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. 2)
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)
October 6, 2000
(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 [ ].
PAGE 1 OF 69
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CUSIP No. N/A 13D/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 1,434,675.18 (fn1)
OWNED BY ---------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING ---------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 1,434,675.18 (fn1)
------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 1,434,675.18 (fn1)
------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 3.5%(fn1)
------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
OO
------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
(fn1) Not included is the number of shares of common stock of CNL
Hospitality Properties, Inc. issuable upon the exchange at any time
or from time to time upon the occurrence of certain events, or with the
passage of time, of 38,670 shares of Class E Cumulative Preferred Stock
and common stock of CNL Hotel Investors, Inc. as described in Item 5(a),
subject to adjustment, held by the reporting person.
PAGE 2 of 69
<PAGE>
CUSIP No. N/A 13D/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 1,434,675.18 (fn1)
OWNED BY ---------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING ---------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 1,434,675.18 (fn1)
------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 1,434,675.18 (fn1)
------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES** [ ]
------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 3.5% (fn1)
------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
OO
------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 3 of 69
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CUSIP No. N/A 13D/A
------------------------------------------------------------------------
Item 1 is hereby amended and restated as follows:
Item 1. Security and Issuer
This Amendment No. 2 (this "Amendment") amends the statement on
Schedule 13D (the "Schedule 13D") initially filed on March 5, 1999, as
amended by Amendment No. 1 (the "First Amendment") on June 18, 1999, by (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 ("Rothschild") with respect to the common stock,
par value $.01 per share (the "CHP Common Stock"), of CNL Hospitality
Properties, Inc., a Maryland corporation (the "Company"). Capitalized terms
used herein and not otherwise defined in this Amendment shall have the
meanings set forth in the First Amendment.
Except as specifically provided herein, this Amendment does not
modify any of the information previously reported on Schedule 13D or the
First Amendment.
PAGE 4 of 69
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CUSIP No. N/A 13D/A
------------------------------------------------------------------------
The following paragraph is hereby added to Item 4:
Item 4. Purpose of Transaction
On October 3, 2000 the Company, Five Arrows and CNL Hotel
Investors, Inc. ("CHI") entered into the Securities Purchase Agreement
attached hereto as Exhibit 99.6 (the "Repurchase Agreement"). The Repurchase
Agreement is incorporated by reference in its entirety in this Item 4. On
October 6, 2000 the parties concluded (i) the transfer from Five Arrows to
the Company of (A) 7,563 shares of Class A Cumulative Preferred Stock of CHI
("Class A Shares") and (B) 65,285 shares of CHP Common Stock, for
$12,015,207.50, (ii) the transfer from Five Arrows to CHI of 2,104 Class A
Shares for $2,104,000, and (iii) the transfer by Five Arrows to CHI of all
its remaining Class A Shares (38,670) in exchange for 38,670 shares of Class
E Preferred Stock of CHI ("Class E Shares"), the terms of which are set forth
in the Articles Supplementary attached hereto as Exhibit 99.8 (the "Class E
Articles") and herein incorporated by reference in its entirety.
PAGE 5 of 69
<PAGE>
CUSIP No. N/A 13D/A
------------------------------------------------------------------------
The following paragraph of Item 5 is amended and restated as follows:
Item 5. Interest in Securities of the Issuer
(a) As of the close of business on October 6, 2000, Five Arrows
beneficially owned, within the meaning of Rule 13d-3 under the Exchange Act,
1,434,675.18 shares of CHP Common Stock, or 3.5% of the issued and
outstanding shares of CHP Common Stock, (based on the Company reporting, in
its 10-Q filed on August 14, 2000, 40,656,887 shares of CHP Common Stock
outstanding as of August 7, 2000).
In addition, Five Arrows owned, within the meaning of Rule 13d-
3 under the Exchange Act, 38,670 Class E Shares and 38,670 shares of CHI
Common Stock, par value $.01 per share ("CHI Common Stock"), of which 14,501
Class E Shares, each together with one share of CHI Common Stock, are
exchangeable on or after June 30, 2001, and 24,169 Class E Shares, each
together with one share of CHI Common Stock, are exchangeable on or after
June 30, 2002 (or prior to such dates under certain circumstances set forth
in the Repurchase Agreement)into 157.000609 shares of CHP Common Stock,
subject to adjustment, as described in the Repurchase Agreement, which is
attached as Exhibit 99.6 and incorporated by reference in its entirety in
this Item 5(a), and the Class E Articles. Rothschild, as sole managing
member of Five Arrows, may be deemed the beneficial owner of the 1,434,675.18
shares of CHP Common Stock and the 38,670 Class E Shares and the 38,670
shares of CHI Common Stock which are exchangeable into shares of CHP Common
Stock, held by Five Arrows.
Pursuant to the Repurchase Agreement, Five Arrows has also
granted to the Company an option to purchase from Five Arrows up to 14,501
Class E Shares.
PAGE 6 of 69
<PAGE>
CUSIP No. N/A 13D/A
------------------------------------------------------------------------
The following paragraph of Item 5 is hereby amended and restated as follows:
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(b) Five Arrows has the sole power to vote and dispose of the
shares of CHP Common Stock, CHI Common Stock and Class E Shares owned by it
reported herein, which power may be exercised by Rothschild.
* * * *
The following paragraph of Item 5 is hereby supplemented as follows:
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(c) Pursuant to the Repurchase Agreement attached hereto as Exhibit
99.6 and incorporated by reference in its entirety in this Item 5(c), on
October 6, 2000, the following transfers for cash consideration were
completed: (i) Five Arrows sold 2,104 shares of CHI Common Stock and 2,104
Class A Shares to CHI for $2,104,000, (ii) Five Arrows sold 7,563 shares of
CHI Common Stock and 7,563 Class A Shares to the Company for $11,395,000, and
(iii) Five Arrows sold 65,285 shares of CHP Common Stock to the Company for
$620,207.50. In addition, on October 6, 2000, pursuant to the Repurchase
Agreement Five Arrows exchanged 38,670 Class A Shares to CHI for 38,670 Class
E Shares.
* * * *
Item 6 is hereby amended and restated as follows:
ITEM 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer
Other than as described in the instruments filed as Exhibits attached hereto
all of which are incorporated by reference into this Item 6 in their
entirety, there are no contracts, understandings or relationships (legal or
otherwise) among the persons named in Item 2 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.
PAGE 7 of 69
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CUSIP No. N/A 13D/A
------------------------------------------------------------------------
Item 7 is hereby amended and restated in its entirety as follows:
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.
99.6** Securities Purchase Agreement, dated as of
October 3, 2000, between the Company,
CHI and Five Arrows.
99.7** Stockholders Agreement, dated as of
October 3, 2000, among the Company, CHI,
CNL Hospitality Partners, LP and Five
Arrows.
99.8** Articles Supplementary classifying 50,866
shares of Preferred Stock as Class E
Preferred Stock of CHI
* Filed with Schedule 13D on March 5, 1999 and the First Amendment on
June 18, 1999.
** Filed with this Amendment.
PAGE 8 of 69
<PAGE>
CUSIP No. N/A 13D/A
------------------------------------------------------------------------
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: October 11, 2000
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 9 of 69
<PAGE>
EXECUTION COPY
=============================================================================
SECURITIES PURCHASE AGREEMENT
Dated as of October 3, 2000
among
CNL HOSPITALITY PROPERTIES, INC.,
CNL HOTEL INVESTORS, INC.
and
FIVE ARROWS REALTY SECURITIES II L.L.C.
=============================================================================
PAGE 10 OF 69
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
October 3, 2000, among CNL Hospitality Properties, Inc., a Maryland
corporation ("CHP"), CNL Hotel Investors, Inc., a Maryland corporation
("Hotel Investors"), 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, Hotel Investors and CNL Hospitality
Partners LP, a Delaware limited partnership ("Hospitality Partners"), are
parties to a Subscription and Stockholders Agreement, dated as of February
24, 1999 (the "Subscription Agreement"), pursuant to which Five Arrows
purchased from Hotel Investors 48,337 shares of its 8% Class A Cumulative
Preferred Stock (the "Class A Shares") and an equal number of shares of Hotel
Investors common stock, par value $.01 per share (the "Hotel Investors Common
Shares"); and
WHEREAS, pursuant to Section 4.2(b) of the Subscription Agreement,
Five Arrows proposed to exercise its right to convert (the "Conversion") the
Class A Shares and Hotel Investors Common Shares into shares of CHP common
stock, par value $.01 per share (the "CHP Common Shares"); and
WHEREAS, pursuant to this Agreement Five Arrows will have agreed,
as an alternative to the Conversion, to permit Hotel Investors and CHP to
redeem and purchase Class A Shares and Hotel Investors Common Shares from
Five Arrows as provided herein, and to defer exchange of any remaining Class
A Shares (or such shares as Five Arrows may receive upon a reclassification
of the Class A Shares as provided herein) not purchased by Hotel Investors,
upon the terms and subject to the conditions set forth herein; and
WHEREAS, simultaneously with, and as a condition to, their
execution of this Agreement, Five Arrows, CHP and Hotel Investors are
entering into a Stockholders Agreement (the "Stockholders Agreement") with
Hospitality Partners.
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:
Except where otherwise indicated in this Agreement, the capitalized
terms used herein have the meanings set forth or referenced in Annex A
hereto.
PAGE 11 OF 69
<PAGE>
ARTICLE I
1. PURCHASE OF SECURITIES.
----------------------
1.1. Five Arrows Transactions.
------------------------
(a) Upon execution of this Agreement by Five Arrows, Hotel
Investors and CHP:
(1) Five Arrows shall sell, transfer, assign, convey
and deliver to Hotel Investors, and Hotel Investors shall redeem and accept
from Five Arrows, Two Thousand One Hundred and Four (2,104) Class A Shares
and Two Thousand One Hundred and Four (2,104) Hotel Investors Common Shares
(collectively, the "Redemption Shares");
(2) Five Arrows shall sell, transfer, assign, convey
and deliver to CHP, and CHP shall purchase and accept from Five Arrows, Seven
Thousand Five Hundred and Sixty Three (7,563) Class A Shares and Seven
Thousand Five Hundred and Sixty Three (7,563) Hotel Investors Common Shares
(collectively, the "Initial Shares"); and
(3) Five Arrows shall sell, transfer, assign, convey
and deliver to CHP, and CHP shall purchase and accept from Five Arrows, Sixty
Five Thousand Two Hundred and Eighty Five (65,285) CHP Common Shares (the
"CHP Sold Shares").
(b) Upon the terms and subject to the conditions herein
stated, at the Closing Five Arrows shall transfer, assign, convey and deliver
to Hotel Investors, and Hotel Investors shall accept from Five Arrows, Thirty
Eight Thousand Six Hundred and Seventy (38,670) Class A Shares (the
"Remaining Class A Shares").
1.2. CHP Transactions.
----------------
(a) Upon execution of this Agreement by Five Arrows, Hotel
Investors and CHP:
(1) CHP shall pay to Five Arrows Eleven Million Three
Hundred and Ninety Five Thousand Dollars ($11,395,000) (the "Initial Shares
Purchase Price") in respect of the Initial Shares by wire transfer of
immediately available funds to an account or accounts designated in writing
by Five Arrows at least two (2) Business Days prior to the Closing Date.
(2) CHP shall pay to Five Arrows Six Hundred and
Twenty Thousand Two Hundred Seven Dollars and Fifty Cents ($620,207.50) (the
"CHP Common Purchase Price") in respect of the CHP Sold Shares by wire
transfer of immediately available funds to an account or accounts designated
in writing by Five Arrows at least two (2) Business Days prior to the Closing
Date.
PAGE 12 OF 69
<PAGE>
(b) Upon the terms and subject to the conditions herein
stated, at the Closing CHP shall sell, transfer, assign, convey and deliver
to Hotel Investors (i) One Thousand Six Hundred and Fifty Three (1,653)
shares of Hotel Investors Class B Cumulative Preferred Stock, par value $.01
per share (the "Class B Shares"), (ii) Two Thousand and Twenty One (2,021)
Hotel Investors Common Shares and (iii) Eight Thousand and Ninety Four
(8,094) Hotel Investors Common Shares (collectively, the "CHP Transferred
Shares").
1.3. Hotel Investors Transactions at Closing.
---------------------------------------
(a) Upon execution of this Agreement by Five Arrows, Hotel
Investors and CHP, Hotel Investors shall pay to Five Arrows Two Million One
Hundred and Four Thousand Dollars ($2,104,000) (the "Redemption Price") in
respect of the Redemption Shares by wire transfer of immediately available
funds to an account or accounts designated in writing by Five Arrows at least
two (2) Business Days prior to the Closing Date.
(b) Upon the terms and subject to the conditions herein
stated, at or prior to the Closing, Hotel Investors shall pay to CHP One
Million Six Hundred and Fifty Three Thousand Dollars ($1,653,000) (the "Hotel
Investors Purchase Price") in respect of the CHP Transferred Shares by wire
transfer of immediately available funds to an account or accounts designated
in writing by CHP at least two (2) Business Days prior to the Closing Date.
(c) Upon the terms and subject to the conditions herein
stated, at the Closing, Hotel Investors will issue and deliver to Five Arrows
a certificate or certificates representing Thirty Eight Thousand Six Hundred
and Seventy shares of Class E Preferred Stock with the rights and preferences
set forth in the Articles Supplementary attached hereto as Exhibit A (the
"Class E Shares") in exchange for the certificate or certificates
representing the Remaining Class A Shares.
1.4. Closing. The transfers of shares described
-------
in Sections 1.1(b), 1.2(b) and 1.3(b) hereof (the "Closing") shall take place
at the offices of Schulte Roth & Zabel LLP, 900 Third Avenue, New York, N.Y.
10022, at 10:00 a.m. on October 6, 2000 (the "Closing Date") or at such other
place, time and date as the parties hereto may agree in writing.
1.5. Deliveries by Five Arrows.
-------------------------
Upon execution of this Agreement, Five Arrows shall deliver one or more
certificates representing the Redemption Shares, the Initial Shares and the
CHP Sold Shares to Hotel Investors and CHP, duly endorsed in blank or
accompanied by stock powers duly endorsed in blank, in proper form for
transfer subject to Hotel Investors obligation to issue replacement
certificates for any Class A Shares in excess of the Redemption Shares
represented by the certificates delivered by Five Arrows. At the Closing,
Five Arrows shall deliver to Hotel
PAGE 13 OF 69
<PAGE>
Investors one or more certificates representing the Remaining Class A Shares
duly endorsed in blank or accompanied by stock powers duly endorsed in blank,
in proper form for transfer.
1.6. Additional Deliveries by Five Arrows.
------------------------------------
At the Closing, in addition to the certificates described in Section 1.5,
Five Arrows shall deliver:
(a) an amendment to the Registration Rights Agreement, in
the form attached hereto as Exhibit B (the "Registration Rights Agreement
Amendment"), executed by Five Arrows;
(b) the certificates and other documents required to be
delivered by Five Arrows pursuant to Article VII; and
(c) such other evidence of the performance of all covenants
and the satisfaction of all conditions required of Five Arrows by this
Agreement at or prior to the Closing Date as CHP and Hotel Investors may
reasonably require.
1.7. Closing Deliveries by Hotel Investors.
-------------------------------------
Upon execution of this Agreement, Hotel Investors shall pay to Five Arrows
the Redemption Price. At or prior the Closing, Hotel Investors shall deliver
to CHP, payment of the Hotel Investors Purchase Price. At the Closing, Hotel
Investors shall deliver to Five Arrows, certificates evidencing the Class E
Shares issued to Five Arrows in exchange for the Remaining Class A Shares, in
form and substance satisfactory to Five Arrows.
1.8. Additional Deliveries by Hotel Investors.
----------------------------------------
At the Closing, in addition to the payments and certificates described in
Section 1.7, Hotel Investors shall deliver:
(a) the certificates and other documents required to be
delivered by Hotel Investors pursuant to Article VIII; and
(b) such other evidence of the performance of all covenants
and the satisfaction of all conditions required of Hotel Investors by the
Agreement at or prior to the Closing Date as Five Arrows may reasonably
require.
1.9. Closing Deliveries by CHP.
-------------------------
Upon execution of this Agreement, CHP shall pay to Five Arrows the Initial
Shares Purchase Price and the CHP Common Purchase Price. At the Closing, CHP
shall deliver to Hotel Investors, one or more stock certificates representing
the One Thousand Six Hundred and Fifty Three Class B Shares, the Two Thousand
and Twenty One Hotel Investors Common Shares and the Eight Thousand and
Ninety Four (8,094) Hotel Investors Common Shares to be purchased by Hotel
Investors from CHP pursuant to Section 1.2(b) hereof.
PAGE 14 OF 69
<PAGE>
1.10. Additional Deliveries by CHP.
----------------------------
At the Closing, in addition to the payments and certificates described in
Section 1.9, CHP shall deliver:
(a) the Registration Rights Agreement Amendment, executed by
CHP;
(b) the certificates and other documents required to be
delivered by CHP pursuant to Article VIII; and
(c) such other evidence of the performance of all covenants
and the satisfaction of all conditions required of CHP by the Agreement at or
prior to the Closing Date as Five Arrows may reasonably require.
1.11. CHP Exchange of Initial Shares.
------------------------------
Upon the Closing CHP shall deliver to Hotel Investors a certificate or
certificates representing the Initial Shares, and Hotel Investors shall
deliver to CHP a certificate or certificates representing Seven Thousand Five
Hundred and Sixty Three (7,563) Class E Shares.
ARTICLE II
2. REPRESENTATIONS AND WARRANTIES OF CHP AND HOTEL INVESTORS.
----------------------------------------------------------
CHP (with respect to itself and Hotel Investors), represents and warrants, as
of the date hereof (except as otherwise specified herein) as follows:
2.1. Corporate Power and Authority.
-----------------------------
Each of CHP and Hotel Investors has the full legal right, power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. Hotel Investors is authorized to issue the Class E Shares to be
issued pursuant to this Agreement.
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 Hotel Investors 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 or Hotel
Investors of the transactions contemplated by this Agreement. This Agreement
has been duly and validly authorized, executed and delivered by CHP and Hotel
Investors and constitutes the valid and legally binding agreements of CHP and
Hotel Investors, 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 Hotel Investors of this Agreement, and any other agreements and
instruments to be executed and
PAGE 15 OF 69
<PAGE>
delivered by them in connection herewith, do not, and the consummation of the
transactions contemplated hereby will not, in any manner: (i) violate any
provision of the Articles of Incorporation or By-Laws of CHP or Hotel
Investors; (ii) 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 Hotel
Investors 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 Hotel Investors is a party or by
which CHP or Hotel Investors or any of their respective properties is bound,
or (iii) violate or conflict with, or create a default under, any material
contract or restriction of any kind or character to which CHP or Hotel
Investors is bound or subject.
2.3. Existence and Good Standing.
---------------------------
(a) Each of CHP and Hotel Investors is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of CHP and Hotel Investors has the
requisite corporate power 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 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) Each of CHP and Hotel Investors is 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 Internal Revenue Code of 1986, as amended (the "Code").
2.4. Capital Stock.
-------------
(a) The authorized capital stock of CHP consists of: (i)
150,000,000 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
September 30, 2000, (i) 44,211,187.545 shares of CHP 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. The authorized capital stock of Hotel Investors consists of:
(i) 99,776 Hotel Investors Common Shares, (ii) 50,886 Class A Shares, (iii)
39,982 Class B Shares, (iv) 50,986 shares of Class C Cumulative Preferred
Stock ("Class C Shares"), (v) 10,000 shares of Class D Junior Preferred Stock
("Class D Shares"), and (vi) zero Class E Shares (with the classes of capital
stock described in clauses (ii) through (vi) being referred to as the "Hotel
Investors Preferred Shares"). As of the Closing, the authorized capital
stock of Hotel Investors will consist of: (i) 99,776 Hotel Investors Common
PAGE 16 OF 69
<PAGE>
Shares, (ii) 50,886 Class A Shares, (iii) 39,982 Class B Shares, (iv) 50,986
Class C Shares, (v) 1 Class D Share and (vi) 50,886 Class E Shares. As of
September 30, 2000, (i) 94,778 Hotel Investors Common Shares were validly
issued and outstanding, fully paid and non-assessable, (ii) 48,337 Class A
Shares were validly issued and outstanding, fully paid and non-assessable,
(iii) 37,979 Class B Shares were validly issued and outstanding, fully paid
and non-assessable, (iv) 100 Class C Shares were validly issued and
outstanding, fully paid and non-assessable and (v) no Class D Shares were
outstanding. All of such shares of capital stock of CHP and Hotel Investors
were issued in compliance with all applicable federal and state securities
laws. The Class E Shares, upon their issuance to Five Arrows at the Closing,
will be validly issued and outstanding, fully paid and non-assessable, and
issued in compliance with all applicable federal and state securities laws.
Except as set forth on Schedule 2.4(a) or as disclosed in the SEC Reports and
as otherwise contemplated by this Agreement, since June 30, 2000 (i) no
preemptive rights or any other similar rights have been granted by CHP or
Hotel Investors on any shares of capital stock of CHP or Hotel Investors;
(ii) neither CHP or Hotel Investors has issued any securities which, directly
or indirectly, are convertible into or exchangeable for any of the capital
stock of CHP or Hotel Investors; and (iii) neither CHP or Hotel Investors has
issued any options, warrants, rights, calls or commitments relating to such
shares or other such securities. Five Arrows, upon issuance of the Class E
Shares, will not be subject to personal liability by reason of being a holder
of such shares.
(b) Except as set forth on Schedule 2.4(a) or as disclosed
in the SEC Reports, neither CHP nor Hotel Investors 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 Hotel Investors, except as set forth in
or contemplated by this Agreement. Except as set forth on Schedule 2.4(b) or
as disclosed in the SEC Reports, there are no agreements between CHP's
shareholders or Hotel Investors' shareholders, respectively, with respect to
the voting, transfer or registration of CHP's capital stock or Hotel
Investors' capital stock, respectively.
2.5. SEC Reports.
-----------
(a) 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.
PAGE 17 OF 69
<PAGE>
(b) Since the quarter ended June 30, 2000, except as
contemplated by this Agreement, there has been no material adverse change in
the assets or 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.
2.6. Compliance with Laws.
--------------------
Except as set forth on Schedule 2.6 attached hereto, each of CHP and Hotel
Investors and each of their respective subsidiaries is in compliance in all
material respects with all applicable laws, regulations, orders, judgments
and decrees. Neither CHP, Hotel Investors nor any of their respective
subsidiaries, any employee of CHP, Hotel Investors nor any of their
respective subsidiaries nor any of their respective affiliates acting upon
CHP's or Hotel Investors' request has at any time made any payments for
unlawful political contributions or made any bribes, kickback payments or
other illegal payments.
2.7. No Changes Since June 30, 2000.
------------------------------
Since June 30, 2000, except as expressly contemplated hereby or as disclosed
in a Schedule or Exhibit hereto (including, without limitation, Schedule 2.7)
or any SEC Report, neither CHP, Hotel Investors nor any of their respective
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, Hotel Investors nor any of
their respective 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 (except for Permitted Liens
and, with respect to CHP, other than in its ordinary course of business), (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 (other than in the ordinary
course of business) 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 18 OF 69
<PAGE>
2.8. Disclosure.
----------
None of this Agreement, 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, Hotel Investors or by any of their
respective 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.
2.9. No Distribution Intent.
----------------------
CHP and Hotel Investors are acquiring the Redemption Shares, the Initial
Shares and the Remaining Class A Shares (and including any Class E Shares
issued in exchange for any such shares) for the purpose of retiring or
holding such shares, and will not resell or redistribute any of such shares
whether pursuant to a private sale exempt from registration under the
Securities Act, a public sale in compliance with the registration
requirements of the Securities Act, or otherwise, other than as permitted by
the Stockholders Agreement.
2.10. Ownership Limits Waiver.
-----------------------
The exchange by Five Arrows of its Class A Shares for Class E Shares shall
not require stockholder approval for a waiver of the Ownership Limits set
forth in Section 7.6(ii)(a) and (b) of the Articles of Incorporation of CHP
and the waiver of such Ownership Limits previously obtained by CHP for the
benefit of Five Arrows in respect of its ownership or conversion of Class A
Shares shall be equally applicable to Five Arrows' ownership or conversion of
the Class E Shares.
2.11. No Exchange Approvals Required.
------------------------------
The consummation of any of the transactions described in Article IV or
Article VI of this Agreement shall not require (i) any approvals of CHP's
stockholders or approvals from the SEC (based upon applicable laws and the
rules and regulations of the SEC as in effect on the date of this Agreement)
or (ii) the expiration or termination of the applicable waiting period, if
any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended and as in effect on the date of this Agreement.
ARTICLE III
3. REPRESENTATIONS AND WARRANTIES OF FIVE ARROWS.
---------------------------------------------
Five Arrows hereby represents, warrants and agrees as follows:
3.1. Power and Authority.
-------------------
Five Arrows has the full legal right, power and authority to enter into this
Agreement and to consummate the other transactions contemplated hereby and
thereby.
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<PAGE>
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, 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.
----------
Except as provided for in this Agreement, Five Arrows is acquiring the Class
E 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 Class E 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 Class E Shares and Hotel Investors Common
Shares (collectively, 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 by CHP or an affiliate of CHP (with
tacking of time periods permitted in certain circumstances), (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.
PAGE 20 OF 69
<PAGE>
ARTICLE IV
4. OPTION GRANT.
------------
4.1. Purchase Option.
---------------
(a) Five Arrows hereby grants to CHP the following
options which may be exercised as follows at any time subsequent to the
Closing, subject to the limitations set forth below:
(i) On or before January 31, 2001 (the "First Option
Expiration Date") CHP will have the option (the "First Option") to purchase
up to Seven Thousand Two Hundred and Fifty (7,250) of the Class E Shares held
by Five Arrows and an equal number of Hotel Investors Common Shares (the
"First Option Shares") for a cash purchase price of $1000.00 per each pair of
Class E Shares and Hotel Investors Common Shares constituting a First Option
Share; and
(ii) Provided that CHP has purchased all of the
First Option Shares prior to the First Option Expiration Date, then CHP will
have the option (the "Second Option"), until June 30, 2001 (the "Second
Option Expiration Date"), to purchase an additional Seven Thousand Two
Hundred and Fifty One (7,251) of the Class E Shares held by Five Arrows and
an equal number of Hotel Investors Common Shares (the "Second Option Shares")
for a cash purchase price of $1000.00 per each pair of Class E Shares and
Hotel Investors Common Shares constituting a Second Option Share.
(b) CHP may exercise the First Option at any time or
from time to time prior to the First Option Expiration Date by delivery of
notice (the "Exercise Notice") to Five Arrows stating the number of First
Option Shares to be purchased by CHP and the Business Day, which shall be no
later than February 15, 2001 and which shall otherwise be acceptable to Five
Arrows in its reasonable discretion (the "First Option Closing Date"), on
which such purchase and sale of the First Option Shares shall occur.
(c) Provided that the conditions for exercising the
Second Option have been met by CHP, CHP may exercise the Second Option at any
time or from time to time prior to the Second Option Expiration Date by
delivery of an Exercise Notice to Five Arrows stating the number of Second
Option Shares to be purchased by CHP and the Business Day, which shall be no
later than July 18, 2001 and which shall otherwise be acceptable to Five
Arrows in its reasonable discretion (the "Second Option Closing Date") on
which such purchase and sale of Second Option Shares shall occur.
(d) On or before each First Option Closing Date, in
respect of the First Option, or each Second Option Closing Date, in respect
of the Second Option, Five Arrows shall surrender the certificate or
certificates representing such First Option Shares or Second Option Shares to
CHP in the manner and at the place designated in the respective Exercise
Notices, and on the respective First Option Closing Date or Second Option
Closing Date the full purchase price for such shares shall be paid by CHP by
PAGE 21 OF 69
<PAGE>
wire transfer to an account designated by Five Arrows after receipt of the
Exercise Notice. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued by
Hotel Investors (on the respective First Option Closing Date or Second Option
Closing Date described in the previous sentence) representing the unredeemed
shares.
(e) From and after the applicable First Option
Closing Date or Second Option Closing Date in respect of the First Option
Shares or the Second Option Shares, as the case may be, as are purchased and
paid for pursuant to this Article IV (i) all rights of the holders thereof as
holders of Class E Shares shall cease, and (ii) such shares shall be held by
CHP and shall not be resold or redistributed, except as permitted under the
Stockholders Agreement, without the written consent of Five Arrows.
(f) The rights of CHP to exercise the First Option
and the Second Option may not be transferred or assigned without the consent
of Five Arrows which shall or shall not be granted in Five Arrow's sole
discretion.
ARTICLE V
5. COVENANTS.
---------
5.1. 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, Hospitality Partners, or Hotel
Investors to perform or observe any covenant, agreement, or obligation
contained in this Agreement or any Transaction Document contemplated hereby
or thereby, CHP shall notify Five Arrows of such default or failure.
5.2. Article Amendments.
------------------
(a) The Articles of Incorporation of Hotel Investors,
together with each of the Articles Supplementary classifying the Class A
Shares, Class B Shares, Class C Shares and Class D Shares (collectively, the
"Hotel Investors Articles") shall be amended by Hotel Investors prior to the
Closing Date to include Articles Supplementary classifying the Class E Shares
in the form attached hereto as Exhibit A.
(b) In addition to the amendment described in Section
5.2(a), the Articles Supplementary classifying the Class B Shares and Class D
Shares, respectively, shall be amended in the forms attached hereto as
Exhibits B-1 and B-2 prior to the Closing Date.
5.3. Appointment of Five Arrows Director.
-----------------------------------
For so long as Five Arrows owns any Class E Shares or CHP Common Shares, CHP
shall use its best
PAGE 22 OF 69
<PAGE>
efforts to qualify, nominate and recommend to the stockholders that they
elect to the Board of Directors of CHP 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.
5.4. 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.
5.5. Prohibition on Issuance of Securities.
-------------------------------------
For so long as any Class E Shares 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.
5.6. Deferral Payment.
----------------
(a) To the extent that, as a result of the amendments to
the Hotel Investors Articles described in Section 5.2, Five Arrows pro rata
share of dividends from Hotel Investors are less than the dividends Five
Arrows would have received from CHP if the Conversion had occurred at the
Exchange Rate on June 30, 2000, CHP will pay or cause Hotel Investors to pay
to Five Arrows the difference (the "Deferral Payment") between the dividends
Five Arrows receives from Hotel Investors after June 30, 2000 through the end
of the Black-out Period and any dividends Five Arrows would have received had
it become a holder of 7,588,938 CHP Common Shares (subject to adjustment for
splits, dividends or distributions of CHP Common Shares the "Deferral Payment
Shares") on June 30, 2000 through the end of the Black-out Period (including,
without limitation, dividends on CHP Common Shares declared prior to the end
of the Black-out Period but payable after the Black-out Period).
(b) Deferral Payments will be paid on each date that
Hotel Investors dividends are paid (or, if no such dividends are paid,
quarterly as such dividends would have been paid in respect of the Class A
Shares).
(c) The number of Deferral Payment Shares shall be
reduced (i) after the Closing by the number of CHP Common Shares into which
the Redemption Shares and the Initial Shares acquired at the Closing would
have been convertible at the Exchange Rate then in effect, (ii) after each
First Option Closing Date, by the number of CHP Common Shares into which the
First Option Shares acquired on such First Option Closing Date would have
PAGE 23 OF 69
<PAGE>
been convertible at the Exchange Rate then in effect, and (iii) after each
Second Option Closing Date, by the number of CHP Common Shares into which the
Second Option Shares acquired on such Second Option Closing Date would have
been convertible at the Exchange Rate then in effect. Deferral Payments
shall be payable on the Deferral Payment Shares through and including the
date of transfer of the corresponding Class A Shares and Class E Shares by
Five Arrows to Hotel Investors or CHP as provided in this Agreement, based on
the number of days during each quarter that such Class A Shares or Class E
Shares are owned by Five Arrows (i.e, Five Arrows shall be paid a dividend
for every day such shares are owned by Five Arrows, including the date of
transfer).
5.7. Indemnification for Breach.
--------------------------
Hotel Investors and CHP, jointly and severally, agree to make whole Five
Arrows and its management company, Rothschild Realty Inc., and to hold them
harmless from any breach by CHP or Hotel Investors of their respective
obligations under this Agreement or any Transaction Document, including the
failure of the Closing to occur prior to October 13, 2000 (provided that such
failure does not result from a failure of Five Arrows to perform the
covenants required to be performed by it prior to the Closing). The
indemnification provided for herein shall include, without limitation: (i)
any loss, damage or liability arising from the inability of Five Arrows to
realize an Exchange Rate of 157.000609 CHP Common Shares per Class A Share
owned by Five Arrows, and (ii) Five Arrows being ineligible to receive
dividends on the number of CHP Common Shares into which the Class A Shares
were convertible on June 30, 2000 for any period after June 30, 2000 due to
Five Arrows not being a record holder of such CHP Common Shares on the
applicable record dates for such dividends.
ARTICLE VI
6. EXCHANGE OF CLASS E SHARES.
--------------------------
6.1. Exchange of Class E Shares.
--------------------------
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, and giving effect to the waiver of certain ownership
limitations referred to in Section 2.10 of this Agreement, holders of Class E
Shares may 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 6.1, (i) holders of First Option Shares and Second Option Shares
not purchased by CHP pursuant to Section 4.1 hereof (the "Retained Option
Shares") shall have the right (the "Exchange Right"), at any time and from
time to time after (A) June 30, 2001 or (B) the occurrence of an Acceleration
Event, and (ii) holders of Class E Shares other than the Retained Option
PAGE 24 OF 69
<PAGE>
Shares (the "Remaining Shares") shall have the right, at any time and from
time to time after the earliest of (A) June 30, 2002 or (B) the listing of
CHP Common Stock on a national securities exchange or the National Market
System of the NASD or (C) the occurrence of an Acceleration Event, to
exchange (the "Exchange") all or a portion of the Retained Option Shares or
Remaining Shares into the number of fully paid and non-assessable shares of
CHP Common Stock obtained by multiplying the number of Retained Option Shares
or Remaining Shares to be exchanged (the "Exchange Shares") by the Exchange
Rate in effect on the date that such Exchange Shares are surrendered for
Exchange (pursuant to Section 6.1(b)(iii)), by surrendering the number of
Exchange Shares designated for such Exchange together with an identical
number of Hotel Investors Common Shares in the manner provided in paragraph
(b) of this Section 6.1. With respect to the Retained Option Shares and the
Remaining Shares, respectively, the periods described in this Section 6.1(a)
during which the Retained Option Shares and Remaining Shares cannot be
exchanged are collectively referred to herein as the "Black-out Period".
(b) (i) In order to exercise the Exchange Right, the
holder of Exchange Shares must surrender the certificate representing the
number of Exchange Shares designated for such Exchange and the certificate
representing an identical number of Hotel Investors Common Shares to CHP,
accompanied by written notice to Hotel Investors and CHP, which exercise may
be subject to such conditions as the holder may designate, that the holder
thereof elects to exchange such Exchange Shares (the "Notice of Exchange").
(ii) Holders of Exchange Shares at the close of
business on a distribution payment record date shall be entitled to receive,
on the corresponding distribution payment date, the distribution payable with
respect to the Exchange Shares surrendered under clause (b)(i) following such
distribution payment record date.
(iii) Subject to Section 6.1(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 requisite
number of Hotel Investors Common Shares shall have been surrendered and the
Notice of Exchange shall have been given, provided that Five Arrows may
deliver the Notice of Exchange and certificates for Exchange Shares and Hotel
Investors Common Shares up to thirty days prior to the date set forth in such
Notice of Exchange as the effective date thereof. Notwithstanding any other
provision herein, such Notice of Exchange may be delivered during the Black-
out Period for an Exchange to be consummated after the expiration of the
Black-out Period. The person or persons in whose name or names any
certificate or certificates for CHP Common Shares shall be issuable upon such
exchange shall be deemed to have become the holder or holders of record of
the CHP Common Shares represented thereby at such time on such date, and such
exchange shall be at the Exchange Rate in effect at such time and on such
date; provided, however, that if CHP fails to deliver the CHP Common Shares
deliverable upon any such exchange, the holder of the Exchange Shares and the
applicable number of Hotel Investors Common Shares surrendered for exchange
shall continue to be deemed the holder thereof until CHP complies with such
exchange.
PAGE 25 OF 69
<PAGE>
(iv) Upon consummation of any exchange, the Exchange
Shares received by CHP shall not be transferred, resold or redistributed,
whether pursuant to a private sale exempt from registration under the
Securities Act, a public sale in compliance with the registration
requirements of the Securities Act, or otherwise, other than as permitted by
the Stockholders Agreement or with the written consent of Five Arrows.
(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) If CHP shall (A) make a distribution on CHP
Common Shares in the form of CHP Common Shares, (B) subdivide its outstanding
CHP Common Shares into a greater number of shares or (C) combine its
outstanding CHP Common Shares into a smaller number of shares after the most
recent Reported Quarter, then the Exchange Rate shall be recalculated to give
effect to such distribution, subdivision or combination.
(ii) If CHP shall make a dividend or otherwise make
a distribution to any holders of CHP Common Shares in the form of
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 Shares (excluding those which are referred to in and treated
under subparagraph (i) above) (any of the foregoing being 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 E Shares shall be entitled
to receive concurrently with the receipt by holders of CHP Common Shares the
kind and amount of such Securities or Adjusting Distribution that they would
have owned or been entitled to receive had such Class E Shares 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 E Shares pursuant to this Section 6.2(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 E Shares upon
the liquidation, dissolution or winding-up of Hotel Investors. The fair
market value of any dividend or distribution received by the holders of Class
E Shares pursuant to this Section 6.2(d)(ii) shall be determined by a
nationally recognized investment bank engaged by Hotel Investors and selected
by the holders of a majority of Class E Shares from a list of three
PAGE 26 OF 69
<PAGE>
investment banks selected by Hotel Investors from the investment banks listed
on Schedule 6.2 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 CHP Common
Shares shall be entitled to receive 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 Exchange Rate pursuant to
this Section 6.2; provided, however, that in lieu of any dividend,
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 Class E Shares into shares of CHP Common Stock,
shall issue and attach to such CHP Common Shares 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 CHP Common Shares other than
upon exchange.
(iv) All calculations under this Section 6.2 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.
(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 CHP Common Shares, sale of all or
substantially all of its assets or recapitalization of the CHP Common Shares
(each of the foregoing being referred to herein as a "Transaction"), in each
case as a result of which CHP Common Shares shall be converted into the right
to receive stock, partnership interests, securities or other property
(including cash or any combination thereof), each Class E Share 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 CHP Common Shares for which one share of Class E
Share was exchangeable immediately prior to such Transaction, assuming such
holder of CHP Common Shares (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
Stock 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
PAGE 27 OF 69
<PAGE>
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 CHP Common Shares 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 6.1 applies); or
(3) there shall be any reclassification of CHP
Common Shares (other than an event to which subparagraph (d)(i)(A) of this
Section 6.1 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 Shares into
securities or other property, or a self tender offer by CHP for all or
substantially all of its outstanding CHP Common Shares, 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 Hotel Investors or CHP,
then Hotel Investors shall cause to be mailed to the holders of Class E
Shares at their addresses as shown on the records of Hotel Investors, 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 CHP Common Shares 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 CHP Common Shares shall be entitled to exchange their
CHP Common Shares 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 6.1.
PAGE 28 OF 69
<PAGE>
(ii) If any holders of Class E Shares 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 Shares
(including, without limitation, as a result of the circumstances described in
paragraph (c) of this Section 6.1 hereof ), CHP shall make appropriate
arrangements to enable such holders to receive the intended protections
afforded by this paragraph (f).
(g) Whenever the Exchange Rate is adjusted as herein
provided, CHP shall (i) promptly prepare (A) an officer's certificate setting
forth the Exchange Rate after such adjustment and setting forth a brief
statement of the facts requiring such adjustment, and (B) a notice of such
adjustment of the Exchange Rate setting forth the adjusted Exchange Rate and
the effective date thereof, 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 Rate and a
copy of such certificate to the holders of Class E Shares at such holders'
last address as shown on the records of Hotel Investors.
(h) In any case in which paragraph (d) of this Section
6.1 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 CHP Common
Shares issuable upon such exchange by reason of the adjustment required by
such event over and above the CHP Common Shares issuable upon such exchange
before giving effect to such adjustment.
(i) If any action or transaction would require adjustment
of the Exchange Rate pursuant to more than one paragraph of this Section 6.1,
only one adjustment shall be made, and such adjustment shall be the amount of
adjustment that results in the lowest Exchange Rate.
(j) If CHP shall take any action affecting the CHP
Common Shares, other than action described in this Section 6.1, that would
materially adversely affect the Exchange Rights, then the Exchange Rate for
the Class E Shares shall be adjusted, to the extent permitted by law, so that
the economic benefit of the Exchange Rights prior to such action are
preserved. Such adjustment shall be taken in such manner, if any, and at
such time, as the holders of a majority of the then outstanding Class E
Shares 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 CHP Common Shares or other securities or property on exchange of the
Exchange Shares pursuant hereto.
PAGE 29 OF 69
<PAGE>
ARTICLE VII
7. CONDITIONS TO CHP'S AND HOTEL INVESTORS' OBLIGATIONS
--------------------------------------------------
The obligation of CHP and Hotel Investors to consummate the transactions
contemplated by this Agreement on the Closing Date is conditioned upon
satisfaction, on or prior to such date, of the following conditions:
7.1. 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, and Five Arrows shall have delivered to CHP a certificate, dated the
Closing Date, to such effect
7.2. 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.
7.3. 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 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.
7.4. Performance of Agreements.
-------------------------
All of the covenants and agreements of Five Arrows 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
Five Arrows shall have delivered to CHP a certificate, dated such Closing
Date, to such effect.
ARTICLE VIII
8. CONDITIONS TO FIVE ARROWS' OBLIGATIONS.
--------------------------------------
The obligation of Five Arrows to consummate the transactions contemplated by
this Agreement on the Closing Date is conditioned upon satisfaction, on or
prior to such date, of the following conditions:
PAGE 30 OF 69
<PAGE>
8.1. Representations and Warranties.
------------------------------
The representations and warranties of CHP (and Hotel Investors) 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 the
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 the Closing Date, to such effect.
8.2. Performance of Agreements.
-------------------------
All of the covenants and agreements of CHP and Hotel Investors 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.
8.3. 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.
8.4. 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 Hotel Investors are in good
standing or subsisting in each such State and listing all charter documents
of CHP and Hotel Investors on file with each such State.
8.5. Registration Rights Agreement.
-----------------------------
On such Closing Date, CHP shall have properly and validly executed the
Registration Rights Agreement Amendment.
8.6. Valid Issuance.
--------------
The Class E Shares to be issued 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 Class E Shares being acquired by Five Arrows on such Closing Date.
8.7. Proceedings.
-----------
All proceedings to be taken in connection with the transactions contemplated
by this Agreement and all documents incident thereto shall be satisfactory in
PAGE 31 OF 69
<PAGE>
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 may request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
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:
PAGE 32 OF 69
<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 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.
PAGE 33 OF 69
<PAGE>
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.
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.]
PAGE 34 OF 69
<PAGE>
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:
---------------------------
Name:
Title:
FIVE ARROWS REALTY SECURITIES II L.L.C.
By:
---------------------------
Name:
Title:
CNL HOTEL INVESTORS, INC.
By:
---------------------------
Name:
Title:
PAGE 35 OF 69
<PAGE>
Annex A
-------
Definitions and Index of Terms
------------------------------
"Acceleration Event" shall mean the occurrence of any of the
following: (i) an Event of Default as defined in the Articles Supplementary
designating the Class E Shares, (ii) a breach by any of CHP, Hotel Investors
or Hospitality Partners of any of its obligations or covenants contained in
this Agreement or any Transaction Documents, (iii) the consolidation or
merger of Hotel Investors with or into any other Person (other than (A) the
consolidation of the financial statements of Hotel Investors into the
financial statements of CHP solely for accounting purposes to the extent
required by generally accepted accounting principles and (B) a consolidation
solely for tax purposes required by tax laws, which exception shall not
include a voluntary election to consolidate for tax purposes), (iv) the
making by Hotel Investors of any advance, loan, extension of credit or
capital contribution to, or purchase of any stock, bonds, notes, debentures
or other securities of or any assets constituting a business unit of, or any
other investment in, any Person (all of the foregoing referred to as an
"Investment"), other than (A) Investments approved by Five Arrows, (B)
Investments in United States treasury bills, notes or similar securities, (C)
Investments in mutual funds which intend to invest primarily in United States
treasury bills, notes or similar securities, and (D) investments and capital
contributions or loans to wholly-owned subsidiaries of Hotel Investors which
do not impair the REIT status of Hotel Investors, (v) Hotel Investors' entry
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 after the Effective Date other than (A) as provided in the
Management Agreement (as defined in the Subscription Agreement, and including
any successor management agreement), (B) leases to tenants that are
Affiliates of Rothschild Realty, Inc. or to tenants that are wholly-owned
subsidiaries of Hotel Investors, and (C) as described in clause (iv)(D) of
this definition, (vi) the making or restructuring by Hotel Investors of any
Investment which (A) results or (B) would result in the Corporation being an
"investment company", or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended and the
rules thereunder, (vii) the setting of a record date by the board of
directors of CHP for any matter requiring the vote of holders of CHP Common
Shares, including, without limitation, mergers, consolidations and sales of
substantially all of the assets of CHP, other than for (A) election of
directors, (B) amendments to CHP's Articles of Incorporation, (C) approval of
auditors, (D) approval of employee benefit plans (or changes to such plans),
and (E) precatory or advisory shareholder proposals, or (viii) CHP's failure
to pay, in any rolling two quarter period during the Black-out Period, a
cumulative dividend during such two-quarter period of less than $0.72 per CHP
Common Share (on an annualized basis).
"Affiliate" as to any Person, shall mean any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
PAGE 36 OF 69
<PAGE>
common control with, such Person. For purposes of this definition, "control"
of a Person means the power, directly or indirectly, either to (a) vote 10%
or more of the securities having ordinary voting power for the election of
directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
CNL Hospitality Corp., a Florida corporation, and any successor thereto,
shall in all cases be considered an
"Affiliate" of Hotel Investors.
"Business Day" means any day which is not a Saturday or Sunday
or other day on which commercial banks in New York, New York are required or
authorized by law to remain closed.
"Exchange Rate" shall mean the rate of 157.000609 shares of CHP
Common Stock per Class E Share issuable upon exercise of the Exchange Right,
as such Exchange Rate may be adjusted pursuant to Section 6.1 hereof.
"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.
"Hotels" means the hotels identified on Exhibit 1.3 of the
Subscription Agreement.
"Permitted Liens" means (i) liens reflected in the Hotel
Investors Balance Sheet dated as of June 30, 2000, (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.
"Person" means any individual, firm, partnership, corporation,
limited liability company or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"Redemption Notice" has the meaning given to such term in the
Hotel Investors Articles.
"Registration Rights Agreement" means the Registration Rights
Agreement by and between CHP and Five Arrows dated as of February 24, 1999.
"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.
PAGE 37 OF 69
<PAGE>
"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).
"Stock" means any Hotel Investors Preferred Shares and Hotel
Investors Common Shares.
"Transaction Document" means the agreements and certificates
executed in connection with this Agreement including, without limitation, the
Stockholders Agreement.
PAGE 38 OF 69
<PAGE>
The following terms shall have the meaning specified in the
indicated section of this Agreement:
Adjusting Distribution Section 6.1(d)(ii)
Agreement Introduction
Black-out Period Section 6.1(a)
CHP Introduction
CHP Common Purchase Price Section 1.2(c)
CHP Common Shares Recitals
CHP Sold Shares Section 1.1(c)
CHP Transferred Shares Section 1.2(b)
Class A Shares Recitals
Class B Shares Section 1.2(b)
Class C Shares Section 2.4(a)
Class D Shares Section 2.4(a)
Class E Shares Section 1.3(c)
Closing Date Section 1.4
Closing Section 1.4
Code Section 2.3(b)
Constituent Person Section 6.1(e)
Conversion Recitals
Excess Stock Section 2.4(a)
Exchange Section 6.1(a)
Exchange Act Section 2.5(a)
Exchange Right Section 6.1(a)
Exercise Notice Section 4.1(b)
Exchange Shares Section 6.1(a)
First Option Closing Date Section 4.1(b)
First Option Expiration Date Section 4.1(a)(i)
First Option Shares Section 4.1(a)(i)
First Option Section 4.1(a)(i)
Five Arrows Introduction
Five Arrows Director Section 5.3
Hospitality Partners Recitals
Hotel Investors Introduction
Hotel Investors Articles Section 5.2(a)
Hotel Investors Common Shares Recitals
Hotel Investors Preferred Shares Section 2.4(a)
Hotel Investors Purchase Price Section 1.3(b)
Initial Shares Purchase Price Section 1.2(a)
Initial Shares Section 1.1(b)
Non-Electing Share Section 6.1(e)
Notice of Exchange Section 6.1(b)
Preferred Stock Section 2.4(a)
Redemption Price Section 1.3(a)
Redemption Shares Section 1.1(a)
Registration Rights Agreement Amendment Section 1.6(a)
Remaining Class A Shares Section 1.1(d)
Remaining Shares Section 6.1(a)
Retained Option Shares Section 6.1(a)
Rights Section 6.1(d)(iii)
Rights Agreement Section 6.1(d)(iii)
PAGE 39 OF 69
<PAGE>
SEC Section 2.5(a)
SEC Reports Section 2.5(a)
Second Option Closing Date Section 4.1(c)
Second Option Expiration Date Section 4.1(a)(ii)
Second Option Shares Section 4.1(a)(ii)
Second Option Section 4.1(a)(ii)
Securities Section 6.1(d)(ii)
Securities Act Section 2.5(a)
Shares Section 3.6
Stockholders Agreement Recitals
Subscription Agreement Recitals
Transaction Section 6.1(e)
PAGE 40 OF 69
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I 2
1. PURCHASE OF SECURITIES 2
1.1. Five Arrows Transactions 2
1.2. CHP Transactions. 2
1.3. Hotel Investors Transactions at Closing 3
1.4. Closing 3
1.5. Closing Deliveries by Five Arrows. 3
1.6. Additional Deliveries by Five Arrows. 3
1.7. Closing Deliveries by Hotel Investors. 4
1.8. Additional Deliveries by Hotel Investors. 4
1.9. Closing Deliveries by CHP. 4
1.10. Additional Deliveries by CHP. 4
1.11. CHP Exchange of Initial Shares. 5
ARTICLE II 5
2. REPRESENTATIONS AND WARRANTIES OF CHP AND HOTEL INVESTORS 5
2.1. Corporate Power and Authority 5
2.2. Consents and Approvals; Authorization and
Noncontravention 5
2.3. Existence and Good Standing 6
2.4. Capital Stock 6
2.5. SEC Reports 7
2.6. Compliance with Laws 7
2.7. No Changes Since June 30, 2000 7
2.8. Disclosure 8
2.9. No Distribution Intent. 8
2.10. Ownership Limits Waiver. 8
2.11. No Exchange Approvals Required. 9
ARTICLE III 9
3. REPRESENTATIONS AND WARRANTIES OF FIVE ARROWS 9
3.1. Power and Authority 9
3.2. Existence and Good Standing 9
3.3. Consents; Authorization 9
3.4. Accredited Investor 9
3.5. Investment 9
3.6. Rule 144 9
ARTICLE IV 10
4. OPTION GRANT 10
4.1. Purchase Option. 10
ARTICLE V 11
5. COVENANTS. 11
5.1. Notice of Default 11
5.2. Article Amendments 11
5.3. Appointment of Five Arrows Directors 12
PAGE 41 OF 69
<PAGE>
5.4. Further Assurances 12
5.5. Prohibition on Issuance of Securities 12
5.6. Deferral Payment. 12
5.7. Indemnification for Breach. 13
ARTICLE VI 13
6. EXCHANGE OF CLASS E SHARES. 13
6.1. Exchange of Class E Shares. 13
ARTICLE VII 18
7. CONDITIONS TO CHP'S AND HOTEL INVESTORS'
OBLIGATIONS 18
7.1. Representations and Warranties 18
7.2. Approvals 18
7.3. Proceedings 18
7.4. Performance of Agreements 19
ARTICLE VIII 19
8. CONDITIONS TO FIVE ARROWS' OBLIGATIONS 19
8.1. Representations and Warranties 19
8.2. Performance of Agreements 19
8.3. Approvals 19
8.4. Good Standing and Other Certificates 19
8.5. Registration Rights Agreement 19
8.6. Valid Issuance 19
8.7. Proceedings 20
ARTICLE IX 20
9. MISCELLANEOUS 20
9.1. Preservation of Confidential Information 20
9.2. Governing Law 20
9.3. Prevailing Party 20
9.4. Captions 20
9.5. Publicity 20
9.6. Notices 20
9.7. Successors and Assigns 21
9.8. Counterparts 22
9.9. Entire Agreement 22
9.10. Amendments 22
9.11. Severability 22
9.12. Termination of Agreement 22
PAGE 42 OF 69
<PAGE>
EXECUTION COPY
_______________________________________________________________________
STOCKHOLDERS AGREEMENT
Dated as of October 3, 2000
Among
CNL HOSPITALITY PROPERTIES, INC.,
CNL HOTEL INVESTORS, INC.
CNL HOSPITALITY PARTNERS, LP
And
FIVE ARROWS REALTY SECURITIES II L.L.C.
_______________________________________________________________________
PAGE 43 OF 69
<PAGE>
STOCKHOLDERS AGREEMENT
_______________________
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of October 3,
2000, among CNL Hospitality Properties, Inc., a Maryland corporation ("CHP"),
CNL Hotel Investors, Inc., a Maryland corporation ("Hotel Investors"), CNL
Hospitality Partners, LP, a Delaware limited partnership ("Hospitality
Partners"), and Five Arrows Realty Securities II L.L.C., a Delaware limited
liability company ("Five Arrows" and collectively with CHP, Hotel Investors
and Hospitality Partners, the "Capital Stockholders").
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, Five Arrows, CHP, Hotel Investors and Hospitality
Partners are parties to a Subscription and Stockholders Agreement, dated as
of February 24, 1999 (the "Subscription Agreement"), pursuant to which Five
Arrows purchased from Hotel Investors 48,337 shares of its 8% Class A
Cumulative Preferred Stock (the "Class A Shares") and an equal number of
shares of Hotel Investors common stock, par value $.01 per share (the "Hotel
Investors Common Shares"); and
WHEREAS, pursuant to Section 4.2(b) of the Subscription
Agreement, Five Arrows proposed to exercise its right to convert (the
"Conversion") the Class A Shares and Hotel Investors Common Shares into
shares of CHP common stock, par value $.01 per share (the "CHP Common
Shares"); and
WHEREAS, CHP and Hotel Investors requested that Five Arrows
consider an alternative to the Conversion; and
WHEREAS, concurrently with their entering into this Agreement,
CHP, Five Arrows and Hotel Investors have entered into a Securities Purchase
Agreement dated as of the date hereof (the "Repurchase Agreement") as an
alternative to the Conversion pursuant to which the Class A Shares owned by
Five Arrows shall be converted into Class E Shares; and
WHEREAS, an agreement among the Capital Stockholders is necessary
in light of the transactions contemplated by the Repurchase Agreement.
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:
Capitalized terms used herein but not defined herein or in Annex
A hereto have the meaning given to such terms in the Repurchase Agreement.
PAGE 44 OF 69
<PAGE>
ARTICLE I
1. CORPORATE GOVERNANCE.
____________________
1.1. Number of Directors. Hotel Investors shall continue
to be governed by a Board of Directors (the "Board") consisting of three (3)
members. The number of directors may be increased or decreased in accordance
with the Hotel Investors Articles, Hotel Investors' By-laws and the
provisions of this Agreement.
1.2. Board of Directors. Until the next meeting of
stockholders, the Board shall continue to consist of the following directors:
James M. Seneff, Jr.
Robert A. Bourne
Matthew W. Kaplan
Each Capital Stockholder agrees to vote all of its Hotel
Investors Common Shares and use its best efforts to elect to the Board at any
annual meeting of stockholders of Hotel Investors and subsequent annual
meetings or at any special stockholders' meeting at which directors are to be
elected 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 1.2(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 Hotel Investors
Common Shares 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 Hotel Investors Preferred Shares 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 Hotel Investors then outstanding entitled to vote in the
election of directors, voting as a single class; provided, that the Capital
Stockholders shall promptly cause their designees on the Board to vote or
consent to replace any such removed director designated by Five Arrows with
another nominee designated by Five Arrows. 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 Hotel Investors Common Shares and use
its best efforts to remove such director.
PAGE 45 OF 69
<PAGE>
1.3. Director Approval Required For Certain Action.
_____________________________________________
(a) Subject to paragraph (b) of this Section 1.3, during
the Black-out Period (as defined in the Repurchase Agreement), CHP and Hotel
Investors hereby agree that none of the following actions may be taken by
Hotel Investors without the prior written consent of Five Arrows or the
director(s) of Hotel Investors designated by Five Arrows:
(i) the sale, lease, assignment, transfer or other
disposition of any of Hotel Investors' 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 of any shares of such Subsidiary's Capital
Interest to any Person other than Hotel Investors or any wholly
owned Subsidiary of Hotel Investors 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
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 Hotel Investors from personal property
leased by Hotel Investors 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 Hotels) or Investments by Hotel Investors other
than 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 February
24, 1999, between Hotel Investors and CNL Hospitality Advisors,
Inc.;
(iv) the discontinuance or disqualification of Hotel
Investors' status as a Real Estate Investment Trust within the
meaning of the Code; provided, however, that the consent of the
director(s) of Hotel Investors 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 ("REIT")
thereby and;
(v) the incurrence of Indebtedness, other than (A)
Indebtedness outstanding pursuant to the Senior Loan Facility as
in existence on the date hereof 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
PAGE 46 OF 69
<PAGE>
outstanding or (2) the payment of distributions required for Hotel
Investors 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 Hotel Investors designated by Five Arrows, and (2)
Hospitality Partners or the directors of Hotel Investors designated by
Hospitality Partners:
(i) the entering into or conducting any business
other than the Business and matters reasonably related to the
Business;
(ii) even if the Hotel Investors Articles were
amended to provide otherwise, for so long as Hotel Investors 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 the Class E Shares, engaging in any business or taking any
action that would result in Hotel Investors realizing "unrelated
business taxable income" within the meaning of Section 512 of the
Code, if Hotel Investors 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 in the Management Agreement (including
any successor management agreement consented to by Five Arrows),
(B) leases to tenants that are Affiliates of Rothschild Realty,
Inc. or to tenants that are wholly-owned subsidiaries of Hotel
Investors, and (C) investments and capital contributions or loans
to wholly-owned subsidiaries of Hotel Investors which do not
impair the REIT status of Hotel Investors.
1.4. Covenant to Vote. 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 Hotel Investors
Common Shares 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.
1.5. 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 Hotel Investors Common Shares, nor shall any Stockholder
enter into any stockholder agreements or arrangements of any kind with any
person with respect to Hotel
PAGE 47 OF 69
<PAGE>
Investors Preferred Shares or Hotel Investors Common Shares, inconsistent
with the provisions of this Agreement (whether or not such agreements and
arrangements are with other Stockholders or holders of Hotel Investors
Preferred Shares or Hotel Investors Common Shares 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 Hotel Investors Preferred Shares or Hotel Investors
Common Shares. 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 Hotel Investors
Common Shares 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 Hotel
Investors as contemplated by this Agreement shall not be deemed prohibited
hereunder.
1.6. Actions Consistent with Agreement. No Stockholder
shall circumvent this Agreement by taking any action that would be prohibited
under this Agreement indirectly through a Subsidiary, Affiliate or otherwise.
1.7. Conflict with Articles or By-laws. In the event of
any conflict or inconsistency between or among the provisions of this
Agreement and the Hotel Investors Articles, as amended, 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 Hotel Investors Articles and/or
the By-laws as shall resolve and remove any such conflicts or
inconsistencies.
ARTICLE II
2. RESTRICTIONS ON TRANSFER OR ISSUANCE OF STOCK.
_____________________________________________
2.1. 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 Hotel Investors Articles) any Hotel Investors Preferred Shares without
at the same time transferring a proportionate number of Hotel Investors
Common Shares then held by it, and vice versa, and (ii) except as provided in
Section 2.3 (Permitted Transfers) and 2.4 (Hospitality Partners' Right of
First Refusal), and except for sales pursuant to any registration statement
which becomes effective under 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.
PAGE 48 OF 69
<PAGE>
(b) Except in the event of (i) the Transfer of all of the
then outstanding Hotel Investors Preferred Shares and Hotel Investors Common
Shares to one or more purchasers in a contemporaneous transaction, (ii) the
merger or consolidation of Hotel Investors, (iii) the sale or other transfer
of all or substantially all of the assets and business of Hotel Investors or
(iv) any similar transaction resulting in a change in control of Hotel
Investors, in each case consummated with another person or entity which is
not an Affiliate of Hotel Investors prior to the consummation of such
transaction (each such transaction being a "Hotel Investors Sale
Transaction"), no Transfer by any Stockholder of any 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 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.
Hotel Investors shall not transfer upon its books any Stock held or owned by
any Stockholder to any person except in accordance with this Agreement.
2.2. 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 III 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.
2.3. Permitted Transfers. Except as otherwise provided
in this Agreement, the restrictions contained in Section 2.1(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
PAGE 49 OF 69
<PAGE>
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 Hotel Investors'
obligations under Section 2.1 of the Consent and Amendment to Management
Agreements, each dated as of February 24, 1999, among Hotel Investors, the
respective tenant and the respective property manager named therein by Five
Arrows to a third party (a "Section 2.3.(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 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 2.1(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 Hotel Investors 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 Hotel Investors to reflect such Transfer shall be
appropriately legended.
2.4. Hospitality Partners' Right of First Offer.
__________________________________________
(a) In the event Five Arrows seeks to Transfer shares to a
Section 2.3(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 the notice referred to in
Section 2.4(a) by Five Arrows, to agree to purchase all of such Hotel
Investors Preferred Shares and Hotel Investors Common Shares proposed to be
disposed of by Five Arrows for an amount equal to that which Five Arrows
would have received had Hotel Investors sold all of its assets and liquidated
and distributed the net proceeds to the Stockholders.
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<PAGE>
The amount payable to Five Arrows pursuant to this Section 2.4
shall be determined by a nationally recognized investment bank engaged by
Hotel Investors and selected by Five Arrows from a list of three investment
banks selected by Hospitality Partners from the investment banks listed on
Exhibit 2.4 attached hereto, whose determination shall be final and binding
on the parties.
(c) If at any time during and up until February 24, 2002
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 February 24, 2002
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 in
accordance with the terms hereof.
2.6. Mandatory Exchange at the Option of Hospitality
Partners. Hospitality Partners shall have the option, exercisable in
writing, to require Five Arrows to exchange all Class E Shares held by Five
Arrows into shares of CHP Common Stock in accordance with the terms of
Article VII 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 III
3. LEGENDS ON STOCK CERTIFICATES.
______________________________
3.1. Legends on Stock Certificates. A copy of this
Agreement shall be filed with the Secretary of Hotel Investors and kept with
the records of Hotel Investors. Each Stockholder hereby agrees that each
outstanding certificate or other instrument representing Hotel Investors
Common Stock or Class E Shares shall bear legends reading substantially as
follows:
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<PAGE>
"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 Hotel Investors 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 Stockholders Agreement, dated as of October 3,
2000, a copy of which may be obtained from Hotel Investors or from the holder
of this certificate. Any transferee of the securities represented by this
certificate shall be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of such Stockholders Agreement. No
transfer of such securities will be made on the books of Hotel Investors
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 IV
4. MISCELLANEOUS.
______________
4.1. 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).
4.2. Governing Law; Injunctive Relief. The interpretation
and construction of this Agreement, and all matters relating hereto, shall be
governed by the laws of the State of Maryland applicable to agreements
executed and to be performed solely within such State. 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. Therefore, in addition to any other remedies available at law
or in equity, any such person shall 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.
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<PAGE>
4.3. 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.
4.4. 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.
4.5. 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.
4.6. 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
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
PAGE 53 OF 69
<PAGE>
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 4.6, 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.
4.7. 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. If any transferee of any Stockholder
shall acquire any Hotel Investors Common Shares, in any manner, whether by
operation of law or otherwise, and such transfer is not otherwise null and
void, such Hotel Investors Common Shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such Hotel Investors
Common Shares 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 4.7 shall give any
Stockholder any right to transfer any Hotel Investors Common Shares in
contravention of the terms of this Agreement.
4.8. Counterparts. This Agreement may be executed in two
or more counterparts, all of which taken together shall constitute one
instrument.
4.9. Entire Agreement. Upon the consummation of the
Closing (as defined in the Repurchase 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 (including the
Subscription Agreement) between the parties with respect to such subject
matter.
4.10. Amendments. This Agreement may not be changed
orally, but only by an agreement in writing signed by the parties hereto.
4.11. 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.
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<PAGE>
4.12. 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.]
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<PAGE>
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: ______________________________
Name:
Title:
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: _____________________________
Name:
Title:
CNL HOTEL INVESTORS, INC.
By: _____________________________
Name:
Title:
CNL HOSPITALITY PARTNERS, LP
By: CNL Hospitality GP Corp., its
general partner
By: _____________________________
Name:
Title:
PAGE 56 OF 69
<PAGE>
Annex A
_______
Definitions and Index of Terms
______________________________
"Affiliate" as to any Person, shall mean any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition, "control"
of a Person means the power, directly or indirectly, either to (a) vote 10%
or more of the securities having ordinary voting power for the election of
directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
CNL Hospitality Corp., a Florida corporation, shall in all cases be
considered an "Affiliate" of Hotel Investors.
"Business" means the management of the Hotels.
"Hotels" means the hotels identified on Exhibit 1.3 of the
Subscription Agreement.
"Indebtedness" has the meaning given to such term in the Articles
Supplementary classifying the Class E Shares.
"Investments" has the meaning given to such term in the
Repurchase Agreement.
"Permitted Refinancing" has the meaning given to such term in the
Hotel Investors Articles.
"Person" means any individual, firm, partnership, corporation,
limited liability company or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"Senior Loan Facility" has the meaning given to such term in the
Articles Supplementary classifying the Class E Shares.
"Stock" means any Hotel Investors Preferred Shares and Hotel
Investors Common Shares.
"Stockholder" means each Capital Stockholder and any other Person
who shall hereafter acquire Stock pursuant to the provisions of, and subject
to the restrictions and rights set forth in this Agreement.
"Subsidiary" as to any Person, shall mean a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or
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<PAGE>
other managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"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.
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<PAGE>
The following terms shall have the meaning specified in the
indicated section of this Agreement or in the other agreements referred to
below:
Agreement Introduction
Board Section 1.1
Capital Stockholders Introduction
CHP Introduction
CHP Common Shares Recitals
Conversion Recitals
Five Arrows Introduction
Hospitality Partners Introduction
Hotel Investors Common Shares Recitals
Hotel Investors Sale Transaction Section 2.1(b)
Hotel Investors Introduction
Management Agreement Section 1.3(a)(iii)
Option Section 2.4(b)
Option Notice Section 2.4(b)
Permitted Transferee Section 2.3
REIT Section 1.3(a)(iv)
Repurchase Agreement Recitals
Section 2.3(c) Transferee Section 2.3
Securities Act Repurchase Agreement
Subscription Agreement Recitals
Transfer Hotel Investors Articles
PAGE 59 OF 69
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I 2
1. CORPORATE GOVERNANCE. 2
1.1. Number of Directors. 2
1.2. Board of Directors. 2
1.3. Director Approval Required For Certain Action. 3
1.4. Covenant to Vote. 4
1.5. No Voting or Conflicting Agreements. 4
1.6. Actions Consistent with Agreement. 5
1.7. Conflict with Articles or By-laws. 5
ARTICLE II 5
2. RESTRICTIONS ON TRANSFER OR ISSUANCE OF STOCK. 5
2.1. General Prohibition on Transfers. 5
2.2. Compliance with Securities Laws. 6
2.3. Permitted Transfers. 6
2.4. Hospitality Partners' Right of First Offer. 7
2.6. Mandatory Exchange at the Option of Hospitality
Partners. 7
ARTICLE III 7
3. LEGENDS ON STOCK CERTIFICATES. 7
3.1. Legends on Stock Certificates. 8
ARTICLE IV 8
4. MISCELLANEOUS 8
4.1. Preservation of Confidential Information 8
4.2. Governing Law; Injunctive Relief 8
4.3. Prevailing Party 8
4.4. Captions 8
4.5. Publicity 9
4.6. Notices 9
4.7. Successors and Assigns 9
4.8. Counterparts 10
4.9. Entire Agreement 10
4.10. Amendments 10
4.11. Severability 10
4.12. Termination of Agreement 10
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<PAGE>
ARTICLES SUPPLEMENTARY
______________________
CLASSIFYING 50,886 SHARES OF
PREFERRED STOCK AS
CLASS E PREFERRED STOCK
OF
CNL HOTEL INVESTORS, INC.
Pursuant to Section 2-105 of the Maryland General Corporation Law
(the "M.G.C.L."), CNL Hotel Investors, Inc., a corporation organized and
existing under the M.G.C.L. (the "Corporation"), and having its principal
office in the State of Maryland located at c/o The Corporation Trust,
Incorporated, 300 East Lombard St., Baltimore, MD 21202,
DOES HEREBY CERTIFY TO THE STATE DEPARTMENT OF ASSESSMENT AND
TAXATION OF MARYLAND THAT:
FIRST: Pursuant to authority granted to and vested in the Board
of Directors of the Corporation (the "Board") by the Articles of
Incorporation of the Corporation (the "Articles of Incorporation"), and
pursuant to the provisions of Section 2-105 of the M.G.C.L., the Board,
acting by written consent on October 3, 2000, adopted resolutions duly
classifying 50,886 shares of the Preferred Stock of the Corporation into a
series of Preferred Stock to be designated as "Class E Preferred Stock, par
value $.01 per share, liquidation preference $.01 per share" and has provided
for the issuance of such shares;
SECOND: The terms of the "Class E Preferred Stock," as set
forth by the Board, including the preferences, exchange or other rights,
voting powers, limitations as to dividends and qualifications of such series,
are as follows:
SECTION 1. Number of Shares and Designation. A class of
Preferred Stock shall be designated as "Class E Preferred Stock, par value
$.01 per share, liquidation preference $.01 per share" (the "Class E
Preferred Stock"), and 50,886 shall be the total number of shares of
Preferred Stock constituting such class.
SECTION 2. Definitions. For purposes of the Class E Preferred
Stock, terms defined in the Articles of Incorporation and not otherwise
defined herein shall have the meanings ascribed to such terms in the Articles
of Incorporation and the following terms shall have the meaning indicated:
"Affiliate" as to any Person, shall mean any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this
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definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting power
for the election of directors of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract
or otherwise. CNL Hospitality Corp., a Florida corporation, and any
successor thereto, shall in all cases be considered an "Affiliate" of Hotel
Investors.
"Articles of Incorporation" shall mean the articles of
incorporation of the Corporation, as the same may be amended or modified from
time to time.
"Articles Supplementary" shall mean these Articles Supplementary,
as the same may be amended or modified from time to time with the consent of
the holders of the Class E Preferred Stock.
"Attributable Indebtedness" shall mean (a) in respect of a
Sale/Leaseback Transaction, as of the time of determination, the present
value (discounted at the interest rate used to calculate the lease payments)
of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been or may be extended), and
(b) the principal portion of all obligations of a Person under any synthetic
lease (or the aggregate purchase option price), tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing product
of such Person where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease in
accordance with GAAP.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to perform
any of its responsibilities with respect to the Class E Preferred Stock.
"Business Day" shall mean any day that is not a Saturday, Sunday
or a day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
"Capital Interests" shall mean any shares, interests,
participations or other equivalents (however designated) of capital stock of
a corporation (other than the Class E Preferred Stock of the Corporation),
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.
"CHP" shall mean CNL Hospitality Properties, Inc., a Maryland
corporation.
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"CHP Common Stock" shall mean the Common Stock, par value $.01
per share, of CHP.
"Class A Preferred Stock" shall mean the 8% Class A Cumulative
Preferred Stock, par value $.01 per share, liquidation preference $1,000 per
share, of the Corporation.
"Class B Preferred Stock" shall mean the Class B Preferred Stock,
par value $.01 per share, liquidation preference $.01 per share, of the
Corporation.
"Class C Preferred Stock" shall mean the 8% Class C Cumulative
Preferred Stock, par value $.01 per share, liquidation preference $1,000 per
share, of the Corporation.
"Class D Junior Preferred Stock" shall mean the Class D Junior
Preferred Stock, par value $.01 per share, liquidation preference $.01 per
share, of the Corporation.
"Class E Preferred Stock" shall have the meaning set forth in
Section 1 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Common Stock" shall mean all classes or series of the
Corporation's common stock, par value $.01 per share (or any equivalent
thereof).
"Effective Date" shall mean date of filing of these Articles
Supplementary with the State of Maryland.
"Event of Default" shall mean any of the events specified in
Section 10, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"Financing Lease" shall mean any lease of property, real or
personal, the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the lessee.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governing Documents" as to any Person, shall mean its articles
or certificate of incorporation and by-laws, its partnership agreement, its
certificate of formation and operating agreement, and/or the other
organizational or governing documents of such Person.
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"Guarantee Obligation" as to any Person (the "guaranteeing
person"), shall mean any obligation (determined without duplication) of (a)
the guaranteeing person or (b) another Person (including, without limitation,
any bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary
obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course
of business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the maximum stated amount of the primary
obligation relating to such Guarantee Obligation (or, if less, the maximum
stated liability set forth in the instrument embodying such Guarantee
Obligation), provided, that, in the absence of any such stated amount or
stated liability, the amount of such Guarantee Obligation shall be such
guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by the Corporation in good faith.
"Indebtedness" of any Person at any date, shall mean without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), to
the extent such obligations constitute indebtedness for the purposes of GAAP,
(c) any other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, or upon which interest payments are
customarily made, (d) all obligations of such Person under Financing Leases,
(e) all obligations, contingent or otherwise, of such Person under
acceptance, standby letter of credit or similar facilities, (f) all Guarantee
Obligations of such Person, (g) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof and (h) all Attributable
Indebtedness of such Person.
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"Junior Stock" shall mean all classes of Common Stock and each
other Capital Interest hereafter authorized or issued by the Corporation the
terms of which expressly provide that it ranks junior to the Class E
Preferred Stock as to distribution rights and rights on liquidation, winding-
up and dissolution of the Corporation.
"Person" shall mean any individual, firm, partnership,
corporation, limited liability company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Real Estate Investment Trust" shall mean a real estate
investment trust as defined in Section 856 of the Code (or any successor
provision thereof).
"Sale/Leaseback Transaction" shall mean an arrangement relating
to property now owned or hereafter acquired whereby the Corporation or any of
its Subsidiaries transfers such property to a Person and the Corporation or a
Subsidiary leases such property from such Person.
"Senior Loan Facility" shall mean the credit facility evidenced
by seven loan agreements, each by and between the Corporation and Jefferson
Pilot Life Insurance Company and all other material documents, agreements,
instruments and certificates required to be delivered thereunder.
"Subsidiary" as to any Person, shall mean a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers
of such corporation, partnership or other entity are at the time owned, or
the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person.
SECTION 3. Distributions. The holders of shares of Class E
Preferred Stock shall not be entitled to receive any distributions other than
as expressly otherwise provided in these Articles Supplementary.
SECTION 4. Liquidation Preference. In the event of any
liquidation, dissolution or winding-up of the Corporation, whether voluntary
or involuntary, before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for
the holders of Junior Stock, the holders of shares of Class E Preferred Stock
shall be entitled to receive one cent ($.01) per share of Class E Preferred
Stock (the "Liquidation Preference"). The Liquidation Preference shall be
payable on a pari passu basis with the liquidation preference payable on
account of the Class B Preferred
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Stock and on the Class D Preferred Stock. If, upon any such liquidation,
dissolution or winding-up of the Corporation, the assets of the Corporation,
or proceeds thereof, distributable among the holders of all shares of Class E
Preferred Stock, Class B Preferred Stock and Class D Preferred Stock shall be
insufficient to pay in full the respective liquidation preferences of such
three classes, then such assets, or the proceeds thereof, shall be
distributed among the holders of shares of Class E Preferred Stock, the
holders of Class B Preferred Stock and the holders of the Class D Preferred
Stock ratably in accordance with their shares.
SECTION 5. Liquidation Distributions After Payment Of
Liquidation Preference. In the event of any liquidation, dissolution or
winding-up of the Corporation as described in Section 4 hereof, after payment
shall have been made in full to the holders of shares of Class E Preferred
Stock as provided in Section 4, the holders of Junior Stock shall, subject to
any respective terms and provisions applying thereto, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders of
shares of the Class E Preferred Stock, as such, shall not be entitled to
share therein.
SECTION 6. Ranking. The Class E Preferred Stock ranks (a)
junior to the Class A Preferred Stock and Class C Preferred Stock and pari
passu with the Class B Preferred Stock and Class D Preferred Stock as to
distribution rights and rights on liquidation, winding-up and dissolution of
the Corporation, and (b) as to the Liquidation Preference only, (i) pari
passu with the Class B Preferred Stock and the Class D Preferred Stock as to
rights on liquidation, winding-up and dissolution of the Corporation, and
(ii) senior to all classes of Common Stock and to each other share of Junior
Stock as to rights on liquidation, winding-up and dissolution of the
Corporation.
SECTION 7. Voting. Except as otherwise set forth herein or
provided by law, shares of the Class E Preferred Stock shall not have any
voting rights and powers, and the consent of the holders thereof shall not be
required for the taking of any action. Notwithstanding anything to the
contrary contained herein, these Articles Supplementary shall not be amended
without the consent of a majority of the votes entitled to be cast by the
holders of shares of Class E Preferred Stock at the time outstanding.
For any matter requiring a vote of the holders of shares of Class
E Preferred Stock, each share of Class E Preferred Stock shall have one vote
per share.
SECTION 8. Record Holders. The Corporation may deem and treat
the record holder of any shares of Class E Preferred Stock as the true and
lawful owner thereof for all purposes, and the Corporation shall not be
affected by any notice to the contrary.
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SECTION 9. Notices And Reporting.
_____________________
(a) The Corporation shall deliver to the holders of the Class E
Preferred Stock all reports and statements delivered to Jefferson Pilot Life
Insurance Company under the Senior Loan Facility and stockholders under the
Governing Documents.
(b) The Corporation shall promptly give notice to the holders
of the Class E Preferred Stock of:
(i) the occurrence of any Event of Default; and
(ii) promptly upon, and in any event within two
business days after the Corporation first has knowledge of, (i)
the Corporation failing to continue to qualify as a Real Estate
Investment Trust, (ii) any act by the Corporation causing its
election to be taxed as a Real Estate Investment Trust to be
terminated, (iii) any act causing the Corporation to be subject to
the taxes imposed by Section 857(b)(6) of the Internal Revenue
Code (or any successor provision thereto), or (iv) the Corporation
failing to be entitled to a dividends paid deduction which meets
the requirements of Section 857 of the Internal Revenue Code.
Each notice pursuant to this Section shall be accompanied by a
statement of an officer of the Corporation setting forth details
of the occurrence referred to therein and stating what action the
Corporation proposes to take with respect thereto.
SECTION 10. Events Of Default.
__________________
If any of the following events shall occur and be continuing:
(a) The Corporation shall fail to observe or perform any other
covenant or obligation contained in these Articles Supplementary, and such
failure shall continue unremedied for a period of 5 days after notice from
any holder of shares of Class E Preferred Stock;
(b) The Corporation or any of its Subsidiaries shall (i)
default in making any payment of any principal of any Indebtedness
(including, without limitation, any Guarantee Obligation) on the scheduled or
original due date with respect thereto; or (ii) default in the observance or
performance of any agreement or condition relating to Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause such Indebtedness to be
declared or otherwise become due prior to its stated maturity or (in the case
of any such
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Indebtedness constituting a Guarantee Obligation) to become payable;
provided, that the defaults or accelerations described in this paragraph (b)
shall not at any time constitute an Event of Default unless, at such time,
one or more of such defaults, conditions or accelerations continue for a
period of 30 days without such amount of Indebtedness being paid in full;
(c) (i) The Corporation, CHP or any of their respective
Subsidiaries shall commence any case, proceeding or other action (A) under
any existing or future law of any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all
or any substantial part of its assets, or the Corporation or any of their
respective Subsidiaries shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against the Corporation, CHP,
or any of their respective Subsidiaries any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in the entry of
an order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against the Corporation, CHP, or any of their respective
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Corporation or any of its Subsidiaries shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Corporation,
CHP, or any of their respective Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(d) The Corporation ceases, for any reason, to maintain its
status as a Real Estate Investment Trust unless ceasing such status is
approved by the holders of a majority of shares of Class E Preferred Stock
then outstanding;
then there shall be deemed to have occurred an Event of Default, and in any
such event, and as the sole and exclusive result of such Event of Default and
the sole and exclusive remedy of the holders of shares of Class E Preferred
Stock, there shall be deemed to have occurred an "Acceleration Event," as
that term is defined in that certain Securities Purchase Agreement dated as
of October 3, 2000 to which the Corporation is a party.
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IN WITNESS WHEREOF, CNL Hotel Investors, Inc. has caused its
corporate seal to be hereunto affixed and these Articles Supplementary to be
signed by its President, and attested by its Secretary this 3rd day of
October, 2000.
CNL HOTEL INVESTORS, INC.
By: _______________________
Robert A. Bourne
President
THE UNDERSIGNED, being the Secretary of CNL Hotel Investors,
Inc., does hereby acknowledge in the name and on behalf of said corporation,
that Robert A. Bourne, who executed on behalf of said corporation the
foregoing Articles Supplementary, of which this certificate is made a part,
is the duly elected and acting President of said corporation, that the
foregoing Articles Supplementary are the corporate act of said corporation
and certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof or
otherwise required to be verified under oath are true in all material
respects, under the penalties of perjury.
By: ______________________
Lynn E. Rose
Secretary
Corporate Seal
