Representations of Hospitality Partners. Hospitality
---------------------------------------
Partners hereby represents and warrants, as of the date hereof and as of
each date Capital Stockholders are required to contribute to the Company
any portion of their respective Capital Commitments, as follows:
<PAGE>
(a) Hospitality Partners has the full legal right, power
and authority to enter into this Agreement and the other agreements
contemplated hereby, and such instruments do not conflict with any
contract or agreement to which it is a party or by which it is bound.
(b) The acquisition of the Portfolio Investments by the
Company does not conflict with any agreement or contract to which
Hospitality Partners is bound or constitute a taking of a corporate
opportunity by the Company from Hospitality Partners.
(c) Hospitality Partners is an accredited investor as
defined in Rule 501 under the Securities Act of 1933, as amended.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses. The reasonable costs and expenses,
--------
including, without limitation, attorney's and accountant's fees and
expenses, of each of Five Arrows, Rothschild Realty, Inc. ("Rothschild")
and Hospitality Partners shall be paid by the Company on the date on
which Five Arrows and Hospitality Partners contribute the initial
portion of their respective Capital Commitments hereunder. In addition,
the Company shall pay to Rothschild a commitment fee in an amount equal
to $523,860 (the "Commitment Fee") in cash, by wire transfer to an
account specified by Rothschild. Prior to the date hereof, the Company
has paid $100,000 to Rothschild and shall pay to Rothschild the balance
of the Commitment Fee shall be payable on the date on which Five Arrows
contributes the initial portion of its Capital Commitment hereunder.
8.2 Injunctive Relief. It is acknowledged that it will be
-----------------
impossible to measure in money the damages that would be suffered if the
parties hereto fail to comply with any of the obligations herein imposed
on them and that in the event of any such failure, an aggrieved person
will be irreparably damaged and will not have an adequate remedy at law.
Except with respect to Section 1.3 hereof, in addition to any other
remedies available at law or in equity, any such person shall,
therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be
brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an
adequate remedy at law.
<PAGE>
8.3 Notice. All notices, statements, instructions or
------
other documents required to be given hereunder, shall be in writing and
shall be given either personally, by telecopy (followed by first class
U.S. mail), by Federal Express or other reputable express delivery
service for overnight delivery, or by mailing the same in a sealed
envelope, first-class mail, postage prepaid and either certified or
registered, return receipt requested, addressed to the Company at its
principal offices and to the other parties at their addresses reflected
in the stock records of the Company. Each Stockholder, by written
notice given to the Company in accordance with this Section 8.3 may
change the address to which notices, statements, instructions or other
documents are to be sent to such Stockholder. All notices, statements,
instructions and other documents shall be deemed to have been given on
the date of delivery, if given personally, by telecopy, or by overnight
courier, or two days after the date of mailing, if mailed. Whenever
pursuant to this Agreement any notice is required to be given by any
Stockholder to any other Stockholder or Stockholders, such Stockholder
may request from the Company a list of addresses of all Stockholders of
the Company, which list shall be promptly furnished to such Stockholder.
8.4 Successors and Assigns. This Agreement shall be
----------------------
binding upon and shall inure to the benefit of the parties, and their
respective successors and assigns. If any transferee of any Stockholder
shall acquire any Common Stock, in any manner, whether by operation of
law or otherwise, such Common Stock shall be held subject to all of the
terms of this Agreement, and by taking and holding such Common Stock
such person shall be conclusively deemed to have agreed to be bound by
and to perform all of the terms and provisions of this Agreement;
provided, however, that nothing in this Section 8.4 shall give any
- -------- -------
Stockholder any right to transfer any shares of Common Stock on
contravention of the terms of this Agreement.
8.5 Governing Law. Regardless of the place of execution,
-------------
this Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland, applicable to agreements made and to be
wholly performed in such State, without regard to principles of
conflicts of laws of Maryland or of any other jurisdiction.
8.6 Headings. Section headings are inserted herein for
--------
convenience only and do not form a part of this Agreement. Unless
otherwise indicated, reference in this Agreement to a Section shall be
deemed to refer to such Section of this Agreement.
<PAGE>
8.7 Entire Agreement; Amendment. This Agreement (together
---------------------------
with all exhibits hereto) contains the entire agreement among the
parties hereto with respect to the transactions contemplated herein,
supersede all prior written agreements and negotiations and oral
understandings among the parties hereto, and may not be discharged
except by performance, or amended or supplemented except by an
instrument in writing signed by the Company, CHP, and each person or
entity which at the time of such amendment beneficially owns any shares
of Class A Preferred Stock or Class B Preferred Stock. The parties
hereto acknowledge and agree that in the event that any conflict or
inconsistency between the provisions of this Agreement and the CNL
Hospitality Properties, Inc. Subscription Agreement to be delivered
pursuant to the CHP prospectus, the provisions of this Agreement shall
govern and be deemed controlling.
8.8 Inspection. So long as this Agreement shall be in
----------
effect, this Agreement shall be made available for inspection by any
stockholder of the Company at the principal offices of the Company.
8.9 Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
[The remainder of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date first written above.
CNL HOTEL INVESTORS, INC.
By: /s/ James M. Seneff
Name: James M. Seneff
Title: Chairman and Chief
Executive Officer
<PAGE>
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Matthew W. Kaplan
Name: Matthew W. Kaplan
Title: Manager
CNL HOSPITALITY PARTNERS, LP
By: CNL Hospitality GP Corp., its
general partner
By: /s/ James M. Seneff
Name: James M. Seneff
Title:
CNL HOSPITALITY PROPERTIES, INC.
By: /s/ James M. Seneff
Name: James M. Seneff
Title: Chairman and Chief
Executive Officer
<PAGE>
SCHEDULE 2.1A
-------------
Articles of Incorporation of the Company
<PAGE>
SCHEDULE 2.1B
-------------
Articles Supplementary of the Company
<PAGE>
SCHEDULE 2.1C
-------------
Bylaws of the Company
<PAGE>
EXHIBIT 1.3
-----------
Hotels
Project Owner
- ---------------------------------------------------------
Courtyard:
Addison, TX Acourt Property, Ltd.
Plano, TX PLC Hotel Property, Ltd.
Scottsdale, AZ SAHD Property, L.P.
Seattle, WA Westlake Hotel Property, L.P.
Residence Inn:
Las Vegas, NV LVHC Hotel Property,
Limited Partnership
Phoenix, AZ PARI Hotel Property, L.P.
Plano, TX PLRI Hotel Property, Ltd.
Marriott Suites:
Dallas, TX Marcen Property, Ltd.
<PAGE>
EXHIBIT 3.5
-----------
Investment Bank Choices
AG Edwards
Allen & Company Incorporated
BancBoston Robertson Stephens Inc.
Bear Stearns & Co. Inc.
BT Alex. Brown Incorporated
CS First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman Sachs & Co.
ING Barings Furman Selz L.L.C.
Legg Mason
JP Morgan Securities Inc.
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
Nationsbanc Montgomery Securities L.L.C.
Paine Webber Incorporated
Salomon Smith Barney Inc.
<PAGE>
EXHIBIT 99.5
INVESTMENT OPTION AGREEMENT
---------------------------
INVESTMENT OPTION AGREEMENT (this "Agreement"), dated as of
February 24, 1999 among CNL Hospitality Partners, LP, a Delaware limited
partnership ("Hospitality Partners"), CNL Group, Inc., a Florida
corporation ("CNL"), and Five Arrows Realty Securities II L.L.C., a
Delaware limited liability company ("Five Arrows").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Five Arrows, CNL Hospitality Properties, Inc. ("CHP")
and Hospitality Partners, 100% of the partnership interests of which are
owned by CHP through its wholly owned subsidiaries, have formed CNL
Hotel Investors, Inc., a Maryland corporation ("Hotel Investors"), to be
operated as a real estate investment trust ("REIT") within the meaning
of Section 856 of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, in accordance with and subject to the terms and
conditions contained in the Subscription and Stockholders' Agreement,
(the "Hotel Investors Subscription Agreement"), dated as of the date
hereof, among Five Arrows, CHP and Hospitality Partners, Five Arrows has
agreed to contribute to Hotel Investors up to a maximum amount of
$50,886,508.86; and
WHEREAS, pursuant to and in accordance with the terms set
forth in the Hotel Investors Subscription Agreement, Five Arrows will
purchase from Hotel Investors up to 50,886 shares of Hotel Investors' 8%
Class A Cumulative Preferred Stock, par value $.01 per share,
liquidation preference $1,000 per share (the "Class A Preferred Stock")
and up to 50,886 shares of Hotel Investors' common stock, par value $.01
per share (the "Hotel Investors Common Stock"); and
WHEREAS, a purpose of Hotel Investors is to acquire from
various sellers 100% of the partnership interests in eight partnerships
that own the eight (8) hotels identified on Exhibit A of the Hotel
Investors Subscription Agreement or such other hotels as may be
consented to by Five Arrows (the "Hotels"); and
WHEREAS, pursuant to and in accordance with the terms set
forth in the Securities Purchase Agreement (the "CHP Securities Purchase
Agreement"), dated as of the date hereof, by and among Five Arrows, CHP
and Hotel Investors, Five Arrows has agreed to purchase from CHP up to
1,578,947 shares of CHP common stock, par value $.01 per share (the "CHP
<PAGE>
Common Stock"), at a price per share of $9.50, for an aggregate
purchase price of $14,999,996.50; and
WHEREAS, pursuant to the Securities Purchase Agreement (the
"Advisors Securities Purchase Agreement"), dated as of the date hereof,
by and between Five Arrows and CNL Hospitality Advisors, Inc., a Florida
corporation ("CNL Advisors"), Five Arrows has agreed to purchase from
CNL Advisors 200 shares of CNL Advisors' Class A Common Stock, par value
$1.00 per share (the "Advisors Common Stock"), representing 10% of the
issued and outstanding shares of Advisors Common Stock, at a price per
share of $7,500, for an aggregate purchase price of $1,500,000; and
WHEREAS, pursuant to the terms set forth in the Hotel
Investors Subscription Agreement and the Articles Supplementary of Hotel
Investors designating the Class A Preferred Stock (the "Articles
Supplementary"), it is contemplated that Hotel Investors will purchase
at least seven of the Hotels before December 31, 1999 or the
Distribution Rate on the Class A Preferred Stock may be increased in
accordance with the Articles Supplementary; and
WHEREAS, Capitalized terms not otherwise defined herein shall
have the meaning ascribed to such terms in the Articles Supplementary.
NOW, THEREFORE, in consideration of the premises and the
respective covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Election to Increase Distribution Rate. If Five
--------------------------------------
Arrows has elected, pursuant to and in accordance with the Articles
Supplementary to increase the Distribution Rate as provide therein, Five
Arrows shall deliver a notice (the "Increase Notice") concurrently with
the notice under Section 3(e) of the Articles Supplementary, notifying
Hotel Investors and Hospitality Partners of its election to increase the
Distribution Rate.
2. Buy-Back Option.
---------------
(a) Hospitality Partners and CNL Group shall have the
option (the "Option"), exercisable in writing (the "Option Notice") no
later than 15 days following the delivery to Hotel Investors and
Hospitality Partners of the Increase Notice, to irrevocably agree to (i)
purchase from Five Arrows (a) all shares of Class A Preferred Stock
owned by Five Arrows, at price per share equal to the liquidation
preference thereof, plus all accrued and unpaid dividends thereon
through the date of repurchase hereunder, (b) all shares of Hotel
<PAGE>
Investors Common Stock owned by Five Arrows, at price per share equal to
$.01, (c) all shares of CHP Common Stock owned by Five Arrows, at price
per share equal to $9.50, and (d) all shares of Advisors Common Stock
and all shares of CNL Advisors' Class B Common Stock (if any) owned by
Five Arrows, at a price per share equal to their original purchase
price, and (ii) repay the outstanding principal of the Note (as defined
in the CHP Securities Purchase Agreement) plus all accrued and unpaid
interest thereon.
(b) If Hospitality Partners elects to exercise the Option,
Hospitality Partners and CNL Group shall pay to Five Arrows the
aggregate of all amounts listed in Section 2(a) above, and shall
consummate such purchase and repayment within 15 days after delivery of
the Option Notice to Five Arrows.
(c) Five Arrows shall not be required to repay or refund
to CNL Group, Hospitality Partners or any of their respective affiliates
any fees or reimbursed out-of-pocket costs expenses paid to Five Arrows
pursuant to the Hotel Investors Subscription Agreement.
3. Governing Law. The interpretation and construction of
-------------
this Agreement, and all matters relating hereto, shall be governed by
the laws of the State of New York applicable to agreements executed and
to be performed solely within such State.
4. Prevailing Party. The prevailing party or parties in
----------------
any litigation shall be entitled to receive from the losing party or
parties all costs and expenses, including reasonable counsel fees,
incurred by the prevailing party or parties.
5. Captions. The Article and Section captions used herein
--------
are for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement.
6. Notices. All notices, statements, instructions or
-------
other documents required to be given hereunder, shall be in writing and
shall be given either by hand delivery, by overnight delivery service,
by facsimile transmission or by mailing the same in a sealed envelope,
first-class mail, postage prepaid and either certified or registered,
return receipt requested, addressed as follows:
<PAGE>
if to Five Arrows, to:
Five Arrows Realty Securities II L.L.C.
c/o Rothschild Realty, Inc.
1251 Avenue of the Americas
51st Floor
New York, New York 10020
Facsimile No. (212) 403-3520
Attention: Matthew W. Kaplan
with a copy to its counsel:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022-4728
Facsimile No. (212) 593-5955
Attention: Andre Weiss
if to Hospitality Partners or Hotel Investors, to:
CNL Hospitality Properties, Inc.
CNL Hotel Investor, Inc.
c/o CNL Hospitality Group
400 E. South Street
Orlando, FL 32801
Facsimile No. (407) 428-9370
Attention: C. Brian Strickland
with a copy to its counsel:
Shaw Pittman Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Facsimile No. (202) 663-8007
Attention: Thomas H. McCormick
Five Arrows, by written notice given to Hospitality Partners or Hotel
Investors in accordance with this Section 6, and Hospitality Partners
and Hotel Investors by written notice to Five Arrows, may change the
address to which notices, statements, instruction or other documents are
to be sent to such party. All notices, statements, instructions and
other documents delivered hereunder shall be deemed effective upon
receipt.
<PAGE>
7. Successors and Assigns. This Agreement shall be
----------------------
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Five Arrows shall not, at any
time before January 31, 2000, be permitted to transfer any shares of
Class A Preferred Stock, Hotel Investors Common Stock, CHP Common Stock,
Advisors Common Stock, CNL Advisors' Class B Common Stock or the Note to
any party unless such party agrees to be bound hereby.
8. Counterparts. This Agreement may be executed in two or
------------
more counterparts, all of which taken together shall constitute one
instrument.
9. Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties hereto with respect to the subject matter
contained herein and therein and supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
10. Amendments. This Agreement may not be changed orally,
----------
but only by an agreement in writing signed by the parties hereto.
11. Severability. In case any provision in this Agreement
------------
shall be held invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof will not in any
way be affected or impaired thereby.
12. Termination of Agreement. The Agreement may be
------------------------
terminated upon mutual written agreement of the parties.
[The remainder of this page has been intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
CNL GROUP, INC.
By: /s/ James M. Seneff
Name: James M. Seneff
Title:
CNL HOSPITALITY PARTNERS, LP
By: /s/ James M. Seneff
Name: James M. Seneff
Title:
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Matthew W. Kaplan
Name: Mathew W. Kaplan
Title: Manager
<PAGE>
